Columbia/HCA Healthcare Corporation; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 941 0108]

Columbia/HCA Healthcare Corporation; Proposed Consent Agreement

With Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

permit, among other things, the hospital company to complete its

acquisition of Medical Care America, but would require it to divest the

Alaska Surgery Center within twelve months to a Commission-approved

entity. If the transaction is not completed in the designated time

frame, the respondents would be required to permit the Commission to

appoint a trustee. In addition, the consent agreement would require the

respondent, for ten years, to obtain Commission approval before

acquiring an interest worth more than $1 million in any outpatient

surgical services facility in Anchorage, Alaska, and before selling

such an interest to any entity that operates an outpatient surgical

services facility in Anchorage, Alaska.

DATES: Comments must be received on or before November 22, 1994.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:

Mark Horoschak, FTC/S-3115, Washington, D.C. 20580. (202) 326-2756.

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 Sec. 4.9(b)(6)(ii) of the Commission's Rules of

Practice (16 CFR 4.9(b)(6)(ii)).

Agreement Containing Consent Order

The Federal Trade Commission (``Commission''), having initiated an

investigation into the proposed acquisition of Medical Care America,

Inc. by Columbia/HCA Healthcare Corporation (``Columbia/HCA''), and it

now appearing that Columbia/HCA (``proposed respondent'') is willing to

enter into an agreement containing an order to divest certain assets

and to cease and desist from making certain acquisitions, and providing

for other relief:

It is hereby agreed by and between the proposed respondent by its

duly authorized officer and attorney, and counsel for the Commission

that:

1. The proposed respondent Columbia/HCA is a corporation organized,

existing, and doing business under and by virtue of the laws of the

State of Delaware, with its office and principal place of business at

201 West Main Street, Louisville, Kentucky, 40202.

2. The proposed respondent admits all the jurisdictional facts set

forth in the draft of complaint here attached.

3. The proposed respondent waives:

a. Any further procedural steps;

b. The requirement that the Commission's decision contain a

statement of findings of fact and conclusions of law;

c. All rights to seek judicial review or otherwise to challenge or

contest the validity of the order entered pursuant to this agreement;

and

d. Any claim under the Equal Access to Justice Act.

4. This agreement shall not become part of the public record of the

proceeding unless and until it is accepted by the Commission. If this

agreement is accepted by the Commission it, together with the draft of

complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

of this agreement and so notify the proposed respondent, in which event

it will take such action as it may consider appropriate, or issue and

serve its complaint (in such form as the circumstances may require) and

decision, in disposition of the proceeding.

5. This agreement is for settlement purposes only and does not

constitute an admission by the proposed respondent that the law has

been violated as alleged in the draft of complaint here attached, or

that the facts as alleged in the draft complaint, other than

jurisdictional facts, are true.

6. This agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of Sec. 2.34 of the Commission's

Rules, the Commission may, without further notice to the proposed

respondent, (1) issue its complaint corresponding in form and substance

with the draft of complaint here attached and its decision containing

the following order to divest and to cease and desist, and other relief

in disposition of the proceeding, and (2) make information public with

respect thereto. When so entered, the order shall have the same force

and effect and may be altered, modified, or set aside in the same

manner and within the same time provided by statute for other orders.

The order shall become final upon service. Delivery by the 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. ``Respondent'' or ``Columbia/HCA'' means Columbia/HCA Healthcare

Corporation, its partnerships, joint ventures, companies, subsidiaries,

divisions, groups and affiliates controlled by Respondent, and their

respective directors, officers, employees, agents, and representatives,

and their respective successors and assigns.

B. The ``Acquisition'' means the acquisition by Columbia/HCA of

Medical Care America, Inc., including the Alaska Surgery Center.

C. ``Outpatient surgery facility'' means a health facility which

has as a function the provision of outpatient surgery services.

Outpatient surgery facilities include general acute care hospitals that

offer outpatient surgery services, as well as ambulatory surgery

centers that are not part of a general acute care hospital. The term

``outpatient surgery facility'' shall not include a physician's, other

healthcare professional's, or group practice's office or offices that

provide outpatient surgery services for use solely by that physician,

healthcare professional, or group practice, so long as such facility is

not licensed as an ambulatory surgical facility by the State of Alaska.

