[Federal Register Volume 59, Number 143 (Wednesday, July 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18258]


[[Page Unknown]]

[Federal Register: July 27, 1994]


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FEDERAL TRADE COMMISSION
[File No. 941 0020]

 

Healthtrust, Inc.--The Hospital Company; Proposed Consent 
Agreement With Analysis to Aid Public Comment

agency: Federal Trade Commission.

action: Proposed Consent Agreement.

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summary: In settlement of alleged violations of federal law prohibiting 
unfair acts and practices and unfair methods of competition, this 
consent agreement, accepted subject to final Commission approval, would 
require, among other things, a Tennessee-based corporation that 
provides acute care hospital services to divest Holy Cross Hospital of 
Salt Lake City to a Commission approved acquirer; to complete the 
divestiture within six months of the date of the order; and to consent 
to the appointment of a trustee, if the divestiture is not completed 
within six months. In addition, the proposed consent agreement would 
require the respondent to obtain prior Commission approval, for ten 
years, before purchasing any acute care hospital or any hospital, 
medical or surgical diagnostic or treatment service or facility in the 
Utah counties of Weber, Davis, and Salt Lake.

dates: Comments must be received on or before September 26, 1994.

addresses: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave. NW., Washington, DC 20580.

for further information contact: Mark Horoschak or Philip Eisenstat, 
FTC/S-3115, Washington, DC 20580. (202) 326-2756 or 326-2769.

supplementary information: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of 
the Commission's Rule of Practice (16 CFR 2.34), notice is hereby given 
that the following consent agreement containing a consent order to 
divest, having been filed with and accepted, subject to final approval, 
by the Commission, has been placed on the public record for a period of 
sixty (60) days. Public comment is invited. Such comments or views will 
be considered by the Commission and will be available for inspection 
and copying at its principal office in accordance with Section 
4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

Agreement Containing Consent Order

    The Federal Trade Commission (``Commission''), having initiated an 
investigation into the proposed acquisition of assets of Holy Cross 
Health System Corporation by Healthtrust, Inc.--The Hospital Company 
(``Healthtrust'') is willing to enter into an agreement containing an 
order to divest certain assets and to cease and desist from making 
certain acquisitions, and providing for other relief:
    It is hereby agreed by and between the proposed respondent by its 
duly authorized officer and attorney, and counsel for the Commission 
that:
    1. The proposed respondent Healthtrust is a corporation organized, 
existing and doing business under and by virtue of the laws of the 
State of Delaware with its office and principal place of business at 
4525 Harding Road, Nashville, Tennessee.
    2. The proposed respondent admits all the jurisdictional facts set 
forth in the draft complaint here attached.
    3. The proposed respondent waives:
    a. Any further procedural steps;
    b. The requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law;
    c. All rights to seek judicial review or otherwise to challenge or 
contest the validity of the order entered pursuant to this agreement; 
and
    d. Any claim under the Equal Access to Justice Act.
    4. This agreement shall not become a part of the public record of 
the proceeding unless and until it is accepted by the Commission. If 
this agreement is accepted by the Commission it, together with the 
draft of complaint contemplated thereby, will be placed on the public 
record for a period of sixty (60) days and information in respect 
thereto publicly released. The Commission thereafter may either 
withdraw its acceptance of this agreement and so notify the proposed 
respondent, in which event it will take such action as it may consider 
appropriate, or issue and serve its complaint (in such form as the 
circumstances may require) and decision, in disposition of the 
proceeding.
    5. This agreement is for settlement purposes only and does not 
constitute an admission by the proposed respondent that the law has 
been violated as alleged in the draft complaint here attached, or that 
the facts as alleged in the draft complaint, other than jurisdictional 
facts, are true.
    6. This agreement contemplates that, if it is accepted by the 
Commission, and if such acceptance is not subsequently withdrawn by the 
Commission pursuant to the provisions of Section 2.34 of the 
Commission's Rules, the Commission may, without further notice to the 
proposed respondent, (1) Issue its complaint corresponding in form and 
substance with the draft of complaint here attached and its decision 
containing the following order to divest and to cease and desist, and 
other relief in disposition of the proceeding, and (2) make information 
public with respect thereto. When so entered, the order shall have the 
same force and effect and may be altered, modified, or set aside in the 
same manner and within the same time provided by statute for other 
orders. The order shall become final upon service. Delivery by the U.S. 
Postal Service of the complaint and decision containing the agreed-to 
order to respondent's address as stated in this agreement shall 
constitute service. The proposed respondent waives any right it may 
have to any other manner of service. The complaint may be used in 
construing the terms of the order, and no agreement, understanding, 
representation, or interpretation not contained in the order or this 
agreement may be used to vary or contradict the terms of the order.
    7. The proposed respondent has read the proposed complaint and 
order contemplated hereby. The proposed respondent understands that 
once the order has been issued, it will be required to file one or more 
compliance reports showing that it has fully complied with the order. 
The proposed respondent further understands that it may be liable for 
civil penalties in the amount provided by law for each violation of the 
order after it becomes final.

