Are patients receiving the best care in hospitals? The
German competition authority – Bundeskartellamt
– has now decided to apply a health check to the German
On May 31, 2016, the German competition authority announced that
it was launching a so-called "sector inquiry" into the
hospital services market to examine the degree of competition in
that sector of the economy.
A sector inquiry is still a relatively new instrument in the
toolboxes of European competition authorities. The law allows the
Bundeskartellamt to investigate a specific sector of the economy
– even if there is no evidence of anticompetitive behavior.
The Bundeskartellamt may then request documents, ask for
information, search the premises of companies, and invite comments
from third parties. At the end of the investigation, a report on
the results is published. Although such a report does not contain
any binding instructions or guidelines, it often has a significant
impact on how the authority later enforces the law. For example,
following a 2012 inquiry into the production facilities for road
asphalt, the Bundeskartellamt forced the breakup of some 80 joint
ventures and more than 70 cooperation agreements between market
participants. And when the authority found in 2014 in its study of
the German food retailing market that the four largest supermarket
groups had significant buying power vis-à-vis manufacturers,
it blocked a merger in this sector the very next year.
The Bundeskartellamt's new sector inquiry is apparently
triggered by the ongoing consolidation process among hospital
operators. In the past, hospitals in Germany were largely run by
municipalities or not-for-profit organizations. This has
significantly changed over the last twenty years. Several privately
run hospital groups have emerged, some of which have grown
considerably by mergers and the acquisition of privatized
To the extent that transactions in the hospital market have been
subject to merger control, the Bundeskartellamt has followed them
with a critical eye. From the perspective of the authority, such
transactions frequently give rise to competition concerns, chiefly
for two reasons: First, the authority defines the relevant
geographic market narrowly according to the core catchment area of
the hospitals concerned. Where the catchment areas of the merging
parties overlap, this approach often results in very large market
shares. Secondly, German hospitals are heavily regulated. Among
others, construction planning laws make it difficult to open a new
hospital, and growth is mostly achieved by acquisitions. Against
this background, it is no surprise that in the last five years
alone, the Bundeskartellamt intervened in nine transactions (of
which three were prohibited, two were withdrawn by the parties, and
one transaction was cleared only after the parties made concessions
to overcome the authority's concerns).
As hospitals in Germany cannot compete on prices – for
most patients, prices are fixed centrally – the focus of the
sector inquiry will be limited to quality of care. According to the
Bundeskartellamt, it aims to obtain information about the current
market situation and intensity of competition in acute inpatient
hospital treatment. The authority wants to understand what factors
influence patients in their choice of hospital and how hospitals
try to set themselves apart from competitors. Moreover, the inquiry
will look into the role of various stakeholders such as medical
staff, referring physicians or emergency services, and it will also
examine remuneration structures and the financial situation of
The Bundeskartellamt has announced that it will question around
500 hospitals across the country, to be selected in terms of
location, size and type of operator to give a representative
picture of the hospital landscape in Germany. Based on past
experience, the investigation can be expected to last some two to
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