FTC OBTAINS SETTLEMENT AGREEMENT FROM COLUMBIA/HCA TO RESTORE PSYCHIATRIC HOSPITAL COMPETITION IN SOUTH CENTRAL VIRGINIA

The Federal Trade Commission has acted to restore competition for psychiatric hospital services in the Tri-Cities area of south central Virginia by obtaining a settlement agreement from Columbia/HCA Healthcare Corp., under which Columbia/HCA could follow through with its plan to acquire a local hospital which has an inpatient psychiatric unit only if it divests a psychiatric hospital it already owns. The settlement would resolve FTC allegations that Columbia/HCA's proposed acquisition of John Randolph Medical Center in Hopewell would boost the hospital chain's market share for psychiatric hospital services in the Tri-Cities area from 50 percent to more than 70 percent, and violate antitrust laws. By requiring Columbia/HCA to divest Poplar Springs Hospital in Petersburg to an FTC-approved entity that would operate it in competition with Columbia/HCA, the settlement would restore competition allegedly destroyed by the challenged transaction.

Columbia/HCA is based in Nashville, Tennessee. This is the fifth law-enforcement action the FTC has taken in recent years to block or modify hospital acquisitions by Columbia/HCA, which now operates more than 300 hospitals nationwide.

According to the FTC complaint detailing the charges in this case, Columbia/HCA proposes to acquire John Randolph, a 150-bed general acute-care hospital that includes a 34-bed psychiatric department. Columbia/HCA already owns Poplar Springs Hospital, a 100-bed facility specializing in psychiatric care. Columbia/HCA and John Randolph are two of only three competing providers of psychiatric hospital services in the Tri-Cities area, the FTC alleged. (They compete with a smaller psychiatric unit at Southside Regional Medical Center in Petersburg.) Thus, according to the complaint, the acquisition would increase the already high level of concentration and eliminate John Randolph as a substantial competitive force. Moreover, the FTC alleged, it is unlikely that new competitors would emerge quickly, due to state certificate-of-need regulation. The complaint charges that, absent the divestiture required by the proposed settlement, the acquisition could increase the possibility of coordination among the remaining competitors in the market, which may raise prices or otherwise impose less favorable terms on health plans that contract for psychiatric hospital services, and deny patients, physicians, third-party payers and others the benefits of competition for psychiatric hospital services.

Columbia/HCA has signed a proposed consent agreement to settle these allegations, and the settlement is being announced today for public comment. Columbia/HCA would have to complete the divestiture required by the settlement within 12 months after its acceptance by the Commission. Under an agreement accompanying the settlement, Poplar Springs must be operated as a viable psychiatric hospital independent of Columbia/HCA and John Randolph until it is divested.

The proposed consent agreement also would require Columbia/HCA, for 10 years, to notify the FTC before combining its psychiatric facility with any other psychiatric hospital facility in the Tri-Cities area. This prior-notification requirement would allow the FTC an opportunity to block any anticompetitive merger in the same market. By the same token, the acquirer of Poplar Springs would be required to give the FTC notice before transferring the facility to an entity that already operates a psychiatric hospital facility in the area.

Finally, the settlement contains various reporting provisions that would assist the FTC in monitoring Columbia/HCA's compliance.

The Commission vote to announce the proposed settlement 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. 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.

Copies of the complaint, proposed consent agreement, an analysis of the agreement to assist the public in commenting, and news releases on other FTC law enforcement actions involving Columbia/HCA are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov

(FTC File No. 951 0044)
(col-john)