FTC celebrates end of planned California hospital sale

About a month after the Federal Trade Commission announced legal action to block a California hospital sale, regulators achieved what they wanted.

The deal is not going to happen.

John Muir Health had planned to purchase San Ramon Regional Medical Center from Tenet Healthcare Corp. Tenet is the majority owner of San Ramon Medical, and John Muir proposed taking full ownership in a $142.5 million deal. The FTC said it was moving to block the deal because it would drive up healthcare costs for consumers and potentially reduce services.

The FTC said Monday it was dropping its case against the deal now that the deal has been terminated.

Henry Liu, the FTC’s bureau of competition director, issued a statement celebrating the effort to avert the deal.

“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,” Liu said in a statement.

“John Muir’s anticompetitive hospital takeover would have driven up health care costs for critical services like heart surgery, spinal surgery, and maternity care,” he added. “It also threatened to eliminate improvements in care driven by competition, which directly benefit patients.”

The FTC argued that if the deal was finalized, John Muir would control more than 50% of the inpatient hospital market along the I-680 corridor, potentially raising the already high healthcare costs in the region. The FTC said in a news release the deal “would lead to higher insurance premiums, co-pays, deductibles, and other out-of-pocket costs, or reduced benefits for commercial health insurance enrollees.”

The trade commission filed a suit in federal court, and also teamed with the California attorney general’s office to petition for a temporary restraining order. The FTC move to dismiss the federal court case.

Mike Thomas, president and CEO of John Muir Health, said in November that he was disappointed by the FTC’s action to block the transaction.

“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,” Thomas said in a statement.

A nonprofit system, John Muir Health operates two hospitals and employs more than 1,000 physicians and 6,500 workers. John Muir Health announced an agreement with Tenet in January to take full ownership of the medical center.

Tenet Healthcare, a for-profit health system based in Dallas, owns 61 acute care and specialty hospitals and more than 480 ambulatory surgical centers and surgical hospitals. Last month, Tenet reached a $2.4 billion deal to sell three hospital in South Carolina to Novant Health.

The pace of hospital mergers has picked up in 2023, and many analysts expect to see more deal-making in the next year.

However, federal regulators have been more aggressive in reviewing hospital mergers and acquisitions under President Biden’s administration. Several hospital deals have been abandoned in the face of FTC objections in the past few years.

Citing the scrutiny of regulators, Moody’s Investors Service suggests that hospital merger activity may cool off a bit next year.

“The rate of consolidation among health systems may slow due to increased scrutiny of mergers by federal and state governments, potentially depriving distressed systems of exit strategies and slowing the growth of larger systems active in the M&A space,” Moody’s stated.