Columbia Healthcare Corporation, et al.; Proposed Consent Agreement with Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 941 0005]

Columbia Healthcare Corporation, et al.; 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

require, among other things, the respondents to divest the HCA Aiken

Regional Medical Center, in South Carolina, to Commission-approved

acquirers and to complete the divestiture within twelve months, or else

consent to the appointment of a trustee to consummate the divestiture.

In addition, the order would prohibit the respondents from acquiring or

transferring, without prior Commission approval, any acute care

hospital in the Augusta-Aiken area.

DATES: Comments must be received on or before May 3, 1994.

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

room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Oscar Voss, FTC/S-3115, 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

In the Matter of: Columbia Healthcare Corporation, a

corporation, and HCA-Hospital Corporation of America, a corporation.

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

investigation into the proposed acquisition of HCA-Hospital Corporation

of America (``HCA'') by Columbia Healthcare Corporation (``Columbia''),

and it now appearing that Columbia and HCA, hereinafter sometimes

referred to as proposed respondents, are willing to enter into an

agreement containing an order to divest certain assets and to cease and

desist from certain acts;

It is hereby agreed by and between Columbia and HCA, by their duly

authorized officers and attorneys, and counsel for the Federal Trade

Commission that:

1. Proposed respondent Columbia Healthcare Corporation is 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.

2. Proposed respondent HCA-Hospital Corporation of America is 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.

3. Proposed respondents admit all the jurisdictional facts set

forth in the draft of complaint here attached.

4. Proposed respondents waive:

(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.

5. 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 respondents, 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.

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

constitute an admission by proposed respondents 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.

7. 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 proposed

respondents, (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 in

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

respect thereto. When so entered, the order to divest and to cease and

desist 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 proposed respondents'

addresses as stated in this agreement shall constitute service.

Proposed respondents waive any right they 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.

8. Proposed respondents have read the proposed complaint and order

contemplated hereby. They understand that once the order has been

issued, they may be required to file one or more compliance reports

showing that they have fully complied with the order. Proposed

respondents further understand that they 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'' means Columbia Healthcare Corporation, a

corporation organized, existing and doing business under and by virtue

of the laws of Delaware, with its principal place of business at 201

West Main Street, Louisville, Kentucky 40202, as well as its directors,

officers, employees, agents, representatives, parents, divisions

subsidiaries, affiliates, and their respective successors and assigns,

and the directors, officers, employees, agents, or representatives of

Columbia's divisions, subsidiaries, affiliates, and their respective

successors and assigns.

B. ``HCA'' means HCA-Hospital Corporation of America, 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, as well as its directors, officers,

employees, agents, representatives, parents, divisions, subsidiaries,

affiliates, and their respective successors and assigns, and the

directors, officers, employees, agents, or representatives of HCA's

divisions, subsidiaries, affiliates, and their respective successors

and assigns.

C. ``Respondents'' means Columbia and HCA, collectively and

individually.

D. ``Acute care hospital'' means a health facility, other than a

federally owned facility, having a duly organized governing body with

overall administrative and professional responsibility, and an

organized medical staff, that provides 24-hour inpatient care, as well

as outpatient services, and having as a primary function the provision

of inpatient services for medical diagnosis, treatment, and care of

physically injured or sick persons with short-term or episodic health

problems or infirmities.

E. To ``acquire an acute care hospital'' means to directly or

indirectly acquire the whole or any part of the assets of an acute care

hospital; to acquire the whole or any part of the stock or share

capital of, the right to designate directly or indirectly directors or

trustees of, or any equity or other interest in, any person which

operates an acute care hospital; or to enter into any other arrangement

to obtain direct or indirect ownership, management or control of an

acute care hospital or any part thereof, including but not limited to a

lease of or management contract for an acute care hospital.

F. To ``operate an acute care hospital'' means to own, lease,

manage, or otherwise control or direct the operations of an acute care

hospital, directly or indirectly.

