[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Notices]
[Pages 5409-5412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-01942]
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FEDERAL TRADE COMMISSION
[File No. 131 0202]
Community Health Systems, Inc. and Health Management Associates,
Inc.; Analysis of Agreement Containing Consent Orders to Aid Public
Comment
AGENCY: Federal Trade Commission.
[[Page 5410]]
ACTION: Proposed Consent Agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis of Agreement Containing Consent Orders to Aid
Public Comment describes both the allegations in the draft complaint
and the terms of the consent orders--embodied in the consent
agreement--that would settle these allegations.
DATES: Comments must be received on or before February 21, 2014.
ADDRESSES: Interested parties may file comments at https://ftcpublic.commentworks.com/ftc/chshealthmanagementconsent online or on
paper, by following the instructions in the Request for Comments part
of the SUPPLEMENTARY INFORMATION section below. Write ``Community
Health Systems, Inc., and Health Management Associates, Inc.--Consent
Agreement; File No. 131-0202'' on your comment and file your comment
online at https://ftcpublic.commentworks.com/ftc/chshealthmanagementconsenthttps://ftcpublic.commentworks.com/ftc/fidelitynationalconsent by following the instructions on the web-based
form. If you prefer to file your comment on paper, mail or deliver your
comments to the following address: Federal Trade Commission, Office of
the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW.,
Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Katherine A. Ambrogi, Bureau of
Competition, (202-326-2205), 600 Pennsylvania Avenue NW., Washington,
DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing consent orders to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, having been
placed on the public record for a period of thirty (30) days. The
following Analysis to Aid Public Comment describes the terms of the
consent agreement, and the allegations in the complaint. An electronic
copy of the full text of the consent agreement package can be obtained
from the FTC Home Page (for January 22, 2014), on the World Wide Web,
at http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained
from the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue
NW., Washington, DC 20580, either in person or by calling (202) 326-
2222.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before February 21,
2014. Write ``Community Health Systems, Inc., and Health Management
Associates, Inc.--Consent Agreement; File No. 131-0202'' on your
comment. Your comment--including your name and your state--will be
placed on the public record of this proceeding, including, to the
extent practicable, on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the
Commission tries to remove individuals' home contact information from
comments before placing them on the Commission Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which . . . is privileged or confidential,'' as discussed in Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
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\1\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comment online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/chshealthmanagementconsent by following the instructions on the
web-based forms. If this Notice appears at http://www.regulations.gov/#!home, you also may file a comment through that Web site.
If you file your comment on paper, write ``Community Health
Systems, Inc., and Health Management Associates, Inc.--Consent
Agreement; File No. 131-0202'' on your comment and on the envelope, and
mail or deliver it to the following address: Federal Trade Commission,
Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue
NW., Washington, DC 20580. If possible, submit your paper comment to
the Commission by courier or overnight service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before February 21, 2014. You can find more
information, including routine uses permitted by the Privacy Act, in
the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
Analysis of Agreement Containing Consent Orders To Aid Public Comment
I. Introduction and Background
The Federal Trade Commission (``Commission'') has accepted for
public comment, subject to final approval, an Agreement Containing
Consent Orders (``Consent Agreement'') from Community Health Systems,
Inc. (``CHS'') and Health Management Associates, Inc. (``HMA''). The
purpose of the proposed Consent Agreement is to remedy the
anticompetitive effects that otherwise would result from CHS's
acquisition of HMA. The proposed Consent Agreement requires CHS to
divest the Riverview Regional Medical Center (``Riverview'') and all
associated operations and businesses in and around Gadsden, Alabama,
and the Carolina Pines Regional Medical Center (``Carolina Pines'') and
all associated operations and businesses in and around Hartsville,
South Carolina, to a Commission-approved acquirer, and in a manner
approved by the Commission, within six months after the Decision and
Order is issued. Under the proposed Consent Agreement, CHS also is
required to hold separate the to-be-divested assets and maintain the
[[Page 5411]]
economic viability, marketability, and competitiveness of the
divestiture assets, until the potential acquirer is approved by the
Commission and the divestiture is complete. Finally, CHS is required to
provide the Commission prior notice of any acquisition of a GAC
services provider in the Gadsden Metropolitan Statistical Area and the
Florence Metropolitan Statistical Area for ten years.
