LEGAL:

FTC wants Supreme Court to review Palmyra case

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.”