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

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

it is affiliated.

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

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

entity, including any governmental agency.

I. ``Augusta-Aiken'' means the three-county area consisting of the

counties of Richmond and Columbia in Georgia and Aiken County in South

Carolina.

J. ``HCA Aiken Regional Medical Center'' means the general acute

care hospital currently owned and operated by HCA at 202 University

Parkway, Aiken, South Carolina 29801, all of its title, properties,

stock, rights, privileges, and other assets and interests, and all

other related HCA assets and interests in Augusta-Aiken, of whatever

nature, tangible and intangible, including without limitation all

medical office buildings, other buildings, machinery, equipment, and

other property of whatever description, except for accounts receivable

and cash.

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

II

It is further ordered that: A. Within twelve (12) months after the

date this Order becomes final, respondents shall divest, absolutely and

in good faith, HCA Aiken Regional Medical Center. HCA Aiken Regional

Medical Center shall be divested 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. A condition of approval

by the Commission of the divestiture shall be a written agreement by

the party or parties acquiring HCA Aiken Regional Medical Center that

it will not sell for a period of ten (10) years from the date of the

divestiture, directly or indirectly, through subsidiaries, partnerships

or otherwise, without the prior approval of the Commission, HCA Aiken

Regional Medical Center to any other person who operates, or will

operate immediately following such sale, any other acute care hospital

in Augusta-Aiken. The purpose of the divestiture required by this Order

is to ensure the continuation of HCA Aiken Regional Medical Center as

an ongoing, viable acute care hospital and to remedy the lessening of

competition alleged in the Commission's compliant.

B. Respondents 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 respondents have

divested HCA Aiken Regional Medical Center or until such other time

provided in the Agreement to Hold Separate.

C. Pending divestiture, respondents shall take such action as is

necessary to maintain the viability and marketability of HCA Aiken

Regional Medical Center and shall not cause or permit the destruction,

removal or impairment of any assets or businesses of HCA Aiken Regional

Medical Center, except in the ordinary course of business and except

for ordinary wear and tear.

III

It is further ordered that: A. If respondents have not divested,

absolutely and in good faith and with the prior approval of the

Commission, HCA Aiken Regional Medical Center as required by Paragraph

II of this Order within twelve (12) months after the date this Order

becomes final, the Commission may appoint a trustee and respondents

shall consent to the appointment of a trustee by the Commission to

effect the divestiture required by Paragraph II of this Order. In the

event the Commission or the Attorney General brings an action pursuant

to Section 5(l) of the Federal Trade Commission Act, 15 U.S.C. 45 (l)

or any other statute enforced by the Commission, respondents shall

similarly 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 a civil penalties or any other relief

available to it, including a court-appointed trustee, pursuant to

section 5(l) of the Federal Trade Commission Act, or any other statute

enforced by the Commission, for any failure by the respondents 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, respondents shall consent to the

following terms and conditions regarding the trustee's powers,

authorities, duties and responsibilities:

1. The Commission shall select the trustee, subject to the

consent of respondents, which consent shall not be unreasonably

withheld. The trustee shall be a person with experience and

expertise in acquisitions and divestitures of acute care hospitals.

If respondents have not opposed, in writing, the selection of any

trustee within ten (10) days after notice by the staff of the

Commission to respondents of the identity of any proposed trustee,

respondents shall be deemed to have consented to the selection of

the proposed trustee.

2. The trustee shall have the exclusive power and authority,

subject to the prior approval of the Commission, to divest HCA Aiken

Regional Medical Center.

3. The trustee shall have eighteen (18) months from the date of

approval of the trust agreement described in Paragraph III.B.8 of

this Order to accomplish the divestiture, which shall be subject to

the prior approval of the Commission. If, however, at the end of the

eighteen-month period the trustee has submitted a plan of

divestiture or believes that divestiture can be accomplished within

a reasonable time, the divestiture period may be extended by the

Commission, or by the Court for a court-appointed trustee; provided,

however, that the divestiture period may only be extended two (2)

times.

