United States v. Evangelical Community Hospital, et ano. Proposed Final Judgment and Competitive Impact Statement, 13735-13750 [2021-04953]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 86, Number 45 (Wednesday, March 10, 2021)]
[Notices]
[Pages 13735-13750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04953]



[[Page 13735]]

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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Evangelical Community Hospital, et ano. Proposed 
Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation, and Competitive Impact Statement have been filed with the 
United States District Court for the Middle District of Pennsylvania in 
United States of America v. Evangelical Community Hospital and 
Geisinger Health, Civil Action No. 4:20-cv-01383-MWB. On August 5, 
2020, the United States filed a Complaint alleging that Geisinger's 
partial acquisition of Evangelical would violate Section 1 of the 
Sherman Act, 15 U.S.C. 1 and Section 7 of the Clayton Act, 15 U.S.C. 
18. The proposed Final Judgment requires Geisinger and Evangelical to 
amend the transaction to cap Geisinger's ownership interest in 
Evangelical at a 7.5% passive interest and to eliminate additional 
entanglements between the two competing hospitals.
    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 Middle District 
of Pennsylvania. 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 submitted in English and 
directed to Eric D. Welsh, Chief, Healthcare and Consumer Products 
Section, Antitrust Division, Department of Justice, 450 Fifth Street 
NW, Suite 4100, Washington, DC 20530.

Suzanne Morris,
Chief, Premerger and Division Statistics, Antitrust Division.

United States District Court for the Middle District of Pennsylvania

    United States of America, Plaintiff, V. Geisinger Health, and 
Evangelical Community Hospital, Defendants.

Civil Action No.:

Complaint

    The United States of America brings this civil antitrust action to 
enjoin Geisinger Health's partial acquisition of Evangelical Community 
Hospital. Defendants' agreement creates substantial financial 
entanglements between these close competitors and reduces both 
hospitals' incentives to compete aggressively. As a result, this 
transaction is likely to substantially lessen competition and 
unreasonably restrain trade, resulting in harm to patients in the form 
of higher prices, lower quality, and reduced access to high-quality 
inpatient hospital services in central Pennsylvania.

I. Introduction

    1. Geisinger and Evangelical are, respectively, the largest health 
system and largest independent community hospital in a six-county 
region in central Pennsylvania. For many patients in this region, 
Geisinger and Evangelical are close substitutes for the provision of 
inpatient general acute-care services. As the CEO of Evangelical 
explained in an interview describing the transaction with Geisinger, 
``if you don't get your care here [at Evangelical], you get it there 
[at Geisinger].''
    2. Geisinger competes for virtually all of the services that 
Evangelical provides, with Geisinger also offering some high-end, 
specialized services that Evangelical does not offer. This competition 
between Geisinger and Evangelical has improved the quality, 
availability, and price of inpatient general acute-care services in the 
region.
    3. In late 2017, Evangelical announced to Geisinger and other 
industry participants that it was considering selling itself or 
entering into a strategic partnership with another hospital system or 
healthcare entity. This announcement raised concerns for Geisinger, 
which had long feared that Evangelical could partner with a hospital 
system or insurer to compete even more intensely with Geisinger. A more 
effective competitor could put Geisinger's revenues at risk.
    4. In an effort to forestall that outcome and eliminate existing 
competition from Evangelical, Geisinger sought to acquire Evangelical 
in its entirety, making a bid for its rival that was substantially 
larger than any comparable offer. During negotiations, however, both 
Geisinger and Evangelical recognized that a merger between the two 
hospitals would likely be blocked on antitrust grounds. So instead, 
Defendants tried a strategy to avoid antitrust scrutiny.
    5. On February 1, 2019, Defendants agreed to a partial 
acquisition--self-styled as a ``Collaboration Agreement.'' As part of 
this agreement, Geisinger acquired a 30% interest in Evangelical. In 
exchange, Geisinger pledged to provide $100 million to Evangelical for 
investment projects and intellectual property licensing.
    6. The $100 million pledge, however, was not made altruistically 
and is certainly not without strings. The partial-acquisition agreement 
ties Geisinger and Evangelical together in a number of ways, 
fundamentally altering their relationship as competitors and curtailing 
their incentives to compete independently for patients. Patients and 
other purchasers of healthcare in central Pennsylvania likely will be 
harmed as a result of this diminished competition.

II. Jurisdiction and Venue

    7. This Court has subject-matter jurisdiction under Section 4 of 
the Sherman Act, 15 U.S.C. 4, Section 15 of the Clayton Act, 15 U.S.C. 
25, and 28 U.S.C. 1331, 1337, and 1345.
    8. Defendants are engaged in activities that substantially affect 
interstate commerce. Defendants provide healthcare services for which 
employers, insurers, and individual patients remit payments across 
state lines. Defendants also purchase supplies and equipment that are 
shipped across state lines, and they otherwise participate in 
interstate commerce.
    9. Venue is proper under Section 12 of the Clayton Act, 15 U.S.C. 
22, and under 28 U.S.C. 1391(b) and (c).
    10. This Court has personal jurisdiction over each Defendant. 
Geisinger and Evangelical are both incorporated in the Commonwealth of 
Pennsylvania with their principal place of business located in the 
Middle District of Pennsylvania.

III. Defendants and the Agreement

    11. Geisinger Health is an integrated healthcare provider of 
hospital and physician services. Geisinger operates 12 hospitals in 
Pennsylvania and New Jersey and owns physician practices throughout 
Pennsylvania, with a significant presence in the central and 
northeastern portions of the state. Geisinger also operates urgent-care 
centers and other outpatient facilities in Pennsylvania and New Jersey. 
As of April 2020, the Geisinger system employed approximately 32,000 
employees, including 1,800 physicians.
    12. Geisinger's flagship hospital, Geisinger Medical Center, is 
located in Danville, Pennsylvania, and is licensed to accommodate 574 
overnight patients. Geisinger operates three other hospitals in the 
area: Geisinger Shamokin (70 beds), Geisinger Jersey Shore (25 beds),

[[Page 13736]]

and Geisinger Bloomsburg (76 beds). In addition, Geisinger operates 
several urgent-care centers and other outpatient facilities within the 
area.
    13. Geisinger also operates Geisinger Health Plan, an insurance 
company that sells commercial health insurance, Medicare, and Medicaid 
products. Geisinger Health Plan has approximately 600,000 members.
    14. Geisinger has a history of acquiring community hospitals in 
Pennsylvania. From 2012 to 2017, Geisinger acquired six hospitals in 
Pennsylvania. Three of the four hospitals that Geisinger owns in the 
area, Shamokin, Jersey Shore, and Bloomsburg, were formerly independent 
hospitals, and two of those hospitals were the subject of previous 
antitrust challenges.
    15. Evangelical Community Hospital is an independent community 
hospital in Lewisburg, Pennsylvania. The hospital is licensed to 
accommodate 132 overnight patients. As of December 2018, Evangelical 
employed approximately 1,800 individuals and had 170 physicians on 
staff. Evangelical also owns a number of physician practices in central 
Pennsylvania and operates an urgent-care center and several other 
outpatient facilities.

A. Defendants Are Close Competitors in Central Pennsylvania

    16. Geisinger and Evangelical both provide inpatient general acute-
care services to patients in central Pennsylvania and together provide 
care for the vast majority of patients living in Danville and 
Lewisburg, Pennsylvania, and the surrounding communities.
    17. Defendants are particularly close competitors in the six-county 
area in central Pennsylvania comprised of Union, Snyder, 
Northumberland, Montour, Lycoming, and Columbia counties.
    18. This six-county area has benefitted from competition between 
Geisinger and Evangelical. Geisinger and Evangelical are each other's 
closest competitor for many services and compete on dimensions that 
include quality, scope of services, and price. According to a Geisinger 
Health Plan executive, Geisinger and Evangelical ``care for the same 
people and populations.'' Geisinger and Evangelical recognize that they 
compete closely to provide inpatient general acute-care services, which 
include orthopedics, women's health, cardiac, and general surgery 
services. Geisinger and Evangelical also recognize that they compete to 
win patients at the expense of the other.
    19. The competition between Geisinger and Evangelical to attract 
patients is reflected in their plans for capital investments. When 
planning for the future, competition between Geisinger and Evangelical 
affects the capital investments each chooses to make. For example, in 
2016, when Evangelical's CEO was explaining to the hospital's board why 
she recommended constructing a new orthopedic facility, she said that 
Evangelical was ``vulnerable to GMC [Geisinger Medical Center] in 
orthopedics.'' Similarly, in considering capital expenditures for 
certain improvements to its facilities in 2018, Geisinger cited 
Evangelical's competitive activities.
    20. Geisinger and Evangelical also compete against each other in 
their negotiations with insurers. For example, insurers have used 
Evangelical's lower prices for inpatient general acute-care services to 
negotiate lower prices for those services from Geisinger.
    21. Geisinger and Evangelical also have engaged in direct price 
competition for members of several religious communities that include 
Amish and Mennonite practitioners, who Defendants refer to as the 
``Plain Community.'' Members of the Plain Community generally pay their 
medical bills directly and do not rely on any form of health insurance. 
In 2018, for example, an Evangelical physician obtained, and circulated 
to Evangelical executives, Geisinger's then-current Plain Community 
discount program. After learning about Geisinger's newly lowered 
prices, Evangelical lowered its prices in response, and Evangelical's 
CFO sent a letter to members of the Plain Community with the new 
pricing ``[s]o that they would know that our rates were lower.'' 
Evangelical's CEO observed that Plain Community business ``has recently 
become more competitive as Geisinger has significantly reduced its 
prices,'' prompting Evangelical ``to reduce its prices to the Plain 
Community in order to remain competitive.''

