[Federal Register Volume 60, Number 176 (Tuesday, September 12, 1995)]
[Notices]
[Pages 47369-47376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22580]
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FEDERAL TRADE COMMISSION
[File No. 951-0044]
Columbia/HCA Healthcare Corporation.; Consent Agreement With
Analysis to Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: 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 a Nashville-based health care corporation to divest Poplar
Springs Hospital, a psychiatric hospital facility in Petersburg,
Virginia.
DATES: Comments must be received on or before November 13, 1995.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th Street and Pennsylvania Avenue NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT:
Mark Horoschak, Bureau of Competition, Federal Trade Commission, S-
3115, 6th Street and Pennsylvania Avenue NW., Washington, DC 20580.
(202) 326-2756
Oscar Voss, Bureau of Competition, Federal Trade Commission, S-3115,
6th Street and Pennsylvania Avenue, NW., Washington, DC 20580, (202)
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)).
Agreement Containing Consent Order
The Federal Trade Commission (``Commission''), having initiated an
investigation into the proposed acquisition of John Randolph Medical
Center in Hopewell, Virginia, and certain related assets, by Columbia/
HCA Healthcare Corporation (``Columbia/HCA'') from the Hopewell
Hospital Authority, and it is now appearing that Columbia/HCA
(``proposed respondent'') is willing to enter into an agreement
containing an order to divest certain assets, 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 officers and attorneys, and counsel for the Commission
that:
1. The proposed respondent Columbia/HCA is a corporation organized,
existing, and doing business under and by virtue of the laws of
Delaware, with its principal place of business at One Park Plaza,
Nashville, Tennessee 37203.
2. The proposed respondent admits all the jurisdictional facts set
forth in the draft complaint.
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
[[Page 47370]]
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, 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, and other relief in
disposition of the proceedings, 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
It is ordered that, as used in this order, the following
definitions shall apply:
A. ``Columbia/HCA'' or ``respondent'' means Columbia/HCA Healthcare
Corporation, its partnerships, joint ventures, companies, subsidiaries,
divisions, and groups and affiliates controlled by Columbia/HCA; their
directors, officers, employees, agents, and representatives; and their
successors and assigns.
B. ``Commission'' means the Federal Trade Commission.
C. The ``Acquisition'' means the transaction contemplated by the
October 31, 1994, agreement between Columbia/HCA and the Hopewell
Hospital Authority, whereby Columbia/HCA will acquire John Randolph
Medical Center in Hopewell, Virginia, and certain related assets.
D. ``Psychiatric hospital'' means a health care facility licensed
or certified as a psychiatric hospital (except for a facility limited
by its license or certificate to residential treatment or other long-
term care), that provides 24-hour inpatient services for the
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.
E. ``Psychiatric unit'' means a department, unit, or other
organizational subdivision of a general acute care or other non-
psychiatric hospital, licensed or certified as a provider of inpatient
psychiatric care (except for a facility limited by its license or
certificate to residential treatment or other long-term care), that
provides 24-hour inpatient services for the 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.
F. ``Psychiatric hospital facility'' means a psychiatric hospital,
a non-psychiatric hospital with a psychiatric unit, or a psychiatric
unit.
G. ``Psychiatric hospital services'' means the provision by
psychiatric hospitals or psychiatric units of inpatient services for
the psychiatric diagnosis, treatment, and care of persons suffering
from acute mental illnesses or emotional disturbance, or alcohol or
drug abuse. ``Psychiatric hospital services'' do not include the long-
term psychiatric treatment provided by residential treatment
facilities, other long-term treatment of chronic mental illnesses, or
such treatment and other services provided by Federally-owned
facilities and state mental hospitals.
H. To ``operate'' a psychiatric hospital facility means to own,
lease, manage, or otherwise control or direct the operations of a
psychiatric hospital facility directly or indirectly.
I. To ``acquire'' a psychiatric hospital facility means to directly
or indirectly, through subsidiaries, partnerships, or otherwise:
1. Acquire the whole or any part of the assets of a psychiatric
hospital facility;
2. Acquire the whole or any part of the stock, share capital,
equity, or other interest in any person operating a psychiatric
hospital facility;
3. Acquire or otherwise obtain the right to designate, directly or
indirectly, directors or trustees of a psychiatric hospital facility;
or
4. Enter into any other arrangement to obtain direct or indirect
ownership, management, or control of a psychiatric hospital facility or
any art thereof, including, but not limited to, a lease of or
management contract for a psychiatric hospital facility.
