[Federal Register Volume 77, Number 198 (Friday, October 12, 2012)]
[Notices]
[Pages 62238-62240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-25140]
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FEDERAL TRADE COMMISSION
[File No. 121 0157]
Alan B. Miller and Universal Health Services; Analysis of
Agreement Containing Consent Orders To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of Federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint and the terms of the consent order--embodied in the consent
agreement--that would settle these allegations.
DATES: Comments must be received on or before November 7, 2012.
ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/uhsascendconsent/ online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``Universal Health
Services, File No. 121 0157''on your comment, and file your comment
online at https://ftcpublic.commentworks.com/ftc/uhsascendconsent/, by
following the instructions on the web-based form. If you prefer to file
your comment on paper, mail or deliver your comment to the following
address: Federal Trade Commission, Office of the Secretary, Room H-113
(Annex D), 600 Pennsylvania Avenue NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Janelle Filson (202-326-2882), FTC,
Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC
20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing 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 thirty (30) days. The
following Analysis to Aid Public Comment describes the terms of the
consent agreement, and the allegations in the complaint. An electronic
copy of the full text of the consent agreement package can be obtained
from the FTC Home Page (for October 5, 2012), on the World Wide Web, at
http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained from
the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue NW.,
Washington, DC 20580, either in person or by calling (202) 326-2222.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before November 7,
2012. Write ``Universal Health Services, File No. 121 0157'' on your
comment. Your comment--including your name and your state--will be
placed on the public record of this proceeding, including, to the
extent practicable, on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the
Commission tries to remove individuals' home contact information from
comments before placing them on the Commission Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which * * * is privileged or confidential,'' as discussed in Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
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\1\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/uhsascendconsent/ by following the instructions on the web-based
form. If this Notice appears at http://www.regulations.gov/#!home, you
also
[[Page 62239]]
may file a comment through that Web site.
If you file your comment on paper, write ``Universal Health
Services, File No. 121 0157'' on your comment and on the envelope, and
mail or deliver it to the following address: Federal Trade Commission,
Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue
NW., Washington, DC 20580. If possible, submit your paper comment to
the Commission by courier or overnight service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before November 7, 2012. You can find more
information, including routine uses permitted by the Privacy Act, in
the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
Analysis of Agreement Containing Consent Order To Aid Public Comment
I. Introduction and Background
The Federal Trade Commission (``Commission'') has accepted for
public comment, subject to final approval, an Agreement Containing
Consent Orders (``Consent Agreement'') from Alan B. Miller and
Universal Health Services, Inc. (collectively, ``UHS''). The purpose of
the proposed Consent Agreement is to remedy the anticompetitive effects
that otherwise would result from the merger of UHS with Ascend Health
Corporation (``Ascend''). Under the terms of the proposed Consent
Agreement, UHS is required to divest, within six months after the
Decision and Order is issued, its Peak Behavioral Health Services
facility (``Peak''), and all relevant assets and real property in the
local market encompassing El Paso, Texas and its suburb, Santa Teresa,
New Mexico (``El Paso/Santa Teresa''), to an acquirer that receives the
approval of the Commission. UHS will acquire University Behavioral
Health of El Paso, the Ascend facility, when the merger closes. To
ensure that the divested assets attract a buyer that can adequately
compete with UHS post-divestiture, the Consent Agreement requires a
second UHS hospital, Mesilla Valley Hospital (``Mesilla Valley''),
located in Las Cruces, New Mexico, to be divested if the original
divestiture assets are not sold to an approved buyer within the six-
month timeframe. UHS and Ascend have also agreed to hold the to-be-
divested assets separate, and to maintain the economic viability,
marketability, and competitiveness of both the Peak and Mesilla Valley
assets until the potential acquirer is approved by the Commission and
the divestiture is complete.
The proposed Consent Agreement has been placed on the public record
for thirty days to solicit comments from interested persons. Comments
received during this period will become part of the public record.
After thirty days, the Commission again will review the proposed
Consent Agreement and comments received, and decide whether it should
withdraw the Consent Agreement, modify the Consent Agreement, or make
it final.
On June 3, 2012, UHS agreed to acquire Ascend in a transaction
valued at approximately $517 million. The Commission's complaint
alleges that the proposed acquisition, if consummated, would violate
Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5
of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, by
removing an actual, direct, and substantial competitor from one local
market for acute inpatient psychiatric services. The proposed Consent
Agreement would remedy the alleged violations by requiring a complete
divestiture in the affected market. The divestiture will replace the
competition that otherwise would be lost in the El Paso/Santa Teresa
market as a result of the proposed acquisition.
II. The Parties
UHS, headquartered in King of Prussia, Pennsylvania, owns or
operates 25 general acute care hospitals and 198 behavioral health
facilities located in 36 states, Washington, DC, Puerto Rico, and the
U.S. Virgin Islands. It is one of the largest hospital management
companies in the United States, with 2011 revenues totaling
approximately $7.5 billion. In 2011, UHS's 198 behavioral health
facilities generated approximately $3.4 billion in revenue (25% of
total revenues) from nearly 19,000 licensed beds and over 5 million
patient days. The top revenue sources for its behavioral health centers
are commercial payors (38% of 2011 net revenue), Medicaid (24%), and
Medicare (17%). In November 2010, UHS completed its acquisition of
Psychiatric Solutions, Inc., which had operated the nation's largest
network of freestanding inpatient behavioral health facilities, subject
to an FTC consent order that required UHS to divest facilities in
Nevada, Delaware, and Puerto Rico.
