[Federal Register Volume 59, Number 133 (Wednesday, July 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16910]


[[Page Unknown]]

[Federal Register: July 13, 1994]


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DEPARTMENT OF JUSTICE
 

United States and State of Florida v. Morton Plant Health System, 
Inc. and Trustees of Mease Hospital, Inc., No. 94-748-CIV-T-23E (M.D. 
Fla., Filed May 5, 1994)

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Consent 
Judgment, Stipulation, and Competitive Impact Statement have been filed 
with the United States District Court for the Middle District of 
Florida in the above-captioned case.
    On May 5, 1994, the United States and State of Florida filed a 
complaint to block the proposed combination of the two largest general 
acute care hospitals in North Pinellas County, Florida. Morton Plant 
Health System, Inc. (``MPHS'') owns and operates Morton Plant Hospital 
(``Morton Plant'') in Clearwater, and Trustees of Mease Hospital, Inc. 
(``TMH'') owns and operates the Mease hospitals in Dunedin and Safety 
Harbor (``Mease''). The Complaint alleges that the combination of 
Morton Plant and Mease may substantially lessen competition in the 
provision of acute inpatient hospital services in North Pinellas 
County, in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
    The proposed Final Consent Judgment prohibits the consolidation of 
Morton Plant and Mease and requires that they remain as independent, 
competing hospitals. It also, however, permits MPHS and TMH to form a 
partnership in which they may jointly own and operate certain acute 
care and administrative services. The partnership would sell its 
services at cost to each hospital, which would market and price all of 
its services--both those owned separately and those jointly owned and 
operated through the partnership--independently and in competition with 
the other. The proposed Judgment permits MPHS and TMH to achieve 
substantial efficiencies while preserving the vigorous competition 
between them that has restrained their prices to managed care and other 
health insurance plans.
    Public comment is invited within the statutory 60-day period. Such 
comments will be published in the Federal Register and filed with the 
Court. Comments should be addressed to Gail Kursh, Chief, Professions 
and Intellectual Property Section, U.S. Department of Justice, 
Antitrust Division, 555 4th Street, NW., Room 9903, Washington, DC 
20001 (phone 202/307-5799).
Constance K. Robinson,
Director of Operations, Antitrust Division.

United States District Court for the Middle District of Florida, Tampa 
Division

    United States of America and State of Florida, Plaintiffs, v. 
Morton Plant Health System, Inc. and Trustees of Mease Hospital, 
Inc., Defendants. Civ. No. 94-748-CIV-T-23E, Judge Steven D. 
Merryday, Filed: June 17, 1994.

Stipulation

    It is stipulated by and between the undersigned parties, by their 
respective attorneys, that:
    1. The Court has jurisdiction over the subject matter of this 
action and over each of the parties hereto, and venue of this action is 
proper in the Middle District of Florida;
    2. The parties consent that a Final Consent Judgment in the form 
hereto attached may be filed and entered by the Court, upon the motion 
of any party or upon the Court's own motion, at any time after 
compliance with the requirements of the Antitrust Procedures and 
Penalties Act (15 U.S.C. 16), and without further notice to any party 
or other proceedings, provided that plaintiffs have not withdrawn their 
consent, which they may do at any time before the entry of the proposed 
Final Judgment by serving notice thereof on defendants and by filing 
that notice with the Court; and
    3. Defendants agree to be bound by the provisions of the proposed 
Final Consent Judgment pending its approval by the Court. If either 
plaintiff withdraws its consent, or if the proposed Final Consent 
Judgment is not entered pursuant to the terms of the Stipulation, this 
Stipulation shall be of no effect whatsoever, and the making of this 
Stipulation shall be without prejudice to any party in this or in any 
other proceeding.

    Dated: June 17, 1994.
    For Plaintiffs:
Robert A. Butterworth,
Attorney General.
Jerome W. Hoffman,
Chief, Antitrust Section.
Lizabeth A. Leeds,
Assistant Attorney General, FL Bar # 0457991.

    Office of the Attorney General, State of Florida, The Capitol, 
Tallahassee, FL 32399-1050, (904) 488-9105, (904) 488-9134 (fax).

Anne K. Bingaman,
Assistant Attorney General.
Steven C. Sunshine,
Deputy Assistant Attorney General.
Constance K. Robinson,
Director of Operations.
Gail Kursh,
Chief, Professions and Intellectual Property Section.
K. Craig Wildfang,
Special Counsel to the Assistant Attorney General, Antitrust Division.
Anthony E. Harris, Trial Counsel
Jon B. Jacobs
Jessica N. Cohen
M. Lee Doane

    U.S. Department of Justice, Antitrust Division, 555 4th Street, 
NW., Room 9901, Washington, DC 20001, (202) 307-0951, (202) 514-1517 
(fax).

