CMA merger review: Diagnostics joint venture

Aldwych Partners gained CMA clearance for a public and private sector joint venture in diagnostic services. Our analysis of service provision, including the scope for competing provision of time-sensitive diagnostic tests, enabled a Phase 1 clearance decision by the CMA as well as setting the benchmark for subsequent competition authority analyses of this industry.

Aldwych Partners gained CMA clearance for a joint venture between iPP, Basildon & Thurrock University Hospitals and Southend University Hospital in pathology services.

Prior to the joint venture, Basildon & Thurrock and Southend each had their own in-house pathology service that carried out a broad range of tests for each hospital trust as well as GPs and other healthcare providers in their local area. The transaction involved outsourcing these pathology services to a joint venture company owned by the two trusts and iPP, a private sector pathology services company. Urgent pathology tests would continue to be carried out at each hospital, through the joint venture company, with other tests being carried out at a newly constructed off-site facility.

The primary competition concern in relation to the transaction was whether GPs and other healthcare providers, who currently sent their samples to the two hospitals for testing – and had the option of switching between hospitals – would no longer have any effective choice of provider. A key part of the case revolved around the distance that pathology samples could be transported for testing, given that many of these samples could deteriorate if not tested sufficiently quickly.

Working with our clients, Aldwych Partners was able to present persuasive evidence about the distance that pathology samples could be safely transported, and show that there was a sufficient number of other providers within this distance of the hospitals’ customers to provide alternatives in the event of poor service by the post-merger joint venture company.

As a result, the merger was cleared following a Phase 1 review.

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