Healthcare News & Insights

Supreme Court puts the kabosh on Georgia hospital merger

If you’re keeping score, it’s the Federal Trade Commission (FTC) 1 and hospital mergers 0, thanks to the Supreme Court. In a unanimous decision, it upheld an FTC challenge that contested the merger of the only two hospitals in Albany, GA.

What does that means to hospitals everywhere?

The FTC now has the power again to police hospital mergers. That means hospitals will have to be bettered educated on federal antitrust laws and take them into consideration if they plan to join a accountable care organization.

Georgia merger story

The FTC tried to block a deal between Phoebe Putney Memorial Hospital, a subsidiary of a nonprofit corporation created by a local hospital board, and its competitor Palmyra Park Hospital, a for-profit hospital owned by HCA Holdings Inc., both in Albany, GA, because it violated federal antitrust law. The FTC argued that the merger would create a monopoly in the area and possibly even increase prices for patients and health insurers.

Lower federal courts allowed Phoebe to buy Palmyra from HCA for $195 million despite objection from the FTC, because the courts believed antitrust laws didn’t apply if the acquiring party was a government body, such as the local hospital board. So now both facilities are now nominally owned by the Hospital Authority of Albany-Dougherty County, but run by Phoebe Putney Health System under long-term leases, according to the Associated Press.

In the past, deals such as this one that lead to monopolies have been allowed if they’re done by states. But they have to clearly show why competition isn’t in the public’s best interest and they must ensure control and oversight over the monopolies.

Doesn’t fit criteria

However, in this case the Supreme Court said the merger didn’t meet the criteria.

In a 19-page opinion by Justice Sonia Sotomayor, the Supreme Court said Georgia’s general grant of power to the hospital board didn’t amount to such authorization, reported the Wall Street Journal.

“We hold that Georgia has not clearly articulated and affirmatively expressed a policy to allow hospital authorities to make acquisition that substantially lessen competition,” said Sotomayor. “There is no evidence the state affirmatively contemplated that hospital authorities would displace competition by consolidating hospital ownership.”

Now the case is being sent back to the lower courts for further proceedings.

Of course, Phoebe Putney Memorial Hospital isn’t happy with the Supreme Courts decision. It noted that it bought the hospital because it needed to expand to meet community needs, and it was cheaper than building a new hospital. And the facities have been merged for more than a year and there have been no anticompetitive effects.

We’ll keep you posted on the outcome.

 

 

 

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