United States et al. v. The Charlotte-Mecklenburg Hospital Authority, d/b/a Carolinas Healthcare System; Proposed Final Judgment and Competitive Impact Statement, 63674-63685 [2018-26755]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 83, Number 237 (Tuesday, December 11, 2018)]
[Notices]
[Pages 63674-63685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26755]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States et al. v. The Charlotte-Mecklenburg Hospital 
Authority, d/b/a Carolinas Healthcare System; Proposed Final Judgment 
and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec.  16(b)-(h), that a proposed Final 
Judgment, Stipulation, and Competitive Impact Statement have been filed 
with the United States District Court for the Western District of North 
Carolina in United States and State of North Carolina. v. The 
Charlotte-Mecklenburg Hospital Authority, d/b/a Carolinas HealthCare 
System, Civil Action No. 3:16-cv-00311-RJC-DCK. On June 6, 2016, the 
United States and the State of North Carolina filed a Complaint 
alleging that The Charlotte-Mecklenburg Hospital Authority formerly 
known as Carolinas HealthCare System (or CHS) and now doing business as 
Atrium Health (``Atrium'') included provisions in its contracts with 
health insurers that restricted insurers from steering their members to 
lower-cost, high-quality providers, in violation of Section 1 of the 
Sherman Act, 15 U.S.C. Sec.  1. The proposed Final Judgment, filed 
November 15, 2018, enjoins Atrium from (1) enforcing provisions in its 
current insurer contracts that restrict steering and transparency; (2) 
having contract provisions with an insurer that would prohibit, prevent 
or significantly restrain the insurer from using certain steering 
methods or providing transparency; and (3) penalizing, or threatening 
to penalize, any insurer for its use of certain steering methods and 
transparency.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection on the Antitrust 
Division's website at https://www.justice.gov/atr and at the Office of 
the Clerk of the United States District Court for the Western District 
of North Carolina. Copies of these materials may be obtained from the 
Antitrust Division upon request and payment of the copying fee set by 
Department of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, including the name of the submitter, and 
responses thereto, will be posted on the Antitrust Division's website, 
filed with the Court, and, under certain circumstances, published in 
the Federal Register. Comments should be directed to Peter J. 
Mucchetti, Chief, Healthcare and Consumer Products Section, Antitrust 
Division, Department of Justice, 450 Fifth Street NW, Suite 4100, 
Washington, DC 20530 (telephone: 202-307-0001).

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the Western District of North Carolina 
Charlotte Division

    United States of America and the State of North Carolina, 
Plaintiffs, v. The Charlotte-Mecklenburg Hospital Authority, d/b/a 
Carolinas Healthcare System, Defendant.

Case No. 3:16-cv-00311-RJC-DCK
Judge Robert J. Conrad, Jr.

COMPLAINT

    The United States of America and the State of North Carolina 
bring this civil antitrust action to enjoin Defendant, The 
Charlotte-Mecklenburg Hospital Authority, d/b/a Carolinas HealthCare 
System (``CHS''), from using unlawful contract restrictions that 
prohibit commercial health insurers in the Charlotte area from 
offering patients financial benefits to use less-expensive 
healthcare services offered by CHS's competitors. These steering 
restrictions reduce competition resulting in harm to Charlotte area 
consumers, employers, and insurers.

I. CHS AND ITS UNLAWFUL STEERING RESTRICTIONS

    1. CHS is a North Carolina not-for-profit corporation providing 
healthcare services with its principal place of business in 
Charlotte. Its flagship facility is Carolinas Medical Center, a 
large general acute-care hospital located in downtown Charlotte. It 
also operates nine other general acute-care hospitals in the 
Charlotte area.
    2. CHS is the dominant hospital system in the Charlotte area, 
with approximately a 50 percent share of the relevant market, and 
2014 revenue of approximately $8.7 billion. Its closest competitor 
by size is Novant, which owns five general acute care hospitals in 
the Charlotte area and has less than half

[[Page 63675]]

of CHS's revenue. After Novant, the next-largest hospital in the 
Charlotte area is CaroMont Regional Medical Center, which has less 
than one tenth of CHS's revenue.
    3. CHS exerts market power in its dealings with commercial 
health insurers (``insurers''). CHS's market power results from its 
large size, the comprehensive range of healthcare services that it 
offers, its high market share, and insurers' need to include access 
to CHS's hospitals-as well as its other facilities and providers-in 
at least some of their provider networks in insurance plans that 
cover people in the Charlotte area. CHS's market power is further 
evidenced by its ability to profitably charge prices to insurers 
that are higher than competitive levels across a range of services, 
and to impose on insurers restrictions that reduce competition.
    4. CHS's market power has enabled it to negotiate high prices 
(in the form of high ``reimbursement rates'') for treating insured 
patients. CHS has long had a reputation for being a high-priced 
healthcare provider. In a 2013 presentation, CHS's internal strategy 
group recognized that CHS ``has enjoyed years of annual 
reimbursement rate increases that are premium to the market, with 
those increases being applied to rates that are also premium to the 
market.''
    5. Steering is a method by which insurers offer consumers of 
healthcare services options to reduce some of their healthcare 
expenses. Steering typically occurs when an insurer offers consumers 
a financial incentive to use a lower-cost provider or lower-cost 
provider network, in order to lower their healthcare expenses.
    6. Steering-and the competition from lower-priced healthcare 
providers that steering animates-threatens CHS's high prices and 
revenues. In 2013, CHS's internal strategy group surveyed a dozen of 
CHS's senior leaders, asking them to list the ``biggest risks to CHS 
revenue streams.'' Nine of the twelve leaders polled identified the 
steering of patients away from CHS as one of the biggest risks to 
CHS's revenues.
    7. To protect itself against steering that would induce price 
competition and potentially require CHS to lower its high prices, 
CHS has imposed steering restrictions in its contracts with 
insurers. These restrictions impede insurers from providing 
financial incentives to patients to encourage them to consider 
utilizing lower-cost but comparable or higher-quality alternative 
healthcare providers.
    8. Tiered networks are a popular type of steering that insurers 
use in healthcare markets. Typically, insurers using tiered networks 
place healthcare providers that offer better value healthcare 
services (lower cost, higher quality) in top tiers. Patients who use 
top-tier providers pay lower out-of-pocket costs. For example, for a 
procedure costing $10,000, a patient might be responsible for paying 
$3,600 in coinsurance at a lower-tier hospital, but only $1,800 
coinsurance to have the same procedure performed at a top-tier 
hospital.
    9. Narrow-network insurance plans are another popular steering 
tool. Typically, narrow networks consist of a subset of all the 
healthcare providers that participate in an insurer's conventional 
network. A consumer who chooses a narrow-network insurance plan 
typically pays lower premiums, and lower out-of-pocket expenses than 
a conventional broad-network insurance plan as long as the consumer 
is willing to choose from the smaller network of providers for his 
or her healthcare needs.
    10. Providers are motivated to have insurers steer towards them, 
including through an insurer's narrow or tiered network, because of 
the increased patient volume that accompanies steering. Thus, the 
ability of insurers to steer gives providers a powerful incentive to 
be as efficient as possible, maintain low prices, and offer high 
quality and innovative services. By doing so, providers induce 
insurers to steer patient volume to them. Individuals and employers 
that provide health insurance to their employees benefit 
tremendously from this because they can lower their healthcare 
expenses.
    11. CHS has gained patient volume from insurers steering towards 
CHS, and has obtained higher revenues as a result. CHS encourages 
insurers to steer patients toward itself by offering health insurers 
modest concessions on its market-power driven, premium prices.
    12. However, CHS forbids insurers from allowing CHS's 
competitors to do the same. CHS prevents insurers from offering 
tiered networks that feature hospitals that compete with CHS in the 
top tiers, and prevents insurers from offering narrow networks that 
include only CHS's competitors. By restricting its competitors from 
competing for-and benefitting from-steered arrangements, CHS uses 
its market power to impede insurers from negotiating lower prices 
with its competitors and offering lower-premium plans.
    13. CHS also imposes restrictions in its contracts with insurers 
that impede insurers from providing truthful information to 
consumers about the value (cost and quality) of CHS's healthcare 
services compared to CHS's competitors. CHS's restrictions on 
insurers' price and quality transparency are an indirect restriction 
on steering, because they prevent patients from accessing 
information that would allow them to make healthcare choices based 
on available price and quality information.
    14. Because CHS's steering restrictions prevent its competitors 
from attracting more patients through lower prices, CHS's 
competitors have less incentive to remain lower priced and to 
continue to become more efficient. As a result, CHS's restrictions 
reduce the competition that CHS faces in the marketplace. In the 
instances in which insurers have steered in other markets and in the 
few instances in which insurers have steered in the Charlotte area 
despite CHS's restrictions, insurers have reduced health insurance 
costs for consumers.
    15. Four insurers provide coverage to more than 85 percent of 
the commerically-insured residents of the Charlotte area. They are: 
Aetna Health of the Carolinas, Inc., Blue Cross Blue Shield of North 
Carolina, Cigna Healthcare of North Carolina, Inc., and United 
Healthcare of North Carolina, Inc.
    16. CHS maintains and enforces steering restrictions in its 
contracts with all four of these insurers. In some instances, the 
contract language prohibits steering outright. For example, CHS 
secured a contractual obligation from one insurer that it ``shall 
not directly or indirectly steer business away from'' CHS. In other 
instances, the contract language gives CHS the right to terminate 
its agreement with the insurer if the insurer engages in steering, 
providing CHS the ability to deny the insurer and its enrollees 
access to its dominant hospital system unless the steering ends. 
Although the contractual language that CHS has imposed varies with 
each insurer, it consistently creates disincentives that deter 
insurers from providing to their enrollees truthful information 
about their healthcare options and the benefits of price and quality 
competition among healthcare providers that the insurers could offer 
if they had full freedom to steer.