B. Recognizing That a Full Merger Would Create an Illegal ``Monopoly,'' 
Geisinger Proposed a Partial Acquisition That Would Increase 
Coordination

    22. As early as 2016, Geisinger had identified that ``[a]lignment'' 
with Evangelical would provide it with ``[d]efensive positioning 
against expansion by [UPMC] and/or affiliation with [another] 
competitor.'' When Geisinger learned that Evangelical had engaged in a 
process to find a strategic partner or acquirer, Geisinger was 
concerned that Evangelical would partner with a different hospital 
system.
    23. Geisinger would have strongly preferred to fully acquire 
Evangelical and initially submitted a bid for a full acquisition, as it 
has done in the past with other community hospitals. Given the 
competition described above, however, Defendants quickly recognized 
that a full acquisition would likely violate the antitrust laws. 
Evangelical's CEO explained in a video interview that ``the state and 
federal government looks at these kinds of things for antitrust . . . 
and you can't create a monopoly. And so you know the reality of it is 
even if they wanted to, Geisinger would not have been able to acquire 
us.'' Geisinger's documents similarly note that a full acquisition of 
Evangelical ``[p]resented serious anti-trust concerns.''
    24. Instead of a full merger, Geisinger and Evangelical concocted 
the complicated partial-acquisition agreement at issue in this case, in 
part, to avoid antitrust scrutiny. After the letter of intent for the 
agreement was signed, for example, a senior employee at Geisinger wrote 
that the agreement was ``[k]inda smart really'' because it ``[d]oes not 
require AG [Attorney General] approval.'' Nevertheless, the Antitrust 
Division learned of the agreement and opened an antitrust investigation 
shortly after the agreement was executed.
    25. Initially, Defendants' partial-acquisition agreement was 
replete with provisions evidencing Geisinger's intent to substantially 
limit competition by controlling its close competitor and replacing 
competition with ``cooperation'' (as would occur in a full merger), 
such as Geisinger's right to appoint six members to the Evangelical 
board of directors, the potential for Geisinger to fund revenue lost by 
Evangelical, proposed joint ventures in areas where Defendants 
historically competed, and Geisinger's right to have a say in who would 
be Evangelical's Chief Executive Officer. As a senior Geisinger 
employee testified, ``one of Geisinger's objectives was to integrate . 
. . to the fullest extent possible.''
    26. Defendants twice amended their partial-acquisition agreement in 
response to some of Plaintiff's concerns. Nevertheless, the provisions 
of the transaction illuminate Geisinger's motivation for doing this 
deal, which survives despite these amendments. More importantly, the 
anticompetitive effects of the agreement also survive. The amendments 
simply do not rectify the fundamental problems with the agreement: 
Geisinger has acquired a significant ownership interest in its close 
competitor and imposed significant entanglements between the

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two, likely leading to an impermissible substantial lessening of 
competition between Geisinger and Evangelical.
    27. As with a full merger, this partial-acquisition transaction 
would lessen competition between Geisinger and Evangelical as they 
cooperate and look for ``wins'' for both firms. As Evangelical's CEO 
described in an interview discussing the deal, ``there's an economic 
principle called co-opetition. And you can cooperate, and you can 
compete. And as long as both sides find wins, it works.'' Such 
statements are predictive of how these close competitors are likely to 
behave if this transaction is allowed to proceed: They will coordinate 
their activity to ``find wins'' at the expense of robust competition. 
Consumers will be on the losing end of this bargain as prices increase 
and access to high-quality services is diminished.

C. The Transaction Is Likely to Substantially Lessen Competition 
Between Geisinger and Evangelical

    28. Defendants' transaction links Geisinger and Evangelical 
together in a number of ways that fundamentally alter the relationship 
between them, reducing their incentives to attract all patients away 
from each other by competing on the quality, scope, and availability of 
inpatient general acute-care services. The agreement also is likely to 
lead Geisinger to raise prices to commercial insurers and other 
purchasers of inpatient general acute-care services, resulting in harm 
to the consumer.
    29. Financial entanglement. Under the agreement, Geisinger has 
acquired a 30% interest in Evangelical, its close rival. In exchange, 
Geisinger has committed to pay $100 million to Evangelical over the 
next several years and is poised to remain a critical source of funding 
to Evangelical for the foreseeable future. The $100 million consists of 
$90 million in cash--$88 million of which is earmarked for specified 
projects approved by Geisinger and $2 million of which is for 
unspecified projects that Geisinger must approve--and $10 million in 
attributed value for intellectual property that Geisinger would license 
to Evangelical.
    30. These financial arrangements establish an indefinite 
partnership between Evangelical and Geisinger. As a senior Geisinger 
employee put it, through this investment, Evangelical is ``tied to us'' 
so ``they don't go to a competitor.'' As a result, Evangelical is 
likely to avoid competing to enhance the quality or scope of the 
services it offers, which would attract patients from Geisinger, its 
part owner.
    31. This financial entanglement also reduces Geisinger's incentives 
to compete by investing in improvements that would attract patients 
from Evangelical. If Geisinger expands its services or improves the 
quality of its services in areas in which it competes with Evangelical, 
it would attract patients at Evangelical's expense, reducing the value 
of Geisinger's 30% interest in Evangelical.
    32. Thus, as a result of this transaction, both Defendants have the 
incentive to pull their competitive punches--incentives that would not 
exist in the absence of the agreement.
    33. Improper influence. The agreement also gives Geisinger 
influence over Evangelical, including over its ability to partner with 
others in the future. The agreement gives Geisinger rights of first 
offer and first refusal with respect to any future joint venture, 
competitively significant asset sale, or change-of-control transaction 
by Evangelical, which ensures that Geisinger will have the opportunity 
to interfere if Evangelical attempts to enter into any of these 
transactions with a healthcare entity other than Geisinger. These 
rights deter collaborations between Evangelical and other entities that 
compete with Geisinger because Geisinger is given advance notice and is 
able to delay or prevent the collaboration. Such collaborations are and 
have been an important dimension of quality competition among 
hospitals. For example, if Evangelical wanted to enter into a joint 
venture with a health system to enhance its cardiology services to 
better compete against Geisinger, Geisinger would receive advance 
notice and could exercise its rights of first offer or first refusal to 
attempt to prevent this competition.
    34. Geisinger can also improperly influence Evangelical through its 
right to approve Evangelical's use of funds. The agreement allocates 
funds to Evangelical for specific projects or service-line initiatives 
in specified amounts (e.g., $20 million for women's health 
initiatives), including $2 million for ``other mutually agreeable 
Strategic Project Investment projects.'' In addition, if Evangelical 
wants to spend any funds originating from Geisinger for purposes other 
than those described in the agreement, it needs Geisinger's approval. 
The transaction affords Geisinger the right to withhold that approval 
if it believes that the project would enable Evangelical to compete in 
a way that Geisinger does not like.
    35. Less independent expansion and more anticompetitive 
cooperation. For years, Evangelical has independently expanded in a 
number of service lines that compete for patients against service lines 
offered by Geisinger. The agreement, however, lessens Evangelical's 
incentives to expand because it likely will not want to bite the hand 
that feeds it by disrupting its relationship with Geisinger. 
Evangelical instead may seek to cooperate with Geisinger, effectively 
agreeing not to compete. For example, after the transaction with 
Geisinger, an Evangelical executive deleted recommendations to 
independently expand Evangelical's orthopedic offerings from a draft of 
Evangelical's three-year strategic plan and instead focused on 
Evangelical's partnership with Geisinger in this area. Orthopedics is a 
service line in which Evangelical historically has competed closely 
with Geisinger, to the benefit of patients who need orthopedic care. 
Even though Defendants claim to have abandoned the joint venture 
involving orthopedic services that was originally described in the 
partial-acquisition agreement, if this transaction is not rescinded or 
enjoined, they are more likely to avoid competition with each other as 
a result of their financial and other entanglements.
    36. Sharing of competitively sensitive information. Further 
facilitating coordination, the transaction provides the means for 
Geisinger and Evangelical to share competitively sensitive information 
by enabling ongoing interactions between them. For example, the 
agreement provides the opportunity and means for Defendants to share 
competitively sensitive information when Evangelical requests that 
Geisinger disburse funds for strategic projects under the agreement 
because the agreement requires that these requests be ``supported by 
appropriate business plans.'' This request necessarily would require 
sharing competitively sensitive information.
    37. The transaction also requires Evangelical to inform Geisinger 
about any strategic partnerships, joint ventures, or other major 
transactions with other hospital systems before those transactions are 
executed. In addition, Geisinger's approval rights over certain 
Evangelical capital improvements provide additional opportunities for 
Defendants to inappropriately share competitively sensitive 
information. These requirements will give Geisinger advance notice of 
its competitor's strategic moves and will facilitate discussions 
between Geisinger and Evangelical about Evangelical's strategic plans.
    38. Evangelical has publicly stated that it already has cooperative

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relationships with Geisinger, which increases the likelihood that 
Defendants will share such competitively sensitive information. In 
fact, Defendants have already shared important competitive information 
as part of the agreement. In discussions regarding joint ventures, 
Evangelical's CEO sent her counterpart at Geisinger a document that 
detailed her thinking on Evangelical's strategic growth options. The 
transaction continues to contemplate joint ventures between the 
Defendants, and the inappropriate sharing of competitively sensitive 
information is likely to continue.
    39. Increased prices. The transaction also creates incentives for 
Geisinger to raise prices to commercial insurers and other purchasers 
of inpatient general-acute care services. Because Geisinger now owns 
30% of Evangelical, it benefits when patients choose Evangelical 
instead of Geisinger because the value of its ownership interest in 
Evangelical increases. This ability to partially recover the value of 
lost patients through its ownership of Evangelical gives Geisinger 
greater bargaining leverage in negotiations with insurers and the 
ability to set higher prices for patients who lack insurance.

D. Defendants Have a History of Picking and Choosing When To Compete 
With Each Other, Which This Partial Acquisition Will Exacerbate, 
Deepening Coordination at the Expense of Competition

    40. Although Geisinger and Evangelical are competitors for patients 
in central Pennsylvania, they have previously engaged in coordinated 
behavior, picking and choosing when to compete and when not to compete. 
This tendency to coordinate their competitive behavior is reflected by 
Evangelical's CEO's view of ``co-opetition.''
    41. Defendants' prior acts of coordination, which are beneficial 
only to themselves, reinforce their dominant position for inpatient 
general acute-care services in central Pennsylvania. Defendants' 
coordination comes at the expense of greater competition and has taken 
various forms:
     Leaders from Defendants have had ``regular touch base 
meetings,'' in which they discussed a variety of topics, including 
strategic growth options.
     Geisinger has shared with Evangelical the terms of its 
loan forgiveness agreement, which Geisinger uses as an important tool 
to recruit physicians.
     Geisinger and Evangelical established a co-branded urgent-
care center in Lewisburg that included a non-compete clause. As 
Evangelical's head of marketing explained to the board, the venture 
allowed Evangelical ``to build volume to our urgent care with Geisinger 
as a partner rather than potentially as a competitor.''
    42. More concerning, senior executives of Defendants entered into 
an agreement not to recruit each other's employees--a so-called no-
poach agreement. Defendants' no-poach agreement--an agreement between 
competitors, reached through verbal exchanges and confirmed by email 
from senior executives--reduces competition between them to hire 
hospital personnel and therefore directly harms healthcare workers 
seeking competitive pay and working conditions. Defendants have 
monitored each other's compliance with this unlawful agreement, and 
deviations have been called out in an effort to enforce compliance. For 
example, after learning that nurses at Evangelical were being recruited 
by Geisinger via Facebook, the CEO of Evangelical wrote to her 
counterpart at Geisinger, asking: ``Can you please ask that this 
stop[?] Very counter to what we are trying to accomplish.'' After 
receiving the message, the Geisinger executive forwarded the email to 
Geisinger's Vice President of Talent Acquisition, instructing her to 
``ask your staff to stop this activity with Evangelical.'' Defendants' 
no-poach agreement works to insulate Defendants' businesses from 
competition for healthcare professionals.
    43. This history of coordination between Defendants increases the 
risk that the additional entanglements created by the partial-
acquisition agreement will lead Geisinger and Evangelical to coordinate 
even more closely at the expense of consumers when it is beneficial for 
them to do so. Moreover, this history makes clear that Defendants' 
self-serving representations about their intent to continue to compete 
going forward--despite all of the entanglements created by the partial-
acquisition agreement--cannot be trusted.

