The Competition and Markets Authority has said a merger of mental health providers would be anti-competitive unless one of the organisations’ hospitals is sold.

The CMA announced today that if the merger of Cygnet Health Care and Cambian Adult Services is to proceed the new entity will have to sell one of its hospitals in the East Midlands, to counter the loss of competition.

The authority said clinical commissioning groups “may face higher prices or lower quality when referring patients” if a sale was not agreed.

It said the combined company would be many times the size of the largest competing provider of male mental health rehabilitation services.

The CMA has cleared the merger in all other regions where the firms operate.

Simon Polito, who chaired the inquiry group, said: “Mental health hospitals are a vital part of our healthcare system, caring for some of the most vulnerable in our society. CCGs, which are under increasing budget pressure, should have access to a range of facilities and treatment options so they can ensure the best possible care.

“We have found that this merger could affect the quality and price of mental health rehabilitation services for male patients in the East Midlands. The companies must now sell off one of their hospitals in this region.”

The inquiry began in February.

Cygnet runs 20 mental health facilities across the UK and Cambian runs 61.

A spokesman for Cambian said the company would make no comment at this stage of the CMA’s process.

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