II. RELEVANT MARKET AND COMPETITIVE EFFECTS

    17. The sale of general acute care inpatient hospital services 
to insurers (``acute inpatient hospital services'') is a relevant 
product market. The market includes sales of such services to 
insurers' individual, group, fully-insured and self-funded health 
plans.
    18. The relevant market does not include sales of acute 
inpatient hospital services to government payers, e.g., Medicare 
(covering the elderly and disabled), Medicaid (covering low-income 
persons), and TRICARE (covering military personnel and families) 
because a healthcare provider's negotiations with an insurer are 
separate from the process used to determine the rates paid by 
government payers.
    19. Acute inpatient hospital services consist of a broad group 
of medical and surgical diagnostic and treatment services that 
include a patient's overnight stay in the hospital. Although 
individual acute inpatient hospital services are not substitutes for 
each other (e.g., obstetrics is not a substitute for cardiac 
services), insurers typically contract for the various individual 
acute inpatient hospital services as a bundle, and CHS's steering 
restrictions have an adverse impact on the sale of all acute 
inpatient hospital services. Therefore, acute inpatient hospital 
services can be aggregated for analytical convenience.
    20. There are no reasonable substitutes or alternatives to acute 
inpatient hospital services. Consequently, a hypothetical monopolist 
of acute inpatient hospital services would likely profitably impose 
a small but significant price increase for those services over a 
sustained period of time.
    21. The relevant geographic market is no larger than the 
Charlotte area. In this Complaint, the Charlotte area means the 
Charlotte Combined Statistical Area, as defined by the U.S. Office 
of Management and Budget, which consists of Cabarrus, Cleveland, 
Gaston, Iredell, Lincoln, Mecklenburg, Rowan, Stanly, and Union 
counties in North Carolina, and Chester, Lancaster, and York 
counties in South Carolina. The Charlotte area has a population of 
about 2.6 million people.
    22. Insurers contract to purchase acute inpatient hospital 
services from hospitals

[[Page 63676]]

within the geographic area where their enrollees are likely to seek 
medical care. Such hospitals are typically close to their enrollees' 
homes or workplaces. Insurers who seek to sell insurance plans to 
individuals and employers in the Charlotte area must include 
Charlotte area hospitals in their provider networks because people 
who live and work in the Charlotte area strongly prefer to obtain 
acute inpatient hospital services in the Charlotte area. Charlotte 
area consumers have little or no willingness to enroll in an 
insurance plan that provides no network access to hospitals located 
in the Charlotte area.
    23. For these reasons, it is not a viable alternative for 
insurers that sell health insurance plans to consumers in the 
Charlotte area to purchase acute inpatient hospital services from 
providers outside the Charlotte area. Consequently, competition from 
providers of acute inpatient hospital services located outside the 
Charlotte area would not likely be sufficient to prevent a 
hypothetical monopolist provider of acute inpatient hospital 
services located in the Charlotte area from profitably imposing 
small but significant price increases for those services over a 
sustained period of time.
    24. An insurer selling health insurance plans to individuals and 
employers in the Charlotte area must have CHS as a participant in at 
least some of its provider networks, in order to have a viable 
health insurance business in the Charlotte area. This gives CHS the 
ability to impose steering restrictions in its contracts with 
insurers. When CHS negotiates with insurers for CHS's network 
participation, CHS typically negotiates the prices and terms of 
participation for acute inpatient hospital services and other 
healthcare services, such as outpatient, ancillary, and physician 
services, at the same time, including services that are located 
outside the Charlotte area. As a result, CHS's anticompetitive 
steering restrictions typically apply to all the negotiated 
services.
    25. CHS's maintenance and enforcement of its steering 
restrictions lessen competition between CHS and the other providers 
of acute inpatient hospital services in the Charlotte area that 
would, in the absence of the restrictions, likely reduce the prices 
paid for such services by insurers. Thus, the restrictions help to 
insulate CHS from competition, by limiting the ability of CHS's 
competitors to win more commercially-insured business by offering 
lower prices.
    26. Insurers want to steer towards lower-cost providers and to 
offer innovative insurance plans that steer. For years, insurers 
have tried to negotiate the removal of steering restrictions from 
their contracts with CHS, but cannot because of CHS's market power. 
In the absence of the steering restrictions, insurers would likely 
steer consumers to lower-cost providers more than their current 
contracts with CHS presently permit.
    27. As a result of this reduced competition due to CHS's 
steering restrictions, individuals and employers in the Charlotte 
area pay higher prices for health insurance coverage, have fewer 
insurance plans from which to choose, and are denied access to 
consumer comparison shopping and other cost-saving innovative and 
more efficient health plans that would be possible if insurers could 
steer freely. Deprived of the option to benefit from choosing more 
cost-efficient providers, Charlotte area patients incur higher out-
of-pocket costs for their healthcare. Insurers are directly harmed 
by CHS's imposition of steering restrictions.
    28. CHS restricts steering to help insulate itself from price 
competition, which enables CHS to maintain high prices and preserve 
its dominant position, and not for any procompetitive purpose. 
Indeed, when asked under oath whether CHS should limit the ability 
of insurers to offer tiered networks or narrow networks that exclude 
CHS, Carol Lovin, CHS's Chief Strategy Officer, said that CHS should 
not. And when asked her view about the possibility of eliminating 
CHS's steering restrictions, she testified, ``Would I personally be 
okay with getting rid of them? Yes, I would.'' CHS's steering 
restrictions do not have any procompetitive effects. CHS can seek to 
avoid losses of revenues and market share from lower cost 
competitors by competing to offer lower prices and better value than 
its competitors, rather than imposing rules on insurers that reduce 
the benefit to its rivals from competing on price.

III. JURISDICTION, VENUE AND INTERSTATE COMMERCE

    29. The Court has subject-matter jurisdiction over this action 
under Section 4 of the Sherman Act, 15 U.S.C. Sec.  4 (as to the 
claim by the United States); Section 16 of the Clayton Act, 15 
U.S.C. Sec.  26 (as to the claim by the State of North Carolina); 
and 28 U.S.C. Sec. Sec.  1331, 1337(a), and 1345.
    30. The Court has personal jurisdiction over CHS under Section 
12 of the Clayton Act, 15 U.S.C. Sec.  22. CHS maintains its 
principal place of business and transacts business in this District.
    31. Venue is proper under 28 U.S.C. Sec.  1391 and Section 12 of 
the Clayton Act, 15 U.S.C. Sec.  22. CHS transacts business and 
resides in this District and the events giving rise to the claims 
occurred in this District.
    32. CHS engages in interstate commerce and in activities 
substantially affecting interstate commerce. CHS provides healthcare 
services for which employers, insurers, and individual patients 
remit payments across state lines. CHS also purchases supplies and 
equipment that are shipped across state lines, and it otherwise 
participates in interstate commerce.

IV. CHS'S VIOLATION OF SECTION 1 OF THE SHERMAN ACT

    33. Plaintiffs incorporate paragraphs 1 through 32 of this 
Complaint.
    34. CHS has market power in the sale of acute inpatient hospital 
services in the Charlotte area.
    35. CHS has and likely will continue to negotiate and enforce 
contracts containing steering restrictions with insurers in the 
Charlotte area. The contracts containing the steering restrictions 
are contracts, combinations, and conspiracies within the meaning of 
Section 1 of the Sherman Act, 15 U.S.C. Sec.  1.
    36. These steering restrictions have had, and will likely to 
continue to have, the following substantial anticompetitive effects 
in the relevant product and geographic market, among others:
    a. protecting CHS's market power and enabling CHS to maintain at 
supracompetitive levels the prices of acute inpatient hospital 
services;
    b. substantially lessening competition among providers in their 
sale of acute inpatient hospital services;
    c. restricting the introduction of innovative insurance products 
that are designed to achieve lower prices and improved quality for 
acute inpatient hospital services;
    d. reducing consumers' incentives to seek acute inpatient 
hospital services from more cost-effective providers; and
    e. depriving insurers and their enrollees of the benefits of a 
competitive market for their purchase of acute inpatient hospital 
services.
    37. Entry or expansion by other hospitals in the Charlotte area 
has not counteracted the actual and likely competitive harms 
resulting from CHS's steering restrictions. And in the future, such 
entry or expansion is unlikely to be rapid enough and sufficient in 
scope and scale to counteract these harms to competition. Building a 
hospital with a strong reputation that is capable of attracting 
physicians and patients is difficult, time-consuming, and expensive. 
Additionally, new facilities and programs, and typically the 
expansion of existing facilities and programs, are subject to 
lengthy licensing requirements, and in North Carolina, to 
certificate-of-need laws.
    38. CHS did not devise its strategy of using steering 
restrictions for any procompetitive purpose. Nor do the steering 
restrictions have any procompetitive effects. Any arguable benefits 
of CHS's steering restrictions are outweighed by their actual and 
likely anticompetitive effects.
    39. The challenged steering restrictions unreasonably restrain 
trade in violation of Section 1 of the Sherman Act, 15 U.S.C. Sec.  
1.

V. REQUEST FOR RELIEF

    40. The United States and the State of North Carolina request 
that the Court:
    a. adjudge that all of the steering restrictions in the 
contracts between CHS and any insurer violate Section 1 of the 
Sherman Act, 15 U.S.C. Sec.  1;
    b. enjoin CHS, its officers, directors, agents, employees, and 
successors, and all other persons acting or claiming to act on its 
behalf, directly or indirectly, from seeking, agreeing to, or 
enforcing any provision in any agreement that prohibits or restricts 
an insurer from engaging, or attempting to engage, in steering 
towards any healthcare provider;
    c. enjoin CHS from retaliating, or threatening to retaliate, 
against any insurer for engaging or attempting to engage in 
steering; and
    d. award Plaintiffs their costs in this action and such other 
relief as the Court may deem just and proper.

Dated: June 9, 2016

Respectfully Submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA
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Renata B. Hesse,

[[Page 63677]]

Principal Deputy Assistant Attorney General for Antitrust.

David I. Gelfand,
Deputy Assistant Attorney General.

Patricia A. Brink,
Director of Civil Enforcement.

Peter J. Mucchetti,
Chief, Litigation I.

Jill Westmoreland Rose,
United States Attorney.

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Paul B. Taylor,
Assistant United States Attorney, Chief, Civil Division, N.C. Bar 
Number 10067, Room 233, U.S. Courthouse, 100 Otis Street, Asheville, 
NC 28801-2611, (828) 271-4661(phone), [email protected].

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Paul Torzilli,
Karl D. Knutsen,
 Richard Martin,
John R. Read,
Antitrust Division, U.S. Department of Justice, 450 Fifth Street 
N.W., Suite 4100, Washington, DC 20530, (202) 514-8349 (phone), (202 
514-7308 (fax), [email protected].

FOR PLAINTIFF STATE OF NORTH CAROLINA

Roy Cooper,
Attorney General of North Carolina.
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K.D. Sturgis,
Special Deputy Attorney General, North Carolina Department of 
Justice, N.C. Bar Number 9486, P.O. Box 629, Raleigh, NC 27602, Tel. 
919-716-6011, Fax 919-716-6050, [email protected].

United States District Court for the Western District of North Carolina 
Charlotte Division

    United States of America and State of North Carolina, 
Plaintiffs, v. The Charlotte-Mecklenburg Hospital Authority d/b/a 
Carolinas Healthcare System, Defendant.

Case No. 3:16-cv-00311-RJC-DCK
Judge Robert J. Conrad, Jr.

