FTC Sues to Block Tenet's Memphis Hospitals Sales

Federal regulators say the consolidated health system would reduce competition in the region and raise healthcare costs for consumers.

The Federal Trade Commission is asking a federal court to block Methodist Le Bonheur Healthcare's $350 million acquisition of two Memphis-area hospitals owned by rival Tenet Healthcare Corporation.

In an administrative complaint filed this week in the U.S. District Court for the Western District of Tennessee, the FTC alleges that the acquisition of the 519-bed Saint Francis Hospital – Memphis, and 196-bed Saint Francis Hospital – Bartlett "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."

Four hospital systems now provide acute care services in the Memphis area and the Tenet sale would reduce that number to three and the combined health system would control 60% of the Memphis-area market for general acute care services.

The FTC said that only rival Baptist Memorial Health Care would "meaningfully constrain the combined health system" because the region's fourth system, Regional One Health, is smaller and focuses on a specialized patient mix.

If the acquisition goes through, the FTC said, "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."

"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," he said.

The FTC says the acquisition would eliminate direct competition between Methodist and Tenet, while boosting Methodist's leverage with insurers to negotiate higher reimbursements. Those increased costs, the FTC said, would be passed on to consumers and employer-based health plans.  

On a 5-0 vote Friday, the FTC authorize staff to seek a temporary restraining order and preliminary injunction. An administrative trial is scheduled to begin on May 18, 2021.

Tenet and Methodist Le Bonheur Respond

Sally Hurt-Deitch, CEO, of Saint Francis Healthcare, and Michael Ugwueke, president and CEO of Methodist Le Bonheur, issued this joint statement:

"Our joint commitment has always been to improve healthcare delivery for the residents of Memphis, Bartlett and the surrounding communities, including enhancing access to care, cutting-edge medical technology and the highest quality physicians and staff. Our two organizations promote a culture of compassion backed by strong core values, which together, we believe will have an even greater impact on care delivered in these communities."

"We are reviewing this recent action by the FTC and actively considering next steps. We are surprised by the FTC action given the strong support for the transaction by local stakeholders, including leading local health plans, physicians, employers, and community leaders and the evidence that the transaction will lead to lower prices, improved quality, and enhanced access to care for Memphis-area patients."