Feds to keep fighting Albany hospital deal

Print Friendly and PDF By: Andy Miller Published: Jun 28, 2011

The Federal Trade Commission says it will appeal a federal judge’s ruling Monday that rejected a request for an injunction to block the sale of an Albany hospital.

The FTC, in a statement Tuesday, reiterated its position that Phoebe Putney Health System’s proposed purchase of Palmyra Medical Center would cause higher costs for area residents.

“There is abundant evidence – and the defendants do not dispute – that Phoebe Putney’s acquisition of Palmyra, its only rival hospital in the Albany, Georgia area, will create a monopoly,’’ said the statement from Richard Feinstein, the agency’s Bureau of Competition director.

“This will result in dramatically higher health care costs for citizens of that community,’’ the statement said.

But state Attorney General Sam Olens, who had joined with the FTC in its original court action, said his office would not appeal the judge’s ruling.

In April, the FTC and Olens alleged that Phoebe Putney’s purchase of an Albany competitor hospital was anti-competitive and would raise health costs. The agency filed a complaint in U.S. District Court to halt the purchase.

The FTC also alleged that the local hospital authority was being used to shield the proposed transaction from antitrust scrutiny. Attorneys for the Albany-Dougherty County Hospital Authority, though, maintained that the proposed $195 million deal was exempt from federal antitrust laws.

The proposed acquisition and the resulting dispute raised questions about the extent of oversight that hospital authorities have over their hospitals.

U.S. District Court Judge Louis Sands ruled Monday that the hospital authority is immune from FTC attempts to block its acquisition of Palmyra, owned by HCA, a for-profit hospital chain.

In his 40-page order, Sands wrote, ”So long as the Authority determines that the proposed transaction will continually fulfill the Authority’s mission to promote public health needs of the community and allow it to retain public control of Palmyra as is contemplated by the Hospital Authorities Law— which it has done here… —the Authority may collaborate with private parties such as Phoebe Putney to execute the proposed transaction, without being subject to antitrust liability.”

Phoebe Putney praised the ruling, noting that Sands found  “the FTC does not have jurisdiction in this case and that the Hospital Authority of Albany and Dougherty County is immune from federal antitrust liability.’’

The FTC disagreed, adding in its statement Tuesday, “The deal was specifically structured to avoid antitrust enforcement.’’

And despite his decision not to appeal, Olens in his statement Tuesday said the FTC “provided my office with robust evidence that the merger will reduce competition and raise health care prices in Dougherty County.

“Through the district court litigation, we were able to highlight our concerns with the acquisition process,” the Olens statement concluded.

The FTC alleged that Phoebe structured the deal in a way that used the hospital authority as a “strawman’’ in an effort to shield the acquisition from antitrust scrutiny under the “state action” doctrine.

“The authority engaged in no independent analysis of the proposed acquisition, committed $195 million to the purchase of Palmyra without considering the adverse effects the deal would have on health care prices in the area, and played no supervisory role in connection with the transaction,’’ the FTC said in an April statement. “In fact, since at least 1990, the complaint states, the authority has not actively supervised Phoebe in any way, and has made no effort to review any of the hospital’s recent price increases.’’

The FTC complaint contended that the “state action” doctrine — pertaining to antitrust immunity for government units such as the authority — cannot be used as a defense of Phoebe’s proposed acquisition of Palmyra.

But Sands in his ruling wrote: “Contrary to Plaintiffs’ claims, therefore, whether the Authority authorized the purchase of Palmyra without considering, among other factors, the anticompetitive adverse effect of the acquisition on health care in the community and alternatives to leasing Palmyra to Phoebe Putney [is] irrelevant.”

The authority ”has created the machinery for structuring and executing the transaction, although Phoebe Putney negotiated, promoted, and lobbied for the transaction,” Sands wrote.

Here’s the Albany Herald‘s account of the ruling and its aftermath.

Attorneys for the Albany-Dougherty County Hospital Authority had said authority members were apprised of a possible acquisition of Palmyra and gave tentative approval of the deal before it was struck. The authority later approved the transaction, said a legal brief from the Atlanta firm Bondurant, Mixson and Elmore.

The Bondurant firm said the deal is exempt from antitrust action because it was done by a government entity, the hospital authority.

 

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