UNITED STATES OF
In the Matter of
COLUMBIA/HCA HEALTHCARE CORPORATION,
ORDER REOPENING AND MODIFYING ORDER
On February 18, 1997, Columbia/HCA Healthcare Corporation ("Columbia") filed its Petition Of Columbia/HCA Healthcare Corporation To Reopen And Modify Order ("Petition") pursuant to Section 5(b) of the Federal Trade Commission Act, 15 U.S.C. § 45(b), and Section 2.51 of the Commissions Rules of Practice and Procedure, 16 C.F.R. § 2.51. Respondent asks that the Commission reopen the proceeding in Docket No. C-3619 and modify the Order to terminate the requirement that Columbia divest the commercial lease identified in Item 6 of Part II of Section A of Schedule B of the Order ("the Infusamed Lease"). The Petition was placed on the public record for thirty days, until March 24, 1997, and no comments were received. For the reasons discussed below, the Commission has determined to grant Columbias Petition.
Columbia states that this Petition is the second step of two procedural steps to remedy a minor error in the Order. On December 5, 1995, Columbia filed a petition to reopen and modify the Order to terminate the Utah Hold Separate requirements upon its completion of the divestiture of the Part I assets listed on Schedule B of the Order, i.e., the Utah hospitals themselves. The Part II assets listed on Schedule B consist of certain assets and businesses that were identified by Columbia during consent negotiations with Commission staff as being related to each of the listed Utah hospitals,(1) and included the Infusamed Lease. On May 15, 1996, the Commission granted Columbias December 5, 1995 petition. In addition, as of May 17, 1996, Columbia completed the divestitures of all of the Utah hospitals and related assets and businesses required by the Order except for the Infusamed Lease Asset.
As explained in the Petition,(2) the leased space in question is used by Infusamed, a home health care company providing infusion and pharmacy services that was owned by Healthtrust, Inc. when it was acquired by Columbia. The Order does not require Columbia to divest the Infusamed business. It also appears that the lease was not part of the business of Pioneer Valley Hospital, with which it was identified as a relevant asset. Specifically, Columbia explains that, although the Infusamed program was located temporarily at Pioneer Valley Hospital to enable it to register with the state of Utah and secure necessary licenses, it was subsequently separately incorporated and was not in fact part of the competitive package comprising the Pioneer Valley Hospital Assets.
Columbia claims that the Order should be reopened and modified on the grounds of changed conditions of fact. Specifically, Columbia asserts that there was a mutual mistake of fact during consent negotiations. According to Columbia, during consent negotiations, both Columbia and the Commission were under the impression that the Infusamed Lease Asset was intrinsically related to Pioneer Valley Hospital, one of the Schedule B hospital assets. In reality, Columbia claims, the Infusamed Lease Asset was not "related" to Pioneer Valley Hospital in any sense that is competitively meaningful in terms of that hospital specifically or the relevant acute care inpatient hospital services market in Utah generally. As a result of this mistake, Columbia asserts that there has been a "constructive change of fact" which warrants correction by reopening and modifying the Order to eliminate the requirement that Columbia divest the Infusamed Lease Asset.(3)
Columbia also asserts that reopening and modifying the Order to eliminate its obligation to divest the Infusamed Lease Asset is in the public interest. Columbia states that forcing it to divest the Infusamed Lease will not further the original purposes of the Order. Columbia also states that it will be burdened by unnecessary compliance obligations that will impede its ability to compete in the relevant Utah acute care hospital market. Further, Columbia states that a forced divestiture will cause significant and unforeseen harm to competition for the provision of home health services by interfering with the ongoing business of the Infusamed regional home health care company.
