Methodist Le Bonheur will not move forward with its $350 million acquisition of two Tenet Healthcare Corp.'s Memphis-area hospitals that faced opposition from federal regulators, the organizations announced Wednesday.
The deal included Saint Francis Hospital–Memphis and Saint Francis Hospital–Bartlett, their associated physician practices and six MedPost urgent care centers. The Federal Trade Commission, which sued to block the transaction, said Memphis-based Methodist would control nearly 60% of the already highly concentrated acute-care market, likely resulting in increased healthcare costs.
The Saint Francis hospitals didn't address the FTC's suit in a prepared statement, only saying that the best course for both organizations is to remain independent.
"This decision maintains our ability to provide excellent care to our patients, and doesn't change — or compromise in any way — our longstanding promise to enhance access to care, cutting-edge medical technology and the highest quality physicians and staff," the statement reads.
The providers faced an FTC lawsuit and the regulatory hurdles involved with adding investor-owned hospitals to Methodist's not-for-profit system.
If the transaction went through, it would have eliminated the competitive forces that keep prices and quality in check, the FTC argued, noting that Methodist has provided price concessions to commercial insurers to exclude Saint Francis from narrow network plans or otherwise disadvantage Saint Francis.
In addition to competing to be in insurers' networks, Methodist and Saint Francis also draw patients by improving quality, expanding services and increasing access for patients in the Memphis area, according to the complaint.
Daniel Francis, deputy director of the FTC Bureau of Competition, said the deal's collapse is great news for Memphis-area patients.
"The FTC voted unanimously to challenge this hospital transaction because it would have eliminated competition between two of only four hospital providers and left patients worse off as a result. That outcome has been avoided," he said in prepared remarks. "I'm grateful not only to the bureau's staff—whose work for consumers across the country has continued at a record pace despite the COVID-19 pandemic—but also to our partners in the Tennessee Attorney General's Office, who joined our litigation and worked closely with us to secure this result."
Tenet, which recorded a net loss from continuing operations attributable to shareholders of $197 million in the quarter ended Sept. 30, had expected to complete the sale in 2020. Executives said in recent earnings calls that the proceeds would enhance its liquidity position, in addition to the potential sale leaseback of certain medical office buildings.
Dallas-based Tenet recently agreed to sell most of its urgent care centers to FastMed Urgent for $80 million. Tenet said in a news release that it will focus on its ambulatory surgery center business, which the company is poised to grow with its recently announced $1.1 billion deal to acquire 45 ASCs.