US judge blocks FTC bid to review Louisiana hospital deal

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Sept 27 (Reuters) – A U.S. judge on Wednesday said a hospital consolidation in Louisiana was beyond the reach of federal antitrust law, delivering a setback to the U.S. Federal Trade Commission in a clash over the scope of its power to review certain acquisitions.

U.S. District Judge Lance Africk in New Orleans in a 29-page order said Louisiana’s consideration and approval of the hospital transaction made it exempt from federal antitrust law. In the deal, nonprofit Louisiana Children’s Medical Center acquired three hospitals from HCA Healthcare (HCA.N).

The state of Louisiana intervened in the court dispute, taking sides against the FTC.

The FTC had argued that the deal met a valuation bar subjecting it to the notification and waiting period of the federal Hart-Scott-Rodino (HSR) Act. The law sets a 30-day waiting period for parties to close transactions, giving the agency time to consider and block proposed mergers before they are consummated.

Louisiana argued that “state action” legal doctrine — allowing states to regulate commerce in their boundaries — shielded the acquisition from federal oversight and potential liability.

“Absent a clear statement of Congress’s intent to displace a state’s ability to regulate its own commerce, courts in the antitrust context presume that Congress did not so intend,” Africk wrote.

A spokesperson for the FTC did not immediately respond to a request for comment.

Louisiana Children’s chief executive Greg Feirn in a statement said his health system “will continue to move forward with its partnership and integration plans.”

HCA did not immediately respond to a request for comment.

Louisiana Attorney General Jeff Landry said Africk’s ruling was a “victory not only for the rule of law, but also for increased access to quality health care in a community with so many underserved minorities.”

The FTC argued the state action doctrine was a defense that does not provide immunity to U.S. antitrust law.

“The hospitals’ failure to file notifications before consummation under the HSR Act has thwarted the FTC’s ability to investigate their transaction and their purported state action defense,” agency lawyers told the court.

Africk said his ruling “may make enforcement more difficult for the FTC in the narrow context of transactions that close” based on state-issued “certificates of public advantage.”

But he said parties to such deals have incentives to ensure their transactions satisfy a test established in a 1980 U.S. Supreme Court ruling.

Parties that are wrong about whether state action shields a transaction, Africk wrote, “face equitable measures and steep daily fines.”

The cases are Louisiana Children’s Medical Center v. Garland and HCA Healthcare Inc v. Garland, U.S. District Court for the Eastern District of Louisiana, Nos. 2:23-cv-01305 and 2:23-cv-01311.

For Louisiana Children’s Medical Center: Ken Field of Hogan Lovells; Robert Stander of Jones Day; and Paige Sensenbrenner of Adams and Reese

For HCA Healthcare: Sara Razi of Simpson Thacher & Bartlett; and Judy Barrasso of Barrasso Usdin Kupperman Freeman & Sarver

For Federal Trade Commission: Mark Seidman of the FTC

Read more:

Louisiana accuses FTC of stepping on state power in hospital merger dispute

Reporting by Mike Scarcella; editing by Leigh Jones

Our Standards: The Thomson Reuters Trust Principles.

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