Section 5(b) of the Federal Trade Commission Act, 15 U.S.C. § 45 (b), provides that the Commission shall reopen an order to consider whether it should be modified if the respondent "makes a satisfactory showing that changed conditions of law or fact" require such modification. A satisfactory showing sufficient to require reopening is made when a request to reopen identifies significant changes in circumstances and shows that the changes eliminate the need for the order or make continued application of it inequitable or harmful to competition. S. Rep. No. 96-500, 96th Cong., 2d Sess. 9 (1979) (significant changes or changes causing unfair disadvantage); Louisiana-Pacific Corp., Docket No. C-2956, Letter to John C. Hart (June 5, 1986), at 4 (unpublished) ("Hart Letter").(4)
Section 5(b) also provides that the Commission may modify an order when, although changed circumstances would not require reopening, the Commission determines that the public interest so requires. Respondents are therefore invited in petitions to reopen to show how the public interest warrants the requested modification. Hart Letter at 5; 16 C.F.R. § 2.51. In such a case, the respondent must demonstrate as a threshold matter some affirmative need to modify the order. Damon Corp., Docket No. C-2916, Letter to Joel E. Hoffman, Esq. (March 29, 1983), 1979-83 Transfer Binder, FTC Complaints and Orders, (CCH) ¶22,007, p. 22,585 ("Damon Letter"), at 2. For example, it may be in the public interest to modify an order "to relieve any impediment to effective competition that may result from the order." Damon Corp., Docket No. C-2916, 101 F.T.C. 689, 692 (1983). Once such a showing of need is made, the Commission will balance the reasons favoring the requested modification against any reasons not to make the modification. Damon Letter at 2. The Commission also will consider whether the particular modification sought is appropriate to remedy the identified harm. Damon Letter at 4.
The language of Section 5(b) plainly anticipates that the burden is on the petitioner to make a "satisfactory showing" of changed conditions to obtain reopening of the order. The legislative history also makes clear that the petitioner has the burden of showing, other than by conclusory statements, why an order should be modified. The Commission "may properly decline to reopen an order if a request is merely conclusory or otherwise fails to set forth specific facts demonstrating in detail the nature of the changed conditions and the reasons why these changed conditions require the requested modification of the order." S. Rep. No. 96-500, 96th Cong., 1st Sess. 9-10 (1979); see also Rule 2.51(b) (requiring affidavits in support of petitions to reopen and modify). If the Commission determines that the petitioner has made the necessary showing, the Commission must reopen the order to consider whether modification is required and, if so, the nature and extent of the modification. The Commission is not required to reopen the order, however, if the petitioner fails to meet its burden of making the satisfactory showing required by the statute. The petitioner's burden is not a light one in view of the public interest in repose and the finality of Commission orders. See Federated Department Stores, Inc. v. Moitie, 425 U.S. 394 (1981) (strong public interest considerations support repose and finality).
Columbia has not met its burden of showing that changed conditions of fact require reopening and modifying the Order. First, the Commission disagrees with Columbias assertion that the mistaken inclusion of the Infusamed Lease Asset was a mutual mistake by both parties to the consent negotiations. In deriving the list of related assets and businesses to be divested by Columbia along with the core divestiture assets required to be included as the Part I assets of Schedule B (i.e., which Utah hospitals should be divested), the Commission relied on the representations of Columbia that each one of the three separate lease assets identified by Columbia for inclusion on Part II, Section A, of Schedule B (i.e., Items 3 and 4 as well as Item 6, the Infusamed Lease Asset) was related to the business of Pioneer Valley Hospital. It was only when Columbia negotiated its divestiture agreement with Paracelsus Healthcare Corporation, which acquired, among other things, the Pioneer Valley and Davis hospitals in Utah, that Columbia realized its error and also ascertained that Paracelsus did not want the Infusamed Lease Asset. As the Commission stated in Saint-Gobain: "Oversights made unilaterally by respondents do not constitute changed conditions of fact within the meaning of Section 5(b) of the FTC ACT."(5) The mistake in this case was made unilaterally by Columbia and was not a mutual mistake of fact.