IV. The Relevant Market

A. Inpatient General Acute-Care Services are a Relevant Product Market

    44. A relevant product market in which to analyze the effects of 
the partial-acquisition agreement is the sale of inpatient general 
acute-care services. This product market encompasses a broad cluster of 
inpatient medical and surgical diagnostic and treatment services 
offered by both Geisinger and Evangelical that require an overnight 
hospital stay, including many orthopedic, cardiovascular, women's 
health, and general surgical services.
    45. It is appropriate to evaluate the agreement's likely effects 
across the cluster of inpatient general acute-care services. These 
specific services are not substitutes for each other (e.g., obstetrics 
care is not a substitute for hip replacement surgery), but it is 
appropriate to consider them within one relevant product market because 
the services are offered to patients under similar competitive 
conditions by similar market participants. There are no practical 
substitutes for this cluster of inpatient general acute-care services.
    46. The relevant market excludes outpatient services and 
specialized services that are offered by Geisinger but not Evangelical 
because these services are offered under different competitive 
conditions than inpatient general acute-care services. Outpatient 
services are services that generally do not require an overnight 
hospital stay, and some outpatient services are provided in settings 
other than hospitals. Health plans and the vast majority of patients 
who use inpatient general acute-care services would not switch to 
outpatient services in response to a price increase. Similarly, the 
relevant market excludes the more specialized services that are offered 
by Geisinger but not Evangelical, such as certain advanced cancer 
services and organ transplants. These services treat medical conditions 
that require more specialized medical training or equipment, so 
patients have a different set of competitive options for them.

B. The Six-County Area in Central Pennsylvania is a Relevant Geographic 
Market

    47. The relevant geographic market is no larger than the six-county 
area that comprises the Pennsylvania counties of Union, Snyder, 
Northumberland, Montour, Lycoming, and Columbia (the ``six-county 
area''). This area encompasses the cities of Danville and Lewisburg, 
where Geisinger Medical Center and Evangelical are respectively 
located. The hospitals are approximately 17 miles apart. The map below 
illustrates the relevant geographic market and the locations of the 
hospitals in it.

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[GRAPHIC] [TIFF OMITTED] TN10MR21.002

    48. The Horizontal Merger Guidelines (``Merger Guidelines'') issued 
by the U.S. Department of Justice and Federal Trade Commission set 
forth the relevant test for geographic market definition: Whether a 
hypothetical monopolist of the relevant services within the geographic 
area could profitably impose a small but significant and non-transitory 
increase in price (here, reimbursement rates for inpatient general 
acute-care services). If so, the boundaries of that geographic area are 
an appropriate geographic market.
    49. In this case, a hypothetical monopolist of inpatient general 
acute-care services within the six-county area could profitably impose 
a small but significant and non-transitory increase in the price of 
inpatient general acute-care services for at least one hospital in the 
six-county area. In general, patients choose to seek care close to 
their homes or workplaces, and residents of the six-county area also 
prefer to obtain inpatient general acute-care services locally. Thus, 
the availability of these services outside of the six-county area is 
not sufficient to prevent a hypothetical monopolist from profitably 
imposing a price increase.
    50. In addition, health plans that offer healthcare networks in the 
six-county area do not consider hospitals outside of that area to be 
reasonable substitutes in their networks for hospitals within that 
area. Because residents of the six-county area strongly prefer to 
obtain inpatient general acute-care services from within the six-county 
area, a health plan that did not have hospitals in the six-county area 
likely could not successfully market a network to employers and 
patients in the area. Thus, a health plan would not exclude from its 
network a hypothetical monopolist of all inpatient general acute-care 
services in the six-county area in response to a small but significant 
price increase.

V. Anticompetitive Effects

A. The Market for Inpatient General Acute-Care Services in Central 
Pennsylvania is Highly Concentrated

    51. Market concentration is one useful indicator of the level of 
competitive vigor in a market and of the likely competitive effects of 
a transaction involving competitors. The more concentrated a market, 
and the more a transaction would increase concentration in a market, 
the more likely it is that a transaction--even a partial acquisition--
will result in a meaningful reduction in competition.
    52. Geisinger currently accounts for approximately 55% of inpatient 
general acute-care services provided in the six-county area. 
Evangelical accounts for approximately 17% of that market. Defendants 
together thus account for approximately 71% of the relevant market. 
Defendants' internal documents report shares that are consistent with 
these shares for inpatient general acute-care services in general and 
for many service lines. The other competitor of significance in the 
six-county area is the University of Pittsburgh Medical Center 
(``UPMC''), which operates two hospitals in Williamsport and Muncy. 
UPMC also used to operate a hospital in Sunbury, but that hospital 
permanently closed on March 31, 2020.
    53. The shares of total discharges of patients receiving inpatient 
general acute-care services from hospitals in the six-county area 
between the fourth quarter of 2018 and third quarter of 2019 are shown 
in the table below. These shares likely understate the Defendants' 
current shares because they include discharges from UPMC's Sunbury 
hospital, which has now closed, and some patients who would have used 
Sunbury are likely to choose Defendants' hospitals instead.

------------------------------------------------------------------------
                       Hospital system                         Share (%)
------------------------------------------------------------------------
Geisinger...................................................        54.6
Evangelical.................................................        16.7
UPMC........................................................        26.7
Community Health System.....................................         2.0
------------------------------------------------------------------------

    54. As these shares illustrate, the relevant market is highly 
concentrated. The Merger Guidelines measure market concentration by 
using the Herfindahl-Hirschman Index (``HHI''), which is calculated by 
summing the square of

[[Page 13740]]

individual firms' market shares. Under the Merger Guidelines, a market 
is considered to be highly concentrated if the HHI is above 2,500. 
Defendants' partial-acquisition agreement would operate in a market 
that is already highly concentrated, with an HHI of 3,979.
    55. Under the Merger Guidelines, a merger that significantly 
increases concentration in a highly concentrated market is presumed to 
be unlawful. A full merger between Geisinger and Evangelical would 
trigger the presumption of illegality under the Merger Guidelines by a 
wide margin, resulting in a post-merger HHI of 5,799 and an increase of 
1,820. A partial acquisition that creates the incentive and ability for 
two close competitors to coordinate in such a highly concentrated 
market poses a similar danger to consumers.

B. The Partial Acquisition Will Diminish Evangelical's and Geisinger's 
Incentives To Compete Against Each Other for Patients

    56. Geisinger is by far the largest health system in the six-county 
region and within central Pennsylvania. It already enjoys a competitive 
advantage over its smaller competitors. By allowing Geisinger to 
partially acquire Evangelical and creating substantial entanglements 
between the two hospitals, the agreement will likely substantially 
lessen competition as Evangelical will have less incentive to compete 
for patients against the Geisinger behemoth--its financial partner--
than it would have had it remained independent and not partnered with 
its closest competitor.
    57. Similarly, the transaction reduces Geisinger's incentives to 
compete for patients against Evangelical. Any patient that Geisinger 
attracts from Evangelical will diminish the value of Geisinger's 
interest in Evangelical, and Geisinger will also benefit from 
increasing coordination with its close rival.
    58. Competition between hospitals like Geisinger and Evangelical 
benefits patients in a number of ways, including by providing 
convenient access to high quality services. Hospitals also compete to 
be included in health insurers' networks.
    59. Hospitals compete to attract patients to their facilities by 
offering high quality care, a broad scope of services, amenities, 
convenience, customer service, and attention to patient satisfaction. 
To provide these services, hospitals expand service lines, hire 
specialists, family care physicians, and nurses, purchase modern 
equipment and technology, open specialized facilities, and continuously 
make other improvements. These investments improve access to 
healthcare, lower wait times, and improve the quality of care for all 
patients, including Medicare, Medicaid, and uninsured patients.
    60. Anticompetitive effects arising out of this transaction are 
likely to occur from the combination of Geisinger's influence over 
Evangelical, Defendants' reduced incentives to expand and improve 
services, and the facilitation of information sharing and coordination 
between Geisinger and Evangelical. These anticompetitive effects are 
likely to lead to a reduction in the quality, scope, and availability 
of inpatient general acute-care services.

C. The Partial Acquisition Is Also Likely To Lead to Increased Health 
Insurance Prices

    61. Hospitals compete for patients not only through the quality of 
the services they offer, but also through participation in health 
insurers' networks. Hospitals and insurers negotiate prices (called 
reimbursement rates) as part of their negotiations about whether, and 
under what conditions, a hospital will be included in an insurer's 
network. The bargaining positions of a hospital and an insurer during 
these negotiations depend on whether there are other nearby, comparable 
hospitals that are available to the insurer. Competition among 
hospitals limits any individual hospital's leverage with insurers and 
enables insurers to negotiate lower reimbursement rates and other terms 
that reduce healthcare costs. Less costly care benefits patients and 
their employers in the form of lower premiums, copays, and deductibles.
    62. Even if Geisinger and Evangelical continue to negotiate 
separately with commercial health insurers, the partial-acquisition 
agreement creates incentives for Geisinger to increase its rates and 
enhances its ability to do so. Geisinger's incentive to raise its rates 
flows from its 30% interest in Evangelical. Before the partial 
acquisition, Geisinger did not benefit from patients going to 
Evangelical. With the agreement, Geisinger's 30% ownership of 
Evangelical now allows Geisinger to benefit when patients choose 
Evangelical because the value of Geisinger's ownership interest 
increases as a result of the profits that Evangelical earns. This 
dynamic gives Geisinger an incentive to raise its reimbursement rates 
to commercial insurers because the agreement increases Geisinger's 
bargaining leverage, allowing it to profitably impose a price increase. 
The agreement will thus result in higher healthcare costs for 
consumers.
    63. Similarly, Geisinger's 30% interest in Evangelical reduces its 
incentive to compete aggressively with Evangelical on prices to the 
Plain Community. In the six-county area, hospitals compete directly on 
discounted prices offered to the Plain Community. Members of the Plain 
Community usually do not have commercial insurance and pay for medical 
services out of pocket. With the partial acquisition, if Geisinger 
raises prices to Plain Community members and some of those members 
choose Evangelical instead as a result, Geisinger still captures 30% of 
the value of the profits generated from the patients who chose 
Evangelical. In addition, the entanglements between Geisinger and 
Evangelical are likely to cause Evangelical to avoid directly competing 
against Geisinger on the prices it offers to the Plain Community, 
resulting in higher prices for those patients.