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

personnel, books, records and facilities relating to HCA Aiken

Regional Medical Center, or any other relevant information, as the

trustee may reasonably request. Respondents shall develop such

financial or other information as such trustee may reasonably

request and shall cooperate with any reasonable request of the

trustee. Respondents shall take no action to interfere with or

impede the trustee's accomplishment of the divestiture. Any delays

in divestiture caused by respondents shall extend the time for the

divestiture under this Paragraph III in an amount equal to the

delay, as determined by the Commission or the Court for a court-

appointed trustee.

5. Subject to respondents' absolute and unconditional obligation

to divest at no minimum price and the purpose of the divestiture as

stated in Paragraph II of this Order, the trustee shall use his or

her best efforts to negotiate the most favorable price and terms

available with each acquiring entity for the divestiture of HCA

Aiken Regional Medical Center. The divestiture shall be made in the

manner set out in Paragraph II of this Order; provided, however,

that 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 or entities selected by respondents from among

those approved by the Commission.

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

the cost and expense of respondents, on such reasonable and

customary terms and conditions as the Commission or a Court may set.

The trustee shall have authority to employ, at the cost and expense

of respondents, such consultants, accountants, attorneys, investment

bankers, business brokers, appraisers, or other representatives and

assistants as are reasonably 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 respondents 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

divestiture through the trustee.

7. Respondents shall indemnify the trustee and hold the trustee

harmless against any losses, claims, damages, or liabilities arising

in any manner out of, or in connection with, the trustee's duties

under this Order.

8. Within thirty (30) days after appointment of the trustee, and

subject to the prior approval of the Commission and, in the case of

a court-appointed trustee, of the Court, respondents shall execute a

trust agreement that transfers to the trustee all rights and powers

necessary to permit the trustee to effect the divestiture required

by this Order.

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 HCA Aiken Regional Medical Center.

12. The trustee shall report in writing to respondents and to

the Commission every sixty (60) days concerning the trustee's

efforts to accomplish the divestiture.

IV

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

date this Order becomes final, no respondent shall, without the prior

approval of the Commission, directly or indirectly, through

subsidiaries, partnerships, or otherwise:

A. Acquire any acute care hospital in Augusta-Aiken; or

B. Permit any acute care hospital it operates in Augusta-Aiken

to be acquired by any person that operates, or will operate

immediately following such acquisition, any other acute care

hospital in Augusta-Aiken.

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

Paragraph IV of this Order if the fair market value of (or, in case of

a purchase acquisition, the consideration to be paid for) the acute

care hospital or part thereof to be acquired does not exceed one

million dollars ($1,000,000).

V

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

date this Order becomes final, respondents shall not permit all or any

substantial part of any acute care hospital they operate in Augusta-

Aiken 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 respondents shall require as a condition

precedent to the acquisition.

VI

It is further ordered that, for the purposes of determining or

securing compliance with this Order, and subject to any legally

recognized privilege, upon written request and on reasonable notice to

respondents made at their principal offices, respondents shall permit

any duly authorized representatives 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 all other records and documents in respondents'

possession or control relating to any matter contained in this

Order; and

B. Upon five days' notice to respondents and without restraint

or interference from respondents, to interview their officers or

employees, who may have counsel present, regarding such matters.

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

respondents have fully satisfied the divestiture obligations of this

Order, respondents shall submit to the Commission a verified written

report setting forth in detail the manner and form in which they intend

to comply, are complying, and have complied with the Order. Respondents

shall include in their compliance reports, among other things that are

required from time to time, a full description of all contacts or

negotiations with prospective acquirers for the divestiture required by

this Order, including the identity of all parties contacted.

Respondents also shall include in their compliance reports copies of

all written communications to and from such parties, and all internal

memoranda, reports, and recommendations concerning the required

divestiture.

