The new Belgian Act of 29 March 2021 explicitly and generally exempts operations creating loco-regional hospital networks from the notification obligation to the Belgian Competition Authority (BCA) (under Book IV of the Belgian Code of Economic Law (CEL)). This legislative update goes against what the BCA had expressed in its note of 22 July 2020 on the establishment of hospital networks; the BCA stressed there that the establishment of such loco-regional hospital networks could be caught by merger control rules provided the establishment transaction fulfilled the criteria for a notifiable concentration.
Rules applying to regional hospital networks
In February 2019, [1] a legislative amendment to the general Act of 2008 on hospitals obliged hospitals to establish and be part of a loco-regional hospital network (locoregionaal ziekenhuisnetwerk/reseau hospitalier locorégional) as from 1 January 2020. 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 patient benefit.
Following this amendment, the BCA received some questions regarding the applicability of the competition law rules to the newly updated hospital legislation. Consequently, the BCA issued a note in July 2020 in which it 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.
Indeed, the BCA is competent to examine concentrations of a certain size in all sectors, including forms of collaboration between hospitals. However, not all establishments of hospital networks would have to be notified to the BCA. It is only if the establishment of such a hospital network would fulfil the conditions set out in Book IV of the CEL, that it would have to be notified to and approved by the BCA before it is implemented. These conditions require that:
there must be a change of control of the hospitals involved in the transactions on a lasting basis; and
the Belgian notification thresholds set out in Article IV.7 CEL must be reached.
In such cases, the establishment of a hospital network would qualify as a concentration that must be notified to the BCA, and the approval of which must be obtained before the concentration can be effectively implemented.
The new Act exempts the creation of regional hospital networks from merger control rules
However, through the recent Act of 29 March 2021, [2] the Belgian legislator has again amended the general Act of 2008 on hospitals. 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 it would qualify as a notifiable concentration in accordance with the CEL’s competition rules, from the obligation to be notified to and approved by the BCA. This exclusion is without prejudice to the application of the European merger control rules, should the EU notification thresholds be exceeded by the hospitals concerned in the concentration. Moreover, this exemption only applies 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 is subject to strict rules, particularly regarding the prices charged, the quality of services and the supply of care. Second, the hospital sector is to a large extent financed by public funds; hospitals provide a service to the community with the latter’s financial means. Moreover, 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 Article IV.10, §4 of the CEL in which the undertakings concerned in the concentration cannot implement the concentration without the BCA’s prior approval. In light of the foregoing, prior merger control by the BCA is therefore excluded for transactions concerning the establishment of loco-regional hospital networks. The new Act has entered into force with retroactive effect, starting on 28 February 2019, to ensure that hospital networks are excluded from the scope of Belgian merger control rules before the obligation for hospitals to establish a regional network started to apply on 1 January 2020.
Comment
The Act of 29 March 2021 exempts both (1) the establishment of regional hospital networks as well as (2) any subsequent changes to already created hospital networks from the Belgian merger control rules.
During the legislative process leading 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 held the opinion 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 and is a contradictory response to the BCA’s note of July 2020, in which the BCA reiterated 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 really proves to be limited, as the Belgian government argument when it was 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 regarding, for example, prohibited agreements between undertakings and abuse of dominance.
[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.
[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 of 16 April 2021.
