Competition Tribunal approves the Netcare vs Lakeview Hospital merger

PBM

A merger between Netcare Hospitals and Benoni based hospital operaton, Lakeview Hospital, is set to go ahead after it was initially prohibited by the Competition Commission on concerns that the merger would have negative competitive effects.

The Competition Tribunal has ruled that the merger can go ahead subject to conditions relating to the regulation of tariffs.

The merger was completed on 1 December 2016. It was classified as a small merger and there was therefore no initial obligation to notify the transaction. However, during the Commission’s investigation in the large merger between Netcare and the Akeso Group, the Competition Commission came to learn of the transaction and required the merging parties to file notification papers. Thereafter the Commission prohibited the merger.

In a tariff analysis of Netcare and Lakeview the Commission found that the hospital groups, such as Netcare, negotiate tariffs to be applicable in their hospitals on a national basis and Netcare would have a uniform pricing policy across all its hospitals in the country and this would impact on Lakeview tariffs.

The merging parties disputed this finding in their application before the Tribunal, arguing that the matter was pro-competitive and that the Commission’s tariff analysis was unreliable.

In spite of the dispute, the merging parties tendered the conditions which the Tribunal ultimately accepted.

The conditions ,  set to apply for a period of seven years,  broadly require:

  • For the purposes of fee-for-service reimbursement for services rendered at Lakeview hospital, Netcare shall ensure that the tariff used in relation to any Medical Scheme will be at a discount of 5% to the Netcare 57/58 tariff in respect of that Medical Scheme or in respect of that option.
  • For the purposes of alternative reimbursement models services (negotiated in terms of 57/58 facilities in respect of Medical Schemes for options) the tariff will be at a discount of 5% to the Netcare 57/58 tariff.

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