9710024
B219762
UNITED STATES OF
AMERICA
BEFORE FEDERAL TRADE COMMISSION
COMMISSIONERS:
Robert Pitofsky, Chairman
Mary L. Azcuenaga
Janet D. Steiger
Roscoe B. Starek, III
Christine A. Varney
In the Matter of
TENET HEALTHCARE CORPORATION, a
corporation.
Docket No. C-3743
DECISION AND ORDER
The Federal Trade Commission ("Commission"),
having initiated an investigation of the proposed
acquisition of OrNda Healthcorp by Tenet Healthcare
Corporation ("Tenet" or
"respondent"), and the respondent having been
furnished thereafter with a copy of a draft of complaint
which the Bureau of Competition and the Los Angeles
Regional Office proposed to present to the Commission for
its consideration and which, if issued by the Commission,
would charge respondent with a violation of 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
The respondent, its attorney, and counsel for the
Commission having thereafter executed an agreement
containing a consent order, an admission by the
respondent of all jurisdictional facts set forth in the
aforesaid draft of complaint, a statement that the
signing of said agreement is for settlement purposes only
and does not constitute an admission by respondent that
the law has been violated as alleged in such complaint,
and waivers and other provisions as required by the
Commission's Rules; and
The Commission having thereafter considered the matter
and having determined that it had reason to believe that
the respondent has violated the said Acts, and that
complaint should issue stating its charges in that
respect, and having thereupon accepted the executed
consent agreement and placed such agreement on the public
record for a period of sixty (60) days, and having duly
considered the comments filed thereafter by interested
persons pursuant to § 2.34 of its Rules, now in further
conformity with the procedure prescribed in § 2.34
of its Rules, the Commission hereby issues its complaint,
makes the following jurisdictional findings and enters
the following order:
- 1. Respondent Tenet is a corporation organized,
existing, and doing business under and by virtue
of the laws of Nevada, with its principal place
of business at 3820 State Street, Santa Barbara,
California 93105.
-
- 2. The Federal Trade Commission has jurisdiction
of the subject matter of this proceeding and of
the respondent, and the proceeding is in the
public interest.
ORDER
I.
IT IS ORDERED THAT, as used in this
order, the following definitions shall apply:
- A. "Tenet" or "respondent"
means Tenet Healthcare Corporation; its
directors, officers, employees, agents and
representatives, predecessors, successors, and
assigns; its subsidiaries, divisions, groups and
affiliates controlled by Tenet Healthcare
Corporation; and the respective directors,
officers, employees, agents, and representatives,
successors, and assigns of each.
-
- B. "OrNda" means OrNda Healthcorp; its
directors, officers, employees, agents and
representatives, predecessors, successors, and
assigns; its subsidiaries, divisions, groups and
affiliates controlled by OrNda Healthcorp; and
the respective directors, officers, employees,
agents, and representatives, successors, and
assigns of each.
-
- C. "Commission" means the Federal Trade
Commission.
-
- D. The "Acquisition" means the
transaction contemplated by the October 16, 1996
Agreement and Plan of Merger between Tenet and
OrNda, pursuant to which OrNda will become a
wholly-owned subsidiary of Tenet.
-
- E. "Acute care hospital" means a health
care 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, that 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.
-
- F. "Affiliate" means any entity whose
management and policies are controlled in any
way, directly or indirectly, by the person with
which it is affiliated.
-
- G. "Person" means any natural person,
partnership, corporation, company, association,
trust, joint venture, or other business or legal
entity, including any governmental agency.
-
- H. "Relevant area" means the county of
San Luis Obispo in California.
-
- I. The "Schedule A assets" mean the
assets identified in the attached Schedule A.
-
- J. The "Schedule B assets" mean the
assets identified in the attached Schedule B.
-
- K. "Monarch Health Systems" or
"Monarch" means Monarch Medical
Alliance, Inc., doing business as Monarch Health
Systems (a corporation with its headquarters in
Santa Barbara, California), its subsidiaries, and
their successors and assigns.
-
L. "Assets and Businesses" include,
but are not limited to, all assets, properties,
businesses, rights, privileges, contractual
interests, licenses, and goodwill of whatever
nature, tangible and intangible, including,
without limitation, the following:
- 1. all real property interests (including
fee simple interests and real property
leasehold interests, whether as lessor or
lessee), together with all buildings,
improvements, and fixtures located
thereon, all construction in progress
thereat, all appurtenances thereto, and
all licenses and permits related thereto
(collectively, the "Real
Property");
-
- 2. all contracts and agreements with
physicians, other health care providers,
unions, third party payers, health
maintenance organizations and other
health plans, customers, suppliers, sales
representatives, distributors, agents,
personal property lessors, personal
property lessees, licensors, licensees,
cosigners, and consignees (collectively,
the "Contracts");
-
- 3. all machinery, equipment, fixtures,
vehicles, furniture, inventories, and
supplies (other than such inventories and
supplies as are used in the ordinary
course of business during the time that
Tenet owns the assets) (collectively, the
"Personal Property");
-
- 4. all research materials, technical
information, management information
systems, software, software licenses,
inventions, trade secrets, technology,
know- how, specifications, designs,
drawings, processes, and quality control
data (collectively, the "Intangible
Personal Property");
-
- 5. all books, records, and files,
excluding, however, the corporate minute
books and tax records of Tenet, OrNda,
and their affiliates; and
-
- 6. all prepaid expenses.
- M. To "operate" an acute care hospital
means to own, lease, manage, or otherwise control
or direct the operations of an acute care
hospital, directly or indirectly.
