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The Anti- Trust of Healthcare Organizations
Nahla Hussein
Legal & policy Aspects In Healthcare
Fall September, 2018
Instructor: Dr. Michael A. Petrochuk

Summary
This paper indicates how Phoebe Putney Hospital System works as well as the proposed actions that can be taken by the management to avoid similar anti-trust actions in any proposed merger. The more complicated antitrust cases within healthcare, is the Federal Trade Commission FTC v. Phoebe Putney Health System. As it involves a long trail from the lower courts all the way to the Supreme Court, where justices sided with FTC. This case was about whether the hospital mergers and acquisitions could be executed despite FTC within the state legislature which gave the local government entities and the powers to acquire hospitals despite antitrust concerns that were taken place within the health facility. Antitrust laws are known as the “state action doctrine.” The FTC filed suit in April 2011 to go against Albany, Ga.-based Phoebe Putney’s acquisition through a lease within the Hospital Authority of Albany-Dougherty County of Palmyra Medical Center, later known as Phoebe North, also in Albany (Gamble, 2013). The Hospital Authority of Albany-Dougherty County maintains ownership, oversight responsibility and fiduciary supervision of the assets of Phoebe Putney. The previous operator was for-profit hospital that was the operator Hospital Corporation of America.
“In June, U.S. District Court Judge Louis Sands ruled that the Hospital Authority was immune from attempts by the FTC to block the transaction. The FTC appealed that ruling, contending that the Hospital Authority approved the $195 million deal without considering possible antitrust issues, particularly that the acquisition could result in a monopoly and increased prices” (Gamble, 2013).
“In December 2011, the Atlanta-based U.S. Court of Appeals for the Eleventh Circuit approved the $195 million merger, ruling against the FTC’s antitrust concerns. Appeals court is based on its decision with the state action immunity doctrine, ruling that a 1941 Georgia law that allows hospital authorities to have hospitals by purchase, lease or other means met the antitrust exemption. The appeals court ruled that this law gave Phoebe Putney the power to acquire Palmyra. The anticompetitive effects were anticipated when the 1941 Hospital Authorities Law was enacted with everyone and people were not understanding what was happening. In March 2012, the FTC filed an appeal with the Supreme Court that is against the FTC and the claimed the transaction would create a monopoly in the region, raising prices for healthcare services while reducing competition” (Gamble, 2013). In its Supreme Court brief, the hospital authority’s decision to address a long-standing capacity constraint by buying an existing private hospital in the area “plainly falls within the range of decisions that the Georgia legislature expected local authorities to make,” and that the decision was an act of state.
“On 4/20/2011, the FTC challenged Phoebe Putney Health System, Inc.’s (Phoebe’s) proposed acquisition of rival Palmyra Park Hospital, Inc. (Palmyra) from HCA, in Albany, Georgia. The FTC’s administrative complaint alleges that the deal will reduce competition significantly and allow the combined Phoebe/Palmyra to raise prices for general acute-care hospital services charged to commercial health plans, substantially harming patients and local employers and employees. The FTC also alleges that Phoebe has structured the deal in a way that uses the Hospital Authority of Albany-Dougherty County (the Authority) in an attempt to shield the anticompetitive acquisition from federal antitrust scrutiny under the “state action” doctrine. The FTC’s staff, together with the Attorney General of the State of Georgia, filed a separate complaint in federal district court in Albany, Georgia, seeking an order to halt any transaction involving Phoebe, the Authority, or Palmyra, under which Phoebe would acquire control of Palmyra’s operations, until the conclusion of the FTC’s administrative proceeding and any subsequent appeals”. Phoebe Putney Health System, Inc. (2015, November 19)
“Under this Court’s state-action immunity doctrine, when a local governmental entity acts pursuant to a clearly articulated and affirmatively expressed state policy to displace competition, it is exempt from scrutiny under the federal antitrust laws. In this case, we must decide whether a Georgia law that creates special-purpose public entities called hospital authorities and gives those entities general corporate powers, including the power to acquire hospitals, clearly articulates and affirmatively expresses a state policy to permit acquisitions that substantially lessen competition”. Showalter, J. S. (2017)
“The Eleventh Circuit affirmed. It concluded that the Authority, as a local governmental entity, was entitled to state-action immunity because the challenged anticompetitive conduct was a fore seeable result of the Law. The court reasoned that the state legislature could have readily anticipated an anticompetitive effect, given the breadth of the powers delegated to hospital authorities, particularly leasing and acquisition powers that could lead to consolidation of hospital ownership. Held: Because Georgia has not clearly articulated and affirmatively expressed a policy allowing hospital authorities to make acquisitions that substantially lessen competition, state-action immunity does not apply”. Supreme Court of the United States Home. (n.d.)
Court decision
“On 2/19/2013, the Supreme Court reversed the judgment of the Court of Appeals and remanded further proceedings. On June 27, 2011, the district court denied the motion for a preliminary injunction on the grounds that the transaction was protected by the state action doctrine. In February 2013, the Supreme Court reversed, finding that the state of Georgia had not clearly articulated a policy that would permit the Hospital Authority to approve anticompetitive mergers”. Phoebe Putney Health System, Inc. (2015, November 19)

“Due to the unique circumstances of the Certificate of Need (CON) laws in Georgia, the Commission originally believed it was unable to require that the hospitals become independent competitors. On 9/5/2014, based on public comments received, as well as other information, the Commission determined that Georgia’s CON laws may not preclude structural relief, and voted to withdraw its acceptance of the proposed consent agreement and return the matter to administrative litigation. On 3/31/15, the FTC entered into a settlement agreement requiring Phoebe Putney and the Hospital Authority must notify the FTC in advance of acquiring any part of a hospital or a controlling interest in other healthcare providers in the Albany, Georgia area for the next 10 years, and prohibiting them from objecting to regulatory applications made by potential new hospital providers in the same area for up to five years. The settlement is similar to the one proposed in 2013 and does not require structural relief”. Phoebe Putney Health System, Inc. (2015, November 19)
Ultimately, the Supreme Court`s decision was “We hold that Georgia has not clearly articulated and affirmatively expressed a policy to allow hospital authorities to make acquisitions that substantially lessen competition. The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.” Supreme Court of the United States Home. (n.d.)

