The Dutch Healthcare Authority (“NZa”) has applied a healthcare-specific merger test since 2014. Now, eight years later, it’s time to take stock. What will be done about this test in 2022? Will it finally be transferred to the Netherlands Authority for Consumers and Markets (“ACM”)? Or will the test first be changed by the NZa itself in 2022? This blog addresses the current state of affairs and the question why it would be preferable to abolish the test, rather than change or transfer it.
Healthcare-specific merger test: taking stock
The NZa has been tasked with enforcing the healthcare-specific merger test since 1 January 2014. Healthcare providers require the NZa’s approval for a merger or acquisition, or to set up a joint venture (referred to below as a concentration). A notification may be submitted to ACM only after the NZa has given its stamp of approval. The NZa merger test has a very low threshold. The obligation to notify a concentration to the NZa applies to any concentration involving one healthcare provider that, as a rule, provides care to at least fifty people. This relates to care activities under the Zorgverzekeringswet (Healthcare Insurance Act), the Wet langdurige zorg (Long-Term Care Act) and the Wet op de beroepen in de individuele gezondheidszorg (Individual Health Care Professions Act). The NZa merger test does not involve turnover thresholds such as those that apply to merger reviews by ACM. Moreover, a concentration is also subject to notification to the NZa if one healthcare provider merges with a non-healthcare provider or is otherwise involved in a concentration.
In practice, the low thresholds of the NZa merger test mean that almost every healthcare concentration that must be notified to ACM must first be notified to the NZa. This not only means double work, but also places significant administrative and other burdens on the NZa. The threshold of the NZa merger test is so low that a great many healthcare mergers are subject to the merger test. The Memorie van Toelichting (Explanatory Memorandum) to the 2012 bill assumed that an average of 25 concentrations per year would be subject to the NZa merger test. That number has been greatly exceeded in each of the past eight years. In the 2014-2020 period, for instance, the NZa made an average of 125 healthcare merger decisions per year: no fewer than 165 in 2018, 183 in 2019 and 156 in 2020. In 2020, the original estimate of 25 NZa notifications per year was therefore exceeded by a factor of six.
The NZa capacity consequently involved over the past eight years could also have been used for other purposes. The administrative burden placed on the NZa can also be found at healthcare providers and investors every year. When a concentration is reported to the NZa, the healthcare providers involved are required to draw up a merger impact report. This means, among other things, that healthcare providers must closely involve clients, personnel and other stakeholders in the decision-making process. Although the notion that a healthcare merger must be carefully considered is commendable, the NZa test was and is not required to achieve that end, since that is now safeguarded by other laws and regulations; see here and here. Statistically, the added value of the test is also very doubtful. Despite reviewing hundreds of healthcare concentrations, the NZa has not yet prohibited a single one of them. In a very limited number of cases (see here, here and here) the NZa did attach conditions to a merger, however. At the same time, the NZa also spent time these past eight years on tracking down and imposing fines for healthcare concentrations that had not been notified to the NZa; see here.
Bill on the transfer of the NZa merger test to ACM has been pending for five years
The legislature became aware relatively soon after the NZa merger test came into force in 2014 that it required adjustment. In 2016, partly for that reason, the wetsvoorstel Positionering taken NZa (Bill on the Positioning of the NZa’s Tasks) was sent to the Lower House. One of the objectives of the bill is to adjust the healthcare-specific merger supervision and to transfer it from the NZa to ACM, together with the Significant Market Power instrument. More information on this transfer and the associated low turnover thresholds that would apply after the transfer of the healthcare-specific merger test can be found here and here. The debating of the bill has been remarkably slow. The bill was declared controversial after the fall of the Rutte III government in January 2021. The Standing Committee for Health, Welfare and Sport of the Lower House is now finally meeting to debate the bill. The government's response to the questions raised by the Lower House in 2019 regarding the bill will now have to be awaited. The Lower House wanted more clarity, for instance, on how and within what timeframe ACM will be implementing its new tasks. Although the discussion of the bill has finally commenced, it does not appear that the bill will be adopted by both the Lower House and the Upper House in 2022. This would mean that 2022 will be the ninth year without any changes in the review of healthcare concentrations by the NZa on the basis of the healthcare-specific merger test. Or will the NZa itself be changing the test?