Order

I
    As used in this order, the following definitions shall apply:
    A. ``Respondent'' or ``Healthtrust'' means Healthtrust, Inc. The 
Hospital Co., its partnerships, joint ventures, companies, 
subsidiaries, divisions, groups and affiliates controlled by 
Respondent, and their respective directors, officers, employees, 
agents, and representatives, and their respective successors and 
assigns.
    B. The ``Acquisition'' means the acquisition by Healthtrust of 
certain assets of Holy Cross Health System Corporation including Holy 
Cross Hospital of Salt Lake City, Holy Cross-Jordan Valley Hospital, 
and St. Benedict's Hospital.
    C. ``Acute care hospital'' means a health facility, other than a 
federally owned facility, having a duly organized governing body with 
overall administrative and professional responsibility, and an 
organized medical staff, the provides 24-hour inpatient care, as well 
as outpatient services, and having as a primary function the provision 
of inpatient services for medical diagnosis, treatment, and care of 
physically injured or sick persons with short-term or episodic health 
problems or infirmities.
    D. To ``operate an acute care hospital'' means to own, lease, 
manage, or otherwise control or direct the operations of an acute care 
hospital, directly or indirectly.
    E. ``Affiliate'' means any entity whose management and policies are 
controlled in any way, directly or indirectly, by the person with which 
it is affiliated.
    F. ``Person'' means any natural person, partnership, corporation, 
company, association, trust, joint venture or other business or legal 
entity, including any governmental agency.
    G. ``Three-County Area'' means the area consisting of the following 
three Utah counties: Salt Lake County, Davis County, and Weber County.
    H. ``Commission'' means the Federal Trade Commission.
    I. ``Schedule A Assets'' means assets acquired by the respondent 
and listed on the attached Schedule A.
    J. ``Viability and competitiveness'' means that the Schedule A 
Assets are capable of functioning independently and competitively.
    K. ``Assets and Businesses'' include, but are not limited to, all 
assets, properties, businesses, rights, privileges, contractual 
interests, licenses, and goodwill of whatever nature, tangible and 
intangible, including, without limitation, the following:
    1. all real property interests (including fee simple interests and 
real property leasehold interests, whether as lessor or lessee), 
together with all buildings, improvements and fixtures located thereon, 
all construction in progress thereat, all appurtenances thereto, and 
all licenses and permits related thereto (collectively, the ``Real 
Property'');
    2. all contracts and agreements with physicians, other health care 
providers, unions, third party payors, HMOs, customers, suppliers, 
sales representatives, distributors, agents, personal property lessors, 
personal property lessees, licensors, licensees, cosigners and 
consignees (collectively, the ``contracts'');
    3. all machinery, equipment, fixtures, vehicles, furniture, 
inventories and supplies (other than such inventories and supplies as 
are used in the ordinary course of business during the time that 
Healthtrust owns the assets) (collectively, the ``Personal Property'');
    4. all research materials, technical information, management 
information systems, software, software licenses, inventions, trade 
secrets, technology, know how, specifications, designs, drawings, 
processes, and quality control data (collectively, the ``Intangible 
Personal Property'');
    5. all books, records and files, excluding, however, the corporate 
minute books and tax records of Healthtrust and its Affiliates; and
    6. all prepaid expenses.
II
    It is ordered, that:
    A. Respondent shall divest, absolutely and in good faith, within 
six (6) months of the date this order becomes final, the Schedule A 
Assets, and shall also divest such additional assets and businesses 
ancillary to Holy Cross Hospital of Salt Lake City, Utah (excluding 
Pioneer Valley Hospital, Lakeview Hospital, Jordan Valley Hospital, St. 
Benedict's Hospital, Salt Lake Industrial Clinic, and West Jordan 
Clinic), and effect such arrangements as are necessary to assure the 
marketability and the viability and competitiveness of the Schedule A 
Assets.
    B. Respondent shall divest the Schedule A Assets only to an 
acquirer that receives the prior approval of the Commission and only in 
a manner that receives the prior approval of the Commission. The 
purpose of the divestiture of the Schedule A Assets is to ensure the 
continuation of the Schedule A Assets as an ongoing, viable acute care 
hospital and to remedy the lessening of competition resulting from the 
Acquisition as alleged in the Commission's complaint.
    C. Respondent shall comply with all terms of the Agreement to Hold 
Separate, attached hereto and made a part hereof as Appendix I. Said 
Agreement shall continue in effect until such time as respondent has 
fulfilled the divestiture requirements of this order or until such 
other time as the Agreement to Hold Separate provides.
    D. Pending divestiture of the Schedule A Assets, respondent shall 
take such actions as are necessary to maintain the viability and 
competitiveness and the marketability of the Schedule A Assets and to 
prevent the destruction, removal, wasting, deterioration, or impairment 
of any of the Scheduled Assets except for ordinary wear and tear.
    E. A condition of approval by the Commission of the divestiture 
shall be a written agreement by the acquirer of the Schedule A Assets 
that it will not sell for a period of ten (10) years from the date of 
divestiture, directly or indirectly, through subsidiaries, partnerships 
or otherwise, without the prior approval of the Commission, the 
Schedule A Assets to any person who operates, or will operate 
immediately following the sale, any other acute care hospital in the 
Three-County Area. Provided, however, that the acquirer is not required 
to seek prior approval of the Commission for the sale of any of the 
assets identified in Part II of Schedule A.

