ALBANY, Ga. — An amici curiae brief filed by a group of economics professors in the U.S. Supreme Court backs the Federal Trade Commission’s case regarding the acquisition of Palmyra Medical Center — now known as Phoebe North — by the Hospital Authority of Albany-Dougherty County, also the owners of Phoebe Putney Memorial Hospital.
The brief, filed shortly after the FTC filed its brief on the case, was compiled by more than 20 experts from institutions including Northwestern University, University of Pennsylvania, Harvard University, Stanford Graduate School of Business, Columbia University and the University of Illinois at Chicago.
“In our view, the economists’ brief entirely misses what this case is about: the issue in this case is not whether non-profits generally are subject to the antitrust laws, but whether federal antitrust law governs the actions or decisions of state-created public bodies such as the Authority,” said Jackie Ryan, vice president of corporate strategy at Phoebe. “The brief also ignores the fundamental policy issue of how to provide high-quality and low-cost hospital care to those in need. We will respond more fully when we file our own brief in the Court.”
The first thing the brief addresses is whether non-profit hospitals such as Phoebe Putney Memorial Hospital should be shielded from federal antitrust scrutiny — stating that competition among hospitals is a central element of the nation’s health care system, and that there is no compelling basis for an antitrust exemption for non-profit hospitals.
“Nonprofits control approximately 69 percent of all general acute care hospitals and 78 percent of all hospital beds in the United States,” the brief states. “If the Court accepts Phoebe Putney’s claims and shields nonprofits from federal antitrust scrutiny then most hospitals would be free to engage in anticompetitive conduct that would not be tolerated from for-profit firms, posing a threat to the success of our market-based healthcare system.”
The brief goes on to make the case that patients may be harmed, specifically in terms of pricing, if nonprofit entities obtain such an amount of market power. In so doing, it cites three studies to back that point up.
“There is a great deal of empirical evidence showing that hospital prices are substantially higher in concentrated markets,” the brief states. “Moreover, nearly all studies that account for ownership form find that nonprofit hospitals exercise market power by raising prices...
“All three studies find no difference in the extent to which nonprofits and for-profits exploit their ability to raise prices.”
The brief further addresses Phoebe’s claim that the merger will lead to efficiencies by saying that empirical evidence on whether such a consolidation leads to cost savings is mixed at best. It also indicated there was an opinion of those compiling the brief that claims that the acquisition will ultimately allow Phoebe to provide more uncompensated care are also weak.
“Even if it were the case that nonprofit hospitals with more market power both receive higher prices and provide greater levels of uncompensated care, that care would still come at the expense of other consumers who pay the higher prices directly and through reduced pay or benefits, including the possibility of losing insurance coverage entirely,” the brief reads. “Moreover, in the wake of the Court’s decision upholding key elements of the Patient Protection and Affordable Care Act, the number of uninsured persons is likely to shrink substantially in the relatively near future. Given this, funding the provision of uncompensated care, already a questionable rationale, is an even less compelling justification for lax antitrust scrutiny of nonprofit hospitals.”
This all led to the conclusion that an economic analysis of Phoebe’s contentions offers no theoretical or empirical basis for antitrust exemption or lax treatment for non-profit hospitals, and that a merger giving a non-profit hospital a significant market power is likely to harm consumers.
Phoebe’s brief is expected to be filed on or before Oct. 1.