FTC reverses course on Phoebe Putney, seeks sale of Palmyra

The Federal Trade Commission has withdrawn its agreement resolving a high-profile antitrust dispute with Phoebe Putney Health System. The commission will instead pursue its earlier ambition to unwind a hospital deal that it argued all the way to the U.S. Supreme Court created an illegal monopoly in Albany, Ga.

Last year, the FTC accepted a proposed consent agreement that would have allowed Phoebe Putney to keep Palmyra Medical Center, now named Phoebe North Campus in Albany, Ga., under certain conditions. For example, Phoebe Putney would have to notify the feds every time it wanted to buy another facility or physician practice for the next decade.

The FTC had challenged the not-for-profit health system's $200 million acquisition of Palmyra from HCA for several years on grounds that it gave Phoebe Putney a monopoly in Albany and would lead to higher healthcare prices. The government won its case in the U.S. Supreme Court in 2013, reversing an appellate court ruling that said Phoebe Putney and its parent hospital authority were exempt from federal antitrust review.

The two sides agreed to the consent order last summer after the FTC concluded Georgia's certificate-of-need laws precluded Phoebe Putney from divesting Palmyra. However, according to documents released last week (PDF), Georgia's CON laws may not be an impediment.

The proposed deal allowed for a 30-day public comment period. The FTC ultimately learned that splitting up Phoebe North from the health system with a separate hospital license would not require CON review and approval as previously thought.

In addition, the FTC found out there may be a new potential buyer for Phoebe North. North Albany Medical Center, a recently formed healthcare company, notified the FTC this past March it was interested in acquiring the acute-care hospital, which has a little more than 100 staffed beds. Details of a proposed deal were not disclosed.

The case will now move to an administrative court, with the initial hearing set for Feb. 4, 2015.

Deborah Feinstein, director of the FTC's Bureau of Competition, called last year's consent agreement at the time a “tremendous victory.” She said while the agency regrets accepting a proposed settlement “based on a potentially erroneous understanding of Georgia's CON requirements, the public comment period served its intended purpose” and will lead to a better result for the area.

“Meaningful structural relief is needed to restore competition to this marketplace,” Feinstein said.

The FTC's decision to reject the proposed settlement is not wholly unsurprising, said Holden Brooks, a healthcare attorney with Foley & Lardner.

“The case took a lot of time and resources at the agency, so it would not be surprising to anyone that they would follow a path what they would consider to be effective relief,” Brooks said.

Phoebe Putney officials called the FTC's move “disappointing” and said it is ready to litigate the matter in court.

Follow Bob Herman on Twitter: @MHbherman