LE­GAL:

FTC wants Supreme Court to re­view Palmyra case

Modern Healthcare - - MODERN HEALTHCARE - Joe Carl­son

FTC wants to take Ge­or­gia hospi­tal ac­qui­si­tion case to Supreme Court

The Fed­eral Trade Com­mis­sion has gone 0-for-2 in ju­di­cial de­ci­sions about its chal­lenge of the nearly $200 mil­lion ac­qui­si­tion of Palmyra Med­i­cal Cen­ter in Al­bany, Ga., but that track record isn’t stop­ping the agency from try­ing to bring the case be­fore the high­est court in the land.

The U.S. solic­i­tor gen­eral’s of­fice re­vealed in a le­gal fil­ing last week that it in­tends to ask the Supreme Court to re­view the Dec. 9 rul­ing from the 11th U.S. Cir­cuit Court of Ap­peals in At­lanta that al­lowed the hospi­tal sale. The Supreme Court gave the gov­ern­ment un­til March 23 to file its pe­ti­tion for a hear­ing.

Ralph Rosen­berg, chair­man of the Al­bany-

“The FTC is just re­lent­less. They won’t give up. I don’t know what their mo­tive is … It is a to­tal waste of time and money.”

—Ralph Rosen­berg, chair­man of the Al­bany-dougherty Hospi­tal Au­thor­ity

Dougherty Hospi­tal Au­thor­ity in south­west Ge­or­gia, said he does not un­der­stand why the FTC wants to keep go­ing with the case af­ter dis­trict and ap­peals courts both up­held the le­gal­ity of a sale. The trans­ac­tion con­sol­i­dates most of the acute-care hospi­tal beds in six Ge­or­gia coun­ties un­der a sin­gle not-for-profit, Phoebe Put­ney Health Care, which op­er­ates the fa­cil­i­ties un­der a lease from the au­thor­ity.

“The FTC is just re­lent­less,” Rosen­berg said. “They won’t give up. I don’t know what their mo­tive is … It is a to­tal waste of time and money.”

The mo­tive, ac­cord­ing to the FTC, is to pre­vent Phoebe Put­ney of­fi­cials from us­ing an ex­cep­tion in fed­eral an­titrust law to give im­mu­nity to a trans­ac­tion the 11th Cir­cuit has ac­knowl­edged would lessen com­pe­ti­tion and tend to cre­ate a mo­nop­oly. The FTC es­ti­mates Phoebe would con­trol 86% of the acute hospi­tal beds in a six-county area af­ter the sale.

The ap­peals court al­lowed the hospi­tal au­thor­ity to buy Palmyra for about $198 mil­lion from HCA, and HCA said it com­pleted the deal Dec. 15.

“This case is about whether nor­mal an­titrust laws ap­ply to an agree­ment that

al­legedly would cen­tral­ize con­trol of health­care in Al­bany, Ga., into a mo­nop­oly,” FTC Gen­eral Coun­sel Will Tom said in an e-mailed state­ment. “Mo­nop­o­lies in health­care usu­ally raise prices sub­stan­tially, harm­ing pa­tients and em­ploy­ers alike.”

Le­gal ex­perts say the FTC has an­other mo­tive in ad­di­tion to just block­ing a deal in south­west Ge­or­gia. Namely, fed­eral of­fi­cials don’t want to see other hos­pi­tals use the le­gal con­cept of the state ac­tion doc­trine to shield their trans­ac­tions from scru­tiny.

“They are prob­a­bly con­cerned that if this decision stands, other peo­ple are go­ing to go and struc­ture deals that rely on this, which other peo­ple pre­sum­ably would, and should, be­cause if it’s the law of the land, that’s le­git­i­mate,” said Dou­glas Ross, a part­ner in the an­titrust prac­tice at Davis Wright Tre­maine in Seat­tle.

FTC Chair­man Jon Lei­bowitz, de­scrib­ing the Ge­or­gia case in a Novem­ber 2011 speech, noted that the FTC has sought to “clar­ify” the use of state-ac­tion ex­cep­tions to an­titrust laws con­sis­tently since 2001. “The real is­sue with that merger is that it could raise prices for med­i­cal care in one of the poor­est ar­eas in the coun­try,” Lei­bowitz said.

Solic­i­tor Gen­eral Don­ald Ver­rilli Jr. ex­plained in a fil­ing with the Supreme Court that although the fed­eral Clay­ton Act pro­hibits merg­ers that lessen com­pe­ti­tion or cre­ate mo­nop­o­lies, the high court has also carved out an ex­cep­tion in case law dat­ing to 1943 that al­lows states to take an­ti­com­pet­i­tive ac­tions.

“This court has held that in our fed­eral sys­tem, the na­tional pol­icy of free com­pe­ti­tion em­bod­ied in the fed­eral com­pe­ti­tion laws (which in­clude the Clay­ton Act) must give way un­der ap­pro­pri­ate cir­cum­stances to a state’s pol­icy to gov­ern a mar­ket by means other than free com­pe­ti­tion,” Ver­rilli’s fil­ing says. “Ac­cord­ingly, a state is not sub­ject to fed­eral com­pe­ti­tion laws.”

The le­gal ques­tion at is­sue, then, is whether a po­lit­i­cal sub­di­vi­sion of a state—such as the Dougherty County hospi­tal au­thor­ity—ought to also en­joy the same ex­emp­tion as the state it­self.

The 11th Cir­cuit ruled: “In grant­ing the power to ac­quire hos­pi­tals, the leg­is­la­ture must have an­tic­i­pated that such ac­qui­si­tions would pro­duce an­ti­com­pet­i­tive ef­fects … It de­fies imag­i­na­tion to sup­pose the leg­is­la­ture could have be­lieved that ev­ery ge­o­graphic mar­ket in Ge­or­gia was so re­plete with hos­pi­tals that au­tho­riz­ing ac­qui­si­tions by the au­thor­i­ties could have no se­ri­ous an­ti­com­pet­i­tive con­se­quences.”

Re­gard­less of the FTC’S chances of be­ing ac­cepted for oral ar­gu­ments and even­tu­ally win­ning at the Supreme Court level, ex­perts said the decision to con­tinue with the case is telling.

“It’s un­usual,” said Chul Pak, a part­ner in the an­titrust prac­tice at Wil­son Son­sini Goodrich and Rosati. “It’s a clear in­di­ca­tion of the se­ri­ous­ness of the FTC’S ef­forts here, be­cause they don’t of­ten try to get some­thing up to the Supreme Court.”

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