    For Defendants:
Emil C. Marquardt, Jr., Esquire,
    McFarlane Ausley Ferguson & McMullen, 400 Cleveland Street, P.O. 
Box 1669, Clearwater, FL 34617, (813) 441-8966, (813) 422-8470 
(fax).
    United States of America and State of Florida, Plaintiffs v. 
Morton Plant Health System, Inc. and Trustees of Mease Hospital, 
Inc., Defendants. Civil No. 94-748-CIV-T-23E, Judge Steven D. 
Merryday, Filed: June 17, 1994.

Final Consent Judgment

    Plaintiffs, the United States of America and the State of Florida, 
having filed their Verified Complaint on May 5, 1994, and Plaintiffs 
and Morton Plant Health System, Inc. and Trustees of Mease Hospital, 
Inc., by their respective attorneys, having consented to the entry of 
this Final Consent Judgment without trial or adjudication of any issue 
of fact or law, and without this Final Consent Judgment constituting 
evidence against or admission by any party with respect to any issue of 
fact or law;
    NOW, therefore, before the taking of any testimony and without 
trial or adjudication of any issue of fact or law, it is hereby 
ORDERED, ADJUDGED AND DECREED:

I

Jurisdiction

    This Court has jurisdiction of the subject matter and each of the 
parties to this action. The Verified Complaint states a claim upon 
which relief may be granted against Morton Plant Health System, Inc. 
and Trustees of Mease Hospital, Inc. under Section 7 of the Clayton 
Act, as amended, 15 U.S.C. Sec. 18.

II

Definitions

    As used in this Final Consent Judgment:
    (A) Eligible Partnership Patient Care Services means the following 
patient care services that Morton Plant and Mease may elect to own, 
manage, operate or provide by the Partnership described herein:
    (1) all patient care services provided by Morton Plant or Mease on 
an outpatient basis that are generally capable of being provided 
outside of a general acute care hospital;
    (2) open-heart surgery and/or services or procedures that require 
the immediate availability of an open-heart surgery unit;
    (3) robotically assisted prosthetic implantation and special spinal 
instrumentation procedures involving the insertion of multiple rods in 
the spinal cord;
    (4) stem cell procedures, advanced linear accelerator equipment and 
procedures, and HDR brachy therapy;
    (5) stereotactic radio therapy;
    (6) inpatient and outpatient diagnostic and therapeutic radiology 
services (e.g., CAT scans, MRI, X-ray, ultrasound, nuclear 
angiography);
    (7) inpatient and outpatient laboratory services;
    (8) neonatal level III services;
    (9) inpatient and outpatient mental health services; and
    (10) home health care, home infusion services, durable medical 
equipment, rehabilitative services, skilled nursing, retirement 
facilities and long-term care.
    (B) Eligible Partnership Administrative Services means the 
following administrative services that Morton Plant and Mease may elect 
to own, manage, operate or provide by the Partnership described herein:
    (1) human resources (except management positions at the hospital 
level with responsibility for management, marketing, planning, pricing 
or managed care contracting);
    (2) medical staff organization and development, including medical 
staff development and recruitment, physician organization structure, 
advising on practice acquisition, governance and credentialing;
    (3) information services;
    (4) telephone and other communication services;
    (5) accounting, billing and collection;
    (6) housekeeping and laundry;
    (7) medical records;
    (8) materials management and plant maintenance;
    (9) support services for charitable foundations; and
    (10) all miscellaneous services not related to patient care and not 
exceeding an expenditure of $250,000 annually.
    (C) Independent Services means all services other than those 
carried out by the Partnership under this Final Consent Judgment.
    (D) Managed Care Plan means a health maintenance organization, 
preferred provider organization, or other health services purchasing 
program that uses financial or other incentives to prevent unnecessary 
services and includes some form of utilization review.
    (E) Mease means the Trustees of Mease Hospital, Inc. and all 
subsidiaries and affiliates.
    (F) Morton Plant means Morton Plant Health System, Inc. and all 
subsidiaries and affiliates.
    (G) Partnership means the nonprofit, tax-exempt organization that 
Morton Plant and Mease may create and operate in accordance with this 
Final Consent Judgment.

III

Applicability

    This Final Consent Judgment applies to Morton Plant and Mease, to 
the Partnership created by them, to Morton Plant's and to Mease's 
officers, directors, trustees, administrators, agents, employees, 
successors and assigns and to all other persons in active concert or 
participation with any of them who receive actual notice of this Final 
Consent Judgment pursuant to F.R.C.P. 65(d).

IV

Prohibited Conduct

    Morton Plant and Mease shall not consummate their agreement to 
consolidate as set forth in their Letter of Intent, dated October 19, 
1993, or any other agreement to merge, consolidate, or combine, except 
in accordance with the terms of this Final Consent Judgment.

