Acadia/Priory merger faces in-depth investigation
Acadia’s completed acquisition of Priory faces being referred for an in-depth investigation by the CMA.
Acadia Healthcare Company, Inc (Acadia) through its UK subsidiary Partnerships in Care, and Priory Group No.1 Limited (Priory) overlap in the supply of a number of inpatient and outpatient mental healthcare services to NHS organisations and local authorities in England and Wales.
Typically, patients in need of these services are referred to private providers when the NHS lacks the capacity to admit a patient close to their home. Acadia and Priory are two of the largest private providers of these services in the UK.
The Competition and Markets Authority (CMA) has looked at the local areas where the companies provide overlapping mental healthcare services and has identified over 20 local areas across 5 mental healthcare services where there could be a substantial lessening of competition (SLC) as a result of those responsible for commissioning the service in each area having a reduced choice of providers. The services giving rise to concern are acute services, children’s and adolescent mental health services, psychiatric intensive care units, rehabilitation services and secure mental health services.
The merger will therefore be referred for an in-depth phase 2 investigation by an independent group of CMA panel members unless Acadia is able to offer undertakings which address the CMA’s competition concerns. Andrea Coscelli, Acting Chief Executive and decision-maker in the phase 1 investigation, said:
With the NHS facing capacity constraints across much of its mental health provision and demand continuing to rise, the private sector plays an important role in providing these vital services.
Customers have raised concerns with us about the merger and how it might affect their ability to obtain quality services at the best possible price. There are relatively few private providers for many of these services in England and Wales and, if the merger goes ahead, the incentives on providers to continue to supply the NHS with value for money services will reduce. Whilst quality of care is the main consideration when making referral decisions, cost is clearly another important factor when such services are funded by the public purse. The bargaining position of the NHS organisations and local authorities funding the treatment is stronger when they have a choice of providers.
These issues mean an in-depth investigation is required, unless the companies are able to offer undertakings which address our concerns.
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law.
- The Reference Test: under the Enterprise Act 2002 (the Act) the CMA has a duty to make a reference to phase 2 if the CMA believes that it is or may be the case that a relevant merger situation has been created, or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
- Under the Act a relevant merger situation is created if 2 or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million (‘the turnover test’) or as a result of the transaction, in relation to the supply of goods or services of any description, a 25% share of supply in the United Kingdom (or a substantial part thereof) is created or enhanced (‘the share of supply test’).
- The CMA’s duty to refer the merger for a phase 2 investigation under the Act is not exercised whilst the CMA is considering whether to accept undertakings (if offered) in lieu of a reference. Acadia has until 21 July 2016 to offer undertakings to the CMA that might be accepted by the CMA. If no undertakings are offered and accepted, then the CMA will refer the merger.
- All the CMA’s functions in phase 2 merger inquiries are performed by inquiry groups chosen from the CMA’s panel members. The appointed inquiry group are the decision makers on phase 2 inquiries. The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business. The membership of an inquiry group usually reflects a mix of expertise and experience (including industry experience).
- The full text of this decision will be placed on the merger case page as soon as is reasonably practicable.
- Enquiries should be directed to Simon Belgard (simon.belgard@cma.gsi.gov.uk, 020 3738 6472) or Rory Taylor (rory.taylor@cma.gsi.gov.uk, 020 3738 6798).
- For more information on the CMA see our homepage, or follow us on Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on merger cases.