The Dutch Healthcare Authority (“NZa”) wants broader (substantive) powers to review healthcare mergers more intensively. It also wishes to involve the Health and Youth Care Inspectorate (“IGJ”). At the same time, the Netherlands Authority for Consumers and Markets (“ACM”) also wants to be able to review more healthcare mergers. What’s going on? And when will the NZa, the IGJ and ACM get the powers they want? We list the developments in this blog.
NZa: substantive expansion of care-specific merger review with input from IGJ
Mergers and acquisitions in the healthcare sector are likely to be notifiable to the NZa. Between July 2022 and December 2023, the NZa assessed no fewer than 295 mergers on the basis of the care-specific merger review. Only twice did the NZa not give the go-ahead (see here and here). In both cases Co-Med was not given permission to take over a GP practice.
In its healthcare-specific merger test, the NZa assesses whether the healthcare providers involved have completed the merger or acquisition process with due care. It is largely a procedural review. It raises questions such as whether the healthcare providers have adequately identified the expected financial consequences, and whether clients, employees and other stakeholders have been sufficiently involved. The most recent substantive change to the NZa review was made in June 2022 (see this blog). In healthcare-specific terms, the NZa’s healthcare merger review assesses only whether the continuity of certain crucial healthcare is at risk. Since no further substantive review is conducted, the Ministry of Health, Welfare and Sport (the “Ministry”) says it has very little scope to prevent clearly undesirable mergers in conducting its healthcare-specific merger test. Clearly undesirable mergers include mergers in which one of the parties involved is of substandard quality. Earlier, NZa-approved acquisitions by Co-Med gave rise to a great deal of controversy in this regard. Healthcare mergers or acquisitions give rise to the risk of a healthcare provider becoming ‘too big to fail’ as a result of series of acquisitions. According to the Ministry, the continuity of healthcare may then be jeopardised. The process used to achieve this end is referred to by regulators as ‘stringing together beads’.
The Ministry has assessed how the NZa’s healthcare-specific merger test could be substantively expanded. In June 2024, the Ministry reported that it wishes to expand the NZa’s powers in that field. The proposed expansion relates to the following three aspects:
- The continuity of healthcare will no longer be assessed only in the case of crucial care. The continuity of all the healthcare provided under the Healthcare Insurance Act and the Long-Term Care Act will be assessed in the future.
- The NZa will be allowed to include wrongful behaviour in its healthcare-specific merger test. This concerns breaches of laws and regulations, such as wrongful claiming. If the NZa identifies risks in the field of lawfulness, it will be able to prevent a merger or acquisition in the future. This will require a legislative amendment, however.
- In the future, the IGJ will have to present an opinion to the NZa on the quality of healthcare in the case of ‘significant concentrations’. The NZa will thereby be given the power to prevent a merger from going ahead if the quality of care is at risk. It remains to be seen what will constitute ‘significant concentrations’.
The Ministry will discuss with the NZa and the IGJ in the coming period how exactly these changes will be implemented. Since the proposed expansion will involve amendments to the Wet marktordening gezondheidszorg (Healthcare (Market Regulation) Act), the expansion of powers will take at least another year.
ACM in favour of reintroducing reduced turnover thresholds in healthcare and a call-in option
The reduced turnover thresholds for merger supervision by ACM in healthcare have no longer applied since 1 January 2023. This means that healthcare mergers are now notifiable to ACM only if they meet its regular turnover thresholds. The NZa has studied the effects of the abolition of the reduced healthcare turnover thresholds. In 2023, twelve healthcare concentrations were not notified to ACM that would have been notifiable under the abolished reduced healthcare turnover thresholds. However, eight healthcare
concentrations were reported to ACM in 2023 because the companies involved met the aforesaid regular ACM turnover thresholds. Each of these eight healthcare concentrations was approved by ACM without any conditions being imposed. The picture in 2023 therefore differed from that in 2022. In that year, ACM prohibited the concentrations of Mediq/Eurocept and Bergman/Mauritskliniek. The Rotterdam Court was rightly critical of ACM’s approach in these two cases and overturned the bans imposed by ACM. Nevertheless, ACM would prefer to see the reduced turnover thresholds for the healthcare sector reintroduced as soon as possible. ACM is furthermore pushing for a so-called ‘call-in’ power (also for transactions outside healthcare). The call-in power would allow ACM to investigate a merger or acquisition even if it does not meet the turnover thresholds. This system already exists in Sweden, Italy and Ireland, among other countries.
Stringing of beads and ban on profit distribution
In particular, the ‘stringing together of beads’ by private equity, whereby an investor acquires small players one by one, appears to be the reason for this (see this blog). But the call-in option does have certain drawbacks for healthcare providers, such as the lack of legal certainty and the cost and administrative burden involved in an ACM process. Moreover, the vast majority of healthcare mergers are approved. And even if beads are strung, it does not go without saying that small concentrations in healthcare are necessarily problematic.
