John Muir Health and Tenet Healthcare have chosen to call off a hospital deal that had been contested by the Federal Trade Commission (FTC) and the State of California, eliciting a quick victory lap from the regulators.
“The FTC has scored another major healthcare win in less than a month, delivering patients in California continued access to quality, affordable healthcare services,” FTC Bureau of Competition Director Henry Liu said in a Monday statement.
The $142.5 million deal would have seen nonprofit John Muir buying out the 51% stake in San Ramon Regional Medical Center held by for-profit Tenet. The former system had held a 49% interest in the 123-bed facility since 2013.
The regulators filed to block the deal in November, citing a joint investigation that determined John Muir would be eliminating its primary competition for inpatient general acute care in the region—specifically, that the Walnut Creek, California-based system would control 50% of the local market due to its ownership of two other nearby hospitals.
John Muir Health President and CEO Mike Thomas said shortly after the block that the organizations would be conducting a “more in-depth review of the transaction” before deciding on their next course of action. The deal’s initial announcement had highlighted electronic health record integrations, facility investments, extended population health programs and reduced administrative expenses among the purchase’s potential benefits.
In new statements given to reporters, the nonprofit said the “significant money and time required to litigate can be better spent on other initiatives.”
"Both Tenet and JMH remain very disappointed in the FTC's decision and strongly disagree with the assumptions and conclusions that were reached in their court submission," the nonprofit said in the statement. We maintain our shared belief that the proposed transaction would have provided substantial benefits for patients and the community."
John Muir said that it and Tenant will continue to run the hospital under the existing 49-51 joint venture structure, with Tenant managing operations.
With news of the deal’s demise, regulators have now filed to dismiss their case.
“John Muir’s anticompetitive hospital takeover would have driven up health care costs for critical services like heart surgery, spinal surgery and maternity care. It also threatened to eliminate improvements in care driven by competition, which directly benefit patients,” the FTC’s Liu said. “Now that this transaction is terminated, John Muir and Tenet’s San Ramon Regional Medical Center can continue competing head-to-head to offer high-quality care at the best prices for Californians in the I-680 corridor.”
Word of the FTC’s successful challenge comes as the agency and the Department of Justice finalized their 2023 Merger Guidelines. Regulators said the latest update takes into account “modern market realities,” such as vertical and horizontal integration, that threaten competition.