III

    It is further ordered , that:
    A. If the respondent has not divested, absolutely and in good faith 
and with the Commission's prior approval, the Schedule A Assets, in 
accordance with this order, within six (6) months of the date this 
order becomes final, the Commission may appoint a trustee to divest the 
Schedule A Assets. In the event that the Commission or the Attorney 
General brings an action for any failure to comply with this Order or 
in any way relating to the Acquisition, pursuant to Section 5(1) of the 
Federal Trade Commission Act, 15 U.S.C. 45(1), or any other statute 
enforced by the Commission, the respondent shall consent to the 
appointment of a trustee in such action. Neither the appointment of a 
trustee nor a decision not to appoint a trustee under this paragraph 
shall preclude the Commission or the Attorney General from seeking 
civil penalties or any other relief available to it for any failure by 
the respondent to comply with this order.
    B. If a trustee is appointed by the Commission or a court pursuant 
to Paragraph III.A. of this order, the respondent shall consent to the 
following terms and conditions regarding the trustee's powers, duties, 
authority, and responsibilities:
    1. The Commission shall select the trustee, subject to the consent 
of the respondent, which consent shall not be unreasonably withheld. 
The trustee shall be a person with experience and expertise in 
acquisitions and divestitures. If respondent has not opposed, in 
writing, including the reasons for opposing, the selection of any 
proposed trustee within ten (10) days after notice by the staff of the 
Commission to respondent of the identity of any proposed trustee, 
respondent shall be deemed to have consented to the selection of the 
proposed trustee.
    2. Subject to the prior approval of the Commission, the trustee 
shall have the exclusive power and authority to divest the Schedule A 
Assets.
    3. Within ten (10) days after appointment of the trustee, 
respondent shall execute a trust agreement that, subject to the prior 
approval of the Commission and, in the case of a court-appointed 
trustee, of the court, transfers to the trustee all rights and powers 
necessary to permit the trustee to effect the divestiture required by 
this order.
    4. The trustee shall have twelve (12) months from the date the 
Commission approves that the trust agreement described in Paragraph 
III.B.3. to accomplish the divestiture, which shall be subject to the 
prior approval of the Commission. If, however, at the end of the 
twelve-month period, the trustee has submitted a plan of divestiture or 
believes that divestiture can be achieved within a reasonable time, the 
divestiture period may be extended by the Commission, or in the case of 
a court-appointed trustee, by the court; provided however, the 
Commission may extend this period only two (2) times.
    5. The trustee shall have full and complete access to the 
personnel, books, records, and facilities related to the Schedule A 
Assets or to any other relevant information as the trustee may request. 
Respondent shall develop such financial or other information as such 
trustee may reasonably request and shall cooperate with the trustee. 
Respondent shall take no action to interfere with or impede the 
trustee's accomplishment of the divestiture. Any delays in divestiture 
caused by respondent shall extend the time for divestiture under this 
Paragraph in an amount equal to the delay, as determined by the 
Commission or, for a court-appointed trustee, by the court.
    6. The trustee shall use his or her best efforts to negotiate the 
most favorable price and terms available in each contract that is 
submitted to the Commission, subject to the respondent's absolute and 
unconditional obligation to divest at no minimum price., The 
divestiture shall be made in the manner and to the acquirer as set out 
in Paragraph II of this order; provided, however, if the trustee 
receives bona fide offers from more than one acquiring entity, and if 
the Commission determines to approve more than one such acquiring 
entity, the trustee shall divest to the acquiring entity selected by 
respondent from among those approved by the Commission.
    7. The trustee shall serve, without bond or other security, at the 
cost and expense of the respondent, on such reasonable and customary 
terms and conditions as the Commission or a court may set. The trustee 
shall have the authority to employ, at the cost and expense of 
respondent, such consultants, accountants, attorneys, investment 
bankers, business brokers, appraisers, and other representatives and 
assistants as are necessary to carry out the trustee's duties and 
responsibilities. The trustee shall account for all monies derived from 
the sale and all expenses incurred. After approval by the Commission 
and, in the case of a court-appointed trustee, by the court, of the 
account of the trustee, including fees for his or her services, all 
remaining monies shall be paid at the direction of the respondent and 
the trustee's power shall be terminated. The trustee's compensation 
shall be based at least in significant part on a commission arrangement 
contingent on the trustee's divesting the Schedule A Assets.
    8. Respondent shall indemnify the trustee and hold the trustee 
harmless against any losses, claims, damages, liabilities, or expenses 
arising out of, or in connection with, the performance of the trustee's 
duties, including all reasonable fees of counsel and other expenses 
incurred in connection with the preparation for, or defense of any 
claim, whether or not resulting in any liability, except to the extent 
that such liabilities, losses, damages, claims, or expenses result from 
misfeasance, gross negligence, willful or wanton acts, or bad faith by 
the trustee.
    9. If the trustee ceases to act or fails to act diligently, a 
substitute trustee shall be appointed in the same manner as provided in 
Paragraph III.A. of this order.
    10. The Commission or, in the case of a court-appointed trustee, 
the court, may on its own initiative, or at the request of the trustee 
issue such additional orders or directions as may be necessary or 
appropriate to accomplish the divestiture required by this order.
    11. The trustee shall have no obligation or authority to operate or 
maintain the Schedule A Assets.
    12. The trustee shall report in writing to the respondent and the 
Commission every sixty (60) days concerning the trustee's efforts to 
accomplish divestiture.
IV
    It is further ordered, That, for a period of ten (10) years from 
the date this order becomes final, respondent shall not, without the 
prior approval of the Commission, directly or indirectly, through 
subsidiaries, partnerships, or otherwise:
    A. Acquire any stock, share capital, equity, or other interest in 
any person presently engaged in, or within the two years preceding such 
acquisition engaged in, operating an acute care hospital in the Three-
County Area;
    B. Acquire any assets used, or previously used, in the Three-County 
Area (and still suitable for use) for operating an acute care hospital 
from any person presently engaged in, or within the two years preceding 
such acquisition engaged in, operating an acute care hospital in the 
Three-County Area;
    C. Enter into any agreement or other arrangement to obtain direct 
or indirect ownership, management, or control of any acute care 
hospital, or any part thereof, in the Three-County Area, including but 
not limited to, a lease of or management contract for any such acute 
care hospital;
    D. Acquire or otherwise obtain the right to designate directly or 
indirectly directors or trustees of any acute care hospital in the 
Three-County Area;
    E. Permit any acute care hospital it operates in the Three-County 
Area to be acquired by any person that operates, or will operate 
immediately following such acquisition, any other acute care hospital 
in the Three-County Area.
    Provided, however, that such prior approval shall not be required 
for:
    1. The establishment of a new hospital service or facility (other 
than as a replacement for a hospital service or facility, not operated 
by respondent, in the Three-County Area, pursuant to an agreement or 
understanding between respondent and the person operating the replaced 
service or facility);
    2. Any transaction otherwise subject to this Paragraph IV of this 
order if the fair market value of (or, in case of an asset acquisition, 
the consideration to be paid for) the acute care hospital or part 
thereof to be acquired does not exceed one million dollars 
($1,000,000); or
    3. The acquisition of products or services in the ordinary course 
of business.
V
    It is further ordered, That, for a period of ten (10) years from 
the date this order becomes final, respondent shall not, directly or 
indirectly, through subsidiaries, partnerships of otherwise, without 
providing advance written notification to the Commission, consummate 
any joint venture or other arrangement with any other acute care 
hospital in the Three-County Area for the joint establishment or 
operation of any new acute care hospital, hospital medical or surgical 
diagnostic or treatment service or facility, or part thereof, in the 
Three-County Area. Such advance notification shall be filed immediately 
upon respondent's issuance of a letter of intent for, or execution of 
an agreement to enter into, such a transaction, whichever is earlier.
    Said notification required by this Paragraph V of this order shall 
be given on the Notification and Report Form set forth in the Appendix 
to Part 803 of Title 16 of the Code of Federal Regulations (as 
amended), and shall be prepared and transmitted in accordance with the 
requirements of that part, except that no filing fee will be required 
for any such notification, notification need not be made to the United 
States Department of Justice, and notification is required only of 
respondent and not of any other party to the transaction. Respondent is 
not required to observe any waiting period for said notification 
required by this Paragraph V.
    Respondent shall comply with reasonable requests by the Commission 
staff for additional information concerning any transaction subject to 
this Paragraph V of this order, within fifteen (15) days of service of 
such requests.
    Provided, however, that no transaction shall be subject to this 
Paragraph V of this order if:
    1. the fair market value of the assets to be contributed to the 
joint venture or other arrangement by acute care hospitals not operated 
by respondent does not exceed one million dollars ($1,000,000);
    2. the service, facility or part thereof to be established or 
operate in a transaction subject to this order is to engage in no 
activities other than the provision of the following services: laundry; 
data processing; purchasing; materials management; billing and 
collection; dietary; industrial engineering maintenance; printing; 
security; records management; laboratory testing; personnel education, 
testing, or training; or health care financing (such as through a 
health maintenance organization or preferred provider organization); or
    3. notification is required to be made, and has been made, pursuant 
to section 7A of the Clayton Act, 15 U.S.C. Sec. 18a, or prior approval 
by the Commission is required, and has been requested, pursuant to 
paragraph IV of this order.
VI
    It is further ordered, that, for a period of ten (10) years from 
the date this order becomes final, respondent shall not permit all or 
any substantial part of any acute care hospital it operates in the 
Three-County Area to be acquired by any other person (except pursuant 
to the divestiture required by paragraph II of this order) unless the 
acquiring person files with the Commission, prior to the closing of 
such acquisition, a written agreement to be bound by the provisions of 
this order, which agreement respondent shall require as a condition 
precedent to the acquisition.
VII
    It is further ordered, that:
    A. Within sixty (60) days after the date this order becomes final 
and every sixty (60) days thereafter until the respondent has fully 
complied with paragraph II of this order, the respondent shall submit 
to the Commission a verified written report setting forth in detail the 
manner and form in which it intends to comply, is complying, and has 
complied with paragraph II of this order. Respondent shall include in 
its compliance reports, among other things that are required from time 
to time, a full description of the efforts being made to comply with 
paragraph II of the order, including a description of all substantive 
contacts or negotiations for the divestiture and the identity of all 
parties contacted. Respondent shall include in its compliance reports 
of all written communications to and from such parties, all internal 
memorandum, and all reports and recommendations concerning divestiture.
    B. One (1) year from the date this order becomes final, annually 
for the next nine (9) years on the anniversary of the date this order 
becomes final, and at other times as the Commission may require, 
respondent shall file a verified written report with the Commission 
setting forth in detail the manner and form in which it has compiled 
and it is complying with paragraphs IV, V and VI of this order.
VIII
    It is further ordered, that respondent shall notify the Commission 
at least thirty (30) days prior to any proposed change in the corporate 
respondent such as dissolution, assignment, sale resulting in the 
emergence of a successor corporation, or the creation or dissolution of 
subsidiaries or any other change in the corporation that may affect 
compliance obligations arising out of the order.
IX
    It is further ordered, that, for the purpose of determining or 
securing compliance with this order, the respondent shall permit any 
duly authorized representative of the Commission:
    A. Access, during office hours and in the presence of counsel, to 
inspect and copy all books, ledgers, accounts, correspondence, 
memoranda and other records and documents in the possession or under 
the control of the respondent relating to any matters contained in this 
order; and
    B. Upon five days' notice to respondent and without restraint or 
interference from it, to interview officers, directors, or employees of 
respondent.