J. ``Relevant area'' means the area in Virginia encompassing the
independent cities of Colonial Heights, Hopewell, and Petersburg;
Dinwiddie and Prince George counties; and those portions of Charles
City and Chesterfield counties within a fifteen (15) mile radius of the
present site of Poplar Springs Hospital in Petersburg, Virginia.
K. ``Affiliate'' means any entity whose management and policies are
controlled in any way, directly or indirectly, by the person with which
it is affiliated.
L. ``Person'' means any natural person, partnership, corporation,
company, association, trust, joint venture, or other business or legal
entity, including any governmental agency.
M. ``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,
[[Page 47371]]
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
Columbia/HCA 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 Columbia/HCA and its affiliates; and
6. all prepaid expenses.
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 Assets and
Businesses, including all improvements, additions, and enhancements
made prior to divestiture, of Poplar Springs Hospital in Petersburg,
Virginia (the ``Paragraph II Assets'').
B. Respondent shall also divest such additional Assets and
Businesses ancillary to the Paragraph II Assets and effect such
arrangements as are necessary to assure the marketability, viability,
and competitiveness of the Paragraph II Assets.
C. Respondent shall divest the Paragraph II 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. The purpose of the divestiture of the Paragraph II
Assets is to ensure the continuation of the Paragraph II Assets as an
ongoing, viable psychiatric hospital and to remedy the lessening of
competition resulting from the Acquisition as alleged in the
Commission's complaint.
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 said Agreement to Hold Separate provides.
E. Pending divestiture of the Paragraph II Assets, respondent shall
take such actions as are necessary to maintain the present
marketability, viability, and competitiveness of the Paragraph II
Assets, and to prevent the destruction, removal, wasting,
deterioration, or impairment of the Paragraph II Assets, except for
ordinary wear and tear.
F. A condition of approval by the Commission of the divestiture
shall be a written agreement by the acquirer(s) of the Paragraph II
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 prior notification to the
Commission in the manner prescribed by Paragraph IV of this Order, any
Paragraph II Asset to any person who operates, or will operate
immediately following the sale, any other psychiatric hospital facility
in the relevant area.
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 Paragraph II Assets, in
accordance with this order, within twelve (12) months of the date this
order becomes final, the Commission may appoint a trustee to divest the
undivested Paragraph II Assets.
B. 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 Sec. 5(1) of the Federal Trade
Commission Act, 15 U.S.C. Sec. 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 Paragraph III.A, 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.
C. 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 Paragraph II
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 the trust agreement described in Paragraph III.C.3
to accomplish the divestiture(s), 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 Comission, 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 undivested
Paragraph II 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(s). 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. Subject to Columbia/HCA's absolute and unconditional obligation
to divest at no minimum price the Paragraph II Assets (and subject to
the terms described in Paragraph II.A), and to remedy the lessening of
competition resulting from the Acquisition as alleged in the
Commission's complaint, 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
[[Page 47372]]
the respondent's absolute and unconditional obligation to divest at no
minimum price. The divestiture(s) shall be made in the manner and to
the acquirer as set out in Paragraph II; 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, 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 undivested Paragraph II
Assests.
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
inclurred 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 waton 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(s) required by this order.
11. The trustee shall have no obligation or authority to operate or
maintain the Paragraph II Assets.
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 providing
advance written notification to the Commission directly or indirectly,
through subsidiaries, partnerships, or otherwise:
A. Acquire any stock, share capital, equity, or other interest in
any person operating a psychiatric hospital facility in the relevant
area;
B. Acquire any assets of a psychiatric hospital facility in the
relevant area;
C. Enter into any agreement or other arrangement to obtain direct
or indirect ownership, management, or control of any psychiatric
hospital facility, or any part thereof, in the relevant area, including
but not limited to, a lease of or management contract for any such
facility;
D. Acquire or otherwise obtain the right to designate, directly or
indirectly, directors or trustees of any psychiatric hospital facility
in the relevant area;
E. Permit any psychiatric hospital facility it operates in the
relevant area to be acquired by any person that operates, or will
operate immediately following such acquisition, any other psychiatric
hospital facility in the relevant area.
