FTC Looks to Block Acquisition of 2 Tenet Hospitals in Memphis

The Federal Trade Commission (FTC) recently filed a lawsuit in federal court to prevent a $350 million healthcare acquisition deal involving two Memphis, Tennessee-based hospitals owned by Tenet Healthcare Corporation.

Nearly a year ago, Methodist Le Bonheur Healthcare, which is also based in Memphis, entered a definitive agreement to purchase Saint Francis Hospital-Bartlett and Saint Francis Hospital-Memphis from Tenet for $350 million. The deal would also include all the physician practices associated with the hospitals and six urgent care centers.

FTC is now claiming that the proposed hospital acquisition deal would “substantially lessen competition in the Memphis area” for a wide range of inpatient general acute care services, including overnight hospital stays and surgeries.

If consummated, the deal could increase healthcare costs for privately insured patients and hold back innovation and quality improvements, the agency added.

“Competition between hospitals helps keep prices down and quality high, and that’s as true in Memphis as it is elsewhere,” Daniel Francis, Deputy Director of the FTC’s Bureau of Competition, said in a press release.

“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,” Francis stated.

Methodist has told local news sources that it was “surprised” by the FTC’s lawsuit and it is “actively considering next steps.”

Methodist is already one of the largest healthcare providers in the Memphis area, operating four general hospitals and one children’s hospital in Tennessee. There are only three other providers of general acute care services in the area, including Saint Francis.

The proposed acquisition would, therefore, bring that number to three total general acute care providers in Memphis, and Methodist would control over 50 percent of the market with only one other major hospital system, Baptist Memorial Health Care, being able to compete, FTC said.

Jason Little, Baptist’s president and CEO, has already spoken out against the proposed acquisition, saying that “the best option is to maintain the competitive balance that we have in Memphis today.”

Little also said Baptist would provide information to the FTC, if asked.

FTC’s stance against the proposed acquisition deal is yet another on a growing list of actions the government has taken to intervene in healthcare merger and acquisition deals. The agency is intent on challenging hospital merger deals that could lessen competition and thereby, increase costs and impact the quality of care.

Just recently, the agency also challenged Thomas Jefferson University Hospital’s proposed acquisition of Einstein Healthcare Network in the Philadelphia, Pennsylvania area.

FTC challenges have squashed deals in the past, including the proposed 2015 merger deal between Penn State Hershey Medical Center and PinnacleHealth. The health systems abandoned the deal shortly after FTC filed a lawsuit attempting to block the proposed combined system from controlling over half the market in the area.

The Methodist-Tenet case will now face an administrative trial on May 18, 2021. In the meantime, FTC has sought a temporary restraining order and a preliminary injunction to block Methodist from acquiring the two hospitals.

Methodist and Tenet would be able to appeal any decision the court makes next year. Additionally, the health systems could restructure the proposed acquisition deal to quell the FTC’s concerns about competition and healthcare prices in Memphis.