Commerce Commission authorises merger of Southern Cross and Aorangi Hospitals in Palmerston North

The Commerce Commission has authorised the merger of the Palmerston North private hospital
operations of Southern Cross Hospitals Limited and Aorangi Hospital Limited. If the merger
proceeds, there will be only one provider of private hospital services in Palmerston North.

Southern Cross and Aorangi made a joint application under section 67(1) of the Commerce Act for
the Commission to authorise the formation of a joint venture between the two. Under the
Commerce Act, the authorisation process requires the Commission, in a merger scenario, to weigh
the detriments from any loss of competition against any public benefits that would arise from the
merger.

“In this case the merger will reduce competition for the provision of private elective surgical
services in the MidCentral DHB region and as a result, may lead to some price rises,” said
Commerce Commission Chair Dr Mark Berry.

“However, the Commission found that the majority of patients would be protected from price
increases as their procedures would be funded by ACC or through fixed-price arrangements
between insurance companies and the private hospital. In addition, there would be substantial cost
savings from the rationalisation of the two businesses that would outweigh the detriments,” said Dr Berry.  

For these reasons, the Commission concluded that the merger should be authorised.

The written reasons for the decision will be available tomorrow on the Commission’s web site at:
www.comcom.govt.nz/southern-cross-hospitals-ltd-and-aorangi-hospital