Insurer's medical links defended

Aucklanders will benefit from Southern Cross' proposed purchase of the country's largest day-stay surgical hospital that will challenge MercyAscot's domination of the sector in the city, a medical chief says.

Southern Cross Healthcare Group chief executive Dr Ian McPherson said rival private hospital chain MercyAscot had the bulk of the Auckland market.

So Southern Cross' proposal to buy the Auckland Surgical Centre would help widen competition rather than lessen it, he said.

The Commerce Commission has yet to decide what effect Southern Cross' deal will have on competition.

This week, the commission said Southern Cross wanted to buy the business.

"The patients of Auckland will be better served with greater competition," McPherson said yesterday.

"Southern Cross strongly contends that there should be more competition for hospital services in Auckland, as MercyAscot has the lion's share of the market."

He challenged statements from MercyAscot chief executive Dr Andrew Wong who claimed competition could be lessened if Southern Cross merged its hospital and insurance businesses.

McPherson said any suggestion of a merger was inconceivable, although he acknowledged the seven directors of the Southern Cross insurance society were also trustees of the Southern Cross hospital chain.

The two organisations also shared the same website.

But McPherson said this created no conflict of interest.

"There are no ownership links between the society and the trust. The society and the trust are completely separate entities. Separate board meetings are held for the two organisations and any relationship between the society and the trust is conducted at arms length.

"By this, I mean the business relationship and protocol practised when the two organisations deal with each other are the same as when the society deals with any other private hospital and conversely when the trust deals with any other insurer."

The trust was a separate legal entity from the society.

A charitable trust, it was established to provide healthcare to the general public. "The organisations' objectives and their beneficiaries are quite distinct ... "Though the directors for the society are the trustees for the trust, it is important to note that the role and responsibilities of trustees differ quite significantly to those of company directors and the fiduciary obligations of trustees are particularly onerous," McPherson said.

The story so far

Monday: Commerce Commission announces Southern Cross wants to buy the Auckland Surgical Centre.

Tuesday: Southern Cross rival MercyAscot raises fears about competition being narrowed and a merger of Southern Cross's two businesses.

Yesterday: Southern Cross fires back, saying no merger is planned and the purchase will widen competition by reducing MercyAscot's dominance in Auckland.