• Competition watchdog highlights concerns over Cygnet’s acquisition of Cambian Adult Services
  • CMA says the merger could result in a substantial lessening of competition in the provision of inpatient rehabilitation services
  • Concerns relate to male rehabilitation services in the East Midlands and female rehabilitation services in the West Midlands

The competition watchdog has raised concerns about the merger of two private mental health providers.

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The CMA said ‘the merger may mean there is not enough choice for NHS customers’

Universal Health Care, through its subsidiary Cygnet Health Care, bought Cambian Adult Services in December in a £377m deal, which will see 81 facilities transferred to Cygnet.

However, the Competition and Markets Authority began an inquiry in the same month and in May announced the merger was being referred for investigation through an inquiry group.

The CMA this week published its preliminary findings, which flag concerns over a substantial lessening of competition in the provision of inpatient rehabilitation services in the West and East Midlands due to the merger.

The concerns in the East Midlands relate to male long term mental health rehabilitation facilities, while the concerns in the West Midlands are over the proximity of female long term mental health rehabilitation services.

In a statement, earlier this week, the CMA said these were two areas where both companies’ hospitals were in close competition.

It added: “The inquiry group conducting the phase two investigation found that clinical commissioning groups, as the main customers of these types of hospitals, would face a reduction in choice, quality or value as a result of the merger when seeking to refer male patients in the East Midlands and female patients in the West Midlands suffering from long term mental illness.”

Cygnet has 15 rehabilitation sites nationwide, comprising 25 wards and 338 beds, while CAS has 25 sites with 36 wards and 686 beds. These provide care for patients with learning disabilities, personality disorders, on the autism spectrum, acquired brain injuries and long term mental illnesses.

In the East Midlands, the CMA said its concern was due to the proximity of CAS’s Storthfield House, Sherwood House, The Limes, The Oaks and St Augustine’s sites and Cygnet’s Hospital Derby and Lodge Brighouse. The regulator said the merger would give them a 50-60 per cent market share.

In a notice of proposed remedies, the CMA said the sale of one or more of the sites to a suitable buyer would mitigate this concern.

The concerns in the West Midlands relate to the proximity of CAS’s Ragland House and Cygnet’s Coventry facility.

It said the merger reduces the current four large providers with equal market share to three and removes the competition between CAS and Cygnet.

The CMA said selling either site would be a possible remedy to its concern.

Simon Polito, chair of the inquiry group, said it was awaiting a response from the companies over what action they will take.

He said: “We have provisionally concluded that the merger may mean there is not enough choice for NHS customers to help them get the best outcomes for patients suffering from long term mental health issues in the East and West Midlands.”

The inquiry found there will be no lessening in competition from the merger in relation to the firm’s residential care homes or low security facilities.

The CMA invited comments on the possible remedies by 8 September.