B. Annually, beginning on the first anniversary of the date this

Order becomes final, and continuing for nine (9) years thereafter,

respondents shall submit a verified report demonstrating the manner in

which they have complied and are complying with this Order.

VIII

It is further ordered that respondents shall notify the Commission

at least thirty (30) days prior to any proposed change, such as

dissolution, assignment, sale resulting in the emergence of a successor

corporation or association, the creation or dissolution of subsidiaries

or affiliates, or any other change in respondents which may affect

compliance obligations arising out of this Order.

Appendix I--Agreement to Hold Separate

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

Columbia Healthcare Corporation, 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 HCA-Hospital Corporation of America, 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 (collectively

and individually referred to as ``respondents''); and the Federal Trade

Commission (the ``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. (collectively, the ``Parties'').

Whereas, on or about October 2, 1993, Columbia Healthcare

Corporation entered into an agreement to acquire all of the voting

stock of HCA-Hospital Corporation of America (hereinafter 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

divestiture of HCA Aiken Regional Medical Center (``ARMC'') in Aiken,

South Carolina, 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 assets and

businesses of ARMC during the period prior to the issuance of the

Consent Order by the Commission (after the 60-day public notice

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 ARMC as described in Paragraph II of the

Consent Order, and the Commission's right to seek to restore ARMC as a

viable independent acute care hospital; and

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

(i) Preserve ARMC as a viable independent acute care hospital

pending its divestiture, and

(ii) Remedy any anticompetitive effects of the Acquisition; and

Whereas, respondents' entering into this Agreement shall in no way

be construed as an admission by respondents that the Acquisition is

illegal; and

Whereas, respondents understand 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,

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

not seek further relief from respondents 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 seek divestiture of ARMC as held separate pursuant

to this Agreement, as follows:

1. Respondents agree to execute and be bound by the attached

Consent Order.

2. Respondents agree that from the date this Agreement is

accepted until the earliest of the dates listed in subparagraphs

2.a-2.c, they will comply with the provisions of paragraph 3 of this

Agreement.

a. Three 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;

b. 120 days after publication in the Federal Register of the

Consent Order, unless by that date the Commission has issued such

Order; or

c. The day after the divestiture required by the Consent Order

has been completed.

3. Respondents will hold the assets and businesses of ARMC as

they are presently constituted separate and apart on the following

terms and conditions:

a. ARMC, as it is presently constituted, shall be held separate

and apart and shall be operated independent of respondents (meaning

here and hereinafter, respondents excluding ARMC) except to the

extent that respondents must exercise direction and control over

ARMC to assure compliance with this Agreement.

b. Respondents shall not exercise direction or control over, or

influence directly or indirectly, ARMC or any of its operations or

businesses; provided, however, that respondents may exercise only

such direction and control over ARMC as is necessary to assure

compliance with this Agreement.

c. Respondents shall maintain the viability and marketability of

ARMC and shall not sell, transfer, encumber (other than in the

normal course of business), or otherwise impair its marketability or

viability.

d. Except for the single respondent director, officer, employee,

or agent serving on the ``New Board'' or ``Management Committee''

(as defined in subparagraph 3..h), respondents shall not permit any

director, officer, employee, or agent of respondents to also be a

director, officer or employee of ARMC.

e. Except as required by law, and except to the extent that

necessary information is exchanged in the course of evaluating the

Acquisition, defending investigations or litigation, or negotiating

agreements to dispose of assets, respondents shall not receive or

have access to, or use or continue to use, any ``material

confidential information'' of ARMC not in the public domain. Any

such information that is obtained pursuant to this subparagraph

shall only be used for the purpose set out in this subparagraph.

