FTC Sues to Block Potential John Muir Monopoly

ack in January, nonprofit John Muir Health announced that it had entered into a definitive agreement with Tenet Healthcare to become the sole owner of San Ramon Regional Medical Center. The Federal Trade Commission (FTC) has now filed a lawsuit seeking to halt the planned $142.5 million acquisition of San Ramon by John Muir Health from its current majority owner, Tenet. 

This legal challenge against John Muir highlights a broader concern concerning the impact of healthcare consolidation on competition, costs, and quality of services. The lawsuit, which was filed in conjunction with the California Attorney General’s office, states that the completion of this deal would cause diminished competition in California’s I-680 corridor, potentially leading to increased healthcare costs for consumers. They also argue that the acquisition may disincentivize the hospitals from prioritizing improving patients’ quality and care. 

Currently, John Muir holds a 49 percent stake and operates two hospitals providing general acute care along the I-680 corridor, while the majority, 51 percent, is owned by Tenet. If the acquisition is permitted, San Ramon will transition into the sole ownership of John Muir, which would eliminate the existing competitive dynamic between the lower-cost San Ramon and John Muir’s facilities in the Contra Costa and Alameda Counties of the San Francisco Bay Area.

Another considerable concern of this deal is the potential concentration of control over inpatient general acute services in the I-680 corridor. According to the FTC complaint, John Muir would exert influence over more than half of these critical services like neuro or cardiac surgery, childbirth, serious illness and infection treatment, and certain emergency care if the acquisition proceeds. This consolidation, the FTC alleges, could enable John Muir to command higher prices from insurers, given the limited alternatives in the region.

John Muir Health, however, argues that the acquisition aims to improve healthcare delivery in this region. They believe that bringing San Ramon Regional Medical Center under its ownership would allow the integration of the facility into its electronic health record system, Epic. Along with expanded investments in quality and population health programs, the nonprofit expects this integration to enhance the overall standard of care. John Muir also states that it would reduce the number of patients seeking healthcare services outside the local community. 

Existing research has suggested that hospital consolidation often leads to higher healthcare prices without clear evidence of improved care quality.

Healthcare consolidation has sparked debates within the industry, with hospital lobbies arguing that consolidation is necessary for financial resilience, particularly in light of challenges intensified by the COVID-19 pandemic. The result of this legal battle will likely have far-reaching implications for the regulatory landscape surrounding healthcare mergers and acquisitions, potentially shaping the future of competition and collaboration within the U.S. healthcare sector.