IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

FEDERAL TRADE COMMISSION
Washington, D.C. 20580

Plaintiff,

v.

COLUMBIA/HCA HEALTHCARE CORPORATION,
One Park Plaza
Nashville, Tennessee 37203

Defendant.

CASE NUMBER 1:98CV01889

COMPLAINT

Plaintiff, Federal Trade Commission ("Commission"), by its undersigned attorneys, bring this action under sections 16(a)(1) and 5(l) of the Federal Trade Commission Act, as amended, 15 U.S.C. 56(a)(1) and 45(l), to obtain civil penalties for violations relating to final consent orders issued by the Commission in FTC Docket Nos. C-3619 and C-3538.

JURISDICTION AND VENUE

  1. This Court has subject matter jurisdiction pursuant to 28 U.S.C. 1331, 1337, 1345, and 1355, and 15 U.S.C.45(l) and 56(a)(1).
  2. Venue in this District is proper by virtue of the defendant’s consent, in the Stipulation relating hereto, to the maintenance of this action and the entry of a Final Judgment in the District.
  3. Columbia/HCA Healthcare Corporation (“Columbia/HCA”) is made defendant herein. Columbia/HCA is a Delaware corporation with its principal place of business located at One Park Plaza, Nashville, Tennessee 37203. Columbia/HCA provides acute inpatient healthcare services in the United States.
  4. At all times relevant to this proceeding, Columbia/HCA has been engaged in commerce, as “commerce” is defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. 44.

COUNT 1

5. In a proceeding entitled In the Matter of Columbia/HCA Healthcare Corporation, FTC Docket No. C-3619, the Commission issued an administrative complaint charging Columbia/HCA with violating Section 7 of the Clayton Act, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45. The administrative complaint alleged that Columbia/HCA’s proposed acquisition of Healthtrust, Inc. (“HTI”) would violate Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, and, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18. The complaint alleged that Columbia/HCA’s acquisition of HTI would lessen competition between Columbia/HCA and HTI’s acute care hospitals in Salt Lake City, Utah; Pensacola, Okaloosa, and Orlando, Florida; Denton, Texas; and Ville Platte-Mamou-Opelousas, Louisiana.

6. The Commission’s order in FTC Docket No. C-3619 (“Columbia/HCA Order”) became final on October 11, 1995. The complaint and order are reported at 120 F.T.C. 743 (1995).

7. Paragraph III.A. of the Columbia/HCA Order required Columbia/HCA to terminate, absolutely and in good faith, within six months of the date the order became final, i.e., by April 11, 1996, the South Seminole Hospital (“SSH”) Joint Venture in Orlando, Florida, either by acquiring Orlando Regional Health System’s (“ORHS”) interest or by divesting, subject to the Commission’s prior approval, Columbia/HCA’s SSH Joint Venture Interest. The purpose of the termination of the SSH Joint Venture was to ensure the continuation of the South Seminole Hospital as an ongoing, viable acute care hospital and to remedy the lessening of competition resulting from the acquisition as alleged in the Commission’s complaint.

8. On June 4, 1996, Columbia/HCA filed an application, without the final divestiture contracts, requesting the Commission’s prior approval to divest its 50% interest in the South Seminole Hospital Joint Venture to ORHS.

9. In that same application, Columbia/HCA requested an extension of time to divest from April 11, 1996, to September 11, 1996.

10. On June 11, 1997, the Commission denied Columbia/HCA’s application to divest, without prejudice, because Columbia/HCA failed to submit final divestiture agreements. The Commission also denied Columbia/HCA’s motion for extension of time to divest because Columbia/HCA failed to show that there was any impediment to Columbia/HCA’s completion of its obligation that was not foreseeable.

11. On June 11, 1997, the Commission, pursuant to Paragraph V.B. of the Columbia/HCA Order, also appointed Robert Crosby as trustee to divest the SSH Joint Venture Interest.

12. On July 8, 1997, the Commission approved the Trustee Agreement between Columbia/HCA and Robert Crosby.

13. On July 18, ten days after the Commission approved the trustee agreement between Columbia/HCA and Robert Crosby, the trustee informed Commission staff that the parties had reached an agreement in principle.