[PROPOSED] FINAL JUDGMENT

    WHEREAS, Plaintiffs, the United States of America and the State 
of North Carolina (collectively ``Plaintiffs''), filed their 
Complaint on June 9, 2016; Plaintiffs and Defendant The Charlotte-
Mecklenburg Hospital Authority d/b/a Atrium Health f/k/a Carolinas 
HealthCare System (collectively the ``Parties''), by their 
respective attorneys, have consented to the entry of this Final 
Judgment without trial or adjudication of any issue of fact or law;
    AND WHEREAS, this Final Judgment does not constitute any 
evidence against or admission by any party regarding any issue of 
fact or law;
    AND WHEREAS, the Plaintiffs and Defendant agree to be bound by 
the provisions of this Final Judgment pending its approval by this 
Court;
    AND WHEREAS, the essence of this Final Judgment is to enjoin 
Defendant from prohibiting, preventing, or penalizing steering as 
defined in this Final Judgment;
    NOW THEREFORE, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is ORDERED, ADJUDGED, AND DECREED:

I. JURISDICTION

    The Court has jurisdiction over the subject matter of and each 
of the Parties to this action. The Complaint states a claim upon 
which relief may be granted against Defendant under Section 1 of the 
Sherman Act, as amended, 15 U.S.C. Sec.  1.

II. DEFINITIONS

    For purposes of this Final Judgment, the following definitions 
apply:
    A. ``Benefit Plan'' means a specific set of health care benefits 
and Healthcare Services that is made available to members through a 
health plan underwritten by an Insurer, a self-funded benefit plan, 
or Medicare Part C plans. The term ``Benefit Plan'' does not include 
workers' compensation programs, Medicare (except Medicare Part C 
plans), Medicaid, or uninsured discount plans.
    B. ``Carve-out'' means an arrangement by which an Insurer 
unilaterally removes all or substantially all of a particular 
Healthcare Service from coverage in a Benefit Plan during the 
performance of a network-participation agreement.
    C. ``Center of Excellence'' means a feature of a Benefit Plan 
that designates Providers of certain Healthcare Services based on 
objective quality or quality-and-price criteria in order to 
encourage patients to obtain such Healthcare Services from those 
designated Providers.
    D. ``Charlotte Area'' means Cabarrus, Cleveland, Gaston, 
Iredell, Lincoln, Mecklenburg, Rowan, Stanly, and Union counties in 
North Carolina and Chester, Lancaster, and York counties in South 
Carolina.
    E. ``Co-Branded Plan'' means a Benefit Plan, such as Blue Local 
with Carolinas HealthCare System, arising from a joint venture, 
partnership, or a similar formal type of alliance or affiliation 
beyond that present in broad network agreements involving value-
based arrangements between an Insurer and Defendant in any portion 
of the Charlotte Area whereby both Defendant's and Insurer's brands 
or logos appear on marketing materials.
    F. ``Defendant'' means The Charlotte-Mecklenburg Hospital 
Authority d/b/a Atrium Health f/k/a Carolinas HealthCare System, a 
North Carolina hospital authority with its headquarters in 
Charlotte, North Carolina; and its directors, commissioners, 
officers, managers, agents, and employees; its successors and 
assigns; and any controlled subsidiaries (including Managed Health 
Resources), divisions, partnerships, and joint ventures, and their 
directors, commissioners, officers, managers, agents, and employees; 
and any Person on whose behalf Defendant negotiates contracts with, 
or consults in the negotiation of contracts with, Insurers. For 
purposes of this Final Judgment, an entity is controlled by 
Defendant if Defendant holds 50% or more of the entity's voting 
securities, has the right to 50% or more of the entity's profits, 
has the right to 50% or more of the entity's assets on dissolution, 
or has the contractual power to designate 50% or more of the 
directors or trustees of the entity. Also for purposes of this Final 
Judgment, the term ``Defendant'' excludes MedCost LLC and MedCost 
Benefits Services LLC, but it does not exclude any Atrium Health 
director, commissioner, officer, manager, agent, or employee who may 
also serve as a director, member, officer, manager, agent, or 
employee of MedCost LLC or MedCost Benefit Services LLC when such 
director, commissioner, officer, manager, agent, or employee is 
acting within the course of his or her duties for Atrium Health. 
MedCostLLC and MedCost Benefits Services LLC will remain excluded 
from the definition of ``Defendant'' as long as Atrium does not 
acquire any greater ownership interest in these entities than it has 
at the time that this Final Judgment is lodged with the Court.
    G. ``Healthcare Provider'' or ``Provider'' means any Person 
delivering any Healthcare Service.
    H. ``Healthcare Services'' means all inpatient services (i.e., 
acute-care diagnostic and therapeutic inpatient hospital services), 
outpatient services (i.e., acute-care diagnostic and therapeutic 
outpatient services, including but not limited to ambulatory surgery 
and radiology services), and professional services (i.e., medical 
services provided by physicians or other licensed medical 
professionals) to the extent offered by Defendant and within the 
scope of services covered on an in-network basis pursuant to a 
contract between Defendant and an Insurer. ``Healthcare Services'' 
does not mean management of patient care, such as through population 
health programs or employee or group wellness programs.
    I. ``Insurer'' means any Person providing commercial health 
insurance or access to Healthcare Provider networks, including but 
not limited to managed-care organizations, and rental networks 
(i.e., entities that lease, rent, or otherwise provide direct or 
indirect access to a proprietary network of Healthcare Providers), 
regardless of whether that entity bears any risk or makes any 
payment relating to the provision of healthcare. The term 
``Insurer'' includes Persons that provide Medicare Part C plans, but 
does not include Medicare (except Medicare Part C plans), Medicaid, 
or TRICARE, or entities that otherwise contract on their behalf.
    J. ``Narrow Network'' means a network composed of a 
significantly limited number of Healthcare Providers that offers a 
range of Healthcare Services to an Insurer's members for which all 
Providers that are not included in the network are out of network.
    K. ``Penalize'' or ``Penalty'' is broader than ``prohibit'' or 
``prevent'' and is intended to include any contract term or action 
with the likely effect of significantly restraining steering through 
Steered Plans or Transparency. In determining whether any contract 
provision or action ``Penalizes'' or is a ``Penalty,'' factors that 
may be considered include: the facts and circumstances relating to 
the contract provision or action; its economic impact; and the 
extent to which the contract provision or action has potential or 
actual procompetitive effects in the Charlotte Area.
    L. ``Person'' means any natural person, corporation, company, 
partnership, joint

[[Page 63678]]

venture, firm, association, proprietorship, agency, board, 
authority, commission, office, or other business or legal entity.
    M. ``Reference-Based Pricing'' means a feature of a Benefit Plan 
by which an Insurer pays up to a uniformly-applied defined 
contribution, based on an external price selected by the Insurer, 
toward covering the full price charged for a Healthcare Service, 
with the member being required to pay the remainder. For avoidance 
of doubt, a Benefit Plan with Reference-Based Pricing as a feature 
may permit an Insurer to pay a portion of this remainder.
    N. ``Steered Plan'' means any Narrow Network Benefit Plan, 
Tiered Network Benefit Plan, or any Benefit Plan with Reference-
Based Pricing or a Center of Excellence as a component.
    O. ``Tiered Network'' means a network of Healthcare Providers 
for which (i) an Insurer divides the in-network Providers into 
different sub-groups based on objective price, access, and/or 
quality criteria; and (ii) members receive different levels of 
benefits when they utilize Healthcare Services from Providers in 
different sub-groups.
    P. ``Transparency'' means communication of any price, cost, 
quality, or patient experience information directly or indirectly by 
an Insurer to a client, member, or consumer.

III. APPLICABILITY

    This Final Judgment applies to Defendant, as defined above, and 
all other Persons in active concert with, or participation with, 
Defendant who receive actual notice of this Final Judgment by 
personal service or otherwise.

IV. PROHIBITED CONDUCT

    A. The contract language reproduced in Exhibit A is void, and 
Defendant shall not enforce or attempt to enforce it. The contract 
language reproduced in Exhibit B shall not be used to prohibit, 
prevent, or penalize Steered Plans or Transparency, but could remain 
enforceable for protection against Carve-outs. For the Network 
Participation Agreement between Blue Cross and Blue Shield of North 
Carolina and Defendant's wholly-owned subsidiary Managed Health 
Resources, effective January 1, 2014, as amended, Defendant shall 
exclude from the calculation of total cumulative impact pursuant to 
Section 6.14 of that agreement any impact to Defendant resulting 
from Blue Cross and Blue Shield of North Carolina disfavoring 
Defendant through Transparency or through the use of any Steered 
Plan.
    B. For Healthcare Services in the Charlotte Area, Defendant will 
not seek or obtain any contract provision which would prohibit, 
prevent, or penalize Steered Plans or Transparency including:
    1. express prohibitions on Steered Plans or Transparency;
    2. requirements of prior approval for the introduction of new 
benefit plans (except in the case of Co-Branded Plans); and
    3. requirements that Defendant be included in the most-preferred 
tier of Benefit Plans (except in the case of Co-Branded Plans). 
However, notwithstanding this Paragraph IV(B)(3), Defendant may 
enter into a contract with an Insurer that provides Defendant with 
the right to participate in the most-preferred tier of a Benefit 
Plan under the same terms and conditions as any other Charlotte Area 
Provider, provided that if Defendant declines to participate in the 
most-preferred tier of that Benefit Plan, then Defendant must 
participate in that Benefit Plan on terms and conditions that are 
substantially the same as any terms and conditions of any then-
existing broad-network Benefit Plan (e.g., PPO plan) in which 
Defendant participates with that Insurer. Additionally, 
notwithstanding Paragraph IV(B)(3), nothing in this Final Judgment 
prohibits Defendant from obtaining any criteria used by the Insurer 
to (i) assign Charlotte Area Providers to each tier in any Tiered 
Network; and/or (ii) designate Charlotte Area Providers as a Center 
of Excellence.
    C. Defendant will not take any actions that penalize, or 
threaten to penalize, an Insurer for (i) providing (or planning to 
provide) Transparency, or (ii) designing, offering, expanding, or 
marketing (or planning to design, offer, expand, or market) a 
Steered Plan.

