It’s not over yet
Phoebe Putney restrained from integrating hospital
Georgia’s Phoebe Putney Health System, which has gone to the U.S. Supreme Court and back in its quest to buy a rival hospital for $200 million, lost a key legal battle last week when a federal judge imposed what he called an “extraordinary and drastic” restraining order on the union.
The Federal Trade Commission has waged a two-year legal battle against the health system, alleging that the acquisition of the former Palmyra Medical Center in Albany, Ga., illegally gave Phoebe Putney monopoly power over hospital care in a sixcounty region. The 102-bed Palmyra became Phoebe’s fourth hospital in southwest Georgia in December 2011 when forprofit HCA sold it for $198 million.
U.S. District Judge W. Louis Sands granted a request for a temporary restraining order that prevents Phoebe from integrating its new hospital into the system, including changing existing healthcare prices with managed-care companies. The ruling does not prevent Phoebe from striking new contracts with insurers that contain new prices. The FTC has said Phoebe gave insurers such as Blue Cross and Blue Shield of Georgia “substantially” lower rates in exchange for agreements that the company would not contract with competitors such as Palmyra.
“Judge Sands made it clear that the TRO is limited entirely to preserving the status quo as it now exists and that this order is not intended to change the way Phoebe currently operates Phoebe North Campus, the former Palmyra Medical Center,” Tommy Chambless, Phoebe senior vice president and general counsel, said in an e-mailed statement. “This will have the effect of slowing some of the progress we have been moving toward, on Phoebe North Campus as well as on our main campus, and naturally, we will not yet be able to immediately undertake our plans to develop a women’s and children’s center for our community,” Chambless said.
One factor that Sands considered in the restraining-order request was the likelihood of an FTC victory that would unwind the transaction, based on initial arguments in a conference call with both sides. The restraining order will remain in effect until Sands rules on the FTC’s related request for a preliminary injunction that would rely on more-detailed legal briefs and would stand until the case is resolved.
Despite the extensive litigation that has already occurred, little has been said about the central question of whether it was actually legal for Phoebe to buy its only crosstown rival for a price that critics held up as evidence that Phoebe was seeking a valuable monopoly.
Rather, Phoebe Putney defended the deal as immune from antitrust law because the legal entity that purchased Palmyra was a public agency known as the Hospital Authority of Albany-Dougherty County, which owns the Phoebe Putney hospitals and leases them to the system for $1 a year.
But in February, a unanimous Supreme Court ruled that the deal was not immune to FTC review.
That decision left the FTC and Phoebe to battle over the merits of the case in an FTC administrative hearing scheduled for August. But only a restraining order from Sands, the FTC attorneys wrote, would prevent the hospitals from changing its prices in the meantime.
The FTC alleges that Phoebe hospitals, including Palmyra, control 86% of the market for hospital care in a six-county area, and that healthcare costs in Albany already far exceed prices in the rest of the state.
A judge imposed a restraining order on Phoebe Putney’s acquisition of Palmyra.