[Federal Register Volume 59, Number 227 (Monday, November 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29182]


[Federal Register: November 28, 1994]


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FEDERAL TRADE COMMISSION

[File No. 941 0074]


Charter Medical Corp; 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, Charter Medical Corporation (Charter), a 
Georgia-based chain of psychiatric hospitals, to modify its agreement 
with National Medical Enterprises (NME) to rescind Charter's 
acquisitions of NME psychiatric facilities in four specified 
localities. In addition, the consent agreement would require, for ten 
years, the Commission's prior approval before acquiring or divesting 
psychiatric facilities in those localities.

DATES: Comments must be received on or before January 27, 1995.

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:
Robert W. Doyle or Ronald B. Rowe, FTC/S-2105, Washington, DC 20580. 
(202) 326-2819 or 326-2610.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the 
Commission's rules of practice (16 CFR 2.34), notice is hereby given 
that the following consent agreement containing a consent order to 
cease and desist, having been filed with 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 
Sec. 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 certain assets of 
National Medical Enterprises, Inc. (``NME'') by Charter Medical 
Corporation (``Charter''), and it now appearing that Charter 
(``proposed respondent'') is willing to enter into an agreement 
containing an order 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. Proposed respondent Charter 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 577 
Mulberry Street, Macon, Georgia 31298.
    2. The proposed respondent admits all the jurisdictional facts set 
forth in the draft of 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 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 of complaint here attached, or 
that the facts as alleged in the draft of 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 Sec. 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 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 United 
States Postal Service of the complaint and decision containing the 
agreed-to order to proposed 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