D. ``Outpatient surgery services'' means facilities, personnel, and

tools and equipment used by doctors in performing surgical procedures

on patients who are not confined for more than 23 hours in an acute

care hospital or other facility for recovery following the surgery.

Outpatient surgery services include operating rooms, recovery rooms,

surgical tools and devices, nurses, anesthesia equipment and personnel.

E. To ``operate an outpatient surgery facility'' means to own,

lease, manage, or otherwise control or direct the operations of an

outpatient surgery facility, directly or indirectly.

F. ``Affiliate'' means any entity whose management and policies are

controlled in any way, directly or indirectly, by the person with which

it is affiliated.

G. ``Person'' means any natural person, partnership, corporation,

company, association, trust, joint venture, or other business or legal

entity, including any governmental agency.

H. ``Commission'' means the Federal Trade Commission.

I. ``Schedule A Assets'' means assets acquired by the respondent

and listed on the attached Schedule A.

J. ``Viability and competitiveness'' means that the Schedule A

Assets are capable of functioning independently and competitively.

K. ``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, 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, the Schedule A

Assets, and shall also divest such additional assets and businesses

ancillary to the Schedule A Assets and effect such arrangements as are

necessary to assure the marketability and the viability and

competitiveness of the Schedule A Assets.

B. Respondent shall divest the Schedule A Assets only to an

acquirer that receives 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 Schedule A Assets is to ensure the

continuation of the Schedule A Assets as an ongoing, viable outpatient

surgery facility and to remedy the lessening of competition resulting

from the Acquisition as alleged in the Commission's complaint.

C. Respondent shall comply with all terms of the Agreement to Hold

Separate, attached hereto and made a part hereof as Appendix I. Said

Agreement shall continue in effect until such time as respondent has

fulfilled the divestiture requirements of this order or until such

other time as the Agreement to Hold Separate provides.

D. Pending divestiture of the Schedule A Assets, respondent shall

take such actions as are necessary to maintain the viability and

competitiveness and the marketability of the Schedule A Assets, and to

prevent the destruction, removal, wasting, deterioration, or impairment

of any of the Schedule A Assets, except for ordinary wear and tear.

E. A condition of approval by the Commission of the divestiture

shall be a written agreement by the acquirer of the Schedule A 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 the prior approval of the

Commission, the Schedule A Assets to any person who operates, or will

operate immediately following the sale, any other outpatient surgery

facility in the Municipality of Anchorage, Alaska.

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 Schedule A 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

Schedule A Assets. In the event that the Commission or the Attorney

General brings an action for any failure to comply with this order or

in any way relating to the Acquisition, pursuant to 5(l) of the Federal

Trade Commission Act, 15 U.S.C. 45(l), or any other statute enforced by

the Commission, the respondent shall consent to the appointment of a

trustee in such action. Neither the appointment of a trustee nor a

decision not to appoint a trustee under this paragraph shall preclude

the Commission or the Attorney General from seeking civil penalties or

any other relief available to it for any failure by the respondent to

comply with this order.

B. If a trustee is appointed by the Commission or a court pursuant

to Paragraph III.A. of this order, 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 Schedule A

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.B.3.

to accomplish the divestiture, which shall be subject to the prior

approval of the Commission. If, however, at the end of the twelve-month

period, the trustee has submitted a plan of divestiture or believes

that divestiture can be achieved within a reasonable time, the

divestiture period may be extended by the Commission, or in the case of

a court-appointed trustee, by the court; provided however, the

Commission may extend this period only two (2) times.

5. The trustee shall have full and complete access to the

personnel, books, records, and facilities related to the Schedule A

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. Any delays in

divestiture caused by respondent shall extend the time for divestiture

under this Paragraph in an amount equal to the delay, as determined by

the Commission or, for a court-appointed trustee, by the court.

