In The Wake Of Phoebe Putney, New York Passes Law Giving Antitrust Immunity To State Health Care System

Earlier this year, the Supreme Court issued its decision in FTC v. Phoebe Putney Health System, Inc., 133 S.Ct. 1003 (2013), which held that the state action antitrust immunity doctrine applies only when the state legislature has "clearly articulated and affirmatively expressed" a policy displacing competition. In the wake of Phoebe Putney, last week New York passed a bill amending Public Authority Law Sections 3401 and 3405 ("the new law"), which concerns Nassau Health Care Corporation (NuHealth). The new law is modeled under the Supreme Court's standard and permits a specific entity to enter into health care-related affiliations and to receive immunity from federal and state antitrust laws.

The "state action doctrine" allows the extension of state immunity from the federal antitrust laws to municipalities and even private parties, but only when they act pursuant to a "clearly articulated and affirmatively expressed state policy" to displace competition. Justice Sonia Sotomayor, writing for a unanimous Court in Phoebe Putney, held that state regulatory statutes that confer general corporate powers are not sufficient to meet the "clearly articulated" standard and cannot be interpreted to mean that the state intended to displace competition. In summary, the Supreme Court reined in the state action doctrine by requiring a specific mandate in legislation conferring immunity from antitrust scrutiny.

Despite strong objections by both the New York Attorney General and Antitrust Bureau Chief, Gov. Andrew Cuomo signed the new law, which then went into effect, protecting state-chartered NuHealth from state and federal antitrust laws. NuHealth is a New York public benefit corporation that includes Nassau University Medical Center, the A. Holly Patterson Extended Care Facility in East Meadow, and five community health centers. The new law is intended to clear the way for NuHealth to enter a planned public-private partnership with North Shore-LIJ Health System, a network of 16 hospitals and about 400 ambulatory and physician practices on Long Island and Staten Island. The partnership would strengthen an already existing affiliation agreement between the two systems, which dates back to 2005, by creating a jointly owned limited liability company. The new structure will allow the two systems to consolidate duplicative health care service units and jointly negotiate rates with insurance companies, along with a host of other consolidation activities.

The...