Said notification 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 (hereinafter referred to as ``the
Notification''), 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 shall provide the Notification to the Commission at least
thirty days prior to consummating the transaction (hereinafter referred
to as the ``first waiting period''). If, within the first waiting
period, representatives of the Commission make a written request for
additional information or documentary material (within the meaning of
16 CFR Sec. 803.20), respondent shall not consummate the transaction
until twenty days after submitting such additional information and
documentary material. Early termination of the waiting periods in this
paragraph may be requested and, where appropriate, granted in the same
manner as is applicable under the requirements and provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C.
Sec. 18a.
Provided, however, that prior notification pursuant to this
Paragraph IV, or pursuant to Paragraph II.F. of this order, shall not
be required for:
1. the establishment by respondent of a new psychiatric hospital
facility in the relevant area: (a) that is a replacement for an
existing psychiatric hospital facility, if that facility is operated by
respondent and is not required to be divested pursuant to Paragraph II
of this order; or (b) that is not a replacement for any psychiatric
hospital facility in the relevant area;
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 psychiatric hospital facility or
part thereof to be acquired does not exceed one million dollars
($1,000,000);
3. the acquisition of products or services in the ordinary course
of business; or
4. any transaction for which notification is required to be made,
and has been made, pursuant to Section 7A of the Clayton Act, 15 U.S.C.
Sec. 18a.
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 hospital facility it operates in
the relevant area to be acquired by any other person (except pursuant
to the divestiture required by Paragraph II), 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:
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, 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
[[Page 47373]]
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 this order, including a description of all substantive
contacts or negotiations for the divestitures and the identity of all
parties contacted. Respondent shall include in its compliance reports
copies of all written communications to and from such parties, all
internal memoranda, and all reports and recommendations concerning the
divestitures.
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 this order.
VII
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, the creation or dissolution of
subsidiaries, or any other change in the corporation that may affect
compliance obligations arising out of the order.
VIII
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, who may have counsel present regarding such matters.
Appendix I
Agreement To Hold Separate
This Agreement to Hold Separate (``Agreement'') is by and
between Columbia/HCA Healthcare Corporation (``Columbia/HCA'' or
``respondent''), 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 One Park Plaza, Nashville,
Tennessee 37203; 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. Sec. 41,
et seq.
Premises
Whereas, on October 31, 1994, Columbia/HCA and the Hopewell
Hospital Authority entered into an agreement whereby Columbia/HCA
will acquire John Randolph Medical Center in Hopewell, Virginia, and
certain related assets, from the Authority (the ``Acquisition'');
and
Whereas, Columbia/HCA, with its principal place of business at
One Park Plaza, Nashville, Tennessee 37203, owns and operates, among
other things, psychiatric hospitals; 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 Agreement Containing
Consent Order (``Consent Order''), which would require the
divestiture of certain assets specified in Paragraph II of the
Consent Order (``Paragraph II 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 Paragraph II
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 divestitures of the Paragraph II Assets, and
the Commission's right to have the Paragraph II Assets continue as a
viable psychiatric hospital independent of Columbia/HCA; and
Whereas, the purposes of this Agreement and the Consent Order
are to:
(i) preserve the Paragraph II Assets as a viable, competitive,
and ongoing psychiatric hospital, independent of Columbia/HCA,
pending the divestitures of the Paragraph II Assets as required
under the terms of the Consent Order;
(ii) prevent interim harm to competition from the operation of
the Paragraph II Assets pending divestiture as required under the
terms of the Consent Order; and
(iii) 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,
at the time it accepts the Consent Order for public comment it will
grant early termination of the Hart-Scott-Rodino waiting period, and
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 of the Paragraph II Assets is not accomplished, to
appoint a trustee to seek divestiture of said assets pursuant to the
Consent Order or to seek civil penalties or a court appointed
trustee or other equitable relief, 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
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 day after the divestiture of the Paragraph II Assets, as
required by the Consent Order, is completed.
