Health care market concentration has led to higher prices – FCCA needs a more effective tool to prevent harmful concentration

In 2023, the scope of merger control was extended, but anti-competitive mergers continue to avoid review. A study by the Finnish Competition and Consumer Authority (FCCA) shows that non-notifiable mergers have increased the prices of private health care services.

The turnover thresholds for merger control in Finland were lowered at the beginning of 2023, but anti-competitive mergers still remain below the thresholds. Unlike in the other Nordic countries and many other EU countries, the Finnish authority is not able to investigate mergers that fall below the notification thresholds.

Concentration on account of mergers

The market for private health care services is an example of a rapid consolidation trend below the turnover threshold. The market share of the large healthcare companies more than doubled in both physician and dental services in the period 2008–2020. While in 2008 the large chains controlled 30% of the physician market and 20% of the dental market, in 2020 the figures were approximately 65% and 60% respectively.

The data for the study concludes in 2020, but market development follows the same trend also after 2020. The large chains hold particularly high market shares in occupational health services and in the outsourcing and purchasing of health services where their combined market shares reach up to 80–90%.

The increase in the market shares of the chains is mainly due to the high number of acquisitions. According to the FCCA data , between 2008 and 2020, there were almost 300 mergers where large operators acquired small local medical and dental clinics.

Ex ante merger control is the only way to prevent harmful market concentration, as market structure cannot be effectively addressed ex post. However, only a few percent of the hundreds of mergers in the health care sector exceeded the turnover thresholds and were investigated by the FCCA.

"The private health care market has seen rapid consolidation in the last two decades. Similar developments are currently taking place in other markets. The FCCA has no effective means to address this type of consolidation. Small and medium-sized enterprises operating in local markets may be taken over by large chains at will. The fact market concentration may occur entirely outside regulatory control is the biggest drawback of Finnish competition policy."

Director-General Kirsi Leivo

Price increases in the health care market due to exempt mergers

In a study published by the FCCA, the impact of mergers in the health care market on prices was assessed by comparing the prices of the acquired clinics with those of clinics not acquired during the sample period.

The study found that prices in the acquired clinics increased by 10–20% post acquisition. The biggest price increases were in auxiliary services provided by medical firms, such as imaging and laboratory services where prices rose by an average of 20%.

“In many areas, prices for private health care services have risen as a result of a big chain buying a local operator. The combined impact on the market as a whole has been significant, considering that there have been several hundred mergers.”

Research Manager Riku Buri

The study looked at the reasons for the increase in clinics’ prices of auxiliary services. The results suggest that the rise in prices for auxiliary services was linked to the fact that large chains price their auxiliary services uniformly nation-wide and, following mergers, chain prices have been applied to the acquired clinics.

“Price harmonisation has led to price increases in the health care market, because on average nation-wide chains have been more expensive than independent clinics”, explains Buri.

Call-in power for mergers the most effective way to tackle consolidation

The FCCA has already previously proposed that the law should include a call-in option for merger review. The call-in option means that the competition authority could, under exceptional circumstances, also review mergers below the turnover thresholds. Several EU countries have a call-in option, including all other Nordic countries once the legislative amendment in Denmark also enters into force in summer 2024.

“The example of the health care market shows how market concentration can transform a whole market unsupervised by way of local acquisitions where the turnover of the individual company being acquired is relatively small. We look on while similar developments take place in therapy-, care and veterinary services for example. A call-in power for merger control is the only tool to prevent this type of market consolidation."

Director Sanna Syrjälä

The call-in option has been opposed in Finland on the grounds of the uncertainty it would create for businesses. Uncertainty can, however, be reduced by establishing clear criteria for the application of the call-in power. In other countries, most recently in Denmark, the view is that limits to the scope of the call-in system are an effective way of reducing uncertainty. In these countries, competitive markets have also been considered so central to the economy that the moderate uncertainty that the system creates for businesses has been deemed acceptable.

Further information:

Call-in power and policy brief: Sanna Syrjälä, Director of Merger Control, tel. +358 29 505 3385
Study of the healthcare market: Riku Buri, Research Manager, tel. +358 29 505 3725