V

Bona Fide Partnership

    Morton Plant and Mease may enter into a Partnership in which they 
consolidate and jointly operate certain patient care services and 
administrative services under the following conditions:
    (A) Morton Plant and Mease may agree to consolidate and jointly 
operate any Eligible Partnership Patient Care Services and any Eligible 
Partnership Administrative Services.
    (B) The Partnership may own and operate any Eligible Partnership 
Patient Care Service and any Eligible Partnership Administrative 
Service and may provide such service to Morton Plant and Mease. The 
Partnership shall sell each service to Morton Plant and Mease on the 
same terms and conditions in an amount equal to cost. The Partnership 
shall conduct an annual cost accounting.
    (C) Morton Plant and Mease may appoint members to a Partnership 
board, which individuals may be members of each hospital's board. 
Executives at Morton Plant and Mease may also serve as executives of 
the Partnership and on the boards of their respective hospitals and of 
the Partnership. The Partnership board will govern the services 
provided by the Partnership. The Partnership board and its executives 
may not discuss Independent Services, managed care contracting for 
Morton Plant or Mease, or the marketing or pricing of any services, 
including Eligible Partnership Patient Care Services or Eligible 
Partnership Administrative Services, with the following exception: the 
Partnership may market and price those services set out in Paragraph 
II(A)(10) as long as Morton Plant and Mease continue their present 
practice of providing their patients and physicians with information on 
other providers of these services in the market. The Partnership board 
may request Morton Plant and Mease to contribute capital to the 
Partnership, but each hospital shall exercise its own independent 
judgment on how much capital to contribute.
    (D) Morton Plant and Mease shall provide plaintiffs with written 
notification of their intent to consolidate and jointly operate any 
additional or new services (such as pediatrics and neonatal level II 
services) through the Partnership under the terms of this Final Consent 
Judgment. Morton Plant and Mease shall also provide any information 
reasonably necessary for plaintiffs to assess the competitive impact of 
adding such services to the Partnership. Morton Plant and Mease may 
consolidate and jointly operate the additional or new services unless 
either plaintiff provides a written objection within 120 days of 
receiving the necessary information. Notwithstanding the foregoing, 
Morton Plant and Mease may jointly operate through the Partnership any 
new service not currently provided by Morton Plant or Mease by 
providing plaintiffs with at least 90-days' notice, so long as the new 
service is a specialized inpatient procedure commonly recognized in the 
medical community as ``tertiary'' or higher, and is performed only by 
physician subspecialists with specialized support staff and expensive 
equipment.
    (E) Morton Plant may lend or grant Mease up to $21 million for 
Mease's planned expansion under terms preventing Morton Plant from 
obtaining any control or leverage over Mease's management or 
operations.
    (F) Morton Plant, Mease and the Partnership may become obligated 
parties, guarantors or co-makers on debt instruments and the assets of 
Morton Plant, Mease and the Partnership may be pledged as security for 
such debt instruments so long as all such obligations are approved 
separately by Morton Plant and Mease. Neither Morton Plant nor Mease 
shall unreasonably withhold consent to, impose conditions on, or 
attempt to influence the use of funds obtained by the other hospital 
through such financing for Independent Services. In the event that 
Morton Plant or Mease believes the other has unreasonably withheld such 
consent, the matter shall be submitted to binding arbitration under the 
American Arbitration Association Rules.
    (G) Nothing in this Final Consent Judgment is intended to prevent 
Morton Plant, Mease and/or the Partnership from participating in lawful 
integrated delivery networks such as accountable health partnerships, 
physician organizations and physician networks of their medical staff; 
provided that participation decisions shall be made independently by 
Morton Plant, Mease and the Partnership.
    (H) In the event that federal or state legislation enacted 
subsequent to the entry of the Final Consent Judgment permits conduct 
prohibited by this Judgment, Morton Plant and Mease may move for and 
plaintiffs will reasonably consider an appropriate modification of the 
Final Consent Judgment. This provision in no way limits Morton Plant's 
or Mease's right to seek any modification of this Final Consent 
Judgment.
    (I) The Partnership shall establish adequate protections to keep 
information concerning pricing, managed care contracts, negotiations 
with managed care plans, and marketing and planning of Morton Plant and 
Mease separate and to insure that the information of one hospital is 
not transmitted to or received by the other hospital directly or 
indirectly. Adequate protections shall include, at a minimum, 
confidentiality agreements for employees with access to such 
information and protocols for preparation of separate reports for 
Morton Plant, Mease, and the Partnership.
    (J) The Partnership may make any lawful acquisition of physician 
practices. However, in the event that a practice is acquired that 
admits patients to either hospital for Independent Services, Morton 
Plant and Mease shall allow each such physician to determine in his or 
her sole discretion to which hospital to admit such patients.