Schedule A

    The assets to be divested (``Schedule A Assets'') shall consist of, 
without limitation, all Assets and Businesses relating to Holy Cross 
Hospital of Salt Lake City (the ``Hospital''), which were acquired by 
HealthTrust pursuant to the Acquisition (including all improvements, 
additions and enhancements made to such assets prior to divestiture), 
and shall include, without limitation, the Assets and Businesses of the 
following:
Part I
    1. Holy Cross Hospital of Salt Lake City, 1050 East South Temple, 
Salt Lake City;
Part II
    2. Moreau Medical Building, 1002 East South Temple, Salt Lake City;
    3. Salt Lake Professional Building, 24 South 1100 East, Salt Lake 
City;
    4. Foothill Family Clinic, 2295 Foothill Drive, Salt Lake City;
    5. Eastridge Clinic medical office suites, South 10th East, Salt 
Lake City;
    6. Southeast Health Center, 1275 East Fort Union Boulevard, 
Midvale, Utah (Southeast Center for Family Medicine; Holy Cross Medical 
Park);
    7. Southwest Health Center, 1990 West 7800 South, West Jordan 
Valley, Utah (Southwest Center for Family Medicine; Southwest Emergency 
Clinic);
    8. The Magna Health Clinic, 8370 West 3500 South, Magna, Utah; and
    9. The Hospitals' Park City, Utah Ambulance Service.
    10. The Real Property located at:
    A. 45 South 1100 East, Salt Lake City--approximately .227 acres 
with house thereon;
    B. 57 South 1100 East, Salt Lake City--approximately .21 acres with 
house thereon;
    C. 59 South 1100 East, Salt Lake City--approximately .086 acres 
with house/office thereon;
    D. 42 South 1000 East, Salt Lake City--approximately .1875 acres of 
unimproved land;
    11. Option to purchase four contiguous residential properties 
consisting of approximately .54 acres in the aggregate located at 
approximately 1014 through 1026 East 100 South, Salt Lake City
* * * * *
    It is further provided, that to the extent that any of the 
contracts, warranties with respect to Personal Property, licenses or 
other interests in the Intangible Personal Property, or other Schedule 
A Assets:
    (A) also applies to facilities or operations other than those 
included in the Schedule A Assets, then during the period (the 
``Contract Period'') beginning on the closing date of the Acquisition 
and ending on the earlier of (1) the expiration of the term of the 
given contract or other right and (2) the second anniversary of 
Healthtrust's divestiture of the Schedule A Assets, Healthtrust, at the 
request of the owner or acquirer of the Schedule A Assets, shall use 
its reasonable best efforts to cause the services, property or other 
benefits provided or made available under such a contract or other 
Schedule A Asset to continue to be available to the owner or acquirer 
of the Schedule A Assets on terms and conditions substantially similar 
to those presently in effect; or
    (B) requires the consent of a third party in order to transfer or 
assign such Contract or other Schedule A Asset, then Healthtrust, at 
the request of the owner or acquirer of the Schedule A Assets, shall 
use its reasonable best efforts to obtain such consent and, if such 
consent cannot be obtained, to cooperate in any reasonable arrangement 
with the owner or acquirer of the Schedule A Assets designed to provide 
to such owner or acquirer the benefits of the given contract or other 
Schedule A Asset during the Contract Period on terms and conditions 
substantially similar to those presently in effect.

