Home E-Weekly February 26, 2013

Supreme Court Upholds FTC Challenge to Hospital Merger

Published: February 25, 2013



A unanimous ruling by the U.S. Supreme Court upholding a Federal Trade Commission challenge to a public hospital merger will strengthen the agency's ability to stop other healthcare consolidations on antitrust grounds.

The SCOTUS decision reverses a lower court's ruling that would have let the Hospital Authority of Albany-Dougherty County in Georgia, which owns Phoebe Putney Memorial Hospital in Albany, acquire the competing Palmyra Medical Center. This merger would have been conducted under the state action doctrine, which provides an exemption from federal antitrust laws.

The FTC had challenged the acquisition in 2011, alleging the deal would "reduce competition significantly and allow the combined Phoebe/Palmyra to raise prices for general acute-care hospital services charged to commercial health plans, substantially harming patients and local employers and employees." It further alleged that the deal had been purposely structured to misuse the state action doctrine as a shield from federal scrutiny.

"We have no doubt that Georgia's hospital authorities differ materially from private corporations that offer hospital services," wrote Justice Sonia Sotamayor in the SCOTUS opinion. "But nothing in the Law or any other provision of Georgia law clearly articulates a state policy to allow authorities to exercise their general corporate powers, including their acquisition power, without regard to negative effects on competition."

According to coverage in the New York Times, the decision should give pause to hospitals "when they join forces with other health care providers to form so-called accountable care organizations, as called for in the new health care law." The $195 million Palmyra acquisition had been completed in 2011, after a circuit court had ruled Georgia's "hospital authorities law" extended antitrust immunities to such mergers, "trumping the FTC's argument that the acquisition would cause higher health costs in the Albany area," says Georgia Health News.

Stephanie Wasek

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