H.I.G. Bayside Debt & LBO Fund II, L.P. and Crestview Partners, L.P. ; Analysis to Aid Public Comment, 65955-65958 [2014-26433]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 79, Number 215 (Thursday, November 6, 2014)]
[Notices]
[Pages 65955-65958]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-26433]


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FEDERAL TRADE COMMISSION

[File No. 141 0183]


H.I.G. Bayside Debt & LBO Fund II, L.P. and Crestview Partners, 
L.P. ; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

[[Page 65956]]


ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis to Aid Public Comment describes both the 
allegations in the draft complaint and the terms of the consent 
orders--embodied in the consent agreement--that would settle these 
allegations.

DATES: Comments must be received on or before December 2, 2014.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/higbaysidedebtconsent online or on 
paper, by following the instructions in the Request for Comment part of 
the SUPPLEMENTARY INFORMATION section below. Write ``In the Matter of 
H.I.G. Bayside Debt & LBO Fund II, L.P., and Crestview Partners, L.P., 
Matter No. 141 0183'' on your comment and file your comment online at 
https://ftcpublic.commentworks.com/ftc/higbaysidedebtconsent by 
following the instructions on the web-based form. If you prefer to file 
your comment on paper, write ``In the Matter of H.I.G. Bayside Debt & 
LBO Fund II, L.P., and Crestview Partners, L.P., Matter No. 141 0183'' 
on your comment and on the envelope, and mail it to the following 
address: Federal Trade Commission, Office of the Secretary, 600 
Pennsylvania Avenue NW., Suite CC-5610 (Annex D), Washington, DC 20580, 
or deliver your comment to the following address: Federal Trade 
Commission, Office of the Secretary, Constitution Center, 400 7th 
Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Jill Frumin, Bureau of Competition, 
(202-326-2758), 600 Pennsylvania Avenue NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing consent orders to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement, and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
from the FTC Home Page (for October 31, 2014), on the World Wide Web, 
at https://www.ftc.gov/os/actions.shtm.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before December 2, 
2014. Write ``In the Matter of H.I.G. Bayside Debt & LBO Fund II, L.P., 
and Crestview Partners, L.P., Matter No. 141 0183'' on your comment. 
Your comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the public Commission Web site, at https://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the Commission tries to 
remove individuals' home contact information from comments before 
placing them on the Commission Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which . . . is privileged or confidential,'' as discussed in Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2). In particular, do not include competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/higbaysidedebtconsent by following the instructions on the web-
based form. If this Notice appears at https://www.regulations.gov/#!home, you also may file a comment through that Web site.
    If you file your comment on paper, write ``In the Matter of H.I.G. 
Bayside Debt & LBO Fund II, L.P., and Crestview Partners, L.P., Matter 
No. 141 0183'' on your comment and on the envelope, and mail your 
comment to the following address: Federal Trade Commission, Office of 
the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC 
20024. If possible, submit your paper comment to the Commission by 
courier or overnight service.
    Visit the Commission Web site at https://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before December 2, 2014. You can find more 
information, including routine uses permitted by the Privacy Act, in 
the Commission's privacy policy, at https://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Orders to Aid Public Comment

I. Introduction And Background

    The Federal Trade Commission (``Commission'') has accepted for 
public comment, subject to final approval, an Agreement Containing 
Consent Orders (``Consent Agreement'') from H.I.G. Bayside Debt & LBO 
Fund II, L.P. (``H.I.G.''), and Crestview Partners, L.P. 
(``Crestview''). The purpose of the proposed Consent Agreement is to 
remedy the anticompetitive effects that otherwise would result from the 
acquisition of Symbion Holdings Corporation (``Symbion''), a Crestview 
subsidiary, by Surgery Center Holdings, Inc. (``Surgery Partners''), an 
H.I.G. subsidiary. The proposed Consent Agreement requires Surgery 
Partners to divest its ownership interest in the Blue Springs Surgery 
Center (``Blue Springs'') in Orange City, Florida, which it will 
acquire as part of its acquisition of Symbion, to a Commission-approved