-
N. To "acquire" an acute care
hospital means, directly or indirectly, through
subsidiaries, partnerships, or otherwise:
- 1. To acquire the whole or any part of
the assets used or previously used within
the last two years (and still suitable
for use) for operating an acute care
hospital from any person presently
engaged in, or within the two years
preceding such acquisition engaged in,
operating an acute care hospital;
-
- 2. To acquire the whole or any part of
the stock, share capital, equity, or
other interest in any person engaged in,
or within the two years preceding such
acquisition engaged in, operating an
acute care hospital;
-
- 3. To acquire or otherwise obtain the
right to designate, directly or
indirectly, directors or trustees of an
acute care hospital; or
-
- 4. To enter into any other arrangement to
obtain direct or indirect ownership,
management, or control of an acute care
hospital or any part thereof, including,
but not limited to, a lease of or
management contract for an acute care
hospital.
II.
IT IS FURTHER ORDERED that:
- A. Respondent shall divest, absolutely and in
good faith, on or before August 1, 1997, the
Schedule A assets.
-
- B. Respondent shall also divest, absolutely and
in good faith, on or before August 1, 1997, such
additional ancillary assets and businesses, and
effect such arrangements, as are necessary to
assure the marketability, independence,
viability, and competitiveness of French Hospital
Medical Center.
-
- C. Respondent shall also divest, absolutely and
in good faith, on or before August 1, 1997, all
of its stock in Monarch Health Systems. The
Monarch Health Systems stock may be, but need not
be, divested to the same person to whom the
Schedule A assets are divested.
-
- D. The purpose of the foregoing divestitures is
to ensure the continuation of French Hospital
Medical Center as an ongoing, independent, and
viable acute care hospital, and to remedy the
lessening of competition resulting from the
Acquisition as alleged in the Commission's
complaint.
-
- E. Respondent shall divest the Schedule A assets,
the Monarch Health Systems stock, and any
additional assets that must be divested pursuant
to Paragraph II.B. above, only to an acquirer
that receives the prior approval of the
Commission and only in a manner that receives the
prior approval of the Commission; provided,
however, that respondent may divest the Monarch
Health Systems stock, or that stock together with
the loan agreement identified in Schedule A,
without the prior approval of the Commission, to
a person other than respondent in connection with
that person's acquisition of all, or
substantially all, Monarch Health Systems stock.
-
- F. Respondent shall comply with all terms of the
Agreement to Hold Separate concerning the
Schedule A assets, the Schedule B assets, and the
Monarch Health Systems stock, attached hereto and
made a part hereof as Appendix I. Said Hold
Separate shall continue in effect until such time
as respondent has fulfilled the divestiture
requirements of this Paragraph II or until such
other time as said Hold Separate provides.
-
- G. Pending the divestitures required by this
Paragraph II, respondent shall take such actions
as are necessary to maintain the present
marketability, viability, and competitiveness of
the Schedule A and Schedule B assets, and to
prevent the destruction, removal, wasting,
deterioration, or impairment of the Schedule A
and Schedule B assets, except for ordinary wear
and tear.
-
- H. A condition of approval by the Commission of
the divestiture of the Schedule A assets shall be
a written agreement by the acquirer(s) of those
assets that it will not sell for a period of ten
(10) years from the date of divestiture, directly
or indirectly, through subsidiaries,
partnerships, or otherwise, without prior
notification to the Commission in the manner
prescribed by Paragraph IV of this Order, any
Schedule A asset to any person who operates, or
will operate immediately following the sale, any
other acute care hospital in the relevant area.
III.
IT IS FURTHER ORDERED that:
- A. If the respondent has not divested, absolutely
and in good faith and with the Commission's prior
approval, the Schedule A assets, in accordance
with this order, on or before August 1, 1997, the
Commission may appoint a trustee to effect the
divestiture of the Schedule A assets. The trustee
may on his or her initiative, or at the direction
of the Commission, also divest some or all of the
Schedule B assets, to the extent such additional
divestitures are necessary to completely fulfill
the purpose, identified in Paragraph II.D. above,
of the divestiture of the Schedule A assets.
-
- B. If the respondent has not divested, absolutely
and in good faith and with the Commission's prior
approval, its stock in Monarch Health Systems, in
accordance with this order, on or before August
1, 1997, the Commission may appoint a trustee to
effect the divestiture of the Monarch Health
Systems stock.
-
- C. In the event that the Commission or the
Attorney General brings an action for any failure
to comply with this order or in any way relating
to the Acquisition, pursuant to Section 5(l)
of the Federal Trade Commission Act, 15 U.S.C.
§ 45(l), or any other statute
enforced by the Commission, the respondent shall
consent to the appointment of a trustee in such
action. Neither the appointment of a trustee nor
a decision not to appoint a trustee under
Paragraph III.A. or Paragraph III.B. shall
preclude the Commission or the Attorney General
from seeking civil penalties or any other relief
available to them for any failure by the
respondent to comply with this order.
D. If a
trustee is appointed by the Commission or a court
pursuant to Paragraph III.A. or Paragraph III.B.
of this order, the respondent shall consent to
the following terms and conditions regarding the
trustee's powers, duties, authority, and
responsibilities:
- 1. The Commission shall select the
trustee, subject to the consent of the
respondent, which consent shall not be
unreasonably withheld. The trustee shall
be a person with experience and expertise
in acquisitions and divestitures. If
respondent has not opposed, in writing,
including the reasons for opposing, the
selection of any proposed trustee within
ten (10) days after notice by the staff
of the Commission to respondent of the
identity of any proposed trustee,
respondent shall be deemed to have
consented to the selection of the
proposed trustee.
-
- 2. Subject to the prior approval of the
Commission (except with respect to any
divestiture of Monarch Health Systems
stock which Paragraph II.E. permits to be
made without Commission approval), the
trustee shall serve as an agent of the
Commission and shall have the exclusive
power and authority to divest (a) the
Schedule A assets and, as necessary, some
or all of the Schedule B assets, if the
trustee is appointed pursuant to
Paragraph III.A., and (b) respondent's
Monarch Health Systems stock, if the
trustee is appointed pursuant to
Paragraph III.B.
