9710090

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of

TENET HEALTHCARE CORPORATION, a corporation, and
POPLAR BLUFF PHYSICIANS GROUP, INC.
d/b/a Doctors Regional Medical Center, a corporation.

Docket No. 9289

COMPLAINT


Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said Act, the Federal Trade Commission ("Commission"), having reason to believe that the respondents, Tenet Healthcare Corporation ("Tenet") and Poplar Bluff Physicians Group, Inc. doing business as Doctors Regional Medical Center ("DRMC"), corporations subject to the jurisdiction of the Commission, have entered into an agreement whereby Tenet will acquire the stock and assets of DRMC; that the acquisition agreement violates Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45; 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; and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, the Commission hereby issues its complaint, stating its charges in that respect as follows:

DEFINITIONS

PARAGRAPH ONE: For purposes of this complaint the following definitions shall apply:

(a) "General acute care hospital" means a health facility, licensed as a hospital, other than a federally owned facility, having a duly organized governing body with overall administrative and professional responsibility, and an organized professional staff, that provides 24-hour inpatient care, and may also provide 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.
(b) "General acute care inpatient hospital services" means 24-hour inpatient health care, and related medical or surgical diagnostic and treatment services, for physically injured or sick persons with short-term or episodic health problems or infirmities.

THE PARTIES

PARAGRAPH TWO: Tenet is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Nevada, with its principal place of business located at 3820 State Street, Santa Barbara, California. Tenet owns and operates, among other things, over 120 acute care hospitals throughout the United States. Included among those hospitals is Lucy Lee Hospital ("Lucy Lee"), a 201-bed general acute care hospital in the city of Poplar Bluff, Missouri. In fiscal year 1997, Tenet had total sales of about $8.7 billion, and Lucy Lee had total sales of over $54 million.

PARAGRAPH THREE: DRMC is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Missouri, with its principal place of business located at 621 Pine Street, Poplar Bluff, Missouri. DRMC owns and operates a 230-bed general acute care hospital in Poplar Bluff, Missouri. In fiscal year 1997, DRMC had total sales of over $41 million.

JURISDICTION

PARAGRAPH FOUR: Tenet and DRMC, at all times relevant herein, have been and are now engaged in or affecting commerce, as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C.  12. The businesses of Tenet and DRMC, at all times relevant herein, have been and are now in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. 44.

THE PROPOSED ACQUISITION

PARAGRAPH FIVE: On or about April 2, 1997, Tenet and DRMC entered into an agreement whereby Tenet will acquire 100 percent of the voting stock of DRMC, and become the owner of all of DRMC's assets. The total value of the transaction is over $40 million.

NATURE OF TRADE AND COMMERCE

PARAGRAPH SIX: All general acute care inpatient hospital services offered by Lucy Lee and DRMC constitute a relevant line of commerce in which to assess the competitive effects of the proposed acquisition. Other health care diagnosis and treatment services offered by Lucy Lee and DRMC, including but not limited to psychiatric care, rehabilitation care, and outpatient surgery, constitute one or more additional relevant lines of commerce in which to assess the competitive effects of the proposed acquisition.

PARAGRAPH SEVEN: A relevant section of the country within which to assess the competitive effects of the proposed acquisition, for the relevant lines of commerce, is no larger than Butler County and portions of seven surrounding counties (Clay County, Arkansas; Ripley County, Missouri; Carter County, Missouri; Reynolds County, Missouri; Wayne County, Missouri; Stoddard County, Missouri; and Dunklin County, Missouri).

MARKET STRUCTURE

PARAGRAPH EIGHT: DRMC and Tenet's Lucy Lee Hospital are the two principal general acute care hospitals in the relevant markets, i.e., the relevant lines of commerce in the relevant section of the country. The only other general acute care hospitals in the relevant section of the country are much smaller than Lucy Lee and DRMC, and do not and cannot practicably offer a range of general acute care hospital services as comprehensive as that available at Lucy Lee and DRMC. Moreover, in the relevant section of the country, there are no specialty hospitals, non-hospital outpatient surgery centers, or any other health facilities that are significant competitive alternatives to Lucy Lee or DRMC for any relevant lines of commerce.

PARAGRAPH NINE: The relevant markets are highly concentrated, whether measured by the Herfindahl-Hirschman Index ("HHI") or by market share. The proposed acquisition would significantly increase concentration in these markets. For example, for general acute care inpatient hospital services, the proposed acquisition would increase Tenet's market share by more than 30 percent, to over 84 percent. The HHI would increase by 2700 points, to a post-acquisition level over 6200.

ENTRY CONDITIONS

PARAGRAPH TEN: It is unlikely that entry into the relevant markets would prevent, or remedy in a timely manner, any anticompetitive effects from the proposed acquisition. Entry is difficult and likely to take more than two years due to, among other things, the unlikelihood of obtaining state certificate of need approval required for new entry in Missouri, and the time required to complete construction of facilities necessary to provide the relevant health services.