The proposed Consent Agreement has been placed on the public record
for thirty days to solicit comments from interested persons. Comments
received during this period will become part of the public record.
After thirty days, the Commission again will review the proposed
Consent Agreement and comments received, and decide whether it should
withdraw the Consent Agreement, modify the Consent Agreement, or make
it final.
On July 29, 2013, CHS and HMA signed a merger agreement pursuant to
which CHS agreed to acquire HMA for $7.6 billion. The Commission's
complaint alleges that the proposed acquisition, if consummated, would
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and
Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C.
45, by removing an actual, direct, and substantial competitor from two
local markets in Alabama and South Carolina for general acute care
inpatient services sold to commercial health plans. The proposed
Consent Agreement would remedy the alleged violations by requiring
complete divestitures in the affected markets. The divestitures will
replace the competition that otherwise would be lost in the Alabama and
South Carolina markets because of the proposed acquisition.
II. The Parties
Headquartered in Franklin, Tennessee, CHS is a for-profit health
system that owns 135 hospitals with approximately 20,000 licensed beds
in 29 states. CHS is the second-largest U.S. hospital chain and one of
the largest publicly-traded operators of hospitals in the United
States. CHS generated approximately $13 billion in revenue in 2012.
HMA is a for-profit health system headquartered in Naples, Florida
that owns 71 hospitals in 15 states, primarily in the southeastern
United States. In 2012, HMA generated $5.9 billion in revenue.
III. General Acute Care Inpatient Services
CHS's proposed acquisition of HMA poses substantial antitrust
concerns in the relevant product market of general acute care inpatient
services (``GAC services'') provided to commercially insured patients.
GAC services consist of a broad cluster of routine inpatient services
that require an overnight hospital stay. They are sold to commercial
health plans, which sell benefit plans to commercially insured
patients. GAC services do not include services related to psychiatric
care, substance abuse, and rehabilitation services. Likewise,
outpatient services are not included in GAC services because such
services are characterized by different competitive conditions (e.g.,
different competitors, lower entry barriers) and because health plans
and their members generally cannot substitute those services for
inpatient services in response to a small but significant and non-
transitory increase in price.
GAC services markets are local in nature. Evidence gathered from
market participants shows that patients strongly prefer to receive care
as close to home as possible and to stay within the area where they
live or work. Accordingly, the proposed acquisition raises serious
antitrust concerns in two local markets for patients seeking GAC
services: (1) The area that approximates Etowah County and includes the
City of Gadsden, Alabama (the ``Gadsden Area''); and (2) the area that
approximates Darlington County, South Carolina (the ``Darlington County
Area'').
The proposed acquisition would combine the only two competitively
meaningful hospitals providing GAC services to Gadsden Area patients--
HMA's Riverview and CHS's Gadsden Regional Medical Center (``Gadsden
Regional''). The Gadsden Area market already is highly concentrated,
and the proposed merger would substantially increase concentration in
that market absent relief. Post-merger, commercially insured patients
in the Gadsden Area would have only CHS's hospitals as meaningful
options to obtain GAC services. The presumption of anticompetitive harm
created by such high levels of market concentration is supported by
evidence of the close competition between Riverview and Gadsden
Regional that would be eliminated by the proposed merger. Consumers in
the Gadsden Area have benefited from this head-to-head competition in
the form of lower health care costs and higher quality of care. Absent
relief, CHS would gain additional leverage and be able to demand higher
reimbursement rates from commercial health plans, and would have
reduced incentives to maintain and improve its quality of care.
Ultimately, these effects are felt by local patients in the form of
higher premiums, co-pays, and out-of-pocket costs, as well as reduced
access to high-quality care.
