The deal between the two was completed in August, but the FTC challenged the consummated acquisition as anti-competitive, arguing specifically that it would enable ProMedica to hike prices for inpatient obstetrical care and general acute-care services.
In the administrative complaint, the FTC contended that the main reason for the deal was to give ProMedica “enhanced bargaining leverage with health plans and the ability to raise prices for services.”
In addition to the administrative complaint, the FTC also filed a separate complaint in U.S. District Court in Toledo, seeking an order to prevent ProMedica from taking control of St. Luke's during the commission's administrative proceedings. And on March 19, a federal judge granted that request, issuing an injunction that preserves St. Luke's as an independent organization. The administrative proceedings are set to begin May 31.
The FTC took that same approach in challenging the Phoebe Putney-Palmyra deal, filing an administrative complaint and a complaint in the federal district court.
“The federal district court hearing is designed to provide a judicial order preliminarily enjoining the transaction,” Razi said. “It's designed to preserve the status quo through an injunction.”
In its news release, the FTC also argued that Phoebe Putney used the Hospital Authority of Albany-Dougherty as a way to shield the deal from federal scrutiny under the state action doctrine.
The state action doctrine is a narrow exception that allows acts of government that are authorized by the state to be exempt from antitrust liability review.
The Hospital Authority of Albany-Dougherty, a political subdivision of the state government, owns all of the assets of Phoebe Putney Memorial Hospital. Georgia law allows a not-for-profit organization to manage those assets through a lease agreement.
In 1990, the authority did exactly that, leasing all of the hospital's assets to newly created Phoebe Putney Health System in a long-term agreement. It's not an unusual arrangement in Georgia, where many hospitals, including 689-bed Grady Memorial Hospital in Atlanta, are owned by a county hospital authority.
But the FTC asserts that the hospital authority served only as a “strawman” and did not actually supervise the deal or perform an independent analysis beforehand.
“Our allegation is that Phoebe Putney Health System, parent company of the hospital, sought out the acquisition, negotiated the deal and will benefit exclusively from it and from the elimination of competition, and the hospital authority has very little to do with it,” Razi said. “They approved it after it was already negotiated and agreed upon, yet Phoebe Putney is claiming state action for what was, in essence, a private deal.”
Palmyra Medical Center declined to comment in detail about the FTC's challenge, but the hospital did acknowledge the move in a one-line e-mailed statement: “We are aware of the filing and are awaiting judge's decision.”
Perry & Walters, the Albany-based law firm that represents the hospital authority, also declined to comment on the FTC's complaint. In a statement, Joel Wernick, Phoebe Putney's president and CEO, called the FTC's decision “disheartening,” adding that the hospital was still confident the deal would benefit the community.
The Georgia attorney general's office, however, echoed the FTC's concerns and filed the complaint in federal district court jointly with the FTC, seeking an injunction until the administrative proceedings and subsequent appeals are completed.
A spokeswoman for Attorney General Sam Olens declined to comment on the decision to join the suit, but in a news release, the office said the transaction would eliminate “vigorous competition” in the area.
“The complaint alleges that Phoebe Putney has used the Hospital Authority to cloak private, anti-competitive activity in governmental guise in the hopes that it would exempt the acquisition from federal antitrust law,” according to the release.
The FTC's administrative trial is scheduled to begin Sept. 19.