Phoebe Putney, Hospital Authority Settle FTC Charges

John Commins, for HealthLeaders Media , August 23, 2013

Joel Wernick, president/CEO of Phoebe Putney, said a settlement after more than two years of legal wrangling allows the health system to "put this proceeding behind us…"

"Today's settlement means Phoebe Putney will be able to use the Phoebe north campus as planned, to meet current capacity needs and to expand its tradition of high quality healthcare for our entire community," Wernick said in prepared remarks. "The citizens of Southwest Georgia are well served by this compromise solution [which] we believe to be in the best interests of all parties. It will also allow us to continue moving forward at a time of great change in our country's health delivery system"

In a case that prompted a ruling in February from the U.S. Supreme Court, the FTC alleged in its antitrust complaint that Phoebe Putney constructed an elaborate scheme that used the Authority as a "straw man" to "cloak private, anticompetitive activity in governmental guise in the hopes that it would exempt the acquisition from federal antitrust law"

Phoebe Putney and the Authority countered that they were immune from federal antitrust liability under the "state action" doctrine—which provides an exception for anticompetitive conduct if it is an act of government.

A federal district court and an appeals court sided with Phoebe Putney and the Authority. In February, however, those rulings were tossed out by the U.S. Supreme Court, which ruled that the appeals court had "loosely" interpreted a state law cited by Phoebe Putney to justify a merger that would give the consolidated health system control of about 85% of the market in the region.

FTC officials said they were disappointed that they could not stop the Palmyra acquisition despite the favorable ruling from the high court, but they took solace in knowing that their complaint had established a more stringent legal precedent for state action exemptions.

"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," Deborah Feinstein, director of the FTC's Bureau of Competition, said in prepared remarks

"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"

John Commins is a senior editor with HealthLeaders Media.

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