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Dive Brief:
- The Federal Trade Commission is suing to stop John Muir Health’s proposed $142.5 million deal to buy San Ramon Regional Medical Center from current majority owner Tenet Healthcare.
- The administrative complaint, filed Friday by the California Attorney General’s office, alleges that the takeover would further reduce competition along the state’s I-680 corridor, raise costs, and restrict hospitals’ ability to focus on quality improvements.
- Walnut Creek, California-based John Muir is discussing next steps, including challenging the decision in court, according to a statement from president and CEO Mike Thomas.
Dive Insights:
The lawsuit comes after nonprofit John Muir announced it entered into a definitive agreement with Tenet in January to become the sole owner of San Ramon Regional Medical Center.
John Muir, which currently operates two hospitals providing inpatient general acute care along the I-680 corridor, currently has a 49% stake in the San Ramon center, while Tenet has a controlling 51% share.
The San Ramon facility is a lower-cost competitor to John Muir’s facilities in the area, which includes Contra Costa and Alameda counties in the San Francisco Bay Area, according to regulators.
The deal will eliminate head-to-head competition between lower-cost San Ramon and John Muir. In addition, if the deal is completed, John Muir will control more than half of the general inpatient care services, such as neuro or cardiac surgery, obstetrics, acute illness and infection treatment, and some emergency care, offered in the corridor, according to the complaint.
John Muir is the largest provider of these services in the region, and competition is low, allowing the system to receive high prices from insurers who need its hospitals in their networks to sell to locals, the FTC said.
“San Ramon Regional Medical Center plays an important role in ensuring that Californians in the I-680 corridor have access to quality, affordable care for critical health care services, such as surgery of the heart and reproduction,” Henry Liu, director of the FTC’s Bureau of Competition, said in a statement.
John Muir argued that the deal, which also includes Pleasanton Diagnostic Imaging, will improve care in the region by bringing facilities to its version of the electronic health record Epic, expanding the health system’s quality and programs in population health, and making investments in facilities in San Ramon and services to reduce the number of patients going outside the community for care.
The latest challenge from the FTC comes as regulators scrutinize the increasingly consolidated hospital sector. Research shows that hospital consolidation leads to higher prices without clear evidence that it improves the quality of care.
Over the summer, the agency signaled that it could challenge more health care deals if it withdrew two merger enforcement antitrust policy statements, which outlined whether the merger would generally be safe from antitrust scrutiny. Regulators said the statements were out of date because of changes in the market.
Hospital lobbyists have pushed back against the policy rollbacks, with the American Hospital Association arguing that the move is “unnecessary and reckless,” adding that hospitals need to unite to prepare themselves. against financial pressures exacerbated by the COVID-19 pandemic.
The FTC and the Department of Justice have also proposed updated merger guidelines that could allow regulators to target vertical and cross-market healthcare deals.
