The Federal Trade Commission has filed an administrative complaint, and authorized a suit in federal court, to block the proposed $350 million acquisition by Memphis-based Methodist Le Bonheur Healthcare of two Memphis-area hospitals, known as Saint Francis, owned by Dallas-based healthcare system Tenet Healthcare Corporation.
The complaint alleges that the proposed acquisition would substantially lessen competition in the Memphis area for a broad range of inpatient medical and surgical diagnostic and treatment services that require an overnight hospital stay, known as inpatient general acute care services, sold to commercial insurers and their insured members. According to the complaint, if the proposed acquisition is consummated, healthcare costs will rise, and the incentive to expand service offerings, invest in technology, improve access to care, and focus on quality of health care provided in the Memphis area will diminish.
Only four hospital systems currently provide general acute care services in the Memphis area. The complaint alleges that the proposed acquisition would reduce that number to three, giving the combined health system control of approximately 60 percent of the Memphis-area market for general acute care services. Only one other major hospital system, Baptist Memorial Health Care, would meaningfully constrain the combined health system; the fourth system in the area, Regional One, is smaller and focuses on a different patient population.
“Competition between hospitals helps keep prices down and quality high, and that’s as true in Memphis as it is elsewhere,” said Daniel Francis, Deputy Director of the FTC’s Bureau of Competition. “It’s clear that patients in the Memphis area have benefitted from the competitive pressure that Saint Francis brings to bear on Methodist, through lower rates, more options for insurers and patients, and quality improvements. This transaction would take that competition away, and patients will pay the price.”
According to the complaint, Methodist and Saint Francis are direct competitors today, vying with one another for inclusion in insurers’ networks, and competing to attract patients by improving quality, expanding services, recruiting high quality physicians, and increasing access. The proposed acquisition would eliminate this direct competition, increasing Methodist’s bargaining leverage with commercial insurers, and allowing it to negotiate higher reimbursement rates. Commercial insurers would have to pass on at least some of the increased healthcare costs to employers and their insurance plan members, while employers that pay the cost of their employees’ healthcare claims directly would bear the full brunt of higher reimbursement rates.
The Commission vote to issue the administrative complaint and to authorize staff to seek a temporary restraining order and preliminary injunction was 5-0. Commissioners Christine S. Wilson and Noah Joshua Phillips issued a joint statement. The FTC will file a complaint in the U.S. District Court for the Western District of Tennessee seeking a Temporary Restraining Order and Preliminary Injunction to stop the deal pending an administrative trial. The administrative trial is scheduled to begin on May 18, 2021.