WASHINGTON (CN) – A Georgia law that bars application of federal antitrust laws against local monopolies created by hospitals mergers will face review by the U.S. Supreme Court.
Phoebe Putney Health System announced plans to merge with its largest local rival, HCA Inc.’s Palmyra Park Hospital, in 2010.
Under the plan, Phoebe would pay a hospital authority created by the city of Albany and county of Dougherty to acquire Palmyra Park. That authority would then contract the facility and its operation to Phoebe for $1 a year for 40 years.
The Federal Trade Commission and the Georgia Attorney General balked at the apparent local monopoly, which they said would reduce competition in the acute-care hospital market and let Phoebe raise its rates.
But Phoebe and the others claimed that that Georgia’s Hospital Authorities Law permits the acquisition and operation of health care networks, even when such constructions result in monopolies.
Finding that the law gave broad powers to the authorities, and that legislators must have expected such powers would result in monopolies, a federal judge dismissed the FTC’s complaint with prejudice. The 11th Circuit affirmed in December 2011.
“Foreseeably, acquisitions could consolidate ownership of competing hospitals, eliminating competition between them,” the Atlanta-based appellate court said.
Palmyra’s acquisition and operation by Phoebe Putney “are authorized pursuant to a clearly articulated state policy to displace competition,” according to the decision. “The execution of the plan, consequently, is protected by state-action immunity.”
In its petition to the Supreme Court, the FTC says that the Georgia law intends to let local authorities act like regular corporations, not monopolistic ones.
Even if the state law protects health care monopolies, that protection extends only to monopolies operated by the local authority, according to the commission.
Since Phoebe’s Palmyra deal does not give any managerial power to the county, the FTC says it acted as a mere “straw man” to protect a private company from antitrust scrutiny.
As is its custom, the Supreme Court did not comment on its decision to grant the FTC’s petition for certiorari.