HCA Holdings Inc : Supreme Court To Hear Hospital Merger Case on Antitrust Immunity
06/25/2012| 10:30am US/Eastern
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By Brent Kendall
WASHINGTON--The Supreme Court agreed Monday to review the Federal Trade Commission's challenge to a Georgia hospital merger, a case that could clarify the circumstances in which state-government entities are exempt from federal antitrust laws.
The FTC raised antitrust objections last year to a hospital merger in Albany, Ga., saying the deal would create a local monopoly, leading to higher hospital prices for patients and health insurers.
Lower courts, however, ruled antitrust laws didn't apply because the acquiring party in the case was a local hospital board-a government body. The two hospitals have since closed the merger, in which Phoebe Putney Health System, a nonprofit corporation created by the hospital board, bought competitor Palmyra Park Hospital from the for-profit hospital company HCA Holdings Inc. (>> HCA Holdings Inc).
The FTC alleges Phoebe Putney and HCA were concerned about the anticompetitive nature of the merger and ran the deal through the hospital board in an attempt to evade antitrust laws. The agency said the hospitals' maneuvers, if successful, could provide a roadmap, in health care and other industries, to avoid federal antitrust scrutiny.
Phoebe Putney said it wanted to buy the HCA hospital because it needed to grow to meet the needs of the community and the acquisition was cheaper than building new facilities. It said it was investing heavily to improve the quality and quantity of services offered at the former HCA facility.
Thanks to states-rights principles, the state governments are immune from federal antitrust laws. That immunity, however, doesn't necessarily extend to municipalities and political subdivisions created by the state. Under prior legal precedent, local governing bodies aren't exempt from antitrust scrutiny unless the state has clearly authorized them to engage in anticompetitive conduct.
The 11th U.S. Circuit Court of Appeals in Atlanta said the hospital board was exempt from scrutiny because Georgia law had given it the right to buy hospitals.
The Supreme Court will review that ruling.
In the past, similar questions about government antitrust immunity have come up in cases involving electricity markets, sewage services and cable-television rights, among others.
The case comes as the FTC is making a renewed push to police consolidation among hospitals. The agency has challenged three hospital mergers since 2011.
Oral arguments are expected to take place in the fall.
Write to Brent Kendall at brent.kendall@dowjones.com
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