Antitrust and Health Care: FTC’s Off-Again, On-Again Challenge to Georgia Hospital Merger

amurinoFeatured Expert Column – Antitrust/Federal Trade Commission

Andrea Agathoklis Murino, Wilson Sonsini Goodrich & Rosati

Consolidation in the health care industry, and the Federal Trade Commission’s (“FTC” or “Commission”) perspective on such activity, are being closely watched in antitrust law and policy circles. In April 2011, the FTC challenged the acquisition of Palmyra Park Hospital by Phoebe Putney Health System Inc. (“Phoebe”) in Albany, Georgia. The Commission argued that the combination would result in unduly high market shares (>85%) in the provision of acute care services in a six-county region and result in anticompetitive price increases. Shortly thereafter, the FTC sought and obtained a preliminary injunction (“PI”) from the United States District Court for the Middle District of Georgia halting the transaction pending trial. Typical enough. But here’s where our story starts to take some strange twists. What began that April in a federal district court is an adventure leading from the Supreme Court to local Georgia healthcare regulatory bodies…and possibly, back again. Here’s what happened.

Phoebe responded to the PI not by throwing itself into a trial on the merits, but rather by filing a motion to dismiss on the grounds that by virtue of the state action doctrine, Phoebe’s conduct was permissible. Generally, the state action doctrine provides that where (1) there is a clearly articulated state policy to displace competition and (2) there is active supervision by the state of the policy or activity, otherwise anticompetitive activity will be permitted. Here, Phoebe argued that because it was owned by the Hospital Authority of Albany-Dougherty County, and operated under Georgia’s Hospital Authorities Law, it was immune. Phoebe prevailed on its motion to dismiss in the district court and then again at the U.S. Court of Appeals for the Eleventh Circuit. Phoebe then completed its purchase of Palmyra, closing the transaction. Continue reading “Antitrust and Health Care: FTC’s Off-Again, On-Again Challenge to Georgia Hospital Merger”