After losing in Supreme Court, Phoebe Putney vows to continue fight with FTC

Phoebe Putney Health System officials are preparing to head back into federal court to defend a $200 million hospital acquisition after the U.S. Supreme Court wiped away a legal defense that had previously shielded the transaction from scrutiny.

The Federal Trade Commission, meanwhile, celebrated today's U.S. Supreme Court decision in the southwest Georgia hospital merger case as “a big victory for consumers who want to see lower health care costs,” a statement from outgoing FTC Chairman Jon Leibowitz said.

The FTC has argued that the acquisition of the former Palmyra Medical Center in Albany, Ga., by its only competitor within several counties consolidated too much power over the local healthcare market to Phoebe Putney Health System, which is a private not-for-profit organization that operates the public hospitals under a $1-a-year lease from the authority.

But district and appeals courts both agreed with Phoebe Putney lawyers that the transaction was immune from the FTC's antitrust review because the authority is a political subdivision of the state of Georgia, and states have the power to flout antitrust laws in order to further public interests.

On Tuesday, the Supreme Court said that the lower courts had misread state-action powers.

“We hold that Georgia has not clearly articulated and affirmatively expressed a policy to allow hospital authorities to make acquisitions that substantially lessen competition,” Justice Sonia Sotomayor wrote for the unanimous court. “The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings.”

Not only does the ruling potentially narrow state hospital authorities' use of so-called “state-action” immunities, it could also imperil Phoebe Putney's operation of the hospital, which is now called Phoebe North.

FTC officials were still reviewing the Supreme Court decision and declined to immediately comment on whether they would seek to eventually unwind the purchase and send Palmyra back to HCA, or if they would want to have the owner find a new buyer through a public divestment process or some other means.

Thomas Chambless, senior vice president and general counsel at Phoebe Putney Health System, said the system isn't making any plans to get rid of the hospital and will continue to fight the FTC in court. Rather, hospital authority officials intend to fight the FTC's assertion that the consolidation of the hospitals would create anti-competitive effects. He said Phoebe's year of experience operating the hospital since the deal closed should show the FTC that the market has not seen monopolistic effects.

“Consolidation is what the healthcare policy of this country is imposing on people who operate healthcare organizations. It is going to continue,” Chambless said. “I think you're going to continue to see transactions like this around the country going forward … because it's going to be necessary for folks to survive.”