In South Carolina, the proposed acquisition would combine two of
only three competitively meaningful hospitals providing GAC services to
Darlington County Area commercially insured patients--HMA's Carolina
Pines and CHS's Carolinas Hospital-Florence (``Carolinas Hospital'').
Third-party McLeod Regional Medical Center (``McLeod Regional'') also
serves the Darlington County Area. The Darlington County Area market is
highly concentrated, and the proposed merger would substantially
increase concentration in that market absent relief. Post-merger,
commercially insured patients in the Darlington County Area would have
only two meaningful options for GAC services--either a CHS-owned
hospital or third-party McLeod Regional. The presumption of
anticompetitive harm is supported by evidence of the close competition
between Carolina Pines and Carolinas Hospital that would be eliminated
by the proposed merger. Consumers in the Darlington County Area have
benefited from this head-to-head competition in the form of lower
health care costs and higher quality of care. Absent relief, CHS would
gain additional leverage and be able to demand higher reimbursement
rates from commercial health plans, and would have reduced incentives
to maintain and improve its quality of care. Ultimately, these effects
are felt by local patients in the form of higher premiums, co-pays, and
out-of-pocket costs, as well as reduced access to high-quality care.
New entry or expansion is unlikely to deter or counteract the
anticompetitive effects of the proposed acquisition in either market.
Alabama's Certificate of Need (``CON'') statute poses a regulatory
hurdle that must be overcome before constructing new healthcare
facilities, expanding or modifying existing facilities, or altering
inpatient services. South Carolina has a similar CON statute.
Significant entry barriers also include the time and costs associated
with constructing or expanding a general acute care hospital. There is
no evidence of planned entry into either market or any evidence that
there is unmet demand for GAC services in either market that might spur
entry or expansion. Thus, it is unlikely that new entry or expansion
sufficient to achieve a significant market impact will occur in a
timely manner in either market.
[[Page 5412]]
IV. The Proposed Consent Agreement
The proposed Consent Agreement remedies the anticompetitive
concerns in both local markets. The proposed Consent Agreement would
maintain competition in the Gadsden Area by requiring CHS to divest
Riverview and its associated operations and businesses. Similarly, the
proposed Consent Agreement would fully maintain competition in the
Darlington County Area by requiring CHS to divest Carolina Pines and
its associated operations and businesses. Any potential buyer for
either hospital is subject to the prior approval of the Commission.
The proposed Consent Agreement also requires CHS to provide
transitional services to the approved acquirers for one year, as
needed, to assist the acquirers with operating the divested assets as
viable and ongoing businesses. Until the divestitures are completed,
CHS is required to hold Riverview and Carolina Pines separate, subject
to the standard terms of the Order to Hold Separate and Maintain
Assets. The proposed order also appoints Curtis Lane, the senior
managing director of MTS Health Partners, LP, as Hold Separate Monitor
to oversee CHS's compliance with the Order to Hold Separate and
Maintain Assets. Finally, the proposed order contains a ten-year prior
notice requirement for acquisitions of GAC services providers in the
Gadsden, Alabama Metropolitan Statistical Area or in the Florence,
South Carolina Metropolitan Statistical Area, as well as compliance
reporting requirements.
The hospitals to be divested are each stand-alone businesses and
include all of the assets and real property necessary for a Commission-
approved buyer to compete immediately and effectively in each relevant
market. In addition to divestiture of the actual facilities at issue,
CHS has agreed to divest the rights to all intellectual property,
including the facility names, and all provider and health plan
contracts associated with the facilities. Although the competitive
concerns relate to GAC services to commercially insured patients only,
the proposed order contemplates divestiture of all services and
operations that are affiliated with the facility or facilities to be
divested that are necessary to be a viable business. Specifically, CHS
will divest all outpatient operations and businesses, including
outpatient physician practices, associated with each hospital. This
requirement is consistent with similar divestitures in prior Commission
actions.
The sole purpose of this analysis is to facilitate public comment
on the Consent Agreement. This analysis does not constitute an official
interpretation of the Consent Agreement or modify its terms in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2014-01942 Filed 1-30-14; 8:45 am]
BILLING CODE 6750-01-P