I. PERMITTED CONDUCT

    A. Defendant may exercise any contractual right it has, provided 
it does not engage in any Prohibited Conduct as set forth above.
    B. For any Co-Branded Plan or Narrow Network in which Defendant 
is the most-prominently featured Provider, Defendant may restrict 
steerage within that Co-Branded Plan or Narrow Network. For example, 
Defendant may restrict an Insurer from including at inception or 
later adding other Providers to any (i) Narrow Network in which 
Defendant is the most-prominently featured Provider, or (ii) any Co-
Branded Plan.
    C. With regard to information communicated as part of any 
Transparency effort, nothing in this Final Judgment prohibits 
Defendant from reviewing its information to be disseminated, 
provided such review does not delay the dissemination of the 
information. Furthermore, Defendant may challenge inaccurate 
information or seek appropriate legal remedies relating to 
inaccurate information disseminated by third parties. Also, for an 
Insurer's dissemination of price or cost information (other than 
communication of an individual consumer's or member's actual or 
estimated out-of-pocket expense), nothing in the Final Judgment will 
prevent or impair Defendant from enforcing current or future 
provisions, including but not limited to confidentiality provisions, 
that (i) prohibit an Insurer from disseminating price or cost 
information to Defendant's competitors, other Insurers, or the 
general public; and/or (ii) require an Insurer to obtain a covenant 
from any third party that receives such price or cost information 
that such third party will not disclose that information to 
Defendant's competitors, another Insurer, the general public, or any 
other third party lacking a reasonable need to obtain such 
competitively sensitive information. Defendant may seek all 
appropriate remedies (including injunctive relief) in the event that 
dissemination of such information occurs.

V. REQUIRED CONDUCT

    Within fifteen (15) business days of entry of this Final 
Judgment, Defendant, through its designated counsel, must notify in 
writing Aetna, Blue Cross and Blue Shield of North Carolina, Cigna, 
MedCost, and UnitedHealthcare, that:
    A. This Final Judgment has been entered (enclosing a copy of 
this Final Judgment) and that it prohibits Defendant from entering 
into or enforcing any contract term that would prohibit, prevent, or 
penalize Steered Plans or Transparency, or taking any other action 
that violates this Final Judgment; and
    B. For the term of this Final Judgment Defendant waives any 
right to enforce any provision listed in Exhibit A and further 
waives the right to enforce any provision listed in Exhibit B to 
prohibit, prevent, or penalize Steered Plans and Transparency.

VII. COMPLIANCE

    A. It shall be the responsibility of the Defendant's designated 
counsel to undertake the following:
    1. within fifteen (15) calendar days of entry of this Final 
Judgment, provide a copy of this Final Judgment to each of 
Defendant's commissioners and officers, and to each employee whose 
job responsibilities include negotiating or approving agreements 
with Insurers for the purchase of Healthcare Services, including 
personnel within the Managed Health Resources subsidiary (or any 
successor organization) of Defendant;
    2. distribute in a timely manner a copy of this Final Judgment 
to any person who succeeds to, or subsequently holds, a position of 
commissioner, officer, or other position for which the job 
responsibilities include negotiating or approving agreements with 
Insurers for the purchase of Healthcare Services, including 
personnel within the Managed Health Resources subsidiary (or any 
successor organization) of Defendant; and
    3. within sixty (60) calendar days of entry of this Final 
Judgment, develop and implement procedures necessary to ensure 
Defendant's compliance with this Final Judgment. Such procedures 
shall ensure that questions from any of Defendant's commissioners, 
officers, or employees about this Final Judgment can be answered by 
counsel (which may be outside counsel) as the need arises. Paragraph 
21.1 of the Amended Protective Order Regarding Confidentiality shall 
not be interpreted to prohibit outside counsel from answering such 
questions.
    B. For the purposes of determining or securing compliance with 
this Final Judgment, or any related orders, or determining whether 
the Final Judgment should be modified or vacated, and subject to any 
legally-recognized privilege, from time to time authorized 
representatives of the United States or the State of North Carolina, 
including agents and consultants retained by the United States or 
the State of North Carolina, shall, upon written request of an 
authorized representative of the Assistant Attorney General in 
charge of the Antitrust Division or the Attorney General for the 
State of North Carolina, and on reasonable notice to Defendant, be 
permitted:
    1. access during Defendant's office hours to inspect and copy, 
or at the option of the

[[Page 63679]]

United States, to require Defendant to provide electronic copies of 
all books, ledgers, accounts, records, data, and documents in the 
possession, custody, or control of Defendant, relating to any 
matters contained in this Final Judgment; and
    2. to interview, either informally or on the record, Defendant's 
officers, employees, or agents, who may have their individual 
counsel present, regarding such matters. The interviews shall be 
subject to the reasonable convenience of the interviewee and without 
restraint or interference by Defendant.
    C. Within 270 calendar days of entry of this Final Judgment, 
Defendant must submit to the United States and the State of North 
Carolina a written report setting forth its actions to comply with 
this Final Judgment, specifically describing (1) the status of all 
negotiations between Managed Health Resources (or any successor 
organization) and an Insurer relating to contracts that cover 
Healthcare Services rendered in the Charlotte Area since the entry 
of the Final Judgment, and (2) the compliance procedures adopted 
under Paragraph VII(A)(3) of this Final Judgment.
    D. Upon the written request of an authorized representative of 
the Assistant Attorney General in charge of the Antitrust Division 
or the Attorney General for the State of North Carolina, Defendant 
shall submit written reports or responses to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment as may be requested.
    E. The United States may share information or documents obtained 
under Paragraph VII with the State of North Carolina subject to 
appropriate confidentiality protections. The State of North Carolina 
shall keep all such information or documents confidential.
    F. No information or documents obtained by the means provided in 
Paragraph VII shall be divulged by the United States or the State of 
North Carolina to any Person other than an authorized representative 
of (1) the executive branch of the United States or (2) the Office 
of the North Carolina Attorney General, except in the course of 
legal proceedings to which the United States or the State of North 
Carolina is a party (including grand jury proceedings), for the 
purpose of securing compliance with this Final Judgment, or as 
otherwise required by law.
    G. If at the time that Defendant furnishes information or 
documents to the United States or the State of North Carolina, 
Defendant represents and identifies in writing the material in any 
such information or documents to which a claim of protection may be 
asserted under Rule 26(c)(1)(G) of the Federal Rules of Civil 
Procedure, and Defendant marks each pertinent page of such material, 
``Subject to claim of protection under Rule 26(c)(1)(G) of the 
Federal Rules of Civil Procedure,'' the United States and the State 
of North Carolina shall give Defendant ten (10) calendar days' 
notice prior to divulging such material in any legal proceeding 
(other than a grand jury proceeding).
    H. For the duration of this Final Judgment, Defendant must 
provide to the United States and the State of North Carolina a copy 
of each contract and each amendment to a contract that covers 
Healthcare Services in the Charlotte Area that it negotiates with 
any Insurer within thirty (30) calendar days of execution of such 
contract or amendment. Defendant must also notify the United States 
and the State of North Carolina within thirty (30) calendar days of 
having reason to believe that a Provider which Defendant controls 
has a contract with any Insurer with a provision that prohibits, 
prevents, or penalizes any Steered Plans or Transparency.

VIII. Retention of Jurisdiction

    The Court retains jurisdiction to enable any Party to this Final 
Judgment to apply to the Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or 
construe this Final Judgment, to modify any of its provisions, to 
enforce compliance, and to punish violations of its provisions.

IX. Enforcement of Final Judgment

    A. The United States retains and reserves all rights to enforce 
the provisions of this Final Judgment, including the right to seek 
an order of contempt from the Court. Defendant agrees that in any 
civil contempt action, any motion to show cause, or any similar 
action brought by the United States regarding an alleged violation 
of this Final Judgment, the United States may establish a violation 
of the decree and the appropriateness of any remedy therefor by a 
preponderance of the evidence, and Defendant waives any argument 
that a different standard of proof should apply.
    B. The Final Judgment should be interpreted to give full effect 
to the procompetitive purposes of the antitrust laws and to restore 
all competition Plaintiffs alleged was harmed by the challenged 
conduct. Defendant agrees that it may be held in contempt of, and 
that the Court may enforce, any provision of this Final Judgment 
that, as interpreted by the Court in light of these procompetitive 
principles and applying ordinary tools of interpretation, is stated 
specifically and in reasonable detail, whether or not it is clear 
and unambiguous on its face. In any such interpretation, the terms 
of this Final Judgment should not be construed against either Party 
as the drafter.
    C. In any enforcement proceeding in which the Court finds that 
Defendant has violated this Final Judgment, the United States may 
apply to the Court for a one-time extension of this Final Judgment, 
together with such other relief as may be appropriate. In connection 
with any successful effort by the United States to enforce this 
Final Judgment against Defendant, whether litigated or resolved 
prior to litigation, Defendant agrees to reimburse the United States 
for the fees and expenses of its attorneys, as well as any other 
costs including experts' fees, incurred in connection with that 
enforcement effort, including in the investigation of the potential 
violation.

X. Expiration of Final Judgment

    Unless the Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry, except that after 
five (5) years from the date of its entry, this Final Judgment may 
be terminated upon notice by the United States to the Court and 
Defendant that the continuation of the Final Judgment is no longer 
necessary or in the public interest.

XI. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The 
Parties have complied with the requirements of the Antitrust 
Procedures and Penalties Act, 15 U.S.C. Sec.  16, including making 
copies available to the public of this Final Judgment, the 
Competitive Impact Statement, any comments thereon, and the United 
States' responses to comments. Based upon the record before the 
Court, which includes the Competitive Impact Statement and any 
comments and responses to comments filed with the Court, entry of 
this Final Judgment is in the public interest.

Date:------------------------------------------------------------------

[Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec.  16]
-----------------------------------------------------------------------

Robert J. Conrad, Jr.
United States District Judge.

Exhibit A

Aetna

    Section 2.8 of the Physician Hospital Organization Agreement 
between and among Aetna Health of the Carolinas, Inc., Aetna Life 
Insurance Company, Aetna Health Management, LLC, and Defendant 
states in part:

    ``Company may not . . . steer Members away from Participating 
PHO Providers other than instances where services are not deemed to 
be clinically appropriate, subject to the terms of Section 4.1.3 of 
this Agreement.''

    In addition, Section 2.11 of the above-referenced agreement 
states in part:

    ``Company reserves the right to introduce in new Plans . . . and 
products during the term of this Agreement and will provide PHO with 
ninety (90) days written notice of such new Plans, Specialty 
Programs and products. . . . For purposes under (c) and (d) above, 
Company commits that Participating PHO Providers will be in-network 
Participating Providers in Company Plans and products as listed on 
the Product Participation Schedule. If Company introduces new 
products or benefit designs in PHO's market that have the effect of 
placing Participating PHO Providers in a non-preferred position, PHO 
will have the option to terminate this Agreement in accordance with 
Section 6.3. Notwithstanding the foregoing, if Company introduces an 
Aexcel performance network in PHO Provider's service area, all PHO 
Providers will be placed in the most preferred benefit level. As 
long as such Plans or products do not directly or indirectly steer 
Members away from a Participating PHO Provider to an alternative 
Participating Provider for the same service in the same level of 
care or same setting, the termination provision would not apply.''

