[Federal Register Volume 60, Number 18 (Friday, January 27, 1995)]
[Notices]
[Pages 5401-5408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2059]



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FEDERAL TRADE COMMISSION
[File No. 951 0007]


HEALTHSOUTH Rehabilitation Corporation; 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, HEALTHSOUTH, an Alabama-based corporation, 
to divest Nashville Rehabilitation Hospital and related assets in 
Nashville, TN. within twelve months to a Commission approved entity. If 
the divestiture is not completed on time, the Commission would be 
permitted to appoint a trustee to complete the transaction. In 
addition, the consent agreement would require HEALTHSOUTH to terminate 
management contracts to operate rehabilitation units at Medical Center 
East in Birmingham, AL. and Roper Hospital in Charleston, S.C. Also, 
the consent agreement would require HEALTHSOUTH, for ten years, to 
obtain Commission approval before merging, by acquisition, lease, 
management contract or otherwise, any of its rehabilitation hospital 
facilities in any of the three areas with any competing facilities in 
those areas.

DATES: Comments must be received on or before March 28, 1995.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: Mark Horoschak or Oscar Voss, FTC/S-
3115, Washington, D.C. 20580. (202) 326-2756 or 326-2750.

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 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 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)).

    In the matter of HEALTHSOUTH REHABILITATION CORPORATION, a 
corporation,

Agreement Containing Consent Order

    The Federal Trade Commission (``Commission''), having initiated an 
investigation of the proposed merger of ReLife, Inc. with HEALTHSOUTH 
Rehabilitation Corporation (``HEALTHSOUTH''), and it now appearing that 
HEALTHSOUTH, hereinafter sometimes referred to as ``proposed 
respondent,'' 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. Proposed respondent HEALTHSOUTH 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 
located at Two Perimeter Park South, Birmingham, Alabama 35243.
    2. Proposed respondent admits all the jurisdictional facts set 
forth in the draft of complaint.
    3. 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 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 and its decision containing the 
following order to divest and to cease and desist in disposition of the 
proceeding, and (2) make information public with respect thereto. When 
so entered, the order shall have the same [[Page 5402]] 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 
proposed respondent's address as stated in this agreement shall 
constitute service. 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 the 
agreement may be used to vary or contradict the terms of the order.
    7. Proposed respondent has read the proposed complaint and order 
contemplated hereby. 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. 
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 ``HEALTHSOUTH'' means HEALTHSOUTH 
Rehabilitation Corporation, its predecessors, subsidiaries, divisions, 
and partnerships, joint ventures, groups, and affiliates controlled by 
HEALTHSOUTH; their respective directors, officers, employees, agents, 
and representatives; and their respective successors and assigns.
    B. The ``Acquisition'' means the merger of ReLife, Inc. with 
HEALTHSOUTH, pursuant to their merger agreement dated September 18, 
1994.
    C. ``Rehabilitation hospital facility'' means a hospital, or 
distinct part thereof or unit therein with beds licensed as hospital 
beds, that specializes in the provision of comprehensive, acute 
inpatient medical rehabilitation care to patients requiring intensive, 
multidisciplinary rehabilitation treatment programs, such as patients 
suffering from stroke, head injury, spinal cord injury, amputation, 
severe fractures, or neuromuscular diseases.
    D. To ``acquire'' a rehabilitation hospital facility means to 
directly or indirectly, through subsidiaries, partnerships, or 
otherwise, acquire the whole or any part of the stock, share capital, 
equity, or other interest in a person who operates the rehabilitation 
hospital facility; acquire any assets of the rehabilitation hospital 
facility; enter into any agreement or other arrangement to obtain 
direct or indirect ownership, management, or control of the 
rehabilitation hospital facility or any part thereof, including but not 
limited to, a lease of or management contract for any such 
rehabilitation hospital facility, or an agreement to replace the 
rehabilitation hospital facility with a new rehabilitation hospital 
facility to be operated by respondent; or acquire or otherwise obtain 
the right to designate, directly or indirectly, directors or trustees 
of any rehabilitation hospital facility.
    E. To ``operate'' a rehabilitation hospital facility means to own, 
lease, manage, or otherwise control or direct the operations of a 
rehabilitation hospital facility, directly or indirectly.
    F. ``Affiliate'' means any entity whose management and policies are 
controlled in any way, directly or indirectly, by the person with whom 
it is affiliated.
    G. ``Relevant market area'' means each of the following areas:
    1. The ``Birmingham metropolitan area,'' consisting of Blount, 
Jefferson, St. Clair, and Shelby counties in Alabama;
    2. The ``Charleston metropolitan area,'' consisting of Berkeley, 
Charleston, and Dorchester counties in South Carolina; and
    3. The ``Nashville metropolitan area,'' consisting of Cheatham, 
Davidson, Dickson, Robertson, Rutherford, Summer, Williamson, and 
Wilson counties in Tennessee.
    H. ``Person'' means any natural person, partnership, corporation, 
company, association, trust, joint venture, or other business or legal 
entity, including any governmental agency.
    I. ``Commission'' means the Federal Trade Commission.
    J. ``Material confidential information'' means competitively 
sensitive or proprietary information not independently known to 
respondent from sources other than the rehabilitation hospital facility 
to which that information pertains, including but not limited to 
customer lists, price lists, marketing methods, patents, technologies, 
processes, or other trade secrets.

