Special-interest groups representing for-profit and not-for-profit hospitals are choosing sides in the antitrust battle between a public hospital in Florida and the Federal Trade Commission.
At stake, they say, is the fairness of antitrust policy toward for-profit and not-for-profit hospitals. Both sides are trying to consolidate their market shares in many areas across the country in anticipation of national healthcare reform.
In fact, the stakes are perceived by the players to be so high that for-profit hospitals and their national and Florida trade associations are aligning themselves with the FTC, which has been their nemesis in several big transactions of late. On the side of the public hospitals is the largest alliance of not-for-profit hospitals in the country.
The case involves the FTC's antitrust challenge of the proposed acquisition of Cape Coral (Fla.) Hospital by Lee Memorial Hospital in Fort Myers, Fla. Cape Coral is a freestanding, 201-bed not-for-profit hospital. Lee Memorial is a 602-bed public hospital.
The FTC says the acquisition would violate Section 7 of the Clayton Act by giving Lee Memorial control of more than two-thirds of the inpatient business in a five-hospital market in Lee County, Fla. Section 7 bars acquisitions that may reduce competition.
After the FTC's five commissioners voted 3-2 to authorize the challenge, the agency obtained a temporary restraining order blocking the deal. But, U.S. District Judge Henry Lee Adams Jr. in Tampa later lifted the order and denied the government's motion for an injunction. He said the deal was exempt from federal scrutiny under the doctrine of state-action immunity.
Under the doctrine, activities authorized and actively supervised by a state are exempt from federal antitrust laws because the state effectively has replaced previously open competition with a regulated activity.
Judge Adams said a special 1987 Florida law that gave Lee Memorial the authority to acquire and operate other healthcare facilities also, by extension, gave it antitrust protection with the state Legislature's understanding that the hospital could engage in anti-competitive behavior.
The FTC subsequently appealed the decision to the 11th U.S. Circuit Court of Appeals in Atlanta, which has scheduled oral arguments in the case for July 11. Because of this, a scheduled July 13 trial before a federal administrative law judge on the merits of the FTC's antitrust lawsuit will be delayed.
In its appeal, the FTC says the 1987 law was never intended to give Lee Memorial carte blanche to engage in illegal activities. Siding with the agency on that position is the Federation of American Health Systems and the Florida League of Hospitals.
The Washington-based FAHS is a national trade group representing for-profit hospitals, and the league is a state trade group representing for-profit hospitals in Florida.
Two of the five hospitals in the Lee County market are owned by Columbia/HCA Healthcare Corp., the nation's largest for-profit hospital company.
The FAHS and the FLH filed a joint friend-of-the-court brief with the 11th Circuit May 31 in support of the agency's position. They say Judge Adams' decision, if upheld by the 11th Circuit, could tilt the antitrust playing field in public hospitals' favor to the detriment of other hospitals, namely for-profits.
"Under the District Court's holding, any public hospital that is legislatively authorized to operate or acquire other hospitals could do so with antitrust impunity," the groups said. "A public hospital could use this authority to obtain monopoly power. It is well established that firms with monopoly power have the ability to exclude competition, including by driving remaining competition from the market."
Meanwhile, coming to the aid of Lee Memorial and all public hospitals are VHA, the Irving, Texas-based national alliance of not-for-profit hospitals, and the Voluntary Hospital Association of Florida, which represents 90 not-for-profit hospitals in Florida.
The two groups were scheduled to submit a joint friend-of-the-court brief with the 11th Circuit on June 10 in support of Lee Memorial's position. Representatives of the two groups said their brief would be narrow in scope, arguing that the 1987 law does protect Lee Memorial specifically from federal antitrust protection.