Blue Cross and Blue Shield of North Carolina

    The Benefit Plan Exhibit to the Network Participation Agreement 
between Blue Cross and Blue Shield of North Carolina and

[[Page 63680]]

Defendant (originally effective January 1, 2014), as replaced by the 
Fifth Amendment, states in part:

    ``After meeting and conferring, if parties cannot reach 
agreement, then, notwithstanding Section 5.1, this Agreement will be 
considered to be beyond the initial term, and you may terminate this 
Agreement upon not less than 90 days' prior Written Notice to us, 
pursuant to Section 5.2.''

Cigna

    Section II.G.5 of the Managed Care Alliance Agreement between 
Cigna HealthCare of North Carolina, Inc. and Defendant states in 
part:

    ``All MHR entities as defined in Schedule 1 will be represented 
in the most preferred benefit level for any and all CIGNA products 
for all services provided under this Agreement unless CIGNA obtains 
prior written consent from MHR to exclude any MHR entities from 
representation in the most preferred benefit level for any CIGNA 
product. . . . As a MHR Participating Provider, CIGNA will not steer 
business away from MHR Participating Providers.''

Medcost

    Section 3.6 of the Participating Physician Hospital Organization 
agreement between Medcost, LLC and Defendant states in part:

    ``Plans shall not directly or indirectly steer patients away 
from MHR Participating Providers.''

UnitedHealthcare

    Section 2 of the Hospital Participation Agreement between 
UnitedHealthcare of North Carolina, Inc. and Defendant states in 
part:

    ``As a Participating Provider, Plan shall not directly or 
indirectly steer business away from Hospital.''

Exhibit B

Cigna

    Section II.G.5 of the Managed Care Alliance Agreement between 
Cigna HealthCare of North Carolina, Inc. and Defendant states in 
part:

    ``CIGNA may not exclude a MHR Participating Provider as a 
network provider for any product or Covered Service that MHR 
Participating Provider has the capability to provide except those 
carve-out services as outlined in Exhibit E attached hereto, unless 
CIGNA obtains prior written consent from MHR to exclude MHR 
Participating Provider as a network provider for such Covered 
Services.''

UnitedHealthcare

    Section 2 of the Hospital Participation Agreement between 
UnitedHealthcare of North Carolina, Inc. and Defendant states in 
part:

    ``Plan may not exclude Hospital as a network provider for any 
Health Service that Hospital is qualified and has the capability to 
provide and for which Plan and Hospital have established a fee 
schedule or fixed rate, as applicable, unless mutually agreed to in 
writing by Plan and Hospital to exclude Hospital as a network 
provider for such Health Service.''

    In addition, Section 3.6 of the above-referenced agreement 
states in part:

    ``During the term of this Agreement, including any renewal 
terms, if Plan creates new or additional products, which product 
otherwise is or could be a Product Line as defined in this 
Agreement, Hospital shall be given the opportunity to participate 
with respect to such new Product Line.''

United States District Court for the Western District of North Carolina 
Charlotte Division

    United States of America and the State of North Carolina, 
Plaintiffs, v. The Charlotte-Mecklenburg Hospital Authority, d/b/a 
Carolinas Healthcare System, Defendant.

Case No. 3:16-cv-00311-RJC-DCK
Judge Robert J. Conrad, Jr.

COMPETITIVE IMPACT STATEMENT

    Plaintiff United States of America (``United States''), pursuant 
to Section 2(b) of the Antitrust Procedures and Penalties Act 
(``APPA'' or ``Tunney Act''), 15 U.S.C. Sec. Sec.  16(b)-(h), files 
this Competitive Impact Statement relating to the proposed Final 
Judgment submitted for entry in this civil antitrust proceeding.
    I. NATURE AND PURPOSE OF THE PROCEEDING
    On June 9, 2016, the United States and the State of North 
Carolina filed a civil antitrust lawsuit against The Charlotte-
Mecklenburg Hospital Authority, formerly known as Carolinas 
HealthCare System and now doing business as Atrium Health 
(``Atrium''), to enjoin it from using steering restrictions in its 
agreements with health insurers in the Charlotte, North Carolina 
area. The Complaint alleges that Atrium's steering restrictions are 
anticompetitive and violate Section 1 of the Sherman Act, 15 U.S.C. 
Sec.  1, because the restrictions have detrimental effects on 
competition among healthcare providers in the Charlotte area.
    Healthcare providers charge health insurers a wide variety of 
prices for the same service, but insurers have generally not passed 
these price differences on to consumers because most commercial 
health plans offer coverage that is the same no matter which 
provider a patient chooses. This weakens the connection between 
price and quantity that is the essence of competition because it 
allows a provider to charge a high price without losing business to 
rivals. To control escalating healthcare costs, insurers have 
developed health plans and plan features that ``steer'' members by 
providing financial incentives that enable members to share savings 
by choosing more cost-effective providers, which stimulates 
competition between providers. To enable patients to choose more 
cost-effective providers, insurers also provide members with 
transparency about the prices, quality, patient experience, or 
anticipated out-of-pocket costs at different healthcare providers.
    Atrium is the largest health system in the Charlotte area. For 
an insurer to maintain a competitive health insurance business in 
the Charlotte area, it needs to have a contractual relationship with 
Atrium that gives employers and consumers the option of purchasing 
insurance that covers care there.
    Atrium has used its dominant position to demand contractual 
restrictions on steering and transparency that interfere with the 
competitive process. Insurers that contract with Atrium are 
prohibited from providing financial incentives or information that 
would encourage consumers to obtain healthcare services from 
competing providers. These contract provisions significantly reduce 
the number of additional patients that Atrium's competitors can hope 
to attract by agreeing to lower prices or otherwise providing 
greater value. These restrictions have been in Atrium's contracts 
for years, and remain to this day.
    Atrium's steering restrictions reduce the competitive incentive 
that Atrium's competitors would otherwise have to lower prices in 
order to win more business. This interference in the competitive 
process has reduced competition between Atrium and other healthcare 
providers in the Charlotte area. In addition, because many of the 
most innovative healthcare plans in the country today are based on 
steering to more efficient providers, Atrium's steering restrictions 
have also curbed the introduction of such plans, and reduced choices 
for Charlotte-area consumers.
    Plaintiffs and Atrium have entered into a Stipulation and 
proposed Final Judgment. The proposed Final Judgment enjoins Atrium 
from (1) enforcing provisions in its current insurer contracts that 
restrict steering and transparency; (2) seeking or obtaining 
contract provisions with an insurer that would prohibit, prevent, or 
penalize the insurer from using popular steering methods or 
providing transparency; and (3) penalizing, or threatening to 
penalize, any insurer for its use of these popular steering methods 
and transparency. The proposed Final Judgment is described in detail 
beginning with Section III below. In the Stipulation, Atrium agrees 
to abide by the injunctive provisions of the proposed Final Judgment 
while awaiting its entry by the Court.
    The United States (unless it has withdrawn its consent), the 
State of North Carolina, and Atrium have stipulated that the Court 
may enter the proposed Final Judgment at any time after compliance 
with the APPA. Entry of the proposed Final Judgment would terminate 
this action, except that the Court would retain jurisdiction to 
construe, modify, or enforce the provisions of the proposed Final 
Judgment and to punish violations thereof.

II. DESCRIPTION OF THE ALLEGED VIOLATION

A. Atrium and other Charlotte-Area Hospitals

    Atrium is the largest healthcare system in North Carolina and 
one of the largest not-for-profit healthcare systems in the United 
States. It is the dominant hospital system in the Charlotte area. 
Its flagship facility is Carolinas Medical Center, a general acute-
care hospital located near downtown Charlotte and the largest 
hospital in North Carolina. Atrium also operates nine additional 
general acute-care hospitals in the Charlotte area. Atrium owns, 
manages, or has strategic affiliations with over 40 hospitals in the 
Carolinas, and sells healthcare services throughout the Carolinas, 
including in

[[Page 63681]]

freestanding emergency departments, urgent care centers, physician 
practices, outpatient surgery centers, imaging centers, nursing 
homes, and laboratories. In 2017, Atrium's owned, managed, and 
affiliated hospitals and other healthcare providers earned net 
operating revenue of close to $10 billion.
    In addition to Atrium's ten Charlotte-area hospitals, there are 
eleven other general acute-care hospitals in the Charlotte area. The 
next largest hospital system, Novant Health (``Novant''), owns five 
general acute-care hospitals located in that area and had operating 
revenue of approximately $4.6 billion in 2017, making Novant less 
than half the size of Atrium. Novant's largest hospital in the 
Charlotte area is Novant Presbyterian Medical Center, which is the 
second-largest hospital in Charlotte. After Novant, the next-largest 
hospital in the Charlotte area is CaroMont Regional Medical Center. 
CaroMont Regional Medical Center is a 370-bed hospital in Gastonia, 
North Carolina, and is owned and operated by CaroMont Health, an 
independent community hospital system. In 2016, CaroMont Health had 
net operating revenue of approximately $529 million. The remaining 
hospitals in the Charlotte area are operated by Community Health 
Systems, Inc., Tenet Healthcare Corporation, and Iredell Health 
System.

B. The Relevant Market

    The Complaint alleges that Atrium has market power in a relevant 
market for the sale of general acute care inpatient hospital 
services sold to commercial health insurers (``GAC inpatient 
hospital services'') in the Charlotte area. GAC inpatient hospital 
services consist of a broad group of medical and surgical diagnostic 
and treatment services that includes a patient's overnight stay in 
the hospital. Although individual GAC inpatient hospital services 
are not substitutes for each other (e.g., a patient who needs heart 
surgery cannot elect instead to have her knee replaced), GAC 
inpatient hospital services can be aggregated for analytical 
convenience because the competitive conditions for each of the 
individual services is largely the same.
    The relevant geographic market for the sale of GAC inpatient 
hospital services is no larger than the Charlotte area.\1\ Insurers 
contract to purchase GAC inpatient hospital services from hospitals 
within the geographic area where their members are likely to seek 
medical care because consumers prefer to seek medical care near the 
places where they work and live. As a result, insurers doing 
business in the Charlotte area must include in their provider 
networks hospitals located in the Charlotte area. Charlotte-area 
consumers have little or no willingness to enroll in an insurance 
plan that provides no network access to hospitals located in the 
Charlotte area. For these reasons, it is not a viable alternative 
for insurers that sell health plans to consumers in the Charlotte 
area to contract for GAC inpatient hospital services from providers 
outside the Charlotte area.
---------------------------------------------------------------------------

    \1\ As used in this case, the Charlotte area means the Charlotte 
Combined Statistical Area, as defined by the U.S. Office of 
Management and Budget, which consists of Cabarrus, Cleveland, 
Gaston, Iredell, Lincoln, Mecklenburg, Rowan, Stanly, and Union 
counties in North Carolina, and Chester, Lancaster, and York 
counties in South Carolina.
---------------------------------------------------------------------------

C. Anticompetitive Effects of the Steering Restrictions

1. Atrium is the dominant hospital system in the Charlotte area

    Atrium is the dominant seller of GAC inpatient hospital services 
in the Charlotte area. Atrium has market power in this market. The 
market for GAC inpatient hospital services in the Charlotte area is 
highly concentrated, and Atrium's market share is more than 55 
percent. By comparison, Atrium's largest rival, Novant Health, has 
approximately 17 percent of the licensed hospital beds in the 
Charlotte area. Without an attractive broad-network plan that 
includes Atrium, insurers would not be viable in the Charlotte area 
because they would not be able to attract the business of employers. 
Atrium's size and breadth give it significant market power because 
it can decline to participate in an insurer's network unless it 
obtains high prices and advantageous contract terms.
    As a result of its market power, Atrium has been able to secure 
from insurers high prices relative to other hospital systems in the 
Charlotte area and relative to other advanced medical centers in 
North Carolina. These higher prices are not explained by any measure 
of relative high-quality. Because of high provider prices, patients' 
out-of-pocket healthcare costs in the Charlotte area are among the 
highest in North Carolina.