VI. Absence of Countervailing Factors

    64. Geisinger's acquisition of a 30% stake in its close competitor 
is not reasonably necessary to achieve any of the benefits that 
Defendants tout in connection with this transaction. For example, 
Defendants claim the partial-acquisition agreement will improve 
Evangelical's electronic medical records system. But Evangelical could 
have licensed Geisinger's electronic medical records software without 
this transaction, and Defendants were in discussions to do so long 
before this transaction was under consideration.
    65. Evangelical also could have obtained funds for capital 
improvements from sources other than Geisinger, its closest competitor. 
At the time Evangelical executed the agreement with Geisinger, it was 
in a strong financial position, had been profitable for the last five 
years, and already had decided that it had the financial wherewithal to 
move forward on the major capital improvement project that now has been 
funded in part by its competitor and partial owner.
    66. Finally, Evangelical's placement in the most favored tier of 
Geisinger Health Plan's commercial insurance products does not require 
the partial-acquisition agreement. To the contrary, agreements between 
hospitals and insurers that offer favorable placement in commercial 
insurance products in exchange for favorable rates are common and do 
not require the entanglements created by the partial-acquisition 
agreement.
    67. For these reasons, there are no transaction-specific 
efficiencies that outweigh the likely competitive harms

[[Page 13741]]

of the proposed transaction; indeed, there are no transaction-specific 
efficiencies to weigh against the harm.
    68. In addition, entry or expansion into the relevant market is 
unlikely to eliminate the anticompetitive effects of the partial-
acquisition agreement because entry and expansion are not likely to be 
timely, likely, or sufficient to offset the agreement's anticompetitive 
effects. The construction of a new hospital that offers inpatient 
general acute-care services would require significant time, 
expenditures, and risk. Moreover, the six-county area is unlikely to 
attract greenfield entry by a new hospital due to declining demand for 
inpatient general acute-care services and low population growth. 
Indeed, no new hospitals have been built in the six-county area for 
more than 10 years, and UPMC's Sunbury hospital closed in March 2020.
    69. Enjoining the partial-acquisition will not require undue 
disruption of Defendants' businesses. Geisinger and Evangelical have 
not implemented many of the provisions of the agreement because, on 
October 1, 2019, they entered into a hold-separate agreement with the 
United States to maintain the status quo pending an investigation of 
the agreement by the Antitrust Division. The hold-separate agreement 
requires Geisinger and Evangelical to cease certain activities 
contemplated by the agreement, including making most expenditures, 
integrating IT systems, and planning joint ventures. The hold-separate 
agreement remains in force until this Court makes a final decision.

VII. Violations Alleged

Count I

(Section 1 of the Sherman Act)

    70. Plaintiff alleges and incorporates paragraphs 1 through 69 of 
this complaint as if set forth fully herein.
    71. Geisinger and Evangelical have market power in the sale of 
inpatient general acute-care services in the six-county area.
    72. The partial-acquisition agreement is an agreement between 
Defendants to unreasonably restrain trade. The partial-acquisition 
agreement is a contract, combination, or conspiracy within the meaning 
of Section 1 of the Sherman Act, 15 U.S.C. 1.

Count II

(Section 7 of the Clayton Act)

    73. Plaintiff alleges and incorporates paragraphs 1 through 72 of 
this complaint as if set forth fully herein.
    74. The partial-acquisition agreement likely substantially lessens 
competition in the relevant geographic market for inpatient general 
acute-care services in violation of Section 7 of the Clayton Act, 15 
U.S.C. 18.
    75. Among other things, the partial-acquisition agreement has and 
is likely to continue to cause Defendants:
    (a) To coordinate their competitive behavior with respect to 
inpatient general acute-care services;
    (b) to increase their prices for inpatient general acute-care 
services to insurers, self-paying patients, and other purchasers of 
healthcare; and
    (c) to reduce quality, service, and investment with respect to 
inpatient general acute-care services or to diminish future 
improvements in these areas.

VIII. Request for Relief

    76. Plaintiff requests that:
    (a) The agreement between Geisinger and Evangelical be adjudged to 
violate Section 1 of the Sherman Act, 15 U.S.C. 1, and Section 7 of the 
Clayton Act, 15 U.S.C. 18;
    (b) the Court order (i) Defendants to rescind or be enjoined 
permanently from carrying out the subject agreement; (ii) Geisinger to 
divest to Evangelical its 30% ownership interest in Evangelical; and 
(iii) Defendants be permanently enjoined and restrained from carrying 
out any other transaction that would allow Geisinger to partially 
acquire Evangelical;
    (c) Plaintiff be awarded the costs of this action; and
    (d) Plaintiff be awarded any other relief that the Court deems just 
and proper.

Dated: August 5, 2020

Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA:

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Makan Delrahim

Assistant Attorney General for Antitrust.
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Bernard A. Nigro, Jr.

Principal Deputy Assistant Attorney General.
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Kathleen S. O'Neill.

Senior Director of Investigations & Litigation.
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Eric D. Welsh

Chief, Healthcare and Consumer Products Section.
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Lee F. Berger

Cecilia Cheng
Chris S. Hong
David C. Kelly
Garrett Liskey
Natalie Melada
David M. Stoltzfus

Attorneys for the United States, U.S. Department of Justice, 
Antitrust Division, 450 5th Street NW, Suite 4100, Washington, DC 
20530, Tel.: (202) 598-2698, Email: [email protected].

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David J. Freed

United States Attorney.
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Richard D. Euliss

Assistant Unites States Attorney, DC 999166, United States 
Attorney's Office, 228 Walnut Street, 2nd Floor, P.O. Box 11754, 
Harrisburg, PA 17108-1754, Phone: 717-221-4462, Fax: 717-221-4493, 
[email protected].

United States District Court for the Middle District of Pennsylvania

    United States of America, Plaintiff, vs. Evangelical Community 
Hospital and Geisinger Health, Defendants.

Civil Action No.: 4:20-cv-01383-MWB

[Proposed] Final Judgment

    Whereas, Plaintiff, United States of America, filed its Complaint 
on August 5, 2020, the United States and Defendants, Geisinger Health 
and Evangelical Community Hospital, by their respective attorneys, have 
consented to the entry of this Final Judgment without trial or 
adjudication of any issue of fact or law, without this Final Judgment 
constituting any evidence against or admission by any party regarding 
any issue of fact or law, and without Defendants admitting liability, 
wrongdoing, or the truth of any allegations in the Complaint;
    And whereas, Defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    And whereas, the purpose of the proposed Final Judgment is to 
preserve competition for hospital services in central Pennsylvania and 
to ensure Evangelical and Geisinger remain independent competitors;
    And whereas, Defendants agree to undertake certain actions and 
refrain from certain conduct for the purpose of remedying the 
anticompetitive effects of the Collaboration Agreement, as alleged in 
the Complaint.
    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 Defendants under Section 7 of the Clayton 
Act, 15 U.S.C. 18 and Section 1 of the Sherman Act, 15 U.S.C. 1.

[[Page 13742]]

II. Definitions

    A. ``Amended and Restated Collaboration Agreement'' means the 
``Amended and Restated Collaboration Agreement'' entered into by 
Geisinger and Evangelical on February 18, 2021.
    B. ``Back Office Systems'' means the following computer systems and 
their functional substitutes: Spok/WebXchange (electronic phonebook); 
Digital Control Systems/Micros (food services registers); Lawson 
Accounts Payable; Lawson Activities Mgmt (project accounting and 
activities-based costing); Lawson Asset Mgmt (depreciation and 
reporting requirements); Lawson General Ledger; Allscripts (data 
transfer); and Axiom.
    C. ``Collaboration Agreement'' means the document titled 
``Collaboration Agreement'' entered into by Evangelical and Geisinger 
on February 1, 2019.
    D. ``Covered Person'' means (i) each employee or agent of each 
Defendant who has duties and responsibilities for overseeing the 
implementation of information technology systems that Geisinger may 
provide to Evangelical under Paragraph V.B. of this Final Judgment; 
(ii) the Chief Executive Officers of Defendants and each of their 
direct reports; and (iii) each director (including each member of the 
Boards of Directors) of each Defendant.
    E. ``Defendants'' means Geisinger and Evangelical.
    F. ``Epic'' means Epic Systems Corporation, a medical software 
company based in Verona, Wisconsin.
    G. ``Evangelical'' means Defendant Evangelical Community Hospital, 
a non-profit community hospital located in Lewisburg, Pennsylvania, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    H. ``Existing Financial Payment'' means the combined payments of 
twenty million, three hundred thirty-four thousand twenty-three dollars 
($20,334,023.00) paid by Geisinger to Evangelical, directly or 
indirectly.
    I. ``Executive Leadership Personnel'' means any President, Chief 
Executive Officer, Chief Financial Officer, Chief Information Officer, 
Chief Operating Officer, Chief Strategy Officer, Chief Nursing Officer, 
Chief Human Resources Officer, Controller, Director, Executive Vice 
President, Vice President, and any other person with any direct or 
indirect input, influence, or control over any strategic or competitive 
decision.
    J. ``Geisinger'' means Defendant Geisinger Health, a regional non-
profit corporation with its headquarters in Danville, Pennsylvania, its 
successors and assigns, and its subsidiaries, including Geisinger 
Health Plan, divisions, groups, affiliates, partnerships, and joint 
ventures, and their directors, officers, managers, agents, and 
employees.
    K. ``Including'' means including but not limited to.
    L. ``Miller Center Joint Venture'' means the Miller Center for 
Recreation and Wellness, a Pennsylvania non-profit corporation 
operating a recreation and wellness center in Lewisburg, Pennsylvania.
    M. ``Ownership Interest'' means the seven-and-one-half percent 
(7.5%) ownership interest in Evangelical that Evangelical transferred 
to Geisinger in exchange for the Existing Financial Payment, based on 
Evangelical's valuation as of January 25, 2021.
    N. ``Person'' means any natural person, trade association, 
corporation, company, partnership, joint venture, firm, association, 
proprietorship, agency, board, authority, commission, office, or other 
business or legal entity, whether private or governmental.
    O. ``Pre-Existing Joint Ventures'' means the Keystone Accountable 
Care Organization, LLC, an organization of doctors, hospitals, and 
other healthcare providers that provides coordinated care to Medicare 
patients and Evangelical-Geisinger, LLC, the joint venture between 
Evangelical and Geisinger to provide student health services to 
Bucknell University.

