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FTC reviewing proposed Phoebe/Hospital Authority settlement

A Tennessee group is asking the Georgia Department of Community Health to clarify the application of Certificate of Need regarding Phoebe North

Workers at Palmyra Medical Center remove the “Y” in Palmyra on the front of the building in 2012 after the hospital was purchased by the Hospital Authority of Albany-Dougherty County, which leased the facility to Phoebe Putney Memorial Hospital Inc. The Federal Trade Commission, however, is currently reviewing a proposed settlement deal reached last August. (Albany Herald file photo)

Workers at Palmyra Medical Center remove the “Y” in Palmyra on the front of the building in 2012 after the hospital was purchased by the Hospital Authority of Albany-Dougherty County, which leased the facility to Phoebe Putney Memorial Hospital Inc. The Federal Trade Commission, however, is currently reviewing a proposed settlement deal reached last August. (Albany Herald file photo)

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As the Federal Trade Commission reviews its proposed settlement with Phoebe Putney Memorial Hospital and the Hospital Authority of Albany-Dougherty County in regard to last year’s acquisition of the former Palmyra Medical Center, Phoebe general counsel Tommy Chambless, right, shown with Phoebe CEO Joel Wernick, said Phoebe officials feel the matter was resolved appropriately last August. The proposal, however, has yet to be formally voted upon by the FTC. (File Photo)

ALBANY — New questions have arisen over Phoebe Putney Memorial Hospital’s operation of Phoebe North. Many thought the merger was a done deal after last year’s settlement proposal by the Federal Trade Commission. The proposed agreement, however, remains unapproved by the FTC six months later.

In April 2011, the FTC pursued litigation against Phoebe Putney Health System, Phoebe Putney Memorial Hospital, HCA, Palmyra Park Hospital, Phoebe North and the Hospital Authority of Albany-Dougherty County, challenging the Hospital Authority’s acquisition of the former Palmyra Medical Center. After a U.S. Supreme Court decision in February 2013 reversed lower court rulings that had exempted the purchase from federal review, the FTC, Phoebe Putney Health System and the Hospital Authority agreed to a proposed settlement last August.

The proposed settlement stated that the Hospital Authority would retain ownership of Palmyra Medical Center that it purchased from HCA for $195 million. Phoebe Putney would lease and operate the facility that was renamed Phoebe North, while agreeing to not oppose new Certificate of Need (CON) applications for a hospital in Metro Albany and Mitchell County for five years and to not make certain acquisitions in those six counties for the next 10 years without first notifying the FTC.

On March 14, however, the FTC was granted a motion in the U.S. District Court of Middle Georgia to extend the court deadline for the filing of the necessary case dismissal documents in regard to the Hospital Authority’s purchase of Palmyra. The FTC requested the extension “because the Commission is still considering a potential settlement of the underlying administrative procedures.” The motion was unopposed and U.S. District Court Judge Louis Sands granted an extension until April 14.

“As far as Phoebe and the Authority are concerned, the matter was resolved appropriately last August based on standing law and precedent, which the Federal Trade Commission recognized in its analysis at the time.,” Tommy Chambless, Phoebe senior vice president and general counsel, said. “We anticipate a final order consistent with the earlier order.

“In the meantime, Phoebe has not wavered in its planning for the utilization of the North Campus, which is designed to enhance the delivery of health care for the community we serve.”

Calls to the FTC for comment were not returned. FTC Commissioner Julie Brill, in an article published earlier this month in Mlex (a publication that covers regulatory stories), however, indicated the settlement proposal was still being reviewed by the FTC. “Phoebe’s not done yet,” she was quoted as saying. “It’s a proposed order. It has not been finalized.”

The sticking point, according to merger opponents, centers on their contention that the FTC misinterpreted Georgia’s CON law. The FTC cited Georgia’s CON law, which it described as “strict,” in determining that the option of ordering the divestiture of the former Palmyra Medical Center was “unavailable” to the agency.

Also, another player emerged earlier this month when the North Albany Medical Center LLC (NAMC), a group based in Franklin, Tenn., that registered with the Georgia Secretary of State’s Office in December, issued a news release stating it has filed a Letter of Determination (DET) request with with the Georgia Department of Community Health (DCH). The letter asks for confirmation that the state’s CON law would not prevent the sale of the former Palmyra Park Hospital should the FTC order that the property be decoupled from Phoebe management.

NAMC attorney Victor Moldovan said the proposed settlement wasn’t final because the FTC had yet to vote on approving the settlement. “They can approve, delay or reject the settlement,” Moldovan said. “I can’t speak for the FTC, but I am not aware of any deadline for them to move forward or not.”

Moldovan did not say what interest his organization, which has no Albany area partners, has in Phoebe North. The address listed on the Secretary of State’s website for the NAMC, however, lists the same location and suite as Surgical Development Partners of Franklin, Tenn. That group, according to its website, provides, hospital management, development and funding.

Dr. Joe Stubbs, an Albany physician and vocal critic of the Palmyra acquisition, met with the FTC earlier this month to express his concerns.

“I’m glad they are interested in taking another look at the proposed settlement,” Stubbs said of the FTC. “They may well not accept the proposed settlement. I think an administrative hearing would make it pretty obvious that Phoebe has created a monopoly. Now they are trying to throw up a smoke screen by using Georgia CON laws, and I don’t think it applies.

“The real question is do they really need the CON if a decoupling occurs?

Stubbs then criticized the Hospital Authority, saying the group should have placed the lease for the acquisition out for competitive bid rather than choosing Phoebe, which manages Phoebe Putney Memorial Hospital under a long-term lease with the Authority.

As part of the August settlement proposal, Phoebe and the Authority agreed that for the next 10 years they would 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 a six-county region — Dougherty, Terrell, Lee, Worth, Baker (which comprise the Albany Metropolitan Statistical Area) and Mitchell.

Phoebe and the Authority also agreed that for the next five years they would not file any objections with the Georgia DCH 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 agreed to provide a copy of any such objection to the FTC.

Phoebe also agreed to provide annual reports of its compliance with these provisions for the next decade.

In the proposed agreement, Phoebe and the Authority agreed to stipulate that the acquisition of the former Palmyra Medical Center might lessen competition within the relevant service and geographic market.

The Phoebe hospital board and the Authority board voted Aug. 26 to approve the settlement proposal.