FTC, California Attorney General Sue to Block John Muir-Tenet Deal

The Federal Trade Commission, joined by the California Attorney General’s office, sued to block John Muir Health’s proposed $142.5 million deal to acquire sole ownership of San Ramon Regional Medical Center LLC from current majority owner Tenet Healthcare Corp., saying the deal would drive up healthcare costs.

The Commission issued an administrative complaint and authorized a lawsuit in federal court alleging the proposed acquisition would eliminate head-to-head competition between John Muir Health and nearby San Ramon Regional Medical Center. John Muir and San Ramon Medical operate in California’s I-680 corridor, which spans Contra Costa and Alameda Counties in the San Francisco Bay Area.

The FTC argues that the deal would allow John Muir to demand higher rates at its two hospitals as well as San Ramon Medical for inpatient general acute care services (GAC), which are a broad range of essential medical, surgical, and diagnostic services that require an overnight hospital stay. “The elimination of competition between John Muir and San Ramon Medical would also reduce incentives for these hospitals to invest in quality improvements,” the FTC 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,” said Henry Liu, director of the FTC’s Bureau of Competition, in a statement. “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 and the California Attorney General’s office closely cooperated throughout the investigation and will jointly file a complaint in federal district court.

John Muir Health, a nonprofit corporation headquartered in Walnut Creek, Calif., operates two hospitals that provide inpatient GAC services along the I-680 corridor. Dallas-based Tenet operates 61 general acute-care hospitals and hundreds of outpatient facilities nationally, including numerous facilities in California.

Currently, Tenet operates San Ramon Medical and holds a 51 percent interest in the medical center, while John Muir owns a 49 percent non-operating interest in San Ramon Medical. Under the terms of the proposed deal, John Muir would acquire Tenet’s remaining interest in San Ramon Medical and would become its sole owner and operator.

The complaint alleges that the proposed deal would allow John Muir to control more than 50 percent of the market for inpatient GAC services sold to commercial insurers and their enrollees in the I-680 corridor, eliminating competition between John Muir and San Ramon Medical. 

The FTC said that currently, San Ramon Medical is a lower-priced competitor seeking to offer inpatient GAC services in the I-680 corridor to enrollees. John Muir’s hospitals are close competitors to San Ramon Medical in terms of both patient preference and geographic location, according to the complaint. The FTC argues that the proposed acquisition would lead to higher insurance premiums, co-pays, deductibles, and other out-of-pocket costs, or reduced benefits for commercial health insurance enrollees, the complaint alleges.

In addition to filing an administrative complaint, FTC staff will also ask a federal court to issue a temporary restraining order and preliminary injunction to prevent John Muir from taking control of San Ramon Medical pending the agency’s administrative proceeding.

The Commission vote to issue the administrative complaint and authorize staff to seek a temporary restraining order and preliminary injunction was 3-0.

“We’re in court today challenging John Muir Health’s anticompetitive acquisition of San Ramon Regional Medical Center, because when healthcare markets illegally consolidate, patients pay the price,” said California Attorney General Rob Bonta, in a statement. “At the California Department of Justice, ensuring that every Californian can access quality, affordable care is a top priority. Competitive markets help keep prices lower. We will continue to fight to ensure that Bay Area residents – and all Californians – can access the affordable healthcare they need to live healthy and happy lives.”

A news story in the Pleasanton Weekly  quotes Mike Thomas, president and CEO of John Muir Health: ”We are 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.”

According to the article, “John Muir officials said that the acquisition had been poised to improve services and patient outcomes by extending existing programs and practices at John Muir to the San Ramon hospital and investing in it with the goal of reducing the likelihood that patients would need to leave the area for care.”