Despite losses at the district and appellate levels, the Federal Trade Commission’s fight to enjoin the merger of two hospitals in Georgia is not over. The Supreme Court announced on June 25, 2012 that it would hear an appeal by the FTC to consider whether an alleged merger to monopoly of two hospitals, Phoebe Putney Health System and Palmyra Medical Center, is exempt from antitrust enforcement based on the “state action” doctrine. That doctrine holds that certain actions mandated or directed by the state are not subject to antitrust liability. The FTC and critics of the Eleventh Circuit decision fear that this case will pave the way for future transactions to be structured in a similar way to avoid the reach of the antitrust laws.

The Georgia statute at issue allows a local county hospital authority to acquire certain land and buildings, including hospital facilities, and lease them to others. The local hospital authority used that statute to acquire Palmyra and lease it to Phoebe Putney – Palmyra’s only significant competitor – for forty years at a rate of one dollar per year. Phoebe Putney guaranteed the $195 million purchase price and a $35 million break-up fee, and it received immediate control over Palmyra’s operations upon closing of the transaction.