    It is ordered that as used in this order, the following definitions 
shall apply:
    A. ``Respondent'' or ``Charter'' means Charter Medical Corporation, 
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. ``NME'' means National Medical Enterprises, Inc., a corporation 
organized, existing and doing business under and by virtue of the laws 
of the State of Nevada with its office and principal place of business 
at 2700 Colorado Avenue, Santa Monica, California 90404.
    C. ``Commission'' means the Federal Trade Commission.
    D. ``Hospital'' means a health care facility, licensed as a 
hospital, other than a federally-owned facility (such as a military or 
Veterans Administration hospital), having a duly organized governing 
body with overall administrative and professional responsibility, and 
an organized professional staff that provides 24-hour inpatient care, 
and that may also provide outpatient services.
    E. ``General acute care hospital'' means a health care facility 
licensed as a hospital, 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.
    F. ``Psychiatric hospital'' means a hospital licensed or certified 
as a psychiatric hospital (except for a license or certificate that 
limits service to residential treatment facility services only), other 
than a federal, state or county psychiatric hospital that primarily 
provides long-term, i.e., 30 days or more, treatment of chronic mental 
illness or short term court ordered detentions and involuntary 
treatment, that provides 24-hour inpatient services for psychiatric 
diagnosis, treatment, and care of persons suffering from acute mental 
illness or emotional disturbance, and may also provide treatment for 
alcohol or drug abuse.
    G. ``Psychiatric unit'' means a department, unit, or other 
organizational subdivision of a general acute care hospital licensed or 
certified as a provider of inpatient psychiatric care (except for a 
license or certificate that limits service to residential treatment 
facility services only), other than a federal, state or county 
psychiatric unit that primarily provides long-term, i.e., 30 days or 
more, treatment of chronic mental illness or short term court ordered 
detentions and involuntary treatment, that provides 24-hour inpatient 
services for psychiatric diagnosis, treatment and care of persons 
suffering from acute mental illness or emotional disturbance, and may 
also provide treatment for alcohol or drug abuse.
    H. ``Psychiatric facility'' means either a psychiatric hospital, a 
general acute care hospital with a psychiatric unit, or a psychiatric 
unit.
    I. ``Psychiatric service'' means the provision of inpatient 
services for psychiatric diagnosis, treatment and care of persons 
suffering from mental illness, emotional disturbance, or alcohol or 
drug abuse at a psychiatric facility.
    J. To ``operate'' a psychiatric facility means to own, lease, 
manage, or otherwise control or direct operations of a psychiatric 
facility, directly or indirectly.
    K. To ``acquire'' a psychiatric facility means to directly or 
indirectly, through subsidiaries, partnerships, or otherwise:
    (1) Acquire the whole or any part of assets used or previously used 
within the last two years (and still suitable for use) for operating a 
psychiatric facility from any person presently engaged in, or within 
the two years preceding such acquisition engaged in, operating a 
psychiatric facility;
    (2) Acquire the whole or any part of the stock, share capital, 
equity, or other interest in any person engaged in, or within the two 
years preceding such acquisition engaged in, operating a psychiatric 
facility;
    (3) Acquire or otherwise obtain the right to designate directly or 
indirectly directors or trustees of a psychiatric facility; or
    (4) Enter into any other arrangement to obtain direct or indirect 
ownership, management or control of a psychiatric facility or any part 
thereof, including but not limited to, a lease of or management 
contract for a psychiatric facility.
    L. ``Residential treatment center'' means a treatment center that 
provides long-term (length of stay of 30 days or more) care in a non-
psychiatric facility setting to patients that require long term care 
for psychiatric diagnosis and treatment for mental illness, emotional 
disturbance, or alcohol or drug abuse.
    M. ``Outpatient facility'' means a facility that is not licensed as 
a psychiatric facility and has a primary function of providing 
outpatient treatment for psychiatric diagnosis, treatment and care of 
persons suffering from mental illness, emotional disturbance, or 
alcohol or drug abuse, for patients that do not require inpatient 
psychiatric services.
    N. ``Affiliate'' means any entity whose management and policies are 
controlled in any way, directly or indirectly, by the person with which 
it is affiliated.
    O. ``Person'' means any natural person, partnership, corporation, 
company, association, trust, joint venture or other business or legal 
entity, including any governmental agency.
    P. ``Relevant area(s)'' means:
    (1) The ``Orlando area,'' consisting of the Florida counties of 
Orange, Osceola and Seminole;
    (2) The ``Atlanta area,'' consisting of the Georgia counties of 
Fulton, Paulding, Fayette, Clayton, Henry, Rockdale, De Kalb, Gwinnett, 
Cobb, Cherokee, Forsyth and Douglas;
    (3) The ``Memphis area,'' consisting of the Tennessee countries of 
Shelby, Tipton and Fayette, the Arkansas county of Crittenden, and the 
Mississippi county of De Soto;
    (4) The ``Richmond area,'' consisting of the Virginia city of 
Richmond and the Virginia counties of Henrico, Hanover, Goochland, 
Powhatan, Chesterfield, Charles City, and New Kent.
    Q. ``Relevant facilities'' means the following NME psychiatric 
hospitals, including, without limitation, all related assets and 
businesses, successors and assigns and all improvements, additions and 
enhancements made to such assets: MidSouth Hospital, Memphis, 
Tennessee; Psychiatric Institute of Richmond, Richmond Virginia; 
Brawner North Medical Health System; Smyrna, Georgia; Crescent Pines 
Hospital, Stockbridge, Georgia; Laurel Oaks Hospital and Residential 
Treatment Center, Orlando, Florida.

II

    It is further ordered that respondent forthwith modify its Asset 
Sale Agreement with NME, dated March 29, 1994, to rescind respondent's 
agreement to acquire the relevant facilities.

III

    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:
    A. Acquire any psychiatric facility in any of the relevant areas, 
including the relevant facilities;
    B. Permit any psychiatric facility it operates in the relevant 
areas to be acquired by any person that operates, or will operate 
immediately following such acquisition, any other psychiatric facility 
in the relevant areas, including the relevant facilities.
    Provided, however, that such prior approval shall not be required 
for:
    1. The acquisition of a facility that is (a) solely licensed as a 
residential treatment center and not licensed as a psychiatric 
facility, or (b) solely operated as an outpatient facility and not 
licensed as a psychiatric facility;
    2. Any acquisition that does not involve psychiatric services; or
    3. Any acquisition otherwise subject to this Paragraph III of this 
order if the fair market value of (or, in case of an asset acquisition, 
the consideration to be paid for) the psychiatric facility or part 
thereof to be acquired, including assumption by respondent of any 
liabilities, does not exceed five hundred thousand dollars ($500,000).

