Supreme Court Holds General Authorization To County Hospital Authority Insufficient For Antitrust Immunity

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On February 19, 2013, the United States Supreme Court unanimously decided that the acquisition by a county hospital authority of another hospital in the same county was not immune from antitrust scrutiny under the state action doctrine, even though the hospital authority had been delegated broad powers under a Georgia statute. In Federal Trade Commission v. Phoebe Putney Health System, Inc., No. 11-1160, the Supreme Court clarified the scope of the state action doctrine, which shields states and state subdivisions (such as counties, municipalities, and other authorities) from antitrust liability when they act in accordance with a clearly articulated state policy that is intended to supplant competition. The Supreme Court held that the Georgia state law did not satisfy this “clear articulation” test where the law simply granted hospital authorities general powers that “mirror general powers routinely conferred by state law on private corporations.” The Court explained that “because Georgia’s grant of general corporate powers to hospital authorities does not include permission to use those powers anticompetitively,” there is no evidence that Georgia had clearly articulated or affirmatively contemplated that hospital authorities may use their powers in a monopolistic manner. As a result, the Court held that the state action doctrine does not shield Georgia hospital authorities from antitrust liability.

The FTC’s appeal stemmed from its efforts to obtain a preliminary injunction to block the combination of Palmyra Park Hospital (“Palmyra”) and Phoebe Putney Memorial Hospital (“Memorial”). Memorial, a 443-bed facility is owned by the Hospital Authority of Albany-Dougherty County (the “Authority”) and is leased and operated by Phoebe Putney Health System, Inc. (“PPHS”). The Authority was established in 1941 pursuant to the Georgia Hospital Authorities Law, O.G.C.A. § 31-7-70, et. seq., which authorized the creation of local hospital authorities and granted them broad powers to, among other things, acquire, lease, and operate hospitals to meet public health needs. In late 2010, the Authority authorized the purchase by PPHS of nearby Palmyra from HCA, Inc., a for-profit corporation. In 2011, the FTC sought a preliminary injunction in federal court on the grounds that the transaction would substantially lessen competition in violation of Section 7 of the Clayton Act. The United States District Court for the Middle District of Georgia denied the injunction on the basis of state action immunity, and the Court of Appeals for the Eleventh Circuit affirmed. Yesterday, the Supreme Court reversed and remanded the case.

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Topics:  Acquisitions, FTC, FTC v. Phoebe Putney Health System, General Authorization, Government Entities, Governmental Immunity, Governmental Liability, Hospital Mergers, Hospitals, Preliminary Injunctions, Remand, Reversal, SCOTUS, State Action Doctrine

Published In: Antitrust & Trade Regulation Updates, Health Updates, Mergers & Acquisitions Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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