14. On August 27, 1997, Mr. Crosby filed an application to divest the SSH Joint Venture Interest to ORHS.

15. The Commission approved the application on September 28, 1997, and the divestiture was consummated on September 30, 1997.

16. During the period from April 11, 1996, through September 30, 1997, Columbia/HCA failed to timely divest the SSH Joint Venture Interest, as required by the Columbia/HCA Order.

17. As a result of Columbia/HCA’s failure to timely divest its interest in the SSH Joint Venture, consumers of acute care hospital services in the Orlando, Florida geographic area were denied the full benefits of competition.

COUNT 2

18. The allegations of Paragraphs 5 and 6 hereof are repeated and realleged as though fully set forth herein.

19. Paragraph IV.A. of the Columbia/HCA Order required Columbia/HCA to divest, absolutely and in good faith, within nine months of April 21, 1995, the assets listed on Schedule B of the Columbia/HCA Order, which consisted of Pioneer Valley Hospital, Jordan Valley Hospital, Davis Hospital and any assets related to the three hospitals. The Columbia/HCA Order required those divestitures to be completed by January 21, 1996, and required each divestiture to be made to an acquirer that received the prior approval of the Commission and to be made in a manner that received the prior approval of the Commission.

20. As part of the settlement contained in the Columbia/HCA Order, Plaintiff Commission and Defendant Columbia/HCA entered into an Agreement to Hold Separate the HTI hospitals in Utah ("Utah Hold Separate Agreement"). The Utah Hold Separate Agreement became effective on April 21, 1995, and imposed obligations on Columbia/HCA during the period before the Columbia/HCA Order became final.

21. Paragraph IV.D. of the Columbia/HCA Order incorporated the Utah Hold Separate Agreement into the order, and provided that the agreement would remain in effect until Columbia/HCA completed the divestitures pursuant to Paragraph IV. of the order.

22. The Utah Hold Separate Agreement, among other things, required Columbia/HCA to hold HTI’s assets and businesses in Utah ("HTI Utah") separate and apart from Columbia/HCA until Columbia/HCA completed the divestitures pursuant to Paragraph IV.

23. The Utah Hold Separate Agreement also required Columbia/HCA and HTI Utah to refrain from having access to, receiving or using each other’s Material Confidential Information, as the term is defined in the agreement.

24. The Utah Hold Separate Agreement also required Columbia/HCA to submit the names of three individuals to serve as the Board of Directors ("HTI Board") for HTI Utah.

25. On or before April 21, 1995, Columbia/HCA submitted the names of Kent Wallace, Chairman, and Ken Perry and David Colby as the individuals who would constitute the HTI Board, with responsibility for the management and operation of HTI Utah during the time the Utah Hold Separate Agreement was in effect.

26. On or before April 21, 1995, Columbia/HCA appointed the chairman of the HTI Board, Kent Wallace, to serve as President of Columbia/HCA’s Utah Division, which consisted of both Columbia/HCA and HTI hospitals, during the time the Utah Hold Separate Agreement was in effect. On or before April 21, 1995, Columbia/HCA also appointed Ken Perry, another member of the HTI Board, to serve as Chief Financial Officer of Columbia/HCA’s Utah Division.

27. On or about April 21, 1995, Columbia/HCA’s senior level managers began to exercise direction and control over the management and operations of HTI Utah.

28. On or about April 21, 1995, Columbia/HCA and HTI Utah provided one another access to each other’s Material Confidential Information, including financial results for the individual HTI Utah hospitals and operating plans.

29. Columbia/HCA and HTI Utah continued to provide access to each other’s Material Confidential Information through May 16, 1996.

30. On or about April 21, 1995, Columbia/HCA and HTI Utah began to coordinate their activities and to negotiate jointly contracts between Columbia/HCA and HTI Utah, and third parties.

31. During the period from April 26, 1995, through May 16, 1996, Columbia/HCA failed to comply with the Utah Hold Separate Agreement. In October 1995 Columbia/HCA, at the urging of the Commission’s staff, ceased some, but not all, of the aforementioned conduct.

32. As a result of Columbia/HCA’s failure to comply with the Utah Hold Separate Agreement, consumers of acute care hospital services in Utah were denied the full benefits of competition.