[[Page 65957]]

acquirer, and in a manner approved by the Commission, no later than 
sixty (60) days after the Commission's final Decision and Order is 
issued. Under the proposed Consent Agreement, Surgery Partners is 
required to hold separate the to-be-divested interest and maintain the 
economic viability and competitiveness of Blue Springs until the 
potential acquirer is approved by the Commission and the divestiture is 
complete. In the event that a timely divestiture of Surgery Partners' 
Blue Springs interest is not accomplished, the Decision and Order 
provides that the Commission may appoint a trustee to divest either 
Surgery Partners' ownership interest in Blue Springs, or its ownership 
interest in Orange City Surgery Center (``OCSC''), a competing facility 
in Orange City in which Surgery Partners owns a controlling interest.
    The proposed Consent Agreement has been placed on the public record 
for thirty days to solicit comments from interested persons. Comments 
received during this period will become part of the public record. 
After 30 days, the Commission again will review the proposed Consent 
Agreement and comments received, and decide whether it should withdraw 
the Consent Agreement, modify the Consent Agreement, or make it final.
    On June 13, 2014, Surgery Partners and Symbion signed a merger 
agreement pursuant to which Surgery Partners agreed to acquire all of 
the voting securities of Symbion for $792 million. The Commission's 
complaint alleges 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, by eliminating actual, direct, and substantial competition between 
the parties for the sale and provision of outpatient surgical services 
to commercial health plans and commercially insured patients in the 
Orange City/Deltona market in Florida. The proposed Consent Agreement 
would remedy the alleged violations by requiring a complete divestiture 
of Surgery Partners' ownership interest in Blue Springs in the affected 
market. The divestiture will restore the competition that otherwise 
would be lost as a result of the proposed acquisition.

II. The Parties

    H.I.G. is a private equity fund that owns 100% of Surgery Partners. 
Surgery Partners owns, in whole or in part, 47 ambulatory surgery 
centers (``ASCs'') in 17 states across the country. Surgery Partners 
generated approximately $280 million in revenue during 2013.
    Crestview is a private equity firm that owns 100% of Symbion. 
Symbion owns, in whole or in part, 44 ASCs in 21 states, as well as 
several short-stay surgical hospitals and other clinical facilities. 
Symbion generated more than $535 million in revenue during 2013.

III. Outpatient Surgical Services in Orange City/Deltona, Florida

    The relevant product market in which Surgery Partners' proposed 
acquisition of Symbion poses antitrust concerns is the sale and 
provision of outpatient surgical services to commercial health plans 
and commercially insured patients. Outpatient surgical services are 
sold to commercial health plans, which then sell benefit plans to 
commercially insured patients. Outpatient surgical procedures can be 
performed at an ASC, a specialty hospital, or a general acute care 
hospital.
    When commercial health plans reimburse providers for outpatient 
surgical services, they pay two fees: A professional services fee to 
the surgeon who performed the procedure and a separate facility fee to 
the ASC or hospital where the procedure was performed. The facility fee 
covers use of the operating room as well as other costs associated with 
the procedure, such as nursing services or supplies. The potential 
anticompetitive effects of the proposed acquisition here are limited to 
facility fees. The acquisition is unlikely to have an anticompetitive 
effect on professional services fees because Blue Springs and OCSC do 
not employ physicians and, therefore, do not charge or compete for 
those fees.
    Outpatient surgical services markets are local in nature. Evidence 
gathered during our investigation of the proposed acquisition 
establishes that patients have a strong preference for receiving 
outpatient surgical services within the area where they live or work. 
Accordingly, the proposed acquisition raises serious antitrust concerns 
for patients seeking outpatient surgical services in the southwestern 
Volusia County, Florida, area, which includes the cities of Orange City 
and Deltona, Florida (the ``Orange City/Deltona Area''). The evidence 
indicates that commercially insured patients who reside in the Orange 
City/Deltona Area are unlikely to seek outpatient surgical services 
from more distant providers, even in response to a small but 
significant and non-transitory increase in price.
    The proposed acquisition would combine the only two multi-specialty 
ASCs in the Orange City/Deltona Area, Symbion's Blue Springs and 
Surgery Partners' OCSC, and, post-merger, would leave commercial health 
plans and commercially insured patients in the Orange City/Deltona Area 
with only one meaningful alternative to Surgery Partners for outpatient 
surgical services. Absent relief, the proposed acquisition would 
substantially increase concentration in the Orange City/Deltona Area 
market for outpatient surgical services. Using the Herfindahl-Hirschman 
Index (``HHI''), the standard measure of market concentration under the 
2010 Department of Justice and Federal Trade Commission Merger 
Guidelines (``Merger Guidelines''), the proposed acquisition would 
result in a post-merger HHI of greater than 2,500 and a delta of 
greater than 1,000, thus creating a presumption under the Merger 
Guidelines that the transaction will result in competitive harm.