NZa to change the healthcare-specific merger test in 2022
In anticipation of the Bill on the Positioning of the NZa’s Tasks, the NZa is currently working on a policy change regarding its merger test. The purpose of the policy change is apparently to make the test more efficient and effective. For instance, the NZa wants to prevent the merger test from also applying to concentrations between entities that, in practice, do not provide care. That situation may currently occur if the entities involved in the concentration belong to a group in which one or more other entities do provide care at a different level within the same group. The NZa therefore wants to reconsider its own interpretation of the scope of the merger test. It furthermore wants to avoid a situation in which, when stakeholders are informed about a proposed merger, stakeholders that, in practice, are not involved in the merger or in the provision of care by the entities in question also need to be informed. In such cases, informing stakeholders offers no added value and merely delays the process. The NZa may therefore reconsider its interpretation of the term “stakeholder”. The NZa will likely publish a brochure in April or May 2022 setting out its policy changes regarding the merger test. Although it is commendable that the NZa is taking these steps, more is needed. This is explained below.
NZa merger test was and is demonstrably superfluous
The NZa's healthcare-specific merger test has been the subject of much criticism in recent years. That was the case before the introduction of the test (see here) and is the case still (see here, here, here and here). Not only the added value of the merger test has been questioned, but also the significant administrative burden. As identified in this preliminary report, the test imposes a great administrative burden on healthcare providers. That is remarkable, since the legislature in fact announced that it intended to reduce the administrative burden for small healthcare providers. Moreover, the low 50-person threshold of the NZa merger test implies that the NZa’s capacity is focused primarily on relatively small healthcare providers. These cases usually have little to do with monster mergers and “too big to fail” healthcare providers. That is also remarkable, since the Explanatory Memorandum specifically refers to countering the possible risks created by “large healthcare conglomerates”. First and foremost, monster mergers in the healthcare sector have had to be notified to ACM in the past ten years. ACM has said it assesses care mergers very critically and has for years been able to allow or prohibit them only subject to strict conditions (Parnassia/Antes). Examples include the ACM prohibitions of Zorggroep Noordwest Veluwe/Het Baken, Rivas/ASZH and ZGA/Trimenzo in combination with Sensire/Trimenzo and Bergman Clinics/Mauritskliniek. The NZa healthcare-specific merger test was not needed to conditionally approve or prohibit these healthcare mergers.
Abolish the test to allow the NZa and ACM to focus on real problems in the healthcare sector
For many years, the NZa and ACM have had to address many issues in order to safeguard the proper functioning of the healthcare system. This applies not only to healthcare mergers, but also to the supervision of healthcare procurement and the enforcement by the NZa of the duty of care and the care procurement obligation of the health insurers and care administration offices. The same applies to the provision of information by healthcare insurers to consumers and the effective tackling of the ever increasing healthcare policy jungle by the NZa and ACM. It makes no sense to transfer the NZa test to ACM, since ACM’s time can be spent better than on first conducting a healthcare-specific merger test in addition to the current ACM merger test. The latest ACM guidelines for the healthcare sector are now twelve years old and in need of an update. No NZa and ACM investigation into excessive purchasing power of health insurers in the procurement of healthcare and their cooperation within the ZN (the Association of Dutch Health Insurers) had been conducted in the past ten years either. Like the NZa, ACM focuses on the supervision of healthcare providers. For years, for instance, ACM has directed its attention exclusively towards healthcare providers in enforcing the cartel prohibition; see here and here, for instance. Health insurers have therefore been able to dodge the bullet these past 15 years, despite signals that health insurers in the context of the Association of Dutch Health Insurers have coordinated and shared matters, which is (or may be) incompatible with the cartel prohibition; see here and here. In sum, it is time for the NZa and ACM to reconsider their enforcement priorities and to critically reassess the deployment of their capacity.
It is clear that the merger test, which originated from a flawed law, is superfluous and has given rise to duplication of work for eight years already. The shortcomings of the test and the unnecessary burden it creates will not suddenly be removed by transferring it to ACM. If the Minister of Health, Welfare and Sport wished to be of service to supervisory authorities NZa and ACM, care providers and the compulsorily insured, the solution is to abolish the healthcare-specific merger test as soon as possible. The NZa and ACM could then do what they should have been doing for years: more closely supervise healthcare procurement by insurers and care administrative offices, effectively tackle the healthcare policy jungle, and improve the provision of information to consumers by insurers and care administrative offices.
More information on the assessment of transactions in the healthcare sector by the NZa and ACM can be found at zorgspecificfusietoets.nl. More information on the rights of healthcare providers and the obligations of healthcare purchasers in healthcare procurement can be found at zorgcontractering.com.Follow Maverick Advocaten on Twitter and LinkedIn