The Federal Trade Commission today 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 Corporation, saying the deal will drive up health care costs.

The Commission issued an administrative complaint and authorized a lawsuit in federal court alleging the proposed acquisition will eliminate head-to-head competition between John Muir Health (John Muir) and nearby San Ramon Regional Medical Center (San Ramon Medical). 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 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.

“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. “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 non-profit corporation headquartered in Walnut Creek, California, 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% interest in the medical center, while John Muir owns a 49% 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% 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 to provide better services, high-quality care, and access that benefits patients in this region. 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 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.

Business Affairs Homepage