In Phoebe Putney Hospital Merger Case, FTC Rejects Proposed Consent Agreement; Parties to Return to Litigation

The Federal Trade Commission rejected a proposed settlement agreement with Phoebe Putney Health System, Inc., and returned the matter to administrative court to assess whether Phoebe’s 2011 merger with rival hospital Palmyra Park Hospital, Inc. in Albany, Georgia violated the antitrust laws.

“We’ve argued all along that this merger would create a monopoly in Albany that would harm consumers and employers in the region,” said Deborah Feinstein, Director of the FTC’s Bureau of Competition. “Meaningful structural relief is needed to restore competition to this marketplace.”

The FTC’s 2011 complaint challenging the merger of Phoebe and Palmyra Park alleged that it would significantly reduce competition in the market for acute-care hospital services sold to commercial health plans in the six-county area surrounding Albany, Georgia – raising prices, harming patients and their employers, and giving the new hospital a market share of more than 85 percent.

Because Phoebe Putney is owned by the Hospital Authority of Albany-Dougherty County, which is organized and exists under Georgia’s Hospital Authorities Law, the parties argued that the transaction was exempt from federal antitrust scrutiny under the so-called “state action” doctrine. However, in February 2013, the U.S. Supreme Court unanimously reversed the Eleventh Circuit Court of Appeals, which had previously affirmed the district court’s determination, and ruled that the merger was not exempt from antitrust scrutiny. 

Despite the favorable Supreme Court decision, it initially appeared that, even if the transaction were ultimately deemed illegal after a trial and appeals, a structural remedy requiring Phoebe Putney to divest the Palmyra assets was precluded by Georgia Certificate of Need laws. Believing that meaningful structural relief was unavailable, the FTC accepted for public comment a proposed settlement with non-structural relief last year.

As the Commission explained in its statement, based on public comments received, as well as other information, it now appears that Georgia’s CON laws may not, in fact, preclude structural relief.  The Commission therefore voted to withdraw its acceptance of the proposed consent agreement and return the matter to administrative litigation.

The Commission vote to file the administrative complaint was 3-0-2, with Commissioners Joshua D. Wright and Terrell McSweeny not participating.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., NW, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.