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FTC case with Phoebe, Authority settled

Phoebe Putney Memorial Hospital

Phoebe Putney Memorial Hospital

ALBANY, Ga. — The Hospital Authority of Albany-Dougherty County and Phoebe Putney Health System have agreed to settle Federal Trade Commission charges that the acquisition of Palmyra Medical Center violated federal antitrust laws.

A news release posted on the FTC website Thursday stated that the Hospital Authority and Phoebe had agreed to settle FTC charges that the acquisition of Palmyra harmed hospital competition in six counties — the Albany Metropolitan Statistical Area and Mitchell County.

The proposed consent includes provisions to aid competition in those markets, but because of the unique circumstances of the Certificate of Need (CON) laws in Georgia, the agency said it was unable to require that the hospitals become independent competitors.

“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,” Deborah Feinstein, director of the FTC Bureau of Competition, said in a statement. “Regrettably, that legal victory will not undo the acquisition’s clear harm to competition.

“Because divestiture is unavailable in light of Georgia’s strict certificate of need legislation, this proposed order is the most effective and efficient resolution that can be achieved at this time.”

Under the terms of the settlement, the Hospital Authority will retain ownership of the former Palmyra and Phoebe Putney Memorial Hospital will continue to operate what is now known as Phoebe North. The FTC said that Georgia’s strict need assessment criteria have Albany rated as “over-bedded” and that it was unlikely that a new owner of Palmyra would be able to qualify for a CON to operate an independent hospital.

“We are pleased with today’s news and look forward to a new, exciting era for our hospital, staff, and the patients we’re proud to serve,” Joel Wernick, president and CEO of Phoebe Putney Health System, said in a statement Thursday. “We will soon be able to put this proceeding behind us and move forward with our plans to deliver world-class medical care for women and children, to provide new and expanded in-patient rehabilitation services, and to increase Phoebe’s ability to handle critically injured and ill patients who need intensive care. From the beginning, Phoebe’s goal has been to bring the finest medical talent and technology to the citizens of Southwest Georgia, and to serve all citizens of the community regardless of ability to pay. Our ability to fulfill our mission has been challenged by a need for additional capacity. That is what the transaction has always been about.

“Today’s settlement means Phoebe Putney will be able to use the Phoebe North campus as planned, to meet current capacity needs and to expand its tradition of high-quality health care for our entire community. The citizens of Southwest Georgia are well served by this compromise solution we believe to be in the best interests of all parties. It will also allow us to continue moving forward at a time of great change in our country’s health delivery system.”

An order was issued in earlier this year by U.S. District Judge Louis Sands barring Phoebe from taking any further steps to make changes at Phoebe North, which officials say they expect will soon be dismissed.

“I don’t want to presume what Judge Sands will do, but I anticipate there will be a joint motion from Phoebe and the FTC to dismiss (the preliminary injunction),” said Tommy Chambless, senior vice president and general counsel for the health system.

As part of the settlement, Phoebe and the Authority have agreed that, for the next 10 years they will not acquire, without prior notification to the FTC, a general acute care hospital, an inpatient or outpatient clinic or facility or a physician group practice of five or more physicians within the six-county region, which includes the counties of Dougherty, Terrell, Lee, Worth, Baker and Mitchell.

Phoebe and the Authority have also agreed that, for the next five years, they will not file any objections with the Georgia Department of Community Health to the issuance of a CON for a new general acute care hospital in the same six-county region. Phoebe and the Authority are not restricted from objecting to CON applications for other projects, but have agreed to provide a copy of any such objection to the FTC. Lastly, Phoebe agreed to provide annual reports of its compliance with these provisions for the next decade, officials with the health system say.

Phoebe and the Hospital Authority have stipulated that the acquisition of Palmyra might substantially lessen competition within the relevant service and geographic markets. The settlement reserves the rights of Phoebe and the Authority to contest that allegation in any other proceeding.

The agreement is subject to a 30-day public commenting period that began Thursday continues through Sept. 23. After that, the FTC is expected to decide whether to finalize the proposed consent order. Officials with the FTC say they will accept comments in paper form that are sent to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.