The United States Supreme Court, in a unanimous opinion written Justice Sotomayor, overturned an Eleventh Circuit Court of Appeals and Georgia District Court finding “state action” antitrust immunity in the case of FTC v. Phoebe Putney Health System, Inc. et al, No. 11-1160. Had they ruled otherwise there would have opened a huge whole in the FTC’s ability to regulate anticompetitive conduct by state sub-entities under a general grant of state authority. Georgia like many states has a hospital authorities law that permits counties and or municipalities to create quasi governmental entities with broad grants of powers to operate health care facilities.
Although states are exempt from anticompetitive actions their sub-entities are not, because the are not sovereign entities. In order to be protected from antitrust liability they must be granted rather specific authority from the state to engage in anticompetitive conduct. Starting from the point that “state action immunity is disfavored in the law,” mere broad grants of power are in and of themselves insufficient to constitute a “clearly articulated and affirmatively expressed state policy to displace competition. The state, while granting power while remaining essentially neutral on its potential use in an anticompetitive manner is insufficient. The state policy permitting anticompetitive conduct must be the “inherent, logical and ordinary result” of the grant of power.
Here a hospital authority authorized under state statutes attempted to acquire another hospital within its market leading to a commanding control of 86% of the market through the use of purchase and leaseholds to private corporations. The first hospital itself controls 75% of the relevant market. Nobody disputes that the increase in market share would not serve the benefit of consumers. The broad interpretation of the state immunity action defense to anticompetitive behavior had all the potential to open the flood gates in health care and many other areas of industry where government inserts itself in the economy. It would also have severely handicapped the FTC’s effort to balance the consolidation of economic power in hospital systems buying up practices for their ACOs.