The recent federal appellate court decision in the controversial Lee Memorial Hospital antitrust case illustrates the often arbitrary nature of state and federal antitrust enforcement policy as it applies to private and public hospitals.
Meanwhile, the decision could give public hospitals in other states the impetus to take advantage of similar laws or lobby for comparable protections.
In a narrowly focused decision, a three-judge panel of the 11th U.S. Circuit Court of Appeals in Atlanta ruled Nov. 30 that the proposed sale of Cape Coral (Fla.) Hospital to Lee Memorial Hospital in Fort Myers was protected from federal antitrust laws under the state-action immunity doctrine.
Under the doctrine, activities that are permitted and monitored by the state are exempt from federal antitrust laws.
The court said the doctrine applied in the case because Lee Memorial, a 627-bed public hospital, was given special permission under a 1987 state statute to acquire other hospitals. And, the court said, the Florida Legislature did so knowing that it could lead to anti-competitive behavior by the hospital.
The Federal Trade Commission had challenged the Cape Coral acquisition, claiming it would violate Section 7 of the Clayton Act, which bars acquisitions that may reduce competition.
The agency had sought a court injunction barring the deal until the antitrust charges could be resolved, but a federal district court and the federal appellate court sided with Lee Memorial.
Whether the FTC appeals or the merger goes through as planned are open questions (See related story, this page). Also uncertain are several broader antitrust policies raised by the decision.
Perhaps foremost is the conflicting antitrust rules facing the five hospitals in the Lee County, Fla., market.
If the court's decision stands, Lee Memorial is free to acquire Cape Coral, a private not-for-profit hospital, or any of the other three hospitals in the market.
Columbia/HCA Healthcare Corp., a Louisville, Ky.-based hospital chain, owns two of the remaining three hospitals, Southwest Florida Regional Medi-Antitrust
cal Center and Gulf Coast Hospital, both in Fort Myers. Healthtrust, a Nashville, Tenn.-based hospital chain, owns the county's fifth hospital, East Pointe Hospital, in Lehigh Acres.
But Columbia/HCA is proposing to buy Healthtrust, and the FTC and several states are investigating (Nov. 28, p. 4).
Based on history, the FTC likely will approve the acquisition but require Columbia/HCA to sell off facilities in markets where the company is deemed to control too many hospitals. One such market may be Lee County, where the acquisition would give Columbia/HCA control of three of the five hospitals.
If that happens, federal antitrust policy would have blocked an acquisition by a for-profit hospital in Lee County at the same time state antitrust policy permitted a similar acquisition by a county-owned hospital.
Mixing the pot some more is the fact that Columbia/HCA has offered to buy Cape Coral (Dec. 5, p. 2).
Toby Singer, the attorney representing Lee Memorial in the antitrust case, said it's appropriate to have two sets of rules for two sets of hospitals because they're operated differently for different purposes. The public hospital is a not-for-profit institution governed by local officials while the chains are for-profit companies with shareholders to please.
Another policy implication of the decision is the likelihood that public hospitals in other states may try to use the ruling to their advantage, said Robert Bloch, a former top Justice Department healthcare antitrust official.
Although the ruling is limited to Lee Memorial's situation, it may prompt other public hospitals to dust off decades-old enabling laws that authorized their formation and try to stretch them for antitrust protection, he said.