6. The trustee shall use his or her best efforts to negotiate the

most favorable price and terms available in each contract that is

submitted to the Commission, subject to the respondent's absolute and

unconditional obligation to divest at no minimum price. The divestiture

shall be made in the manner and to the acquirer as set out in Paragraph

II of this order; provided, however, if the trustee receives bona fide

offers from more than one acquiring entity, and if the Commission

determines to approve more than one such acquiring entity, the trustee

shall divest to the acquiring entity selected by respondent from among

those approved by the Commission.

7. The trustee shall serve, without bond or other security, at the

cost and expense of the respondent, on such reasonable and customary

terms and conditions as the Commission or a court may set. The trustee

shall have the authority to employ, at the cost and expense of

respondent, such consultants, accountants, attorneys, investment

bankers, business brokers, appraisers, and other representatives and

assistants as are necessary to carry out the trustee's duties and

responsibilities. The trustee shall account for all monies derived from

the sale and all expenses incurred. After approval by the Commission

and, in the case of a court-appointed trustee, by the court, of the

account of the trustee, including fees for his or her services, all

remaining monies shall be paid at the 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 Schedule A Assets.

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

incurred in connection with the preparation for, or defense of any

claim, whether or not resulting in any liability, except to the extent

that such liabilities, losses, damages, claims, or expenses result from

misfeasance, gross negligence, willful or wanton acts, or bad faith by

the trustee.

9. If the trustee ceases to act or fails to act diligently, a

substitute trustee shall be appointed in the same manner as provided in

Paragraph III.A. of this order.

10. The Commission or, in the case of a court-appointed trustee,

the court, may on its own initiative, or at the request of the trustee

issue such additional orders or directions as may be necessary or

appropriate to accomplish the divestiture required by this order.

11. The trustee shall have no obligation or authority to operate or

maintain the Schedule A 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 the prior

approval of the Commission, directly or indirectly, through

subsidiaries, partnerships, or otherwise:

A. Acquire any stock, share capital, equity, or other interest in

any person presently engaged in, or within the two years preceding such

acquisition engaged in, operating an outpatient surgery facility in the

Municipality of Anchorage, Alaska;

B. Acquire any assets used, or previously used, in the Municipality

of Anchorage, Alaska (and still suitable for use) for operating an

outpatient surgery facility from any person presently engaged in, or

within the two years preceding such acquisition engaged in, operating

an outpatient surgery facility in the Municipality of Anchorage,

Alaska;

C. Enter into any agreement or other arrangement to obtain direct

or indirect ownership, management, or control of any outpatient surgery

facility, or any part thereof, in the Municipality of Anchorage,

Alaska, including but not limited to, a lease of or management contract

for any such outpatient surgery facility;

D. Acquire or otherwise obtain the right to designate directly or

indirectly directors or trustees of any outpatient surgery facility in

the Municipality of Anchorage, Alaska.

E. Permit any outpatient surgery facility it operates in the

Municipality of Anchorage, Alaska to be acquired by any person that

operates, or will operate immediately following such acquisition, any

other outpatient surgery facility in the Municipality of Anchorage,

Alaska.

Provided, however, that such prior approval shall not be required

for:

1. The establishment of a new outpatient surgery service or

facility (other than as a replacement for an outpatient surgery service

or facility, not operated by respondent, in the Municipality of

Anchorage, Alaska, pursuant to an agreement or understanding between

respondent and the person operating the replaced service or facility);

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 outpatient surgery facility or

part thereof to be acquired does not exceed one million dollars

($1,000,000); or

3. The acquisition of products or services in the ordinary course

of business.

V

It is further ordered That, for a period of ten (10) years from the

date this order becomes final, respondent shall not, directly or

indirectly, through subsidiaries, partnerships or otherwise, without

providing advance written notification to the Commission, consummate

any joint venture or other arrangement with any other outpatient

surgery facility in the Municipality of Anchorage, Alaska, for the

joint establishment or operation of any new outpatient surgery

facility, or part thereof, in the Municipality of Anchorage, Alaska.

Such advance notification shall be filed immediately upon respondent's

issuance of a letter of intent for, or execution of an agreement to

enter into, such a transaction, whichever is earlier.

