Columbia/HCA Healthcare Corporation.; Consent Agreement With Analysis to Aid Public Comment

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

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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,

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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

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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

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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

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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