VI

Independent Activities

    (A) Morton Plant and Mease shall continue as separate and competing 
corporate entities, with separate Boards of Trustees and executive 
management, and shall separately own and operate their respective 
Independent Services. Marketing, pricing, and managed care negotiating 
and contracting decisions shall remain Independent Services to be 
considered only in each hospital board's respective meeting. Each board 
shall adhere to a separate agenda and will record such meeting in 
separate minutes.
    (B) Morton Plant and Mease shall each price and sell its services, 
both those owned and operated and operated separately and those 
purchased from the Partnership, in active competition with each other. 
Morton Plant and Mease shall each exercise its own independent judgment 
on how to market and price its patient care services and shall not 
discuss, communicate, or exchange with each other or any other hospital 
information relating to the marketing, pricing, negotiating, or 
contracting of any patient care services, including those purchased 
from the Partnership.
    (C) Morton Plant or Mease shall be free to offer any patient care 
service or administrative service provided through the Partnership 
independently and in competition with any other provider and may end 
its provision of any such service through the Partnership.
    (D) Morton Plant and Mease shall negotiate and contract 
independently with health care purchasers such as Managed Care Plants. 
Morton Plant and Mease may contract with the same Managed Care Plan or 
any other health care purchaser so long as they do so independently; 
provided, that Morton Plant and Mease may independently enter into 
similar but separate contracts with the same Managed Care Plan.

VII

Compliance Program

    Morton Plant and Mease shall maintain an antitrust compliance 
program, which shall include:
    (A) Distributing within 60 days from the entry of this Final 
Consent Judgment, a copy of the Final Consent Judgment and Competitive 
Impact Statement to all officers, directors, trustees and 
administrators;
    (B) Distributing in a timely manner a copy of the Final Consent 
Judgment and Competitive Impact Statement to any person who succeeds to 
a position described in Paragraph VII(A);
    (C) Briefing annually those persons designated in Paragraph VII(A) 
on the meaning and requirements of this Final Consent Judgment, 
penalties for violation thereof and the antitrust laws, including 
potential antitrust concerns raised by hospitals;
    (D) Obtaining from the officers and administrators an annual 
written certification that he or she has read, understands and agrees 
to abide by this Final Consent Judgment and in not aware of any 
violation of this Final Consent Judgment; and
    (E) Maintaining for inspection by plaintiffs a record of recipients 
to whom this Final Consent Judgment and Competitive Impact Statement 
have been distributed.

VIII

Certifications

    (A) Within 75 days after the entry of this Final Consent Judgment, 
Morton Plant and Mease shall each certify to plaintiffs whether it has 
made the distribution of this Final Consent Judgment in accordance with 
Paragraph VII(A) above.
    (B) For five years after the entry of this Final Consent Judgment, 
on or before its anniversary date, Morton Plant and Mease shall each 
certify annually to plaintiffs whether it has complied with the 
provisions of Paragraph VII.

IX

Plaintiffs' Access

    For the sole purpose of determining or securing compliance with 
this Final Consent Judgment, and subject to any recognized privilege, 
authorized representatives of the United States Department of Justice 
or the Office of the Attorney General, State of Florida, upon written 
request of the Assistant Attorney General in charge of the Antitrust 
Division or the Attorney General of the State of Florida, respectively, 
shall on reasonable notice be permitted:
    (A) Access during regular business hours of Morton Plant and Mease 
to inspect and copy all records and documents relating to any matters 
contained in this Final Consent Judgment;
    (B) To interview Morton Plant and Mease officers, directors, 
trustees, administrators, and employees, who may have counsel present, 
concerning such matters; and
    (C) To obtain written reports from Morton Plant and Mease relating 
to any of the matters contained in the Final Consent Judgment.

X

Jurisdiction Retained

    Jurisdiction is retained by this Court for the purpose of enabling 
any of the parties to this Final Consent Judgment to apply to this 
Court at any time for further orders and directions as may be necessary 
or appropriate to carry out or construe this Final Consent Judgment, to 
modify or terminate any of its provisions, to enforce compliance, and 
to punish violations of its provisions.

XI

Expiration of Final Consent Judgment

    This Final Consent Judgment shall expire 5 years from the date of 
entry; provided that, before the expiration of this Final Consent 
Judgment, either plaintiff, after consultation with Morton Plant and 
Mease and in each plaintiff's sole discretion, may extend the Judgment 
for an additional five years.

XII

Public Interest Determination

    Entry of this Final Consent Judgment is in the public interest.
Steven D. Merryday,
United States District Judge.

