Finding an immunity from antitrust laws, a federal judge in Georgia has tossed out (PDF) a Federal Trade Commission request to temporarily block Phoebe Putney Health System from purchasing a rival hospital in Albany, Ga., for $195 million.
Judge tosses FTC court complaint against Phoebe Putney
U.S. District Judge W. Louis Sands ruled that Phoebe Putney was entitled to immunity from federal antitrust laws in the plan to purchase competitor Palmyra Medical Center because of the “state action doctrine,” which allows publicly owned businesses to legally engage in monopolistic actions.
Phoebe Putney is a not-for-profit hospital operator, and Palmyra is owned by for-profit hospital chain HCA. However, the transaction was purposely structured so that the legal purchaser of Palmyra is a government entity, the Hospital Authority of Albany-Dougherty County, which also owns Phoebe Putney Memorial Hospital and leases it to the legally separate Phoebe Putney Health System for $1 a year.
FTC officials had argued that the authority members effectively did not oversee the hospital, which made it a "straw man" owner designed to shield the transaction from scrutiny. Sands said that reasoning didn't matter because state lawmakers had clearly intended hospital authorities to engage private operating companies.
Sands' decision dismisses only a district court complaint that the FTC had filed to request a restraining order while the commission reviews the transaction in its administrative courts, but the FTC is free to continue its administrative review of the transaction.
The commission will appeal the judge's ruling, FTC Competition Bureau Director Richard Feinstein announced during an educational session on antitrust enforcement at the American Health Lawyers Association annual meeting in Boston.
"This is going to be appealed to the 11th Circuit," Feinstein said. "We went into this with eyes wide open. We understood the state of the law on state action in the 11th Circuit, and we will attempt to convince the court that the facts in this case should compel a different decision."
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