(``Material confidential information,'' as used herein, means

competitively sensitive or proprietary information not independently

known to respondents from sources other than ARMC, and includes but

is not limited to customer lists, price lists, marketing methods,

patents, technologies, processes, or other trade secrets.)

f. Respondents shall not change the composition of the

management of ARMC except that the directors or members serving on

the New Board or Management Committee of ARMC (as defined in

subparagraph 3.h) shall have the power to remove employees for

cause.

g. All material transactions, out of the ordinary course of

business and not precluded by subparagraphs 3.a-3.f hereof, shall be

subject to a majority vote of the New Board or Management Committee

(as defined in subparagraphs 3.h).

h. Respondents shall either separately incorporate ARMC and

adopt new Articles of Incorporation and By-laws that are not

inconsistent with other provisions of this Agreement or establish

separate business ventures with articles of agreement covering the

conduct of ARMC in accordance with this Agreement. Respondents shall

also elect a new three person board of directors (``New Board'') or

Management Committee (``Management Commenttee'') of ARMC.

Respondents may elect the directors to the New Board or select the

members of the Management Committee; provided, however, that such

New Board or Management Committee shall include no more than one

respondent director, officer, employee, or agent. Except as

permitted by this Agreement, the director of the New Board or member

of the Management Committee who is also a respondent director,

officer, employee or agent, shall not receive in his or her capacity

as a New Board director or Management Committee member material

confidential information and shall not disclose any such information

received under this Agreement to respondents or use it to obtain any

advantage for respondents. Said director of the New Board or member

of the Management Committee who is also a respondent director,

officer, employee or agent, shall enter a confidentiality agreement

prohibiting disclosure of material confidential information (as that

term is defined in subparagraph 3.e). Such New Board director or

Management Committee member shall participate in matters which come

before the New Board or Management Committee only for the limited

purpose of considering a capital investment or other transaction

exceeding $1,000,000 and carrying out respondents' responsibility to

assure that ARMC is maintained in such manner as will permit its

divestiture as an ongoing, viable acute care hospital. Except as

permitted by this Agreement, such New Board director or Management

Committee member shall not participate in any matter, or attempt to

influence the votes of the other directors or Management Committee

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

interest if respondents and ARMC were separate and independent

entities. Meetings of the New Board or Management Committee during

the term of this Agreement shall be stenographically transcribed and

the transcripts retained for two (2) years after the termination of

this Agreement.

i. All earnings and profits of ARMC shall be retained separately

in ARMC. If necessary, respondents shall provide ARMC with

sufficient working capital to operate at its current rate of

operation, and to carry out any capital improvement plans for ARMC

which have already been approved.

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

compel respondents (meaning here and hereinafter respondents

including ARMC) to divest ARMC, or to seek any other injunctive or

equitable relief, respondents 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. Respondents also waive all rights to

contest the validity of this Agreement.

4. 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 respondents made to

their principal officer, respondents shall permit any duly

authorized representative or representatives of the Commission:

a. Access during the office hours of respondents 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 respondents relating to

compliance with this Agreement;

b. Upon five (5) days' notice to respondents, and without

restraint or interference from respondents, to interview officers or

employees of respondents, who may have counsel present, regarding

any such matters.

5. This agreement shall not be binding until approved by the

Commission.

Analysis of Proposed Consent Order to Aid Public Comment

The Federal Trade Commission has accepted, subject to final

approval, and agreement to a proposed consent order from Columbia

Healthcare Corporation (``Columbia'') and HCA-Hospital Corporation of

America (``HCA''). The agreement would settle charges by the Federal

Trade Commission that Columbia's proposed acquisition of 100 percent of

the voting stock of HCA 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.

Both Columbia and HCA (the ``respondents'') own and operate acute

care hospitals in various states, including acute care hospitals in a

three-county urban area that includes the cities of Augusta, Georgia,

and Aiken, South Carolina (``Augusta-Aiken''). The complaint

accompanying the proposed consent order concerns the proposed

acquisition's impact upon competition for acute care hospital services

in Augusta-Aiken. According to the complaint, Columbia owns and

operates Augusta Regional Medical Center in Augusta, Georgia. HCA owns

and operates HCA Aiken Regional Medical Center, located about 15 miles

northeast of Augusta, Georgia in Aiken, South Carolina.

