High Court Review Sought in Georgia Hospital Merger Case

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

At the request of the FTC, the U.S. Solicitor General has petitioned the U.S. Supreme Court to review a decision of the U.S. Court of Appeals in Atlanta (2011-2 Trade Cases ¶77,722), holding that the proposed combination of the only two hospitals in Albany, Georgia, was immune from antitrust attack under the state action doctrine. The appellate court had upheld dismissal (2011-1 Trade Cases ¶77,508) of the Commission’s complaint for injunctive relief pending the completion of an administrative proceeding.

According to the petition, the case presents the question whether a hospital’s acquisition of its only rival, effectuated by using a substate governmental entity’s general corporate powers, is exempt from antitrust scrutiny under the “state action doctrine.” The appellate court decision conflicts with decisions of the Fifth, Sixth, Ninth, and Tenth Circuits, the agency contends.

In April 2011, the FTC issued an administrative complaint challenging the transaction (CCH Trade Regulation Reporter ¶16,588). The FTC alleged that a local hospital authority’s purchase of Palmyra Park Hospital’s assets from HCA, Inc. and subsequent lease to Phoebe Putney Health
System, Inc. (PPHS)—the operator of Phoebe Putney Memorial Hospital—would substantially lessen competition or tend to create a monopoly in the inpatient general acute-care hospital services market in Georgia’s Dougherty County and surrounding areas.

The agency also sought injunctive relief to prevent the consummation of the plan prior to the completion of the administrative proceeding. Pending conclusion of the court action, the FTC stayed its administrative proceedings (CCH Trade Regulation Reporter ¶16,620).

In its petition for certiorari, the government has asked the Court to consider: (1) whether the Georgia legislature, by vesting the local government entity with general corporate powers to acquire and lease out hospitals and other property, has “clearly articulated and affirmatively expressed” a “state policy to displace competition” in the market for hospital services; and(2) whether such a state policy, even if clearly articulated, would be sufficient to validate the alleged anticompetitive conduct, given that the local government entity neither actively participated in negotiating the terms of the hospital sale nor had any practical means of overseeing the hospital’s operation.

The petition, FTC v. Phoebe Putney Health System, Inc., Dkt. 11-1160, is available here on the FTC website.