U.S. District Judge W. Louis Sands granted a request (PDF) for a temporary restraining order that prevents Phoebe from integrating its new hospital into the system, including changing existing healthcare prices with managed-care companies. The ruling does not prevent Phoebe from striking new contracts with insurers that contain new prices.
“Judge Sands made it clear that the TRO is limited entirely to preserving the status quo as it now exists and that this order is not intended to change the way Phoebe currently operates Phoebe North Campus, the former Palmyra Medical Center,” Tommy Chambless, Phoebe senior vice president and general counsel, said in an e-mailed statement (PDF).
“This will have the effect of slowing some of the progress we have been moving toward, on Phoebe North Campus as well as on our main campus, and naturally, we will not yet be able to immediately undertake our plans to develop a women's and children's center for our community,” the statement said.
The FTC has said Phoebe gave insurers such as Blue Cross and Blue Shield of Georgia “substantially” lower rates (PDF) in exchange for agreements that the company would not contract with competitors like Palmyra.
One factor that Sands considered in the restraining-order request was the likelihood of an FTC victory that would unwind the transaction, based on initial arguments in a conference call with both sides. The restraining order will remain in effect until Sands can rule on the FTC's related request for a preliminary injunction that would rely on more-detailed legal briefs and would stand until the final outcome of the case.
Despite the extensive litigation that has already taken place in administrative court, district court, circuit court and the Supreme Court, little has been said about the central question of whether it was actually legal for Phoebe to buy its only cross-town rival for a price that critics held up as evidence that Phoebe was seeking a valuable monopoly.
Rather, the transaction was explicitly designed to be immune from antitrust law because the legal entity that purchased Palmyra was a public agency known as the Hospital Authority of Albany-Dougherty County, which owns the Phoebe hospitals and leases them to the not-for-profit Phoebe Putney Health System corporation for $1 a year. When the authority bought Palmyra, it leased that hospital to Phoebe Putney as well.
But in February, a unanimous Supreme Court ruled that the deal was not immune to FTC review. The high court found that the hospital had misread the Georgia state law that purportedly allowed hospital authorities to create healthcare monopolies to advance state interest in providing healthcare—known as the “state action” defense. The court said the state law did not grant the protection Phoebe claimed.
That decision left the FTC and Phoebe to battle over the merits of the case in an FTC administrative hearing scheduled for August. But only a restraining order from Sands, the FTC attorneys wrote, would prevent the hospitals from changing its prices in the meantime.
The FTC alleges that Phoebe hospitals, including Palmyra, control 86% of the market for hospital care in a six-county area, and that healthcare costs in Albany already far exceed prices in the rest of the state.
Phoebe Putney officials have said in the past that they do not believe the transaction violated antitrust laws.
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