Carilion Clinic; Analysis of Agreement Containing Consent Orders To Aid Public Comment, 53252-53254 [E9-24949]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 74, Number 199 (Friday, October 16, 2009)]
[Notices]
[Pages 53252-53254]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-24949]


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FEDERAL TRADE COMMISSION

[Docket No. 9338]


Carilion Clinic; Analysis of Agreement Containing Consent Orders 
To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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

DATES: Comments must be received on or before November 6, 2009.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to ``Carilion 
Clinic, Docket No. 9338'' to facilitate the organization of comments. 
Please note that your comment -- including your name and your state -- 
will be placed on the public record of this proceeding, including on 
the publicly accessible FTC website, at (https://www.ftc.gov/os/publiccomments.shtm).
    Because comments will be made public, they should not include any 
sensitive personal information, such as an individual'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. Comments also 
should not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, comments should not include any ``[t]rade secret or any 
commercial or financial information which is obtained from any person 
and which is privileged or confidential . . . .,'' as provided in 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which 
confidential treatment is requested must be filed in paper form, must 
be clearly labeled ``Confidential,'' and must comply with FTC Rule 
4.9(c), 16 CFR 4.9(c).\1\
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR 
4.9(c).
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    Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink: (https://public.commentworks.com/ftc/carilionclinic) and following the 
instructions on the web-based form. To ensure that the Commission 
considers an electronic comment, you must file it on the web-based form 
at the (https://public.commentworks.com/ftc/carilionclinic.). If this 
Notice appears at (https://www.regulations.gov/search/index.jsp), you 
may also file an electronic comment through that website. The 
Commission will consider all comments that regulations.gov forwards to 
it. You may also visit the FTC website at (https://www.ftc.gov/) to read 
the Notice and the news release describing it.
    A comment filed in paper form should include the ``Carilion, Docket 
No. 9338'' reference both in the text and on the envelope, and should 
be mailed or delivered to the following address: Federal Trade 
Commission, Office of the Secretary, Room H-135 (Annex D), 600 
Pennsylvania Avenue, NW, Washington, DC 20580. The FTC is requesting 
that any comment filed in paper form be sent by courier or overnight 
service, if possible, because U.S. postal mail in the Washington area 
and at the Commission is subject to delay due to heightened security 
precautions.
    The Federal Trade Commission Act (``FTC Act'') and other laws 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, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC website, to the extent practicable, 
at (https://www.ftc.gov/os/publiccomments.shtm). As a matter of 
discretion, the Commission makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC website. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, at (https://www.ftc.gov/ftc/privacy.shtm).

FOR FURTHER INFORMATION CONTACT: Jeffrey Perry, Bureau of Competition, 
600 Pennsylvania Avenue, NW, Washington, D.C. 20580, (202) 326-2331.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  3.25(f) 
the Commission Rules of Practice, 16 CFR 3.25(f), notice is hereby 
given that the above-captioned consent agreement containing a consent 
order 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

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package can be obtained from the FTC Home Page (for October 7, 2009), 
on the World Wide Web, at (https://www.ftc.gov/os/actions.shtm). A paper 
copy can be obtained from the FTC Public Reference Room, Room 130-H, 
600 Pennsylvania Avenue, NW, Washington, D.C. 20580, either in person 
or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted for 
public comment, subject to final approval, an Agreement Containing 
Consent Orders (``Consent Agreement'') from Carilion Clinic 
(``Carilion''). The purpose of the proposed Consent Agreement is to 
remedy the competitive harm resulting from Carilion's acquisition of 
two independent outpatient centers, Odyssey IV, L.L.C. d/b/a The Center 
for Advanced Imaging (``CAI''), and The Center for Surgical Excellence, 
L.L.C. (``CSE''). Under the terms of the proposed Consent Agreement, 
Carilion is required to divest both acquired centers, together with 
related assets sufficient to ensure that the buyer(s) of the divested 
centers will replace fully the competition eliminated by the 
acquisition.
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days to solicit comments from interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission again will review the 
proposed Consent Agreement and comments received, and decide whether it 
should withdraw the Consent Agreement or make it final.
    The sole purpose of this analysis is to facilitate public comment 
on the Consent Agreement; it is not intended to constitute an official 
interpretation of the Consent Agreement or modify its terms in any way.

