| Thu 19 Jan 2012, 14:41 | | THEE - The Competition Commission - Competition Commission recommends |
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JSE
THEE
THEE - The Competition Commission - Competition Commission recommends
prohibition of healthcare merger
MEDIA RELEASE
19 January 2012
Competition Commission recommends prohibition of healthcare merger
The Competition Commission has made a recommendation to the Competition Tribunal
to prohibit the acquisition of Joint Medical Holdings Ltd ("JMH``) by Life
Healthcare Group (Pty) Ltd ("LHG``), a wholly owned subsidiary of Life
Healthcare Group Holdings Ltd. According to the Commission`s assessment, LHG is
increasing its shareholding in JMH from joint to sole control.
LHG owns various hospitals throughout South Africa whilst JMH owns five
hospitals in and around the Durban area. As such, the product overlap occurs in
the Durban area.
The Commission found that the combination of LHG and JMH creates regional
dominance which undermines the ability of funders to stimulate competition
between hospitals in the Durban area by pitting them against each other when
negotiating terms and conditions of service. The proposed merger is likely to
lead to the erosion of the countervailing power of large medical schemes
especially in terms of their ability to construct cost-effective Designated
Service Provider Networks. Such networks enable medical funders to achieve
discounts from hospitals, which translate into lower contribution rates by
medical aid members.
Furthermore, a shift from joint to sole control of JMH could mean that the
countervailing power of the non-LHG shareholders, who are mostly doctors, will
be substantially reduced.
The proposed merger is likely to substantially prevent or lessen competition in
the Durban area and consequently lead to increases in the cost of healthcare.
"We are concerned about what seems like creeping concentration and regional
dominance of the hospital groups, and assess hospital mergers very carefully",
said Shan Ramburuth, the Competition Commissioner.
ENDS
For further details contact:
Molebogeng Taunyane, Coordinator: External Communication
012 394 3289/082 646 8663/ molebogengt@compcom.co.za
Date: 19/01/2012 14:41:01 Produced by the JSE SENS Department.
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