II

    It is further ordered that:
    A. Respondent shall divest, absolutely and in good faith, within 
twelve (12) months of the date this order becomes final, all of its 
rights, title, and interests in and to all tangible and intangible 
assets, businesses, goodwill, properties, lands, licenses, and leases 
relating to Nashville Rehabilitation Hospital, a general acute care 
hospital in Nashville, Tennessee which contains a rehabilitation 
hospital facility (``assets to be divested''). Respondent shall divest 
the assets only to an acquirer or acquirers that receive the prior 
approval of the Commission, and only in a manner that receives the 
prior approval of the Commission, and only in a manner that receives 
the prior approval of the Commission. Respondent may, but is not 
required to, divest to said acquirer(s) the management contract under 
which ReLife, Inc. operates the rehabilitation hospital facility at 
Sumner Memorial Hospital in Gallatin, Tennessee, or otherwise transfer 
operation of that facility to said acquirer(s), if Sumner Memorial 
consents to the transfer. The purpose of the divestiture is to ensure 
the continuation of the rehabilitation hospital facility of Nashville 
Rehabilitation Hospital as an ongoing, viable rehabilitation hospital 
facility, and to remedy the lessening of competition resulting from the 
Acquisition as alleged in the Commission's complaint.
    B. Respondent shall unconditionally terminate, absolutely and in 
good faith, the following management contracts, and cease operating the 
rehabilitation hospital facilities to which those contracts pertain:
    1. By no later than October 1, 1995, the Rehabilitation Unit 
Management Agreement between ReLife, Inc. and Roper Hospital, dated 
December 6, 1991, under which ReLife operates the rehabilitation 
hospital facility at Roper Hospital in Charleston, South Carolina; and
    2. Within ninety (90) days of the date this order becomes final, 
the Consulting Services Contract between HEALTHSOUTH Rehabilitation 
Corp. and Medical Center East, Inc. dated January 1, 1990, as amended, 
under which HEALTHSOUTH operates the rehabilitation hospital facility 
at Medical Center East in Birmingham, Alabama.
    Provided, however, that respondent may contract with Medical Center 
East to provide to that hospital's rehabilitation hospital facility the 
services of licensed physical, occupational, or speech therapists, so 
long as the therapists provided by respondent do not perform managerial 
functions at the facility, or supervise [[Page 5403]] personnel except 
other therapists provided by respondent.
    C. By no later than the termination of each contract identified in 
Paragraph II.B. above, respondent shall enter into an agreement with 
the hospital whose rehabilitation hospital facility was operated under 
such contract (the ``managed hospital''), that:
    1. Prohibits respondent from using, in connection with respondent's 
operation of any rehabilitation hospital or other health care facility 
in the relevant market area where the managed hospital is located, any 
material confidential information of the managed hospital's 
rehabilitation hospital facility; and
    2. Confers upon the managed hospital a legal right to enforce the 
prohibition set forth above in Paragraph II.C.1.
    D. Respondent shall comply with all terms of the Agreement to Hold 
Separate, attached hereto and made a part hereof as Appendix I. Said 
Agreement to Hold Separate 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.
    E. Pending the divestiture required by Paragraph II.A. above, and 
the contract terminations required by Paragraph II.B. above, respondent 
shall take such actions as are necessary to maintain the viability, 
competitiveness, and marketability of the assets to be divested and of 
the rehabilitation hospital facilities operated under the contracts to 
be terminated, and to prevent the destruction, removal, wasting, 
deterioration, or impairment of any of the those assets, except for 
ordinary wear and tear.
    F. A condition of approval by the Commission of the divestiture 
required by Paragraph II.A. shall be a written agreement by the 
acquirer that it will not, 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, sell or otherwise transfer all or substantially all of the 
rehabilitation hospital facility of Nashville Rehabilitation Hospital 
to any person who operates, or will operate immediately following such 
sale or transfer, any other rehabilitation hospital facility in the 
Nashville metropolitan area as defined in Paragraph I.G.3. above.

