Watchdog digs into health deal

The Auckland Surgical Centre employs 80 staff, does a wide range of surgery and has about 6000 patients a year. Picture / Martin Sykes

Southern Cross Health Trust's plan to buy a Remuera surgical hospital depends on a Commerce Commission assessment of whether it would cut competition in the healthcare market.

But a key player in the field, private hospital business MercyAscot, doubts enough information exists for the commission to make that assessment.

MercyAscot is a business associated with Warehouse founder Stephen Tindall.

The Auckland Surgical Centre is owned by 63 shareholders, mainly health professionals.

MercyAscot chief executive Dr Andrew Wong said that before the commission decided if competition could be curtailed by the deal, the size of the private healthcare market in Auckland had to be quantified.

But, he claimed, the value and scope of the sector in the city - and nationally - was impossible to quantify.

"We're concerned about anything that has the potential to lessen competition but we're not sure if this will or won't. We're watching this with interest," he said.

On Monday, the commission said it received an application from Southern Cross Health Trust to acquire the assets of the Auckland Surgical Centre.

It described it as primarily a day-stay facility at which orthopaedic, plastic, gynaecological, ear nose and throat, oral, paediatric, breast, urological and general surgery were performed, with a particular focus on orthopaedic surgery. It said the trust owned two hospitals in the Auckland region - Southern Cross Brightside Hospital and Southern Cross North Harbour Hospital.

The trust was also a 50 per cent shareholder in Gillies Hospital.

The commission said all of the trust's facilities provided secondary elective surgery for day-stay patients and in-patients.

It said the acquisition would result in "aggregation in the provision of hospital facilities and related non-specialist services for elective secondary services in the Auckland region".

Its task was to determine whether the deal would have the effect of substantially lessening competition.

On a side issue, Wong said he was not as concerned about the threat posed by Southern Cross' deal to buy the country's largest day-stay surgical business as he was about other issues.

The potential for the insurer Southern Cross to restrict members to the Southern Cross hospitals was a bigger threat than the business' expansion in Auckland.

Any possible tie-up between Southern Cross's 800,000-member insurance business and its private hospital chain was more of a worry for the welfare of the industry.

"The potential for arrangements to be put in place that don't allow patients equal access to hospitals is a bigger concern," Wong said, noting that the Southern Cross hospitals and insurer shared the same website.

But a Southern Cross executive emphasised this week that the two operations were separate and the only immediate plans were to buy another Auckland business and expand.

Southern Cross Healthcare Group chief executive Ian McPherson said yesterday that it was "inconceivable" the two would merge.

Wong said MercyAscot wanted to talk to the commission about Southern Cross's proposal to buy the Auckland Surgical Centre. Commission communications manager Jackie Maitland said full details of Southern Cross's application would be posted on the commission's website this week. Southern Cross chief operating officer Terry Moore and Auckland Surgical Centre chairman and a founder, Dr Joseph Petoe, defended the deal this week.

They say competition will not be lessened because Auckland has so many private health providers.

Moore has stressed that the insurance business of Southern Cross and the nine-strong private hospital business were separate entities, a point further reinforced by Southern Cross communications manager Aimee Bourke.

"Southern Cross Healthcare is comprised of two organisations that focus on the health sector," she said. "One organisation - the first created - is the Southern Cross Medical Care Society with about 800,000 members. It is a not-for-profit friendly society that focuses on health insurance services for individual members and group schemes.

"The other organisation is the Southern Cross Health Trust, which consists of the Southern Cross Hospitals, New Zealand's only private hospital network, and Southern Cross Travel Insurance."

The Auckland Surgical Centre was founded 17 years ago, employs 80 full-time and part-time staff and has about 6000 patients a year.

The players

* Southern Cross Health Trust is the largest private hospital chain, treating about 40,000 patients a year.

* The insurer Southern Cross Medical Care Society has about 800,000 members.

* Competitor MercyAscot is dominant in Auckland, treating about 22,000 patients.

* Auckland Surgical Centre is the largest day-stay hospital.

* The Commerce Commission is yet to decide if Southern Cross can buy the Auckland Surgical Centre.