NMa: potential problems with acquisition of Vlietland Hospital by Dutch health insurance company DSW

Having conducted a preliminary investigation, the Netherlands Competition Authority (NMa) has concluded that the planned concentration between Cooperative Vlietland and the Foundation of Cooperating Hospitals in Schiedam and Vlaardingen could impede competition. The NMa foresees potential problems, particularly in the region of Schiedam, Vlaardingen and Maassluis, all of which are suburbs of the city of Rotterdam, on the markets of hospital care, nursing home care, and health care insurances. The NMa wants to further investigate the planned concentration's effects on patients and insured individuals.

Health insurance company DSW is one of Cooperative Vlietland's members, and it has veto powers in the cooperative. A considerable share of DSW's clients live in the aforementioned region. This is the first time that the NMa has ruled on a vertical concentration between a health insurer and a hospital. The cooperative's other members include general practitioners' cooperative Zorggroep Eerste Lijn, three government-subsidized health-care providers, as well as the medical specialists and other employees of Vlietland Hospital.

Relation between general practitioner and hospital care
The NMa's concerns primarily focus on the general practitioners' participation in the cooperative, and on the effects such a participation might have on the position of Vlietland Hospital and DSW. Because of their participation, the general practitioners may have an incentive to refer patients to Vlietland Hospital, thereby potentially strengthening its regional market position. In addition, if Vlietland hospital signed an exclusive contract with DSW, and thus not with other insurers, chances are that patients and insured individuals could become too dependent on DSW. It would potentially reduce regional competitive pressure on DSW from other insurers, which could then lead to DSW raising its clients' premiums. Whether, and to what extent this scenario will actually play out depends on a number of factors: the actual strength of the aforementioned presumed incentive for the general practitioners to refer patients to Vlietland Hospital, the extent to which clients are willing to be referred, and the number of insured individuals that would switch to DSW if it became the sole insurer having a contract with Vlietland Hospital. The NMa will be further investigating all of these aspects.

Nursing home care
The three government-subsidized health-care providers participating in Cooperative Vlietland, which are Stichting Argos Zorggroep, Frankelandgroep and Zorgcombinatie Nieuwe Maas, are the only players on the nursing-home care market in the three aforementioned Rotterdam suburbs. If patients were exclusively referred by Vlietland Hospital to these three providers, it could lead to potential entrants wishing to enter this region refraining from actually doing so, because of their anticipated limited access to potential clients. This is another point of concern the NMa plans to rule on after it has concluded its further investigation.

Cooperation among members of the cooperative
According to the draft version of the cooperative's bylaws, the cooperative's members and the hospital have the intention to cooperate on a number of health-care-related areas. However, the question whether this particular form of cooperation is allowed under the Dutch Competition Act is not part of the concentration assessment. It is up to each of the individual members themselves to ascertain whether or not a cooperative agreement complies with the Dutch Competition Act.

The Dutch Healthcare Authority's opinion
In its preliminary investigation, the NMa consulted with the Dutch Healthcare Authority (NZa). In its opinion, the NZa agrees with the NMa's conclusions. Furthermore, the NZa does not rule out the possibility that the planned concentration may negatively affect the accessibility, affordability and quality of the hospital care market, nursing home care market, and the health insurance market.

Next steps in the procedure
If the parties involved apply for a license, the NMa is required to issue a decision within 13 weeks on whether or not the concentration is allowed. When reviewing concentrations and acquisitions, the NMa assesses whether effective competition in the market is significantly impeded, particularly when a dominant position is created or strengthened. Such a dominant position can have negative effects on the price, quality and range of the products or services offered on the market. The NMa may attach conditions to a concentration, or it may disapprove of the concentration altogether. It is prohibited to go through with a concentration without having had the NMa assess it first.

The decision (in Dutch) will soon be published on the NMa's website (www.acm.nl).