Markets Wired

Carilion Clinic, a Virginia-based health care company, has agreed to sell two independent outpatient medical clinics it acquired last year to settle Federal Trade Commission charges that the acquisitions were anticompetitive and violated federal law.

In July 2009, the FTC issued an administrative complaint challenging Carilion Clinic’s 2008 acquisition of an outpatient imaging center and an outpatient surgical center in Roanoke, Virginia. According to the complaint, the acquisition was anticompetitive and, if left unchecked, would increase out-of-pocket expenses for some procedures by more than 800 percent. The complaint sought divestiture of the acquired clinics and certain related assets. Carilion has now agreed to the full relief sought in the complaint. The consent agreement quickly and completely restores the competition eliminated by the clinics’ acquisition.

Before the acquisition, each of the acquired clinics had provided – or was about to provide – important competition to Carilion; both centers had reputations for offering high-quality care and convenient services at prices much lower than Carilion’s. The Center for Advanced Imaging offered services such as MRIs and CT scans, and the Center for Surgical Excellence offered gastrology and invasive pain management services, and was going to provide outpatient surgical procedures in the future.

Absent relief, the acquisition would have left Carilion facing competition for these services from only one remaining provider, HCA, the other major hospital system in the Roanoke area. The complaint alleged that this substantial lessening of competition would have resulted in higher prices for outpatient imaging and surgical services and led to higher premiums and the risk of reduced coverage for these needed services.

Under the proposed consent order settling the FTC charges, Carilion will sell the Center for Advanced Imaging and the Center for Surgical Excellence, along with all related assets, within three months to a buyer or buyers approved by the Commission. The consent order requires Carilion to divest all the assets necessary to permit the buyer(s) to operate the centers independently and to compete effectively in the marketplace.

The order also contains several provisions that will accelerate the buyer’s or buyers’ ability to replace the competition eliminated by the acquisition. First, for six months, the order prohibits Carilion from soliciting for employment any physician or physician practice that has referred patients to the Center for Advanced Imaging since January 1, 2008. This will allow the new owner to develop and reestablish its referral base. Second, for one year, the order prohibits Carilion from making any change that would restrict its own doctors who have referred patients to the Center for Advanced Imaging from continuing to do so. Third, the order contains a provision that requires Carilion to preserve the viability, marketability, and competitiveness of the two clinics’ assets prior to divestiture. Fourth, the order requires Carilion to offer financial incentives to the staff of both clinics to remain during and after their sale to a Commission-approved buyer or buyers. Finally, the order prohibits Carilion from using or disclosing competitively sensitive information and permits the FTC to appoint a monitor to ensure Carilion’s compliance with the terms of the order.

The Commission vote approving the proposed consent order was 4-0. It will be subject to public comment for 30 days, until November 6, 2009, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. Electronic comment may be submitted at the following link: https://public.commentworks.com/ftc/carilionclinic.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $16,000.

Copies of the complaint, consent order, and an analysis to aid in public comment can be found on the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC Docket No. 9338)
(Carilion Consent.final.wpd)