Supreme Court Ruling Won’t Impact Future Hospital Mergers

by webadmin on February 21, 2013

After the Supreme Court ruled this week against Phoebe Putney Health System, Inc.’s attempted $195-million acquisition of Palmyra Park Hospital, accepting the FTC’s anticompetitive challenge against the system, many healthcare executives might be wondering how the Court’s decision will impact future hospital mergers.

According to John Commins at HealthLeaders Media, it probably won’t have much of an affect at all.

If the Phoebe-Palmyra deal had gone through, the system would have controlled 85 percent of its region, Commins writes. In attempting to pull off the merger, “the FTC alleged that Phoebe Putney constructed an elaborate scheme that used the Hospital Authority of Albany-Dougherty County, Ga., as a ‘straw man’ to ‘cloak private, anticompetitive activity in governmental guise in the hopes that it would exempt the acquisition from federal antitrust law.’”

In two separate FTC appeals, a federal district judge and the 11th Circuit Court ruled in Phoebe Putney’s favor. However, Jay Levine, a healthcare antitrust specialist with Bradley Arant Boult Cummings LLP, said the Supreme Court primarily took issue with “the 11th circuit interpretation of foreseeability,” seeing it as “far too loose.”

Levine explains, “In that respect it could have broader implications. But most transactions among hospitals today are not done pursuant to any hospital authority, are really just private transactions so state action really isn’t applicable.”

Levin does believe, Commins explains, that state policies encouraging integration and formation of collaboratives under the PPACA might be reexamined thanks to this ruling, “because if you are different practice groups or you are a (Physician Hospital Organization) and you want to do something because a state authorizes us to get together to create this sort of network, then if you are going to try to avoid antitrust scrutiny by pointing to that state mandate and saying there is a clear articulation of state policy to displace competition, you are going to have to prove that your conduct was a foreseeable result of that state mandate and that now that foreseeability standard is not as loose.”

What is your opinion of the Supreme Court’s ruling in the Phoebe Putney case? Do you agree or disagree with the decision? As executives, do you agree that it won’t have much of an impact on future hospital mergers?

-by Pete Fernbaugh

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