After years of litigation culminating in a unanimous win before the U.S. Supreme Court earlier this year, the Federal Trade Commission today voted to settle its antitrust suit with the Hospital Authority of Albany-Dougherty County and Phoebe Putney Health System, Inc.
The result, however, is less than satisfying - that is, virtually nothing changes. The FTC originally wanted to break up the already-consummated hospital merger, but as it turns out, the Georgia Department of Community Health determined that the region already has too many hospital beds, making approval of any potential buyer a long shot.
"Due to the unique circumstances of the Certificate of Need (CON) laws in Georgia, the Commission is unable to require that the hospitals become independent competitors,” the FTC stated in a statement announcing the settlement. The agency said “divestiture, the Commission’s preferred remedy to restore competition lost due to an illegal merger,” was not feasible under the circumstances. “Unfortunately, Albany is deemed ‘over-bedded’ by Georgia’s strict need assessment criteria making it unlikely that any possible divestiture buyer could obtain the necessary CON approval to operate an independent hospital.”
Instead, the best the FTC could do was require the merged hospital to give the agency prior notice of future transactions, and bar the hospital from opposing certain applications by potential competitors in the future seeking to enter local health care markets.
The FTC in April 2011 originally brought two complaints challenging the hospital merger, one in the U.S. District Court for the Middle District of Georgia and the other administratively. The administrative proceeding was stayed pending resolution of the federal court litigation.
The FTC in district court lost its bid for a preliminary injunction to stop the deal, and lost again before the U.S. Court of Appeals for the Eleventh Circuit. Technically, the acquiring party in the deal was the local hospital authority ("a straw man" according to the FTC) and the courts found that as a government entity, the authority was exempt from antitrust scrutiny under the state action doctrine. But the Supreme Court disagreed and remanded the case.
In March, the FTC lifted the stay on the administrative case—and sounded rather urgent about it.
"Time is of the essence because 'this is now a consummated acquisition in which significant integration of hospital assets and operations—and likely, interim harm to competition—may have taken place,'" the FTC commissioners wrote in a March 14 order lifting the stay.
Still, while the FTC in the end didn’t get to break up the merger, it did win on principle, securing a Supreme Court ruling with implications for antitrust enforcement in other industries and contexts.
“The FTC’s efforts in this case produced a tremendous victory for consumers when the Supreme Court unanimously reined in overbroad application of state action immunity and allowed federal antitrust review of this merger,” said Deborah Feinstein, director of the FTC’s Bureau of Competition, in a statement. “Regrettably, that legal victory will not undo the acquisition’s clear harm to competition.”