Concentrations in the healthcare sector in the Netherlands: futureproof?

The rules for obtaining approval from the Dutch Competition Authority ("ACM") and the Dutch Healthcare Authority ("NZa") for mergers and acquisitions ("concentrations") in the healthcare sector have changed. This blog provides an overview of the changes that the NZa has already introduced as of 1 July 2022 and the changes that will apply to the ACM as of 1 January 2023.

Changes to care-specific concentration test NZa

Under Article 49a(3) of the Health Care (Market Regulation) Act, a concentration must receive prior approval from the NZa when a healthcare provider that provides healthcare by 50 persons or more is involved in the merger. As of 1 July 2022, the NZa has already adjusted its notification procedure in three areas: 1) scope of the healthcare-specific merger test, 2) description of the financial consequences of the concentration and 3) hearing of clients and staff in the proposed concentration.

1. Limiting the scope of healthcare-specific merger test: One of the changes is that only concentrations directly involving a healthcare provider have to be reported to the NZa. This means that the entity involved in the concentration (i) itself provides healthcare or (ii) indirectly controls an entity that provides healthcare (see also the amended application form). Narrowing the scope of the test will particularly affect investment companies, where there is a healthcare provider somewhere in the group but the acquisition involves a non-healthcare provider being taken over by a non-healthcare provider in the group. In that case, such concentration no longer needs to be approved by the NZa.
2. Description of financial consequences of the concentration: The NZa will request more information in some situations to establish a realistic picture of the medium-term financial impact of the merger. Three circumstances are decisive for this: (i) all organisations involved have a positive operating result; (ii) one of the organisations involved has a negative operating result; and (iii) in addition to approval by the NZa, approval by another external regulator (e.g. the ACM or the European Commission) is required (see also par. 2.4. of the explanatory notes to the amended application form).
3. Involving clients and staff: Involving clients and staff in a concentration is also an important test for the NZa and this requirement will now be extended. From now on, the NZa will ask healthcare providers directly involved in the concentration to involve their clients and staff in the concentration (regardless of whether they are obliged to establish a client council or works council under the Wmcz 2018 and the WOR, as was previously the case).

Healthcare merger thresholds ACM - healthcare concentrations less likely to be subject to ACM scrutiny

From 1 January 2023, the rules for obtaining approval from the ACM for concentrations in the healthcare sector will change. The Minister of Health, Welfare and Sport ("the Minister") has decided to drop the so-called reduced healthcare thresholds.

Concentrations - based on regular competition regulations - require prior approval by the ACM when at least two companies involved in the concentration jointly achieve a global turnover of €150 million or more and at least two companies involved achieve an individual turnover in the Netherlands of €30 million or more. These are also known as the 'regular turnover thresholds'.

Healthcare concentrations (i.e. between healthcare providers) have been subject to reduced turnover thresholds since 1 January 2008. This is based on the Besluit tijdelijke verruiming toepassingsbereik concentratiestoezicht op ondernemingen die zorg verlenen (Decree temporarily widening the scope of merger supervision of companies providing healthcare services, “Healthcare Thresholds Decree”), which has since been extended three times each for the duration of five years. Based on this decree, a concentration between healthcare providers must be reported to the ACM if in the previous calendar year:

1. the companies involved had a combined turnover of €55 million or more;
2. at least two companies involved have each achieved a turnover of €10 million or more in the Netherlands; and
3. at least two companies involved made €5,5 million or more providing certain care granted on the basis of the Healthcare Insurance Act, Long-Term Care Act or Social Support Act.

The Minister has indicated that he intends not to extend the Healthcare Thresholds Decree (see also the Decision Memorandum). As a result, from 1 January 2023, healthcare providers will be subject to the regular turnover thresholds for assessing whether they have to obtain approval for the concentration from the ACM. The increase in the notification threshold will at least save smaller healthcare providers administrative burdens, legal costs and the ACM filing fee of €17,450. Note that there may still be an obligation to report the concentration to the NZa, regardless of whether there is an obligation to report to the ACM.

Reasons for abolishing the reduced healthcare thresholds

Abolishing the special healthcare regime for concentrations at the ACM is based on two reasons. First, the Minister commissioned an evaluation of the operation of the reduced turnover thresholds by the research firm AEF in 2021. According to AEF, an average of 10 mergers are notified annually based on the reduced healthcare thresholds. Out of the ten mergers, the ACM ultimately approves nine in the first phase. On an annual basis, only one concentration is rejected, allowed with conditions or withdrawn. The Minister believes that the administrative burden involved in these type of concentrations cannot justify the existence of the reduced healthcare thresholds.

Secondly, there is a change in government objectives, such as 1) promoting cooperation between healthcare providers, 2) reducing the administrative burden for healthcare providers and 3) combating fragmentation in certain healthcare sectors. Allowing the reduced healthcare thresholds to lapse can contribute to the aforementioned objectives, according to the Minister.

Viewpoint ACM

The ACM has since stated in a viewpoint its opposition to the abolition of the reduced healthcare thresholds. The ACM fears that the interests of patients and the insured will no longer be taken into account in concentrations. In addition, the ACM suspects that there will be more concentrations between healthcare providers that will gain a powerful position locally or regionally. This may have a negative effect on smaller healthcare providers as they are likely to be able to exert less pressure on larger healthcare providers. Patients and clients may also have less choice between healthcare providers at the local level and may face high prices. This is not sufficiently recognised by the Minister, according to the ACM.

Regarding the administrative burden, the ACM notes that the turnaround time of a notification for a healthcare concentration is 51 days on average and in some cases even shorter. Moreover, the administrative burden affects the head office of the healthcare provider, but hardly the healthcare staff who provide direct healthcare.

In addition, the ACM believes that abolishing the healthcare thresholds is more likely to hinder cooperation between healthcare providers. For instance, the ACM expects that healthcare providers are more likely to proceed with a concentration (which no longer needs to be reported to the ACM) instead of entering into collaborations in healthcare supply chains and networks on specific activities that provide targeted added value.

Regarding the fragmentation of healthcare supply, the ACM notes that concentrations of healthcare providers with an annual turnover below €10 million do not have to be reported to the ACM. They nevertheless need to be reported to the NZa. The threshold for obtaining approval from the NZa for concentrations is much lower: 50 persons or more need to provide healthcare. In 2021, the NZa issued 186 merger decisions (none of which it rejected) compared to 113 notifications assessed by the ACM over the past 13 years.

Merger test for the future

The ACM touched upon a sensitive issue. The Minister is abolishing the reduced healthcare thresholds to save healthcare providers from high administrative burdens. What the Minister apparently fails to realise is that in practice it is the healthcare-specific merger test of the NZa that increases the administrative burden on healthcare providers: the concentrations that have to be reported to the NZa are often (much) smaller in size and may concern a takeover of a dental practice, a pharmacy, a physiotherapy practice and so on, in a local/regional context. This has also been one of the reasons for the NZa to amend its policy around the healthcare-specific merger test, but the question remains whether this is sufficient to actually reduce the administrative burden for healthcare providers.

Since 2016, a bill that would transfer the healthcare-specific merger test from the NZa to the ACM has been pending in the Parliament. Perhaps the Minister will take ACM's subtle criticism into account when dealing with this bill. In any case, it would be advisable to include this in the decision-making for futureproof specific merger control rules for the healthcare sector.

For more information, please contact Pauline Kuipers, Reshmi Rampersad and Tialda Beetstra and visit our Competition & EU homepage.