By David Ingram
WASHINGTON, Feb 19 (Reuters) - A local hospital authority in
Georgia is not immune from federal antitrust laws even though
the state gave it the power to make acquisitions, the U.S.
Supreme Court ruled on Tuesday.
The unanimous ruling is a win for the Federal Trade
Commission, which is challenging a deal that put two hospitals
in Dougherty County under the same ownership of the Hospital
Authority of Albany-Dougherty County.
The FTC said the deal threatens to reduce competition, while
the authority said it could move ahead anyway under
"state-action immunity," which gives state governments wide
power to regulate markets without concern for competition.
The authority owns Phoebe Putney Memorial Hospital, although
it leaves day-to-day management to a nonprofit corporation.
In December 2011, it voted to acquire rival Palmyra Medical
Center from healthcare giant HCA Holdings Inc.
The FTC's complaint may now move forward in lower courts,
but because the FTC failed to win an earlier injunction, the
hospitals have already consummated the merger. A judge could
order a split or other remedy if the FTC prevails.
"We've been operating as one hospital now for almost a
year," said Thomas Chambless, general counsel of Phoebe Putney
Health System Inc, the nonprofit that operates the combined
hospitals, in a phone interview.
Examining a 1941 Georgia law that created hospital
authorities, Justice Sonia Sotomayor wrote that there is no
evidence to show that state lawmakers wanted antitrust immunity
State lawmakers must clearly articulate that a local
government entity should have immunity, Sotomayor wrote in the
court's only opinion.
"The state legislature's objective of improving access to
affordable healthcare does not logically suggest that the state
intended that hospital authorities pursue that end through
mergers that create monopolies," she wrote.
The 11th U.S. Circuit Court of Appeals had ruled for the
hospital authority using a different principle: that reduced
competition was "foreseeable" under the 1941 law, so state
lawmakers anticipated similar deals.
FTC Chairman Jon Leibowitz said in a statement that the
ruling "is a big victory for consumers who want to see lower
healthcare costs, and the court's opinion will ensure
competition in a variety of other industries, as well."
Chambless said he was disappointed by the ruling but
prepared to continue litigating because the merger has been
successful. Prices have held constant since the merger, he said.
"The old saying about 'the proof is in the pudding' is
applicable here," he said.
The FTC objected to the deal on additional grounds, saying
that hospital officials revived what was an inactive local
authority to make a wholly private transaction appear to be
public. Sotomayor wrote that the Supreme Court did not need to
address that argument.
The case is FTC v. Phoebe Putney Health System Inc, U.S.
Supreme Court, No. 11-1160.
For the FTC: Benjamin Horwich of the Department of Justice.
For the defendant: Seth Waxman of Wilmer Cutler Pickering
Hale and Dorr.
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