Mediclinic merger may be blocked
• Commission recommends prohibition of Matlosana deal on concern about less competition and higher tariffs
Mediclinic’s proposed acquisition of Klerksdorpbased Matlosana Medical Health Services may be prohibited for the same reasons that the Competition Commission blocked Life HealthCare’s bid to acquire Lowveld Hospital in 2015.
Mediclinic’s proposed acquisition of Matlosana Medical Health Services may be prohibited for the same reasons the Competition Commission blocked Life Healthcare’s bid to acquire Lowveld Hospital in 2015.
In the first week of July, the commission said it was recommending that the Competition Tribunal prohibit Mediclinic’s proposed acquisition of Klerksdorp-based Matlosana.
The latest research from the commission shows this recommendation marks its sixth prohibition since the end of March.
In the 12 months to end March 2017, the commission prohibited just five mergers out of the 393 it investigated in that period. Of those, 353 were approved unconditionally and 32 approved with conditions. In the three months to end-June, the commission finalised 91 merger investigations. It unconditionally approved 77 and conditionally approved seven.
The recommended prohibition of the Mediclinic merger was based on the grounds that it was “likely to substantially prevent or lessen competition in the market for private healthcare services in Klerksdorp and the surrounding areas”.
The decision has a familiar ring to it. In January 2015 the commission prohibited Life Healthcare’s acquisition of Lowveld Hospital on the grounds it was likely to result in a substantial prevention or lessening of competition in Nelspruit and the surrounding areas.
The commission found the merger would result in an immediate and substantial increase in hospital tariffs for the Lowveld hospital once the hospital fee structure was changed from the National Hospital Network-based structure, which was used by Lowveld, to the Life Healthcare fee model.
“There was no credible technological, efficiency or procompetitive gains submitted by the merging parties that could outweigh the competitive harm identified by the commission,” commissioner Thembinkosi Bonakele said.
The National Hospital Network is a network of independently owned private hospitals that attempts to achieve economies of scale to compete against the big three players, which are Mediclinic, Life Healthcare and Netcare.
The commission’s Life Healthcare decision was challenged at the tribunal, but the parties later abandoned the challenge and the merger.
In recommending the prohibition of the Mediclinic acquisition, the commission also raised concern about hikes in hospital tariffs and the effect on public interest issues in the area.
While the Life Healthcare transaction was classified as an intermediate one, which is decided by the commission, the Mediclinic deal is a large merger and the decision is taken by the tribunal. This means the parties have an opportunity to argue why their transaction should not be prohibited.
The encouraging statistic for Mediclinic is that the tribunal has only prohibited 10 mergers since 2000. Three of these were overturned on appeal.