2. Steering is part of the competitive process

    Employers in Charlotte and elsewhere around the country have 
approached health insurers about ways to address rising healthcare 
costs. One approach of increasing interest is the introduction of 
steering mechanisms into the health plans that employers offer. 
Steering can be one way of fostering competition among hospitals.
    Steering can be accomplished in several ways. Popular types of 
steering in healthcare are narrow networks and tiered networks, 
reference-based pricing, and centers of excellence.\2\ Transparency 
into hospitals' or physicians' relative prices and quality is also 
important to help effectuate steering.
---------------------------------------------------------------------------

    \2\ The proposed Final Judgment defines narrow networks, tiered 
networks, and health plans with reference-based pricing or centers 
of excellence as ``Steered Plans.''
---------------------------------------------------------------------------

a. Narrow networks and tiered networks

    In addition to offering the broad-network plans that are most 
popular with employers, insurers in Charlotte want to introduce 
narrow network and tiered insurance options. Narrow networks are 
formed by using cost and/or quality criteria to select and contract 
with a subset of healthcare providers in an area. For example, a 
health plan sold in the Charlotte area that consists of hospitals 
and physicians only at Novant, CaroMont, and Community Health 
Systems would be a narrow-network plan. Because using an in-network 
provider costs a member less than using an out-of-network provider, 
a consumer that enrolls in a narrow-network plan is choosing to be 
steered to participating providers. The likely increase in patient 
volume realized by providers in the narrow network can help the 
insurer to negotiate lower prices, and then to pass those savings 
along in the form of lower premiums.
    Tiered networks are typically created by designating network 
providers into different levels (or tiers) based mostly on quality 
and price. Tiered networks typically have two or more tiers of in-
network providers: a preferred tier and one or more secondary in-
network tiers. There may also be providers that remain out-of-
network. In tiered networks, members are free to use any of the 
providers, but receive the most substantial benefits when they 
choose a provider in the preferred tier. This tier typically 
includes the providers with the best mix of quality and price. 
Tiered and narrow network plans are increasingly popular with 
employers and consumers. For example, in 2017, 19 percent of large 
employers that offered healthcare coverage provided a narrow-network 
plan to their employees and 31 percent offered a tiered plan.\3\ A 
large majority of the plans offered on the individual healthcare 
exchanges are narrow network plans. Narrow and tiered networks can 
effectively reduce healthcare costs and make insurance more 
affordable.
---------------------------------------------------------------------------

    \3\ Kaiser Family Foundation, 2017 Employer Health Benefits 
Survey, 213-214, https://files.kff.org/attachment/Report-Employer-Health-Benefits-Annual-Survey-2017.
---------------------------------------------------------------------------

b. Reference-based pricing and centers of excellence

    Reference-based pricing and centers of excellence are forms of 
steering that can be used as a feature of a health benefit plan. For 
reference-based pricing, the insurer establishes a market-wide 
standard, or ``reference,'' price for a service. The reference price 
can be established by drawing from average local prices or from 
other sources such as the reimbursement amounts established by 
Medicare rules. The benefit plan covers the member's expenses up to 
the ``reference price.'' Reference-based pricing steers members 
towards the providers that have prices at or below the reference 
price. This gives higher-priced providers an incentive to reduce 
their prices to be closer to the reference price.\4\
---------------------------------------------------------------------------

    \4\ The California Public Employees' Retirement System 
(``CalPERS'') has successfully used reference-based pricing to lower 
expenses on hip and knee replacements. A study of the first year 
after implementation of the reference-based pricing program 
indicates that surgical volumes at low-price facilities increased 
while volumes at high-price facilities decreased. Prices declined at 
both high and low price facilities. As a result CalPERS and its 
employees saved approximately $3 million. James C. Robinson and 
Timothy T. Brown, Increases in Consumer Cost Sharing Redirect 
Patient Volumes and Reduce hospital Prices for Orthopedic Surgery, 
32 Health Affairs 1392, 1394-97 (2013).
---------------------------------------------------------------------------

    A center of excellence is a designation that an insurer applies 
to a provider for its quality and/or cost efficiency in delivering a 
particular healthcare service. The insurer often provides a 
financial incentive to consumers to select the center of excellence. 
For example, an insurer may designate a particular hospital in a 
metropolitan area as

[[Page 63682]]

its center of excellence in bariatric surgery because the hospital 
has superior expertise or is particularly cost effective. To incent 
members to obtain bariatric surgery there, the insurer may reduce or 
eliminate out-of-pocket expenses for members who choose that 
hospital. Members remain free to obtain bariatric surgery elsewhere 
and pay the out-of-pocket expenses prescribed under the plan. 
Members are steered towards a center of excellence by virtue of the 
designation and the cost savings.

c. Transparency

    Transparency is the communication of price, cost, quality, or 
patient experience information to a member. Transparency makes 
steered plans more effective by providing consumers with information 
to enable them to comparison shop before selecting a provider. 
Transparency may also be a form of steering even in the absence of 
differential benefits because information that identifies one 
provider as more cost effective than another provider may prompt 
consumers to choose the more cost-effective provider.

3. To insulate itself from competition, Atrium required that 
steering restrictions be included in its insurer contracts

    To protect its dominant share and high prices and insulate 
itself from competition, Atrium has used its market power to require 
every major insurer in the Charlotte area-- Aetna Health of the 
Carolinas, Inc. (``Aetna''), Blue Cross and Blue Shield of North 
Carolina (``BCBS-NC''), Cigna Healthcare of North Carolina, Inc. 
(``Cigna''), and United Healthcare of North Carolina, Inc. 
(``UnitedHealthcare'') \5\-- to accept contract terms that restrict 
the insurers from steering their members to Atrium's lower-cost 
competitors.
---------------------------------------------------------------------------

    \5\ These four major insurers cover over 90 percent of the 
commercially-insured residents of the Charlotte area. MedCost is the 
next-largest health plan in the Charlotte area. MedCost provides 
administrative services and access to its healthcare provider 
networks to employers that self-fund their employees' healthcare 
benefits. Employers that are self-funded pay the healthcare benefit 
claims from the assets of their business, rather than purchase 
health insurance policies for the benefit of their employees. Atrium 
owns 50 percent of MedCost.
---------------------------------------------------------------------------

    Atrium's contracts with each of these insurers contain steering 
restrictions that either expressly prohibit the insurer from 
steering their members away from Atrium, or impede steering through 
other means, such as by imposing a financial penalty on any steering 
against Atrium that exceeds a specified amount or by allowing Atrium 
to promptly terminate the insurer's contract if the insurer steers 
against Atrium. Atrium used its market power to require that 
insurers agree to these contract provisions that restrict steering, 
and thereby restrict competition.
    Atrium's steering restrictions restrain insurers from offering 
consumers the choice of narrow-network plans that do not include 
Atrium, and tiered-network plans that do not place Atrium in the 
most favorable tier. Atrium's steering restrictions also prevent 
insurers from offering reference-based pricing because if the 
reference price for a service is lower than the price that Atrium 
charges for that service, members will be steered away from Atrium. 
Insurers are also prevented from offering financial incentives for 
members to obtain services at non-Atrium providers that are 
designated centers of excellence.
    These restrictions also prevent insurers from providing members 
transparency into the price, quality, patient experience, and 
anticipated out-of-pocket costs of Atrium's healthcare services 
compared to Atrium's competitors. Atrium's restrictions on 
transparency indirectly restrict steering because they inhibit 
consumers from accessing information that would allow them to make 
better-informed healthcare provider choices.
    Deprived of any mechanism to reward low prices with more patient 
volume, insurers cannot create incentives for Atrium's rivals to 
compete on price. Atrium's steering restrictions, therefore, reduce 
competition for GAC inpatient hospital services in the Charlotte 
area by impeding its competitors' ability to attract patients by 
offering lower prices to insurers and their members. The steering 
restrictions prevent consumers from benefitting from lower prices, 
so they protect Atrium from losing patient volume in response to 
high prices. This reduction in competition causes prices to be 
higher than they would be in the absence of Atrium's steering 
restrictions.

III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT

    The purpose of the proposed Final Judgment is to prevent Atrium 
from impeding insurers' steered plans and transparency, and to 
restore competition among healthcare providers in the Charlotte 
area. The proposed Final Judgment will accomplish this objective 
through injunctive, compliance, and enforcement provisions.
    Atrium has market power in GAC inpatient hospital services, but 
the proposed Final Judgment applies to the broad range of healthcare 
services that Atrium provides and to which its steering restrictions 
apply. The additional healthcare services covered by the proposed 
Final Judgment include outpatient services (such as ambulatory 
surgeries and radiological services), professional services rendered 
by physicians, and ancillary services such as imaging and lab 
services. The full scope of services covered by the proposed Final 
Judgment falls within the proposed Final Judgment's definition of 
``Healthcare Services.'' Because Atrium uses its market power to 
restrict steering away from it for any healthcare service, the 
proposed Final Judgment provides relief that is broader than the set 
of services in the relevant market.
    The proposed Final Judgment also applies to a broad range of 
benefit plans. This includes health insurance policies sold to 
individuals, fully-insured and self-funded health plans sold to 
employers and other groups, and Medicare Advantage plans.