Said notification required by this Paragraph V of this order shall

be given on the Notification and Report Form set forth in the appendix

to part 803 of title 16 of the Code of Federal Regulations (as

amended), and shall be prepared and transmitted in accordance with the

requirements of that part, except that no filing fee will be required

for any such notification, notification need not be made to the United

States Department of Justice, and notification is required only of

respondent and not of any other party to the transaction. Respondent is

not required to observe any waiting period for said notification

required in this Paragraph V.

Respondent shall comply with reasonable requests by the Commission

staff for additional information concerning any transaction subject to

this Paragraph V of this order, within fifteen (15) days of service of

such requests.

Provided, however, that no transaction shall be subject to this

Paragraph V of this order if:

1. The fair market value of the assets to be contributed to the

joint venture or other arrangement by outpatient surgery facilities not

operated by respondent does not exceed one million dollars

($1,000,000);

2. The service, facility, or part thereof to be established or

operated in a transaction subject to this order is to engage in no

activities other than the provision of the following services: laundry;

data processing; purchasing; materials management; billing and

collection; dietary; industrial engineering; maintenance; printing;

security; records management; laboratory testing; personnel education;

testing, or training; or health care financing (such as through a

health maintenance organization or preferred provider organization); or

3. Notification is required to be made, and has been made, pursuant

to Section 7A of the Clayton Act, 15 U.S.C. Sec. 18a, or prior approval

by the Commission is required, and has been requested, pursuant to

Paragraph IV of this order.

VI

It is further ordered That, for a period of ten (10) years from the

date this order becomes final, respondent shall not permit all or any

substantial part of any outpatient surgery facility it operates in the

Municipality of Anchorage, Alaska to be acquired by any other person

(except pursuant to the divestiture required by Paragraph II of this

order) unless the acquiring person files with the Commission, prior to

the closing of such acquisition, a written agreement to be bound by the

provisions of this order, which agreement respondent shall require as a

condition precedent to the acquisition.

VII

It is further ordered That:

A. Within sixty (60) days after the date this order becomes final

and every sixty (60) days thereafter until the respondent has fully

complied with Paragraph II of this order, the respondent shall submit

to the Commission a verified written report setting forth in detail the

manner and form in which it intends to comply, is complying, and has

complied with Paragraph II of this order. Respondent shall include in

its 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 the order, including a description of all substantive

contracts or negotiations for the divestiture and the identity of all

parties contacted. Respondent shall also include in its compliance

reports copies of all written communications to and from such parties,

all internal memoranda, and all reports and recommendations concerning

divestiture.

B. One (1) year from the date this order becomes final, annually

for the next nine (9) years on the anniversary of the date this order

becomes final, and at other times as the Commission may require,

respondent shall file a verified written report with the Commission

setting forth in detail the manner and form in which it has complied

and it is complying with Paragraphs IV, V, and VI of this order.

VIII

It is further ordered That respondent shall notify the Commission

at least thirty (30) days prior to any proposed change in the corporate

respondent such as dissolution, assignment, sale resulting in the

emergence of a successor corporation, or the creation or dissolution of

subsidiaries, or any other change in the corporation that may affect

compliance obligations arising out of the order.

IX

It is further ordered That, for the purpose of determining or

securing compliance with this order, 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.

Schedule A

The assets to be divested (``Schedule A Assets'') shall consist of,

without limitation, all Assets and Businesses relating to the Alaska

Surgery Center, which were acquired by Columbia/HCA pursuant to the

Acquisition (including all improvements, additions and enhancements

made to such assets prior to divestiture).

