Supreme Court Justices Raise Challenges to Both Sides in FTC v. Phoebe Putney Hearing

The Supreme Court heard arguments from both sides in the Federal Trade Commission v. Phoebe Putney Health System case yesterday, which centers around a $195 million hospital acquisition and the application of state action immunity.

The crux of the FTC v. Phoebe Putney case is whether states can execute hospital mergers and acquisitions despite FTC scrutiny if a state action doctrine gives local government entities power to acquire hospitals.

The FTC filed suit in April 2011 to block Albany, Ga.-based Phoebe Putney's acquisition — through an arranged lease with the Hospital Authority of Albany-Dougherty County — of Palmyra Medical Center, now known as Phoebe North, also in Albany.

Phoebe Putney is working to protect the Atlanta-based U.S. Court of Appeals for the Eleventh Circuit's December 2011 decision, which approved the $195 million merger even though it anticipated monopolistic effects. That court based its decision on a 1941 Georgia law, or state action doctrine, that allows hospital authorities to acquire hospitals by purchase, lease or other means.

The FTC claims Phoebe Putney structured the acquisition in a manner that attempts to shield it from federal antitrust scrutiny under the "state action" doctrine, which provides an antitrust exemption for certain government actions.

In the hearing yesterday, Supreme Court justices presented some challenges to both sides. Justice Antonin Scalia said attorneys for the hospital district gave "an appealing example of a small county that has one hospital" and a merger involving that sole hospital. But the justice also said he would "doubt whether the FTC would be pursuing a situation in which there is a natural monopoly. It's a question of whether the monopoly would be owned by the state or not," according to a court transcript.

Justice Elena Kagan also mentioned other states' stance on the case, clarifying a separation between hospital authorities' powers and federal antitrust law.

"We do have a brief from quite a number of states, and the brief basically says: 'We do this all the time; we set up these local authorities, and then we give them powers because they have to act in the world,'" said Justice Kagan. "'We give them normal powers, like the ability to make contracts and the ability to buy property. And when we do that, we don't mean that they can do anything they want notwithstanding the antitrust laws. And to construe these very normal powers that we would give to a state entity in order to allow it to operate as a permission to violate the antitrust laws is not at all consistent with our own intentions.'".

The Supreme Court is expected to rule on the matter in the spring.

More Articles on Phoebe Putney Health System and the FTC:

AHA Urges Supreme Court to Reject FTC's Challenge to Phoebe Putney Deal
Phoebe Putney's Supreme Court Brief: Palmyra Acquisition Was an Act of the State
FTC Urges Supreme Court to Strike Previous Rulings in Phoebe Putney Case

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