Healthscope Limited - proposed acquisition of 14 hospitals from Ramsay Health Care

Summary

Healthscope Ltd - acquisition of 14 hospitals from Ramsay Health Care Ltd

Market definition

Local markets for: (i) the supply to health funds (and entities undertaking similar functions - for example, the Repatriation Commission) of the right for their members to be supplied with general overnight hospital services at specified rates (in practice, often there is no charge to health fund members); and (ii) the supply to health funds (and similar entities) of the right for their members to be supplied with rehabilitation hospital services at specified rates. The ACCC concluded that the geographic dimension of local rehabilitation hospital markets was likely to be wider than that for local general surgical and medical hospital markets.

Competition analysis

The ACCC decided not to oppose Healthscope's acquisition of 14 hospitals from Ramsay Health Care Ltd. The hospitals were located in Sydney (4), Brisbane (1), Perth (1) and Melbourne (8).

The ACCC considered that Healthscope's current hospitals in Sydney and Brisbane were unlikely to be in the same local markets as the ones it proposes to acquire from Ramsay. The acquisition of a hospital in Perth will be Healthscope's first in that city.

Healthscope proposed to acquire hospitals in Melbourne in local markets (both for general hospital services and rehabilitation hospital services) where it already owns hospitals. Pre-acquisition, a health fund going out of contract with Healthscope would lose access for its members to existing Healthscope hospitals. Post-acquisition, the fund would lose access for its members to these hospitals and the hospitals Healthscope proposed to acquire. The ACCC compared the position of health funds pre- and post-acquisition, focusing on any change in their ability to offer members access to a satisfactory range of hospitals if they refused to enter a Hospital Purchaser Provider Agreement (HPPA) with Healthscope containing higher prices. The ACCC concluded that health funds' ability to resist price increases sought by Healthscope (by convincingly threatening to go out of contract) would not be sufficiently affected by the proposed acquisitions to substantially lessen competition. In reaching this conclusion, the ACCC took account of the nature and number of non-Healthscope hospitals that would remain in the relevant markets post-acquisition.

Merger type

Horizontal

Initiation

Parties