-
- 3. Within ten (10) days after appointment
of the trustee, respondent shall execute
a trust agreement that, subject to the
prior approval of the Commission and, in
the case of a court-appointed trustee, of
the court, transfers to the trustee all
rights and powers necessary to permit the
trustee to effect the divestitures
required by this order.
-
- 4. The trustee shall have twelve (12)
months from the date the Commission
approves the trust agreement described in
Paragraph III.D.3 to accomplish the
divestitures, which shall be subject to
the prior approval of the Commission
(with the exception set forth in
Paragraph III.D.2). If, however, at the
end of the twelve-month period, the
trustee has submitted a plan of
divestiture or believes that divestiture
can be achieved within a reasonable time,
the divestiture period may be extended by
the Commission, or in the case of a
court-appointed trustee, by the court;
provided, however, that the Commission
may extend this period only two (2)
times, for up to twelve (12) months each
time.
-
- 5. The trustee shall have full and
complete access to the personnel, books,
records, and facilities related to the
assets he or she is to divest, as well as
to any other relevant information as the
trustee may request. Respondent shall
develop such financial or other
information as such trustee may
reasonably request, and shall cooperate
with the trustee. Respondent shall take
no action to interfere with or impede the
trustee's accomplishment of the
divestitures. Any delays in divestiture
caused by respondent shall extend the
time for divestiture under this Paragraph
III in an amount equal to the delay, as
determined by the Commission or, for a
court-appointed trustee, by the court.
-
- 6. The trustee shall use his or her best
efforts to negotiate the most favorable
price and terms available in each
contract that is submitted to the
Commission, subject to the trustee's
fiduciary duty to the Commission and to
respondent's absolute and unconditional
obligation to divest at no minimum price.
The divestiture shall be made in the
manner and to an acquirer as set forth in
Paragraph II; provided, however, if the
trustee receives bona fide offers
from more than one acquiring entity for
the Schedule A assets (along with, if
necessary, some or all of the Schedule B
assets), or for the Monarch Health
Systems stock, and if the Commission
determines to approve more than one such
acquiring entity (or, for the Monarch
Health Systems stock, more than one
entity is either approved to acquire the
stock, or does not require Commission
approval under Paragraph II.E.), the
trustee shall divest to the acquiring
entity selected by respondent from among
those approved by the Commission.
-
- 7. The trustee shall serve, without bond
or other security, at the cost and
expense of the respondent, on such
reasonable and customary terms and
conditions as the Commission or a court
may set. The trustee shall have the
authority to employ, at the cost and
expense of respondent, such consultants,
accountants, attorneys, investment
bankers, business brokers, appraisers,
and other representatives and assistants
as are necessary to carry out the
trustee's duties and responsibilities.
The trustee shall account for all monies
derived from the sale and all expenses
incurred. After approval by the
Commission and, in the case of a
court-appointed trustee, by the court, of
the account of the trustee, including
fees for his or her services, all
remaining monies shall be paid at the
direction of the respondent and the
trustee's power shall be terminated. The
trustee's compensation shall be based at
least in significant part on a commission
arrangement contingent on the trustee's
divesting the Schedule A assets (if the
trustee is appointed pursuant to
Paragraph III.A.) and the Monarch Health
Systems stock (if the trustee is
appointed pursuant to Paragraph III.B.).
-
- 8. Respondent shall indemnify the trustee
and hold the trustee harmless against any
losses, claims, damages, liabilities, or
expenses arising out of, or in connection
with, the performance of the trustee's
duties, including all reasonable fees of
counsel and other expenses incurred in
connection with the preparation for, or
defense of any claim, whether or not
resulting in any liability, except to the
extent that such liabilities, losses,
damages, claims, or expenses result from
misfeasance, gross negligence, willful or
wanton acts, or bad faith by the trustee.
-
- 9. If the trustee ceases to act or fails
to act diligently, a substitute trustee
shall be appointed in the same manner as
provided in Paragraph III.A. or Paragraph
III.B. of this order.
-
- 10. The Commission or, in the case of a
court-appointed trustee, the court, may
on its own initiative, or at the request
of the trustee, issue such additional
orders or directions as may be necessary
or appropriate to accomplish the
divestitures required by this order.
-
- 11. The trustee shall also divest such
additional ancillary assets and
businesses and effect such arrangements
as are necessary to assure the
marketability and the viability and
competitiveness of French Hospital
Medical Center.
-
- 12. The trustee shall have no obligation
or authority to operate or maintain the
Schedule A assets, or the Schedule B
assets, or to take any actions (other
than in furtherance of divestiture)
relating to the Monarch Health Systems
stock.
-
- 13. The trustee shall report in writing
to the respondent and to the Commission
every sixty (60) days concerning the
trustee's efforts to accomplish
divestiture.
IV.
IT IS FURTHER ORDERED that, for a
period of ten (10) years from the date this order becomes
final, respondent shall not, without providing advance
written notification to the Commission, directly or
indirectly, through subsidiaries, partnerships, or
otherwise:
- A. Acquire any stock, share capital, equity, or
other interest in any person, other than
respondent, operating an acute care hospital in
the relevant area;
-
- B. Acquire any assets of an acute care hospital
in the relevant area, or any assets used within
the two years preceding such acquisition (and
still suitable for use) for operating an acute
care hospital in the relevant area;
-
- C. Enter into any agreement or other arrangement
to obtain direct or indirect ownership,
management, or control of any acute care
hospital, or any part thereof, in the relevant
area, including but not limited to, a lease of or
management contract for any such facility;
-
- D. Acquire or otherwise obtain the right to
designate, directly or indirectly, directors or
trustees of any acute care hospital in the
relevant area;
-
- E. Permit any acute care hospital it operates in
the relevant area to be acquired by any person
that operates, or will operate immediately
following such acquisition, any other acute care
hospital in the relevant area; or
-
- F. Acquire any stock, share capital, equity, or
other interest in Monarch Health Systems.
