CADE challenges Unimed Cascavel’s acquisition of Hospital Policlínica

The Office of the Superintendent General of CADE (SG) submitted the transaction involving the acquisition of Hospital Policlínica by Unimed Cascavel to the Tribunal of CADE.

The Hospital Policlínica is one of the main general hospitals of the city of Cascavel, in the Brazilian state of Paraná, and it has 40 to 50% of market share, controlled by Hospital Care Caledônia S.A. On the other hand, Unimed Cascavel is the main health insurance company in the city, having 80 to 90% of the beneficiaries of medical-hospital health insurances.

The merger would encourage vertical integrations that include health insurances from Unimed Cascavel and medical-hospital services from Hospital Policlínica, mainly from the segment of general hospitals in Cascavel.

The discovery phase concluded that there are elements indicating both capacity and incentives to foreclose the market. According to the document, the risks involve both the input, which are the services provided by Hospital Policlínica, and the access to the consumer market, which are the beneficiaries from Unimed Cascavel, in vertical integrations between health insurances and general hospitals.

The results of the application of the vertical arithmetic methodology were used to analyse the competitive implications of vertical integrations, in accordance with the expert opinion of the Department of Economic Studies of CADE (DEE) and qualitative aspects related to the health insurance market and the transaction.

As a result of the market foreclosure of general hospitals for health insurance companies, there may be harmful effects to competition. They could happen as a lack of interest for health insurances from Unimed’s competitors, an eventual absence of Hospital Policlínica in accredited networks, or a limited growth of these rivals, considering the possibility of a significant reduction of hospital beds in the accredited networks to offer to its beneficiaries.

Besides the likelihood of a complete market foreclosure, Unimed Cascavel could also adopt strategies to make competitors lose accreditation, such as Hospital São Lucas, its main competitor in the municipality. After using the vertical arithmetic analysis, the DEE identified incentives that facilitate this type of conduct. The study also considers partial foreclosures for cases that the health insurance could send its beneficiaries to make certain medical procedures in specific hospitals, adversely affecting other competitors in the segment of general hospitals.

Thus, considering the importance of Unimed Cascavel as a contracting buyer of hospital services in the region, there could be negative effects in the market of general hospitals in the municipality of Cascavel.
According to the SG, the remedies cannot be applied to mitigate the potential harm to the competitive environment. The remedies would be overly burdensome for both CADE and merging parties without restoring competitive market conditions.

Therefore, the SG decided to direct the case to the Tribunal and recommended the blockage of the transaction. After the case submission for a final decision, a commissioner will be assigned for a close analysis, followed by the adjudication of the collegial body.