The Lower House adopted three motions in September 2024 (see here, here and here) that collectively aim to achieve a ban on private equity in healthcare and to further restrict profit distribution in healthcare. The Minister of Health, Welfare and Sport (the “Minister”) was thereby particularly critical of the motion on the proposed ban on private equity in healthcare. In response to concerns about private equity in healthcare, the Ministry earlier this year commissioned a study into its scope and effects. According to the study, there is no reason to ban private equity investments in healthcare. This outcome of the study is in line with the Minister’s view. In the Parliamentary debate of 5 September 2024, the Minister again stressed the importance of private investors in healthcare and feared that such a ban would have the effect of jeopardising the financing of certain (innovative) forms of healthcare. In Minister Agema’s words: “I do of course promise Mr Dijk that I will tackle the money grabbers in the healthcare sector in every possible way, but it would be a great shame if we were to throw the baby out with the bathwater.” In other words, private equity is also beneficial to the Dutch healthcare sector. She therefore specifically advised the Lower House against passing the motion, in light of the findings of the study and doubts about the legal tenability of the motion. The Lower House nevertheless adopted the motion, despite Minister Agema’s objections. As the Minister stressed, the question is whether the prohibition for which the motions provide is legally tenable. This makes it difficult to (quickly) achieve such a prohibition, in our opinion, Partly for this reason, a radical change of course by the Ministry with regard to private equity is therefore unlikely.
It should also be noted that, before the three motions were adopted, the Ministry announced its intention to take a number of measures to mitigate the risks to the quality, affordability and accessibility of care. The tightening of the care-specific merger review is one of those measures. A bill for the Good Governance by Healthcare and Youth Care Providers Act has been submitted following advice from the Council of State. By means of this bill, the Ministry aims to guarantee good governance and impose conditions on the distribution of (excessive) profits.
Why ACM considers lowered turnover thresholds and a call-in option in healthcare unnecessary
Although it is commendable that, in addition to the Ministry and the NZa, ACM is also expressing the need for more powers, the other side of the coin should also be mentioned. As the Ministry also recognised in the Comprehensive Care Agreement (IZA), there are already a multitude of administrative burdens in the healthcare sector – not least in light of the intensive reviews already conducted by the NZa in that sector. Every ‘bead strung’ in healthcare usually requires notification to the NZa. As described in this blog, the Ministry wants to further intensify the NZa’s healthcare merger review. Although it is understandable that on certain points a substantive review by the NZa is desirable, there is a risk that the proposed substantive review will be unnecessary for many transactions. Since a generic framework applies to the healthcare-specific merger test, all notifiable healthcare transactions will have to comply with the substantive healthcare-specific merger test. This places a significant administrative burden on healthcare providers. The question is whether the burdens involved in a generic intensification of the healthcare-specific merger test by the NZa outweigh its proposed added value. If consideration is given to tightening the review, it would make sense to aim for the most targeted review possible. If, on top of the expansion of the NZa review, ACM were also to have its say due to lowered turnover thresholds or the call option, the administrative burdens in healthcare would be further increased. The question is whether that is necessary. We believe it is not, and list a few reasons below.
- If a healthcare provider wished to abuse an alleged dominant position resulting from one or more healthcare transactions, the NZa and ACM may also jointly (see Article 18(5) of the Healthcare (Market Regulation) Act) deploy the significant market power (SMP) instrument. (speedily) where necessary (Articles 48/49 of the Healthcare (Market Regulation) Act). The imposition of a contracting obligation is among the successfully tested options in this respect. Moreover, this and various other SMP obligations can be imposed even before any abuse actually occurs. Thus, negative consequences of that SMP-position can be prevented by the NZa and ACM. The NZa has done so in the past and this has been deemed permissible by the highest administrative court.
- The adaptation of the existing SMP instrument was recently assessed by the Ministry. The SMP instrument has barely been deployed, but it is fit for purpose according to the Ministry. The Ministry is therefore calling on the NZa to actually deploy the instrument (more often). This demonstrates that the NZa (see Article 18(5) of the Healthcare (Market Regulation) Act) and ACM have adequate instruments at their disposal, but are not deploying them (or willing to do so). There may be several reasons for this. One of them is that, because of the permanent market power of the healthcare buyer(s), an SMP position on the part of the healthcare provider is unlike to arise, also not as a result of a merger that is not already notifiable to the NZa and ACM. This is not the first time that the NZa and ACM underestimate the market power already exercised by healthcare buyers in practice (see this case) and action is not necessary.
In short, ACM (together with the NZa) already has sufficient instruments at its disposal precisely in the healthcare sector. In light of the Comprehensive Care Agreement, the Ministry, the NZa and ACM should also take into account the accumulation of administrative burdens that would result from a merger or acquisition in the healthcare sector if all of their wishes were fulfilled. Either way, the proposed call-in power for ACM, like the tightening of the NZa healthcare merger test, will first have to be enshrined in law. Experience shows that a legislative process usually takes at least a year. It will therefore be some time before this could become a reality. For now, the proposed additional powers of the NZa, the IGJ and ACM will not stand in the way of collaborations, mergers, joint ventures and acquisitions in the healthcare sector.
More information on the latest developments can be found at zorgspecifiekefusietoets.nl. More information and practical tips on the healthcare merger review is provided in our briefings.
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