Said notification shall be given on the Notification
and Report Form set forth in the Appendix to Part 803 of
Title 16 of the Code of Federal Regulations as amended
(hereinafter referred to as "the
Notification"), and shall be prepared and
transmitted in accordance with the requirements of that
part, except that no filing fee will be required for any
such notification, notification need not be made to the
United States Department of Justice, and notification is
required only of respondent and not of any other party to
the transaction. Respondent shall provide the
Notification to the Commission at least thirty days prior
to consummating the transaction (hereinafter referred to
as the "first waiting period"). If, within the
first waiting period, representatives of the Commission
make a written request for additional information or
documentary material (within the meaning of 16 C.F.R. §
803.20), respondent shall not consummate the transaction
until twenty days after submitting such additional
information and documentary material. Early termination
of the waiting periods in this paragraph may be requested
and, where appropriate, granted by letter from the Bureau
of Competition.
Provided, however, that prior notification pursuant to
this Paragraph IV, or pursuant to Paragraph II.H. of this
order, shall not be required for:
- (1) the establishment by respondent of an acute
care hospital in the relevant area: (a) that is a
replacement for an existing acute care hospital,
if that facility is operated by respondent and is
not required to be divested pursuant to Paragraph
II of this order; or
- (b) that is not a replacement for any acute care
hospital in the relevant area;
-
- (2) any transaction otherwise subject to this
Paragraph IV of this order if the fair market
value of (or, in case of an asset acquisition,
the consideration to be paid for) the acute care
hospital or part thereof to be acquired does not
exceed one million dollars ($1,000,000); or
-
- (3) any transaction for which notification is
required to be made, and has been made, pursuant
to Section 7A of the Clayton Act, 15 U.S.C.
§ 18a.
V.
IT IS FURTHER ORDERED that, for a
period of ten (10) years from the date this order becomes
final, respondent shall not permit all, or any
substantial part of, any acute care hospital it operates
in the relevant area to be acquired by any other person
(except pursuant to the divestitures required by
Paragraph II, or to divestitures by a trustee pursuant to
Paragraph III), unless the acquiring person files with
the Commission, prior to the closing of such acquisition,
a written agreement to be bound by the provisions of this
order, which agreement respondent shall require as a
condition precedent to the acquisition.
VI.
IT IS FURTHER ORDERED that within
sixty (60) days after the date this order becomes final
and every sixty (60) days thereafter until the respondent
has fully complied with Paragraph II of this order,
respondent shall submit to the Commission a verified
written report setting forth in detail the manner and
form in which it intends to comply, is complying, and has
complied with Paragraph II of this order. Respondent
shall include in its compliance reports, among other
things that are required from time to time, a full
description of the efforts being made to comply with
Paragraph II of the order, including a description of all
substantive contacts or negotiations for the
divestitures, and the identity of all parties contacted.
Respondent shall include in its compliance reports copies
of all written communications to and from such parties,
all internal memoranda, and all reports and
recommendations concerning the divestitures.
VII.
IT IS FURTHER ORDERED that respondent
shall notify the Commission at least thirty (30) days
prior to any proposed change in the corporate respondent
such as dissolution, assignment, sale resulting in the
emergence of a successor corporation, or the creation or
dissolution of subsidiaries or any other change in the
corporation that may affect compliance obligations
arising out of the order.
VIII.
IT IS FURTHER ORDERED that, for the
purpose of determining or securing compliance with this
order, the respondent shall permit any duly authorized
representative of the Commission:
A. Access, during office hours and in the presence of
counsel, to inspect and copy all books, ledgers,
accounts, correspondence, memoranda, and other records
and documents in the possession or under the control of
the respondent relating to any matters contained in this
order; and
B. Upon five days' notice to respondent and without
restraint or interference from it, to interview officers,
directors, or employees of respondent, who may have
counsel present regarding such matters.
By the Commission.
Donald S. Clark
Secretary
ISSUED: May 20, 1997
SCHEDULE A
The "Schedule A assets" to be divested
pursuant to Paragraph II shall include all Assets and
Businesses (including all improvements, additions and
enhancements made to such assets prior to divestiture) of
French Hospital Medical Center, 1911 Johnson Avenue, San
Luis Obispo, California, including without limitation
OrNda's ownership, partnership, or leasehold interests in
the following properties and businesses in San Luis
Obispo County, California:
- 1. Pacific Medical Plaza, 1941 Johnson Avenue,
San Luis Obispo, California;
-
- 2. Pulse Health Services, 1911 Johnson Avenue,
San Luis Obispo, California;
-
- 3. Med Stop Urgent Care Centers, at 283 Madonna
Road, San Luis Obispo, California, and 877 Oak
Park Boulevard, Pismo Beach, California;
-
- 4. Central Coast Surgery Center, 1941 Johnson
Avenue, Suite 103, San Luis Obispo, California;
-
- 5. San Luis Recovery Partners, 1575 Bishop, San
Luis Obispo, California; and
-
- 6. La Posada Medical Center, 225 Posada Lane,
Templeton, California.
The "Schedule A assets" shall include, in
addition, the January 1997 loan agreement between OrNda
Investments, Inc. and Monarch Health Systems, including
all of OrNda Investments' rights and obligations
thereunder, and all promissory notes issued thereunder.
