Hearing held on Phoebe, Hospital Authority complaint

A public hearing was held about an injunction by the FTC to postpone the Phoebe-Palmyra merger until an administrative law judge hears the case in September

The U.S. District Court in Albany held a hearing regarding an injunction filed against Phoebe Putney, the Hospital Authority of Albany-Dougherty County and HCA Palmyra Medical Centers by the Federal Trade Commission.

It was a hearing that took nearly ten hours.

The FTC is asking the court to postpone the merger of Phoebe Putney Memorial Hospital and Palmyra Medical Center until a hearing before an administrative law judge in Washington in September. Lawyers for Phoebe, HCA Palmyra and the Hospital Authority all filed motions to dismiss this injunction.

"The Hospital Authority is an instrumentality of state government; as such it is exempt from the antitrust laws which do not apply to it," says Emmet Bondurent who is representing the Hospital Authority.

In their arguments at the hearing, the Federal Trade Commission spent a lot of time saying the Phoebe-Palmyra merger is about one actor.

"This transaction was planned for by Phoebe Putney, conceived of, negotiated by Phoebe Putney and it's to benefit Phoebe Putney," says Ted Hassi with the Federal Trade Commission.

Lawyers with Phoebe Putney and the Hospital Authority say state action immunity should keep them from having to be in court at all.

"If you've got state action immunity, that's the beginning, the middle and the end of the story. The fact that the FTC thinks that this will reduce competition is irrelevant," says Bondurent.

"Phoebe Putney used the Hospital Authority as a rubber stamp, and they had them wave their magic wand of state action over it and now they want to say now it's an act of the state. This transaction is going to harm the consumers of Dougherty County," says Hassi.

Attorneys with the FTC say the Hospital Authority would purchase Palmyra and then lease it to Phoebe Putney. Attorneys representing the defendants say Phoebe Putney Memorial Hospital is a separate entity that wants to lease another separate entity (Palmyra) that is owned by a private party and, therefore, antitrust arguments lose interest.

During the hearing as the FTC discussed how healthcare prices would increase if the merger went through, a representative from the hospital authority stood up and said they were there to discuss public interests and balancing of equity, and that increased costs is not public interest.

"We spent about four or five hours, maybe longer, in the FTC's presentation and the Attorney General's presentation hearing about things that are utterly irrelevant if this is an entity that is an agency of the state," says Bondurent.

"They want to ignore the fact that they can't defend this transaction on the merits. They can't tell you why this transaction will be good because they've got no reason. They've got no basis to say this transaction will benefit the citizens of this county and the surrounding counties. It's going to hurt them, and that's the problem," says Hassi.

According to the FTC, local employers using Phoebe as their health care provider say Palmyra's rates are seven percent lower than the state while Phoebe is 45 percent higher. The FTC says Albany has the most expensive health care costs in Georgia. They say prices will only climb higher if the Phoebe-Palmyra merger occurs because it will eliminate competition.

FTC attorneys also argued that Phoebe Putney's capacity constraints are "illusionary." They say reports show Phoebe Putney Memorial Hospital's occupancy rates are between 40 and 60 percent capacity except at ICU, which FTC officials say are used inefficiently.

FTC attorneys say Phoebe Putney spends millions of dollars on new construction projects but none to increase capacity. They say the hospital did no planning to expand (I.e., saving money in budget).

Attorneys representing the defendants say the FTC could not reach a decision on the merger until April 2012, but the merger deal needs to close by Dec. 31. They say by the FTC not making a quick decision, they are holding their decision past the closing deadline to sway their case in favor of the FTC. The FTC says that the closing date of the merger has changed before and can be altered again.

Judge Louis Sands says he will make a decision on the injunction in two weeks.

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