Introduction
Rules applicable to regional hospital networks
New act exemption
Comment
The new act of 29 March 2021 explicitly and generally exempts operations which create loco-regional hospital networks from the obligation to notify the Belgian Competition Authority (BCA) (under Book IV of the Code of Economic Law (CEL)).
This legislative update contradicts the BCA's 22 July 2020 note on the establishment of hospital networks. In this note, the BCA stressed that the establishment of such loco-regional hospital networks could be caught by merger control rules if the establishment transaction fulfilled the criteria for a notifiable concentration.
Rules applicable to regional hospital networks
In February 2019 a legislative amendment to the General Act on Hospitals 2008 obliged hospitals to establish and be part of a loco-regional hospital network (known as a 'locoregionaal ziekenhuisnetwerk' in Dutch or a 'reseau hospitalier locorégional' in French) from 1 January 2020.(1) A 'loco-regional hospital network' is defined as:
a long-term, legally formalised cooperation with legal personality… between at least two non-psychiatric hospitals that are separately recognised at the time of the creation of the local hospital network… which are located within a geographically contiguous area and which offer complementary and rational locoregional care assignments.
The legislative reform's preparatory works stressed that the establishment of loco-regional hospital networks aimed to maintain qualitative, accessible and affordable care in the long term and that collaboration between hospitals would improve the coordination of care for the benefit of patients.
Following this amendment, the BCA received various questions regarding how the competition law rules would apply to the newly updated hospital legislation. Consequently, in July 2020 the BCA issued a note which indicated that the creation of regional clinical hospital networks could be caught by merger control rules. In that note, the BCA also set out the principles that it would 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. However, under the general Belgian merger control rules, not all establishments of hospital networks would have to be notified to and approved by the BCA, only those which fulfilled the conditions set out in Book IV of the CEL. Such conditions require:
- a change of control of the hospitals involved in the transactions on a lasting basis; and
- that the notification thresholds set out in Article IV.7 of the CEL are reached.
In such cases, the establishment of a hospital network would qualify as a concentration that had to be notified to the BCA and the approval thereof would have to be obtained before the concentration could be implemented effectively.
However, through the recent act of 29 March 2021,(2) the legislature again amended the General Act on Hospitals 2008. The act provides that without prejudice to the competence of the European Union, the establishment of a loco-regional hospital network and any subsequent changes in its composition are not subject to ex ante merger control under Book IV, Title 1, Chapter 2 of the CEL.
In other words, the act exempts any establishment of hospital networks – even if such establishment would qualify as a notifiable concentration in accordance with the CEL competition rules – from the obligation to be notified to and approved by the BCA. This exclusion is without prejudice to the application of the EU merger control rules, should the EU notification thresholds be exceeded by the hospitals concerned in the concentration. Further, this exemption applies only to the creation of loco-regional hospital networks as defined above; all other transactions concerning hospitals remain subject to the Belgian merger control rules.
This new amendment stems from different considerations. In the act's preparatory works, the government states that the impact of the establishment of such hospital networks on competition would likely be limited because hospitals do not operate within classic market dynamics. First, the hospital sector is highly regulated and subject to strict rules, particularly regarding prices charged, quality of services and supply of care.
Second, the hospital sector is largely financed by public funds; hospitals provide a service to the community with the latter's financial means. Further, hospitals are generally not profit-oriented and fulfil a mission of general interest that is entrusted to them by law.
Finally, the BCA's ex ante merger control would significantly delay the implementation of the 2019 reform, given the obligation in Section 4 of Article IV.10 of the CEL in which the undertakings concerned in a concentration cannot implement the concentration without the BCA's prior approval. In light of this, prior merger control by the BCA is therefore excluded for transactions concerning the establishment of loco-regional hospital networks.
The new act entered into force with retroactive effect, starting on 28 February 2019, to ensure that hospital networks are excluded from the scope of the merger control rules before the obligation for hospitals to establish a regional network started to apply on 1 January 2020.
The act of 29 March 2021 exempts the following from the Belgian merger control rules:
- the establishment of regional hospital networks; and
- any subsequent changes to already created hospital networks.
During the legislative process which led to the act's adoption, concerns were expressed regarding the exemption from prior merger control for any subsequent changes in the composition of a hospital network. Some political parties opined that further expansions of such networks could lead to unhealthy dominant positions and possible monopolies that would undermine freedom of choice and result in higher costs for patients.
This new amendment might come as a surprise. It contradicts the BCA's July 2020 note, which 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. Future events and practice will tell whether the impact on competition of the creation of such hospital networks proves to be limited as suggested by the government when seeking the law's adoption.
In any event, the exemption from prior merger control for the establishment of loco-regional hospital networks does not exempt these hospital networks from abiding with the other competition law rules (eg, regarding prohibited agreements between undertakings and abuse of dominance).
For further information on this topic please contact Beatrijs Gielen or Nina Methens at ALTIUS by telephone (+32 2 426 1414) or email ([email protected] or [email protected]). The ALTIUS website can be accessed at www.altius.com.
Endnotes
(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, 28 March 2019.
(2) Act of 21 March 2021 amending the coordinated act of 10 July 2008 on hospitals and other health care institutions, concerning clinical networks between hospitals, Official Gazette, 16 April 2021.