Appendix I

Agreement to Hold Separate

    This Agreement to Hold Separate (``Agreement'') is by and 
between Healthtrust, Inc.--The Hospital Company (``respondent'' or 
``Healthtrust''), a corporation organized, existing, and doing 
business under and by virtue of the laws of the State of Delaware, 
with its principal place of business at 4525 Harding Road, 
Nashville, Tennessee 37205; and the Federal Trade Commission 
(``Commission''), an independent agency of the United States 
Government, established under the Federal Trade Commission Act of 
1914, 15 U.S.C. 41, et seq.
    Whereas, on or about December 3, 1993, respondent entered into 
an agreement with Holy Cross Health System Corporation (``Holy 
Cross''), an Indiana corporation, whereby respondent will acquire 
from Holy Cross certain Holy Cross assets in Utah (hereinafter the 
``Acquisition''); and
    Whereas, the Commission is now investigating the Acquisition to 
determine if it would violate any of the statutes enforced by the 
Commission; and
    Whereas, if the Commission accepts the attached Agreement 
Containing Consent Order (``Consent Order''), which would require 
the divestiture of certain assets listed in Schedule A of the 
Consent Order (``Schedule A Assets''), including Holy Cross Hospital 
(``HCH'') in Salt Lake City, Utah, the Commission must place the 
Consent Order on the public record for a period of at least sixty 
(60) days and may subsequently withdraw such acceptance pursuant to 
the provisions of Section 2.34 of the Commission's Rules' and
    Whereas, the Commission is concerned that if an understanding is 
not reached, preserving the status quo ante of the Schedule A Assets 
during the period prior to the final acceptance and issuance of the 
Consent Order by the Commission (after the 60-day public comment 
period), divestiture resulting from any proceeding challenging the 
legality of the Acquisition might not be possible, or might be less 
than an effective remedy; and
    Whereas, the Commission is concerned that if the Acquisition is 
consummated, it will be necessary to preserve the Commission's 
ability to require the divestiture of the Schedule A Assets as 
described in Paragraph II of the Consent Order and the Commission's 
right to have HCH continue as a viable independent acute care 
hospital; and
    Whereas, the purpose of this Agreement and the Consent Order is 
to:
    (i) preserve HCH as a viable independent acute care hospital 
pending its divestiture, and
    (ii) remedy any anticompetitive effects of the Acquisition;
    Whereas, respondent's entering into this Agreement shall in no 
way be construed as an admission by respondent that the Acquisition 
is illegal; and
    Whereas, respondent understands that no act or transaction 
contemplated by this Agreement shall be deemed immune or exempt from 
the provisions of the antitrust laws or the Federal Trade Commission 
Act by reason of anything contained in this Agreement.
    Now, therefore, the parties agree, upon understanding that the 
Commission has not yet determined whether the Acquisition will be 
challenged, and in consideration of the Commission's agreement that, 
unless the Commission determines to reject the Consent Order, it 
will not seek further relief from respondent with respect to the 
Acquisition, except that the Commission may exercise any and all 
rights to enforce this Agreement and the Consent Order to which it 
is annexed and made a part thereof, and in the event the required 
divestiture is not accomplished, to appoint a trustee to seek 
divestiture of the Schedule A Assets pursuant to the Consent Order, 
as follows:
    1. Respondent agrees to execute the Agreement Containing Consent 
Order and be bound by the attached Consent Order.
    2. Respondent agrees that from the date this Agreement is 
accepted until the earliest of the dates listed in subparagraphs 
2.a-2.b, it will comply with the provisions of paragraph 3 of this 
Agreement:
    a. three (3) business days after the Commission withdraws its 
acceptance of the Consent Order pursuant to the provisions of 
Section 2.34 of the Commission's Rules; or
    b. the day after the divestiture required by the Consent Order 
has been completed.
    3. Respondent will hold the Schedule A Assets as they are 
presently constituted separate and apart on the following terms and 
conditions:
    a. The Schedule A Assets, as they are presently constituted, 
shall be held separate and apart and shall be operated independently 
of respondent (meaning here and hereinafter, Healthtrust excluding 
the Schedule A Assets) except to the extent that respondent must 
exercise direction and control over the Schedule A Assets to assure 
compliance with this Agreement or the Consent Order, and except as 
otherwise provided in this Agreement.
    b. Prior to, or simultaneously with its acquisition of the Holy 
Cross assets in Utah, respondent shall organize a distinct and 
separate legal entity, either a corporation, limited liability 
company, general or limited partnership (``New Company'') and adopt 
constituent documents for the New Company that are not inconsistent 
with other provisions of this Agreement or the Consent Order. 
Respondent shall transfer all ownership and control of all Schedule 
A Assets to the New Company.
    c. The board of directors of the New Company, or, in the event 
respondent organizes an entity other than a corporation, the 
governing body of the entity (``New Company Board'') shall have five 
members. Respondent may elect the members of the New Company Board; 
provided, however, that the New Company Board shall include no more 
than two members who are a director, officer, employee, or agent of 
respondent (``the respondent's New Company Board member(s)''). The 
New Company Board shall include a chairman who is independent of 
respondent and is competent to assure the continued viability and 
competitiveness of the Schedule A Assets. Meetings of the New 
Company Board during the term of this Agreement shall be 
stenographically transcribed and the transcripts retained for two 
(2) years after the termination of this Agreement.
    d. Respondent shall not exercise direction or control over, or 
influence directly or indirectly, the Schedule A Assets, the 
independent Chairman of the Board of the New Company, the New Board, 
or the New Company or any of its operations or businesses; provided, 
however, that respondent may exercise only such direction and 
control over the New Company as is necessary to assure compliance 
with this Agreement or the Consent Order.
    e. Respondent shall maintain the viability and competitiveness 
and the marketability of the Schedule A Assets and shall not sell, 
transfer, encumber (other than in the normal course of business), or 
otherwise impair their viability and competitiveness or their 
marketability.
    f. Except for the respondent's New Company Board members, 
respondent shall not permit any director, officer, employee, or 
agent of respondent to also be a director, officer, or employee of 
the New Company.
    g. The New Company shall be staffed with sufficient employees to 
maintain the viability and competitiveness of the Schedule A Assets, 
which employees shall be selected from Holy Cross's existing 
employee base and may also be hired from sources other than Holy 
Cross.
    h. With the exception of the respondent's New Company Board 
Members, respondent shall not change the composition of the New 
