A stunning blow to Albany hospital merger

Print Friendly and PDF By: Andy Miller Published: Feb 19, 2013

The U.S. Supreme Court, in a unanimous decision Tuesday, ruled that an acquisition by a hospital authority that owns Phoebe Putney Memorial Hospital was not immune from antitrust scrutiny.

The decision represents a victory for the Federal Trade Commission, which argued that the Albany merger was anti-competitive.

The Albany-Dougherty County Hospital Authority’s bid to acquire Palmyra Medical Center drew opposition because Phoebe Putney and Palmyra are the only two hospitals in the Albany area.

In 2011, the Atlanta-based 11th U.S. Circuit Court of Appeals ruled that the Georgia General Assembly had granted antitrust immunity to such deals through a hospital authorities law, trumping the FTC’s argument that the acquisition would cause higher health costs in the Albany area.

After the appeals court’s decision, the hospital authority completed its $195 million acquisition of Palmyra from HCA.

The appeals court, even as it cleared the way for the merger, accepted the contention that it would lessen competition. And the Supreme Court emphasized that very point in its decision Tuesday.

“We hold that Georgia has not clearly articulated and affirmatively expressed a policy to allow hospital authorities to make acquisitions that substantially lessen competition,’’ wrote Justice Sonia Sotomayor in the decision. “The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.’’

What happens now is unclear.

Phoebe Putney Health System has already taken over operation of Palmyra, renaming it Phoebe North. The CEO of Phoebe system said Tuesday that the plans for that hospital will continue to move forward.

“We have not changed our vision,” said the CEO, Joel Wernick, as quoted by the Albany Herald. “We will proceed with the plans we have until someone tells us we cannot. Nobody has told us that yet; [the opinion] just said that it is to [go] back for further proceedings.”

Meanwhile, a bill introduced in the Georgia Legislature aims to buttress the antitrust immunity of hospital authorities. But that legislation, House Bill 230, does not mention competition.

The high court ruling could have an effect on hospital authorities in other states, said Marc Peterzell, an attorney with Arnall Golden Gregory in Atlanta who focuses on health care antitrust issues.

“The decision could be far-reaching,’’ he said. “Many states have hospital authority laws. It could have an impact in other states.’’

And what about the ultimate impact on the Albany dispute? “I don’t know where this can go, from the standpoint of Phoebe Putney,’’ Peterzell said. It would be messy to undo the acquisition now, he noted.

The Georgia case was part of a recent batch of merger lawsuits the FTC has brought in an attempt to revive its hospital enforcement program, the Wall Street Journal reported. The agency and the Justice Department suffered a series of court defeats in hospital cases in the 1990s.

FTC Chairman Jon Leibowitz, in a statement Tuesday, praised the Supreme Court ruling.

“Today’s ruling is a big victory for consumers who want to see lower health care costs, and the court’s opinion will ensure competition in a variety of other industries as well,” Leibowitz said.

The Phoebe Putney Health System issued a statement Tuesday that it is “studying the decision closely.’’

“We are disappointed because the lower court rulings were clear in the applicability of state action immunity in accordance with long-standing precedent,’’ the statement said. “This does not alter our resolve or the commitment Phoebe has to meeting the growing needs of this community and the region we serve.’’

 

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