III. Applicability

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

IV. Prohibited Conduct

    A. The Collaboration Agreement and all amendments, modifications, 
addenda or supplements, are null and void, with the exception of the 
Amended and Restated Collaboration Agreement.
    B. Geisinger must not, directly or indirectly:
    1. Appoint any directors to the Board of Directors of Evangelical;
    2. make any financial contribution, payment, or commitment to 
Evangelical that would result in Geisinger obtaining any equity 
interest in Evangelical in excess of the Ownership Interest;
    3. make any loan or extend any line of credit to Evangelical;
    4. maintain or obtain any management, leadership, committee, board 
or other position at or with Evangelical that provides Geisinger with 
any direct or indirect input, influence, or control over any strategic 
or competitive decision to be made by Evangelical, except for any such 
positions within Pre-Existing Joint Ventures or the Miller Center Joint 
Venture;
    5. maintain or obtain any right of first offer or right of first 
refusal with respect to any proposal or offer involving Evangelical, 
including offers or proposals to acquire, affiliate or enter into a 
joint venture with Evangelical, or otherwise influence or seek to 
influence any decision to be made by Evangelical with respect to any 
proposal or offer involving Evangelical and any other party;
    6. approve, reject or otherwise influence Evangelical's use of any 
funds or provide a guaranty to Evangelical against any financial losses 
that Evangelical may incur; or
    7. license to Evangelical any information technology system owned, 
used, or licensed by Geisinger, without the prior written consent of 
the United States, in its sole discretion.
    C. Evangelical must not, directly or indirectly, appoint any 
directors to the Board of Directors of Geisinger, including to the 
Board of Directors of Geisinger Health Plan.
    D. Except for the verification of dates of employment and the 
checking of references for new hires, Defendants must not consult with, 
provide advice to, or seek to influence, directly or indirectly, each 
other regarding the decision to appoint or employ any Executive 
Leadership Personnel, except for such positions within Pre-Existing 
Joint Ventures or the Miller Center Joint Venture.
    E. Defendants must not enter into a joint venture unless the United 
States, in its sole discretion, has consented in writing. Defendants 
must not renew, extend, or amend the term of the Miller Center Joint 
Venture unless the United States, in its sole discretion, has consented 
in writing. Defendants may renew or extend the term of a Pre-Existing 
Joint Venture, but may not amend a Pre-Existing Joint Venture unless 
the United States, in its sole discretion, has consented in writing.
    F. Defendants must not amend, supplement, terminate, or modify the 
Amended and Restated Collaboration Agreement, or any portion of it, 
without the prior written consent of the United States, in its sole 
discretion. Defendants must provide at least sixty (60) days written 
notice to the United States of any intent to enter into or execute any 
amendment, supplement, or

[[Page 13743]]

modification to the Amended and Restated Collaboration Agreement.
    G. Defendants must not provide each other with non-public 
information, including any non-public financial information of either 
Defendant or information about any strategic projects under 
consideration by either Defendant; provided however that nothing herein 
will be construed to prevent Geisinger and Evangelical from disclosing 
to each other non-public information necessary for the care and 
treatment of patients or as required for the payment for the care and 
treatment of patients.

V. Permitted Conduct

    A. Evangelical must not use the Existing Financial Payment for any 
purpose other than the following permitted uses:
    1. Assisting Evangelical's PRIME patient room improvement project 
(approximately $17 million); and
    2. sponsoring the Miller Center Joint Venture (approximately $3.3 
million).
    B. Notwithstanding Paragraph IV.B.7. above, Geisinger may provide 
Evangelical with information technology systems and support under the 
following terms and conditions:
    1. Geisinger may provide to Evangelical Geisinger's electronic 
medical record systems (Epic and related embedded clinical systems), 
including a license to the embedded Geisinger intellectual property, at 
a cost of no less than 15% of the incremental increase in cost to 
Geisinger resulting from Evangelical's use of these same systems;
    2. Geisinger may provide Evangelical with electronic medical record 
systems support for the systems identified in Paragraph V.B.1. at a 
cost of no less than 15% of the incremental increase in cost to 
Geisinger for the support for these same systems; and
    3. Geisinger may provide additional Back Office Systems to 
Evangelical at commercially reasonable rates.

VI. Required Conduct

    A. Within ten (10) days of entry of this Final Judgment, each 
Defendant must appoint an Antitrust Compliance Officer and identify to 
the United States the Antitrust Compliance Officer's name, business 
address, telephone number, and email address. Within forty-five (45) 
days of a vacancy in a Defendant's Antitrust Compliance Officer 
position, that Defendant must appoint a replacement, and must identify 
to the United States the replacement Antitrust Compliance Officer's 
name, business address, telephone number, and email address. A 
Defendant's initial or replacement appointment of an Antitrust 
Compliance Officer is subject to the approval of the United States in 
its sole discretion.
    B. Each Antitrust Compliance Officer must:
    1. Within thirty (30) days of entry of this Final Judgment, furnish 
a copy of this Final Judgment and the Competitive Impact Statement to 
all Covered Persons;
    2. within thirty (30) days after entry of this Final Judgment, in a 
form and manner to be approved by the United States in its sole 
discretion, provide all Covered Persons with reasonable notice of the 
meaning and requirements of this Final Judgment and the antitrust laws;
    3. annually train all Covered Persons on the meaning and 
requirements of this Final Judgment and the antitrust laws;
    4. brief and distribute a copy of this Final Judgment and the 
Competitive Impact Statement to any person who succeeds to a position 
of a Covered Person within thirty (30) days of such succession;
    5. obtain from each Covered Person, within thirty (30) days of that 
person's receipt of this Final Judgment, a certification that he or she 
(i) has read and, to the best of his or her ability, understands and 
agrees to abide by the terms of this Final Judgment; (ii) is not aware 
of any violation of this Final Judgment that has not been reported to 
the relevant Defendant's Antitrust Compliance Officer; and (iii) 
understands that any person's failure to comply with this Final 
Judgment may result in an enforcement action for civil or criminal 
contempt of court against any Defendant and/or any person who violates 
this Final Judgment;
    6. maintain a record of certifications received pursuant to this 
Section;
    7. annually communicate to all Covered Persons and all other 
employees that they must disclose to the Antitrust Compliance Officer, 
without reprisal, information concerning any potential violation of 
this Final Judgment or the antitrust laws; and
    8. by not later than ninety (90) calendar days after entry of this 
Final Judgment and annually thereafter, file written reports with the 
United States affirming that Defendant is in compliance with its 
obligations under Section VI of this Final Judgment, including the 
training requirements under Paragraph VI.B.3.
    C. Immediately upon the Antitrust Compliance Officer's learning of 
any violation or potential violation of any of the terms of this Final 
Judgment, a Defendant must take appropriate action to investigate and, 
in the event of a violation, must cease or modify the activity so as to 
comply with this Final Judgment. Each Defendant must maintain all 
documents related to any potential violation of this Final Judgment for 
the term of this Final Judgment.
    D. Within thirty (30) calendar days of the Antitrust Compliance 
Officer's learning of any potential violation of any of the terms of 
this Final Judgment, a Defendant must file with the United States a 
statement describing the potential violation, including a description 
of (1) any communications constituting the potential violation, the 
date and place of the communication, the persons involved in the 
communication, and the subject matter of the communication; and (2) all 
steps taken by the Defendant to remedy the potential violation.
    E. Each Defendant must have its CEO or Chief Financial Officer and 
its General Counsel certify in writing to the United States, no later 
than ninety (90) calendar days after this Final Judgment is entered and 
then annually on the anniversary of the date of the entry of this Final 
Judgment, that the Defendant has complied with the provisions of this 
Final Judgment. The United States, in its sole discretion, may approve 
different signatories for the certification.

VII. Firewall

    A. Defendants must implement and maintain reasonable procedures to 
prevent competitively sensitive information from being disclosed, by or 
through implementation and execution of the obligations in this Final 
Judgment or the Amended and Restated Collaboration Agreement or through 
Geisinger's provision of information technology systems and support to 
Evangelical as permitted in Paragraph V.B., between or among employees 
of Geisinger and Evangelical.
    B. Defendants must, within forty-five (45) business days of the 
entry of the Stipulation and Order, submit to the United States a 
document setting forth in detail the procedures implemented to effect 
compliance with this Section VII. Upon receipt of the document, the 
United States will inform Defendants within thirty (30) business days 
whether, in its sole discretion, it approves of or rejects Defendants' 
compliance plan. Within ten (10) business days of receiving a notice of 
rejection, Defendants must submit a revised compliance plan. The United 
States may request that this Court determine whether Defendants' 
proposed compliance plan fulfills the requirements of this Section VII.

[[Page 13744]]

VIII. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of any related orders such as any Stipulation and 
Order, or of determining whether this Final Judgment should be modified 
or vacated, and subject to any legally recognized privilege, from time 
to time, authorized representatives of the United States, including 
agents and consultants retained by the United States, shall, upon 
written request of an authorized representative of the Assistant 
Attorney General in charge of the Antitrust Division, and on reasonable 
notice to Defendants, be permitted:
    (1) Access during Defendants' office hours to inspect and copy, or 
at the option of the United States, to require Defendants to provide 
electronic copies, of all books, ledgers, accounts, records, data, and 
documents in the possession, custody, or control of Defendants, 
relating to any matters contained in this Final Judgment; and
    (2) to interview, either informally or on the record, Defendants' 
officers, employees, or agents, who may have their individual counsel 
present, regarding such matters. The interviews will be subject to the 
reasonable convenience of the interviewee and without restraint or 
interference by Defendants.
    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
Defendants 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.
    C. No information or documents obtained by the means provided in 
Section VIII will be divulged by the United States to any person other 
than an authorized representative of the executive branch of the United 
States, except in the course of legal proceedings to which the United 
States is a party (including grand jury proceedings), for the purpose 
of securing compliance with this Final Judgment, or as otherwise 
required by law.
    D. If at the time that Defendants furnish information or documents 
to the United States, Defendants represent and identify 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 Defendants mark each pertinent page of such 
material, ``Subject to claim of protection under Rule 26(c)(1)(G) of 
the Federal Rules of Civil Procedure,'' then the United States shall 
give Defendants ten (10) calendar days' notice prior to divulging such 
material in any legal proceeding (other than a grand jury proceeding).

