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From Antitrust Law Daily, August 22, 2013

FTC announces settlement in challenge to Georgia hospital acquisition

By Jeffrey May, J.D.

Due to “highly unusual” circumstances, the FTC has agreed to end administrative litigation challenging Phoebe Putney Health System, Inc.’s now completed acquisition of Palmyra Park Hospital, Inc., without requiring divestiture relief (In the Matter of Phoebe Putney Health System, Inc., FTC Dkt. 9348, File No. 111 0067).

Today, the FTC announced that Hospital Authority of Albany-Dougherty County and Phoebe Putney Health System have agreed to settle the agency's challenge filed back in April 2011. The agency had alleged that the hospital authority’s purchase of Palmyra Park Hospital’s assets from HCA, Inc. and subsequent lease to Phoebe Putney Health System—the operator of Phoebe Putney Memorial Hospital—would substantially lessen competition or tend to create a monopoly in the inpatient general acute-care hospital services market in Dougherty County and surrounding areas. The agency sought injunctive relief to prevent the consummation of the plan prior to the completion of the administrative proceeding.

Although the court action was dismissed on state action immunity grounds, it was revived by the U.S. Supreme Court. The Court ruled in February 2013 that the state action immunity doctrine did not shield the transaction from attack. Following the Supreme Court's decision, the stayed administrative litigation was reactivated.

The proposed settlement avoids an administrative trial. The proposed consent order announced today is designed to address through the most effective means available the FTC’s competitive concerns regarding the acquisition of Palmyra by the Hospital Authority and Phoebe Putney, according to the FTC. The Commission also dismissed the complaint as to HCA and Palmyra, since the settlement imposes no further relief upon them.

The consent order would require for 10 years the hospital authority and Phoebe Putney to give the Commission prior notice of any future transactions involving hospitals as well as other healthcare providers, such as inpatient and outpatient facilities or physician practice groups, in six Georgia counties. In addition, for five years, the hospital authority and Phoebe Putney would be barred from opposing a certificate of need application for a general acute-care hospital in the six-county area.

According to the Commission, divestiture relief—the agency's preferred remedy to restore competition allegedly lost as a result of an anticompetive merger—was not feasible in this case. The “legal and practical challenges presented by Georgia’s certificate of need (CON) laws and regulations would very likely prevent a divestiture of hospital assets from being effectuated to restore competition.” The Albany area in which the hospitals operate is deemed “over-bedded” by Georgia’s strict need assessment criteria, making it unlikely that any possible divestiture buyer could obtain the necessary CON approval to operate an independent hospital, according to the agency.

The FTC cautioned that the terms of the consent order were acceptable only under the unique circumstances of this case. In other words, parties to a merger or acquisition under FTC review should not expect the agency to sign off on a similar settlement where divestitures or other structural relief are feasible.

FTC Bureau of Competition Director's Statement

“The FTC’s efforts in this case produced a tremendous victory for consumers when the Supreme Court unanimously reined in overbroad application of state action immunity and allowed federal antitrust review of this merger,” said Deborah Feinstein, Director of the FTC Bureau of Competition. “Regrettably, that legal victory will not undo the acquisition’s clear harm to competition. Because divestiture is unavailable in light of Georgia’s strict certificate of need legislation, this proposed order is the most effective and efficient resolution that can be achieved at this time.”

Phoebe Putney Health System Statement

Phoebe Putney Health System issued a statement today, saying that it was pleased with the settlement. Noting that the FTC made no findings that Phoebe Putney or the hospital authority committed any violation of the antitrust laws, the hospital operator said that it had stipulated that the acquisition of Palmyra might substantially lessen competition within the service and geographic markets alleged by the FTC "solely to achieve a compromise with the FTC, and for purposes of these proceedings only."

Attorneys: Maria DiMoscato for FTC. Lee K. Van Voorhis (Baker & McKenzie LLP) for Phoebe Putney Health System, Inc. Kevin J. Arquit (Simpson Thacher & Bartlett LLP) for HCA Inc. and Palmyra Park Hospital, Inc. Frank M. Lowrey IV (Bondurant, Mixson & Elmore LLP) for Hospital Authority of Albany-Dougherty County.

Companies: Phoebe Putney Health System, Inc.; HCA Inc.; Palmyra Park Hospital, Inc.

MainStory: TopStory Antitrust FederalTradeCommissionNews

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