Company Board unless the independent chairman consents. The 
independent chairman shall have power to remove members of the New 
Company Board for cause. Respondent shall not change the composition 
of the management of the New Company except that the New Company 
Board shall have the power to remove management employees for cause.
    i. If the independent chairman ceases to act or fails to act 
diligently, a substitute chairman shall be appointed in the same 
manner as provided in Paragraph 3.c. of this Agreement.
    j. Except as required by law, and except to the extent that 
necessary information is exchanged in the course of evaluating the 
Acquisition, defending investigations or defending or prosecuting 
litigation, or negotiating agreements to divest assets, or complying 
with this Agreement or the Consent Order, respondent shall not 
receive or have access to, or use or continue to use, any material 
confidential information not in the public domain about the New 
Company or the activities of the New Company Board. Nor shall the 
New Company or the New Company Board receive or have access to, or 
use or continue to use, any material confidential information not in 
the public domain about respondent and relating to respondent's 
acute care hospitals in Utah. Respondent may receive on a regular 
basis aggregate financial information relating to the New Company 
necessary and essential to allow respondent to prepare United States 
consolidated financial reports, tax returns and personnel reports. 
Any such information that is obtained pursuant to this subparagraph 
shall be used only for the purposes set forth in this subparagraph. 
(``Material confidential information,'' as used herein, means 
competitively sensitive or proprietary information not independently 
known to respondent from sources other than the New Company, and 
includes but is not limited to customer lists, price lists, 
marketing methods, patents, technologies, processes, or other trade 
secrets.)
    k. Except as permitted by this Agreement, the respondent's New 
Company Board members shall not in their capacity as New Company 
Board members, receive material confidential information and shall 
not disclose any such information received under this Agreement to 
respondent or use it to obtain any advantage for respondent. The 
respondent's New Company Board members shall enter a confidentiality 
agreement prohibiting disclosure of material confidential 
information. The respondent's New Company Board members shall 
participate in matters that come before the New Company Board only 
for the limited purposes of considering a capital investment or 
other transaction exceeding $250,000, approving any proposed budget 
and operating plans, and carrying out respondent's responsibilities 
under this Agreement and the Consent Order. Except as permitted by 
this Agreement, the respondent's New Company Board members shall not 
participate in any matter, or attempt to influence the votes of the 
other members of the New Company Board with respect to matters, that 
would involve a conflict of interest if respondent and the New 
Company were separate and independent entities.
    l. If necessary to assure compliance with the terms of this 
Agreement, the Consent Agreement, or the Consent Order, respondent 
may, but is not required to, assign an individual to the New Company 
for the purpose of overseeing such compliance (``on-site person''). 
The on-site person shall have access to all officers and employees 
of the New Company and such records of the New Company as he deems 
necessary and reasonable to assure compliance. Such individual shall 
enter into a confidentiality agreement prohibiting disclosure of 
material confidential information.
    m. Any material transaction of the New Company that is out of 
the ordinary course of business must be approved by a majority vote 
of the New Company Board; provided that the New Company shall engage 
in no transaction, material or otherwise, that is precluded by this 
Agreement.
    n. All earnings and profits of the New Company shall be retained 
separately in the New Company. If necessary, respondent shall 
provide the New Company with sufficient working capital to operate 
at its current rate of operation, and to carry out any capital 
improvement plans for the New Company which have already been 
approved.
    o. During the period commencing on the date this Agreement is 
effective and terminating on the earlier of (i) six months after the 
date the Consent Order becomes final, or (ii) the date contemplated 
by subparagraph 2.a (the ``Initial Divestiture Period''), respondent 
shall make available for use by the New Company funds sufficient to 
perform all necessary routine maintenance to, and replacements of, 
the Schedule A Assets (``normal repair and replacement''). After 
termination of the Initial Divestiture Period and until the earlier 
of the date contemplated by either subparagraph 2.a or 2.b, 
respondent shall make available for use by the New Company each year 
an amount not less than that required for normal repair and 
replacement, plus $1,000,000 for capital improvements to the 
Schedule A Assets, unless a smaller amount is requested or required 
by the New Company, in its sole discretion, for capital 
expenditures. Provided, however, that in any event, respondent shall 
provide the New Company with such funds as are necessary to maintain 
the viability and competitiveness and marketability of the Schedule 
A Assets.
    4. Should the Federal Trade Commission seek in any proceeding to 
compel respondent to divest any of the Schedule A Assets, as 
provided in the Consent Order, or to seek any other injunctive or 
equitable relief for any failure to comply with the Consent Order or 
this Agreement, or in any way relating to the Acquisition, as 
defined in the draft complaint, respondent shall not raise any 
objection based upon the expiration of the applicable Hart-Scott-
Rodino Antitrust Improvements Act waiting period or the fact that 
the Commission has permitted the Acquisition. Respondent also waives 
all rights to contest the validity of this Agreement.
    5. To the extent that this Agreement requires respondent to 
take, or prohibits respondent from taking, certain actions that 
otherwise may be required or prohibited by contract, respondent 
shall abide by the terms of this Agreement or the Consent Order and 
shall not assert as a defense such contract requirements in a civil 
penalty action brought by the Commission to enforce the terms of 
this Agreement or Consent Order.
    6. For the purpose of determining or securing compliance with 
this Agreement, subject to any legally recognized privilege, and 
upon written request with reasonable notice to respondent made to 
its principal office, respondent shall permit any duly authorized 
representative or representatives of the Commission:
    a. Access during the office hours of respondent and in the 
presence of counsel to inspect and copy all books, ledgers, 
accounts, correspondence, memoranda, and other records and documents 
in the possession or under the control of respondent relating to 
compliance with this Agreement;
    b. Upon five (5) days' notice to respondent, and without 
restraint or interference from respondent, to interview officers or 
employees of respondent, who may have counsel present, regarding any 
such matters.
    7. This Agreement shall not be binding until approved by the 
Commission.