SCHEDULE B
The "Schedule B assets" shall consist of all
Assets and Businesses (including all improvements,
additions and enhancements made to such assets prior to
divestiture) of Valley Community Hospital, 505 East Plaza
Drive, Santa Maria, California, including without
limitation OrNda's ownership, partnership, or leasehold
interests in the following properties and businesses in
Santa Barbara County, California:
- 1. Valley Medical Plaza, 525 East Plaza Drive,
Santa Maria, California;
-
- 2. Valley Medical Courtyard, 505 and 506 East
Plaza Drive, Santa Maria, California; and
-
- 3. Knollwood Business Plaza, 5075 South Bradley
Road, Santa Maria, California.
Appendix I
AGREEMENT TO HOLD SEPARATE
This Agreement to Hold Separate
("Agreement") is by and between Tenet
Healthcare Corporation ("Tenet" or
"respondent"), 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 at 3820 State Street, Santa Barbara, California
93105; and the Federal Trade Commission
("Commission"), an independent agency of the
United States Government, established under the Federal
Trade Commission Act of 1914, 15 U.S.C. § 41, et
seq.
PREMISES
WHEREAS, on October 16, 1996, Tenet
and OrNda Healthcorp ("OrNda") entered into an
Agreement and Plan of Merger pursuant to which OrNda will
become a wholly-owned subsidiary of Tenet (the
"Acquisition"); and
WHEREAS, Tenet with its principal
place of business at 3820 State Street, Santa Barbara,
California 93105, owns and operates, among other things,
acute care hospitals in San Luis Obispo County,
California, and elsewhere; and
WHEREAS, Tenet through the
Acquisition will acquire French Hospital Medical Center
and related OrNda assets and businesses in San Luis
Obispo County, California; Valley Community Hospital and
related OrNda assets and businesses in northern Santa
Barbara County, California; about one-third of the
outstanding stock of Monarch Medical Alliance, Inc.,
doing business as Monarch Health Systems
("Monarch"), an integrated health care delivery
system which is a major customer of French Hospital
Medical Center; and a short-term loan agreement for OrNda
to lend funds to Monarch; and
WHEREAS, the Commission is now
investigating the Acquisition to determine whether it
would violate any of the statutes enforced by the
Commission; and
WHEREAS, if the Commission accepts
the Agreement Containing Consent Order in this matter,
which would require the divestiture of French Hospital
Medical Center and certain related assets identified in
Schedule A of the Consent Order (the "Schedule A
assets") and respondent's Monarch stock, and may
require the divestiture of certain other assets
identified in Schedule B of the Consent Order (the
"Schedule B assets") pursuant to Paragraph II
of the Consent Order, the Commission must place the
Consent Order on the public record for a period of at
least sixty (60) days and may subsequently withdraw such
acceptance pursuant to the provisions of Section 2.34 of
the Commission's Rules; and
WHEREAS, the Commission is concerned
that if an understanding is not reached, preserving the status
quo ante of the Schedule A assets and the Schedule B
assets, and preserving the independence of Monarch from
Tenet, during the period prior to the final acceptance
and issuance of the Consent Order by the Commission
(after the "60-day public comment period"),
divestiture resulting from any proceeding challenging the
legality of the Acquisition might not be possible, or
might be less than an effective remedy; and
WHEREAS, if the Commission accepts
the Consent Order, and Tenet has not divested with the
Commission's prior approval French Hospital Medical
Center, related assets, and its Monarch stock, in
accordance with the Consent Order, on or before August 1,
1997, the Commission may appoint a trustee to divest
those assets; and
WHEREAS, the Commission is concerned
that if the Acquisition is consummated, it will be
necessary to preserve the Commission's ability to require
the divestiture of French Hospital Medical Center,
related assets, and Monarch stock, and the Commission's
right to have French Hospital Medical Center continue as
a viable acute care hospital independent of Tenet; and
WHEREAS, the purposes of this
Agreement and the Consent Order are to:
- (i) preserve French Hospital Medical Center as a
viable, competitive, and ongoing acute care
hospital, independent of Tenet, pending the
divestiture required under the terms of the
Consent Order;
-
- (ii) prevent interim harm to competition from the
operation of French Hospital Medical Center
pending the divestiture required under the terms
of the Consent Order; and
-
- (iii) remedy any anticompetitive effects of the
Acquisition;
WHEREAS, respondent's entering into
this Agreement shall in no way be construed as an
admission by respondent that the Acquisition is illegal;
and
WHEREAS, respondent understands that
no act or transaction contemplated by this Agreement
shall be deemed immune or exempt from the provisions of
the antitrust laws or the Federal Trade Commission Act by
reason of anything contained in this Agreement.
NOW, THEREFORE, the parties agree,
upon understanding that the Commission has not yet
determined whether the Acquisition will be challenged,
and in consideration of the Commission's agreement that,
at the time it accepts the Consent Order for public
comment it will grant early termination of the
Hart-Scott-Rodino waiting period, and unless the
Commission determines to reject the Consent Order, it
will not seek further relief from respondent with respect
to the Acquisition, except that the Commission may
exercise any and all rights to enforce this Agreement and
the Consent Order to which it is annexed and made a part
thereof, and in the event the divestitures required by
the Consent Order are not accomplished on or before
August 1, 1997, to appoint a trustee to seek divestiture
of French Hospital Medical Center, related assets, and
Monarch stock pursuant to the Consent Order, to seek
civil penalties, to seek a court appointed trustee,
and/or to seek other equitable relief, as follows:
- 1. Respondent agrees to execute the Agreement
Containing Consent Order and be bound by the
attached Consent Order.
-
- 2. Respondent agrees that:
-
- a. from the date this Agreement to Hold
Separate is accepted until the earliest
of the dates listed in subparagraphs
2.a.(i) or 2.a.(ii), it will comply with
the provisions of paragraph 3 of this
Agreement:
-
- (i) three (3) business days after
the Commission withdraws its
acceptance of the Consent Order
pursuant to the provisions of
Section 2.34 of the Commission's
Rules; or
-
- (ii) the day after the
divestitures required by
Paragraphs II.A. and II.B. of the
Consent Order are completed.
