Competition, which forces businesses to provide the best quality product at the lowest price, is a cornerstone of any free market society. Health care is no exception. The Albany-Dougherty County Hospital Authority, which is responsible for overseeing and protecting the community’s health care interests, is about to sign a lease with Phoebe Putney Memorial Hospital, which will give Phoebe a monopoly in the delivery of health care services for 40 years. The lease would compromise the quality of health care, result in higher costs, and frustrate efforts to attract new business. This decision will impact our community for generations to come. The citizens of this community must come together to convince the Authority leasing Palmyra to Phoebe would be a terrible mistake.
Phoebe has already demonstrated a strong track record of anticompetitive behavior. For years, Phoebe used Palmyra’s inability to provide obstetrics and cardiology as leverage to force insurers and other payers to exclude Palmyra. Phoebe maintained this unfair advantage, by preventing Palmyra from providing obstetric and cardiology services, through the use of Georgia’s certificate of need law. Palmyra filed suit, alleging violations of the federal antitrust laws, in July 2008. The case, which was initially dismissed, was reinstated by the Appeals Court. Phoebe began negotiating with HCA, the parent company of Palmyra, to purchase Palmyra, immediately following that decision. Phoebe had no option, as its business practices would have been exposed, and it would have been subject to triple damages, had the case proceeded to trial.
HCA eventually agreed to accept $195 million for Palmyra. The price tag was worth it for Phoebe, even though it is almost three times Palmyra’s actual market value. Phoebe’s CFO, in a written communication, asserted the purchase of Palmyra would allow Phoebe to “avoid (the) antitrust lawsuit,” “control all hospital beds in (the) county” and “increase (its) negotiation power with all payers.”
Knowing the FTC would not approve the merger because of the monopoly it would create, Phoebe simply brought the Authority into the deal at the final hour. The federal courts allowed the transaction, over objections from the FTC, as the Authority, a political subdivision of the state, is not subject to federal antitrust laws.
Palmyra is now owned by the Authority, and therefore the people of this community. But Phoebe, to complete its scheme to be the sole hospital in the region, has now prepared a long-term lease whereby the Authority would relinquish management of Palmyra to Phoebe for 40 years. Under state law, the Authority cannot lease Palmyra unless it determines this would lower the cost of health care or make additional facilities available in the community. Neither objective would be accomplished should the Authority relinquish control of Palmyra to Phoebe.
Do the members of the Authority, with all the land Phoebe has purchased, all the Taj Mahal buildings it has constructed, and all the outrageous salaries they pay administrators, really believe their prices are competitive? The FTC presented evidence at the hearing last year which established Phoebe’s charges are already considerably higher than the state average and that these higher health care costs are the direct result of Phoebe’s existing dominance in the local market. No one, including members of the Authority, can expect health care costs will be lower should Phoebe obtain control over Palmyra. Indeed, virtually every study in the literature confirms health care costs increase significantly when the only two hospitals in a market are consolidated. In addition, despite its “world class” costs, Phoebe has fallen far short of the mark for “world class” quality, as recent articles in The Herald have shown.
Leasing Palmyra to Phoebe, which, for the last 20 years, has concentrated on profits rather than the best interests of the community, will compromise the quality of health care and propel prices, which are already excessive, even higher. Why just give the lease to Phoebe? Why not put it out for competitive bid? There are many hospital management companies which would be willing to bid on the lease for Palmyra, if they were assured that process would be fair. Such companies could provide quality care and at a price that is lower than Phoebe’s. The management company could, as a condition of the lease, provide a certain level of indigent care and be required to pay substantially more than the $1 per year the Authority would receive from Phoebe. The Authority could also sell Palmyra. For-profit hospitals would be interested in Palmyra, though they would pay nothing more than the fair market value. Such entities would, like Palmyra, pay property tax. What great good could the Authority do with $65 million? Leasing Palmyra to another hospital management company or selling the hospital would preserve competition, and thereby protect the people of this community from a monopoly in health care.
The Authority will be holding a public hearing on Thursday at 10 a.m. in Room 100 of the City-County Governmental Building. Despite the inconvenience, timing and paucity of coverage of this hearing, I encourage all concerned citizens to attend the public hearing, as this will be your only opportunity to express your objections to the proposed lease. Citizens should, in the interim, contact members of the Authority to remind them both hospitals belong to the community, not Phoebe’s CEO.
Joseph W. Stubbs, MD, MACP, has been a practicing internist/geriatrician with Albany Internal Medicine since 1982. From 2009-10, he served as president of the American College of Physicians, the largest specialty society in the United States. He is currently secretary-treasurer of the national medical honor society, Alpha Omega Alpha.