[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Notices]
[Pages 5409-5412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-01942]


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FEDERAL TRADE COMMISSION

[File No. 131 0202]


Community Health Systems, Inc. and Health Management Associates, 
Inc.; Analysis of Agreement Containing Consent Orders to Aid Public 
Comment

AGENCY: Federal Trade Commission.

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ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis of Agreement Containing Consent Orders to Aid 
Public Comment describes both the allegations in the draft complaint 
and the terms of the consent orders--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before February 21, 2014.

ADDRESSES: Interested parties may file comments at https://ftcpublic.commentworks.com/ftc/chshealthmanagementconsent online or on 
paper, by following the instructions in the Request for Comments part 
of the SUPPLEMENTARY INFORMATION section below. Write ``Community 
Health Systems, Inc., and Health Management Associates, Inc.--Consent 
Agreement; File No. 131-0202'' on your comment and file your comment 
online at https://ftcpublic.commentworks.com/ftc/chshealthmanagementconsenthttps://ftcpublic.commentworks.com/ftc/fidelitynationalconsent by following the instructions on the web-based 
form. If you prefer to file your comment on paper, mail or deliver your 
comments to the following address: Federal Trade Commission, Office of 
the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW., 
Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Katherine A. Ambrogi, Bureau of 
Competition, (202-326-2205), 600 Pennsylvania Avenue NW., Washington, 
DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing consent orders to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, having been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement, and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
from the FTC Home Page (for January 22, 2014), on the World Wide Web, 
at http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained 
from the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue 
NW., Washington, DC 20580, either in person or by calling (202) 326-
2222.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before February 21, 
2014. Write ``Community Health Systems, Inc., and Health Management 
Associates, Inc.--Consent Agreement; File No. 131-0202'' on your 
comment. Your comment--including your name and your state--will be 
placed on the public record of this proceeding, including, to the 
extent practicable, on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the 
Commission tries to remove individuals' home contact information from 
comments before placing them on the Commission Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which . . . is privileged or confidential,'' as discussed in Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2). In particular, do not include competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comment online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/chshealthmanagementconsent by following the instructions on the 
web-based forms. If this Notice appears at http://www.regulations.gov/#!home, you also may file a comment through that Web site.
    If you file your comment on paper, write ``Community Health 
Systems, Inc., and Health Management Associates, Inc.--Consent 
Agreement; File No. 131-0202'' on your comment and on the envelope, and 
mail or deliver it to the following address: Federal Trade Commission, 
Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue 
NW., Washington, DC 20580. If possible, submit your paper comment to 
the Commission by courier or overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before February 21, 2014. You can find more 
information, including routine uses permitted by the Privacy Act, in 
the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction and Background

    The Federal Trade Commission (``Commission'') has accepted for 
public comment, subject to final approval, an Agreement Containing 
Consent Orders (``Consent Agreement'') from Community Health Systems, 
Inc. (``CHS'') and Health Management Associates, Inc. (``HMA''). The 
purpose of the proposed Consent Agreement is to remedy the 
anticompetitive effects that otherwise would result from CHS's 
acquisition of HMA. The proposed Consent Agreement requires CHS to 
divest the Riverview Regional Medical Center (``Riverview'') and all 
associated operations and businesses in and around Gadsden, Alabama, 
and the Carolina Pines Regional Medical Center (``Carolina Pines'') and 
all associated operations and businesses in and around Hartsville, 
South Carolina, to a Commission-approved acquirer, and in a manner 
approved by the Commission, within six months after the Decision and 
Order is issued. Under the proposed Consent Agreement, CHS also is 
required to hold separate the to-be-divested assets and maintain the