A. Prohibited Conduct

    The proposed Final Judgment seeks to restore competition by 
prohibiting Atrium from engaging in specific conduct. There are 
three main provisions. The first stops Atrium from enforcing the 
current contract provisions at issue in this suit. The second stops 
Atrium from enforcing similar or new contractual provisions that 
would restrict steering in the Charlotte area. The third stops 
Atrium from retaliating against insurers for steering in the 
Charlotte area.

1. Eliminating the anticompetitive contract provisions

    The proposed Final Judgment eliminates the contractual language 
that Plaintiffs alleged is anticompetitive. The proposed Final 
Judgment voids the contractual provisions listed in Exhibit A to the 
proposed Final Judgment that expressly prevent steering. For 
example, a provision stating that an insurer ``will not steer 
business away from'' Atrium is voided from that insurer's contract. 
Additionally, a part of a contract between Atrium and an insurer 
that required the insurer to give Atrium 90 days' notice before 
bringing a plan to market that would steer patients away from Atrium 
is also voided. Further, the proposed Final Judgment eliminates a 
provision in one insurer's contract that allows Atrium to terminate 
the contract on 90 days' notice if the insurer offers a plan that 
would steer away from Atrium.
    In addition, Atrium's contracts with commercial insurers contain 
other provisions that require the insurer to include Atrium in all 
of its benefit plans. Each such provision prevents the insurer from 
creating narrow networks that feature Atrium's rivals, but exclude 
Atrium. The proposed Final Judgment lists that language in Exhibit 
B, and prohibits Atrium from enforcing or attempting to enforce such 
contractual provisions to prevent, prohibit, or penalize steered 
plans and transparency.\6\
---------------------------------------------------------------------------

    \6\ The contract provisions appearing in Exhibit B could remain 
enforceable to prevent insurers from ``carving out'' certain Atrium 
procedures from their benefits plans. A ``carve-out'' is an industry 
term defined in the proposed Final Judgment as an arrangement by 
which an insurer unilaterally removes all or substantially all of a 
particular healthcare service from coverage in a benefit plan during 
the performance of a network-participation agreement. Insurers are 
free to negotiate carve-outs as part of a contract, but Atrium may 
prohibit insurers from carving additional services out of a contract 
after it is signed.
---------------------------------------------------------------------------

    Finally, the proposed Final Judgment prevents Atrium from 
enforcing a ``material impact'' provision in its contract with BCBS-
NC in a manner that reduces BCBS-NC's incentives to steer to more 
efficient providers.

2. Preventing new contractual provisions that harm steering

    The proposed Final Judgment also prevents Atrium from seeking or 
obtaining similar or new contract provisions that would prohibit, 
prevent, or penalize steering through steered plans or transparency 
in the Charlotte area.
    Paragraph IV(B) of the proposed Final Judgment identifies three 
types of contractual provisions that, among others, would prohibit, 
prevent, or penalize steering through steered plans and would thus 
violate the terms of the proposed Final Judgment. First, Atrium may 
not expressly prohibit

[[Page 63683]]

steered plans or transparency. Second, Atrium may not require prior 
approval of new benefit plans. Third, Atrium may not demand to be 
included in the most-preferred tier of benefit plans regardless of 
price.
    The Final Judgment's injunction against steering restrictions 
also reaches beyond these three existing provisions to include any 
contract provision that prohibits, prevents, or penalizes steering. 
``Penalize'' is a term in the proposed Final Judgment that includes 
within its definition anything that would significantly restrain an 
insurer's steering. Because steering away from Atrium necessarily 
reduces its volume and revenues, terms that punish such reductions 
with higher prices or other detrimental consequences may be 
penalties. Whether a provision or action is likely to significantly 
restrain steering depends on the facts and circumstances, including 
but not limited to its economic impact, and any procompetitive 
effects that would tend to lower healthcare costs or otherwise 
benefit consumers in the Charlotte area.

3. Atrium may not retaliate against steering

    Under the terms of the proposed Final Judgment Atrium also may 
not seek or obtain any contract provision, or take any other action 
that would penalize an insurer for steering away from Atrium through 
steered plans or transparency. For example, Atrium may not threaten 
to terminate its participation in an insurer's healthcare networks 
because the insurer was planning to introduce a tiered-network plan 
that steered away from Atrium.

B. Conduct That is Not Prohibited by the Final Judgment

    Paragraph V of the proposed Final Judgment sets forth conduct 
that Atrium may undertake without violating the terms of the 
proposed Final Judgment. Paragraph V(A) makes clear that nothing in 
the proposed Final Judgment prohibits Atrium from exercising any of 
its contractual rights provided it does not engage in any conduct 
that would violate the terms of the proposed Final Judgment.
    If Atrium is the most-prominently featured provider in a narrow-
network plan or co-branded plan,\7\ Paragraph V(B) of the proposed 
Final Judgment allows Atrium to restrict an insurer from steering 
away from Atrium in that plan. Such restrictions may help narrow 
networks and co-branded plans be more effective, and this provision 
allows Atrium to participate in plans that steer towards it.
---------------------------------------------------------------------------

    \7\ A co-branded plan is a benefit plan created by a formal and 
substantial level of alliance or affiliation, such as a partnership 
or joint venture, between a provider and an insurer. A co-branded 
plan has the logos of both the insurer and provider on the plan's 
marketing materials.
---------------------------------------------------------------------------

    Paragraph V(C) makes clear that the proposed Final Judgment does 
not prohibit Atrium from negotiating with insurers for the ability 
to review the information about Atrium that an insurer disseminates 
through transparency, as long as any provision for review does not 
delay dissemination of the information. The proposed Final Judgment 
does not prevent Atrium from challenging information that it 
believes is inaccurate, including pursuing legal remedies available 
to it.
    Paragraph V(C) also makes clear that the proposed Final Judgment 
does not prohibit Atrium from seeking certain safeguards regarding 
the insurer's dissemination of the prices Atrium has negotiated with 
insurers. Atrium may seek contractual provisions with an insurer 
prohibiting the insurer from disseminating Atrium's negotiated 
prices to Atrium's competitors, other insurers, or the general 
public. Atrium may also seek contractual provisions with an insurer 
requiring the insurer to obtain a covenant from any third party 
receiving Atrium's negotiated prices that such third party will not 
disclose that information to Atrium's competitors, another insurer, 
the general public, or another third party lacking a reasonable need 
to know such information. Atrium may also seek all appropriate 
remedies in the event that dissemination of such information occurs.

C. Required Conduct

    The proposed Final Judgment also prescribes conduct that Atrium 
is required to undertake in order to facilitate prompt and effective 
relief. Paragraph VI of the proposed Final Judgment requires Atrium 
to provide Aetna, BCBS-NC, Cigna, MedCost and UnitedHealthcare with 
a copy of the Final Judgment and notify them in writing within 15 
business days of the Court's entry of the proposed Final Judgment 
that (1) the Final Judgment has been entered; (2) the Final Judgment 
prohibits Atrium from entering into or enforcing any agreement 
provision that violates the Final Judgment; (3) Atrium waives the 
right to enforce any contract language reproduced in Exhibit A; and 
(4) Atrium waives the right to enforce any contract language 
reproduced in Exhibit B to the extent such language prohibits, 
prevents, or penalizes steered plans or transparency.

D. Compliance

    Under Paragraph VII of the proposed Final Judgment, within 15 
calendar days of the entry of the Final Judgment, Atrium must 
provide a copy of the Final Judgment to each of its commissioners 
and officers as well as each employee who has responsibility to 
negotiate or approve contracts with insurers. Within 60 calendar 
days of the entry of the proposed Final Judgment, Atrium must 
develop and implement procedures necessary to ensure Atrium's 
compliance with the proposed Final Judgment, including procedures to 
answer questions from Atrium's commissioners and employees about 
abiding by the terms of the proposed Final Judgment.
    Within 270 calendar days of entry of the proposed Final 
Judgment, Atrium must submit to the United States and the State of 
North Carolina a written report setting forth its actions to comply 
with the proposed Final Judgment. Atrium must also submit to the 
United States and the State of North Carolina a copy of any new or 
revised agreement or amendment to any agreement with any insurer 
that is executed during the term of the proposed Final Judgment no 
later than 30 calendar days after the date the agreement or 
amendment is executed.
    Atrium must also notify the United States and the State of North 
Carolina within 30 calendar days of having reason to believe that a 
provider which Atrium controls has a contract with any insurer with 
a provision that prohibits, prevents, or penalizes transparency or 
any steered plan.
    To facilitate monitoring Atrium's compliance with the proposed 
Final Judgment, Paragraphs VII(B) and VII(D) of the proposed Final 
Judgment require Atrium to grant the United States access, upon 
reasonable notice, to Atrium's records and documents relating to 
matters contained in the proposed Final Judgment. In addition Atrium 
must make its employees available for interviews or depositions and 
answer interrogatories and prepare written reports relating to 
matters contained in the proposed Final Judgment upon request.
    The proposed Final Judgment also contains provisions that 
promote compliance and make the enforcement of the proposed Final 
Judgment as effective as possible. Paragraph IX(A) provides that the 
United States retains and reserves all rights to enforce the 
provisions of the proposed Final Judgment, including its rights to 
seek an order of contempt from the Court. Under the terms of this 
Paragraph, Atrium has agreed that in any civil contempt action, any 
motion to show cause, or any similar action brought by the United 
States regarding an alleged violation of the proposed Final 
Judgment, the United States may establish the violation and the 
appropriateness of any remedy by a preponderance of the evidence and 
that Atrium has waived any argument that a different standard of 
proof should apply. This provision aligns the standard for 
compliance obligations with the standard of proof that applies to 
the underlying offense that the compliance commitments address.
    Paragraph IX(B) sets forth the parties' agreed-upon rules for 
interpreting the proposed Final Judgment's provisions. Because 
consent decrees share many attributes with ordinary contracts, they 
should be construed as contracts for purposes of enforcement. See 
Anita's New Mexico Style Mexican Food v. Anita's Mexican Foods 
Corp., 201 F.3d 314, 319 (4th Cir. 2000) (quoting United States v. 
ITT Continental Baking Co., 420 U.S. 223, 236-37 (1975)). The 
parties have agreed that the Court should employ ordinary tools of 
interpretation to enforce the proposed Final Judgment. In Paragraph 
IX(B), the parties make clear the purpose of the proposed Final 
Judgment that can be used as an interpretive tool. The proposed 
Final Judgment was drafted with the purpose of resolving this 
litigation and restoring all competition that Plaintiffs alleged was 
harmed by the challenged conduct. Paragraph IX(B) says that the 
provisions of the proposed Final Judgment are to be interpreted to 
give effect to the procompetitive purpose of the federal antitrust 
laws, and to restore this lost competition.
    Atrium also agrees that the Court may enforce any provision of 
the proposed Final Judgment that is stated specifically and in 
reasonable detail, see Fed.R.Civ.P. 65(d) (requiring specific terms 
and ``reasonable detail''), even if the provision is not clear and