IX. Notifications

    For purposes of this Final Judgment, any notice or other 
communication required to be provided to the United States shall be 
sent to the person at the address set forth below (or such other 
addresses as the United States may specify in writing to Defendants): 
Chief, Office of Decree Enforcement and Compliance, U.S. Department of 
Justice, Antitrust Division, 950 Pennsylvania Avenue NW, Room 3207, 
Washington, DC 20530, Email: [email protected].

X. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this 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.

XI. 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. Defendants agree 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 therefore by a preponderance of the 
evidence, and Defendants waive 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 harmed by the challenged conduct. Defendants agree that 
they 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 
Defendants have 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 a Defendant, whether litigated or resolved prior to 
litigation, that 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.

XII. Expiration of Final Judgment

    Unless this 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 Defendants 
that the continuation of this Final Judgment is no longer necessary or 
in the public interest.

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

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United States District Judge

United States District Court for the Middle District of Pennsylvania

    United States Of America, Plaintiff, vs. Evangelical Community 
Hospital, and Geisinger Health, Defendants.

Civil Action No.: 4:20-cv-01383-MWB

Competitive Impact Statement

    The United States of America, under Section 2(b) of the Antitrust 
Procedures and Penalties Act, 15 U.S.C. 16(b)-(h) (the ``APPA'' or 
``Tunney Act''), files this Competitive Impact Statement relating to 
the proposed Final Judgment submitted for entry in this civil antitrust 
proceeding.

[[Page 13745]]

I. Nature and Purpose of the Proceeding

    Defendant Geisinger Health (``Geisinger'') and Defendant 
Evangelical Community Hospital (``Evangelical'') entered into a 
partial-acquisition agreement (the ``Collaboration Agreement'') dated 
February 1, 2019, pursuant to which Geisinger would, among other 
things, acquire 30% of Evangelical. The United States filed a civil 
antitrust Complaint on August 5, 2020, seeking to rescind and enjoin 
the Collaboration Agreement. The Complaint alleged that the likely 
effect of Geisinger's partial acquisition of Evangelical would be to 
substantially lessen competition and unreasonably restrain trade in the 
market for the provision of inpatient general acute-care services in a 
six-county region in central Pennsylvania, in violation of Section 1 of 
the Sherman Act, 15 U.S.C. 1, and Section 7 of the Clayton Act, 15 
U.S.C. 18.
    Before Defendants responded to the Complaint, the United States 
filed a Stipulation and Order and proposed Final Judgment, which are 
designed to remedy the loss of competition alleged in the Complaint. 
Under the proposed Final Judgment, which is explained more fully below, 
Geisinger is required to cap its ownership interest in Evangelical at 
7.5%, and Defendants are required to eliminate other entanglements 
between them that would allow Geisinger to influence Evangelical. 
Defendants are also each required to establish robust antitrust 
compliance programs.
    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment will terminate this action, except that the 
Court will retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

II. Description of Events Giving Rise to the Alleged Violation

A. Defendants

    Geisinger is a non-profit corporation organized and existing under 
the laws of the Commonwealth of Pennsylvania with its headquarters in 
Danville, Pennsylvania. Geisinger is a regional healthcare provider of 
hospital and physician services that operates twelve hospitals and owns 
physician practices throughout central Pennsylvania. It also operates a 
health insurance company, Geisinger Health Plan, which offers 
commercial health insurance, Medicare, and Medicaid products. 
Geisinger's annual revenue in 2019 was approximately $7.1 billion.
    Evangelical is a non-profit corporation organized and existing 
under the laws of the Commonwealth of Pennsylvania with its 
headquarters in Lewisburg, Pennsylvania. Evangelical operates a 132-bed 
independent community hospital, owns a number of physician practices, 
and operates an urgent-care center and several other outpatient 
facilities in central Pennsylvania. Evangelical's annual revenue in 
2019 was approximately $259 million.

B. The Collaboration Agreement

    On February 1, 2019, Geisinger and Evangelical entered into the 
Collaboration Agreement, pursuant to which Evangelical agreed to give 
Geisinger a 30% ownership interest. In exchange, Geisinger agreed to 
pay $100 million to Evangelical over the next several years for, among 
other things, Geisinger-approved investment projects, future investment 
projects that Geisinger had the right to approve, and intellectual 
property licensing.
    Furthermore, Geisinger's contemplated investment in Evangelical 
would not have been passive: The Collaboration Agreement created 
additional entanglements between these two competitors and provided 
Geisinger with opportunities to influence Evangelical. For example, the 
Collaboration Agreement gave Geisinger rights of first offer and first 
refusal with respect to any future joint venture, competitively 
significant asset sale, or change-of-control transaction by 
Evangelical. It also gave Geisinger the right to approve Evangelical's 
use of certain funds provided by Geisinger. Additionally, the 
Collaboration Agreement provided mechanisms for Geisinger and 
Evangelical to share competitively sensitive information, such as 
requiring Evangelical to disclose business plans when requesting 
disbursement of certain funds and requiring Evangelical to inform 
Geisinger about planned transactions with other hospital systems before 
any such transactions were executed.
    The Collaboration Agreement originally included other provisions 
granting Geisinger additional influence over Evangelical, which 
Defendants eliminated through several amendments during the course of 
the United States' investigation but before the United States filed its 
Complaint. For example, the Collaboration Agreement originally included 
provisions that gave Geisinger the right to appoint six individuals to 
Evangelical's board of directors as well as certain consultation rights 
on the appointment of Evangelical's chief executive officer. It also 
contained provisions that required Defendants to discuss and work 
toward joint ventures in service lines where they have historically 
competed, such as women's health and musculoskeletal care, and also 
required Geisinger to compensate Evangelical for certain financial 
losses.

C. Anticompetitive Effects of the Partial Acquisition

    Defendants are two of the largest hospitals in a six-county region 
in central Pennsylvania. The vast majority of consumers of inpatient 
general acute-care services in and around Danville and Lewisburg, 
Pennsylvania, rely on Geisinger and Evangelical for their care. 
Together, the two hospitals account for approximately 71% of this six-
county market and are each other's closest competitors for many 
services. Geisinger and Evangelical compete head-to-head for patients--
including through investment in high-quality facilities and services, 
in negotiations with insurers, and through discounts to uninsured 
patients--and consumers have benefited from this competition through 
increased quality of care, broader availability, and lower costs.
    As alleged in the Complaint, the partial acquisition of Evangelical 
by Geisinger resulting from the Collaboration Agreement would have 
created significant entanglements between Defendants, likely leading to 
increased coordination between them, higher prices, lower quality, and 
reduced access to inpatient general acute-care services in central 
Pennsylvania.
1. The Relevant Market
    As alleged in the Complaint, the provision of inpatient general 
acute-care services is a relevant product market. Inpatient general 
acute-care services encompass a broad cluster of inpatient medical and 
surgical diagnostic and treatment services that require an overnight 
hospital stay, including many orthopedic, cardiovascular, women's 
health, and general surgical services. The relevant market excludes 
outpatient services, which generally do not require an overnight 
hospital stay and are provided in settings other than hospitals. The 
vast majority of patients who use inpatient general acute-care services 
would not switch to outpatient services in response to a price 
increase. The relevant market also excludes more specialized services, 
such as advanced cancer services and organ transplants, which 
Evangelical does not offer.
    As alleged in the Complaint, the relevant geographic market for the 
sale of inpatient general acute-care services

[[Page 13746]]

is no larger than the six-county area that comprises the Pennsylvania 
counties of Union, Snyder, Northumberland, Montour, Lycoming, and 
Columbia. This area includes the cities of Danville and Lewisburg, 
where Geisinger Medical Center and Evangelical are respectively 
located. In general, patients choose to seek medical care close to 
their homes or workplaces, and residents of the six-county area alleged 
in the Complaint also generally prefer to obtain inpatient general 
acute-care services locally. As a result, health insurers that offer 
healthcare networks in the six-county area generally do not consider 
hospitals outside of that area to be reasonable substitutes in their 
networks for hospitals within that area. Because residents in the six-
county area strongly prefer to obtain inpatient general acute-care 
services from within the six-county area, a health plan that did not 
have hospitals within the six-county area likely could not successfully 
attract employers and patients in the area.
2. The Effects of the Collaboration Agreement on Competition
    Geisinger and Evangelical are, respectively, the largest health 
system and largest independent community hospital in a six-county 
region in central Pennsylvania. For many patients in this region, 
Geisinger and Evangelical are close substitutes for the provision of 
inpatient general acute-care services
    Robust competition between hospitals is important to American 
consumers. Hospitals such as Geisinger and Evangelical compete to be 
included in health insurers' networks and to attract patients by 
offering high-quality care, lower prices, and increased access to 
services. Geisinger and Evangelical, like other hospitals, also compete 
to provide superior amenities, convenience, customer service, and 
attention to patient satisfaction and wellness. The Collaboration 
Agreement would negatively impact all of those facets of competition to 
the detriment of consumers in central Pennsylvania.
a. The Collaboration Agreement Would Create Financial Entanglements 
Between Defendants
    Under the Collaboration Agreement, Geisinger would have acquired a 
30% interest in Evangelical, its close rival. In exchange, Geisinger 
committed to pay $100 million to Evangelical over the next several 
years and would have remained a critical source of funding to 
Evangelical for the foreseeable future. This arrangement would 
establish an indefinite partnership between Evangelical and Geisinger, 
fundamentally altering their relationship as competitors and curtailing 
their incentives to compete independently for patients. As a result, 
Evangelical would be likely to avoid competing to enhance the quality 
or scope of the services it offers because they would attract patients 
from Geisinger, its part owner. It would also reduce Geisinger's 
incentives to compete by investing in improvements that would attract 
patients from Evangelical. For example, if Geisinger were to expand its 
offerings or improve the quality of its services in areas in which it 
competes with Evangelical, it would attract patients at Evangelical's 
expense, reducing the value of Geisinger's 30% interest in Evangelical. 
As a result of the partial acquisition, both Defendants would have an 
incentive to pull their competitive punches.
    If implemented, the Collaboration Agreement would also likely lead 
to Geisinger raising prices to commercial insurers and other purchasers 
of inpatient general acute-care services, resulting in harm to 
consumers. Before the partial acquisition, in the event of a 
contracting disagreement with an insurer, Geisinger risked losing 
patients to Evangelical, and this risk of loss disciplined the pricing 
that Geisinger negotiated with insurers. The same disciplining effect 
would occur when Geisinger raised prices to uninsured patients: In 
response to a price increase, Geisinger risked the uninsured patient 
moving to Evangelical for care, a result which would keep Geisinger 
from raising price. After it secured a 30% ownership interest in 
Evangelical, Geisinger would benefit to some degree when patients 
choose Evangelical over Geisinger for inpatient general acute-care 
services, since greater profits for Evangelical would increase the 
value of Geisinger's ownership interest in Evangelical. This ability to 
recapture a significant portion of the value of lost patients through 
its ownership of Evangelical would give Geisinger increased market 
power to charge higher prices to uninsured patients and greater 
bargaining leverage in negotiations over reimbursement rates with 
insurers. Insurers who pay higher reimbursement rates to Geisinger 
would pass along higher healthcare costs to consumers.
b. The Collaboration Agreement Would Give Geisinger Undue Influence 
Over Evangelical
    The Collaboration Agreement would give Geisinger the ability to 
influence and exert control over Evangelical and how Evangelical 
competes in central Pennsylvania. In addition to the influence gained 
by virtue of Geisinger's $100 million investment and 30% ownership 
interest in Evangelical, the Collaboration Agreement would give 
Geisinger influence over Evangelical's ability to partner with others 
in the future. Geisinger would have rights of first offer and first 
refusal with respect to several types of transactions that Evangelical 
may wish to pursue, including any future joint venture between 
Evangelical and another entity, any competitively significant asset 
sale by Evangelical, and any transaction involving a change-of-control 
of Evangelical. These provisions would provide Geisinger with advance 
notice of Evangelical's competitive plans and the opportunity to 
interfere with Evangelical's ability to engage in such transactions, 
and thus deter potentially procompetitive collaborations between 
Evangelical and other healthcare entities that compete with Geisinger--
arrangements that could otherwise benefit patients and the community.
    The Collaboration Agreement would also enable Geisinger to 
influence Evangelical through Geisinger's right to approve or deny 
Evangelical's use of certain funds provided by Geisinger, as Geisinger 
could withhold that approval if the expenditure threatened Geisinger's 
business. The Collaboration Agreement also included other 
entanglements, such as providing Evangelical with perpetual licenses to 
Geisinger's IT systems at no cost to Evangelical and proposing joint 
ventures in service lines such as women's health and musculoskeletal 
care, where Geisinger and Evangelical have historically competed. 
Maintaining these entanglements would reduce the incentives for 
Geisinger and Evangelical to compete aggressively on the quality, 
scope, and availability of inpatient general acute-care services.
c. The Collaboration Agreement Would Enable the Sharing of 
Competitively Sensitive Information
    The Collaboration Agreement also provided the means and opportunity 
for Defendants to share competitively sensitive information. Under its 
terms, Evangelical was required to inform Geisinger about partnerships, 
joint ventures, and transactions with other healthcare entities before 
those transactions were executed so that Geisinger would have the 
opportunity to invoke its rights of first refusal or first offer. The 
Collaboration Agreement further required that, when Evangelical 
requested that Geisinger disburse funds from its $100 million 
commitment for strategic projects, Evangelical would be required to 
provide Geisinger with

