Phoebe Putney - The Supreme Court Grants Certiorari to Determine the Boundaries of State Action Antitrust Immunity

by Proskauer Rose LLP
Contact

On June 25, 2012, the U.S. Supreme Court granted the Federal Trade Commission's request to hear arguments in FTC v. Phoebe Putney Health System, Inc., a highly anticipated hospital merger case which likely will clarify the circumstances in which state regulation can create immunity from federal antitrust law. The FTC's request for certiorari was joined by the Antitrust Division of the Department of Justice. The dispute turns on the reach of the Supreme Court's "state action" antitrust immunity doctrine, which insulates certain state-sponsored commercial conduct from federal antitrust liability. State action immunity applies when a policy displacing competition with regulation or monopoly is "clearly articulated" and "actively supervised" by the state.[1] The doctrine applies to private actors if they are actively supervised by the state and comply with a clearly articulated state policy to displace competition. In Phoebe Putney, courts in both the U.S. District Court for the Middle District of Georgia and the U.S. Eleventh Circuit Court of Appeals held that the merger of two private hospitals, Phoebe Putney Memorial Hospital and Palmyra Park Hospital, was immune from antitrust scrutiny even though all parties agreed that the merger created a monopoly.[2] Jon Leibowitz, the FTC's Chairman, has called the Eleventh Circuit's opinion "disturbingly, jarringly wrong."[3] The FTC's challenge to the merger and its request for Supreme Court review reflects its renewed commitment to promote competition in health care markets.

In 1941, the Georgia State Legislature enacted the Hospital Authorities Law, a statute which created a hospital authority for each major city and county in Georgia. The legislature invested hospital authorities with general corporate powers to purchase or lease health care facilities and operate hospital networks. The Hospital Authority of Albany-Dougherty County subsequently acquired Phoebe Putney Memorial Hospital, which it leased to its subsidiary Phoebe Putney Health System (the System), a private corporation. The Hospital Authority does not supervise the operations of Memorial hospital. Phoebe Putney Memorial's only significant competitor was Palmyra Park Hospital. In 2010, the Hospital Authority, using funds provided by Phoebe Putney Health System, acted as a nominal purchaser of Palmyra Park Hospital, which it then leased back to the System for a term of 40 years. The Hospital Authority did not actively participate in negotiating the transaction, although it did approve the deal at a board meeting.

The FTC sought to enjoin the merger in the District Court for the Middle District of Georgia. However, the District Court dismissed the FTC's action invoking the state action doctrine. Both the District Court and the Eleventh Circuit held that, by granting hospital authorities the power to acquire health care facilities, the Georgia legislature had articulated a clear intent to displace competition in hospital services because it was reasonably foreseeable that such hospital acquisitions could result in a monopoly or other anticompetitive effects.[4]

The FTC's petition for certiorari argues that Phoebe Putney is "out of line" with Supreme Court precedent, as well as decisions from the Fifth, Sixth, Ninth, and Tenth Circuit Courts of Appeals. These courts have held that the mere grant of general corporate powers does not constitute active supervision for the purposes of the state action doctrine. Underscoring the importance of this case, Chairman Leibowitz said "if this decision is permitted to stand, it will undermine the very basis of the state action doctrine [and] drive up health care costs in Albany, Georgia, and create a roadmap for doing so elsewhere."[5] Given that most states have laws similar to Georgia's Hospital Authorities Law, the Court's interpretation of clear articulation and active supervision has the potential to substantially alter the circumstances in which hospital mergers can gain immunity from antitrust scrutiny.

The case will be heard next term and will decide the following two questions: (1) Whether the Georgia legislature "clearly articulated" a state policy to displace competition in the market for hospital services, and (2) if the policy is clearly articulated, whether the Hospital Authority "actively supervised" the merger, given that it did not participate in negotiating the merger and has no means of overseeing the hospital's operations. Due to Phoebe Putney's significance, Proskauer will provide updates at key milestones as the case proceeds through the Supreme Court.

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.

© Proskauer Rose LLP | Attorney Advertising

Written by:

Proskauer Rose LLP
Contact
more
less

Proskauer Rose LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.