Attorney general, FTC challenge hospital deal

The Federal Trade Commission and Georgia’s attorney general have challenged the proposed Phoebe Putney Health System acquisition of a rival Albany hospital as anti-competitive.

The FTC voted 5-0 to request an injunction of the merger of Phoebe Putney with Palmyra Medical Center, owned by HCA. And the federal agency filed a joint complaint with the Attorney General’s Office in federal district court in Albany on Tuesday, seeking to halt the $195 million acquisition until the conclusion of the FTC’s administrative proceeding and subsequent appeals.

“The complaint alleges that the transaction as proposed would violate federal law by eliminating the vigorous competition that currently exists” between Phoebe Putney Memorial Hospital and Palmyra in Albany and the surrounding six-county area, said a statement from  the office of Attorney General Sam Olens, released Wednesday.

The complaint also alleges that Phoebe Putney has used the Hospital Authority of Albany-Dougherty County “to cloak private, anti-competitive activity in governmental guise in the hopes that it would exempt the acquisition from federal antitrust law,’’ according to the statement.

A spokeswoman from Olens’ office declined further comment, saying that the case is under seal.

Phoebe Putney CEO Joel Wernick issued a statement Wednesday calling the FTC action ”disheartening.”

“We remain confident, especially with increasing demand for collaboration, [the acquisition] will benefit the health of the citizens in our community,” Wernick said in the statement.

He said Phoebe Putney and the Hospital Authority have cooperated fully with FTC requests for information.

The closing of the deal has been delayed twice.

The FTC’s administrative complaint alleges that the deal would allow the combined Phoebe/Palmyra to raise prices for general hospital services charged to health insurance plans,  “substantially harming patients and local employers and employees,” an FTC statement said.

The FTC also alleges that Phoebe has structured the deal in a way that uses the Hospital Authority in an attempt to shield the anti-competitive acquisition from federal antitrust scrutiny under the “state action” doctrine, the agency statement said.

“We have challenged this transaction for one very simple reason,” said Richard Feinstein, director of the FTC’s Bureau of Competition, in a statement. “By eliminating vigorous competition between Phoebe and Palmyra, this merger to monopoly will cause consumers and employers in the Albany region to pay dramatically higher rates for vital health care services, and will likely reduce the quality and choice of services available in the community as well.”

Besides Phoebe and Palmyra, there is only one other independently owned hospital within the six-county area, the FTC said. After Phoebe’s acquisition of Palmyra, the FTC alleges, Phoebe would have a market share of more than 85 percent.

The attorney general’s office said its statement that the complaint “is not a finding or ruling that the defendants have violated the law. A complaint is filed only when there is reason to believe ‘that the law has or is being violated.’ ”

The allegations will be ruled upon after a formal hearing by a judge, the statement said.