[[Page 13747]]

supporting business plans, and Geisinger could grant or withhold 
approval for certain capital projects. These requirements would enable 
Geisinger to secure important forward-looking information about 
Evangelical's plans to compete with Geisinger. Requiring Evangelical to 
give Geisinger a preview of its future competitive endeavors would 
likely soften competition between Geisinger and Evangelical, diminish 
Evangelical's incentives to innovate and expand, and impede 
Evangelical's ability to enter into strategic alliances with others to 
compete with Geisinger in the future.
d. Entry or Expansion Is Difficult
    Entry of new competitors or expansion of existing competitors is 
unlikely to prevent or remedy the anticompetitive effects of the 
Transaction. The construction of a new hospital that offers inpatient 
general acute-care services in the relevant geographic market would 
require significant time, expenditures, and risk. In the six-county 
region where Defendants compete, no new hospitals have been built for 
more than ten years, and one closed in March 2020. Entry by a new 
hospital in the relevant market is unlikely due to declining demand for 
inpatient general acute-care services and low population growth.

III. Explanation of the Proposed Final Judgment

    The purpose of the proposed Final Judgment is to remedy the loss of 
competition alleged in the Complaint and to ensure Evangelical and 
Geisinger remain independent competitors. The relief required by the 
proposed Final Judgment will remedy the loss of competition alleged in 
the Complaint by ensuring that Evangelical remains an independent 
competitor in the market for inpatient general acute-care services in 
central Pennsylvania. The proposed Final Judgment will restore 
competition by: (1) Capping Geisinger's ownership interest in 
Evangelical; (2) preventing Geisinger from exerting control or 
influence over Evangelical; and (3) prohibiting Geisinger and 
Evangelical from sharing competitively sensitive information--all of 
which will restore Defendants' incentives to compete with each other on 
quality, access, and price. At the same time, the proposed Final 
Judgment permits Evangelical to use Geisinger's passive investment for 
specific projects that will benefit patients and the community. 
Finally, Defendants are required to institute antitrust compliance 
programs.

A. Reduction of Ownership Interest and Investment

    First and foremost, the proposed Final Judgment caps Geisinger's 
ownership interest in Evangelical to a 7.5% passive investment. 
Paragraph IV.A. renders the Collaboration Agreement, including its 
provision for Geisinger to obtain a 30% ownership interest in 
Evangelical, null and void. In its place, Defendants have entered into 
an Amended and Restated Collaboration Agreement that is consistent with 
the terms of the proposed Final Judgment. Paragraph IV.B.2. prohibits 
Geisinger from increasing its ownership interest in Evangelical above 
the 7.5% cap that was obtained in exchange for the approximately $20.3 
million already paid by Geisinger to Evangelical, and Paragraph IV.B.3. 
prohibits Geisinger from making any loan or providing any line of 
credit to Evangelical. Paragraph V.A. of the proposed Final Judgment 
permits Evangelical to use the $20.3 million it has already received 
from Geisinger only for two specified projects, improving Evangelical's 
patient rooms and sponsoring a local center for recreation and 
wellness. Under Paragraph IV.F., Defendants may not amend the Amended 
and Restated Collaboration Agreement without the consent of the United 
States.
    In addition, by limiting Geisinger's ownership interest in 
Evangelical and prohibiting Geisinger from making any loans to 
Evangelical, Paragraphs IV.B.2. and IV.B.3. of the proposed Final 
Judgment restore Geisinger's incentives to compete on price in 
negotiations with commercial insurers. Limiting the ownership interest 
and prohibiting loans substantially reduces any bargaining leverage 
Geisinger would gain from recapturing the profits from any patients 
lost to Evangelical. Similarly, these provisions preserve Defendants' 
incentives to compete aggressively with each other as they have in the 
past for the business of uninsured consumers.
    As applied to the facts alleged in the Complaint, the limitations 
imposed on Geisinger's ownership interest and investment in 
Evangelical--along with the removal of significant entanglements 
between the Defendants discussed below--render Geisinger's interest 
passive, eliminate mechanisms for Geisinger to influence its smaller 
competitor, and restore the incentives of both hospitals to continue to 
compete with one another to provide inpatient general acute-care 
services for the benefit of patients and health insurers. Following 
entry of the proposed Final Judgment, Geisinger will not be in a 
position to prevent other healthcare entities from acquiring or 
partnering with Evangelical, and Geisinger's limited investment will 
benefit patients and the community by partially financing Evangelical's 
modernization of its patient rooms and providing funding for wellness 
and recreation at the Miller Center.

B. Prohibitions Against Geisinger's Influence and Control Over 
Evangelical

    The Collaboration Agreement contained numerous provisions that gave 
Geisinger the ability to influence and control its close competitor, 
Evangelical, through management positions and other means. For example, 
as originally crafted, the Collaboration Agreement gave Geisinger the 
right to appoint six members to Evangelical's board of directors. The 
proposed Final Judgment prohibits attempts to reinstate such provisions 
during the ten-year term of the proposed Final Judgment in order to 
prevent Geisinger from exerting influence or control over Evangelical 
in the future.
    Paragraphs IV.B.1. and IV.C. of the proposed Final Judgment, 
respectively, prevent Geisinger from appointing any directors to 
Evangelical's board of directors and prevent Evangelical from 
appointing any directors to the board of directors of Geisinger or 
Geisinger Health Plan. Paragraph IV.B.4. prevents Geisinger from 
obtaining any management or leadership position with Evangelical that 
would provide Geisinger with the ability to influence the strategic or 
competitive decision-making at Evangelical. Paragraph IV.D. prevents 
Defendants from consulting with each other regarding decisions to 
employ individuals in executive-level positions. These provisions in 
the proposed Final Judgment prevent Geisinger from exercising influence 
over Evangelical through participation in its governance, management, 
or strategic decision-making, which would render Evangelical a less 
independent competitor.
    The proposed Final Judgment also prohibits Geisinger from otherwise 
influencing Evangelical, preserving its competitive independence. 
Paragraph IV.B.5. of the proposed Final Judgment prevents Geisinger 
from maintaining or obtaining any right of first offer or first refusal 
regarding any proposal or offer to Evangelical, including proposals to 
enter into future joint ventures with other entities, competitively 
significant asset sales, or change-of-control transactions by 
Evangelical. As alleged in the Complaint, having rights of first offer 
and first refusal would enable Geisinger to interfere if Evangelical

[[Page 13748]]

attempted to enter into such transactions and would deter 
collaborations between Evangelical and other entities. Prohibiting the 
use of such rights eliminates an entanglement between Geisinger and 
Evangelical that would reduce Evangelical's incentive and ability to 
compete vigorously.
    Paragraph IV.B.6. prohibits Geisinger from controlling 
Evangelical's expenditure of funds, including Evangelical's choice of 
strategic project investments. Paragraph IV.B.6. also prohibits 
Geisinger from providing a guaranty to Evangelical against any 
financial losses. In addition, Paragraph IV.B.3. prohibits Geisinger 
from making a loan or extending a line of credit to Evangelical. These 
provisions ensure Evangelical's financial independence. Paragraph 
IV.B.7. prohibits Geisinger from licensing its information technology 
systems to Evangelical without the consent of the United States, except 
for information technology systems and support permitted under 
Paragraph V.B., subject to a firewall to prevent the sharing of 
competitively sensitive information. These provisions enable 
Evangelical to improve its hospital operations and patient care in 
order to be a more effective competitor while limiting Geisinger's 
ability to influence Evangelical.
    Finally, to maintain their competitive independence, Paragraph 
IV.E. prevents Defendants from entering into any joint ventures with 
each other, including those contemplated in the Collaboration Agreement 
in certain service lines where Defendants historically competed, and 
from renewing, extending, or amending their joint venture to operate a 
recreation and wellness center called the Miller Center in Lewisburg, 
Pennsylvania, without the prior written consent of the United States. 
Exempted from this prohibition, however, are the renewal or extension 
of two joint ventures already in place--Evangelical-Geisinger, LLC, a 
joint venture between Geisinger and Evangelical to provide student 
health services to Bucknell University and the Keystone Accountable 
Care Organization, LLC, an organization of doctors, hospitals, and 
other providers, that provides coordinated care to Medicare Patients. 
Defendants, however, may not otherwise amend these two pre-existing 
joint ventures without the prior written consent of the United States.
    Collectively, these provisions in the proposed Final Judgment 
remove Geisinger's ability to exercise influence or control over 
Evangelical. Defendants' incentives to compete with each other are 
preserved by eliminating all of Geisinger's rights to influence or 
control decision-making at Evangelical, removing other entanglements 
from the Collaboration Agreement, and capping Geisinger's equity stake 
in Evangelical to a 7.5% passive investment. The terms of the proposed 
Final Judgment maintain Evangelical's independence as a competitor, 
substantially reduce the likelihood that Defendants' competitive 
incentives will be affected by Geisinger's partial ownership, and 
preserve Defendants' incentives to compete with each other on the 
price, quality, and availability of services.