3. To ensure the complete independence and viability of the
Paragraph II Assets, and to assure that no competitive information
is exchanged between Columbia/HCA and the managers of the Paragraph
II Assets, respondent shall hold the Paragraph II Assets, as they
are presently constituted, separate and apart on the following terms
and conditions:
a. The Paragraph II Assets, as they are presently constituted,
shall be held separate and apart and shall be managed and operated
independently of respondent (meaning here and hereinafter, Columbia/
HCA excluding the Paragraph II Assets), except to the extent that
respondent must exercise direction and control over such 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 the Acquisition, respondent
shall organize a distinct and separate legal entity, either a
corporation, limited liability company, or 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; provided, however, that
Columbia/HCA may designate as the ``New Company'' under this
agreement, the ``New Company'' created pursuant to the Agreement to
Hold Separate Regarding the Florida, Texas, and Louisiana Assets
between Columbia/HCA and the Commission in connection with FTC File
No. 951-0022. Respondent shall transfer all
[[Page 47374]]
ownership and control of all Paragraph II 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 Board''), shall have three
members. Respondent shall elect the members of the New Board. The
New Board shall consist of the following three persons: Winfield C.
Dunn; Samuel H. Howard; and David C. Colby. The Chairman of the New
Board shall be Winfield C. Dunn (provided he agrees), or a
comparable, knowledgeable person, who shall remain independent of
Columbia/HCA and competent to assure the continued viability and
competitiveness of the Paragraph II Assets. The New Board shall
include no more than one member who is a director, officer,
employee, or agent of respondent, who shall be David C. Colby,
provided he agrees, or a comparable knowledgeable person (``the
respondent's New Board member''). The New Board shall meet monthly
during the course of the Hold Separate, and as otherwise necessary.
Meetings of the New Board during the term of this Agreement
shall be audiographically/transcribed and the tapes 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 Paragraph II 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, or with all applicable
laws.
e. Respondent shall maintain the viability, competitiveness, and
marketability of the Paragraph II Assets; shall not sell, transfer,
or encumber said Assets (other than in the normal course of
business); and shall not cause or permit the destruction, removal,
wasting, or deterioration, or otherwise impair their viability,
competitiveness, or marketability of said Assets.
f. Except for the respondent's New Board member, 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 Paragraph II
Assets, which employees shall be selected from the existing employee
base of each facility or entity and may also be hired from sources
other than these facilities and entities.
h. With the exception of the respondent's New Board Member,
respondent shall not change the composition of the New Board unless
the independent Chairman consents. The independent Chairman shall
have power to remove members of the New Board for cause. Respondent
shall not change the composition of the management of the New
Company except that the New 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, defending or prosecuting
litigation, obtaining legal advice, 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 hospital to be
operated by the New Board. Nor shall the New Company or the New
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 hospitals. 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 an entity from
sources other than the entity to which the information pertains, 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
Board member shall not, in his or her capacity as a New Board
member, 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 Board member shall enter a confidentiality
agreement prohibiting disclosure of Material Confidential
Information. The respondent's New Board member shall participate in
matters that come before the New 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 Board member shall not participate in any matter,
or attempt to influence the votes of the other members of the New
Board with respect to matters, that would involve a conflict of
interest if respondent and the New Company were separate and
independent entities.
l. 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 Board; provided that the New Company shall engage in no
transaction, material or otherwise, that is precluded by this
Agreement.
m. If necessary, respondent shall provide the New Company with
sufficient working capital to operate the Paragraph II Assets at
their respective current rates of operation, and to carry out any
capital improvement plans for the Paragraph II Assets which have
already been approved.
n. Columbia/HCA shall continue to provide the same support
services to the Paragraph II Assets, as are being provided to those
Assets by Columbia/HCA as of the date this Agreement is signed.
