Dispute between the Federal Ministry of Health and the Federal Cartel Office over privatisation of hospitals

30 October 2007

Dr Jörg Witting, Peter Rheinländer

The Federal Cartel Office has approved the acquisition of the psychiatric clinic Wunstorf from the federal state of Lower Saxony by the Klinikum Region Hannover GmbH only after imposing conditions. A few weeks before, a higher regional court confirmed a prohibition decision of the Federal Cartel Office on the acquisition of two hospitals by Rhön Klinikum AG.

The buyer, the Klinikum Region Hannover GmbH, owns thirteen hospitals within the administrative district Region Hannover. Amongst them is the clinic for psychology and psychotherapy Langenhagen. The target, the psychiatric clinic Wunstorf, is also geographically located in the administrative district of Region Hannover.

The Federal Cartel Office ruled that there is a separate product market for psychiatric hospital services. This was on the basis of the legal framework of the federal state of Lower Saxony for psychiatric hospital services as well as the specific characteristics of stationary psychiatric treatment.

In terms of defining the relevant geographical market the Federal Cartel Office kept to the narrow definition already applied in a merger control decision concerning the takeover of two publicly run hospitals by the privately owned Rhön Klinikum AG. In this decision the Federal Cartel Office prohibited the planned takeover on the grounds that Rhön Klinikum AG would gain market dominance within the relevant geographical market and patients would not be able to choose between various providers of stationary medical services. The two hospitals were geographically located both in Franken/Bavaria where the buyer Rhön Klinikum AG was already active.

In analysing the takeover of the psychiatric clinic Wunstorf by the Klinikum Region Hannover GmbH the Federal Cartel Office subdivided the administrative district of Region Hannover into several but overlapping geographical markets for psychiatric hospital services. On this basis it found that both the psychiatric clinic Wunstorf and the psychiatric clinic Langenhagen, which already belongs to the Klinikum Region Hannover GmbH, had market shares of more than 70% within their respective geographic markets. As a consequence of the takeover these market shares would rise to more than 80%.

For this reason the purchaser, Klinikum Region Hannover GmbH, agreed to assign a certain number of full and partly stationary beds to an independent competitor. Since this assignment is subject to the approval and authorisation of health insurances and the Federal State Authority, the Federal Cartel Office ruled that the takeover must not be completed before these permissions have been granted.

The prohibition decision delivered by the Federal Cartel Office on the merger planned by Rhön Klinikum AG was criticised in particular by the German Federal Ministry of Health since the public owner did not want to sell the two hospitals to another operator and subsequently closed down one of the two hospitals due to the lack of own financial resources. Accordingly, there is an intensive debate going on in Germany about the scope of German merger control in the health sector.

Source: press release of the Federal Cartel Office dated 11 May 2007 (www.Bundeskartellamt.de); report of the FAZ from 23 April 2007