On February 19, 2013 the U.S. Supreme Court, in a case that has been closely followed in health care circles, limited hospital authorities’ rights to engage in anticompetitive activity. The Court overruled the 11th Circuit Court of Appeals which had held that Phoebe Putney Hospital’s acquisition of Palmyra Hospital, both in Albany Georgia, which may reduce competition in that area, was nevertheless exempt from antitrust challenge by the Federal Trade Commission because Phoebe Putney, a hospital authority entity, was insulated under the long standing state-action immunity doctrine. The state statute at issue was a Georgia statute that authorized a hospital authority to acquire and operate hospitals.
In its unanimous decision, the Supreme Court held that for the state action immunity to apply, the state law that authorizes the state agencies to act in a manner that would lessen competition, must "clearly articulate and affirmatively express" a policy to allow hospital authorities to make acquisitions that substantially lessen competition. It found further that such immunity is disfavored and will not apply unless the standard set forth above is met. It found the Georgia statute that created hospital authorities did not meet the above standard.
The case was remanded for further proceedings consistent with the Supreme Court’s decision. That raises the question of what remedy the lower court (presumably the Federal District Court) will impose. Because the acquisition was several years ago, divestment of Palmyra by Phoebe Putney would be difficult as many of their services and functions have likely been consolidated. Nevertheless, there is precedent for that remedy.
As a result of this decision, several antitrust attorneys have expressed the view that hospital authority operated hospitals and their attorneys will be much more cautious in negotiating acquisitions of competing hospitals as they now assume that the Federal Trade Commission is likely to be more active in opposing such acquisitions. Moreover, it is clear that the Supreme Court’s requirement of a "clearly articulated and affirmatively expressed" state policy to displace competition will not be satisfied merely by the implementation of a general regulatory system created by state statute.