COUNT 3

33. The allegations of Paragraphs 18 through 31 hereof are repeated and realleged as though fully set forth herein.

34. During the period from October 11, 1995, through May 16, 1996, Columbia/HCA failed to comply with Paragraph IV.D. of the Columbia/HCA Order.

35. As a result of Columbia/HCA’s failure to comply with Paragraph IV.D. of the Columbia/HCA Order, consumers of acute care hospital services in Utah were denied the full benefits of competition.

COUNT 4

36. The allegations of Paragraphs 5 through 6 and 19 hereof are repeated and realleged as though fully set forth herein.

37. On October 2, 1995, Columbia/HCA filed its application, without final divestiture contracts, to divest Pioneer Valley Hospital to Paracelsus Healthcare Corporation.

38. On January 4, 1996, Columbia/HCA submitted the final divestiture contracts. 39. On April 25, 1996, Columbia/HCA filed the Second Amendment to the Asset Exchange Agreement covering the divestiture of Pioneer Valley Hospital.

40. On May 15, 1996, Columbia/HCA completed the divestiture of Pioneer Valley Hospital.

41. During the period from January 21, 1996, through May 16, 1996, Columbia/HCA failed to timely divest Pioneer Valley Hospital, as required by the Columbia/HCA Order.

42. As a result of Columbia/HCA’s failure to timely divest, consumers of acute care hospital services in Utah were denied the full benefits of competition.

COUNT 5

43. The allegations of Paragraphs 5 through 6 and 19 hereof are repeated and realleged as though fully set forth herein.

44. On October 2, 1995, Columbia/HCA filed its application, without final divestiture contracts, to divest Davis Hospital to Paracelsus Healthcare Corporation.

45. On January 4, 1996, Columbia/HCA submitted the final divestiture contracts.

46. On April 25, 1996, Columbia/HCA filed with the Commission the First Amendment to the Stock Purchase Agreement covering the divestiture of Davis Hospital.

47. On May 15, 1996, Columbia/HCA completed the divestiture of Davis Hospital.

48. During the period from January 21, 1996, through May 16, 1996, Columbia/HCA failed to timely divest Davis Hospital, as required by the Columbia/HCA Order.

49. As a result of Columbia/HCA’s failure to timely divest, consumers of acute care hospital services in Utah were denied the full benefits of competition.

COUNT 6

50. In a proceeding entitled In the Matter of Healthtrust, Inc. - The Hospital Company, FTC Docket No. C-3538, the Commission issued an administrative complaint charging HTI with violating Section 7 of the Clayton Act, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45. The administrative complaint alleged that HTI’s proposed acquisition of Holy Cross Health Care System on December 3, 1993, would violate Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, and, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18. The complaint alleged that HTI’s acquisition of substantially all of Holy Cross’ hospital assets would substantially lessen competition in acute hospital services in the Salt Lake City-Ogden, Utah area.

51. On October 24, 1994, the Commission’s order in FTC Docket No. C-3538 (the “Healthtrust Order”) became final. The complaint and order are reported at 118 F.T.C. 959 (1994).

52. Paragraph IV.E. of the Healthtrust Order required HTI to obtain the Commission’s approval before permitting any hospital that it operated in the Salt Lake City-Ogden, Utah area to be acquired by any person that already operated a hospital in the area or that would be operating one immediately following the acquisition.

53. On February 15, 1995, Healthtrust sought the Commission’s approval, pursuant to the Healthtrust Order, to sell four of its hospitals in the area to Columbia/HCA.

54. On April 21, 1995, the Commission granted its prior approval for the sale to Columbia/HCA. The Commission expressly conditioned its approval of the sale upon Columbia/HCA’s compliance with the Utah Hold Separate Agreement in the Columbia/HCA Order and with all the terms of the Columbia/HCA Order.

55. Columbia/HCA, through its acquisition of HTI, became a successor to HTI under the Healthtrust Order.

56. The allegations of Paragraphs 5 through 16, 18 through 31, 33 through 34, 36 through 41, and 43 through 48 hereof are repeated and realleged as though fully set forth herein.

57. Columbia/HCA failed to satisfy the conditions upon which the Commission had granted its prior approval to HTI to sell four HTI hospitals in the Salt Lake-Ogden, Utah area to Columbia/HCA.