More significantly, however, this case does not present the kind of situation that the Commission recognized as establishing a "constructive" change of fact in Saint-Gobain. Application of the "constructive" changed facts ground for reopening a final order is limited to situations where, as in Saint-Gobain, the order misnames, mislabels or misidentifies a person, place or thing, and this error incorporated in the order prevents the respondent from complying with the order as written, so that the purposes of the order cannot be achieved. In these situations, the error will typically involve a single fact, the truth or accuracy of which is easily and objectively verifiable, e.g., whether an individual is or is not an officer of a particular corporation, or whether an asset is located at "105 Wright Bros. Drive" or "150 Wright Bros. Drive." In these circumstances, reopening and modification is necessary to allow achievement of the orders remedial purposes. Unlike the situation presented in Saint-Gobain, Columbia is not prevented from complying fully with the Order as written, nor would divestiture of the Infusamed Lease Asset frustrate the Orders purposes. Accordingly, Columbia has not demonstrated that reopening of the Order is compelled on grounds of changed condition of fact.
Columbia has, however, met its burden of showing that public interest considerations warrant reopening and modifying the Order to eliminate the requirement to divest the Infusamed Lease Asset. Columbia has met its burden of showing an affirmative need to reopen the proceeding caused by the continued operation of the Order. Columbia has shown that in view of its divestiture of Pioneer Valley Hospital (the hospital with which the Infusamed Lease Asset was identified as a related asset), the Pioneer Valley Hospital acquirers lack of interest in the Infusamed Lease Asset, and the leases lack of competitive significance in the relevant acute care hospital market, continuing to require Columbia to divest the lease is burdening it with unnecessary expense in terms of achieving the orders remedial purposes, and is having a negative impact on its ability to compete. Columbia has also shown that requiring it to divest the Infusamed Lease Asset will cause harm to competition in the market for the provision of home health services. The Commissions complaint did not identify any competitive problems in the market for home health services and, accordingly, the Commission sought no relief in this market. Requiring Columbia to divest the lease in light of a lack of interest by the acquirer of the other divested assets, and the lack of any allegation in the complaint that a competitive problem exists in the home health services market, would impede competition in that market.
Where the potential harm to the respondent outweighs any further need for the Order, the Commission may modify the Order in the public interest to allow the respondent to retain the relevant assets.(6) Because the Infusamed Lease Asset has been shown to have no competitive significance in the acute care hospital market in Utah, there is no need for Columbia to divest the lease. The remedial purposes identified in the Order have already been achieved by the divestitures that have taken place. Further, requiring Columbia to divest the Infusamed Lease Asset will cause harm to competition for the provision of home health services. The harm and costs to Columbia associated with the continuing requirement to divest the lease appear to be significant, while there do not appear to be any benefits associated with requiring the divestiture.
ACCORDINGLY, IT IS ORDERED that this matter be, and it hereby is, reopened; and
IT IS FURTHER ORDERED that the Order in Docket No. C-3619, be, and it hereby is, modified by deleting the asset identified as Schedule B, Section A, Part II, Item 6: "Lease of 7,134 sq.ft., 150 Wright Bros. Drive, Suite 540, Salt Lake City, Utah 84116" from the list of assets to be divested.
By the Commission, Commissioner Azcuenaga and Commissioner Starek concurring in the result only.
Donald S. Clark
ISSUED: July 14, 1997
Concurring Statement of Commissioner
Mary L. Azcuenaga
Today, the Commission reopens the order against Columbia/HCA Healthcare Corporation under Section 5(b) of the Federal Trade Commission Act, 15 U.S.C. Sec. 45(b), to eliminate the requirement that Columbia/HCA divest an ordinary commercial lease of a 7143 square foot office suite on the ground that reopening and modifying the order is in the public interest. I agree with the result but not with the reasoning of the majority.
The majority is correct that a showing of affirmative need is required before an order will be reopened under the public interest standard, and only after such a showing of affirmative need does the Commission balance the public interest reasons for and against the modification. See Damon Corp., Docket No.
