COLUMBIA/HCA TO DIVEST SEVEN HOSPITALS TO RESTORE COMPETITION ALLEGEDLY LOST IN MERGER WITH HEALTHTRUST
Columbia/HCA Healthcare Corporation has agreed to divest seven hospitals and to terminate a joint venture that owns another hospital to settle Federal Trade Commission charges that its $3 billion merger with Healthtrust, Inc. - The Hospital Company would impair hospital competition in six different geographic areas. The seven hospitals Columbia/HCA has agreed to divest are: one hospital each in the Pensacola, Florida, area; the Okaloosa, Florida, area; the Ville Platte-Mamou-Opelousas, Louisiana area; and the Denton, Texas area; and three hospitals in the Salt Lake City/Ogden, Utah, area. The joint venture at issue is in the Orlando, Florida, area. Absent the settlement, the FTC said, the merger could have resulted in higher prices, reduced services, or both, for acute-care inpatient hospital services in each of the areas.
The FTC received assistance in this case from the Attorneys General of several states affected by the merger, including Florida and Texas. Texas Attorney General Dan Morales said, "After an exhaustive review, we are confident that this agreement will allow the Texas hospital industry to continue operating in a competitive manner." The Florida Attorney General's office, which engaged in a parallel investigation of the transaction as it affected Florida, said it also concurs in the relief obtained by the FTC in Florida.
Both Columbia/HCA and Healthtrust are based in Nashville, Tennessee, and both operate one or more hospitals in each of the areas at issue in the case, as well as in other areas of the country. The merger involves more than 280 hospitals nationwide, and is the largest hospital merger in U.S. history. Healthtrust operates its Orlando-area hospital in a joint venture with the Orlando Regional Health System. According to the FTC complaint detailing the allegations in this case, Columbia/HCA and Healthtrust agreed to merge in October 1994. Under the merger agreement, Healthtrust will operate as a wholly-owned subsidiary of Columbia/HCA.
The hospital market in each of the areas at issue is highly concentrated and the time and other requirements necessary to establish a new hospital make new entry unlikely, the complaint alleges. Thus, the FTC charged, the merger would violate the antitrust laws by increasing the likelihood of collusion among remaining firms and by denying patients, third-party payers and others the benefits of competition on price, quality and service, in all five areas. In all but Orlando, the complaint alleges, the merger also would eliminate competition between Columbia/HCA and Healthtrust hospitals and significantly increase the already high levels of market concentration.
The proposed consent agreement to settle these charges, announced today for public comment, would permit Columbia/HCA and Healthtrust to merge on the condition that Columbia/HCA divest seven hospitals within 12 months (nine months for the Salt Lake City divestitures). The hospitals to be divested are:
-- in the Pensacola area, Santa Rosa Medical Center in Milton (currently operated by Healthtrust); -- in the Okaloosa area, North Okaloosa Medical Center, in Crestview (currently operated by Healthtrust);
-- in the Denton area, Denton Regional Medical Center (currently operated by Healthtrust) or Denton Community Hospital (operated by Columbia/HCA);
-- in the Ville Platte-Mamou-Opelousas area, Ville Platte Medical Center (operated by Columbia/HCA);
-- in the Salt Lake City/Ogden area, Davis Hospital and Medical Center in Layton (operated by Columbia/HCA), Pioneer Valley Hospital in West Valley City and Jordan Valley Hospital in West Jordan (operated by Healthtrust). (Health- trust is subject to a prior settlement with the FTC stemming from its acquisition of three other hospitals in the Salt Lake City area, and which requires Healthtrust to obtain Commission approval before transferring any Salt Lake City area hospital to another entity. See related news release, issued today.)
The hospitals would have to be divested to Commission- approved acquirers who would operate them in competition with Columbia/HCA, so as to restore the level of competition to its pre-merger state. In addition, Columbia/HCA must operate the hospitals to be divested separately from its other hospitals, and to keep them marketable and viable, pending divestiture.
The proposed settlement also calls for Columbia/HCA to terminate participation in the Orlando joint venture after it acquires Healthtrust, either by buying out Orlando Regional Health System's interest or selling Healthtrust's interest. The purpose of this provision is to prevent two major competitors, Columbia/HCA and the Orlando Regional Health System, from sharing ownership of South Seminole Hospital. This joint ownership, the complaint alleges, could facilitate anticompetitive collusion among hospitals in the Orlando area. This requirement would have to be fulfilled within six months after the Commission accepts the settlement as final. If the divestitures are not completed on time, the FTC could appoint a trustee to complete them.
The proposed consent agreement also would require Columbia/ HCA, for 10 years, to obtain FTC approval before acquiring another acute care hospital in any of the six markets at issue and before transferring an acute care hospital in any of the areas to another entity that already operates one in that area. There would be an exemption to these prior approval provisions for assets acquisitions or transfers valued at less than $1 million. The Commission vote to accept the proposed consent agreement for public comment was 5-0. It will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final and binding. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $10,000. Columbia/HCA-Healthtrust Merger--04/21/95) Copies of the complaint, proposed consent agreement, and an analysis of the agreement to assist the public in commenting are available from the FTC's Public Reference Branch, Room 130, same address as above.
(FTC File No. 951 0022)