Answers of Questions:
1- The community of “Albany -Dougherty County” and the corporate structure. The corporate structure includes- “Albany-Dougherty County”-and “Phoebe Putney Memorial Hospital” – Each of these structures have been in operations in Albany since 1911. In addition to these structures-there are non-profits that are available.1. Phoebe Putney Health Service. 2. Phoebe Putney Memorial Hospital. Authority Leased Memorial to PPMH- is at $1 per year for 40 Years. PPMH has exclusive authority over operation of “Memorial”. Also there is another hospital that is part of the County. This is Palmyra Medical Centre-established by Albany in 1971.The transaction is structured-in such a way that hospital authorities are not allowed to make acquisitions-however they did share that they needed to acquire, Palmyra-and this group was acquired for 1$. The acquisition changed the market landscape-as there would be a total of “86% of Acute healthcare system ” that would be managed.
2- The transaction was structured in a way that it did not lessen competition. It actually allowed competition to be more intense. Also, it was shared that few Anti-Trust Immunity Laws- needed to be cleared and see if each of these acquisitions come within the purview of “Anti-Trust”. Phoebe Putney Health System, it owns and operates on the basis of not for profit hospitals, specialty it offers services in the are of cancer care, heart, and vascular care, woman and children care, gastro enterology problems, orthopedics, sports medicine, home care, hospice, pain management, diabetic care and a wide variety of disease condition. It focuses on high quality and affordability. It has two nonprofit corporation to manage merged together Phoebe Putney Memorial Hospital and Palmyra Hospital. Palmyra is a subsidiary of HCA. Because of financing and antitrust concern. So, the transaction was structured. The FTC sough to enjoin the transaction in U.S. Middle court. Therefore, Federal Antitrust law looks upon any liability that is caused to in patients in health care system.
3- The federal trial court was the US District Court for the Middle District of Georgia; the Court of Appeals was the Eleventh Circuit, which sits in Atlanta. Considering the locations of and incumbent judges on these courts, why might the Supreme Court have a different worldview and a different perspective on the policy aspects of this issues.
“The Eleventh Circuit affirmed. It concluded that the Authority, as a local governmental entity, was entitled to state-action immunity because the challenged anticompetitive conduct was a fore seeable result of the Law. The court reasoned that the state legislature could have readily anticipated an anticompetitive effect, given the breadth of the powers delegated to hospital authorities, particularly leasing and acquisition powers that could lead to consolidation of hospital ownership. Held: Because Georgia has not clearly articulated and affirmatively expressed a policy allowing hospital authorities to make acquisitions that substantially lessen competition, state-action immunity does not apply”. Supreme Court of the United States Home. (n.d.)
It’s focused on whether states would be following “Sovereignty” or not. If the states could not be following “Sovereignty they need to share. The basic structure allows whether the States follow “Sherman Act of not”. each of the authorities mentioned have to have a view on the “Sovereign Act”-and look into whether that is being followed or not.
Conclusion
“Because Georgia’s grant of general corporate powers to hospital authorities does not include permission to use those powers anticompetitively, we hold that the clear-articulation test is not satisfied, and state action immunity does not apply.” Supreme Court of the United States Home. (n.d.)
In support of this debate, defendant observe that “hospital authorities operate within a broader regulatory context in which Georgia requires any party seeking to establish or significantly expand certain medical facilities, including hospitals, to obtain a certificate of need from state regulators. We have no doubt that Georgia’s hospital authorities differ materially from private corporations that offer hospital services. But nothing in the Law or any other provision of Georgia law clearly articulates a state policy to allow authorities to exercise their general corporate powers, including their acquisition power, without regard to negative effects on competition. The state legislature’s objective of improving access to affordable health care does not logically suggest that the State intended that hospital authorities pursue that end through mergers that create monopolies. Nor do the restrictions imposed on hospital authorities, including the requirement that they operate on a nonprofit basis, reveal such a policy. ” Supreme Court of the United States Home. (n.d.)
The Court recognized that “Georgia, particularly through its certificate of need requirement, does limit competition in the market for hospital services in some respects. But regulation of an industry, and even the authorization of discrete forms of anticompetitive conduct pursuant to a regulatory structure, does not establish that the State has affirmatively contemplated other forms of anticompetitive conduct that are only tangentially related.” Supreme Court of the United States Home. (n.d.)
In this case, the basic fact that Georgia takes advantage of t limits on entry into the market for medical services, which effect to both hospital authorities and private corporations, clearly does not articulate a policy advocate the consolidation of existing hospitals that are engaged in an effective competition.

References

Phoebe Putney Health System, Inc. (2015, November 19). Retrieved from https://www.ftc.gov/enforcement/cases-proceedings/111-0067/phoebe-putney-health-system-inc

Supreme Court of the United States Home. (n.d.). Retrieved from http://www.supremecourt.gov/

Showalter, J. S. (2017). The law of healthcare administration. Chicago, IL: Health Administration Press.
Five FTC Challenges to Hospital Mergers: Key Concepts for Today’s Antitrust Environment by Molly Gamble, April 01, 2013: http://www.beckershospitalreview.com/legal-regulatory-issues/5-ftc-challenges-to-hospital-mergers-key-concepts-for-todays-antitrust-environment.html

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