The consent order would, if finally accepted by the Commission,

settle charges that the acquisition may substantially lessen

competition in the Augusta-Aiken hospital market. The complaint alleges

that Columbia and HCA are competitors in the market for acute care

hospital services in Augusta-Aiken. The Augusta-Aiken hospital market,

according to the complaint, was 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 Augusta-Aiken hospital 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 of HCA Aiken Regional Medical Center in Aiken, South

Carolina. The purpose of the divestiture is to ensure the continuation

of HCA Aiken Regional Medical Center as an ongoing, viable acute care

hospital independent of Columbia, and to remedy the lessening of

competition in the Augusta-Aiken hospital market resulting from the

acquisition.

The proposed order allows the respondents to divest HCA Aiken

Regional medical Center to one or more acquirers with the prior

approval of the Commission. Under the terms of the order, the required

divestiture would be completed within twelve months of the date the

order becomes final. If the required divestiture were not completed

within the twelve-month period, the respondents would consent to the

appointment of a trustee, who would have eighteen additional months to

effect the divestiture. The hold separate agreement executed as part of

the consent order requires the respondents, until the completion of the

divestiture or as otherwise specified, to hold separate and preserve

all of the assets and businesses of HCA Aiken Regional Medical 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, HCA Aiken Regional

Medical Center to another person operating (or in the process of

acquiring) any other acute care hospital in the area.

The order would prohibit the respondents from acquiring any acute

care hospital in Augusta-Aiken without the prior approval of the

Federal Trade Commission. It would also prohibit the respondents from

transferring, without prior Commission approval, any acute care

hospital they operate in Augusta-Aiken to another person operating (or

in the process of acquiring) an acute care hospital in the area. These

provisions, in combination, would give the Commission authority to

prohibit any substantial combination of the acute care hospital

operations of the respondents with those of any other acute care

hospital in Augusta-Aiken, unless the respondents convinced the

Commission that a particular transaction would not endanger competition

in the Augusta-Aiken hospital market. The provisions 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 the respondents from

transferring all or any substantial part of any hospital in Augusta-

Aiken to a non-respondent 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 the respondents that their proposed

acquisition would have violated the law, as alleged in the Commission's

compliant.

Donald S. Clark,

Secretary.

Statement of Commissioner Mary L. Azcuenaga Concurring in Part and

Dissenting in Part Columbia Healthcare Corp./HCA

Having reason to believe that the Columbia Healthcare Corporation's

acquisition of HCA-Hospital Corporation of America may substantially

lessen competition in the Augusta, Georgia-Aiken, South Carolina

market, I concur in the decision to require divestiture of the Aiken

Regional Medical Center. I dissent from the decision not to challenge

the transaction with respect to the Chattanooga, Tennessee market.

In Chattanooga, the merger will combine HCA's Parkridge Medical

Center and Columbia's East Ridge Hospital in an already highly

concentrated market. In 1985, after a full administrative hearing, the

Commission ordered HCA to divest certain assets, including North Park

Hospital, which has considerable similarity to East Ridge. Hospital

Corporation of America, 106 F.T.C. 361, aff'd, 807 F.2d 1381 (7th Cir.

1986). Although some characteristics of the Chattanooga hospital market

may have changed since 1985, I am not persuaded that the competitive

situation is so fundamentally different to justify abandonment of the

Commission's earlier position.

Dissenting Statement of Commissioner Deborah K. Owen In the Matter of

Columbia Healthcare Corporation, et al.

The Commission is today issuing for public comment a proposed

consent agreement in connection with the merger of two of the nation's

largest hospital chains, Columbia Healthcare Corporation (``Columbia'')

and HCA-Hospital Corporation of America (``HCA''). The proposed consent

agreement permits the merger to go forward, but requires the combined

firm to divest one of its two hospitals in the Augusta, Georgia/Aiken,

South Carolina area. I dissent from the decision to accept this consent

agreement, principally because I do not find reason to believe that,

after the merger, anticompetitive effects are likely in that geographic

market.

