Bournemouth and Poole blocked merger was costly, avoidable and suffered from bad timing

A new report launched today (Monday 14 December) by the Health Foundation, reveals the difficult circumstances including the ongoing reorganisation of the NHS which resulted in the decision to block the merger of two hospitals in Bournemouth and Poole.

The report, titled 'Mergers in the NHS' is the first detailed independent analysis of the proposed merger of Poole Hospital NHS Foundation Trust and the Royal Bournemouth & Christchurch Hospitals NHS Foundation Trust. The merger was blocked one year ago by the Competition Commission after an estimated £5m and significant management time had been spent throughout the long and arduous process to prepare for the merger.

To sustain the NHS and improve quality of care, as set out in the recent NHS Five Year Forward View, significant changes to services are needed. The case study raises questions as to the extent that the current regulatory regime is an obstacle to such changes.

The Bournemouth and Poole case raises important issues for the NHS. It has subsequently been cited as evidence that competition legislation is damaging the NHS, including during the recent the debate on Clive Efford MP’s Private Members Bill on NHS reform. However, the report concludes that the Bournemouth and Poole case should not be viewed as a wider barrier to future reforms given the unique circumstances of its timing and its status as a test case. The attempted merger was happening during the overlap with the passage through parliament of the controversial Health and Social Care Bill and the comprehensive reorganisation in the NHS following the Health and Social Care Act 2012.

The Competition Commission concluded that a proposed merger may be expected to result in a significant lessening of competition of services within the Dorset area. They then considered wider benefits and concluded that the evidence was not strong enough to suggest the merger would result in overall benefits for patients.

Emma Spencelayh, Senior Policy Fellow at the Health Foundation and co-author of the report, comments: “One of our recommendations is that the two trusts should have another opportunity to put their case forward given the unfortunate timing of their first proposal. If there is one main lesson from this report, it is that those pursuing merger or major reconfiguration must produce adequate evidence of patient benefit of their proposals at the outset.”

Dr Jennifer Dixon, Chief Executive of the Health Foundation and report co-author, comments:

“The empirical evidence on whether or not competition can benefit patients (when prices are regulated) is not strong, and other factors may have more impact on improving quality of care for patients. Until the evidence is more robust we suggest that the current tests for merger decision-making should be broadened, and benefits to patients the primary test.”

The regulatory authorities have subsequently published guidance making clear the process to be followed by NHS foundation trusts in future and, crucially, how to provide evidence of likely benefits to patients. In the future, trusts will receive significantly more support from Monitor prior to any review by the Competition and Markets Authority (the successor body to the Office of Fair Trading and Competition Commission).

The main conclusions from the report include:

• The Health and Social Care Act 2012 did not determine the merger decision-making process – it merely confirmed that mergers involving NHS foundation trusts would be subject to the decision-making process established under the Enterprise Act 2002.
• The trusts pursued their proposed merger at a time of considerable instability in the NHS following the widespread organisational change as a result of the Health and Social Care Act 2012.
• The two trusts were required to sign undertakings prohibiting the merger for a decade (without the explicit permissions of the competition authorities). Given that they pursued their proposed merger at a time of flux in the NHS and were viewed as a test case, they should have another opportunity to put their case forward.
• It is crucial that those pursuing merger or major reconfiguration produce adequate evidence of patient benefit from the outset.
• Following the decision to prohibit the merger both Monitor, the health sector regulator, and the Competition and Markets Authority have set out guidance demonstrating benefits to patients as well as seeking to improve sector knowledge of the merger control regime. This is to be welcomed.
• A test which looks at a broader range of issues, including competition, should be part of the merger decision-making process - this can be done within the existing legislative framework. However, more careful analysis on the role of competition in quality improvement, based on empirical evidence, is needed.
• There is ambiguity about whether NHS foundation trusts are independent bodies or whether they should be viewed as belonging to one large NHS chain, this is a question at the heart of how the NHS should be managed and regulated in practice.
• The recent review by Sir David Dalton advocates the buddying or acquisition of poorly performing NHS providers by ambitious and well performing NHS foundation trusts to step up performance in the former. Both arrangements will need to be thought through with reference to the issues raised in this report.

Notes to editors

The analysis draws on in-depth interviews with 10 interviewees with representatives from local providers, and commissioners that took place in 2014.

The functions of both the Competition Commission and the Office of Fair Trading were incorporated into the Competition and Markets Authority on 1 April 2014.

Media contact

Mike Findlay, Media Manager
T: 020 7257 8047
E: mike.findlay@health.org.uk