COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 11/LM/Mar10
In the matter between:
Life Healthcare Group (Pty) Ltd Acquiring Firm
And
Amabubesi Hospitals (Pty) Ltd
Target Firms
Bayview Private Hospital (Pty) Ltd
Panel : Norman Manoim (Presiding Member),
Yasmin Carrim (Tribunal Member)
and Andreas Wessels (Tribunal Member)
Heard on : 02 June 2010
Order issued on : 02 June 2010
Reasons issued on : 09 June 2010
Reasons for Decision
Approval
[1] On 02 June 2010, the Tribunal unconditionally approved the merger
between Life Healthcare Group (Pty) Ltd (“LGH”) and Amabubesi
Hospitals (Pty) Ltd (“Amabubesi”). The reasons for approving the
transaction follow.
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The Transaction
[2] The proposed transaction is for the acquisition of 100% shareholding by
Life Healthcare Group (Pty) Ltd (“LGH”) in Amabubesi Hospitals (Pty) Ltd
(“Amabubesi”) and consequently Bayview Private Hospital (Pty) Ltd
(“Bayview”).
The parties and their activities
[3] The primary acquiring firm is LGH, a key player in the South African
healthcare sector which is controlled by numerous shareholders. LGH’s
primary business is acute hospital care. This includes a geographical
spread of acute care hospitals and same day surgical centres in Southern
Africa. LGH’s private facilities are complemented by related healthcare
services that integrate the healthcare delivery system covering the full
spectrum of medical care.
[4] The target firms are Amabubesi and Bayview. Amabubesi has a wholly
owned subsidiary in Bayview Hospital. Bayview hospital is an independent
hospital falling under the umbrella of the National Health Network.
[5] Bayview hospital provides hospital services including the following
specialities: cardiology and cardiothoracic surgery; orthopaedic surgery;
urology; ear, nose and throat surgery; gastroenterology; general surgery
and endoscope surgery; gynaecology; neurosurgery and neurology;
ophthalmology; vascular and endovascular surgery.
The relevant market
[6] The product market is that of the provision of private hospital services.
[7] Hospitals compete with one another on several levels. They may compete
on price (tariffs) at a national level and on a non-price basis on a local
level. The relevant geographical market is therefore the national and local
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market. A dualistic approach 1 was followed to analyse the geographical
market and to consider the national and the local market.
[8] The national market is defined by reference to pricing negotiated between
hospital groups and medical aid schemes which apply nationally. The
market share accretion post the proposed transaction, in the national
market, is one that is of no significant concern.
[9] The relevant hospitals, in considering the local market, are those situated
in the areas close to the target hospital, i.e. Bayview. Bayview hospital
supplies private hospital services in the Mossel Bay area in the Southern
Cape Province. LGH’s nearest hospital to the Bayview is Life Knysna
hospital (“Life Knysna”) which is approximately 124 km away and a 1 hour
30 minutes drive from Bayview.
[10] Bayview Hospital is not in close proximity to Life Knysna. In applying the
fixed radius test there is no local geographic overlap in the activities of the
merging parties and in using the variable radius test, none or very few of
the patients at Life Knysna come from the Mossel Bay area. 2 The
Commission submitted that the specialists at Life Knysna confirmed that
they have just one practise and that there is difficulty in commuting
between Life Knysna Hospital and Bayview Hospital and at the extreme,
specialists would re-locate their homes in order to practice at these
hospitals. This confirms that Life Knysna and Bayview hospitals could not
be said to be in the same geographical market. Therefore there is no
geographical overlap in the activities of the merging parties at a local level.
The impact on competition
[11] Due to the very low accretion in market shares at the national level and
regional level there are insignificant competition concerns.
[12] The merging parties submit further that based on the current pricing
strategies employed by the two hospitals on a similar case mix, the cost of
strategies employed by the two hospitals on a similar case mix, the cost of
1 As in the Nectare Hospital Group and Community Hospital. Case No: 68/LM/Aug062 Competition Commission Merger Report, Life Healthcare Group (Pty) Ltd and Amabubesi Hospitals
(Pty) Ltd and Bayview Private Hospital (Pty) Ltd at Page 13. CC Case No 2010Mar4963
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healthcare per day at LHG is considered to be lower than that at the
Bayview Hospital. Currently Bayview forms part of the National Health
Network. This network was granted an exemption by the Competition
Commission in which the independent hospitals were offered the ability to
provide greater competition in the market for private healthcare which is
currently dominated by the three large hospitals groups. Post the merger
transaction, Bayview will adopt the national pricing strategy of LHG.
[13] In relation to the effect of the merger on patients, the majority of patients
affiliated to private hospitals are affiliated to medical aid schemes. Since
medical aid schemes mostly negotiate with hospital groups at a national
level, the effect on patients due to the proposed transaction is not
significant. Further, Bayview hospital will have other hospitals exerting
competitive constraints upon the merging hospitals.
[14] Competition concerns are unlikely to arise as a result of the proposed
transaction as there is no potential of adverse affects on the ability of other
hospitals to compete for the doctors’ referral or to negate the
countervailing power of medical aid schemes.
Public interest
[15] It is not contemplated that there will be any retrenchments as a result of
the proposed transaction and no other public interest concerns arise.
Conclusion
[16] The transaction does not result in a significant prevention and lessening
of competition in the market for private hospital services and is approved
without conditions.
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____________________ 09 June 2010
Yasmin Carrim DATE
Norman Manoim and Andreas Wessels concurring.
Tribunal Researcher : Mahashane Shabangu
For the Merging parties : Bowman Gilfillan
For the Commission : Nazeera Ramroop
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