On Thursday, August 22, 2013, the Phoebe Putney Health System (“Phoebe Putney”), which is owned by the Hospital Authority of Albany-Dougherty County (the “Authority”), reached a settlement with the Federal Trade Commission (“FTC”) ending a lengthy legal process that had reached the Supreme Court of the United States. The FTC charged that Phoebe Putney’s acquisition of Palmyra Medical Center, which has since been renamed Phoebe North (“Phoebe North”), harmed competition in six counties in South Georgia. The FTC focused on the fact that Phoebe Putney and the former Palmyra Medical Center were the only hospitals in Dougherty County.

The FTC, which had opposed Phoebe Putney’s acquisition of the former Palmyra Medical Center, won an important legal victory earlier this year in the Supreme Court of the United States. After lower courts had dismissed the FTC’s suit, the Supreme Court, in a unanimous decision, reversed those decisions and allowed the FTC action brought against Phoebe Putney to continue. Specifically, the Supreme Court decided that the antitrust action against Phoebe Putney was not subject to the state action immunity defense because the Georgia General Assembly had not clearly articulated and affirmatively explained a policy to allow hospital authorities to make acquisitions that substantially lessen competition. Georgia had statutes allowing hospital authorities to acquire other hospitals, but the Supreme Court ruled that for such statutes to bar antitrust challenge they must specifically contemplate less competition.

Phoebe Putney’s settlement with the FTC does not require it to divest itself from Phoebe North because of Georgia’s certificate of need (“CON”) laws. Such a divesture would have required a state regulatory review under the CON system, and as the FTC explained, a divestiture buyer would be unlikely to receive the necessary CON approval to operate an independent hospital as Albany, which sits in Dougherty County, is considered to be “over-bedded” by Georgia’s need assessment criteria.

In the settlement, Phoebe Putney and the Authority agreed that they will not acquire a hospital, an inpatient or outpatient facility, or a physician group of five or more doctors within a six-county region, without prior notification to the FTC. The six-county region is made up of Dougherty, Terrell, Lee, Worth, Baker, and Mitchell counties. Phoebe Putney and the Authority will also be prohibited from opposing a CON application for any additional general hospital in the same six-county area for a period of five years. The settlement is expected to become final within a month.

Interestingly, in the settlement order, Phoebe Putney and the Authority acknowledged that the acquisition of Palmyra Medical Center may substantially lessen competition within the relevant service and geographic markets within the FTC’s focus. However, Phoebe Putney officials did point out that the FTC made no finding that Phoebe Putney had violated any antitrust laws.