-
- b. from the date this Agreement to Hold
Separate is accepted until the earliest
of the dates listed in subparagraphs
2.b.(i) or 2.b.(ii), it will comply with
the provisions of paragraph 4 of this
Agreement:
-
- (i) three (3) business days after
the Commission withdraws its
acceptance of the Consent Order
pursuant to the provisions of
Section 2.34 of the Commission's
Rules; or
-
- (ii) the day after the
divestiture required by Paragraph
II.C. of the Consent Order is
completed, or, if later, the day
after all loan agreements between
respondent and Monarch expire,
are terminated, or are divested
in accordance with Paragraph
II.A. of the Consent Order.
-
- 3. To ensure the complete independence and
viability of the Schedule A assets and the
Schedule B assets, and to ensure that no
competitive information is exchanged between
respondent and the managers of the Schedule A
assets and the Schedule B assets, respondent
shall hold the Schedule A assets and the Schedule
B assets, as they are presently constituted,
separate and apart on the following terms and
conditions:
-
- a. The Schedule A assets and the Schedule
B assets, as they are presently
constituted, shall be held separate and
apart and shall be managed and operated
independently of respondent (meaning here
and hereinafter, Tenet excluding the
Schedule A assets and the Schedule B
assets), except to the extent that
respondent must exercise direction and
control over such assets to assure
compliance with this Agreement or the
Consent Order, and except as otherwise
provided in this Agreement.
-
- b. Prior to, or simultaneously with the
Acquisition, respondent shall adopt, for
the corporations that now own and
operate, respectively, French Hospital
Medical Center (the "French
Company"), and Valley Community
Hospital (the "Valley
Company"), constituent documents
that are not inconsistent with other
provisions of this Agreement or the
Consent Order. Respondent shall transfer
to the French Company all ownership and
control of any Schedule A assets it does
not already own and control. Respondent
shall transfer to the Valley Company all
ownership and control of any Schedule B
assets it does not already own and
control. The French Company and the
Valley Company shall hereafter be
described collectively as the "Hold
Separate Companies."
-
- c. The boards of directors of each of the
Hold Separate Companies ("Hold
Separate Companies Boards") shall
have the same three members for each of
the Hold Separate Companies. Respondent
shall elect the members of the Hold
Separate Companies Boards. The Hold
Separate Companies Boards shall consist
of the following three persons: (i)
Michael D. Bakst; (ii) Thomas Sawicki,
and (iii) Michael H. Focht Sr., provided
they agree, or comparable, knowledgeable
persons. The Chairman of the Hold
Separate Companies Boards shall be
Michael D. Bakst, provided he agrees, or
a comparable, knowledgeable person, who
shall remain independent of Respondent
and competent to assure the continued
viability and competitiveness of the
Schedule A assets and the Schedule B
assets. The Hold Separate Companies
Boards shall include no more than one
member who is a director, officer,
employee, or agent of respondent, who
shall be Michael H. Focht Sr., provided
he agrees, or a comparable, knowledgeable
person ("the respondent's Hold
Separate Companies Boards member").
The Hold Separate Companies Boards shall
meet monthly during the course of the
Hold Separate, and as otherwise
necessary. Meetings of the Hold Separate
Companies Boards during the term of this
Agreement shall be audiographically
transcribed and the tapes retained for
two (2) years after the termination of
this Agreement.
-
- d. The operations of the Hold Separate
Companies shall, to the extent deemed
desirable by the Hold Separate Companies
Boards, coordinate their operations with
each other as if they were a single
company.
-
- e. Respondent shall not exercise
direction or control over, or influence
directly or indirectly, the Schedule A
assets, the Schedule B assets, the
independent Chairman of the Boards of the
Hold Separate Companies, or any of their
operations or businesses; provided,
however, that respondent may exercise
only such direction and control over the
Hold Separate Companies as is necessary
to assure compliance with this Agreement
or the Consent Order, or with all
applicable laws.
-
- f. Respondent shall maintain the
viability, competitiveness, and
marketability of the Schedule A assets
and the Schedule B assets; shall not
sell, transfer, or encumber the Schedule
A assets or the Schedule B assets (other
than in the normal course of business);
and shall not cause or permit the
destruction, removal, wasting, or
deterioration, or otherwise impair the
viability, competitiveness, or
marketability of the Schedule A assets or
the Schedule B assets.
-
- g. Except for the respondent's Hold
Separate Companies Boards member,
respondent shall not permit any director,
officer, employee, or agent of respondent
to also be a director, officer, or
employee of the Hold Separate Companies.
-
- h. The Hold Separate Companies shall be
staffed with sufficient employees to
maintain the viability and
competitiveness of the Schedule A assets
and the Schedule B assets, which
employees shall be selected from the
existing employee base of each facility
or entity and may also be hired from
sources other than these facilities and
entities.
-
- i. Respondent shall not employ, or make
offers of employment to, any person
employed by the Schedule A assets or the
Schedule B assets in any capacity
relating to the management or marketing
activities of those assets. Respondent
shall encourage and facilitate continued
employment by the Schedule A assets and
the Schedule B assets of such employees;
shall not offer any incentive to such
employees to cease employment with the
Schedule A assets or the Schedule B
assets, or to accept other employment
with respondent; and shall take all
actions necessary to remove any
impediments that may deter such employees
from continuing their employment with the
Schedule A assets or the Schedule B
assets, including but not limited to, the
payment, or transfer for the account of
the employee, of all accrued bonuses,
pensions and other accrued benefits to
which such employees would otherwise have
been entitled had they remained in the
employment of respondent.