* * * * *

It is further provided That to the extent that any of the

contracts, warranties with respect to Personal Property, licenses or

other interests in the Intangible Personal Property, or other Schedule

A Assets:

(A) Also applies to facilities or operations other than those

included in the Schedule A Assets, then during the period (the

``Contract Period'') beginning on the closing date of the Acquisition

and ending on the earlier of (1) the expiration of the term of the

given contract or other right and (2) the second anniversary of

Columbia/HCA's divestiture of the Schedule A Assets, Columbia/HCA, at

the request of the owner or acquirer of the Schedule A Assets, shall

use its reasonable best efforts to cause the services, property, or

other benefits provided or made available under such a contract or

other Schedule A Asset to continue to be available to the owner or

acquirer of the Schedule A Assets on terms and conditions substantially

similar to those presently in effect; or

(B) Requires the consent of a third party in order to transfer or

assign such Contract or other Schedule A Asset, then Columbia/HCA, at

the request of the owner or acquirer of the Schedule A Assets, shall

use its reasonable best efforts to obtain such consent and, if such

consent cannot be obtained, to cooperate in any reasonable arrangement

with the owner or acquirer of the Schedule A Assets designed to provide

to such owner or acquirer the benefits of the given contract or other

Schedule A Asset during the Contract Period on terms and conditions

substantially similar to those presently in effect.

Appendix I

Agreement to Hold Separate

This Agreement to Hold Separate (``Agreement'') is by and between

Columbia/HCA Healthcare Corporation (``respondent'' or ``Columbia/

HCA''), 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 201 West Main Street, Louisville, Kentucky 40202;

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. 41, et seq.

Whereas, on or about May 23, 1994, Columbia agreed to acquire all

of the stock of Medical Care America, Inc. (``Medical Care America''),

and thereby acquire Alaska Surgery Center, an outpatient surgical

facility in Anchorage, Alaska, and other Medical Care America assets,

including 95 other outpatient surgical facilities (the

``Acquisition''); 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 attached Agreement

Containing Consent Order (``Consent Order''), which would require the

divestiture of certain assets listed in Schedule A of the Consent Order

(``Schedule A Assets''), including the Alaska Surgery Center in

Anchorage, Alaska, 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 Schedule A 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 divestiture of the Schedule A Assets as described in

Paragraph II of the Consent Order and the Commission's right to have

Alaska Surgery Center continue as a viable independent outpatient

surgical facility; and

Wheres, the purpose of this Agreement and the Consent Order is to:

(i) Preserve Alaska Surgical Center as a viable independent

outpatient surgical facility pending its divestiture, and

(ii) Remedy any anticompetitive effects of the Acquisition;

Whereas, respondent's entering into this Agreement shall in no way

be construed as an admission by respondent that the Acquisition is

illegal; and

Whereas, respondent understands that no act or transaction

contemplated by this Agreement shall be deemed immune or exempt from

the provisions of the antitrust laws or the Federal Trade Commission

Act by reason of anything 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,

unless the Commission determines to reject the Consent Order, it will

not seek further relief from respondent with respect to the

Acquisition, except that the Commission may exercise any and all rights

to enforce this Agreement and the Consent Order to which it is annexed

and made a part thereof, and in the event the required divestiture is

not accomplished, to appoint a trustee to seek divestiture of the

Schedule A Assets pursuant to the Consent Order, 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 required by the Consent Order has

been completed.

3. Respondent will hold the Schedule A Assets as they are presently

constituted separate and apart on the following terms and conditions:

a. The Schedule A Assets, as they are presently constituted, shall

be held separate and apart and shall be operated independently of

respondent (meaning here and hereinafter, Columbia/HCA excluding the

Schedule A Assets), except to the extent that respondent must exercise

direction an control over the Schedule A 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 its acquisition of the stock of

Medical Care America, 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. Respondent shall

transfer all ownership and control of all Schedule A 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 Company Board'') shall have five members.

Respondent may elect the members of the New Company Board; provided,

however, that the New Company Board shall include no more than two

members who are a director, officer, employee, or agent of respondent

(``the respondent's New Company Board member(s)''). The New Company

Board shall include a chairman who is independent of respondent and is

competent to assure the continued viability and competitiveness of the

Schedule A Assets. Meetings of the New Company Board during the term of

this Agreement shall be stenographically transcribed and the

transcripts 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 Schedule A Assets, the

independent Chairman of the Board of the New Company, the New Company

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.

e. Respondent shall maintain the viability and competitiveness and

the marketability of the Schedule A Assets and shall not sell,

transfer, encumber (other than in the normal course of business), or

otherwise impair their viability and competitiveness or their

marketability.

