The U.S. Supreme Court has ruled that state and local government-owned corporations are not always immune from federal antitrust laws, allowing the Federal Trade Commission (FTC) to continue its challenge of a merger by two health systems owned by a Georgia county hospital authority.
Overturning the district and circuit court decisions in the FTC v. Phoebe Putney Health System, the Supreme Court ruled unanimously that the "state action doctrine" of antitrust exemption does not apply to Georgia hospital authorities because the 1941 Georgia statute and subsequent amendments don't address the question of business actions weakening competition.
Considering "antitrust laws' values of free enterprise and economic competition, 'state action immunity' is recognized only when it is clear that the challenged anticompetitive conduct is undertaken pursuant to the 'State's own' regulatory scheme," Justice Sonia Sotomayor wrote in the opinion.
The Georgia legislature "has not clearly articulated and affirmatively expressed a policy allowing hospital authorities to make acquisitions that substantially lessen competition," Sotomayor wrote. "A state legislature need not 'expressly state' that intent, but the anticompetitive effect must have been the 'foreseeable result' of what the State authorized."
The Court did not rule on the merits of the FTC's attempt to block a merger of Phoebe Putney Health System and Palmyra Medical Center. Both are owned by the Hospital Authority of Albany-Dougherty County, and Phoebe Putney Health System would officially be leasing Palmyra Medical Center, which the hospital authority purchased from HCA for $195 million in 2011, for $1 a year.
The FTC said the new joint health system could lead to the not-for-profit Phoebe Putney controlling 85 percent of the regional provider market, and the merger may have faced additional hurdles had it not been orchestrated through the hospital authority.
Although the ruling likely won't have much impact on hospital mergers, it could let to changes in how state and local government-owned corporations are regulated. FTC Chairman Jon Leibowitz said the ruling "is a big victory for consumers who want to see lower healthcare costs," and "will ensure competition in a variety of other industries, as well."
Phoebe Putney says its going to resist the FTC's efforts to block the merger in court. Seth Waxman, a former U.S. solicitor general representing Phoebe Putney and the hospital authority, defended the merger in November as something beneficial for the public in the "build or buy" climate, giving the hospital a better economy of scale in providing care to low-income patients.
In line with the Obama Administration's emphasis on consumer protection in other industries, the FTC has been raising concerns over healthcare business practices such as pharmaceutical company reverse payments and provider consolidation.
In April, the FTC ordered Toledo-based nonprofit health system ProMedica to dissolve its ownership of St. Luke's Hospital, in Maumee, Ohio, arguing that ProMedica's 2010 acquisition was likely to lead to lead to increased reimbursement rates for general acute-care inpatient hospital services and inpatient obstetric services covered under commercial health plans.