New hurdle for Palmyra
In a nationally watched antitrust dispute, the planned purchase of a 120-bed hospital in Southwest Georgia for $195 million has been placed on hold again, this time by the 11th Circuit Court of Appeals. The court on July 6 agreed to grant emergency motions for a preliminary injunction and expedited review regarding the sale of Palmyra Medical Center, the sole acute-care competitor to Phoebe Putney Health System in a seven-county area around Albany, Ga.
The Federal Trade Commission asked the appeals judges to stop the sale until the outcome of the appeal only after a district court judge on June 26 lifted an earlier temporary restraining order placed on the sale. Experts say that loss came at a critical time for the FTC, which is responding to the stepped-up pace of healthcare merger activity with a heightened level of scrutiny.
The Phoebe-Palmyra case features a somewhat unusual but increasingly common type of defense known as “state action,” which essentially says that a private entity can legally displace competition without FTC review if the entity operates a government-owned facility under proper oversight. (July 4, p.10)
State action immunity requires an affirmative statement from a legislature that it has enacted a policy to allow political subdivisions to displace competition— something the FTC has been actively discouraging states from doing. On June 8, for example, the FTC advised lawmakers in Connecticut not to approve a bill that would extend state-action protection to certain providers and managed-care companies. That bill is still on hold.
In the Georgia case, state action is a defense because the legal purchaser of Palmyra will be the Hospital Authority of Albany-Dougherty County. The same hospital authority also owns Phoebe Putney Memorial Hospital and leases it to the not-for-profit corporation Phoebe Putney Health System for $1 a year.
“The authority here was essentially a straw man, and what we believed was going on was a merger-to-monopoly orchestrated entirely by the private actors with no meaningful oversight by the state,” Rich Feinstein, director of the FTC Bureau of Competition, said June 27 during a healthcare law panel discussion in Boston.
Phoebe Putney Health System Assistant General Counsel Dawn Benson said the FTC must make that argument because it has no other way around the strong state-action case law in the 11th Circuit.
Benson also said the FTC’s administrative court challenge—which runs separately from the district court process—should be voided because Sands ruled that the commission has no jurisdiction on the matter. An FTC spokesman confirmed that the commission’s administrative challenge remains in place.
“It’s always been our position that in the absence of authority of the FTC, this situation should be decided in the 11th Circuit,” Benson said. “We believe it is the best thing for the community and we are looking forward to it proceeding.”