Bundeskartellamt prohibits merger between Heidelberg University Hospital and University Hospital Mannheim

Following an in-depth examination under competition law, the Bundeskartellamt has prohibited Heidelberg University Hospital’s proposed acquisition of a majority share in the University Hospital Mannheim.

The University Hospital Mannheim (UKMA), a municipal hospital formerly operated under the name Städtisches Klinikum Mannheim, was officially awarded the title of “University Hospital” in 2001. The UKMA is owned by the City of Mannheim, whereas Heidelberg University Hospital (UKHD) – just like three other university hospitals located in Freiburg, Tübingen and Ulm – is owned by the Land Baden-Württemberg. Although the Medical Faculty Mannheim has been integrated into Heidelberg University, the University Hospital Mannheim remains independent in running its hospital services.

Andreas Mundt, President of the Bundeskartellamt: “Our decision to prohibit the merger is based on extensive investigations which give us reason to expect that the merger will have significant negative effects on competition. This would be to the detriment of patients, in particular, as they would be left with only few, or for some medical areas hardly any, comparable and independent competing hospitals in the region to choose from. In the proceeding we also closely examined possible advantages of the merger. We took into account an argument put forward by the parties suggesting that an increase in a hospital’s size, a higher case volume and more specialisation tend to improve the quality of care. However, we do not believe that it takes a merger to achieve this advantage. Other forms of cooperation can have similarly positive effects, without giving up the hospitals’ independence. Moreover, in our view it is not valid to assume that large university hospitals automatically become better by becoming even larger. There is good reason why also in the hospital sector, merger control is tasked with preserving diversity, thus ensuring that patients continue to have a choice between hospitals owned by different operators.”

In second-phase proceedings the Bundeskartellamt examined the range of medical services and the catchment areas of more than 320 hospitals within a radius of approximately 150 km around Heidelberg. In addition, it surveyed a total of 30 hospitals and 215 specialists in private practice based in the region. It analysed anonymised data provided by the hospitals to determine which hospitals patients in the region tend to choose and which market areas would be affected by the merger.

Geographically, the merger affects Mannheim, Heidelberg and the surrounding area as well as Heppenheim, where a district hospital belonging to UKHD, Kreiskrankenhaus Bergstraße, is located. Heidelberg University Hospital and the University Hospital Mannheim are located approximately 20 km apart and are both active in the market for acute inpatient hospital services. As one of Germany’s largest university hospitals, Heidelberg University Hospital already has a dominant position in the Heidelberg hospital market. A merger with the UKMA would further strengthen this position. In addition, the merged university hospitals would also become dominant in both the Mannheim and the Heppenheim region. In the affected regions, the Bundeskartellamt considers the hospitals to be dominant not only in the general market for acute inpatient hospital services, that is the market for general hospital services, but also in the provision of acute inpatient services for children and adolescents, where the parties are the clear market leaders. If their dominant position were to be consolidated, patients and physicians in private practice admitting patients to hospital would be left with hardly any choice of hospital. Quality-based competition can only exist between hospitals with different operators. If, however, all major hospitals are run by the same operator, quality-based competition will suffer as the hospitals will no longer face the risk of patients choosing a competing hospital. When it comes to cutting-edge medicine, the highly specialised university hospitals have an even stronger regional position than in the general market for acute inpatient hospital services. However, there are no clear lines between cutting-edge and “standard” medicine, which makes it hard to define two distinct market segments.

Possible efficiency gains

In the course of the merger control proceeding the parties claimed that the merger would bring advantages, which the Bundeskartellamt took into account as merger efficiencies. The claimed advantages relate, for example, to so-called volume-outcome effects, where an increased case volume leads to an increase in the quality of care. Provided that peer-reviewed studies confirm an improved quality of care, the Bundeskartellamt of course has to recognise such effects. In the present case, however, volume-outcome effects are not capable of offsetting or substantially mitigating the negative effects on competition. This is because such effects are naturally limited, especially as they depend more on the specialisation of individual doctors and how frequently they are assigned to cases than on the hospital case volume in a given medical treatment. In addition, as university hospitals and maximum care providers with more than 1,000 planned beds each, both parties clearly lead the field with many of their medical departments already. When examining possible efficiency gains, the Bundeskartellamt also had to assess the essential question of whether the merger is actually indispensable for achieving the desired effects. This was found not to be the case. Efficiency gains and improved quality can also be achieved through medical and scientific cooperation, which is an option that is always available to hospitals, including the university hospitals in question. A merger between the hospitals, on the other hand, after which their services are run by a joint management team, will give the parties long-term excessive market power in relation to patients, doctors, cooperation partners and competitors. Many of their current competitors or cooperation partners depend on working together with one of the two university hospitals. In the Bundeskartellamt’s view, the advantages the merger is claimed to bring for the parties do not outweigh the negative effects the merger is simultaneously expected to have on third parties.

The prohibited merger must not be implemented. The decision will be available on the Bundeskartellamt’s website.

The Bundeskartellamt’s decision is not yet final. It can be appealed to the Düsseldorf Higher Regional Court.