Where next for hospital mergers?

Blog post

Published: 21/06/2013

Next week sees the deadline for responses to Monitor on their consultation on the proposed approach to advising the Office of Fair Trading on the benefits for patients of mergers involving NHS foundation trusts.

It acts as a further reminder that competition and choice will play an increasing role in the NHS, challenging those involved in proposed hospital mergers to demonstrate that there are clear benefits to ‘customers’ within the framework of the Enterprise Act, in the form of lower prices, higher quality or greater choice.

There are two important points to highlight. First, Monitor will want to test that the proposed benefits of any merger will be delivered as a result of that merger and would have been unlikely to occur without the merger.

Perhaps we should stand back for a moment and remind ourselves of the scepticism around the success of mergers and acquisitions in the NHS

Second, efficiencies that result from mergers are not generally considered part of the merger benefits case. The focus of the Office of Fair Trading will be on the impact on choice and competition.

For those of us who have been involved in making the case for mergers – working with Monitor’s Cooperation and Competition Directorate (CCD), prior to that the Cooperation and Competition Panel (CCP) of the NHS, and now the Office of Fair Trading – we know that this is relatively new territory, with an immature regulator (at least in health) which will evolve over time.

For many of those in the NHS, the approach required can be counter cultural, particularly for clinicians, and sets an extremely high bar of which trust boards should take note.

The limited experience to date with examples of mergers that have been subject to the CCP process and more recently the CCD – including Barts Health, Dartford, Gravesham and more recently Bournemouth and Poole – suggests that the NHS will have to think differently going forward.

Whilst the CCP approved the Barts Health, Dartford and Gravesham mergers, they were unconvinced by the benefits case and approval was made on the basis of the counterfactuals (i.e. that that not pursuing a merger would be worse for patients). For Bournemouth and Poole, the majority of the benefits in the initial submission were rejected, hence the current delays to the process.

Some typical examples of merger benefit, such as consolidating pathology services, are seen as initiatives which can be delivered without merger. Efficiencies of scale or back office do not press the right buttons.

It might be tempting to argue a special case or plead that the regulators don’t understand that health is different: benefits are qualitative, hard to measure and will take time to deliver. But perhaps we should stand back for a moment and remind ourselves of the scepticism around the success of mergers and acquisitions in the NHS.

A more measured response would be to rise to the challenge. If it is so difficult to articulate the benefits to patients, how will we measure success (which we need to do if we are to demonstrate that we have achieved what we set out to do)?

What is likely is that this Monitor guidance, and further guidance to follow, will change the focus of thinking and may well force some trusts that are currently contemplating a merger to go back and think of other ways to resolve their problems.

Dr Lucy Moore is an Associate Director at Deloitte Corporate Finance and former Chief Executive of Whipps Cross University Hospital Trust. Please note that the views expressed in guest blogs on the Nuffield Trust website are the authors’ own.

Suggested citation

Moore L (2013) ‘Where next for hospital mergers?’. Nuffield Trust comment, 21 June 2013. https://www.nuffieldtrust.org.uk/news-item/where-next-for-hospital-mergers