Analysis of Proposed Consent Order Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, a proposed consent order from Healthtrust Inc.--The Hospital 
Company (``Healthtrust''). The agreement would settle charges by the 
Federal Trade Commission that Healthtrust's proposed acquisition of 
three hospitals from Holy Cross Health System Corporation (``Holy 
Cross'') would have violated Section 7 of the Clayton Act, and Section 
5 of the Federal Trade Commission Act, if it had been carried out.
    The proposed consent order has been placed on the public record for 
sixty (60) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will again review the 
agreement and the comments received and will decide whether it should 
withdraw from the agreement or issue and serve the agreement's proposed 
order.
    Both Healthtrust and Holy Cross own and operate acute care 
hospitals in various states, including acute care hospitals in the Salt 
Lake City area, encompassing Salt Lake County and southern Davis 
County; and the Salt Lake City--Ogden Metropolitan Statistical Area, an 
area encompassing three contiguous counties in northern Utah: Weber 
County, Davis County, and Salt Lake County (``Three-County Area''). The 
complaint accompanying the proposed consent order concerns the proposed 
acquisition's impact upon competition for acute care hospital services 
in the Salt Lake City area and the Three-County Area. According to the 
complaint, Healthtrust owns and operates Lakeview Hospital in Bountiful 
(in southern Davis County) and Pioneer Valley Hospital in West Valley 
City (in Salt Lake County). Holy Cross owns and operates St. Benedict's 
Hospital in Ogden (in Weber County), and two acute care hospitals in 
Salt Lake County, Holy Cross Hospital in Salt Lake City, and Holy-
Cross-Jordan Valley Hospital in West Jordan.
    The consent order, if finally accepted by the Commission, would 
settle charges that the acquisition may substantially lessen 
competition in the Salt Lake City area and the Three-County Area. The 
complaint alleges that Healthtrust and Holy Cross are competitors in 
those markets. The hospital markets in the Salt Lake City area and the 
Three-County Area, according to the complaint, were already highly 
concentrated, and entry by new competitors would be difficult. The 
complaint alleges that the Commission has reason to believe that the 
acquisition would have anticompetitive effects in the Salt Lake City 
area and the Three-County Area hospital markets, in violation of 
Section 7 of the Clayton Act and Section 5 of the Federal Trade 
Commission Act, unless an effective remedy eliminates such 
anticompetitive effects.
    The order accepted for public comment contains provisions requiring 
the divestiture by Healthtrust of the Holy Cross Hospital and related 
assets, including interests in five clinics, in Salt Lake City, Utah. 
The purpose of the divestiture is to ensure the continuation of Holy 
Cross Hospital as an ongoing, viable acute care hospital independent of 
Healthtrust, and to remedy the lessening of competition in the Salt 
Lake City area and the Three-County Area hospital markets resulting 
from the acquisition.
    The proposed order requires Healthtrust to obtain the approval of 
the Commission for the divestiture of Holy Cross Hospital. Under the 
terms of the order, the required divestiture must be completed within 
six months of the date the order becomes final. If the required 
divestiture were not completed within the six-month period, Healthtrust 
would consent to the appointment of a trustee, who would have twelve 
additional months to effect the divestiture. The hold separate 
agreement executed as part of the consent order requires Healthtrust, 
until the completion of the divestiture or as otherwise specified, to 
hold separate and preserve all of the assets and businesses of Holy 
Cross Hospital.
    The proposed order provides that approval by the Commission of the 
divestiture shall be conditioned upon the agreement by the acquirer 
that, for ten years from the date of the divestiture, it will not sell, 
without the prior approval of the Commission, Holy Cross Hospital to 
another person operating (or in the process of acquiring) any other 
acute care hospital in the Three-County Area.
    The order would prohibit Healthtrust from acquiring any acute care 
hospital in the Three-County Area without the prior approval of the 
Federal Trade Commission. It would also prohibit Healthtrust from 
transferring, without prior Commission approval, any acute care 
hospital it operates in the Three-County Area to another person 
operating (or in the process of acquiring) an acute care hospital in 
the area. These provisions, in combination, would give the Commission 
authority to prohibit any substantial combination of the acute care 
hospital operations of Healthtrust with those of any other acute care 
hospital in the Three-County Area, unless Healthtrust convinced the 
Commission that a particular transaction would not endanger competition 
in the Salt Lake City area or the Three-County Area. The provisions 
would not apply to acquisitions or sales where the value of the 
transferred assets is $1 million or less, and the provisions would 
expire ten years after the order becomes final.
    For ten years, the order would prohibit Healthtrust from 
transferring all or any substantial part of any hospital in the Three-
County Area to another party without first filing with the Commission 
an agreement by the transferee to be bound by the order.
    The purpose of this analysis is to invite public comment concerning 
the proposed order, to assist the Commission in its determination 
whether to make the order final. This analysis is not intended to 
constitute an official interpretation of the agreement and order or to 
modify their terms in any way.
    The agreement is for settlement purposes only and does not 
constitute an admission by Healthtrust that its proposed acquisition 
would have violated the law, as alleged in the Commission's complaint.
Donald S. Clark,
Secretary.

