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Palmyra Medical Center

Justices poke holes as Ga. antitrust case hits high court


By Joe Carlson
Posted: November 26, 2012 - 7:00 pm ET
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The Supreme Court has long allowed state governments to disregard federal antitrust law and establish monopolies to meet public goals. But a lawyer for the Federal Trade Commission told the justices Monday that the same power does not flow to public hospital authorities unless the legislature explicitly says so in a law.

The FTC has been waging a legal battle against the public hospital authority in Dougherty County, Ga., which federal lawyers say was used as a front to protect an anticompetitive transaction between two private corporations that consolidated the acute-care services within a six-county area under the control of Phoebe Putney Health System, Albany, Ga. Hospital officials deny that allegation and said the purchase of Palmyra Medical Center by the hospital authority was legal under state law.

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But at the Supreme Court on Monday, both the FTC and the attorneys for the hospital authority encountered skeptical justices who tried to poke holes in the legal theories.

Seth Waxman, attorney for Phoebe Putney and the hospital authority, said the authors of the Georgia Hospital Authorities Act clearly contemplated that county governments would establish healthcare monopolies just by giving them the power to purchase hospitals. That's because most of Georgia's counties are rural, and acquisitions of almost any kind would have such effects.

"The question in this case," Waxman said, according to the official court transcript (PDF), "is whether … the acts of the hospital authority in this case in approving and acquiring the second hospital are fairly attributable to the state."

"The antitrust exemption is for the state, not subdivisions, so the state has to give it to the subdivisions for the subdivision to have it,” Justice Ruth Bader Ginsburg said.

Benjamin Horwich, assistant to the solicitor general in the Justice Department, argued that the state law only gave hospital authorities general corporate powers to acquire one hospital, not to establish monopolies that "socialize" healthcare with a county.

Justice Stephen Breyer quoted the state law, saying "What do the words mean, 'to form and operate one or more major networks of hospitals'? … which follow the words, 'to acquire and operate projects, defined to include hospitals'? So what about those words? Why aren't they good enough?"

Horwich said the word "network" in that context was meant to refer to horizontal health systems that include inpatient, outpatient and physician care, not to multiple-hospital networks.

The Georgia case is one of several hospital antitrust challenges the FTC has waged over the past two years as providers have said they have no choice but to consolidate and integrate to meet the goals of healthcare reform and survive a changing business environment. One high-profile case, involving ProMedica's acquisition of a hospital in Maumee, Ohio, is pending before the 6th U.S. Circuit Court of Appeals in Cincinnati. Last week, Reading (Pa.) Health System pulled the plug on plans to buy a physician-owned specialty hospital after the FTC issued an administrative complaint and was about to ask a federal judge to block the deal pending the outcome.


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