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 assets to be divested 
identified in Paragraph II.A. above, in accordance with this order, 
within twelve (12) months of the date this order becomes final, the 
Commission may appoint a trustee to divest such 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 5(l) of the Federal Trade Commission Act, 15 
U.S.C. 45(l), 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, including a court appointment of a trustee pursuant to 
Section 5(l) of the Federal Trade Commission Act, 15 U.S.C. 45(l), or 
any other statute enforced by the Commission, 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, 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 assets 
identified in Paragraph II.A. above.
    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 divestitures required by 
this order.
    4. The trustee shall have twelve (12) months from the date the 
Commission approves 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 assets 
identified in Paragraph II.A. above, 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 in the manner and to acquirer(s) 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 [[Page 5404]] 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 assets 
set forth in Paragraph II.A. above.
    8. Respondent shall identify 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 they 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 assets identified in Paragraph II.A. above.
    12. The trustee shall report in writing to the respondent and to 
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 who operates any rehabilitation hospital facility in any 
relevant market area;
    B. Acquire any assets of any rehabilitation hospital facility in 
any relevant market area;
    C. Enter into any agreement or other arrangement to obtain direct 
or indirect ownership, management, or control of any rehabilitation 
hospital facility or any part thereof in any relevant market area, 
including but not limited to, a lease of or management contract for any 
such rehabilitation hospital facility, or an agreement to replace a 
rehabilitation hospital facility operated by another person with a 
rehabilitation hospital facility to be operated by respondent;
    D. Acquire or otherwise obtain the right to designate, directly or 
indirectly, directors or trustees of any rehabilitation hospital 
facility in any relevant market area; or
    E. Permit any rehabilitation hospital facility it operates in any 
relevant market area to be acquired (in whole or in part, by stock 
acquisition, asset acquisition, lease, management contract, 
establishment of a replacement facility, right to designate directors 
or trustees, or otherwise) by any person who operates, or will operate 
immediately following such acquisition, any other rehabilitation 
hospital facility in that relevant market area.
    Provided, however, that prior approval shall not be required by 
this Paragraph IV for:
    1. The establishment of a new rehabilitation hospital facility 
(other than as a replacement for a rehabilitation hospital facility, 
not operated by respondent, in any relevant area, pursuant to an 
agreement or understanding between respondent and the person operating 
the replaced facility);
    2. Any transaction otherwise subject to this Paragraph IV of this 
order if the fair market value of (or, in case of a purchase 
acquisition, the consideration to be paid for) the rehabilitation 
hospital facility or part thereof to be acquired does not exceed five 
hundred thousand dollars ($500,000);
    3. Any transaction otherwise subject to this Paragraph IV of this 
order if the rehabilitation hospital facility in question is already 
operated by respondent (unless respondent is required by Paragraph II 
of this order to cease operating the facility); or
    4. 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 or otherwise, without 
providing advance written notification to the Commission, consummate 
any joint venture or other arrangement with any rehabilitation hospital 
facility in any relevant market area not operated by respondent, for 
the joint establishment or operation of any new rehabilitation hospital 
service, facility, or part thereof in that relevant market 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 after making 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 receipt of 
such requests.
    Provided, however, that no transaction shall be subject to this 
Paragraph V of this order if:
    A. The fair market value of the assets to be contributed to the 
joint venture or other arrangement, by rehabilitation hospital 
facilities not operated by respondent, does not exceed five hundred 
thousand dollars ($500,000);
    B. The fair market value of the assets to be contributed to the 
joint venture or other arrangement by respondent does not exceed five 
hundred thousand dollars ($500,000);
    C. The service, facility, or part thereof to be established or 
operated in a transactions 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
    D. 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 sell or otherwise 
transfer to any other person [[Page 5405]] all or substantially all of 
any rehabilitation hospital facility it operates in any relevant market 
area (except pursuant to a 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 as applicable to the facility and the relevant 
market area in which the acquired facility is located, 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 Paragraphs II and III 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 Paragraphs II and III of this order. Respondent 
shall include in its compliance reports, among other things that are 
required from time to tome, a full description of the efforts being 
made to comply with Paragraphs II and III of the order, including a 
description of all substantive contracts or negotiations for the 
divestiture of the assets identified in Paragraph II.A. above, the 
steps taken to terminate the contracts identified in Paragraph II.B. 
above, and the identity of all parties contacted. Respondent shall also 
include in its compliance reports, subject to any legally recognized 
privilege, copies of all written communications to and from such 
parties, all internal memoranda, 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 complied 
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, and subject to any legally 
recognized privilege, 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.

