FTC may revive Phoebe fight, seeks state guidance

Print Friendly and PDF By: Andy Miller Published: Apr 1, 2014

Georgia’s high-profile hospital antitrust saga may not be over after all.

The Federal Trade Commission is asking a state agency whether a potential divestiture of the Albany hospital that Phoebe Putney acquired in 2011 would require certificate-of-need regulatory approval.

Phoebe Putney Memorial Hospital

Phoebe Putney Memorial Hospital

Last August, the FTC and Phoebe Putney Health System announced they were settling the agency’s long-running antitrust suit over the hospital acquisition, and that the deal would allow Phoebe to keep control of the former Palmyra Medical Center.

But that deal has not yet been finalized. And the FTC, in a letter Monday to the Georgia Department of Community Health, indicated that the legal opinion by state officials may make a difference in whether it goes through with the settlement.

The letter noted that the FTC gave preliminary agreement to the settlement based on its understanding that the state’s certificate-of-need (CON) laws — which limit the number of health care facilities in the state — would prevent a breakup of the merged hospitals.

But now the possibility of undoing the merger appears to be more than hypothetical. A potential buyer for the former Palmyra has come forward, the FTC letter said.

“FTC staff recently learned that North Albany [Medical Center] is interested in acquiring the former Palmyra assets,’’ said the letter from the commission’s director of the Bureau of Competition, Deborah Feinstein.

An attorney for the North Albany group, Victor Moldovan, told GHN on Tuesday that “it’s our position that the FTC can order divestiture and that CON would not be an obstacle.’’

Moldovan, in a March letter to state officials asking for a determination on the Albany CON matter, noted that Community Health agreed in 2012 that South Georgia Medical Center in Valdosta could decouple and sell a psychiatric hospital without a CON review.

North Albany, he said, “would be very interested’’ in acquiring the former Palmyra assets, now known as Phoebe North.

The FTC, through a spokesman, declined to comment Tuesday on the letter to Community Health, which asked about the state agency’s decision on North Albany’s request.

A spokeswoman for Community Health said Tuesday that the agency had received an emailed copy of the FTC letter. The agency said it was not a formal request from the FTC. And Community Health declined comment whether it had made any determination on the Albany CON issue, or whether there was any precedent established in a previous hospital decision.

A Phoebe Putney Health System spokeswoman Tuesday referred GHN to a recent statement by Vice President and General Counsel Thomas Chambless, which said that “the matter was resolved appropriately last August based on standing law and precedent, which the Federal Trade Commission recognized in its analysis at the time.”

“We anticipate a final order consistent with the earlier order,’’ the statement added.

 

A protracted controversy

The FTC launched its challenge to the Palmyra acquisition in 2011, contending that allowing Phoebe to operate the only two hospitals in Albany was anti-competitive.

Phoebe officials said the sale, completed that year after the court fight had already started, did not lead to any price increases.

The issues of competition, pricing and Phoebe’s regional dominance flared again a few months after the settlement announcement. That’s when premiums for the southwest Georgia region in the Affordable Care Act insurance exchange proved to be among the highest in the nation.

The Washington Post/Kaiser Health News reported that premiums in the Albany area trailed only those in Colorado mountain resort areas around Aspen and Vail.

Dr. Joseph Stubbs, an Albany internist who has helped lead local opposition to the merger, said Tuesday that the acquisition “was increasing Phoebe’s monopoly power in this part of the state.’’

Stubbs told GHN that he met with FTC officials recently on the situation. “They were very interested in decoupling’’ the two hospitals, Stubbs said.

 

What would the deal do?

 

Last year’s announcement of a settlement agreement between Phoebe and the feds came as a surprise to many health care industry officials. Just a few months before, the FTC had won a big victory in the U.S. Supreme Court. The justices unanimously set aside two lower court rulings in favor of the merger and said the challenge to it could continue.

The U.S. Supreme Court made Medicaid expansion optional for states..

The U.S. Supreme Court gave the FTC a victory in its  fight against the Albany hospital merger.

But the FTC, in announcing the settlement proposal last August, cited the CON laws as an impediment to ordering a divestiture. Without a practical prospect of undoing the merger, the FTC said, it was willing to settle the case.

Under Georgia law, hospitals are required to obtain CON licenses for major construction projects and service expansions. CON aims at controlling health care costs, but many states have repealed such laws.

The FTC suit charged that the Phoebe’s acquisition of Palmyra harmed competition in six South Georgia counties.

Under the proposed settlement of the case, Phoebe Putney Health System and the Hospital Authority of Albany-Dougherty County, which was the official purchaser of Palmyra, would get to keep Palmyra but would agree to abide by certain FTC conditions.

Those conditions included that for the next 10 years they would not acquire, without prior notification to the FTC, a hospital, an inpatient or outpatient facility or a physician group of five or more doctors within a six-county region around Albany (Dougherty, Terrell, Lee, Worth, Baker and Mitchell counties). Also, the hospital authority and Phoebe would be barred for five years from opposing a certificate-of-need application for any additional general hospital in the six-county area.

In the months since last August’s provisional announcement of the settlement, the Albany health system has undergone some financial challenges. In October, Phoebe officials announced the elimination of 127 jobs as part of an organizational restructuring. Those reductions came on top of the 33 “leadership’’ positions eliminated earlier that month.

And in December, Phoebe said it would no longer be managing Dorminy Medical Center in Fitzgerald.

 

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