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Researcher sees risks as healthcare giants merge

Mehiläinen's buyout of Pihlajalinna raises a number of questions for both clients and municipalities.

Pihlajalinna on avannut täyden palvelun lääkärikeskuksen myös Ouluun.
Mehiläinen is merging with rival Pihlajalinna, but there are potential risks for both clients and municipalities. Image: Paulus Markkula / Yle

A researcher at the University of Tampere has warned of risks to Finland's private healthcare industry as Mehiläinen on Tuesday announced plans to buy out its rival Pihlajalinna in a deal worth an estimated 360 million euros.

The merged company would employ nearly 25,000 people and could potentially become the largest private healthcare company in the Nordic region if the deal is given the green light by Finland's competition authority.

However, health and social policy researcher Liina-Kaisa Tynkkynen of Tampere University warns both clients and municipalities that there may be potential risks arising from the proposed deal.

"Giants' bargaining power becoming unbalanced"

In particular, municipalities that outsource their services to private operators might find their bargaining power diminishing.

"The giants are starting to get so big that the bargaining power, especially of small municipalities, is starting to become unbalanced," Tynkkynen told Yle. "On a large scale, I see more systemic risks than opportunities."

Private healthcare providers already provide a large share of Finnish nursing and occupational health services. This further concentration would reduce competition within the market and subsequently the choice on offer to customers and employees.

"If there are two powerful players, it affects how they can influence prices or price increases. Of course, it can also begin to influence what is an incentive to provide good or quality service," she said.

Last year, Terveystalo said it was on course to become the biggest player in the private healthcare market in Finland when it acquired rival Attendo's health services. Mehiläinen and Pihlajalinna are slightly larger in terms of number of employees and turnover than Terveystalo before the merger, but two fairly strong companies are emerging in Finland.

One fifth of private sector social services

The founder of Pihlajalinna, board chair Mikko Wirén, explained the decision to sell by saying that the deal would come at a good time for the company to grow. Wirén considered the deal to be a unique opportunity as the companies have very few overlapping functions.

Mehiläinen CEO Janne-Olli Järvenpää believes the deal will boost Mehiläinen's international growth, especially in digital services, as the company continues to grow in size. Järvenpää even suggested the deal could lead to a new health export sector for Finland.

The net sales of the new company are estimated at 1.4 billion euros, which would represent about 1.7 percent of the Finnish social services sector. Approximately one fifth of the private sector social services would be provided.

The first phase of the competition authority's review is expected to take a few months. The deal is likely to be completed at its earliest in March next year, but no later than the fourth quarter of 2020.

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