Mediclinic fights to expand in North West province

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South Africa’s biggest private hospital group by value, Mediclinic International, has presented its final argument to the Competition Tribunal as it fights to expand in North West. Business Day reports that the Competition Commission blocked Mediclinic’s planned acquisition of Matlosana Medical Health Services (MMHS) near Klerksdorp in July 2017. At the time, the commission said it had recommended to the tribunal that the deal be prohibited because it was likely to substantially reduce competition in Klerksdorp and the surrounding areas, and would allow Mediclinic to unilaterally increase prices as soon as the transaction took effect.

The dampening effect on competition was compounded by the fact that two regional rivals had no plans to expand.

The report says Mediclinic owns private hospitals in southern Africa, Switzerland and the Middle East, and has a minority stake in the UK private hospital group, Spire Healthcare. It has a market capitalisation of R41.4bn, trailed by rivals Life Healthcare (R39.5bn) and Netcare (R38.5bn). Mediclinic owns just more than 8,100 private hospital beds in southern Africa, while Life Healthcare and Netcare own 9,055 and 10,605 in the region respectively, according to data published on their websites.

The report says like its rivals, Mediclinic has a stronger presence in some parts of the country than others: 18 of its 48 South African hospitals are in the Western Cape, 12 in Gauteng and only two in North West.

MMHS owns two multidisciplinary hospitals in Klerksdorp – Wilmed Park and Sunningdale – as well as the Parkmed Psychiatric Hospital and the Caerus Nursing Training School.
Mediclinic consultant Roly Buys said in the report that the company was one of several parties that bid for MMHS when it put itself on the market. It presented a good business opportunity, as Mediclinic did not at that stage have any hospitals in Klerksdorp. Its nearest facility was in Potchefstroom, 50km away, he said.

The report says the commission blocked Life Healthcare’s planned acquisition of Lowveld Hospital in 2015 on similar grounds. In both cases, the commission found the proposed mergers would lead to an immediate and substantial increase in tariffs, once they were changed from the model used by the National Hospital Network to the fee structure used by the acquiring party.

In the case of Life Healthcare, the merger was classed as an intermediate one, the report says the the commission had the final say. As the Mediclinic deal is classed as a large merger, the tribunal will decide on the matter. Mediclinic will still have the option of appealing if the tribunal does not find in its favour.

The National Hospital Network is a group of independently owned private hospitals that competes against the industry’s three big players.

The report says the tribunal declined to comment, while the commission had not responded questions at the time of publishing.

Business Day report

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