COMPETITION

PARAGRAPH ELEVEN: Tenet and DRMC are actual and potential competitors in the relevant markets.

EFFECTS

PARAGRAPH TWELVE: The effects of the aforesaid acquisition, if consummated, may be substantially to lessen competition in the relevant markets in the following ways, among others:

(a) it would eliminate actual and potential competition between Tenet and DRMC;
(b) it would significantly increase the already high levels of concentration;
(c) it would eliminate DRMC as a substantial, independent and competitive provider of the relevant health services;
(d) it may permit Tenet to unilaterally raise prices;
(e) it may result in less favorable prices and other terms for health plans that contract with providers to obtain the general acute care inpatient services or other relevant services for plan subscribers in the relevant area;
(f) it may increase the possibility of collusion or interdependent coordination by the remaining providers in the relevant markets; and
(g) it may deny patients, physicians, third-party payers, and other consumers of the relevant services the benefits of free and open competition based on price, quality, and service.

VIOLATIONS CHARGED

PARAGRAPH THIRTEEN: The acquisition agreement described in PARAGRAPH FIVE above violates Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C.  45.

PARAGRAPH FOURTEEN: The acquisition described in PARAGRAPH FIVE, 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.

NOTICE

Notice is hereby given to the respondents Tenet Healthcare Corporation and Popular Bluff Physicians Group, Inc. d/b/a Doctors Regional Medical Center that the twenty-first day of September, 1998, at 10:00 a.m. o'clock, or such later date as determined by an Administrative Law Judge of the Federal Trade Commission, is hereby fixed as the time and the Federal Trade Commission Offices, Sixth Street and Pennsylvania Avenue, N.W., Room 532, Washington, D.C. 20580, as the place when and where a hearing will be had before an Administrative Law Judge, on the charges set forth in this complaint, at which time and place you will have the right under the Federal Trade Commission and Clayton Acts to appear and show cause why an order should not be entered requiring you to cease and desist from the violations of law charged in the complaint.

You are notified that the opportunity is afforded you to file with the Commission an answer to this complaint on or before the twentieth (20th) day after service of it upon you. An answer in which the allegations of this complaint are contested shall contain a concise statement of the facts constituting each ground of defense; and specific admission, denial, or explanation of each fact alleged in the complaint or, if you are without knowledge thereof, a statement to that effect. Allegations of the complaint not thus answered shall be deemed to have been admitted.

If you elect not to contest the allegations of fact set forth in the complaint, the answer shall consist of a statement that you admit all of the material allegations to be true. Such an answer shall constitute a waiver of hearings as to the facts alleged in the complaint, and together with the complaint will provide a record basis on which the Administrative Law Judge shall file an initial decision containing appropriate findings and conclusions and an appropriate order disposing of the proceeding. In such answer you may, however, reserve the right to submit proposed findings and conclusions and the right to appeal the initial decision to the Commission under Section 3.52 of the Commission's Rules of Practice for Adjudicative Proceedings.

Failure to answer within the time above provided shall be deemed to constitute a waiver of your right to appear and contest the allegations of the complaint and shall authorize the Administrative Law Judge, without further notice to you, to find the facts to be as alleged in the complaint and to enter an initial decision containing such findings, appropriate conclusions and order.

NOTICE OF CONTEMPLATED RELIEF

Should the Commission conclude from the record developed in any adjudicative proceedings in this matter that the proposed acquisition challenged in this proceeding would, if consummated, violate Section 7 of the Clayton Act, as amended, and/or Section 5 of the Federal Trade Commission Act, as amended, the Commission may order such relief against respondents as is supported by the record and is necessary and appropriate, including, but not limited to:

1. Rescission of the acquisition agreement between respondents.
2. If the acquisition has been consummated, divestiture of either Lucy Lee Hospital or Doctors Regional Medical Center, and associated assets, in a manner that restores both hospitals as viable, independent competitors in the relevant markets, subject to the prior approval of the Federal Trade Commission.
3. A five (5) year ban on any transaction between respondents that combines their hospitals or other health facilities in the relevant section of the country, except as may be approved by the Commission.
4. A requirement, for a ten (10) year period, that each respondent provide prior notice to the Commission of acquisitions, mergers, consolidations, or any other combinations of a respondent's hospital or other health facilities in the relevant markets with other hospitals or health facilities in the relevant markets.
5. Requirements that respondents file periodic compliance reports with the Commission.
6. Any other provisions appropriate to correct or remedy the anticompetitive effects of the transaction.

IN WITNESS WHEREOF, the Federal Trade Commission has caused this complaint to be signed by its Secretary and its official seal to be hereto affixed, at Washington, D.C. this nineteenth day of August, 1998.

By the Commission.
Donald S. Clark
Secretary
SEAL