f. Except for the respondents New Company Board members, 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 Schedule A Assets,

which employees shall be selected from Alaska Surgery Center's existing

employee base and may also be hired from sources other than Alaska

Surgery Center.

h. With the exception of the respondent's New Company Board

Members, respondent shall not change the composition of the New Company

Board unless the independent chairman consents. The independent

chairman shall have power to remove members of the New Company Board

for cause. Respondent shall not change the composition of the

management of the New Company except that the New Company 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, or 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 New Company Board. Nor shall the New Company or the

New Company 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 outpatient surgical facilities

in Anchorage, Alaska. 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

respondent from sources other than the New Company, 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

Company Board members shall not in their capacity as New Company Board

members, 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 Company Board members shall enter a confidentiality

agreement prohibiting disclosure of material confidential information.

The respondent's New Company Board members shall participate in matters

that come before the New Company 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 Company Board members shall not participate in any matter, or

attempt to influence the votes of the other members of the New Company

Board with respect to matters, that would involve a conflict of

interest if respondent and the New Company were separate and

independent entities.

l. If necessary to assure compliance with the terms of this

Agreement, the Consent Agreement, or the Consent Order, respondent may,

but is not required to, assign an individual to the New Company for the

purpose of overseeing such compliance (``on-site person''). The on-site

person shall have access to all officers and employees of the New

Company and such records of the New Company as he deems necessary and

reasonable to assure compliance. Such individual shall enter into a

confidentiality agreement prohibiting disclosure of material

confidential information.

m. 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 Company Board; provided that the New Company shall engage in a

transaction, material or otherwise, that is precluded by this

Agreement.

n. Respondent shall provide the New Company with sufficient working

capital to operate at its current rate of operation, and to carry out

any capital improvement plans for the New Company which have already

been approved.

o. During the period commencing on the date this Agreement is

effective and terminating on the earlier of (i) twelve months after the

date the Consent Order becomes final, or (ii) the date contemplated by

subparagraph 2.a (the ``Initial Divestiture Period''), respondent shall

make available for use by he New Company funds sufficient to perform

all necessary routine maintenance to, and replacements of, the Schedule

A Assets (``normal repair and replacement''). After termination of

Initial Divestiture Period and until the earlier of the date

contemplated by either subparagraph 2.a or 2.b, respondent shall make

available for use by the New Company each year an amount not less than

that required for 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 and competitiveness

and marketability of the Schedule A Assets.

4. Should the Federal Trade Commission seek in any proceeding to

compel respondent to divest any of the Schedule A Assets, as provided

in the Consent Order, or to seek any other injunctive or equitable

relief for any failure to comply with the Consent Order or this

Agreement, or in any way relating to the Acquisition, 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, respondent shall abide by the

terms of this Agreement or the Consent Order and shall not assert as a

defense such contract requirements in a civil penalty action brought by

the Commission to enforce the terms of this Agreement or Consent Order.

6. For the purpose of determining or securing compliance with this

Agreement, subject to any legally recognized privilege, and upon

written request with reasonable notice to respondent made to its

principal office, respondent shall permit any duly authorized

representative or representatives of the Commission:

a. Access during the office hours of respondent and in the presence

of counsel to inspect and copy all books, ledgers, accounts,

correspondence, memoranda, and other records and documents in the

possession, or under the control of respondent relating to compliance

with this Agreement;

b. Upon five (5) days notice to respondent, and without restraint

or interference from respondent, to interview officers or employees of

respondent, who may have counsel present, regarding any such matters.

7. This Agreement shall not be binding until approved by the

Commission.

Analysis of Proposed Consent Order Aid Public Comment

The Federal Trade Commission has accepted, subject to final

approval, a proposed consent order from Columbia/HCA Healthcare

Corporation (``Columbia''). The agreement would settle charges by the

Federal Trade Commission that Columbia's proposed acquisition of

outpatient surgery facilities from Medical Care America, Inc. (``MCA'')

would have violated Section 7 of the Clayton Act, and Section 5 of the

Federal Trade Commission Act, if it had been carried out.