Columbia/HCA may charge the Paragraph II assets the same fees, if
any, charged by Columbia/HCA for such support services as of the
date of this Agreement. Columbia/HCA personnel providing such
support services must retain and maintain all Material Confidential
Information of the Paragraph II 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. Such
personnel shall also execute a confidentiality agreement prohibiting
the disclosure of any Material Confidential Information of the
Paragraph II Assets.
o. During the period commencing on the date this Agreement is
effective and terminating on the earlier of (i) twelve (12) months
after the date the Consent Order becomes final, or (ii) the date
contemplated by subparagraph 2.b (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 Paragraph II Assets
(``normal repair and replacement''). Provided, however, that in any
event, respondent shall provide the New Company with such funds as
are necessary to maintain the viability, competitiveness, and
marketability of such Assets.
p. Columbia/HCA shall circulate, to its management employees
responsible for the operation of hospitals (including non-
psychiatric facilities) either in the relevant area defined in the
Consent Order in this matter, or in the city of Richmond or Henrico
or Chesterfield counties in Virginia, a notice of this Hold Separate
and Consent Order in the form Attachment A.
q. The New Board shall serve at the cost and expense of
Columbia/HCA. Columbia/HCA shall indemnify the New Board against any
losses or claims of any kind that might arise out of its involvement
under this Hold Separate, except to the extent that such losses or
claims result from misfeasance, gross negligence, willful or wanton
acts, or bad faith by the New Board directors.
r. The New Board shall have access to and be informed about all
companies who inquire about, seek, or propose to buy any Paragraph
II Assets.
s. The New Board shall report in writing to the Commission every
thirty (30) days concerning the New Board's efforts to accomplish
the purposes of this Hold Separate.
4. Should the Commission seek in any proceeding to compel
respondent to divest any of the Paragraph II Assets, as provided in
the Consent Order, or to seek any other injunctive or equitable
relief for any failure
[[Page 47375]]
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, from 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 erms of this
Agreement or Consent Order.
6. For the purposes of determining or securing compliance with
this Agreement, and subject to any legally recognized privilege, and
upon writtens request with reasonable notice to respondent made to
its principal office, respondent shall permit any duly authorized
representatives of the Commission:
a. Access, during office hours of respondent and in the presence
of counsel, to inspect and copy all books, ledgers, accounts,
corespondence, memoranda, and all other records and documents in the
possession or under the control of the 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,
directors, or employees of respondent, who may have counsel present,
regarding such matters.
7. This Agreement shall not be binding until approved by the
Commission.
Attachment A--Notice of Divestiture and Requirement for Confidentiality
Columbia/HCA Healthcare Corporation has entered into a Consent
Agreement and Agreement to Hold Separate with the Federal Trade
Commission relating to the divestiture of Poplar Springs Hospital in
Petersburg, Virginia and certain related assets and businesses
(``Poplar Springs''). Until after the FTC's Order becomes final and
Poplar Springs is divested, Poplar Springs must be managed and
maintained as a separate, ongoing business, independent of all other
Columbia/HCA businesses. All competitive information relating to
Poplar Springs must be retained and maintained by the persons
involved in the operation of Poplar Springs on a confidential basis,
and such persons shall be prohibited from providing, discussing,
exchanging circulating, or otherwise furnishing any such information
to or with any other person whose employment involves any other
Columbia/HCA business. Similarly, all such persons involved in
Columbia/HCA shall be prohibited from providing, discussing,
exchanging, circulating, or otherwise furnishing any such
information to or with any other person whose employment involves
Poplar Springs.
Any violation of the Consent Agreement or the Agreement to Hold
Separate, incorporated by reference as part of the Consent Order,
may subject Columbia/HCA to civil penalties and other relief as
provided by law.
Analysis of Proposed Consent Order To Aid Public Comment, Columbia/HCA
Healthcare Corp., FTC File No. 951-0044
The Federal Trade Commission has accepted, subject to final
approval, a proposed consent order from Columbia/HCA Healthcare
Corp. (``Columbia/HCA''). 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.
The proposed consent order would settle charges by the Federal
Trade Commission that Columbia/HCA's proposed acquisition of John
Randolph Medical Center (``John Randolph'') from the Hopewell
Hospital Authority may substantially lessen competition in the
market for psychiatric hospital services in the ``Tri-Cities'' area
of south central Virginia (which includes Hopewell, Petersburg,
Colonial Heights, and other nearby communities). Because the
Commission has not charged that the proposed acquisition would
endanger competition with respect to non-psychiatric hospital
services offered by John Randolph, the scope of the proposed consent
order is limited to psychiatric services. (Columbia/HCA does not
operate any hospitals in the Tri-Cities area that provide non-
psychiatric hospital services.)
