It’s not over yet

Phoebe Put­ney re­strained from in­te­grat­ing hos­pi­tal

Modern Healthcare - - REGIONAL NEWS - Joe Carl­son

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.

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