Dissenting Statement of Commissioner Dennis A. Yao

In HealthTrust/Holy Cross, File No. 941 0020

    I voted against acceptance of the proposed consent agreement in 
this matter, as well as against a previous motion to seek a preliminary 
injunction to enjoin HealthTrust from acquiring three Holy Cross 
hospitals in the Salt Lake City, Utah, area. The three hospitals to be 
acquired were: Jordan Valley, a 50-bed hospital located in the Salt 
Lake City metropolitan area; St. Benedict's, a 239-bed tertiary level 
hospital\1\ located approximately 34 miles north of Salt Lake City in 
Ogden; and a 200-bed tertiary facility located in downtown Salt Lake 
City. In analyzing the original proposed transaction, I concluded that 
the merger of these two hospital systems would generate significant net 
efficiencies that would outweigh any potential anticompetitive effects 
of the merger in the Salt Lake City Metropolitan area and throughout 
the Wasatch Front. Specifically, the Holy Cross hospitals offered 
HealthTrust the opportunity to expand its geographic coverage by 
including hospitals located throughout the Wasatch Front, and broaden 
the services it provided by including a downtown Salt Lake City 
tertiary care facility.
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    \1\Medical services are generally divided into primary, 
secondary, tertiary and now quaternary levels. Primary services are 
provided by generalists, including family practitioners, 
pediatricians, obstetricians, and internists. Secondary services are 
provided by specialists, such as cardiologists, oncologists, and 
orthopedic specialists. Tertiary services are those provided by sub-
specialists, such as invasive cardiology or neurosurgery. Quaternary 
level services are those offered by only a few highly specialized 
facilities, like high level burn units or organ transplants. The 
demarcation between the various levels of service is not precise, 
but these levels are all included as part of the ``acute care 
inpatient hospital services'' market alleged in the complaint here.
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    The proposed consent allows HealthTrust to acquire two of the Holy 
Cross hospitals, Jordan Valley and St. Benedict's, while requiring 
divestiture of the downtown Holy Cross hospital. Allowing HealthTrust 
to acquire the two Holy Cross hospitals will give HealthTrust better 
geographic coverage across the Wasatch Front. However, requiring the 
divestiture of the downtown Holy Cross facility means that the newly 
formed hospital network will not include a tertiary care facility in 
the Salt Lake City Metropolitan area.
    It was argued in this case (as it has been argued in several recent 
hospital mergers) that the merging hospital systems can achieve network 
and operational efficiencies through acquisition that are not possible 
through alternative arrangements such as contracting or joint 
venturing. Parties have sought to show that contracting and joint 
venturing is inefficient as an alternative to outright merger, among 
other reasons, because of the need to deter ``gaming'' on patient 
referrals as each hospital attempts to shift costly patients to other 
hospitals. This argument seems plausible in this industry because of 
contracting problems involved in establishing ``capitation'' regimes.
    In this particular case, it was argued that purchasing a downtown 
Salt Lake City tertiary care facility was essential to achieve network 
efficiencies and that contracting or joint venturing was an inferior 
alternative. I find this argument persuasive.\2\ Therefore, because I 
believe that the bulk of the network and operational efficiencies that 
are possible from this merger will be lost if the downtown facility is 
divested, and because I believe that the potential anticompetitive 
effects that may have resulted from allowing HealthTrust to acquire the 
downtown facility are outweighed by those efficiencies, I have 
dissented from the issuance of this consent.

    \2\The relative effectiveness of different organizational forms 
such as mergers, joint ventures or contracting relationships 
deserves further study in light of the current restructuring of the 
health care industry. While I agree that network efficiency claims 
may be more credible if they are endorsed by health plans (see 
Remarks of Mary Lou Steptoe before the Practicing Law Institute, 
June 17-20, 1994) we are often presented with situations of 
``dueling'' affidavits, in which case other evidence must be present 
to support such claims.
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[FR Doc. 94-18258 Filed 7-26-94; 8:45 am]
BILLING CODE 6750-01-M