Columbia/HCA operates over 300 hospitals nationwide. Its only
hospital in the Tri-Cities area is Poplar Springs Hospital, a 100-
bed hospital in Petersburg, Virginia specializing in psychiatric
care. John Randolph is a 150-bed general acute care hospital in
Hopewell, Virginia, about ten miles northeast of Petersburg. It is
owned and operated by the Hopewell Hospital Authority. John Randolph
provides psychiatric hospital services in its 34-bed psychiatric
unit, as well as a variety of medical and surgical services in other
departments of the hospital. The complaint accompanying the consent
order alleges that the proposed combination of Columbia/HCA's Poplar
Springs with John Randolph may substantially lessen competition in
the relevant psychiatric hospital services market, and would violate
Section 7 of the Clayton Act and Section 5 of the Federal Trade
Commission Act.
The complaint defines psychiatric hospital services as those
inpatient services provided by psychiatric hospitals, or psychiatric
units of non-psychiatric hospitals, for the psychiatric diagnosis,
treatment, and care of persons suffering from acute mental illnesses
or emotional disturbance, or alcohol or drug abuse. The complaint
distinguishes psychiatric hospital services from outpatient
psychiatric care, as well as from long-term treatment of chronic
mental illnesses (such as that provided by Central State Hospital, a
state mental hospital in Petersburg, which is not included in the
relevant product market alleged in the complaint). According to the
complaint, even though such alternatives are much less expensive
than acute inpatient psychiatric hospital care, they cannot
reasonably meet the mental health needs of the patients who receive
inpatient care at the psychiatric hospitals and hospital units in
the Tri-Cities.
The complaint defines the relevant geographic market as the Tri-
Cities area. Columbia/HCA and John Randolph are two of only three
competing providers of psychiatric hospital services in that area.
The only other provider of psychiatric hospital services in the Tri-
Cities area is Southside Regional Medical Center, a general acute
care hospital in Petersburg, Virginia, which has a 31-bed
psychiatric unit.
As stated in the complaint, the proposed acquisition would
eliminate competition between Columbia/HCA and John Randolph, and
significantly increase the already high level of concentration for
psychiatric hospital services in the Tri-Cities area. The complaint
alleges that the proposed acquisition would eliminate the
psychiatric unit at John Randolph as a substantial, independent
competitive force. The complaint also alleges that the proposed
merger would increase the market share of Columbia/HCA, the leading
provider of psychiatric hospital services in the Tri-Cities area,
from over 50% to over 70%. The complaint further alleges that, as
measured by the Herfindahl-Hirschman Index (``HHI''), market
concentration would increase more than 2400 points to a post-
acquisition level of over 6400, on a scale of 0 to 10,000. (The HHI
is a measure of market concentration used by the Federal antitrust
enforcement agencies to estimate, in conjunction with information on
other market factors, the likelihood that a merger would endanger
competition.) As explained in the 1992 Horizontal Merger Guidelines
issued by the Commission and the Department of Justice (57 Fed. Reg.
41552), the Federal antitrust enforcement agencies consider markets
with HHI levels above 1800 to be ``highly concentrated.'' Where the
post-merger HHI would exceed 1800, the agencies presume that a
merger producing an increase in the HHI of more than 100 points is
likely to significantly lessen competition (unless factors other
than market concentration indicate that the merger presents no
significant threat to competition).
According to the complaint, entry into the Tri-Cities area by
new psychiatric hospital facilities is unlikely to prevent or remedy
any anticompetitive price increases or other effects resulting from
the acquisition. Certificate of need approval is required from a
state regulatory agency for new psychiatric hospital or unit in
Virginia. Such approval would be difficult to obtain in the Tri-
Cities area, given that there is (and likely will be for the
foreseeable future) substantially more psychiatric hospital bed
capacity in the Tri-Cities health planning district than the state
believes is sufficient to meet the mental health needs of the
residents of the Tri-Cities area.
