[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