IV

    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 or otherwise, without 
providing advance written notification to the Commission, consummate 
any joint venture or other arrangement with any other psychiatric 
facility in the relevant areas, for the joint establishment or 
operation of any new psychiatric facility, psychiatric service or part 
thereof, in the relevant areas, including the relevant facilities. 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 IV 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 IV.
    Respondent shall comply with reasonable requests by the Commission 
staff for additional information concerning any transaction subject to 
this Paragraph IV of this order, within fifteen (15) days of service of 
such requests.
    Provided, however, that no transaction shall be subject to this 
Paragraph IV of this order if:
    1. The fair market value of the assets to be contributed to the 
joint venture or other arrangement by the psychiatric facility not 
operated by respondent does not exceed five hundred thousand dollars 
($500,000);
    2. The transaction does not involve psychiatric services; or
    3. Notification is required to be made, and has been made, pursuant 
to Section 7A of the Clayton Act, 15 U.S.C. 18a, or prior approval by 
the Commission is required, and has been requested, pursuant to 
Paragraph III of this order.

V

    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 psychiatric facility it operates in the 
relevant areas to be acquired by any other person 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.

VI

    It is further ordered that, within sixty (60) days after the date 
this order becomes final, and annually thereafter for a period of ten 
(10) 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 complied and it is complying with the 
requirements of this order.

VII

    It is further ordered that, for the purpose of determining or 
securing compliance with this order, 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 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.

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 
emergency 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.

Analysis of Proposed Consent Order to Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted 
provisionally an agreement containing a proposed consent order from 
Charter Medical Corporation (``Charter''), under which Charter would 
agree not to acquire certain psychiatric facilities from National 
Medical Enterprises (``NME'').
    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 make final the agreement's proposed 
order.
    Charter has proposed to acquire certain assets and businesses from 
NME, including 17 psychiatric hospitals, chemical dependency facilities 
and residential treatment centers.
    The proposed complaint alleges that the proposed acquisition, if 
consummated, would constitute a violation of Section 7 of the Clayton 
Act, as amended, 15 U.S.C. 18, and Section 5 of the FTC Act, as 
amended, 15 U.S.C. 45, in the market for psychiatric services in 
several geographic areas in the United States. The proposed Consent 
Order would remedy the alleged violation by allowing the NME facilities 
and those geographic areas to remain as viable competitors or be sold 
to a third party other than Charter.
    The proposed Consent Order provides that Charter forthwith modify 
its Asset Sale Agreement with NME, dated March 29, 1994, to rescind 
Charter's agreement to acquire the following facilities: MidSouth 
Hospital, Memphis, Tennessee; Psychiatric Institute of Richmond, 
Richmond, Virginia; Brawner North Medical Health System, Smyrna, 
Georgia; Crescent Pines Hospital, Stockbridge, Georgia; and Laurel Oaks 
Hospital and Residential Treatment Center, Orlando, Florida. Under the 
terms of a letter of understanding from NME, the Commission will 
receive advance written notification of sale of any of these 
facilities.
    The Order also requires Charter, for a ten-year period, to obtain 
prior approval from the Commission before acquiring any psychiatric 
facility in any of the following geographic areas, as defined in the 
Order: The Orlando area; the Atlanta area; the Memphis area; and the 
Richmond area. The Order also requires Charter to obtain prior approval 
before permitting any psychiatric facility it operates in the four 
geographic areas to be acquired by any person that operates, or will 
operate immediately following such acquisition, any other psychiatric 
facility in the geographic areas, for a ten-year period.
    The Order also requires Charter, for a ten-year period to provide 
advance written notification to the Commission before consummating any 
joint ventures with any other psychiatric facility in the four 
geographic areas specified.
    Under the provisions of the Order, Charter is required to provide 
to the Commission a report of compliance with the Order within sixty 
(60) days following the date the Order becomes final, and annually 
thereafter for period of ten years.
    The purpose of this analysis is to facilitate public comment on the 
proposed Order. and it is not intended to constitute an official 
interpretation of the agreement and proposed Order or to modify in any 
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 94-29182 Filed 11-25-94; 8:45 am]
BILLING CODE 6750-01-M