FTC announces final agreement on Hospital Authority of Albany-Dougherty County purchase of Phoebe North

ALBANY — The Federal Trade Commission announced late Tuesday that it had settled its case with Phoebe Putney Health System and the Hospital Authority of Albany-Dougherty County.

The announcement came hours before a second extension of a temporary withdrawal of the matter from adjudication was set to expire.

The case concerns the December 2010 merger that brought Palmyra Medical Center, then a privately-owned rival to Phoebe Putney Memorial Hospital, under the ownership of the Hospital Authority, raising concerns from the FTC that the $195 million purchase violated antitrust laws and greatly diminished competition in the Southwest Georgia health care marketplace.

“While we continue to have reason to believe that Phoebe Putney’s acquisition of Palmyra violated Section 7 of the Clayton Act and Section 5 of the FTC Act, any relief attempting to restore the competition lost as a result of the merger is precluded by Georgia’s strict CON [Certificate of Need] requirements,” the Commission wrote in a statement.

FTC officials said a divestiture was available when the commission filed the case, but a decision by the 11th U.S. Circuit Court of Appeals allowed The Hospital Authority and the then-owner of Palmyra Medical Center to consummate the transaction, creating circumstances that the FTC determined precluded a divestiture

Under the consent agreement, the FTC stated, 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 health care providers in the Albany area for the next 10 years, and they will be prohibited from objecting to regulatory applications made by potential new hospital providers in the same area for up to five years.

The settlement, FTC officials said, is similar to the one proposed by the commission in 2013 and prohibits the Hospital Authority and Phoebe Putney from opposing a Certificate of Need application for a general acute-care hospital in the Albany area, and contains a stipulation that the effect of the transaction may be substantially to lessen competition within the relevant service and geographic markets alleged in the complaint.

The commission voted 3-0 with commissioners Joshua D. Wright and Terrell McSweeny not participating to make the order final.

Officials with the FTC announced in September that it — in a 3-0 vote, with commissioners Wright and McSweeny abstaining — was rejecting the settlement the agency had developed a year earlier, placing the matter back in administrative court. The matter was due to go back into proceedings in February before being withdrawn from review.

McSweeny and Wright also did not participate in the extension that was to have ended at midnight Tuesday.

In its 2011 complaint against the purchase of Palmyra from Hospital Corporation of America by the Hospital Authority, the FTC argued the acquisition would reduce competition for acute-care hospital services sold to commercial health plans in the five-county area that comprises metro Albany — Dougherty, Lee, Worth, Baker, Terrell counties — and in adjacent Mitchell County. The commission argued the lessened competition would give Phoebe, which was chosen by the Authority to operate Phoebe North, an 85 percent market share and would cause health costs to rise, harming patients and employers.

The Hospital Authority and Phoebe argued the transaction was exempt from federal antitrust oversight under the state action doctrine, a position upheld in U.S. District Court and the 11th U.S. Circuit Court of Appeals, but rejected in February 2013 by the U.S. Supreme Court.

Citing Georgia’s Certificate of Need law, the FTC in August 2013 proposed a settlement that would have allowed the Authority to retain ownership of Phoebe North and Phoebe Putney Memorial Hospital to operate the facility. FTC officials said the CON law made a structural remedy to the acquisition impossible. During the comment period on the proposed agreement, however, FTC officials said input from the public and “other information” led them to believe the Georgia CON law did not preclude a structural solution, resulting in the commissioners’ vote to withdraw acceptance of the proposed consent agreement and return to administrative litigation.

North Albany Medical Center LLC, an out-of-state business that registered with the Georgia Secretary of State’s Office in December 2013, impacted the FTC’s decision to reject the settlement. In early June, Georgia Department of Community Health staff issued an initial determination that said returning Phoebe North to its previous status as a separately licensed hospital for divestiture would not require prior review and approval by the Department of Community Health, a position Phoebe and the Hospital Authority appealed. A state administrative hearing officer reversed the DCH finding, saying the state laws did apply in the event of a divestiture.