The Federal Trade Commission failed in its attempt to prevent the sale of Palmyra Medical Center, a deal that gives effective control to the operator of its crosstown rival in Albany, Ga., Phoebe Putney Memorial Hospital. But the battle may not be over.
FTC ponders next move
Georgia deal goes through, but appeals possible
The FTC opposed as anti-competitive the now-closed $198 million sale of the hospital by HCA to the Hospital Authority of Albany-Dougherty County. The hospital authority also owns 439-bed Phoebe Putney Memorial and leases it to not-for-profit Phoebe Putney Health System, as it plans to do with 102-bed Palmyra.
The purchase closed Dec. 15 after a federal appeals court in Georgia on Dec. 9 affirmed a lower court ruling that said the deal should be allowed to proceed, creating a more difficult but not insurmountable path for the FTC, which would now have to try to undo the deal. The agency could continue to pursue the action administratively within the FTC's internal process, request a rehearing with the full 11th U.S. Circuit Court of Appeals, which ruled on the case with a three-judge panel, or it could appeal to the U.S. Supreme Court.
Given the unusual nature of the situation, the FTC's odds of success in continuing to pursue the matter are unclear. If it were a more of a run-of-the-mill hospital antitrust case, it would be more likely that the FTC would ultimately fail, said attorney Toby Singer, partner in the Washington office of Jones Day.
The case is unusual, however, because of the accusation that the Hospital Authority of Albany-Dougherty County and Phoebe Putney Health System had schemed to avoid antitrust concerns by having the hospital authority purchase the hospital and lease it back to Phoebe Putney, Singer said. The authority, as a government entity, has been ruled to be not bound by federal antitrust laws. The Albany-Dougherty authority currently leases Phoebe Putney Memorial to Phoebe Putney Health System for $1 a year, and the FTC argued in its complaint that Phoebe Putney was the real buyer of the hospital, using the hospital authority as a conduit to do so under protection from antitrust laws.
The 11th Circuit may be receptive to a request from the FTC to have the entire court rehear the case given the facts in the situation, Singer said. But because the 11th Circuit in general has ruled in favor of allowing deals to proceed, that history works against the FTC's chances to pursue a rehearing, she said.
The outlook would be similarly mixed in terms of getting the Supreme Court to hear the case, while the chances that the FTC would continue its administrative case are slim because that avenue would ultimately lead back to the 11th Circuit, Singer said.
The FTC declined to comment beyond a statement the day the appeal was lost, one that left the door open to continued pursuit of the case. “We remain very concerned that it will raise healthcare costs dramatically in Albany, Ga.” Richard Feinstein, director of the FTC's Bureau of Competition said. “We are considering all our options.”
The FTC has until March 8 to file an appeal with the U.S. Supreme Court, assuming it doesn't seek a full appeals court rehearing. The deadline for seeking a rehearing would be due Jan. 23. In that case, if it were to fail, the FTC would have 90 days from that denial to file an appeal with the Supreme Court.
The FTC certainly has other healthcare cases to attend to, notably an action regarding ProMedica Health System's purchase of St. Luke's Hospital, Maumee, Ohio. The FTC won the first round of an effort to undo the purchase of 198-bed St. Luke's by Toledo, Ohio-based ProMedica (Dec. 12). In addition, the FTC in November challenged a deal in which OSF Healthcare System, Peoria, Ill., plans to acquire 293-bed Rockford (Ill.) Memorial Hospital, one of the two hospital competitors to its 235-bed OSF St. Anthony Medical Center, Rockford (Nov. 28).
Moreover, many expect the pace of hospital deals to pick up, presumably enlarging the pool of cases for the FTC to review and potentially pursue. Fitch Ratings noted in a report last week that the ratings agency “believes an increasing number of stand-alone acute-care providers will realize that the need for size and scale to drive greater efficiencies is increasingly important in a tighter reimbursement environment.”
Phoebe Putney declined to comment on the possibility of the FTC continuing its pursuit of the matter. “We're excited about this opportunity to expand access,” Jackie Ryan, Phoebe Putney's vice president of corporate strategy said. “The 11th Circuit said it all for us.”
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