Phoebe CEO Joel Wernick, left, and Tommy Chambless, general counsel, conduct Tuesday’s news conference in the Willson Boardroom at Phoebe Putney Memorial Hospital.
ALBANY —A slip opinion issued from the U.S. Supreme Court on Tuesday held that Georgia has not clearly articulated and affirmatively expressed a policy to allow hospital authorities to make acquisitions that substantially lessen competition.
This effectively reverses a ruling from the 11th U.S. Circuit Court of Appeals that allowed the purchase of Palmyra Medical Center by the Hospital Authority of Albany-Dougherty County to go through and sends the case back to the 11th Circuit Court for further proceedings consistent with the high court’s determination.
“The Supreme Court has today reversed a lower court decision allowing the Hospital Authority of Albany-Dougherty County, which owns Phoebe Putney Memorial Hospital, to acquire a competing hospital under the state-action doctrine,” a statement issued Tuesday by Phoebe officials said. “In effect, the ruling says the State of Georgia has not clearly articulated its intent that hospital authorities are entitled to the same protection from antitrust enforcement as the state enjoys. We are studying the decision closely.
“We are disappointed because the lower court rulings were clear in the applicability of state action immunity in accordance with long-standing precedent. This does not alter our resolve or the commitment Phoebe has to meeting the growing needs of this community and the region we serve. We are continuing with our planning process to implement needed changes and to allocate resources properly to protect the safety and improve the health and wellness of our community.”
Associate Justice Sonia Sotomayor delivered the opinion for the unanimous court.
“Under this Court’s state-action immunity doctrine, when a local governmental entity acts pursuant to a clearly articulated and affirmatively expressed state policy to displace competition, it is exempt from scrutiny under the federal antitrust laws,” the opinion begins. “In this case, we must decide whether a Georgia law that creates special-purpose public entities called hospital authorities and gives those entities general corporate powers, including the power to acquire hospitals, clearly articulates and affirmatively expresses a state policy to permit acquisitions that substantially lessen competition.
“Because Georgia’s grant of general corporate powers to hospital authorities does not include permission to use those powers anticompetitively, we hold that the clear-articulation test is not satisfied and state action immunity does not apply.”
Under State Action Doctrine, federal antitrust laws do not apply to anti-competitive conduct of certain subordinate public entities created by a state if the conduct is authorized as part of a “state policy to displace competition” that is “clearly articulated and affirmatively expressed” in state law.
“Today’s ruling is a big victory for consumers who want to see lower health care costs, and the Court’s opinion will ensure competition in a variety of other industries, as well,” Federal Trace Commission Chairman Jon Leibowitz said in a statement following the announcement of the decision.
On June 25, the Supreme Court granted certiorari in the FTC’s appeal following the Court of Appeals ruling in December 2011 that allowed the $195 million acquisition to close.
“We granted certiorari on two questions: whether the Georgia Legislature, through the powers it vested in hospital authorities, clearly articulated and affirmatively expressed a state policy to displace competition in the market for hospital services; and if so, whether state action immunity is nonetheless inapplicable as a result of the Authority’s minimal participation in negotiating the terms of the sale of Palmyra and the Authority’s limited supervision of the two hospitals’ operations,” the opinion states.
“Concluding that the answer to the first question is ‘no,’ we reverse without reaching the second question.”
The case was argued before the court on Nov. 26. From this point, it is anticipated that the case will go back to the Court of Appeals.
The opinion explains that the claim for state action immunity failed because there is no evidence the state affirmatively contemplated that hospital authorities would displace competition by consolidating hospital ownership, and that the powers exercised by the Hospital Authority mirror general powers routinely conferred by state law upon private corporations.
In a news conference Tuesday afternoon, Phoebe CEO Joel Wernick said the plans that have been established for Palmyra, now Phoebe North, will continue to move forward — and that the long-term strategic plan for Phoebe Putney Health System, of which they say the purchase was a part — will continue to be advocated.
“We have not changed our vision,” Wernick said. “We will proceed with the plans we have until someone tells us we cannot. Nobody has told us that yet; (the opinion) just said that it is to go back for further proceedings.”