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U.S. Supreme Court
The U.S. Supreme Court heard the Phoebe Putney case Nov. 26.
Photo credit: AP PHOTO

Widespread implications

Phoebe Putney decision could affect future deals


By Joe Carlson
Posted: December 1, 2012 - 12:01 am ET
Tags:

Giving a local government the power to buy a hospital is not the same thing as granting it the authority to establish a regional monopoly on acute care, lawyers for the Federal Trade Commission argued before the U.S. Supreme Court last week as they tried to undo a $200 million hospital acquisition in Georgia.

But lawyers defending the year-old purchase of Palmyra Medical Center by a Dougherty County agency said the Georgia Hospital Authorities Act can be read to grant monopoly powers to public hospitals. The state has many rural counties, and virtually any acquisition in a small healthcare market has foreseeable anti-competitive effects, the hospitals' attorney told the Supreme Court justices Nov. 26.

That was the same logic endorsed last year by the 11th U.S. Circuit Court of Appeals in Atlanta, which blessed the acquisition of the 102-bed hospital in Albany, Ga., by the public hospital authority that also owns the other hospital in town, Phoebe Putney Memorial Hospital. The court acknowledged the deal would create a likely monopoly, but said the state had transferred its antitrust immunity to the Albany-Dougherty County Hospital Authority.

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Matthew Cantor, a longtime antitrust attorney with Constantine Cannon in New York who has followed the case, doesn't buy the argument and predicted the 11th Circuit would be reversed.

“In my view, this transaction effectively constitutes a fraud on the court,” Cantor said. “It is beyond reasonableness that this general grant of corporate powers meant a body's action was immunized from antitrust scrutiny.”

James Reynolds Jr., an attorney with Perry & Walters in Albany, Ga., representing the authority and Phoebe, disagreed. “We believe that legal precedents favor our position and that the court's decision will affirm the decisions of the federal district court and the 11th Circuit Court of Appeals, each of which ruled in our client's favor.”

The Supreme Court's decision could have wide implications. Not only could it immunize more hospital transactions from antitrust scrutiny in cases where one of the parties is a public entity, it could also extend to anti-competitive pricing schemes that are closely regulated—and therefore, in theory, blessed by—states or state-created boards, Cantor said.

Benjamin Horwich, assistant to the U.S. solicitor general arguing on behalf of the FTC, argued that state law must explicitly say that a local board was given the power to create a monopoly in order for a state's antitrust immunity to apply to it. But justices expressed skepticism of that interpretation.

“So you think,” Chief Justice John Roberts said to Horwich, “a general (statement) that they may acquire properties doesn't implicitly say they may acquire all properties? That seems pretty thin.”

Former U.S. Solicitor General Seth Waxman, who argued the Supreme Court case on behalf of Phoebe Putney and the hospital authority, said state law does not simply grant hospital authorities general corporate powers to acquire competitors. Rather, the power was given in the context of other state laws mandating counties ensure all residents, including the indigent, have access to acute care.

“These special-purpose authorities do not simply have general corporate powers. They have a mandate,” Waxman said.

A decision in case No. 11-1160, Federal Trade Commission vs. Phoebe Putney Health System, is expected next spring.


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