Bennett sets out new approach for merger and failure

David Bennett revealed details of how Monitor plans to act as a “translator” between the NHS and competition authorities when plans were devised for trusts or individual services to merge.

He said differences in “language” had been one of the biggest areas of misunderstanding during the Competition Commission’s consideration of the proposed merger between Royal Bournemouth and Christchurch Hospitals and Poole Hospital foundation trusts last year.

The commission controversially rejected the deal in October on the grounds the trusts had provided insufficient evidence of the patient benefits of the merger. However, the trusts maintained they could not provide more information ahead of a public consultation on any changes.

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Mr Bennett acknowledged NHS organisations’ legal duty to consult on service change was a “significant issue” that needed more work and “something the national competition authorities haven’t had to deal with before”.

He said Monitor would support trusts to build a “robust” case for merger if that was appropriate. It would do this by engaging with trusts informally when they first considered a merger and again, more formally, once a trust had identified its preferred form.

“I hope by parallel working [with trusts] and our engagement we can both speed things up and make sure if they do need to go to the competition authorities, they’re totally prepared for it,” Mr Bennett said.

HSJ has also learned of the importance that Monitor has attached to the development of a new approach to deal with financially unsustainable foundation trusts. The potential failure of at least one of the parties is usually the driver for organisational mergers.

Monitor is currently funding a piece of work by the commissioners of Milton Keynes Hospital Foundation Trust and neighbouring Bedford Hospital Trust, both of which are struggling financially and had previously planned a merger.

However, merger talks are taking a back seat to the development of a commissioning strategy considering all health services in the area. It is understood Monitor has advised providers and commissioners facing similar challenges to look at the work going on in Milton Keynes and Bedford.

Mr Bennett said this approach, being developed in partnership with the NHS Trust Development Authority and NHS England, reflected lessons learned after the implementation of the failure regime at Mid Staffordshire Foundation Trust.

“It’s a perfect example of where what we ought to do is to step back and say, ‘What’s the right thing for the whole of this health economy’… then we can implement it, hopefully in many cases before we get to the point of needing to appoint a special administrator,” he said.

Mr Bennett added: “Hopefully by working systematically through what are the issues, what are the options then… if it all finished up being looked at by the competition authorities, the evidence would be there that they would need to see those benefits outweigh any loss of competition.”

Under the “exiting firm test”, competition authorities can approve a merger even if it entails a substantial lessening of competition. This is because that loss of competition is likely to occur anyway as one of the firms would fail and exit the market.

However, the Competition Commission rejected Poole’s argument that it was unviable without a merger, concluding that its problems were part of a wider NHS funding shortfall.

Mr Bennett said the trust’s argument was “legitimate” and the commission’s judgement “didn’t quite get it right”.

More work was required with competition authorities to develop “a shared understanding” of the impact on patients of any reduction in competition because the evidence base was weak, he said. 

Asked whether the competition authorities were too ready to assume that any loss of competition was bad for patients, Mr Bennett said: “Yes. I think the issue is in most sectors that competition is sufficiently well established as a mechanism of driving benefits for customers… I don’t think that’s the case in health… and for good reason.”

He said he wanted to move away from this assumption to a more balanced consideration of patient benefit against detriment due to loss of competition.

“I want a similar way of looking at both sides of the scales - that is a bit different to the way the competition authorities would normally do things.”

However, Mr Bennett insisted competition still had an important role to play in improving services for patients. He disagreed with NHS England chief executive Sir David Nicholson’s claim last year that competition regulations were impeding attempts to improve quality.

Care services minister Norman Lamb has also called for the role of competition authorities in the NHS to be “scrapped” in the wake of the Bournemouth and Poole case.

Mr Bennett said: “To simply conclude that because [the Bournemouth and Poole merger] was blocked and was a difficult process, the merger regime is going to get in the way of doing the right thing is absolutely the wrong conclusion.”