    United States of America and State of Florida, Plaintiffs, v. 
Morton Plant Health System, Inc. and Trustees of Mease Hospital, 
Inc., Defendants. Civ. No. 94-748-CIV-T-23E, Judge Steven D. 
Merryday, June 30, 1994.

Competitive Impact Statement

    Pursuant to Section 2(b) of the Antitrust Procedures and Penalties 
Act, 15 U.S.C. 16 (b)-(h), the United States submits this Competitive 
Impact Statement relating to the proposed Final Consent Judgment (or 
``the Judgment'') submitted for entry against Morton Plant Health 
System, Inc. (``MPHS'') and Trustees of Mease Hospital, Inc. (``TMH'') 
in this civil antitrust proceeding.

I

Nature and Purpose of the Proceeding

    The United States of America and the State of Florida, acting under 
the direction of their respective Attorneys General, filed this civil 
antitrust suit on May 5, 1994, alleging that the proposed combination 
of MPHS and TMH, owners of the two largest general acute care hospitals 
in North Pinellas County, Florida, violates Section 7 of the Clayton 
Act, 15 U.S.C. 18.
    MPHS owns and operates Morton Plant Hospital in Clearwater, Florida 
(``Morton Plant''), the largest general acute care hospital in North 
Pinellas County. TMH owns and operates the Mease hospitals in Dunedin 
and Safety Harbor, Florida (``Mease''), which together constitute the 
second-largest general acute care hospital in North Pinellas County.
    The Verified Complaint alleges that the combination of these 
principal competitors under common ownership may substantially lessen 
competition in the provision of acute inpatient hospital services in 
North Pinellas County and likely increase prices for those services to 
health care consumers. These higher prices will be paid by health care 
purchasers, particularly health insurance plans, employers, and unions 
and ultimately result in an increase in prices individual consumers pay 
for health insurance coverage.
    The prayer for relief seeks: (1) A judgment that the proposed 
consolidation of MPHS and TMH violates Section 7 of the Clayton Act; 
(2) preliminary and permanent injunctions preventing defendants from 
consummating their agreement to consolidate or from going forward with 
any other plan by which Morton Plant would be combined with Mease; (3) 
attorneys fees; and (4) costs.

