Monday, April 25, 2011

FTC, Georgia Challenge Proposed Hospital Acquisition

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

The FTC has challenged a proposed hospital acquisition that allegedly “creates a virtual monopoly for inpatient general acute care services sold to commercial health plans and their customers in Albany, Georgia and its surrounding area.”

The Commission has filed an administrative complaint, alleging that Phoebe Putney Health System, Inc.’s proposed acquisition of rival Palmyra Park Hospital, Inc. from HCA will reduce competition and raise prices for general acute-care hospital services.

The FTC said in its April 20 announcement that its staff and the Attorney General of the State of Georgia intended to file a separate complaint in the federal district court in Albany, seeking an order to halt the proposed transaction pending the administrative adjudication.

“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,” said FTC Bureau of Competition Director Richard Feinstein.

Phoebe operates a 443-bed hospital in Albany, which offers a full range of general acute care hospital services, as well as emergency care services, tertiary care services, and outpatient services.

Palmyra is a 248-bed acute care hospital in Albany that is owned by HCA—a for-profit health system that owns or operates 164 hospitals in 20 states and Great Britain. Palmyra provides general acute care services, including services in general surgery, non-invasive cardiology, gastroenterology, gynecology, oncology, pulmonary care, and urology.

Relevant Market

The agency contends that the relevant market in which to analyze the effects of the transaction is the market for inpatient general acute-care hospital services sold to commercial health plans. The alleged relevant geographic market is no broader than the six-county region consisting of Dougherty, Terrell, Lee, Worth, Baker, and Mitchell Counties in Georgia.

Hospitals outside the six-county area do not regard themselves are not meaningful competitors of Phoebe Putney or Palmyra for inpatient general acute care services, according to the FTC.

State Action Doctrine

The FTC also alleges that Phoebe structured the deal in a way that uses the Hospital Authority of Albany-Dougherty County, also a respondent, in an attempt to shield the anticompetitive acquisition from federal antitrust scrutiny under the “state action” doctrine.

According to the FTC’s complaint, rather than acting in the state’s interests, the hospital authority served only as a “strawman” in an attempt to shield an overtly anticompetitive transaction from antitrust scrutiny. The FTC contends that the hospital authority played no meaningful role in the transaction and that the state action doctrine cannot be used as a defense to Phoebe’s proposed acquisition of Palmyra.

The administrative complaint, In the Matter of Phoebe Putney Health System, Inc., Dkt. 9348, was released by the FTC on April 22. It will appear at CCH Trade Regulation Reporter ¶16,588.

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