C. Prohibitions Against Sharing Competitively Sensitive Information

    The Collaboration Agreement would have provided the potential for 
increased coordination between Geisinger and Evangelical arising from 
the sharing of sensitive, forward-looking confidential information 
about Evangelical's plans to compete with Geisinger. The proposed Final 
Judgment requires that the provisions in the Collaboration Agreement 
that would have provided Geisinger with the ability to access 
Evangelical's competitively sensitive information be eliminated in 
order to prevent Defendants from coordinating with one another using 
that information. Paragraph IV.G. of the proposed Final Judgment 
prohibits the Defendants from providing each other with non-public 
information, including any information about strategic projects being 
considered by either Defendant. It also prevents Defendants from having 
access to each other's financial records. By preventing Defendants from 
sharing this information, this provision decreases the possibility of 
anticompetitive coordination between Defendants and helps maintain 
their incentives to compete with one another. This provision, however, 
allows Defendants to exchange non-public information that is necessary 
for the care and treatment of patients. In addition, Paragraph IV.B.5. 
prohibits Defendants from exercising or maintaining any rights of first 
offer and first refusal that would allow Geisinger to receive advance 
notice about Evangelical's competitive plans through exercising such a 
right.

E. Permitted Conduct

    Paragraph V.A. of the proposed Final Judgment permits Evangelical 
to retain the $20.3 million Geisinger already provided to Evangelical, 
defined in the proposed Final Judgment as the Existing Financial 
Payment, but only for the purpose of expending it on Evangelical's 
PRIME patient room improvement project ($17 million) and to sponsor the 
Lewisburg YMCA at the Miller Center in Lewisburg, Pennsylvania 
(approximately $3.3 million). These projects will not impede 
competition between the parties and will benefit the community.
    Paragraph V.B. of the proposed Final Judgment permits Geisinger to 
provide certain information technology systems and support to 
Evangelical at a discounted rate to enable Evangelical to upgrade its 
electronic health records systems. The proposed Final Judgment also 
permits Geisinger to provide Evangelical access to various back office 
software systems at commercially reasonable rates. Evangelical has been 
unable to accomplish such upgrades on its own because of its status as 
a small independent community hospital. Permitting Evangelical to 
obtain this electronic medical records upgrade and related support from 
Geisinger at a discount will benefit patients in central Pennsylvania 
and promote the adoption of health information technology to improve 
the delivery of care to patients. Geisinger's provision of upgraded 
health records software and other support software to Evangelical is 
unlikely to prevent Evangelical from collaborating with other 
healthcare providers. The requirement in Paragraph VII.A. that 
Defendants implement and maintain a firewall will prevent them from 
sharing competitively sensitive information.

F. Antitrust Compliance Program and Firewall

    Defendants are required to institute an antitrust compliance 
program to ensure their compliance with the Final Judgment and the 
antitrust laws. Under Section VI of the proposed Final Judgment, each 
Defendant must create an antitrust compliance program that is 
satisfactory to the United States to ensure that Defendants comply with 
the Final Judgment.
    Defendants must designate an Antitrust Compliance Officer who is 
responsible for implementing training and antitrust compliance programs 
and ensuring compliance with the Final Judgment. Among other duties, 
each Antitrust Compliance Officer will be required to distribute copies 
of the Final Judgment to each of Defendants' respective management, 
among others, and to ensure that relevant training is provided to each 
Defendants' management as well as individuals with responsibility over 
Defendants' information technology systems. Defendants are each 
required to certify compliance with the Final Judgment and the 
requirements of the antitrust compliance programs annually on the

[[Page 13749]]

anniversary of the entry of the Final Judgment.
    Under Section VII, Defendants are required to implement and 
maintain a firewall to prevent competitively sensitive information from 
being disclosed in the course of Geisinger's provision of electronic 
medical records and other IT systems and services to Evangelical. 
Defendants must provide their compliance plan for the firewall to the 
United States for approval, and the United States maintains the right 
to seek the Court's determination as to sufficiency of the Defendants' 
proposed compliance plan for the firewall.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 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 neither impairs 
nor assists the bringing of any private antitrust damage action. Under 
the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 16(a), the 
proposed Final Judgment has no prima facie effect in any subsequent 
private lawsuit that may be brought against Defendants.

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States and Defendants 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 sixty 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 
sixty 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 U.S. Department of Justice, which remains free to 
withdraw its consent to the proposed Final Judgment at any time before 
the Court's entry of the Final Judgment. The comments and the response 
of the United States will be filed with the Court. In addition, 
comments and the United States' responses will be published in the 
Federal Register unless the Court agrees that the United States instead 
may publish them on the U.S. Department of Justice, Antitrust 
Division's internet website.
    Written comments should be submitted to: Eric D. Welsh, Chief, 
Healthcare and Consumer Products Section, Antitrust Division, U.S. 
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 Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    As an alternative to the proposed Final Judgment, the United States 
considered a full trial on the merits challenging the partial 
acquisition. The United States could have continued this litigation and 
sought preliminary and permanent injunctions against Geisinger's 
acquisition of partial ownership of Evangelical and the accompanying 
entanglements in the Transaction. The United States is satisfied, 
however, that the relief described in the proposed Final Judgment will 
remedy the anticompetitive effects alleged in the Complaint, preserving 
competition in the market for inpatient general acute-care services in 
the six-county area in Pennsylvania identified in the Complaint. Thus, 
the proposed Final Judgment achieves 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 
of the Complaint.

VII. Standard of Review Under the APPA 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 sixty-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. 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. 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); United States v. 
U.S. Airways Grp., Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) 
(explaining that the ``court's inquiry is limited'' in Tunney Act 
settlements); United States v. InBev N.V./S.A., No. 08-1965 (JR), 2009 
U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that a 
court's review of a consent judgment is limited and only inquires 
``into whether the government's determination that the proposed 
remedies will cure the antitrust violations alleged in the complaint 
was reasonable, and whether the mechanism to enforce the final judgment 
are clear and manageable'').
    As the U.S. 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 proposed Final Judgment is 
sufficiently clear, whether its enforcement mechanisms are sufficient, 
and whether it may positively harm third parties. See Microsoft, 56 
F.3d at 1458-62. With respect to the adequacy of the relief secured by 
the proposed Final Judgment, a court may not ``make de novo 
determination of facts and issues.'' United States v. W. Elec. Co., 993 
F.2d 1572, 1577 (D.C. Cir. 1993) (quotation marks omitted); see also 
Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 F. 
Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107 F. 
Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787, at 
*3. 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

[[Page 13750]]

Attorney General.'' W. Elec. Co., 993 F.2d at 1577 (quotation marks 
omitted). ``The court should bear in mind the flexibility of the public 
interest inquiry: The court's function is not to determine whether the 
resulting array of rights and liabilities is one that will best serve 
society, but only to confirm that the resulting settlement is within 
the reaches of the public interest.'' Microsoft, 56 F.3d at 1460 
(quotation marks omitted); see also United States v. Deutsche Telekom 
AG, No. 19-2232 (TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). 
More demanding requirements would ``have enormous practical 
consequences for the government's ability to negotiate future 
settlements,'' contrary to congressional intent. Id. at 1456. ``The 
Tunney Act was not intended to create a disincentive to the use of the 
consent decree.'' Id.
    The United States' predictions about the efficacy of the remedy are 
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at 
1461 (recognizing courts should give ``due respect to the Justice 
Department's . . . view of the nature of its case''); United States v. 
Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 2016) (``In 
evaluating objections to settlement agreements under the Tunney Act, a 
court must be mindful that [t]he government need not prove that the 
settlements will perfectly remedy the alleged antitrust harms[;] it 
need only provide a factual basis for concluding that the settlements 
are reasonably adequate remedies for the alleged harms.'' (internal 
citations omitted)); United States v. Republic Servs., Inc., 723 F. 
Supp. 2d 157, 160 (D.D.C. 2010) (noting ``the deferential review to 
which the government's proposed remedy is accorded''); United States v. 
Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A 
district court must accord due respect to the government's prediction 
as to the effect of proposed remedies, its perception of the market 
structure, and its view of the nature of the case.''). The ultimate 
question is whether ``the remedies [obtained by the Final Judgment are] 
so inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest.' '' Microsoft, 56 F.3d at 1461 
(quoting W. Elec. Co., 900 F.2d at 309).
    Moreover, the 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 the 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); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``[T]he 
`public interest' is not to be measured by comparing the violations 
alleged in the complaint against those the court believes could have, 
or even should have, been alleged.''). 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.
    In its 2004 amendments to the APPA, Congress made clear its intent 
to preserve the practical benefits of using consent judgments proposed 
by the United States in antitrust enforcement, Public Law 108-237, 221, 
and added 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. 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). ``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 (citing Enova Corp., 107 F. 
Supp. 2d at 17).

VIII. Determinative Documents

    The only determinative documents or materials within the meaning of 
the APPA that were considered by the United States in formulating the 
proposed Final Judgment are the Collaboration Agreement, dated February 
1, 2019, and the Amended and Restated Collaboration Agreement, dated 
February 18, 2021.

Dated: March 3, 2021

Respectfully submitted,

PLAINTIFF UNITED STATES OF AMERICA

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Natalie Melada
David M. Stoltzfus
Chris S. Hong
David C. Kelly
Garrett Liskey

Attorneys for the United States, U.S. Department of Justice, 
Antitrust Division, 450 5th Street NW, Suite 4100, Washington, DC 
20530, Tel.: (202) 353-1833, Email: [email protected].

[FR Doc. 2021-04953 Filed 3-9-21; 8:45 am]
BILLING CODE 4410-11-P