The complaint alleges that the proposed acquisition may:
substantially lessen competition for psychiatric hospital services
[[Page 47376]]
in the Tri-Cities area; result in less favorable prices and other terms
for health plans that contract with psychiatric hospital facilities
in the Tri-Cities area; increase the possibility of collusion or
interdependent coordination by the remaining market competitors; and
deny patients, physicians, third-party payers, and other consumers
of psychiatric hospital services, the benefits of free and open
competition based on price, quality, and service.
The consent order, if issued in final form by the Commission,
would require Columbia/HCA to divest Poplar Springs Hospital and
related assets. Columbia/HCA is permitted to carry out its proposed
acquisition of John Randolph. The consent order would ensure the
continued operation of Poplar Springs as a viable psychiatric
hospital facility independent of Columbia/HCA and John Randolph, and
remedy the lessening of competition for psychiatric hospital
services resulting from Columbia/HCA's acquisition of John Randolph.
Under the terms of the proposed order, Columbia/HCA must divest
Poplar Springs to an acquirer and in a manner approved by the
Commission. The divestiture must be completed within twelve months
of the date the order becomes final; otherwise, Columbia/HCA will
consent to the appointment of a trustee, who will have twelve
additional months to effect the divestiture. (Paragraphs II and III)
A Hold Separate Agreement executed in conjunction with the
consent agreement requires Columbia/HCA to maintain Poplar Springs
separate from its other operations until the completion of the
divestiture, or as otherwise specified. To assure the complete
independence and viability of Poplar Springs Hospital, the Hold
Separate Agreement requires Columbia/HCA to transfer all ownership
and control of Poplar Springs Hospital to a separate legal entity,
and to assure that no competitive information is exchanged between
Columbia/HCA and this entity. Under the Hold Separate Agreement,
Columbia/HCA may not exercise any direction, control, or influence
over this entity, except as necessary to assure compliance with the
Consent Order and the Hold Separate Agreement and the continued
viability, competitiveness, and marketability of Poplar Springs.
For ten years after the order is made final, the proposed
consent order would prohibit Columbia/HCA from combining (through
purchase, sale, lease, or otherwise) its psychiatric hospital
facility in the Tri-Cities area with any other psychiatric hospital
facility in that area, without prior notice to the Federal Trade
Commission. Columbia/HCA must provide such notice in accordance with
procedures similar to those governing premerger notifications
required by Section 7A of the Clayton Act, 15 U.S.C. Sec. 18a
(unless the merger is already subject to Section 7A's requirements,
in which case no notice is necessary over and above that provided
pursuant to Section 7A). The order provision supplements Section 7A,
to ensure that the Commission receives advance notice of potentially
significantly Columbia/HCA mergers in the relevant market, and
thereby give the Commission an opportunity to block any such merger
if it can demonstrate that the merger may substantially lessen
competition. The proposed order contains certain limited exceptions
to the prior notification requirement for transactions which are
unlikely to substantially lessen competition, such as for small
transactions under $1 million. (Paragraph IV)
The proposed consent order also contains provisions concerning
its continued application to future owners of Columbia/HCA
psychiatric hospital facilities in the Tri-Cities area. The acquirer
of Poplar Springs, pursuant to the divestiture called for by the
order, must agree to not transfer the hospital, for ten years from
the date of the order, without prior notice to the Commission, to
any person already operating a psychiatric hospital facility in the
Tri-Cities area (Paragraph II.F.). In addition, the order would
prohibit Columbia/HCA for ten years from transferring a psychiatric
hospital facility in the Tri-Cities area other than Poplar Springs
(e.g., the John Randolph psychiatric facility it is to acquire) to
another person, unless the acquiring person first files with the
Commission an agreement to be bound by the order (Paragraph V).
The purpose of this analysis is to invite public comment
concerning the proposed order, and to assist the Commission in its
determination of whether to make the order final. This analysis is
not intended to constitute an official interpretation of the
agreement or to modify its terms in any way.
The agreement is for settlement purposes only and does not
constitute an admission by Columbia/HCA that its proposed
acquisition of John Randolph Medical Center would violate the law,
as alleged in the Commission's complaint.
Donald S. Clark,
Secretary.
[FR Doc. 95-22580 Filed 9-11-95; 8:45 am]
BILLING CODE 6750-01-M