Court delays Palmyra purchase

Photo by J.D. Sumner

Photo by J.D. Sumner

WASHINGTON -- Propped up by a recent victory in a fight to halt the buyout of an Ohio-based acute-care hospital by a larger not-for-profit, the Federal Trade Commission has now filed a similar action against the Hospital Authority of Albany-Dougherty County and HCA-owned Palmyra Medical Center in federal court.

On Thursday, U.S. District Court Judge Louis Sands granted the FTC's request to keep on hold the planned $195 million sell of Palmyra to the authority, which would then contract with Phoebe Putney Health System to operate the facility, until at least mid May.

FTC officials contend the absorption of Palmyra by Phoebe would result in a health care monopoly that would drive up health care costs.

The defendants in the complaint -- Phoebe Health System, the authority, Phoebe Putney Memorial Hospital and Palmyra Park Hospital Inc. -- have until May 4 to file briefs in response to the FTC's request for a preliminary injunction that would prevent the transaction from going forward until September, when the FTC would have the purchase's legality reviewed by an administrative judge. The FTC would have until May 11 to respond to the defendants' filings. Sands would then determine whether to uphold or deny the FTC's motion for a preliminary injunction.

Sands has ordered the parties in the complaint to specifically address the Hospital Authority's assertion Wednesday that it was immune from federal review, an argument that the FTC contends is spurious because FTC officials contend the Hospital Authority has not performed its duties and only serves as a "strawman" agency to hide the transaction from proper scrutiny.

Sands also has extended a gag order against parties in the complaint providing access of pleadings and other filings in the case.

The FTC action, the result of a 5-0 vote by the commission Tuesday, came a month after a March 19 decision by a federal judge in Toledo to grant the FTC's request for an injunction blocking ProMedica's acquisition of St. Luke's Hospital in Maurenee, Ohio. That is one of the few legal battles that the FTC has won in the last two decades in dealing with health care mergers.

According to information gleaned from its website, the FTC's only other antitrust victory against a hospital or health system was its 2000 challenge of the merger of Dallas, Texas-based Tenet Healthcare, which was seeking to purchase a hospital in Poplar Bluff, Mo., and then merge it with one of Tenet's hospitals.

But even in that scenario, the FTC apparently won the battle but lost the war in that it was granted a preliminary injunction but lost its attempt to block the merger totally. The hospitals eventually merged.

Since Tenet, the FTC has revamped its mergers and acquisitions guidelines, broadening its scope and changing how it handles the process.

In 2002, the FTC formed the Merger Litigation Task Force, which, according to the FTC, is "responsible for reinvigorating the Commission's hospital merger program, which includes a review of, and potential challenge to, consummated transactions that may have resulted in anticompetitive price increases. The Task Force also will focus on merger enforcement in the retail industry, particularly regarding matters involving food, beverages, and supermarkets."

Those changes appear to bolster the FTC's chances in court when it tackles what it views to be an acquisition that is detrimental to the public's interests.

And there have been some gains made outside the courtroom as well.

In 2008, the FTC dismissed its own complaint against Inova Health System Foundation and Prince William Health System Inc. after the parties agreed to terminate their planned merger of Virginia-based medical facilities.

In 2009, the FTC was able to broker a settlement with the Carilion Clinic in Virginia that required Carilion to sell its Center for Advanced Imaging in a decision that the FTC said restored competition lost in 2008 when Carilion bought the center.

So who is the FTC and what business does it have meddling in corporate affairs?

According to a report filed by the FTC's Bureau of Competition filed in June 2010, "the FTC is a law enforcement agency charged by Congress with protecting the public against anticompetitive behavior and deceptive and unfair trade practices."

The Bureau of Competition is the FTC's antitrust arm and works with the U.S. Department of Justice to prosecute and litigate antitrust matters described under the Clayton Act.

If the FTC's five-member board votes to pursue civil action against a corporation, it typically does so through the administrative law process, which is conducted by an administrative law judge at the FTC.

Appeals from these hearings are taken directly to the U.S. Court of Appeals, according to the report, where they can be argued out.

In instances like Phoebe's current situation where the FTC believes "that a party is violating, or is about to violate, any provision of law enforced by the FTC," it can seek to file a preliminary injunction in U.S. District Court.

"Such preliminary injunctions are intended to preserve the status quo, or to prevent further consumer harm, pending administrative adjudication before the Commission," the report states.

In his instant order Thursday, Sands said that the FTC had "sufficiently established the need for a temporary restraining order based on their showing (1) of a substantial likelihood of success on the merits of their case, (2) that irreparable harm would result in the absence of the TRO, (3) that the balance of the equities favors granting the TRO, (4) that the public interest would not be harmed by the injunction ... Plaintiffs have therefore clearly carried their burden of persuasion to move the court to grant the 'extraordinary and drastic remedy' of a temporary restraining order ..."