Federal Trade Commission Blocks John Muir Health’s $142.5 Million Acquisition of San Ramon Regional Medical Center, Citing Competition Concerns

San Ramon, California – John Muir Health has abandoned its plans to acquire Tenet Healthcare’s San Ramon Regional Medical Center after the Federal Trade Commission (FTC) filed a lawsuit to block the move, citing concerns about competition in the area.

The San Ramon Medical Center, a 123-bed acute care hospital located west of Oakland, sits just 14 miles away from another John Muir Health hospital. Federal regulators argue that the proposed acquisition would “substantially lessen competition for critical healthcare services” along the I-680 corridor, which spans parts of California’s Contra Costa and Alameda Counties.

A 2020 article by The New York Times dubbed John Muir Health the most expensive healthcare system in the country, with private insurers paying 400 percent more than what Medicare covers for the same procedures. Currently, San Ramon Regional Medical Center offers more affordable options in the area, according to the FTC. A RAND Corporation study reveals that most hospitals in North Texas charge between 200 and 300 percent of Medicare to private insurance.

The FTC contends that high prices are the result of limited competition along the I-680 corridor, where John Muir Health’s other hospitals and San Ramon are located. If the acquisition were to proceed, the regulatory complaint states that John Muir would gain even more leverage over payers, resulting in increased regional prices. The FTC lawsuit claims that the acquisition would give John Muir control over 50 percent of inpatient general acute care services in the I-680 corridor, based on discharge data.

Since 2013, John Muir has held a 49 percent ownership stake in San Ramon Medical Center, with Tenet remaining in control. However, in January of last year, both parties agreed to a $142.5 million deal for John Muir to purchase the remaining stake. The lawsuit was filed by the FTC in November with support from the Attorney General of California, seeking an injunction to halt the acquisition. Ultimately, John Muir and Tenet decided to terminate the deal.

“We are disappointed by the FTC’s decision and are discussing our options and next steps, including challenging the decision in court,” said Mike Thomas, president and CEO of John Muir Health. He added that the acquisition would have benefited the community, as well as the healthcare organization and the San Ramon Regional Medical Center.

Following the termination of the deal by Tenet and John Muir, the FTC dropped its case against the health systems. The Bureau of Competition Director, Henry Liu, celebrated the outcome, stating, “The FTC has scored another major health care win in less than a month, delivering patients in California continued access to quality, affordable health care services.”

Studies indicate that hospital mergers and acquisitions contribute to increased costs and are on the rise. According to the American Hospital Association, there were 1,887 hospital mergers between 1998 and 2021, resulting in a reduction of the total number of hospitals from about 8,000 to just over 6,000. Recent data from Kaufman Hall reveals a significant increase in hospital mergers, with 53 announced mergers in the first three quarters of 2023, equaling the total for all of 2022. The Biden Administration has found that the top 10 health systems control 25 percent of the nation’s market.

Despite promises made by hospital CEOs, research indicates that mergers often lead to higher costs without improving the quality of care. The FTC Director of the Bureau of Economics discovered that hospitals sometimes charge 40 to 50 percent more after merging and facing less competition.

Rob Bonta, the Attorney General of California, emphasized the importance of competitive markets in keeping healthcare prices lower. He stated, “At the California Department of Justice, ensuring that every Californian can access quality, affordable care is a top priority.”

Tenet Healthcare did not provide a comment in response to the situation.

In conclusion, John Muir Health has abandoned its attempt to acquire Tenet Healthcare’s San Ramon Regional Medical Center due to a lawsuit filed by the FTC, citing concerns about competition. The regulatory body argued that the acquisition would limit competition for critical healthcare services in the region. Studies show that hospital mergers contribute to increased costs, and research indicates that merging hospitals often do not improve the quality of care provided. The lawsuit’s outcome ensures continued access to quality and affordable healthcare services for patients in California.