-
- j. With the exception of the respondent's
Hold Separate Companies Boards Member,
respondent shall not change the
composition of the Hold Separate
Companies Boards unless the independent
Chairman consents. The independent
Chairman shall have power to remove
members of the Hold Separate Companies
Boards for cause and to require
respondent to appoint replacement members
to the Hold Separate Companies Boards as
provided in Paragraph 3.c. Respondent
shall not change the composition of the
management of the Hold Separate
Companies, except that the Hold Separate
Companies Boards shall have the power to
remove management employees for cause.
-
- k. If the independent Chairman ceases to
act or fails to act diligently, a
substitute Chairman shall be appointed in
the same manner as provided in Paragraph
3.c. of this Agreement.
-
- l. Except as required by law, and except
to the extent that necessary information
is exchanged in the course of evaluating
the Acquisition, defending
investigations, defending or prosecuting
litigation, obtaining legal advice,
negotiating agreements to divest assets,
or complying with this Agreement or the
Consent Order, respondent shall not
receive or have access to, or use or
continue to use, any Material
Confidential Information not in the
public domain about the Hold Separate
Companies, the activities of the
hospitals operated by the Hold Separate
Companies Boards, the activities of
Monarch, the Schedule A assets, or the
Schedule B assets. Nor shall the Hold
Separate Companies or the Hold Separate
Companies Boards receive or have access
to, or use or continue to use, any
Material Confidential Information not in
the public domain about respondent and
relating to respondent's acute care
hospitals. Respondent may receive, on a
regular basis, aggregate financial
information relating to the Hold Separate
Companies necessary and essential to
allow respondent to prepare United States
consolidated financial reports, tax
returns, Medicare or Medicaid cost
reports, and personnel reports. Any such
information that is obtained pursuant to
this subparagraph shall be used only for
the purposes set forth in this
subparagraph. ("Material
Confidential Information," as used
herein, means competitively sensitive or
proprietary information not independently
known to an entity from sources other
than the entity to which the information
pertains, and includes, but is not
limited to, customer lists, price lists,
health plan contracts, marketing methods,
patents, technologies, processes, or
other trade secrets.)
-
- m. Except as permitted by this Agreement,
the respondent's Hold Separate Companies
Boards member shall not, in his or her
capacity as a Hold Separate Companies
Boards member, receive Material
Confidential Information, and shall not
disclose any such information received
under this Agreement to respondent, or
use it to obtain any advantage for
respondent. The respondent's Hold
Separate Companies Boards member shall
enter a confidentiality agreement
prohibiting disclosure of Material
Confidential Information. The
respondent's Hold Separate Companies
Boards member shall participate in
matters that come before the Hold
Separate Companies Boards only for the
limited purposes of considering a capital
investment or other transaction exceeding
$250,000, approving any proposed budget
and operating plans, and carrying out
respondent's responsibilities under this
Agreement and the Consent Order. Except
as permitted by this Agreement, the
respondent's Hold Separate Companies
Boards member shall not participate in
any matter, or attempt to influence the
votes of the other members of the Hold
Separate Companies Boards with respect to
matters, that would involve a conflict of
interest if respondent and the Hold
Separate Companies were separate and
independent entities.
-
- n. Any material transaction of the Hold
Separate Companies that is out of the
ordinary course of business must be
approved by a majority vote of the Hold
Separate Companies Boards; provided that
the Hold Separate Companies shall engage
in no transaction, material or otherwise,
that is precluded by this Agreement.
-
- o. If necessary, respondent shall provide
the Hold Separate Companies with
sufficient working capital to operate the
Schedule A assets and the Schedule B
assets at their current rate of
operation, to fulfill respondent's
obligations under the loan agreement
identified in Schedule A of the Consent
Order, and to carry out any capital
improvement plans for the Schedule A
assets and the Schedule B assets that
have already been approved.
-
- p. Respondent shall continue to provide
the same support services to the Schedule
A assets and the Schedule B assets as are
being provided to them by OrNda as of the
date this Agreement is signed. Respondent
may charge the Hold Separate Companies
the same fees, if any, charged by OrNda
as of December 1, 1996 for such support
services. Respondent's personnel
providing such support services must
retain and maintain all Material
Confidential Information of the Schedule
A assets and the Schedule B assets on a
confidential basis, and, except as is
permitted by this Agreement, such persons
shall be prohibited from providing,
discussing, exchanging, circulating, or
otherwise furnishing any such information
to or with any person whose employment
involves any of respondent's businesses.
Such personnel shall also execute
confidentiality agreements prohibiting
the disclosure of any Material
Confidential Information of the Schedule
A assets and the Schedule B assets.
-
- q. During the period commencing on the
date this Agreement is effective and
terminating on the earlier of (i) August
1, 1997, or (ii) the date contemplated by
subparagraph 2.a.(ii) (the "Initial
Divestiture Period"), respondent
shall make available for use by the Hold
Separate Companies funds sufficient to
perform all necessary routine maintenance
to, and replacements of, the Schedule A
assets and the Schedule B assets
("normal repair and
replacement"). Provided, however,
that in any event, respondent shall
provide the Hold Separate Companies with
such funds as are necessary to maintain
the viability, competitiveness, and
marketability of the Schedule A assets
and the Schedule B assets.
-
- r. Respondent shall circulate, to its
management employees responsible for the
operation of acute care hospitals in San
Luis Obispo County, California, a notice
of this Hold Separate and Consent Order
in the form attached as Attachment A.
-
- s. The Hold Separate Companies Boards
shall serve at the cost and expense of
respondent. Respondent shall indemnify
the Hold Separate Companies Boards
against any losses or claims of any kind
that might arise out of its involvement
under this Hold Separate Agreement,
except to the extent that such losses or
claims result from misfeasance, gross
negligence, willful or wanton acts, or
bad faith by the Hold Separate Companies
Boards directors.