[[Page 5411]]

economic viability, marketability, and competitiveness of the 
divestiture assets, until the potential acquirer is approved by the 
Commission and the divestiture is complete. Finally, CHS is required to 
provide the Commission prior notice of any acquisition of a GAC 
services provider in the Gadsden Metropolitan Statistical Area and the 
Florence Metropolitan Statistical Area for ten years.
    The proposed Consent Agreement has been placed on the public record 
for thirty days to solicit comments from interested persons. Comments 
received during this period will become part of the public record. 
After thirty days, the Commission again will review the proposed 
Consent Agreement and comments received, and decide whether it should 
withdraw the Consent Agreement, modify the Consent Agreement, or make 
it final.
    On July 29, 2013, CHS and HMA signed a merger agreement pursuant to 
which CHS agreed to acquire HMA for $7.6 billion. The Commission's 
complaint alleges that the proposed acquisition, if consummated, would 
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and 
Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 
45, by removing an actual, direct, and substantial competitor from two 
local markets in Alabama and South Carolina for general acute care 
inpatient services sold to commercial health plans. The proposed 
Consent Agreement would remedy the alleged violations by requiring 
complete divestitures in the affected markets. The divestitures will 
replace the competition that otherwise would be lost in the Alabama and 
South Carolina markets because of the proposed acquisition.

II. The Parties

    Headquartered in Franklin, Tennessee, CHS is a for-profit health 
system that owns 135 hospitals with approximately 20,000 licensed beds 
in 29 states. CHS is the second-largest U.S. hospital chain and one of 
the largest publicly-traded operators of hospitals in the United 
States. CHS generated approximately $13 billion in revenue in 2012.
    HMA is a for-profit health system headquartered in Naples, Florida 
that owns 71 hospitals in 15 states, primarily in the southeastern 
United States. In 2012, HMA generated $5.9 billion in revenue.

III. General Acute Care Inpatient Services

    CHS's proposed acquisition of HMA poses substantial antitrust 
concerns in the relevant product market of general acute care inpatient 
services (``GAC services'') provided to commercially insured patients. 
GAC services consist of a broad cluster of routine inpatient services 
that require an overnight hospital stay. They are sold to commercial 
health plans, which sell benefit plans to commercially insured 
patients. GAC services do not include services related to psychiatric 
care, substance abuse, and rehabilitation services. Likewise, 
outpatient services are not included in GAC services because such 
services are characterized by different competitive conditions (e.g., 
different competitors, lower entry barriers) and because health plans 
and their members generally cannot substitute those services for 
inpatient services in response to a small but significant and non-
transitory increase in price.
    GAC services markets are local in nature. Evidence gathered from 
market participants shows that patients strongly prefer to receive care 
as close to home as possible and to stay within the area where they 
live or work. Accordingly, the proposed acquisition raises serious 
antitrust concerns in two local markets for patients seeking GAC 
services: (1) The area that approximates Etowah County and includes the 
City of Gadsden, Alabama (the ``Gadsden Area''); and (2) the area that 
approximates Darlington County, South Carolina (the ``Darlington County 
Area'').
    The proposed acquisition would combine the only two competitively 
meaningful hospitals providing GAC services to Gadsden Area patients--
HMA's Riverview and CHS's Gadsden Regional Medical Center (``Gadsden 
Regional''). The Gadsden Area market already is highly concentrated, 
and the proposed merger would substantially increase concentration in 
that market absent relief. Post-merger, commercially insured patients 
in the Gadsden Area would have only CHS's hospitals as meaningful 
options to obtain GAC services. The presumption of anticompetitive harm 
created by such high levels of market concentration is supported by 
evidence of the close competition between Riverview and Gadsden 
Regional that would be eliminated by the proposed merger. Consumers in 
the Gadsden Area have benefited from this head-to-head competition in 
the form of lower health care costs and higher quality of care. Absent 
relief, CHS would gain additional leverage and be able to demand higher 
reimbursement rates from commercial health plans, and would have 
reduced incentives to maintain and improve its quality of care. 
Ultimately, these effects are felt by local patients in the form of 
higher premiums, co-pays, and out-of-pocket costs, as well as reduced 
access to high-quality care.
    In South Carolina, the proposed acquisition would combine two of 
only three competitively meaningful hospitals providing GAC services to 
Darlington County Area commercially insured patients--HMA's Carolina 
Pines and CHS's Carolinas Hospital-Florence (``Carolinas Hospital''). 
Third-party McLeod Regional Medical Center (``McLeod Regional'') also 
serves the Darlington County Area. The Darlington County Area market is 
highly concentrated, and the proposed merger would substantially 
increase concentration in that market absent relief. Post-merger, 
commercially insured patients in the Darlington County Area would have 
only two meaningful options for GAC services--either a CHS-owned 
hospital or third-party McLeod Regional. The presumption of 
anticompetitive harm is supported by evidence of the close competition 
between Carolina Pines and Carolinas Hospital that would be eliminated 
by the proposed merger. Consumers in the Darlington County Area have 
benefited from this head-to-head competition in the form of lower 
health care costs and higher quality of care. Absent relief, CHS would 
gain additional leverage and be able to demand higher reimbursement 
rates from commercial health plans, and would have reduced incentives 
to maintain and improve its quality of care. Ultimately, these effects 
are felt by local patients in the form of higher premiums, co-pays, and 
out-of-pocket costs, as well as reduced access to high-quality care.
    New entry or expansion is unlikely to deter or counteract the 
anticompetitive effects of the proposed acquisition in either market. 
Alabama's Certificate of Need (``CON'') statute poses a regulatory 
hurdle that must be overcome before constructing new healthcare 
facilities, expanding or modifying existing facilities, or altering 
inpatient services. South Carolina has a similar CON statute. 
Significant entry barriers also include the time and costs associated 
with constructing or expanding a general acute care hospital. There is 
no evidence of planned entry into either market or any evidence that 
there is unmet demand for GAC services in either market that might spur 
entry or expansion. Thus, it is unlikely that new entry or expansion 
sufficient to achieve a significant market impact will occur in a 
timely manner in either market.

