11th Circuit hands FTC another hospital merger defeat

The Phoebe Putney decision is here.  Prior TIE coverage of this case here. From the 11th Circuit opinion Dec 9:

Memorial’s (and thus PPHS’s and PPMH’s) only real competitor is Palmyra Park Hospital, Inc. (“Palmyra”), a subsidiary of HCA, Inc. established in Albany in 1971. Palmyra consists of 248 beds and provides essentially the same services as Memorial. Memorial controls 75 percent and Palmyra 11 percent of their geographic market.

Nevertheless, the merger was approved under the “state action” doctrine – which exempts states from antitrust law when they act in a sovereign capacity. In this case, the state actor was the local hospital authority rather than the State of Georgia.

This is an important and unfortunate decision, allowing local hospital districts to facilitate state action mergers. The state action doctrine makes more sense if the state’s residents are paying the bills for monopolies, but in health care, many of the bills are paid by CMS and the rest by private health plans.

The 11th Circuit simply assumed that Georgia knew what it was doing when it authorized local hospital authorities:

[T]he Georgia legislature must have anticipated anticompetitive harm when it authorized hospital acquisitions by the authorities…  The legislature could hardly have thought that Georgia’s more rural markets could support so many hospitals that acquisitions by an authority would not harm competition. We therefore conclude that, through the Hospital Authorities Law, the Georgia legislature clearly articulated a policy authorizing the displacement of competition.

Our hospital antitrust system is broken – every year we have effective competition in fewer geographic areas.

h/t to Karen Chueng at Fierce Healthcare


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