HealthCare of New Zealand is seeking approval from the Commerce Commission to acquire Geneva Healthcare for an undisclosed amount.

The deal would see New Zealand’s largest provider of home care support acquire another large national provider within the industry. The Commerce Commission must establish whether the transaction would substantially reduce competition in the market.

In recent years the home and community support services sector has been whittled down to just a few large providers holding contracts with funders. Just what the impact of this acquisition would be on the smaller providers who sub-contract to the larger providers is unclear at this point.

That said, HealthCare NZ does not envisage that the acquisition would affect competition. In its application to the Commission, it outlines how the funders – ACC, DHBs and the Ministry of Health – will have many other providers to choose from.

“While the acquisition combines two national providers, all funders will still have one alternative national provider and numerous regional or supra-regional providers to contract with,” it states in its application.

“Healthcare NZ expects that many or all of these providers would readily expand to supply services to a new funder or in a new region, were they given the opportunity and incentive to do so.”

The Home and Community Health Association isn’t surprised by news of the proposed acquisition.

Chief Executive Julie Haggie says the home support sector has faced “constant and brutal changes” over the past several years, which has had a general destabilising effect.

“There have been many sales and mergers, and some have simply exited. Over the last six years more than 26 home support organisations have either sold contracts or whole businesses or gone out of business.

“This is for a mix of reasons, but the pressure on funding has been a major contributor, as funders have driven the effective contract rate down. Over half of our not-for-profit members suffered financial losses last year, amounting to just under $10 million.”

In its application, HealthCare NZ also draws attention to the sector’s ever-tightening funding structures.

“Public funders’ budgets have continued to come under pressure to deliver an ever-increasing level of health services. In response, the funders have looked for ways to constrain the amount they spend on home and community support services. This has led to decreases in margins in the sector.”

The company doesn’t expect the proposed acquisition to alter this trend.

Also in its application, HealthCare NZ says it sees the acquisition as “adding scale that will enhance its capability to continue its drive to provide services in the most cost-effective way it can”.

The acquisition would see HealthCare NZ expand into Auckland and take advantage of Geneva Healthcare’s superior IT and training systems.

A public version of the clearance application is available on the Commission’s Clearances Register.

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