IV. Competitive Effects of the Proposed Acquisition

    The evidence gathered in staff's investigation establishes that 
Symbion's Blue Springs and Surgery Partners' OCSC are each other's 
closest competitors, competing head-to-head on a number of price and 
non-price factors. By eliminating this close competition between 
Surgery Partners and Symbion, the proposed acquisition is likely to 
increase Surgery Partners' bargaining leverage in post-merger 
negotiations with commercial health plans in the Orange City/Deltona 
Area and result in higher reimbursement rates. Absent relief, the 
proposed acquisition would also reduce Surgery Partners' competitive 
incentives to maintain and improve the quality of care of its ASCs in 
the Orange City/Deltona Area. Ultimately, these effects would be felt 
by local patients in the form of higher health insurance premiums and 
out-of-pocket costs, as well as reduced access to high quality care.
    New entry or expansion is unlikely to deter or counteract the 
anticompetitive effects of the proposed acquisition in the Orange City/
Deltona Area. Significant entry barriers include the time and costs 
associated with constructing or expanding an ASC or hospital-based 
outpatient surgical services facility, regulatory and licensing 
requirements that govern the provision of outpatient surgical services, 
and the need to recruit a sufficient number of physicians to staff an 
ASC in order to restore the competition lost as a result of the 
proposed acquisition. Several market-specific factors, including a lack 
of sufficient demand and the potential inability to recruit qualified 
personnel to the area, also reduce the likelihood of new entry in the 
Orange City/Deltona Area. For these

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reasons, it is unlikely that new entry or expansion sufficient to 
achieve a significant market impact will occur in a timely manner.

V. The Proposed Consent Agreement

    The proposed Consent Agreement remedies the concerns about the 
effect of the transaction on competition in the Orange City/Deltona 
Area. The proposed Consent Agreement would maintain competition in the 
area by requiring Surgery Partners to fully divest its newly acquired 
ownership interest in Blue Springs in a manner approved by the 
Commission. The parties have indicated they will propose to divest this 
interest in Blue Springs to Dr. Mark Hollmann, one of Blue Springs' 
other current owners, who is actively involved in Blue Springs' 
operations and a physician at the ASC. Any potential buyer for this 
ownership interest is subject to the prior approval of the Commission. 
The proposed Consent Agreement requires Surgery Partners to provide 
transitional services to the approved acquirer for a period of up to 
six months, renewable for an additional six months at the option of the 
acquirer, to assist the acquirer in operating Blue Springs as a viable 
and ongoing business. Until the divestiture is completed, Surgery 
Partners is required to hold its interest in Blue Springs separate, 
subject to the standard terms of the Order to Hold Separate and 
Maintain Assets (``Hold Separate Order''). Additionally, the Commission 
has appointed Richard Shermer as the Hold Separate Monitor to oversee 
compliance with the Hold Separate Order. If, for any reason, Surgery 
Partners fails to divest its interest in Blue Springs within sixty (60) 
days after entry of the final Decision and Order, the Commission has 
the right to appoint a divestiture trustee to divest Surgery Partners' 
interest in either Blue Springs or OCSC, expeditiously and at no 
minimum price.
    The sole purpose of this analysis is to facilitate public comment 
on the Consent Agreement. This analysis does not constitute an official 
interpretation of the Consent Agreement or modify its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2014-26433 Filed 11-5-14; 8:45 am]
BILLING CODE 6750-01-P