-
- t. The Hold Separate Companies Boards
shall have access to and be informed
about all companies who inquire about,
seek, or propose to acquire the Schedule
A assets or the Schedule B assets.
-
- u. Within thirty (30) days after the date
this Agreement is accepted by the
Commission and every thirty (30) days
thereafter until this Agreement
terminates, the Hold Separate Companies
Boards shall together report in writing
to the Commission concerning those
Boards' efforts to accomplish the
purposes of this Hold Separate.
-
- 4. To ensure the complete independence of Monarch
from respondent (meaning here and hereinafter,
Tenet excluding the Schedule A assets and the
Schedule B assets), and to ensure that no
competitive Monarch information is disclosed to
respondent, respondent shall establish a trust
for Tenet's Monarch stock, on the following terms
and conditions:
-
- a. Prior to, or simultaneously with the
Acquisition, respondent shall establish a
voting trust for Tenet's Monarch stock,
for which the Trustee shall be the
independent Chairman of the Hold Separate
Companies Boards. The Trustee shall
exercise any and all voting rights of
Tenet's Monarch stock, on all matters
(including without limitation the
election or removal of directors), voted
on by Monarch shareholders, whether at a
regular or special meeting, or pursuant
to a unanimous written consent. The
Trustee shall vote all shares of Tenet's
Monarch stock in the same proportion as
all other shares of Monarch's stock are
voted with respect to such matters. The
Trustee shall also be present, in person
or by proxy, at all annual or special
meetings of Monarch shareholders, so that
Tenet's Monarch stock may be counted for
purposes of determining the presence of a
quorum at such meetings.
-
- b. Tenet shall not use its holdings of
Monarch stock, or any loan agreements
with Monarch:
-
- (i) to control or influence the
conduct of Monarch's business, or
Monarch's business relationships
with French Hospital Medical
Center; or
-
- (ii) to obtain Material
Confidential Information of
Monarch, except Monarch financial
information necessary and
essential to allow respondent to
prepare United States
consolidated financial reports
and tax returns, to allow
respondent to prepare Medicare or
Medicaid cost reports, or for use
by the Hold Separate Companies in
order to carry out the loan
agreement identified in Schedule
A of the Consent Order (which
Monarch information shall be used
only for the purposes set forth
in this subparagraph).
-
- c. Tenet shall not permit any director,
officer, employee, agent, or
representative of Tenet to serve on
Monarch's board of directors.
-
- 5. Should the Commission seek in any proceeding
to compel respondent to divest the Schedule A
assets and/or the Schedule B assets, as provided
in the Consent Order, or to seek any other
injunctive or equitable relief for any failure to
comply with the Consent Order or this Agreement,
or in any way relating to the Acquisition, as
defined in the Consent Order, respondent shall
not raise any objection based upon the expiration
of the applicable Hart-Scott-Rodino Antitrust
Improvements Act waiting period or the fact that
the Commission has permitted the Acquisition.
Respondent also waives all rights to contest the
validity of this Agreement.
-
- 6. To the extent that this Agreement requires
respondent to take, or prohibits respondent from
taking, certain actions that otherwise may be
required or prohibited by contract, respondent
shall abide by the terms of this Agreement or the
Consent Order and shall not assert as a defense
such contract requirements in a civil penalty
action brought by the Commission to enforce the
terms of this Agreement or the Consent Order.
-
- 7. For the purposes of determining or securing
compliance with this Agreement, and subject to
any legally recognized privilege, and upon
written request with reasonable notice to
respondent made to its principal office,
respondent shall permit any duly authorized
representatives of the Commission:
-
- a. Access, during office hours of respondent and
in the presence of counsel, to inspect and copy
all books, ledgers, accounts, correspondence,
memoranda, and all other records and documents in
the possession or under the control of the
respondent relating to compliance with this
Agreement;
-
- b. Upon five (5) days' notice to respondent and
without restraint or interference from
respondent, to interview officers, directors, or
employees of respondent, who may have counsel
present, regarding such matters.
-
- 8. This Agreement shall not be binding until
approved by the Commission.
ATTACHMENT A
NOTICE OF DIVESTITURE AND
REQUIREMENT FOR CONFIDENTIALITY
Tenet Healthcare Corporation has entered into a
Consent Agreement and Agreement to Hold Separate with the
Federal Trade Commission relating to the divestiture of
certain assets, in or near San Luis Obispo County,
California, that Tenet is to acquire through its
acquisition of OrNda Healthcorp.
Until after the divestitures required under the
Consent Agreement are completed, OrNda's hospitals and
other businesses in San Luis Obispo County, California,
as well as those in Santa Barbara County, California
(collectively the "Hold Separate Assets"), must
be managed and maintained as a separate, ongoing
business, independent of all other Tenet businesses. All
competitive information relating to the Hold Separate
Assets must be retained and maintained by the persons
involved in the operation of those Assets on a
confidential basis, and such persons shall be prohibited
from providing, discussing, exchanging, circulating, or
otherwise furnishing any such information to or with any
other person whose employment involves any other Tenet
business. Similarly, all such persons involved in Tenet
shall be prohibited from providing, discussing,
exchanging, circulating, or otherwise furnishing any such
information to or with any other person whose employment
involves any of the Hold Separate Assets. (These
confidentiality requirements are subject to limited
exceptions, set forth in the Hold Separate Agreement.)
Monarch Health Systems is also to remain independent
of Tenet's businesses, other than the Hold Separate
Assets, pending Tenet's divestiture of its Monarch stock.
Any violation of the Consent Agreement or the
Agreement to Hold Separate (which is incorporated by
reference as part of the Consent Order to which Tenet has
agreed), may subject Tenet to civil penalties and other
relief as provided by law.
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