FTC sues to block $142M California hospital deal

The Federal Trade Commission has filed a lawsuit to block John Muir Health’s planned purchase of San Ramon Regional Medical Center from Tenet Healthcare Corporation.

The Federal Trade Commission has filed a lawsuit to block John Muir Health’s planned purchase of San Ramon Regional Medical Center from Tenet Healthcare Corporation. (Image credit: ©Roman Babakin - stock.adobe.com)

The FTC says the deal will drive up healthcare costs for residents. Federal regulators have taken a more aggressive posture with hospital and healthcare mergers under President Biden’s administration.

Tenet is the majority owner of San Ramon Medical, and John Muir has proposed taking full ownership in a $142.5 million deal.

The FTC says if John Muir takes ownership of San Ramon Medical, consumers will lose out with the loss of competition between the two organizations. Both operate and serve patients in California’s I-680 corridor in the San Francisco Bay area.

Henry Liu, director of the FTC’s Bureau of Competition, said San Ramon Medical offers more affordable services. He said John Muir could charge more for acute care services, and the organizations would be less motivated to pursue improvements.

“John Muir’s acquisition of San Ramon Medical would increase already high health care costs in the area and threaten to stall quality improvements that help advance care for all patients,” Liu said in a statement.

The FTC argues that if the deal goes forward, John Muir would end up controlling more than 50% of the inpatient hospital market along the I-680 corridor. The FTC says in a news release the deal “would lead to higher insurance premiums, co-pays, deductibles, and other out-of-pocket costs, or reduced benefits for commercial health insurance enrollees.”

The FTC voted 3-0 to file an administrative complaint and authorize staff to seek a temporary restraining order. Regulators will file for preliminary relief with the California Attorney General and the U.S. District Court for the Northern District of California.

John Muir Health has owned a 49% interest in San Ramon Medical since 2013. John Muir Health announced an agreement with Tenet in January to take full ownership of the medical center.

In announcing the deal in January, Mike Thomas, president and CEO of John Muir Health, said, “We believe that this acquisition is good for our community, caregivers, patients, and John Muir Health and San Ramon Regional Medical Center.”

A nonprofit system, John Muir Health operates two hospitals and employs more than 1,000 physicians and 6,500 workers.

Tenet Healthcare, a for-profit health system based in Dallas, owns 61 acute care and specialty hospitals and more than 480 ambulatory surgical centers and surgical hospitals. Tenet Healthcare also announced a deal Friday to sell three South Carolina hospitals to Novant Health.

Federal regulators have taken action to block other hospital mergers and acquisitions recently. Hospitals and trade groups blasted the FTC when it moved to block LCMC Health’s acquisition of three Louisiana hospitals from HCA Healthcare. LCMC Health won a court victory over the FTC in September.

The FTC objected to the New York State Health Department’s application for a Certificate of Public Advantage for SUNY Upstate Medical University’s planned acquisition of Crouse Health System in Syracuse, N.Y. The FTC said the proposed merger would raise healthcare costs and reduce access to care. In the face of regulatory opposition, SUNY Upstate and Crouse Health abandoned the planned merger in February.

Federal regulators have applied more scrutiny to hospital deals involving organizations in the same regions, and some of those systems have abandoned their merger plans.