    In the matter of HEALTH REHABILITATION CORPORATION, a 
corporation File No. 951-0007.

Agreement to Hold Separate

    This agreement to Hold Separate (``Agreement'') is by and between 
HEALTHSOUTH Rehabilitation Corporation (``respondent'' or 
``HEALTHSOUTH''), 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 Two Perimeter Park South, Birmingham, 
Alabama 35243; and the Federal Trade Commission (``Commission''), and 
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 before September 18, 1994, HEALTHSOUTH agreed to 
merge with ReLife, Inc. (``Relife''), and thereby acquire, inter alia, 
a majority partnership interest in Nashville Rehabilitation Hospital in 
Nashville, Tennessee (the ``Acquisition''); and
    Whereas, The Commission is now investigating the Acquisition to 
determine if it would violate any of the status enforced by the 
Commission; and
    Whereas, if the Commission accepts the Agreement Containing Consent 
Order in this matter (``Consent Order''), which would require the 
divestiture of ReLife's majority partnership interest in, and certain 
other assets listed in Paragraph II.A. of the Consent Order Relating 
to, Nashville Rehabilitation Hospital (which assets, together with the 
Hospital, hereinafter are referred to as the ``NRH Assets''), 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 NRH 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 compel the divestiture required by Paragraphs II.A. and III of the 
Consent Order and the Commission's right to have NRH Assets continue as 
a viable independent rehabilitation hospital facility; and
    Whereas, the purpose of this Agreement and the Consent Order is to:
    (i) Preserve the NRH Assets as a viable independent inpatient 
rehabilitation hospital facility pending the divestiture required by 
Paragraphs II.A. and III of the Consent Order, 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 as follows, 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 NRH 
Assets pursuant to the Consent Order:
    1. Respondent agrees to execute the Agreement Containing Consent 
Order [[Page 5406]] and be bound by the attached Consent Order.
    2. Respondent agrees that from the date this Agreement is accepted 
until the earliest of the times listed in subparagraphs 2.a or 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 time that the divestiture required by the Consent Order has 
been completed.
    3. Respondent will hold the NRH Assets as they are presently 
constituted separate and apart, on the following terms and conditions:
    a. The NRH Assets, as they are presently constituted, shall be held 
separate and apart and shall be operated independently of respondent 
(meaning here and hereinafter, HEALTHSOUTH excluding the NRH Assets), 
except to the extent that respondent must exercise direction and 
control over the NRH Assets to assure compliance with this Agreement or 
the Consent Order and except as otherwise provided in this Agreement.
    b. HEALTHSOUTH shall appoint a Management Committee to manage and 
maintain the NRH Assets on a day-to-day basis while this Agreement 
remains in effect. The Management Committee shall have exclusive 
management and control of the NRH Assets, and shall manage the NRH 
Assets independently of HEALTHSOUTH's other businesses.
    c. The Management Committee, which shall be appointed by 
HEALTHSOUTH, shall consist of three or five members, including a 
chairman who is independent of respondent and is competent to assure to 
continued viability and competitiveness of the NRH Assets; a person 
with experience in operating rehabilitation hospital facilities; and a 
HEALTHSOUTH controller or other financial officer, whose 
responsibilities do not include any participation in HEALTHSOUTH's 
operations in the Nashville metropolitan area as defined in Paragraph 
I.G. of the Consent Order. No more than a minority of Management 
Committee members shall be directors, officers, employees, or agents of 
respondent (``respondent's Management Committee members''). Meetings of 
the Management Committee during the term of this Agreement shall be 
audio recorded, and recordings shall be retained for two (2) years 
after the termination of this Agreeement.
    d. Respondent shall not exercise direction or control over, or 
influence directly or indirectly, the NRH Assets, any associated 
operations or businesses, the Management Committee, or the independent 
chairman of the Management Committee; provided, however, that 
respondent may exercise only such direction and control over the 
Management Committee as is necessary to assure compliance with this 
Agreement or the Consent Order.
    e. Respondent shall maintain the viability, competitiveness, and 
marketability of the NRH Assets, and shall not sell, transfer, encumber 
(other than in the normal course of business, or to effect the 
divestitures contemplated by the consent order), or otherwise impair 
their viability, competitiveness, or marketability.
    f. The NRH Assets shall be staffed with employees sufficient in 
numbers and skills to maintain the viability, competitiveness, and 
marketability of the Hospital and the NRH Assets, which employees shall 
be selected from the existing employee base of the NRH Assets, and may 
also be hired from other sources. To this end, respondent shall 
maintain at least the same ratios of full-time equivalent employees to 
inpatient days, for professional employee staff (Such as nurses and 