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IV. The Proposed Consent Agreement

    The proposed Consent Agreement remedies the anticompetitive 
concerns in both local markets. The proposed Consent Agreement would 
maintain competition in the Gadsden Area by requiring CHS to divest 
Riverview and its associated operations and businesses. Similarly, the 
proposed Consent Agreement would fully maintain competition in the 
Darlington County Area by requiring CHS to divest Carolina Pines and 
its associated operations and businesses. Any potential buyer for 
either hospital is subject to the prior approval of the Commission.
    The proposed Consent Agreement also requires CHS to provide 
transitional services to the approved acquirers for one year, as 
needed, to assist the acquirers with operating the divested assets as 
viable and ongoing businesses. Until the divestitures are completed, 
CHS is required to hold Riverview and Carolina Pines separate, subject 
to the standard terms of the Order to Hold Separate and Maintain 
Assets. The proposed order also appoints Curtis Lane, the senior 
managing director of MTS Health Partners, LP, as Hold Separate Monitor 
to oversee CHS's compliance with the Order to Hold Separate and 
Maintain Assets. Finally, the proposed order contains a ten-year prior 
notice requirement for acquisitions of GAC services providers in the 
Gadsden, Alabama Metropolitan Statistical Area or in the Florence, 
South Carolina Metropolitan Statistical Area, as well as compliance 
reporting requirements.
    The hospitals to be divested are each stand-alone businesses and 
include all of the assets and real property necessary for a Commission-
approved buyer to compete immediately and effectively in each relevant 
market. In addition to divestiture of the actual facilities at issue, 
CHS has agreed to divest the rights to all intellectual property, 
including the facility names, and all provider and health plan 
contracts associated with the facilities. Although the competitive 
concerns relate to GAC services to commercially insured patients only, 
the proposed order contemplates divestiture of all services and 
operations that are affiliated with the facility or facilities to be 
divested that are necessary to be a viable business. Specifically, CHS 
will divest all outpatient operations and businesses, including 
outpatient physician practices, associated with each hospital. This 
requirement is consistent with similar divestitures in prior Commission 
actions.
    The sole purpose of this analysis is to facilitate public comment 
on the Consent Agreement. This analysis does not constitute an official 
interpretation of the Consent Agreement or modify its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2014-01942 Filed 1-30-14; 8:45 am]
BILLING CODE 6750-01-P