The Federal Trade Commission has sued to block John Muir Health's proposed $142.5 million acquisition of San Ramon (Calif.) Regional Medical Center from majority owner Tenet Healthcare, arguing that the deal will drive up healthcare costs.
Walnut Creek, Calif.-based John Muir Health has held a 49 percent stake in the 123-bed hospital since 2013. Under the proposed deal, it would acquire the remaining 51 percent interest from Dallas-based Tenet, a 61-hospital, for-profit system.
The addition would grow John Muir to three hospitals, but the FTC alleges the transaction would eliminate head-to-head competition between John Muir and San Ramon Regional. Both entities operate in California's I-680 corridor, which spans Contra Costa and Alameda Counties in the San Francisco Bay Area.
San Ramon Regional is a lower-priced competitor seeking to offer inpatient general acute care services in the I-680 corridor to enrollees. John Muir's hospitals are close competitors both in terms of patient preference and geographic location, according to the FTC, which alleges the acquisition would lead to higher insurance premiums, co-pays, deductibles, and other out-of-pocket costs, or reduced benefits for commercial health insurance enrollees.
If the acquisition closes, John Muir would be able to demand higher rates at its two hospitals as well as San Ramon Regional for inpatient general acute care services, according to the FTC. The elimination of competition between John Muir and San Ramon Regional would also reduce incentives for these hospitals to invest in quality improvements.
"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 healthcare services, such as cardiac surgery and childbirth," Henry Liu, director of the FTC's bureau of competition, said in a Nov. 17 news release. "John Muir's acquisition of San Ramon Medical would increase already high healthcare costs in the area and threaten to stall quality improvements that help advance care for all patients."
The FTC and the California attorney general's office cooperated on the investigation and will jointly file a complaint in federal district court. The FTC will also seek a temporary restraining order and preliminary injunction to prevent John Muir from taking control of San Ramon Regional.
"We are disappointed by the FTC's decision, and are discussing our options and next steps, including challenging the decision in court," John Muir President and CEO Mike Thomas said in a statement shared with Becker's. "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."