therapists), and for other staff employees, as exist at the date of 
this Agreement, and shall offer salaries and employee benefits 
sufficient to maintain such staffing levels and maintain quality of 
patient care at least substantially equivalent to that now provided by 
the employees of the NRH Assets.
    g. With the exception of respondent's Management Committee members, 
respondent shall not change the composition of the Management Committee 
unless the independent chairman consents to such change. The 
independent chairman shall have power to remove members of the 
Management Committee for cause. Respondent shall not change the 
composition of the management of the NRH Assets, except that the 
Management Committee shall have the power to remove management 
employees for cause.
    h. 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.
    i. Except as required by law, and except to the extent that 
necessary information is exchanged in the course of evaluating the 
Acquisition, defending investigations, defending or prosecuting 
litigation, negotiating agreements to divest assets, or complying with 
this agreement or the Consent Order, respondent shall not receive, have 
access to, use, or continue to use, any material confidential 
information (as that term is defined in the Consent Order) not in the 
public domain about the NRH Assets, or the activities of the Management 
Committee. Nor shall the NRH Assets or the Management Committee receive 
or have access to, or use or continue to use, any material confidential 
information not in the public domain about respondent that relates to 
rehabilitation hospital facilities operated by respondent in the 
Nashville metropolitan area as defined in Paragraph I.G. of the Consent 
Order. Respondent may receive on a regular basis aggregate financial 
information relating to the NRH Assets 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 purpose set 
forth in this subparagraph.
    j. Except as permitted by this Agreement, respondent's Management 
Committee members shall not, in their capacity as Management Committee 
members, receive material confidential information of the NRH Assets, 
and shall not disclose any such information received under this 
Agreement to respondent, or use it to obtain any advantage for 
respondent. Each of respondent's Management Committee members shall 
enter a confidentiality agreement prohibiting disclosure of material 
confidential information. Respondent's Management Committee members 
shall participate in matters that come before the Management Committee 
only for the limited purposes of considering a capital investment or 
other transaction exceeding $100,000, approving any proposed budget and 
operating plans, and carrying out respondent's responsibilities under 
this Agreement, the Consent Agreement, and the Consent Order. Except as 
permitted by this Agreement, respondent's Management Committee members 
shall not participate in any matter, or attempt to influence the votes 
of the other members of the Management Committee with respect to 
matters, that would involve a conflict of interest if respondent and 
the NRH Assets were separate and independent entities.
    k. Any material transaction relating to the NRH Assets that is out 
of the ordinary course of business must be approved by a majority vote 
of the Management Committee; provided that the Management Committee 
shall approve no transaction, material or otherwise, that is precluded 
by this Agreement.
    l. All earnings and profits of the NRH Assets shall be retained 
separately. If [[Page 5407]] necessary, respondent shall provide the 
NRH Assets with sufficient working capital to maintain the current rate 
of operation of the NRH Assets, and to carry out any capital 
improvement plans which have been approved.
    m. HEALTHSOUTH shall continue to provide the same support services 
to the NRH Assets, which are not provided by that hospital's employees, 
as are being provided by ReLife to the hospital as of the date this 
Agreement is signed. HEALTHSOUTH may charge the NRH Assets the same 
fees, if any, charged by ReLife for such support services as of the 
date of this Agreement. HEALTHSOUTH personnel providing such support 
services must retain and maintain all material confidential information 
of the NRH Assets on a confidential basis, and, except as is permitted 
by this Agreement, such persons shall be prohibited from providing, 
discussing, exchanging, circulating, or otherwise furnishing any such 
information to or with any person whose employment involves any of 
respondent's businesses, including without limitation businesses in the 
Nashville metropolitan area. Such personnel shall also execute a 
confidentiality agreement prohibiting the disclosure of any material 
confidential information of the NRH Assets.
    n. HEALTHSOUTH shall cause the NRH Assets to continue to expend 
funds for marketing and advertising at a level not lower than that 
expended in fiscal year 1994 or budgeted in fiscal year 1995, and shall 
increase such spending as deemed reasonably necessary by the Management 
Committee in light of competitive conditions.
    4. Should the Federal Trade Commission seek in any proceeding to 
compel respondent to divest any of the NRH 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, 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 to Aid Public Comment HEALTHSOUTH 
Rehabilitation Corp., File No. 951-0007

