Mediclinic to challenge Competition Tribunal ruling against it
Battle highlights the conundrum facing all three JSE-listed hospital groups, as they face regulatory constraints to domestic expansion and have struggled to succeed abroad
Private hospital group Mediclinic is poised to challenge the Competition Tribunal’s prohibition of its proposed acquisition of Matlosana Medical Health Services (MMHS) at the Competition Appeal Court, as it fights to expand its footprint in the North West.
The battle between Mediclinic and the competition authorities highlights the conundrum facing all three JSE-listed hospital groups — Mediclinic, Netcare and Life Healthcare — as they face regulatory constraints to domestic expansion and have struggled to succeed in many of their offshore ventures.
Mediclinic’s plans to acquire MMHS — which owns two hospitals in Klerksdorp, a psychiatric hospital and a nursing training school — were blocked by the Competition Commission in 2017. At the time, the commission said it was likely to substantially reduce competition in and around Klerksdorp and would allow Mediclinic to raise prices as soon as the transaction took effect.
Mediclinic took the matter to the tribunal and presented its final argument in mid-January.
The tribunal upheld the Competition Commission’s recommended prohibition, saying in late January that the transaction would lessen competition and drive up prices.
Mediclinic’s chief marketing officer, Biren Vilodia, said on Tuesday that the company has evaluated the tribunal’s reasons for its decision and will take the matter to the Competition Appeal Court. The the case is expected to be heard on October 14 and 15.
On Tuesday, the tribunal released the non-confidential version of its reasons for prohibiting the transaction, which it said would increase costs for both medical scheme members and patients who paid their own bills.
MMHS grants significantly larger discounts than Mediclinic on ward and theatre fees to patients who do not belong to medical schemes, and should the deal be permitted, these uninsured patients would have to pay higher rates, the tribunal said.
“These uninsured patients do not have the benefit of a medical scheme negotiating on their behalf, and from a public interest perspective, this group is thus important and significant. They are vulnerable when one considers consumer welfare and the importance of private healthcare in South Africa,” it said.
The tribunal said the proposed merger would make it difficult for medical schemes to exclude Mediclinic in the region when they were constructing networks of designated service providers, giving the hospital group the power to decline to offer discounts on such networks. Hospitals in designated service provider networks usually charge lower rates in return for guaranteed patient volumes.
The tribunal also said it has evidence that Mediclinic had previously attempted to leverage its dominance in one geographic region where it did not face much competition to require medical schemes to increase their utilisation of its facilities where it did face competition.