Last week was a landmark: a new competition authority (the Competition and Markets Authority (CMA) – itself the consequence of a merger) approved the first full merger of two NHS acute trusts. Their decision will allow the merger between Frimley Park Hospital NHS Foundation Trust and Heatherwood and Wexham Park Hospitals NHS Foundation Trust to proceed.
The competition authorities are quick to point out that this is the third NHS merger they have approved since the passage of the 2012 Act. They earlier approved the transfer of neurology from the Royal Free to University College London Hospital (UCLH) (which qualified as a ‘merger’) and the creation of the pathology joint venture between UCLH, the Royal Free and The Doctors Laboratory (TDL).
There are also other transactions that have satisfied the authorities so they have not required a review meaning they can go ahead more quietly.
However, this is the first positive decision for a major merger. The decision on this transaction reveals more about the CMA’s thinking than even the draft guidance that is circulating now. First of all, it emphasises the weight they place on the decisions of GPs and their patients.
Most of the discussions I have with trusts considering mergers focus on the benefits that the merger will bring for patients. Rightly so
It is a very pragmatic approach to considering who is competing with whom: where are patients actually going? More importantly, if quality falls at their first choice, where would they go as a second choice?
The decision also emphasises how the competition authorities view “failure” in the NHS. All trusts are under significant pressure. That pressure may require changes to how they operate or how they are funded.
It will not, in the view of the competition authorities, lead to the full closure of facilities and their exit from the provision of health care services. Heatherwood and Wexham Park has been in breach of its terms of authorisation for longer than any Foundation Trust other than Mid-Staffordshire. It had been subject to critical Care Quality Commission (CQC) reviews.
Nevertheless, the competition authorities did not think it would “exit”. They did think, as a consequence, that it was a weak competitor. The distinction between ‘weak’ and ‘exiting’ was important in this case, and may be increasingly so in future cases. Getting clearance from the CMA will be easier if it is possible to demonstrate that the merging party has been having less success at attracting patients or winning contracts over recent years.
The decision about whether or not to submit a benefits case is always a topic of much debate. Most of the discussions I have with trusts considering mergers focus on the benefits that the merger will bring for patients. Rightly so.
Everyone is clear that these transactions can only be justified in light of benefits to patients. Indeed, despite the trusts not submitting a benefits case, the CMA decision quotes Monitor’s advice that the transaction was the “most likely” way to deliver “improvements to services for patients”.
Saying that a merger will deliver patient benefits is different to proving to Monitor and the CMA the nature and size of the benefits that flow only from the merger in question. For that reason, many trusts are choosing to only submit a formal benefits case where there are some clear competition concerns against which the CMA needs to balance merger-specific, implementable benefits.
Finally, this was the first transaction to really test the new (and evolving) process between the trusts, Monitor and the competition authorities. Recent statements by Monitor emphasise its desire to be involved early in transactions and to help with the decision about the merger and then with the case.
That was certainly true of this case, as the trusts and us, as advisers, met with them many times and discussed all aspects of the case. It was a process that achieved its objective: to provide the chance for a real solution to some very difficult problems.
For all the sound and fury around the competition regime, we now have a roadmap – let’s get motoring.
Matthew Bell is Director at Frontier Economics. Please note that the views expressed in guest blogs on the Nuffield Trust website are the authors’ own.
Bell M (2014) ‘The benefits to patients? Shining a light on the NHS merger regime’. Nuffield Trust comment, 24 June 2014. https://www.nuffieldtrust.org.uk/news-item/the-benefits-to-patients-shining-a-light-on-the-nhs-merger-regime