Phoebe Putney Health System will keep the Albany, Ga., hospital whose acquisition gave it a monopoly there. A settlement with the Federal Trade Commission, announced Tuesday, ends the public system's four-year fight with commission.
But that agreement also could expose Phoebe Putney to civil lawsuits and limits Phoebe Putney's legal options should competitors seek to enter the market.
The Federal Trade Commission's announced settlement with Phoebe Putney came roughly four years after the agency first sought to block the health system's acquisition of a local hospital.
The FTC succeeded in the courts—including a 2013 U.S. Supreme Court victory—but ultimately lost in the Georgia marketplace when the agency was unable to force Phoebe Putney to divest the hospital. The state's certificate-of-need law essentially blocked Phoebe Putney from unwinding the acquisition, which proceeded as the FTC battled the deal in the courts.
“While it would have been the most appropriate and effective remedy to restore the lost competition in Albany and the surrounding six-county area from this merger to monopoly, Georgia's certificate of need (“CON”) laws and regulations unfortunately render a divestiture in this case virtually impossible, leading us to accept this less-than-ideal remedy,” the commission said in a statement.
Phoebe Putney CEO Joel Wernick said at a news conference Wednesday that the healthcare market and policy had chanced since the initial deal for what was then called Palmyra Medical Center.
“We will carefully evaluate 5-year-old assumptions and apply them to today's realities," he said according to a statement.
"Much has changed over the past five years. Inpatient utilization has fallen, not just at Phoebe, but throughout all hospitals. Growth of outpatient and home-care alternatives are replacing institutionally based services. High-deductible health insurance has made consumers demand more accessible and affordable alternatives. Phoebe must both embrace and excel in assuring both high quality and affordability,” he said.
The settlement requires Phoebe Putney and the public hospital authority that owns the system to notify the FTC ahead of any plans to acquire any hospital, clinic or physician group that operates in Phoebe Putney's six-county market.
The health system also is prohibited from fighting the entry of any new rival that seeks to enter the market in the next five years. Phoebe Putney and the hospital authority cannot file objections or “negative comments” should a competitor seek a certificate of need. Nor can Phoebe Putney appeal should the CON be granted.
Notably, the agreement also stipulates that Phoebe Putney and the public hospital authority acknowledge that the deal for Palmyra Medical Center was anticompetitive, said Jay Levine, an antitrust attorney with Porter Wright Morris and Arthur. That could expose the system to potential civil lawsuits from consumers over the cost of care, he said. Phoebe Putney could be liable for financial damages in such cases.
The settlement holds little significance outside of the Phoebe Putney marketplace, Levine said. However, the FTC legal battle is one that matters to publicly owned hospitals. The Supreme Court victory for the FTC in its case against Phoebe Putney helped to clarify when publicly owned hospitals are immune from antitrust enforcement.
The U.S. Supreme Court rejected the argument by Phoebe Putney that the system's monopoly was immune from antitrust enforcement under “state action” protection for public entities. The court said that Georgia's state action protection did not clearly articulate that its public hospitals could strike deals that reduce competition.
“The FTC needs and wanted the state action doctrine clarified so that if states really want to authorize anticompetitive conduct, they can do so, but they just have to do it clearly,” Levine said.
The FTC called the Supreme Court decision an important victory. “By reaffirming that state action immunity from the antitrust laws only applies where states have clearly intended to restrain competition, the court's decision will benefit competition and consumers throughout the economy in the future.”