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FTC Seeks New Remedy in Phoebe Putney Hospital Merger Case
Practical Law Legal Update 8-580-3986 (Approx. 3 pages)
FTC Seeks New Remedy in Phoebe Putney Hospital Merger Case
by Practical Law Antitrust
| Published on 09 Sep 2014 • USA (National/Federal) |
The FTC rejected a proposed settlement agreement with Phoebe Putney Health System, Inc. and returned the merger case to administrative litigation.
On September 5, 2014, the Federal Trade Commission (FTC) rejected a proposed settlement agreement with Phoebe Putney Health System, Inc. regarding its merger with Palmyra Park Hospital, Inc. and returned the matter to administrative court. In 2011, the FTC challenged a merger between the two hospitals, alleging that the merger would significantly reduce competition for acute-care hospital services sold to commercial health plans in the six-county area surrounding Albany, Georgia, resulting in:
- Increased prices.
- Harm to patients and their employers.
- An 85% market share for the merged hospital.
The defendants argued that the merger was shielded from federal antitrust law by the state action doctrine because Phoebe Putney was owned and operated pursuant to Georgia's Hospital Authorities Law statute. After an 11th Circuit decision in their favor, the parties merged. In 2013, the Supreme Court found for the FTC, holding that the state action doctrine did not protect the merger from antitrust scrutiny and remanding the case for further proceedings. For more on this decision, see Legal Update, Supreme Court Overturns 11th Circuit Decision in FTC v. Phoebe Putney.
The FTC settled with Phoebe Putney following the decision. In the settlement, the FTC did not require Phoebe Putney to divest Palmyra Park because it had determined that Georgia's Certificate of Need (CON) statutes and regulations prevented a divestiture. As a result, the remedy only required prior notice for any future acquisitions in that market and prevented Phoebe Putney (and its owner, the Hospital Authority of Albany-Dougherty County) from objecting to any future hospital in the area.
However, the FTC recently determined that Georgia's CON laws may not preclude structural relief. The FTC made this determination based on:
- Public comments it received after release of the proposed settlement.
- The Georgia Department of Community Health's (DCH) recent determination that returning Palmyra to its status as a separately licensed hospital for divestiture would not require CON review and approval.
Although the DCH determination is on appeal, the FTC Commissioners voted to withdraw the proposed settlement and return the matter to administrative litigation.
For more information on the FTC's investigation of the Phoebe Putney/Palmyra merger and the original settlement agreement, see What's Market, In the Matter of Phoebe Putney Health System, Inc. and Palmyra Park Hospital, Inc. (litigated case).