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Economists submit amicus brief to Supreme Court in FTC v. Phoebe Putney Health System Inc.

Cory Capps
August 20, 2012

On August 20, 2012, a group of economics professors submitted an amicus brief in support of the Federal Trade Commission (FTC) in the agency′s challenge of Phoebe Putney Health System Inc.′s (Phoebe) merger with its only nearby rival, Palmyra Park Hospital Inc. (Palmyra). Although the central issue in the case is whether or not the merger is shielded from antitrust scrutiny under the state action doctrine, Phoebe also argued that, as a nonprofit hospital, it would not be able to charge prices in excess of amounts necessary to “cover costs and create reasonable reserves” and that it would necessarily pass any cost savings onto consumers.

Bates White Partner Cory Capps coauthored the Brief of Amici Curiae, which was signed by more than two dozen professors from some of the nation′s most prominent universities. Amici advised the Supreme Court that, insofar as Phoebe was seeking special or more lenient treatment under the antitrust laws due to its nonprofit status, there is no theoretical or empirical basis in economics for such favorable treatment. On the contrary, there is compelling empirical evidence that, in general, nonprofit hospitals with market power do exploit that power by raising prices.

The Supreme Court is currently weighing the FTC′s bid to overturn the Eleventh Circuit ruling that allowed Phoebe to consummate its merger with Palmyra. The FTC has argued since April 2011 that Phoebe′s Palmyra acquisition is anticompetitive and will allow the health system to raise prices for general acute-care hospital services charged to commercial health plans, which would harm patients, local employers, and employees. However, the 11th Circuit U.S. Court of Appeals in Atlanta in December 2011 upheld the U.S. District Court for the Middle District of Georgia ruling that the merger was shielded under the state action doctrine. The FTC has since submitted its 52-page Brief for the Petitioner to the U.S. Supreme Court.

For case filings and other information, see