C-2916, Letter to Joel E. Hoffman, Esq. (Mar. 29, 1983). Commission Rule 2.51(b), 16 C.F.R. Sec. 2.51(b), provides that the petition must be supported by affidavits containing specific facts justifying the reopening and modification of an order and cautions against conclusory justifications. Because Columbia/HCA failed to make the requisite showing of affirmative need under Rule 2.51(b), I cannot agree with the majority that the petition should be granted under the public interest standard.
Finding affirmative need, the majority states: continuing to require Columbia to divest the lease is burdening it with unnecessary expense in terms of achieving the orders remedial purposes, and is having a negative impact on its ability to compete. Order at 5. The affidavit filed in support of Columbia/HCAs petition contains the bare assertion that the expenditure of time and other resources (presumably to find a buyer for the lease) will impede its ability to compete in the hospital market.(1) It is virtually always foreseeable at the time a consent agreement is signed that a divestiture will entail time and other resources to accomplish. An order need not be reopened and modified on the basis of a circumstance that is foreseeable at the time that a consent order is signed. See Louisiana-Pacific Corp., Docket No. C-2956, Letter to John C. Hart (June 5, 1986); United States v. Louisiana-Pacific Corp., 967 F.2d 1372, 1378 (9th Cir. 1992).
Columbia/HCA does not assert, much less support, a particular cost of leaving the requirement to divest the lease in the order. This omission alone is sufficient ground to deny the petition under the public interest standard. On this point, the Commissions decision is tantamount to waiving the requirements of Rule 2.51(b) that a petition must be supported with particularity. It seems to me that the requirements of Rule 2.51(b) are there for good reason, and I see no reason to waive them.
The majoritys substantive discussion of affirmative need is contained in one paragraph. Order at 4-5. After stating its conclusion that the petitioner has shown affirmative need, the majority refers in one sentence to three circumstances to bolster its conclusion: the already completed divestiture of Pioneer Valley Hospital, the hospital acquirers asserted lack of interest in the lease, and the lack of competitive significance [of the lease] in the relevant acute care hospital market. Order at 4-5. None is explained. Pioneer Valley Hospital was divested, as required by the Commissions order, to Paracelsus Healthcare Corp., except for the lease in question, which was listed among the Pioneer Valley Assets to be divested. It is at best unclear why a partial divestiture justifies elimination of the remaining divestiture obligation. Surely this is not a precedent the majority would like to establish for other cases.
Second, the majority relies on the Pioneer Valley Hospital acquirers lack of interest in the lease. Assuming the truth of this conclusion, it is not at all clear why it should be relevant. Columbia/HCA asserts in a single sentence that Paracelsus did not want the lease in question. Petition Para. 8. In the past, the Commission has been rigorous in probing assertions like this. Its failure to do so here is an indication that the Commission thinks the lease is competitively insignificant, which, indeed, is the next circumstance to which the majority refers as a basis for granting the petition. The majoritys reliance on the lack of competitive significance [of the lease] in the relevant acute care hospital market amounts to a finding that the Commission made a mistake in requiring divestiture of the lease. But for the assumption that the lease was competitively significant, there would have been no possible reason to require divestiture in the first place.
Finally, the majority states that divestiture of the lease will cause harm to competition in the market for the provision of home health services. Order at 5. This asserted harm is entirely unexplained,(2) no doubt because the market for home health services was not alleged in the complaint and is not otherwise at issue in the order that Columbia/HCA seeks to have changed. Presumably, the majority would not so lightly assume harm to competition in a market it has not studied or previously identified -if the majority were deciding liability. To do so in this context undermines the Commissions analytical standards.
The petitioner asserts that the petition should be granted on the basis of mutual mistake of fact (constructive change of fact), citing Saint-Gobain/Norton Industrial Ceramics Corp., Order Reopening and Modifying Order, Docket No. C-3573 (November 19, 1996). On that ground, I concur in the result.
STATEMENT OF COMMISSIONER ROSCOE B.
In the Matter of