The Federal Trade Commission (FTC) announced recently that it is suing to block John Muir Health’s proposed $142.5 million deal to acquire sole ownership of the San Ramon Regional Medical Center, LLC. The FTC alleges that the deal, which would transfer ownership from current majority owner Tenet Healthcare Corporation to John Muir Health, could lead to increased healthcare costs.
According to the administrative complaint issued by the Commission, the acquisition would eliminate direct competition between John Muir Health and San Ramon Regional Medical Center. Both institutions operate in California’s I-680 corridor, spanning Contra Costa and Alameda Counties in the San Francisco Bay Area.
The FTC argues that the deal would enable John Muir Health to demand higher rates for inpatient general acute care services (GAC) at its two hospitals and San Ramon Medical. GAC services include a wide range of essential medical, surgical, and diagnostic services that require an overnight hospital stay. The FTC further claims that the elimination of competition would reduce the hospitals’ incentives to invest in quality improvements.
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 based in Walnut Creek, California, operates two hospitals providing inpatient GAC services along the I-680 corridor. Dallas-based Tenet operates 61 general acute care hospitals and numerous outpatient facilities nationwide, including several in California.
Currently, Tenet owns a 51% interest in San Ramon Medical and operates the center, while John Muir holds a 49% non-operating interest. The proposed deal would see John Muir acquiring Tenet’s remaining interest, becoming San Ramon Medical’s sole owner and operator.
The FTC alleges that the proposed deal would allow John Muir to control over 50% of the market for inpatient GAC services sold to commercial insurers and their enrollees in the I-680 corridor. This would eliminate competition between John Muir and San Ramon Medical, leading to higher insurance premiums, co-pays, deductibles, and other out-of-pocket costs, or reduced benefits for commercial health insurance enrollees.
In addition to filing an administrative complaint, FTC staff will also request 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 voted to issue the administrative complaint and authorize staff to seek a temporary restraining order and preliminary injunction was unanimous at 3-0. The complaint and request for preliminary relief will be filed jointly with the California Attorney General in the U.S. District Court for the Northern District of California to halt the transaction pending an administrative proceeding.
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