[[Page 63684]]

unambiguous on its face, by applying these procompetitive principles 
and ordinary tools of interpretation. See Martin's Herend Imports, 
Inc. v. Diamond & Gem Trading, 195 F.3d 765, 771 (5th Cir. 1999) 
(``The mere fact that interpretation is necessary does not render 
the injunction so vague and ambiguous that a party cannot know what 
is expected of him.'' (internal citation and quotation omitted)). 
When interpreting the proposed Final Judgment, the Court should not 
construe the language of the proposed Final Judgment against either 
party as the drafter.
    Paragraph IX(C) of the proposed Final Judgment provides that 
should the Court find in an enforcement proceeding that Atrium has 
violated the proposed Final Judgment, the United States may apply to 
the Court for a one-time extension of the proposed Final Judgment, 
together with such other relief as may be appropriate. In addition, 
in order to compensate American taxpayers for any costs associated 
with the investigation and enforcement of violations of the proposed 
Final Judgment, Paragraph IX(C) further provides that in any 
successful effort by the United States to enforce the proposed Final 
Judgment against Atrium, whether litigated or resolved prior to 
litigation, Atrium agrees to reimburse the United States for 
attorneys' fees, experts' fees, or costs incurred in connection with 
any enforcement effort, including the investigation of the potential 
violation.
    Finally, Paragraph X of the proposed Final Judgment provides 
that the proposed Final Judgment shall expire ten years from the 
date of its entry, except that after five years from the date of its 
entry, the proposed Final Judgment may be terminated upon notice by 
the United States to the Court and Atrium that the continuation of 
the proposed Final Judgment is no longer necessary or in the public 
interest.

IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS

    Section 4 of the Clayton Act, 15 U.S.C. Sec.  15, provides that 
any person who has been injured as a result of conduct prohibited by 
the antitrust laws may bring suit in federal court to recover three 
times the damages the person has suffered, as well as costs and 
reasonable attorneys' fees. Entry of the proposed Final Judgment 
will neither impair nor assist any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
Sec.  16(a), the proposed Final Judgment has no prima facie effect 
in any subsequent private lawsuit that may be brought against 
Atrium.

V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT

    The United States, the State of North Carolina, and Atrium have 
stipulated that the proposed Final Judgment may be entered by the 
Court after compliance with the provisions of the APPA, provided 
that the United States has not withdrawn its consent. The APPA 
conditions entry upon the Court's determination that the proposed 
Final Judgment is in the public interest.
    The APPA provides a period of at least 60 calendar days 
preceding the effective date of the proposed Final Judgment within 
which any person may submit to the United States written comments 
regarding the proposed Final Judgment. Any person who wishes to 
comment should do so within 60 calendar days of the date of 
publication of this Competitive Impact Statement in the Federal 
Register, or the last date of publication in a newspaper of the 
summary of this Competitive Impact Statement, whichever is later. 
All comments received during this period will be considered by the 
United States Department of Justice, which remains free to withdraw 
its consent to the entry of the proposed Final Judgment at any time 
prior to the Court's entry of the judgment. The comments and the 
response of the United States will be filed with the Court. In 
addition, comments will be posted on the U.S. Department of Justice, 
Antitrust Division's internet website and, under certain 
circumstances, published in the Federal Register.
    Written comments should be submitted to:

Peter J. Mucchetti
Chief, Healthcare and Consumer Products Section
Antitrust Division
United States Department of Justice
450 Fifth Street, NW, Suite 4100
Washington, DC 20530

    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the 
Court for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the proposed Final Judgment.

VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT

    As an alternative to the proposed Final Judgment, the United 
States considered continuing this litigation, and proceeding to 
trial in May 2019 against Atrium. While the proposed Final Judgment 
represents a negotiated resolution to the action that necessitated 
compromises by Plaintiffs and Atrium, the United States is satisfied 
that the relief contained in the proposed Final Judgment will remedy 
the anticompetitive conduct identified in the Complaint. The 
proposed Final Judgment would achieve all or substantially all of 
the relief the United States would have obtained through litigation 
but avoids the time, expense, and uncertainty of a full trial on the 
merits.

VII. APPA's STANDARD OF REVIEW FOR THE PROPOSED FINAL JUDGMENT

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a 60-day comment period, after which the Court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. Sec.  16(e)(1). In making that 
determination, the Court, in accordance with the statute as amended 
in 2004, is required to consider:
    (A) the competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) the impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.

15 U.S.C. Sec.  16(e)(1)(A) & (B). In considering these statutory 
factors, the Court's inquiry is necessarily a limited one as the 
government is entitled to ``broad discretion to settle with the 
defendant within the reaches of the public interest.'' United States 
v. Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); see 
generally United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 
(D.D.C. 2007) (assessing public interest standard under the Tunney 
Act); United States v. U.S. Airways Group, Inc., 38 F. Supp. 3d 69, 
75 (D.D.C. 2014) (explaining that the ``court's inquiry is limited'' 
in Tunney Act settlements).
    As the United States Court of Appeals for the District of 
Columbia Circuit has held, under the APPA a court considers, among 
other things, the relationship between the remedy secured and the 
specific allegations in the government's complaint, whether the 
decree is sufficiently clear, whether its enforcement mechanisms are 
sufficient, and whether the decree may positively harm third 
parties. See Microsoft, 56 F.3d at 1458-62. With respect to the 
adequacy of the relief secured by the decree, a court may not 
``engage in an unrestricted evaluation of what relief would best 
serve the public.'' United States v. BNS, Inc., 858 F.2d 456, 462 
(9th Cir. 1988) (quoting United States v. Bechtel Corp., 648 F.2d 
660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62; 
United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001). 
Instead:

[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\8\
---------------------------------------------------------------------------

    \8\ See also BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass'').
---------------------------------------------------------------------------

    In determining whether a proposed settlement is in the public 
interest, a district

[[Page 63685]]

court ``must accord deference to the government's predictions about 
the efficacy of its remedies, and may not require that the remedies 
perfectly match the alleged violations.'' SBC Commc'ns, 489 F. Supp. 
2d at 17; see also U.S. Airways, 38 F. Supp. 3d at 74-75 (noting 
that a court should not reject the proposed remedies because it 
believes others are preferable and that room must be made for the 
government to grant concessions in the negotiation process for 
settlements); Microsoft, 56 F.3d at 1461 (noting the need for courts 
to be ``deferential to the government's predictions as to the effect 
of the proposed remedies''); United States v. Archer-Daniels-Midland 
Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court 
should grant ``due respect to the government's prediction as to the 
effect of proposed remedies, its perception of the market structure, 
and its views of the nature of the case''). The ultimate question is 
whether ``the remedies [obtained in the decree are] so inconsonant 
with the allegations charged as to fall outside of the `reaches of 
the public interest.''' Microsoft, 56 F.3d at 1461. To meet this 
standard, the United States ``need only provide a factual basis for 
concluding that the settlements are reasonably adequate remedies for 
the alleged harms.'' SBC Commc'ns, 489 F. Supp. 2d at 17.
    Moreover, a court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States 
has alleged in its complaint, and does not authorize a court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. 
Airways, 38 F. Supp. 3d at 75 (noting that the court must simply 
determine whether there is a factual foundation for the government's 
decisions such that its conclusions regarding the proposed 
settlements are reasonable). Because the ``court's authority to 
review the decree depends entirely on the government's exercising 
its prosecutorial discretion by bringing a case in the first 
place,'' it follows that ``the court is only authorized to review 
the decree itself,'' and not to ``effectively redraft the 
complaint'' to inquire into other matters that the United States did 
not pursue. Microsoft, 56 F.3d at 1459-60. As the court confirmed in 
SBC Communications, courts ``cannot look beyond the complaint in 
making the public interest determination unless the complaint is 
drafted so narrowly as to make a mockery of judicial power.'' SBC 
Commc'ns, 489 F. Supp. 2d at 15.
    In its 2004 amendments,\9\ Congress made clear its intent to 
preserve the practical benefits of utilizing consent decrees in 
antitrust enforcement, adding the unambiguous instruction that 
``[n]othing in this section shall be construed to require the court 
to conduct an evidentiary hearing or to require the court to permit 
anyone to intervene.'' 15 U.S.C. Sec.  16(e)(2); see also U.S. 
Airways, 38 F. Supp. 3d at 76 (indicating that a court is not 
required to hold an evidentiary hearing or to permit intervenors as 
part of its review under the Tunney Act). This language explicitly 
wrote into the statute what Congress intended when it first enacted 
the Tunney Act in 1974. As Senator Tunney explained: ``[t]he court 
is nowhere compelled to go to trial or to engage in extended 
proceedings which might have the effect of vitiating the benefits of 
prompt and less costly settlement through the consent decree 
process.'' 119 Cong. Rec. 24,598 (1973) (statement of Sen. Tunney). 
Rather, the procedure for the public interest determination is left 
to the discretion of the court, with the recognition that the 
court's ``scope of review remains sharply proscribed by precedent 
and the nature of Tunney Act proceedings.'' SBC Commc'ns, 489 F. 
Supp. 2d at 11. A court can make its public interest determination 
based on the competitive impact statement and response to public 
comments alone. U.S. Airways, 38 F. Supp. 3d at 76. See also United 
States v. Enova Corp., 107 F. Supp. 2d 10, 17 (D.D.C. 2000) (noting 
that the ``Tunney Act expressly allows the court to make its public 
interest determination on the basis of the competitive impact 
statement and response to comments alone''); S. Rep. No. 93-298 93d 
Cong., 1st Sess., at 6 (1973) (``Where the public interest can be 
meaningfully evaluated simply on the basis of briefs and oral 
arguments, that is the approach that should be utilized.'').
---------------------------------------------------------------------------

    \9\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for a court to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
Sec.  16(e) (2004), with 15 U.S.C. Sec.  16(e)(1) (2006); see also 
SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004 
amendments ``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------

VIII. DETERMINATIVE DOCUMENTS

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

Respectfully submitted,

Dated: December 4, 2018

FOR PLAINTIFF UNITED STATES OF AMERICA:

-----------------------------------------------------------------------
John R. Read
Karl D. Knutsen
Natalie Melada
Catherine R. Reilly
David Stolzfus
Paul Torzilli

Antitrust Division, U.S. Department of Justice, 450 Fifth Street NW, 
Suite 4100, Washington, D.C. 20530, (p) 202/307.0468, 
[email protected].
[FR Doc. 2018-26755 Filed 12-10-18; 8:45 am]
BILLING CODE 4410-11-P