II

The Practices and Events Giving Rise to the Alleged Clayton Act 
Violation

A. Background
    Morton Plant and Mease are the two largest general acute care 
hospitals in North Pinellas County. Morton Plant, with 672 licensed 
acute care hospital beds, generated about $130 million in net inpatient 
revenues in fiscal year 1993. Mease, with a total of 358 licensed acute 
care hospital beds on two campuses, generated about $75 million in net 
inpatient revenues in fiscal year 1993.
    Morton Plant and Mease, like other general acute care hospitals, 
receive the bulk of their revenues from the provision of acute 
inpatient hospital services--i.e., services provided for the diagnosis 
and treatment of patients who require an overnight hospital stay. Acute 
inpatient hospital services include room and board, medical and 
surgical services, around-the-clock monitoring and observation, nursing 
care, and laboratory, x-ray and support services.
    Acute inpatient hospital services are sold to a variety of 
purchasers, including managed care health insurance plans such as 
health maintenance organizations and preferred provider organizations 
(colloquially known as HMOs and PPOs). These plans contract with a 
select number of competing hospitals and employ financial incentives to 
encourage plan enrollees to use the contracted facilities. Hospitals 
reduce the prices of services provided to managed care plan enrollees 
in return for the plans' commitment to increase the volume of patients 
hospitals receive.
    Managed care plans and other price-sensitive health care purchasers 
rely on competition among hospitals to obtain hospital services at 
competitive rates. This, in turn, permits managed care plans to offer 
health insurance to consumers at lower prices. Managed care plans 
constitute a significant, and growing, percentage of Morton Plant's and 
Mease's revenues from patient care.
B. Product Market
    The Verified Complaint alleges that the appropriate product market 
within which to assess the competitive effect of the proposed 
combination of Morton Plant and Mease is the provision of acute 
inpatient hospital services. A relevant product market consists of 
those products that are reasonably interchangeable by consumers for the 
same purpose. The pivotal question in the determination is whether a 
small but significant increase in the price of one product would cause 
enough buyers to turn to other products so as to make the price 
increase unprofitable.
    It is well established that acute inpatient services constitute a 
relevant product market for analyzing a merger of general acute care 
hospitals. The market for acute inpatient services is separate from the 
market for outpatient services, which general acute care hospitals also 
provide. Patients whose treatment or condition requires an overnight 
hospital stay cannot be safely or effectively treated on an outpatient 
basis. For this reason, health care purchasers, including managed care 
plans, do not view outpatient services as substitutes for acute 
inpatient services. General acute care hospitals profitably could 
increase the price of acute inpatient hospital services without causing 
a significant number of health care purchasers to switch to outpatient 
services.\1\
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    \1\Moreover, mergers between general acute care hospitals 
typically do not raise competitive concerns in the market for 
outpatient services because hospitals compete with many other 
providers (such as clinics, ambulatory surgery centers. and 
physicians' offices) in the provision of those services.
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C. Geographic Market
    The Verified Complaint alleges that North Pinellas County, the 
portion of Pinellas County north of Ulmerton Road, is the relevant 
geographic market.
    Pinellas County is the most densely populated county in Florida. A 
long, narrow peninsula, surrounded on three sides by large bodies of 
water, the Gulf of Mexico and Tampa Bay, Pinellas County is 
geographically isolated from Tampa, the area's major city. In addition, 
because few major highways connect communities in the northern and 
southern ends of the County, it is extremely difficult to travel 
between North and South Pinellas County, a problem which is much worse 
during the winter months when the area's population swells with a 
seasonal influx of tourists and winter residents.
    For these reasons, residents of North Pinellas, physicians 
practicing in North Pinellas, and health care purchasers such as 
managed care plans with North Pinellas enrollees strongly prefer to use 
or contract with general acute care hospitals in North Pinellas for 
acute inpatient hospital services. In 1992, over 85 percent of North 
Pinellas County residents who were hospitalized were admitted to 
general acute care hospitals in North Pinellas. Very few physicians who 
practice at hospitals in North Pinellas admit patients to hospitals in 
other areas. Health care purchasers such as managed care plans do not 
consider hospitals in other areas to be good substitutes for North 
Pinellas hospitals. Therefore, general acute care hospitals in North 
Pinellas County profitably could increase the price of acute inpatient 
hospital services without losing a significant number of patients to 
hospitals in other areas.
D. Effect of the Combination
    As the largest general acute care hospitals in North Pinellas 
County, Morton Plant and Mease control, respectively, about 38% and 20% 
of all general acute care hospital beds in that area. Together, Morton 
Plant and Mease would dominate the market for the provision of acute 
inpatient hospital services with a combined share of 58%. The market is 
highly concentrated by any measure of hospital capacity or output, and 
market concentration would increase substantially as a result of the 
proposed combination.
    Health care purchasers such as managed care plans have secured 
competitive rates for acute inpatient hospital services because Morton 
Plant and Mease have vigorously competed for their business. A full-
fledged merger of Morton Plant and Mease, in which they would market 
and price all of their services together, would eliminate that 
competitive rivalry, significantly reduce the ability of managed care 
plans to bargain for competitive rates, and permit the combination to 
increase prices for acute inpatient hospital services to the detriment 
of health care purchasers and consumers.

III

Explanation of the Proposed Final Consent Judgment

    The United States, the State of Florida and Morton Plant and Mease 
have stipulated that the Court may enter the proposed Final Consent 
Judgment at any time after compliance with the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16 (b)-(h). The Judgment provides that its 
entry does not constitute any evidence or admission by any party with 
respect to any issue of fact or law.
    Under the provisions of Section 2(e) of the Antitrust Procedures 
and Penalties Act, 15 U.S.C. Sec. 16(e), the Judgment may not be 
entered unless the Court finds entry is in the public interest. Section 
XII of the proposed Judgment sets forth such a finding.
A. Terms
    The proposed Final Consent Judgment prohibits Morton Plant and 
Mease from merging and requires them to remain as separate, competing 
hospitals. Morton Plant and Mease may, however, enter into a 
Partnership in which they consolidate and jointly operate certain 
general acute care and administrative services under specified terms. 
The proposed Judgment is designed to permit Morton Plant and Mease to 
achieve substantial efficiencies while preserving maximum competition 
between them.
    The acute care (or ``patient'') services eligible for Partnership 
operation include: outpatient services; laboratory services; mental 
health services; diagnostic and therapeutic radiology services; and 
certain inpatient services that are commonly recognized as ``tertiary'' 
services--i.e., those procedures performed by physician subspecialists 
with specialized support staff and expensive equipment. The tertiary 
services eligible for Partnership operation include: neonatal level III 
services; open heart surgery and similar procedures; robotically 
assisted prosthetic implantation and special spinal instrumentation 
procedures; stem cell procedures, HDR brachy therapy and advanced 
linear accelerator equipment and procedures; and stereotactic radio 
therapy. The Partnership also may own and operate home health care, 
home infusion services, durable medical equipment, rehabilitative 
services, skilled nursing, retirement facilities and long-term care. 
(Section II(A)).
    The eligible Partnership administrative services include: human 
resources (with some exceptions); medical staff organization and 
development; information services; telephone and other communication 
services; accounting, billing and collection; housekeeping and laundry; 
medical records; materials management and plant maintenance; support 
services for charitable foundations; and certain miscellaneous 
services. (Section II(B)).\2\
---------------------------------------------------------------------------