    The Federal Trade Commission has accepted, subject to final 
approval, a proposed consent order from HEALTHSOUTH Rehabilitation 
Corporation (``HEALTHSOUTH''). The agreement would settle charges by 
the Federal Trade Commission that HEALTHSOUTH's proposed merger with 
ReLife Inc. (``ReLife'') would violate Section 5 of the Federal Trade 
Commission Act, and Section 7 of the Clayton Act.
    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.
    HEALTHSOUTH owns and operates rehabilitation hospital service 
facilities nationwide, including facilities in the Birmingham, Alabama, 
Charleston, South Carolina, and Nashville, Tennessee metropolitan 
areas. ReLife operates rehabilitation hospital facilities in these same 
areas, among others. The complaint accompanying the proposed consent 
order discusses the proposed acquisition's impact upon competition for 
rehabilitation hospital services in the Birmingham, Charleston, and 
Nashville areas. According to the complaint, HEALTHSOUTH operates 
(i.e., owns, leases, or manages):

--a rehabilitation unit within Medical Center East, a general acute 
care hospital in Birmingham, Alabama;
--Trident Neurosciences Center, a rehabilitation hospital in 
Charleston, South Carolina; and
--Vanderbilt Stallworth Rehabilitation Hospital, a rehabilitation 
hospital in Nashville, Tennessee.

    ReLife operates:

--Lakeshore Hospital, a rehabilitation hospital in Birmingham, Alabama, 
as well as rehabilitation hospital units within Bessemer Carraway 
Medical Center, Brookwood Medical Center, and Carraway Methodist 
Medical Center, all general acute care hospitals in Birmingham, Alabama 
or adjacent communities in Jefferson County, Alabama;
--a rehabilitation hospital unit within Roper Hospital, a general acute 
care hospital in Charleston, South Carolina; and
--Nashville Rehabilitation Hospital in Nashville, Tennessee, a general 
acute care hospital in Nashville, Tennessee which contains a 
rehabilitation hospital unit, as well as rehabilitation unit within 
Sumner Memorial Hospital, a general acute care hospital in Gallatin, 
Tennessee northeast of Nashville.