Ascend, headquartered in New York, New York, owns or operates nine
behavioral health facilities located in Arizona, Oregon, Texas, Utah,
and Washington, including seven acute inpatient psychiatric hospitals,
a substance abuse residential treatment center, and an addiction
treatment center.
III. Acute Inpatient Psychiatric Services
UHS's proposed acquisition of Ascend poses substantial antitrust
concerns in the relevant product market of acute inpatient psychiatric
services provided to commercially insured patients. Acute inpatient
psychiatric services are those provided for the diagnosis, treatment,
and care of patients deemed to be a threat to themselves or others or
unable to perform basic life functions, due to an acute psychiatric
condition. Acute inpatient psychiatric care is distinct from other
psychiatric services such as partial hospitalization, intensive
outpatient programs, outpatient care, and residential treatment. Other,
less intensive, psychiatric services are not substitutes for acute
inpatient psychiatric services.
The acute inpatient psychiatric services market is local in nature.
Analysis of patient flow data and evidence gathered from market
participants indicate that patients and their families prefer to find
care as close to home as possible and to stay within the city where
they live or work. Accordingly, most residents of El Paso and Santa
Teresa obtain acute inpatient psychiatric services from providers
located in El Paso or Santa Teresa. Health plans also have internal
guidelines or regulatory ``geo-access'' standards requiring that
services be made available within a certain, usually short, distance
from their members. The acute inpatient psychiatric services market
affected by the proposed acquisition is thus limited to the El Paso/
Santa Teresa market.
The proposed acquisition would lead to a virtual monopoly in the
provision of acute inpatient psychiatric services provided to
commercially insured patients in the El Paso/Santa Teresa market, which
creates a strong presumption that the acquisition would create or
enhance market power or facilitate its exercise. The presumption of
anticompetitive harm is further supported by evidence of the close
competition between the UHS- and Ascend-owned facilities that would be
eliminated by the proposed merger. Consumers in El Paso/Santa Teresa
have benefitted from the head-to-head competition in the form of lower
health
[[Page 62240]]
care costs, higher quality of care, and improved service offerings.
Left unremedied, the proposed acquisition likely would cause
anticompetitive harm by enabling UHS to profit by unilaterally raising
the reimbursement rates negotiated with commercial health plans. These
costs are ultimately borne by consumers in the form of higher premiums,
co-pays, and other out-of-pocket costs. The loss of competition also
reduces UHS?s incentive to improve quality and provide better service.
New entry or expansion is unlikely to deter or counteract the
anticompetitive effects of the proposed acquisition. While regulatory
barriers to opening a new psychiatric facility or unit are lower in
Texas and New Mexico than in other states (e.g., there are no
Certificate of Need regulations in either state), local zoning
regulations, Medicaid and Medicare certifications, and the need to
develop strong relationships with local patient referral sources hinder
the ability of firms to enter the market. Cuts to Medicaid funding may
also affect the financial incentive of a provider to offer inpatient
psychiatric services. Thus, it is unlikely that new entry or expansion
sufficient to achieve a significant market impact will occur in a
timely manner.
IV. The Proposed Consent Agreement
The proposed Consent Agreement wholly remedies the anticompetitive
effects in the El Paso/Santa Teresa market by requiring UHS to divest
Peak, located in Santa Teresa, New Mexico, and its associated
operations and businesses within six months after issuance of the
Decision and Order. The potential acquirer of Peak is subject to prior
approval of the Commission. The Consent Agreement also provides that,
if Peak is not sold to an approved acquirer within six months, a
Divestiture Trustee will be appointed and empowered to divest both Peak
and Mesilla Valley. The purpose of this provision is to address the
uncertainty of whether Peak alone is sufficient to attract an acquirer
that would compete as effectively as UHS competed prior to the merger.
Until completion of the requisite divestiture(s), UHS is required
to abide by the Order to Hold Separate and Maintain Assets, which
includes a requirement that UHS hold Peak separate from its other
businesses and facilities, and a requirement to take all actions
necessary to maintain the economic viability, marketability, and
competitiveness of the both the Peak and Mesilla Valley assets. The
Consent Agreement also requires UHS to provide transitional services to
the approved acquirer for one year, as needed to assist the acquirer
with operating the divested assets as a viable and ongoing business. In
addition, the proposed order allows the Commission to appoint a Hold
Separate Trustee to oversee UHS's compliance with the Order to Hold
Separate and Maintain Assets. Finally, the proposed order contains a
ten-year prior notice requirement for acquisitions of acute inpatient
psychiatric service providers in the local area, as well as compliance
reporting requirements.
The sole purpose of this analysis is to facilitate public comment
on the Consent Agreement. This analysis does not constitute an official
interpretation of the Consent Agreement or modify its terms in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2012-25140 Filed 10-11-12; 8:45 am]
BILLING CODE 6750-01-P