    \2\Services currently provided by one of the hospitals may be 
added to the Partnership if plaintiffs are provided with written 
notification and any information reasonably necessary for them to 
assess the competitive impact of adding such services and they do 
not object within 120 days. (Section V(D)). Any new service not 
currently provided by either Morton Plant or Mease may be combined 
and jointly operated by the Partnership with at least 90 days 
notice, so long as the new service is a specialized inpatient 
procedure commonly recognized in the medical community as tertiary 
or higher and is performed only by physician subspecialists with 
specialized support staff and expensive equipment. (Id.).
---------------------------------------------------------------------------

    Section V sets forth the conditions under which the Partnership may 
operate. Morton Plant and Mease may agree to consolidate and jointly 
operate any eligible Partnership patient care and administrative 
service. (Section V(A)). They may appoint a Partnership board, which 
may consist of individuals from each hospital's board. (Section V(C)). 
The Partnership must sell its services to Morton Plant and Mease on the 
same terms and conditions in an amount equal to cost. (Section V(B)).
    All services other than those eligible for consolidation through 
the Partnership are defined as ``Independent Services.'' (Section 
II(C)). Morton Plant and Mease must continue to operate these services 
separately. (Section VI(A)). Specifically, all marketing, managed care 
contracting and pricing decisions must remain independent. (Id.) Each 
hospital must price and sell all services (both Independent and 
Partnership Services) in active competition with the other. (Section 
VI(B)). The Partnership board may not discuss Independent Services, 
managed care contracting for the hospitals, or the pricing of any 
service with the individual hospital boards with minor exceptions. 
(Section V(C)).\3\
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    \3\The Partnership may market and price home health care, home 
infusion services, durable medical equipment, rehabilitative 
services, skilled nursing retirement facilities and long term care 
as long as Morton Plant and Mease continue their present practice of 
providing patients and physicians with information on other 
providers of the services in the market.
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    Additionally, the Judgment provides that Morton Plant may lend or 
grant Mease up to $21 million for Mease's planned expansion under terms 
preventing Morton Plant from obtaining any control or leverage over 
Mease's management or operations. (Section V(E)). Moreover, Morton 
Plant, Mease and the Partnership may become obligated parties, 
guarantors or co-makers on debt instruments and their assets may be 
pledged as security for such instruments so long as such obligations 
are approved separately. Neither Morton Plant nor Mease shall 
unreasonably withhold consent to, impose conditions on, or attempt to 
influence the use of funds obtained by the other hospital through such 
financing for Independent Services. (Section V(F)). The Judgment 
directs Morton Plant and Mease to establish adequate protections to 
ensure that the hospitals do not share competitively sensitive 
information concerning pricing, managed care contracts, and marketing 
and planning functions. These protections shall include, at a minimum, 
confidentiality agreements for employees with access to such 
information and protocols for preparation of separate reports for 
Morton Plant, Mease, and the Partnership. (Section V(I)). The Judgment 
also requires Morton Plant and Mease to maintain an antitrust 
compliance program and annually certify compliance with the Judgment, 
and permits plaintiffs access to monitor compliance. (Sections VII, 
VIII, and IX).
B. Effect on Competition
    The Court's entry of this proposed Judgment would be a ``double 
win'' for consumers. First, the Judgment preserves the vigorous 
competitive rivalry between Morton Plant and Mease, thereby insuring 
that consumers will continue to reap the benefits of competition in the 
form of lower prices and better services. Second, the Judgment permits 
Morton Plant and Mease to achieve substantial cost savings by combining 
and jointly operating certain services through a Partnership. The 
preservation of competition between Morton Plant and Mease will insure 
that these savings will be passed on to consumers.
    The Partnership is unlikely to result in a lessening of 
competition. The proposed Judgment permits Morton Plant and Mease to 
consolidate only those services for which consolidation would pose few, 
if any, competitive concerns. The services eligible for inclusion in 
the Partnership can be roughly grouped into three categories: 
outpatient, tertiary, and administrative.
    A consolidation of Morton Plant's and Mease's outpatient services 
would pose no significant competitive risk because there are a very 
large number of providers of such services in North Pinellas County. In 
addition to general acute care hospitals, other providers of outpatient 
services include physician offices, clinics, and ambulatory surgery 
centers. Furthermore, in North Pinellas County it is relatively easy 
for new providers of outpatient services to enter the market.
    Nor would a consolidation of certain tertiary services offered by 
Morton Plant or Mease threaten competition. For some of these services, 
a consolidation would have no effect because only one of the hospitals 
currently provides that service. For example, open-heart surgery is 
currently provided by Morton Plant, but not by Mease. Even for services 
in which the hospitals currently compete, persons are typically willing 
to travel greater distances for highly sophisticated, tertiary-level 
care than they are for more routine medical care. Therefore, Morton 
Plant and Mease compete in providing these services in a geographic 
market much broader than North Pinellas County. For example, the 
geographic market for level III neonatal care includes at least several 
major hospitals in South Pinellas County, and the same is true for 
other tertiary services that the Judgment permits Morton Plant and 
Mease to consolidate.
    Finally, the proposed Judgment protects against anticompetitive 
harm from the joint ownership and operation of certain administrative 
services. Services such as human resources, information services, 
accounting, billing, and collection, are only a part of the inputs into 
Morton Plant's and Mease's provision of acute care services. Currently, 
Morton Plant and Mease independently decide how to allocate their 
administrative costs in pricing their acute care services to managed 
care plans and other health care purchasers, and they will continue to 
do so under the Judgment.4 Moreover, the proposed Judgment 
requires the Partnership to establish protections to ensure that the 
joint operation of administrative services does not result in any 
sharing of information such as pricing or managed care contracting for 
Morton Plant and Mease, thus guarding against the risk of ``spillover'' 
of competitively sensitive information from the Partnership to the 
independent hospitals. (Section V(I)).
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    \4\Of course, Morton Plant and Mease also ``compete'' in 
purchasing these administrative services, but they do so in a 
geographic market much larger than North Pinellas County. The 
consolidation would not lessen competition in that market to any 
substantial degree.
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    In addition to these protections, the proposed Judgment requires 
Morton Plant and Mease to market, price and sell all of their 
services--even those jointly owned and operated through the 
Partnership--in competition with each other and other hospitals.5 
This ensures that both hospitals will remain as separate and viable 
competitors and permits them the maximum flexibility in competing for 
managed care contracts in the future.
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    \5\The minor exceptions to this would be home health care, home 
infusion services, durable medical equipment, rehabilitative 
services, skilled nursing retirement facilities and long term care, 
for which the markets are very competitive in North Pinellas County. 
(Section V(C)).
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IV

