In a decision issued on February 19, 2013, the U.S. Supreme Court upheld the Federal Trade Commission’s efforts to prohibit a hospital merger which would substantially reduce competition.  Federal Trade Commission v. Phoebe Putney Health System, Inc. involved the acquisition by a public hospital in Georgia of the only other hospital in the county.  The FTC alleged that the transaction would substantially reduce competition in the market for acute care hospital services and sought to prohibit the transaction as being in violation of Federal antitrust laws.

The lower court dismissed the FTC’s claim, holding that, because the acquisition was effected pursuant to Georgia’s Hospital Authorities Law, the acquisition was immune from Federal antitrust law under the state action doctrine.  Under the state action doctrine, certain anti-competitive actions taken or authorized by state government or an agency of state government are immune from Federal antitrust prosecution.  The Georgia Hospital Authorities Law authorized political subdivisions of the state of Georgia to create hospital authorities as special purpose entities, with the power to acquire, lease and operate hospitals and other healthcare facilities.   The hospital system successfully argued in the lower court that the power to acquire hospitals granted to it by the Hospital Authorities Law immunized the acquisition of the competing hospital from Federal antitrust law under the state action doctrine.

The Supreme Court reversed the holding of the lower court, ruling that the state action doctrine protects anti-competitive behavior taken or authorized by state government only if the anti-competitive actions are undertaken pursuant to a “clearly articulated and affirmatively expressed” state policy to displace competition.  The Supreme Court found that, although the Georgia Hospital Authorities Law granted public hospital authorities the power to acquire hospitals, there was no evidence in the Law that the Georgia Legislature affirmatively contemplated granting hospital authorities the power to substantially reduce or displace competition for hospital services in a particular market.

From a healthcare policy perspective, the case demonstrates support for competition among providers as a positive value that should be protected, absent a very specific indication of state intent to limit competition.  From a more general jurisprudential perspective, the case is a surprising example of the Roberts Court, in a unanimous decision, limiting the authority of the states and supporting and expanding Federal antitrust powers.