Background

    Carilion is the largest provider of healthcare services in the 
Roanoke, Virginia area, controlling nearly 80 percent of the hospital 
beds in the Roanoke area. On August 28, 2008, Carilion acquired CAI and 
CSE, the only two independent (non-hospital-owned) providers of 
advanced outpatient imaging and outpatient surgical services in the 
Roanoke area. Advanced outpatient imaging services are a cluster of 
imaging services, including Magnetic Resonance Imaging (``MRI'') and 
Computerized Tomographic Imaging (``CT'') scanning, used to obtain 
images of the internal anatomy. Outpatient surgical services are 
surgical procedures, such as interventional spine surgeries or vascular 
access surgeries, that do not require an overnight stay at a hospital.
    Prior to the acquisition, CAI and CSE were direct competitors to 
Carilion for these services in the Roanoke area, competing on price as 
well as non-price terms. Notably, the freestanding centers' charges 
were significantly lower than Carilion's charges for the same services. 
In many cases, CAI's procedures were also more convenient and 
accessible than those performed at a hospital. In response to this 
competition, Carilion took steps to compete and maintain market share, 
including improving the accessibility of its services and reducing wait 
times for scheduling services. This competition provided real benefits, 
financial and otherwise, for patients in the Roanoke area.
    Carilion's acquisition of CAI and CSE eliminated this price and 
non-price competition, and threatened substantial competitive harm in 
the markets for advanced outpatient imaging and outpatient surgical 
services in the Roanoke area. First, the acquisition reduced from three 
to two the number of competitors for both outpatient services, and 
reduced the incentives to compete for the remaining firms, Carilion and 
HCA Lewis-Gale (``HCA''), a similarly-situated hospital provider. 
Second, the acquisition eliminated health plans' and patients' only 
independent alternative to Carilion and HCA, and thus substantially 
reduced competition and enhanced Carilion's power to impose a 
unilateral price increase. Staff's investigation confirmed that 
repositioning by existing healthcare providers or new entry would be 
insufficient to deter or counteract this harm to competition.
    Having reason to believe the proposed transaction would result in 
competitive harm, the Commission authorized staff to commence an 
administrative trial under Part 3 of the Commission's Rules of 
Practice. The administrative complaint alleged that the combined entity 
would increase prices and decrease non-price competition in the markets 
for advanced outpatient imaging and outpatient surgical services in the 
Roanoke area.

Litigation History

    On July 23, 2009, the Commission issued an administrative complaint 
pursuant to Part 3 of the Commission's Rules of Practice challenging 
Carilion's acquisition of CAI and CSE. On August 7, 2009, the parties 
filed an amended joint motion to withdraw the matter from 
administrative litigation, together with a proposed settlement 
agreement that the parties asserted would ``completely restore the 
competition that was alleged to have been eliminated by the 
acquisition.''The Commission granted the amended joint motion on August 
11, 2009, and temporarily withdrew the matter from adjudication for 30 
days. The withdrawal was subsequently extended until October 14, 2009, 
as Carilion and Commission staff continued to negotiate a remedy in 
settlement of the ongoing litigation.

The Proposed Consent Agreement

    The proposed Consent Agreement remedies the anticompetitive effects 
of the acquisition by requiring the divestiture of all of the acquired 
assets to a Commission-approved buyer (or buyers) within three months. 
The assets to be divested include not only the two acquired centers, 
but also the associated assets - such as patient and physician records, 
government permits, medical equipment, and payor and supplier contracts 
- necessary for a Commission-approved buyer to independently and 
effectively operate each center. The Commission may appoint a 
divestiture trustee if Carilion has not completed the required 
divestitures within three months.
    In addition to requiring the divestiture of both centers and all 
related assets, the Consent Agreement includes several provisions 
designed to accelerate the Commission-approved buyer(s)' ability to 
replicate the competition that was eliminated by the acquisition. For 
example, the Consent Agreement prohibits Carilion from soliciting for 
employment any physician or physician practice that has referred 
patients to CAI since the acquisition. The prohibition is effective for 
six months as of the date Carilion signs the Agreement Containing 
Consent Orders, and will allow the Commission-approved buyer sufficient 
time to develop CAI's referral base by preventing Carilion from seeking 
out and acquiring referring physicians and physician practices. The 
Consent Agreement also prohibits Carilion from restricting its employed 
physicians who have referred patients to CAI since the acquisition from 
continuing to refer patients to CAI. The prohibition is in

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effect for one year, and is designed to ensure that any Carilion-
employed physician who previously referred patients to CAI will 
continue to be able to do so.
    Finally, incorporated into the Consent Agreement is an Order to 
Maintain Assets (``OMA''). The OMA preserves the viability, 
marketability, and competitiveness of the assets to be divested, and 
prohibits Carilion from using or disclosing competitively sensitive 
information. The OMA also allows the Commission to appoint a Monitor to 
ensure Carilion's compliance with the Consent Agreement. In addition, 
the OMA requires Carilion to offer financial incentives to CAI and CSE 
personnel to remain with each business before the sale, during the 
transition period, and at the option of the buyer(s), after the 
transition. Under the Consent Agreement, Carilion also must remove any 
contractual impediments that may deter CAI or CSE staff from accepting 
a Commission-approved buyer's offer of employment.
    The proposed Consent Agreement will resolve fully the competitive 
issues raised by the acquisition by reestablishing price, quality, and 
service competition in the markets for advanced outpatient imaging and 
outpatient surgical services in the Roanoke area. Moreover, acceptance 
of the proposed Consent Agreement will bring immediate and certain 
relief to Roanoke-area consumers by avoiding the expense and 
uncertainty inherent in continuing litigation.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. E9-24949 Filed 10-15-09; 9:29 am]
BILLING CODE 6750-01-S