    The consent order, if issued in final form by the Commission, would 
settle charges that the acquisition may substantially lessen 
competition for rehabilitation hospital services in the Birmingham, 
Charleston, and Nashville areas. The complaint alleges that HEALTHSOUTH 
and ReLife are competitors in those market areas, where, according to 
the complaint, concentration is already high, 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 Birmingham, Charleston, and Nashville 
rehabilitation hospital services markets, in violation of Section 5 of 
the Federal Trade Commission Act and Section 7 of the Clayton Act, 
unless an effective remedy eliminates such anticompetitive effects.
    The order accepted for public comment contains provisions requiring 
the divestiture by HEALTHSOUTH of Nashville Rehabilitation hospital and 
related assets in Nashville, Tennessee. The order also requires the 
termination by HEALTHSOUTH of management contracts pertaining to the 
rehabilitation hospital facilities at Roper Hospital in 
[[Page 5408]] Charleston, South Carolina, and Medical Center East in 
Birmingham, Alabama. The purpose of the divestiture and contract 
terminations is to ensure the continuation of these designated 
facilities as ongoing, viable rehabilitation facilities independent or 
HEALTHSOUTH, and to remedy the lessening of competition resulting from 
the acquisition in the Birmingham, Charleston, and Nashville areas.
    The proposed order requires HEALTHSOUTH to divest Nashville 
Rehabilitation Hospital to an acquirer, and in a manner, approved by 
the Commission. Under the terms of the order, the required divestiture 
mut be completed within twelve months of the date the order becomes 
final. If the required divestiture is not completed within the twelve-
month period, HEALTHSOUTH will consent to the appointment of a trustee, 
who would have twelve additional months to effect the divestiture. The 
acquirer of Nashville Rehabilitation Hospital would be required to 
agree that, for ten years from the date of the order, it will not 
transfer Nashville Rehabilitation Hospital, without the prior approval 
of the Commission, to any person already operating a rehabilitation 
hospital facility in the Nashville area. In addition, the hold separate 
agreement executed in conjunction with the consent agreement requires 
HEALTHSOUTH, until the completion of the divestiture or as otherwise 
specified, to maintain Nashville Rehabilitation separate from 
HEALTHSOUTH's other operations.
    The provisions of the order relating to Roper Hospital and Medical 
Center East require HEALTHSOUTH to terminate the management contracts 
for the operation of those hospitals' rehabilitation units, and cease 
operation of those rehabilitation facilities, within 90 days after the 
order becomes final (for Medical Center east) or by October 1, 1995 
(for Roper Hospital). HEALTHSOUTH may, however, continue to supply 
therapy personnel to the Medical Center East rehabilitation unit. In 
addition, HEALTHSOUTH would be required to enter into agreements with 
Roper Hospital and Medical Center East to protect any competitively-
sensitive information about those hospitals which HEALTHSOUTH has 
obtained, so that HEALTHSOUTH rehabilitation facilities which compete 
with those hospitals will not be able to use that information to their 
competitive advantage.
    The order would prohibit HEALTHSOUTH from acquiring any 
rehabilitation hospital facilities in the Birmingham, Charleston, and 
Nashville areas without the prior approval of the Federal Trade 
Commission. It would also prohibit HEALTHSOUTH from transferring, 
without prior Commission approval, any rehabilitation hospital facility 
it operates in any of those areas to another person operating (or in 
the process of acquiring) another rehabilitation hospital facility in 
that area. These provisions, in combination, would give the Commission 
authority to prohibit any substantial combination of the rehabilitation 
hospital operations of HEALTHSOUTH with those of any other 
rehabilitation hospital facility in the Birmingham, Charleston, and 
Nashville areas, unless HEALTHSOUTH convinced the Commission that a 
particular transaction would not endanger competition in those areas. 
The provisions would not apply to transaction where the value of the 
transferred assets does not exceed $500,000, or to certain transactions 
between HEALTHSOUTH and the rehabilitation hospital facilities it 
already operates. They would expire ten years after the order becomes 
final.
    The order would also require HEALTHSOUTH to provide advance notice 
to the commission before carrying out certain joint ventures with 
competing rehabilitation hospital facilities in the Birmingham, 
Charleston, and Nashville areas, for which the order does not otherwise 
require prior approval. This requirement is subject to limitation 
similar to those applicable to the prior approval provision, does not 
require notice of certain specified support services joint ventures, 
and also does not require additional notice for transactions which 
HEALTHSOUTH provides notice under the premerger notification 
requirements of the Clayton Act.
    For ten years, the order would prohibit HEALTHSOUTH from 
transferring any of its rehabilitation hospital facilities in the 
Birmingham, Charleston, or Nashville areas to another person without 
first filing with the Commission an agreement by the transferee to be 
bound by the order provisions that apply to the facility and the market 
area in which it is located.
    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 HEALTHSOUTH that its proposed acquisition 
would have violated the law, as alleged in the Commission's complaint.
Donald S. Clark,
Secretary.
[FR Doc. 95-2059 Filed 1-26-95; 8:45 am]
BILLING CODE 6750-01-M