58. Columbia/HCA’s failure to satisfy the conditions upon which the Commission approved HTI’s sale of its four hospitals in Salt Lake-Ogden, Utah to Columbia/HCA voided the Commission’s approval, and therefore, caused Columbia/HCA, as successor to HTI, to violate Paragraph IV.E. of the Healthtrust Order.

59. As a result of Columbia/HCA’s failure to satisfy the conditions upon which the Commission granted its prior approval to HTI’s sale of four hospitals to Columbia/HCA, consumers of acute care hospital services in Utah were denied the full benefits of competition.

VIOLATIONS ALLEGED

60. As a result of Columbia/HCA’s failure to timely divest its 50% interest in the SSH Joint Venture by April 11, 1996, Columbia/HCA was continuously in violation of Paragraph III.A. of the Columbia/HCA Order for each day of the period from April 11, 1996, through September 30, 1997.

61. Columbia/HCA was continuously in violation of the Utah Hold Separate Agreement from April 26, 1995, through May 16, 1996.

62. As a result of Columbia/HCA’s failure to comply with the Utah Hold Separate Agreement, Columbia/HCA was continuously in violation of Paragraph IV.D. of the Columbia/HCA Order from April 26, 1995, through May 16, 1996.

63. As a result of Columbia/HCA’s failure to divest Pioneer Valley Hospital by January 21, 1996, Columbia/HCA was continuously in violation of Paragraph IV. of the Columbia/HCA Order from January 21, 1996, through May 16, 1996.

64. As a result of Columbia/HCA’s failure to divest Davis Hospital by January 21, 1996, Columbia/HCA was continuously in violation of Paragraph IV. of the Columbia/HCA Order from January 21, 1996, through May 16, 1996.

65. As a result of Columbia/HCA’s failure to satisfy the conditions upon which the Commission granted its prior approval of HTI’s sale of four hospitals in the Salt Lake City-Ogden, Utah area, Columbia/HCA, as successor to HTI, was continuously in violation of the Healthtrust Order from April 26, 1995, through May 16, 1996.

PRAYER

WHEREFORE PLAINTIFF PRAYS:

  1. That this Court adjudge and decree that, with respect to the violation alleged in Count 1, the Defendant was in violation of the Columbia/HCA Order each day from April 11, 1996, through September 30, 1997.
  2. That this Court adjudge and decree that, with respect to the violation alleged in Count 2, the Defendant was in violation of the Utah Hold Separate Agreement each day from April 26, 1995, through May 16, 1996.
  3. That this Court adjudge and decree that, with respect to the violation alleged in Count 3, the Defendant was in violation of the Columbia/HCA Order each day from October 11, 1995, through May 16, 1996.
  4. That this Court adjudge and decree that, with respect to the violation alleged in Count 4, the Defendant was in violation of the Columbia/HCA Order each day from January 21, 1996, through May 16, 1996.
  5. That this Court adjudge and decree that, with respect to the violation alleged in Count 5, the Defendant was in violation of the Columbia/HCA Order each day from January 21, 1996, through May 16, 1996.
  6. That this Court adjudge and decree that, with respect to the violation alleged in Count 6, the Defendant was in violation of the Healthtrust Order each day from April 26, 1995, through May 16, 1996.
  7. That this Court enter judgment against Defendant for an appropriate civil penalty as allowed by law, 15 U.S.C. 45 (l).
  8. That the Plaintiff be awarded costs and disbursements of this action as the Court may deem just and proper.

Dated: June 10, 1998

FOR THE PLAINTIFF FEDERAL TRADE COMMISSION:

William J. Baer
D.C Bar No. 324723
Director
Federal Trade Commission
Washington, D.C. 20580

Richard G. Parker
D.C Bar No. 327544
Senior Deputy Director
Bureau of Competition
Federal Trade Commission
Washington, D.C. 20580

Elizabeth A. Piotrowski
D.C Bar No. 348052
Deputy Assistant Director
Federal Trade Commission
Washington, DC 20580

Tonya Williams
Attorney
Federal Trade Commission
Washington, DC 20580

Daniel P. Ducore
Assistant Director
Bureau of Competition
D.C Bar No. 933721
Attorney for Plaintiff
Federal Trade Commission
Washington, D.C. 20580
(202) 326-2526