RACGP issues warning over pathology takeover bid

A proposed merger that would bring almost half of Australia’s pathology industry under the same umbrella could be ‘to the detriment’ of patients, the RACGP has said.
 
In a letter to the Australian Competition and Consumer Commission (ACCC), RACGP President Dr Nicole Higgins has warned of the implications of a takeover bid of Healius by Australian Clinical Labs (ACL).
 
‘The RACGP suggests the merger between Healius and ACL could lead to significant reduction in competition between pathology companies to the potential detriment of patients, particularly those in rural and remote areas,’ she wrote to Daniel McCracken-Hewson, ACCC’s General Manager of Merger Investigations.
 
‘This should be considered by the ACCC in their determination on the proposed acquisition of Healius Limited by ACL.’
 
The correspondence describes a ‘high degree’ of concentration and regulated prices within the industry in Australia, citing three dominant companies for Medicare-billed pathology testing: Sonic Health Care, Healius, and ACL.
 
‘If this merger were to proceed ACL would become Australia’s largest pathology business with more approved collection centres nationally than any other pathology provider in the Australian market,’ Dr Higgins states.
 
‘It is expected that this merger will have significant implications for competition in the pathology and diagnostic imaging sector, particularly given the high barriers to entry and the current level of competition.
 
‘As such, this acquisition is likely to create implications for pricing and service availability and general practice viability.’
  
The college also flags the potential for large corporates to abandon services in ‘weaker-performing, quieter rural locations’ if the number of providers is reduced. 
 
‘We note this has been evident with other community services such as banks and post offices,’ the letter states.
 
‘This must be factored into any decision regarding the progression of this merger, including any conditions that the ACCC may place on this acquisition if it were to proceed.’
 
The RACGP President says the proposed new entity would have increased bargaining power with implications for pricing negotiations and reimbursement for general practice services, as well as a possible knock-on effect for patients.
 
‘Maintaining a higher number of providers in the marketplace has allowed smaller companies to compete on the market margins, as we have seen in radiology provision in rural locations,’ Dr Higgins stated.
 
RACGP WA Chair Dr Ramya Raman says GPs from across Australia’s largest state have raised concerns about the planned merger.
 
‘We do rely on clinical labs for diagnostic testing and timely results, so possible disruptions or changes to the service quality, any new workflow that occurs, could ultimately impact general practice viability and patient care,’ she told newsGP.
 
It could impact rural and remote communities for patient choice and access of affordable services.
 
‘It has implications for general practice viability – a significant proportion of practice viability can rely on pathology sublease for general practice.’
 
Dr Raman also cited the current circumstances for radiology.
 
‘Smaller companies are able to offer radiology services, particularly in rural and remote settings, so it means that there is an availability for the consumer which is a lot better,’ she said.
 
‘The opportunity to have increased competition will mean that smaller companies would be able to survive within the market, and ultimately, that will mean better access.’
 
The ACCC has also sought the views from other interested parties about the potential impact of the proposed takeover on price, quality and service levels, with reference to the ‘already high levels of concentration in pathology services in Australia’.
 
It says it ‘prohibits acquisitions that are likely to have the effect of substantially lessening competition in a market’.
 
Meanwhile, ACL has said that its proposed takeover of Healius could benefit regional patients, according to Nine Newspapers.
 
ACL pathology services are run through its Clinical Laboratories subsidiary, operating in all states and territories apart from Tasmania. It also runs SkinDoctors skin cancer clinics.
 
Healius operates its pathology services under different brands in different states, including QML in Queensland, Laverty Pathology in NSW, Dorevitch Pathology in Victoria, Abbott Pathology in South Australia, Western Diagnostic Pathology in WA and the Northern Territory, and TML Pathology in Tasmania.
 
Both organisations are listed on the Australian Securities Exchange (ASX), with Healius the much larger company. According to Reuters, ACL launched the takeover bid in March with its offer of $1.52 billion being resisted by Healius directors.
 
Dr Higgins says the consequences of a successful merger would be ‘of great concern to the RACGP’.
 
‘We urge you to consider the outlined ramifications of the proposed acquisition of Healius Limited by ACL in your deliberations, particularly regarding the impacts this acquisition could have on the general practice sector and patient care,’ she wrote to the ACCC.
 
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