‘Strong concerns’: ACCC queries pathology merger bid

The commissioner of the Australian Competition and Consumer Commission (ACCC) has said a proposed merger of two giant pathology companies used by many general practices could be bad for patients.
 
In a statement released on 20 July, ACCC Commissioner Stephen Ridgeway raised a number of ‘preliminary competition concerns’ about a takeover move initiated by Australian Clinical Laboratories (ACL) of its rival Healius to form Australia’s biggest pathology company.
 
‘The ACCC is concerned that the proposed acquisition would be likely to substantially lessen competition in Australian pathology services markets,’ he said.
 
‘[It] would combine two of the top three providers of pathology services in Australia, significantly increasing concentration in already concentrated markets.’
 
According to the ACCC, a merger could impact the extent of bulk billing, even if competition for pathology services is not obvious to patients.
 
‘The ACCC is concerned that the significant reduction in competition could lead to adverse consequences for patients, including reduced levels of bulk billing, higher co-payments for privately billed services, collection centre closures, less frequent collection of samples, or longer turnaround times,’ Mr Ridgeway said.
 
‘Market feedback has identified strong concerns about the impact of this acquisition on community pathology services, and there is the potential for even greater impacts in regional and remote areas.’
 
Many of the concerns echo those expressed by the RACGP President Dr Nicole Higgins in a letter to the ACCC in May, with RACGP representatives also meeting with the ACCC last month to reiterate the college’s misgivings.
 
Dr Higgins suggested that an ACL takeover of Healius could have a negative impact on patients.
 
In correspondence to Daniel McCracken-Hewson, ACCC’s General Manager of Merger Investigations, she warned of significant implications, especially in more isolated areas.
 
‘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,’ Dr Higgins wrote.
 
‘This should be considered by the ACCC in their determination on the proposed acquisition of Healius Limited by ACL.’
 
ACL and Healius both provide pathology services, including to general practices, private and public hospitals and veterinary clinics.
 
ACL pathology services are operated through a subsidiary, Clinical Laboratories, in all states and territories apart from Tasmania, and it also has the SkinDoctors skin cancer clinics in its portfolio.
 
Healius has pathology services under multiple different brands, such as 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.
 
General practices in WA in particular had expressed significant misgivings about the takeover attempt, which was first reported in March.
  
RACGP WA Chair Dr Ramya Raman flagged concerns it could impact patient choice in remote communities.
 
‘It has implications for general practice viability – a significant proportion of practice viability can rely on pathology sublease for general practice,’ she previously told newsGP.
 
‘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.
 
‘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.’
 
If the takeover bid were successful, the resulting company would be the largest provider of pathology services in every state and territory in which they operate and would also own more than half of the approved collection centres around the country.
 
In the May letter, the RACGP President warned of the possibility of large companies abandoning ‘weaker-performing, quieter rural locations’. 
 
‘We note this has been evident with other community services such as banks and post offices,’ Dr Higgins wrote.
 
‘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 ACCC is currently inviting further feedback with a decision scheduled for 12 October 2023.
 
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ACCC ACL Australian Clinical Labs Australian Competition and Consumer Commission Healius pathology