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20 August 2020
Following the recent legislative amendment obliging hospitals to establish and be part of a loco-regional hospital network,(1) on 22 July 2020 the Belgian Competition Authority (BCA) published a note setting out the principles that it will use when assessing the establishment of hospital networks and their possible qualification as concentrations under competition law.
The BCA is competent to examine concentrations of a certain size in all sectors, including forms of collaboration between hospitals. Hospitals are considered undertakings under Belgian competition law: they offer their services in return for remuneration, which is received either directly from patients or through patients' insurance. They are thus generally considered as engaging in an economic activity and therefore subject to competition law.
The Act of 28 February 2019 states that healthcare facilities, including hospitals, must create and be part of a network of hospitals, whose tasks include:
In other words, hospitals must engage in a network that frames the collaboration between them. This network must have its own management composed of representatives of the individual hospitals as well as independent directors. The law provides that this management body can take decisions that bind the individual hospitals which are members of said local network.
In its note, the BCA clearly indicated that competition rules on merger control apply in full to such loco-regional hospital network arrangements. This means that if the establishment of a hospital network fulfils the conditions of a notifiable concentration under the competition law rules enshrined in Book IV of the Code of Economic Law (CEL), it must be notified to and approved by the BCA before it is implemented.
Hospitals should be aware that the implementation of a concentration without the BCA's prior approval could result in significant penalties. For example, the BCA may impose a fine of up to 10% of the annual turnover of the hospitals concerned if they implement a notifiable transaction before its clearance by the BCA.
Notably, not all establishments of hospital networks automatically qualify as a concentration under Belgian competition law. To qualify as a concentration (that must be notified to the BCA depending on the hospitals' turnovers under Article IV.7 of the CEL), the hospital network concerned must bring about a lasting change in the individual hospitals' control. As noted above, a network's management body can take decisions that bind the individual hospitals that are members of that local network. Consequently, the management structure of the network and its influence on the strategic decisions of the individual hospitals are important criteria for determining whether such a change of control has occurred.
The question of whether a local regional network's management body's members have been given the power to take strategic decisions for the individual hospitals, which are part of the network, and has resulted in a lasting change of control (under competition law) over these hospitals must be answered on a case-by-case basis and depends on the characteristics of each network. Account should be taken not only of the way in which these hospitals were controlled before the creation of the network, but also of the composition and decision-making rules of the managing body of the network to which they now belong.
To avoid delays in setting up and implementing a network, hospitals should seek advice from the beginning of the discussions or negotiations to determine whether the network would qualify as a concentration and require prior clearance from the BCA. Hospitals must become aware of the potential competition law implications of the various structures they could envisage to set up their network and the obligations that they and the newly-created networks might have to comply with to avoid the fines that the BCA could impose if a notifiable concentration is implemented without the BCA's prior approval.
The BCA's latest note reiterates that competition law rules concerning merger control fully apply to the creation of local hospital networks as required under the Act of 28 February 2019.
Although hospitals seem largely unaware of the obligations under the merger control rules attached to such forms of cooperation, they should consider that the BCA is paying more attention to the sector and that significant penalties may be incurred for non-compliance.
Therefore, hospitals should seek solid legal advice either to verify whether the establishment of the hospital network qualifies as a concentration and whether that concentration must be notified or to discuss the ways in which the network's internal decision structure may possibly be organised to avoid a so-called 'lasting change of control' and therefore the qualification as a concentration.
For further information on this topic please contact Carmen Verdonck or Nina Methens at ALTIUS by telephone (+32 2 426 1414), fax (+32 2 426 2030) or email (email@example.com or firstname.lastname@example.org). The ALTIUS website can be accessed at www.altius.com.
(1) Act of 28 February 2019 amending the coordinated Act of 10 July 2008 on hospitals and other health care institutions, concerning clinical networks between hospitals, Official Gazette of 28 March 2019.
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