Dive Brief:
- John Muir Health will not acquire San Ramon Regional Medical Center from Tenet Healthcare following a lawsuit from the Federal Trade Commission filed last month.
- The FTC announced on Monday it dismissed its lawsuit seeking to block John Muir’s acquisition after the hospital systems agreed to terminate the deal last week. The agency argued the acquisition would reduce competition and drive up healthcare costs in California’s I-680 corridor.
- Regulators hailed the deal’s collapse as a victory, with the FTC calling it “another major health care win” in a statement.
Dive Insight:
The FTC argued that John Muir’s intent to become the sole owner of the San Ramon facility would eliminate head-to-head competition between lower-cost San Ramon and John Muir.
The San Ramon center is a lower-priced competitor to John Muir’s facilities in the corridor, which includes Contra Costa and Alameda Counties in the San Francisco Bay Area. If the deal went through, John Muir would have controlled more than half of the inpatient general acute care services in the corridor, according to the lawsuit.
John Muir, which currently holds a 49% stake in the San Ramon facility, entered into a definitive agreement in January to buy Tenet’s majority 51% stake in the center.
“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,” said Henry Liu, director of FTC’s Bureau of Competition, in a Nov. 17 statement.
John Muir previously argued the acquisition would improve care in the region by consolidating the facilities into its version of the Epic electronic health record. Additionally, the system promised to invest in San Ramon’s facilities and reduce the number of patients forced to travel outside the area for care.
In a Monday statement, John Muir and Tenet said they decided not to move forward with the deal due to the “cost and disruption of litigation.”
“Both Tenet and JMH remain very disappointed in the FTC's decision and strongly disagree with the assumptions and conclusions that were reached in their court submission,” the statement said. “We maintain our shared belief that the proposed transaction would have provided substantial benefits for patients and the community.”
San Ramon will continue to operate under a joint venture agreement between John Muir and Tenet, according to the systems.
The FTC said the deal’s collapse was the second major healthcare victory for the agency this month. Regulators on Monday also announced that DNA sequencing company Illumina would divest its Grail subsidiary after the agency argued Illumina’s acquisition threatens competition in the cancer test market.
Also on Monday, the FTC and Department of Justice released merger guidelines that could chill healthcare dealmaking.