I cannot, however, conclude with reasonable confidence that the

proposed merger has no anticompetitive effects in any hospital market

across the country. There is evidence (although incomplete) that in one

market, the consolidation of the Columbia and HCA hospitals may create

a monopoly that could injure consumers.

In that matter, one of the hospitals satisfies the statistical

criteria for the hospital merger ``safety zone'' as set forth in the

Statements of Enforcement Policy in the Health Care Area, adopted in

September 1993 by the Department of Justice and the Federal Trade

Commission (over my dissent).\1\ Based on its size alone, the

acquisition of this hospital has been declared by the federal

enforcement agencies to be immune from antitrust review.\2\

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\1\Department of Justice and Federal Trade Commission Antitrust

Enforcement Policy Statements in the Health Care Area, 4 Trade Reg.

Rep. (CCH)  13,150; Dissenting Statement of Commissioner Deborah K.

Owen on DOJ/FTC Antitrust Enforcement Policy Statements in the

Health Care Area (September 14, 1993).

\2\Department of Justice and Federal Trade Commission Antitrust

Enforcement Policy Statements in the Health Care Area, 4 Trade Reg.

Rep. (CCH)  13,150 at 20,757:

The Agencies will not challenge any merger between two general

acute-care hospitals where one of the hospitals (1) has an average

of fewer than 100 licensed beds over the three most recent years,

and (2) has an average daily inpatient census of fewer than 40

patients over the three most recent years, absent extraordinary

circumstances. This antitrust safety zone will not apply if that

hospital is less than 5 years old.

It is not clear what constitutes ``extraordinary circumstances''

within the contemplation of the Policy Statement. The Commission's

action today may, however, be viewed as implicit support for the

proposition that a merger to monopoly does not qualify as an

``extraordinary circumstance.''

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This is not to suggest that the Commission is indifferent to the

monopolization of all hospital markets. Last week, the Commission voted

unanimously to authorize staff to file a preliminary injunction to

prevent the merger to monopoly of the only two acute care hospitals in

Pueblo, Colorado.\3\ In Pueblo, the requirements of the hospital merger

``safety zone'' were not satisfied, so a full investigation and

analysis of the likely competitive effects of the merger were

undertaken, in accordance with the 1992 Horizontal Merger

Guidelines.\4\ In such a traditional analysis, the Commission considers

whether the merging hospitals are economically viable, whether

significant efficiencies may be achieved by combining the hospitals,

whether these efficiencies are merger-specific, and whether cost

savings are likely to be passed on to consumers in the form of lower

prices or higher quality. Most critically, whether the anticipated

efficiency benefits outweigh the substantial anticompetitive risks

associated with the creation of a monopoly is also evaluated. Under a

Guidelines analysis, the Commission's action in the Pueblo merger

suggests a conclusion that the likely anticompetitive effects outweigh

the possible efficiencies stemming from the merger.

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\3\Parkview Episcopal Medical Center, FTC File No. 931-0125.

\4\U.S. Department of Justice and Federal Trade Commission

Horizontal Merger Guidelines, reprinted in 4 Trade Reg. Rep. (CCH) 

13,104 (Apr. 2, 1992).

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The Commission did not, however, conduct a thorough investigation

of the market in which the merger of Columbia and HCA may have created

a monopoly. The Commission abandoned its traditional approach to merger

analysis upon determining that the HCA hospital falls within the

``antitrust safety zone.''

In sum, the Antitrust Enforcement Policy Statements in the Health

Care Area may have claimed their first casualty. Perhaps a full

investigation would have demonstrated that the merger, though creating

a monopoly, posed no anticompetitive problem. But we will never know at

the level of confidence that consumers have a right to expect of us. I

therefore dissent.