South Africa's Competition Tribunal blocks Mediclinic's hospital merger

The competition authority has scuppered Mediclinic's plans to expand in the country's North West province.

South Africa’s Competition Tribunal has blocked the merger between private hospital groups Mediclinic Southern Africa and Matlosana Medical Health Services, scuppering the former’s plans to expand in the country’s North West province.

In terms of the proposed transaction, Mediclinic would acquire a majority interest in Matlosana Medical Health Services, which owns and operates two private hospitals, Wilmed Park and Sunningdale Hospitals, in Klerksdorp (North West).

Mediclinic is one of the largest hospital groups in South Africa, which is listed on the JSE. It owns private hospitals in Southern Africa, Switzerland and the Middle East, and has a minority stake in British private hospital group Spire Healthcare. 

The Competition Tribunal, which is South Africa’s competition authority, blocked the merger because it would substantially lessen competition in the North West province.

The Competition Tribunal said Mediclinic owns and operates Mediclinic Potchefstroom, which is located about 50km from Matlosana Medical Health Services’ hospitals.

“Mediclinic Potchefstroom, Wilmed Park and Sunningdale all provide inpatient private hospital services in the Klerksdorp and Potchefstroom area,” the Competition Tribunal said in a statement on Wednesday.

Mediclinic Southern Africa and Matlosana Medical Health Services notified the Competition Commission of their plans to merge on September,29 2016.

After the Competition Commission investigated the merger, it recommended on June 28,2017 to the Competition Tribunal that the merger should be prohibited on concerns that the joining together of Mediclinic Potchefstroom, Wilmed Park and Sunningdale hospitals “would likely result in a significant increase in healthcare prices in the region.’’

“In addition, the Commission argued that the incentive to improve on non-price factors, such as patient experience and quality healthcare, would likely diminish after the merger. The Commission also argued that the acquisition would confer relatively greater bargaining power to Mediclinic vis-à-vis medical schemes.’’

Mediclinic Southern Africa and Matlosana Medical Health Services denied that the proposed merger would have any negative effects on competition and argued that it would lead to a number of pro-competitive efficiencies.

“This included improved costs of procurement and increased clinical quality and patient experience at the target hospitals,’’ the Competition Tribunal said.

“The Tribunal engaged extensively with the merging parties on whether a potential remedy could be found to address the Commission’s competition concerns. The merging parties' proposed remedies were canvassed with a number of medical aids that gave valuable inputs to the Tribunal.”

“However, despite different proposed remedies put up by the merging parties over several months, no appropriate remedy was tendered that would cure the substantial lessening of competition that would arise as a result of the proposed transaction.”