Remedies Available to Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages suffered, as well as costs and reasonable attorney's fees. 
Entry of the proposed Final Consent Judgment will neither impair nor 
assist the bringing of such actions. Under the provisions of Section 
5(a) of the Clayton Act, 15 U.S.C. Sec. 16(a), the Judgment has no 
prima facie effect in any subsequent lawsuits that may be brought 
against Morton Plant or Mease in this matter.

V

Procedures Available for Modification of the Proposed Final Consent 
Judgment

    As provided by the Antitrust Procedures and Penalties Act, any 
person believing that the proposal Final Consent Judgment should be 
modified may submit written comments to Gail Kursh, Chief, Professions 
and Intellectual Property Section, U.S. Department of Justice, 
Antitrust Division, 555 4th Street, NW, Room 9903, Washington, DC 
20001, within the 60-day period provided by the Act. These comments, 
and the Department's responses, will be filed with the Court and 
published in the Federal Register. All comments will be given due 
consideration by the Department of Justice, which remains free, 
pursuant to a stipulation signed by the United States and Morton Plant 
and Mease, to withdraw its consent to the Judgment at any time prior to 
entry. Section X of the Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for modification, 
interpretation, or enforcement of the Judgment.

VI

Determinative Materials/Documents

    No materials or documents of the type described in Section 2(b) of 
the Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16(b), were 
considered in formulating the proposed Final Consent Judgment.

VII

Alternative to the Proposed Final Consent Judgment

    The alternative to the proposed Judgment is a full trial on the 
merits. While the Department is confident of its ability to succeed in 
such a trial, the litigation involves difficult issues of law and fact. 
A favorable outcome is not a certainty. Had the Department won a 
litigated judgment, at most the Court would have barred the 
combination. The consent judgment agreed to by the parties achieves the 
same underlying objective--preserving the vigorous competitive rivalry 
between Morton Plant and Mease--by requiring them to continue competing 
for all general acute care services, including those consolidated 
through the Partnership. It has the additional advantage, which a 
litigated judgment in favor of plaintiffs would not, of allowing 
defendants to achieve potential efficiencies and cost savings.

      Respectfully submitted,
Anthony E. Harris,
Trial Counsel.
Jon B. Jacobs
Jessica N. Cohen
M. Lee Doane

    Attorneys, U.S. Department of Justice, Antitrust Division, 555 
4th Street, N.W., Rm. 9901, Washington, DC 20001, 202/307-0951, 202/
514-1517 (fax).

[FR Doc. 94-16910 Filed 7-12-94; 8:45 am]
BILLING CODE 4410-01-M