FTC blocks Tenet Healthcare, John Muir Health's California hospital deal

The Federal Trade Commission (FTC) has stepped in to block a California hospital deal it said will result in less competition and higher healthcare costs.

Near the beginning of the year, nonprofit John Muir Health had unveiled a definitive agreement to purchase Tenet Healthcare’s majority stake in San Ramon Regional Medical Center for $142.5 million. John Muir Health has held a 49% interest in the hospital since 2013 and with the deal would be taking on full ownership and operation of the 123-bed facility.  

The hospital’s primary competition for inpatient general acute care in that portion of California’s I-680 corridor is two other hospitals run by John Muir Health, the FTC wrote in a release. Placing all three centers under one roof would give the Walnut Creek, California-based system control of more than 50% of the market, the regulator said.

“San Ramon Regional Medical Center has played an important role in ensuring Californians in the I-680 corridor have access to quality, affordable care for critical health care services, such as cardiac surgery and childbirth,” Henry Liu, director of the FTC’s Bureau of Competition, said in a release. “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.”

The FTC said it issued an administrative complaint and authorized a lawsuit to be filed in the U.S. District Court for the Northern District of California seeking a temporary restraining order and preliminary injunction. The actions were authorized in a 3-0 vote by the FTC’s commissioners.

The federal regulator said it “closely cooperated” with the California attorney general’s office during its investigation of the proposed transaction and plans for the latter to join its court filing.

Specifically, the regulators allege in their legal filing that the proposed 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 said in its announcement. The commission said it plans to upload its complaint publicly “as soon as possible.”

Earlier this year, John Muir Health President and CEO Mike Thomas said the organization believes that its planned acquisition was a boon for patients and providers. The system pointed to electronic health record integration, facility investments, extended community benefit and population health programs along with the elimination of duplicative administrative expenses among the benefits of bringing the hospital under John Muir Health’s wing.

In a new statement, Thomas said his organization is "disappointed by the FTC’s decision, and are discussing our options and next steps, including challenging the decision in court.

"We believe the proposed acquisition would benefit our community, caregivers and patients, as well as John Muir Health, San Ramon Regional Medical Center and Pleasanton Diagnostic Imaging," the latter of which was also included in the deal.

John Muir Health said in its Friday statement that it and Tenet learned of the FTC's plans "to conduct a more in-depth review of the transaction" and had "submitted a large volume of documents and data, as well as expert testimony on the Bay Area health care market and letters of support from local community leaders and government officials."

For now, the systems will maintain their joint venture structure, with Tenet managing the medical center's operations.

“We appreciate the patience of John Muir Health, San Ramon Regional Medical Center and Pleasanton Diagnostic Imaging-affiliated employees and physicians throughout this process,” Thomas said. “Once we determine our course of action, we will communicate with all impacted audiences.”