German competition authority launches inquiry into hospital sector

The German Federal Cartel Office (Bundeskartellamt) launched a sector inquiry into the hospital sector on 31 May 2016. The objective of the investigation is to assess the current market situation and competitive conditions of hospital markets across the country. In order to obtain the information, the Bundeskartellamt will send questionnaires to 500 hospitals covering different geographical areas, hospital sizes, and types of operators.

The background to the inquiry is the increasing consolidation among hospitals. The Bundeskartellamt had to deal with several transactions involving hospital operators notified for merger approval in recent years. Active players on the hospital markets are municipal and non-profit operators as well as privately run companies. The hospital market in Germany has changed significantly over the past 20 years. Consolidation resulted in declining numbers of individual hospitals as well as hospital operators.

The inquiry’s objective is to help further develop examination criteria for hospital mergers, which also has to take into account sector-specific regulation. The Bundeskartellamt further hopes to gain more information on how patients choose their hospital and the way hospitals try to attract patients in order to stand out from their competitors. To find out about these factors, the inquiry will, inter alia, examine the different roles of various stakeholders such as medical staff, referring physicians, or emergency services. In addition, remuneration structures and the financial situation of participative hospitals will be analysed.

The inquiry will be completed with a final report once the Bundeskartellamt has analysed its findings. The latest mergers in the sector have triggered in-depth investigations. While some transactions were prohibited others were only approved subject to conditions. The outcome can be expected to have a significant impact on the competitive assessment of future hospital transactions and their approval by the Bundeskartellamt.

Competition between hospitals has become a live issue across Europe in recent years and so the findings of the Bundeskartellamt will also be reviewed with interest by other competition authorities. In the UK, for example, the private healthcare market has been the recent subject of an in-depth market investigation by the Competition & Markets Authority (CMA). Additionally, the CMA has – in collaboration with Monitor, the UK’s healthcare sector regulator – investigated several mergers between hospitals and has intervened to prevent mergers that would reduce patient choice and/or incentives for hospitals to offer better quality or value for money.  This is certainly one to watch.