The proposed consent order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

agreement and the comments received and will decide whether it should

withdraw from the agreement or issue and serve the agreement's proposed

order.

Columbia owns and operates acute care hospitals in various

localities, including an acute care hospital in the Anchorage, Alaska

area which provides outpatient surgery services. MCA owns and operates

ambulatory surgery centers in various localities, including Anchorage,

Alaska. The complaint accompanying the proposed consent order concerns

the proposed acquisition's impact upon competition for outpatient

surgery services in Anchorage. According to the complaint, Columbia

owns and operates Alaska Regional Hospital in Anchorage which provides

outpatient surgery services. MCA owns and operates the Alaska Surgery

Center in Anchorage.

The consent order, if issued in final form by the Commission, would

settle charges that the acquisition may substantially lessen

competition in Anchorage. The complaint alleges that Columbia and MCA

are competitors for outpatient surgery services in that market. The

outpatient surgery services market in Anchorage, according to the

complaint, is already highly concentrated, and entry by new competitors

would be difficult. The complaint alleges that the Commission has

reason to believe that the acquisition would have anticompetitive

effects in the Anchorage outpatient surgery services market, in

violation of Section 7 of the Clayton Act and Section 5 of the Federal

Trade Commission Act, unless an effective remedy eliminates such

anticompetitive effects.

The order accepted for public comment contains provisions requiring

the divestiture by Columbia of the MCA outpatient surgery facility,

Alaska Surgery Center, and related assets in Anchorage, Alaska. The

purpose of the divestiture is to ensure the continuation of the Alaska

Surgery Center as an ongoing, viable outpatient surgery facility

independent of Columbia, and to remedy the lessening of competition in

the Anchorage outpatient surgery services market resulting from the

acquisition.

The proposed order requires Columbia to obtain the approval of the

Commission for the divestiture of the Alaska Surgery Center. Under the

terms of the order, the required divestiture must be completed within

twelve months of the date the order becomes final. If the required

divestiture were not completed within the twelve-month period, Columbia

would consent to the appointment of a trustee, who would have twelve

additional months to effect the divestiture. The hold separate

agreement executed in conjunction with the consent agreement requires

Columbia, until the completion of the divestiture or as otherwise

specified, to hold separate and preserve all of the assets and

businesses of the Alaska Surgery Center.

The proposed order provides that approval by the Commission of the

divestiture shall be conditioned upon the agreement by the acquirer

that, for ten years from the date of the divestiture, it will not sell,

without the prior approval of the Commission, to another person

operating (or in the process of acquiring) any outpatient surgery

facility in Anchorage, Alaska.

The order would prohibit Columbia from acquiring any outpatient

surgery facility in Anchorage without the prior approval of the Federal

Trade Commission. It would also prohibit Columbia from transferring,

without prior Commission approval, any outpatient surgery facility it

operates in Anchorage to another person operating (or in the process of

acquiring) an outpatient surgery facility in the area. These

provisions, in combination, would give the Commission authority to

prohibit any substantial combination of the outpatient surgery services

operations of Columbia with those of any other outpatient surgery

facility in Anchorage, unless Columbia convinced the Commission that a

particular transaction would not endanger competition in Anchorage. The

provision would not apply to acquisitions or sales where the value of

the transferred assets is $1 million or less, and the provisions would

expire ten years after the order becomes final.

For ten years, the order would prohibit Columbia from transferring

all or any substantial part of any outpatient surgery facility in

Anchorage to another party without first filing with the Commission an

agreement by the transferee to be bound by the order.

The purpose of this analysis is to invite public comment concerning

the proposed order, to assist the Commission in its determination

whether to make the order final. This analysis is not intended to

constitute an official interpretation of the agreement and order or to

modify their terms in any way.

The agreement is for settlement purposes only and does not

constitute an admission by Columbia that its proposed acquisition would

have violated the law, as alleged in the Commission's complaint.

Donald S. Clark,

Secretary.

[FR Doc. 94-23583 Filed 9-22-94; 8:45 am]

BILLING CODE 6750-01-M