Phoebe Putney Health System, Inc.

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IN THE MATTER OF PHOEBE PUTNEY HEALTH SYSTEM, INC., PHOEBE PUTNEY MEMORIAL HOSPITAL, INC., PHOEBE NORTH, INC., HCA INC., PALMYRA PARK HOSPITAL, INC., AND HOSPITAL AUTHORITY OF ALBANY- DOUGHERTY COUNTY CONSENT ORDER, ETC. IN REGARD TO ALLEGED VIOLATIONS OF SEC. 7 OF THE CLAYTON ACT AND SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket No. 9348; File No. 111 0067 Complaint, April 19, 2011 – Decision, March 31, 2015 In April 2011, the Commission issued an administrative complaint challenging Phoebe Putney Health System, Inc.’s (“Phoebe Putney”) proposed acquisition of Palmyra Park Hospital, Inc. (“Palmyra”) from Hospital Corporation of America in Albany, Georgia. The complaint alleged the acquisition would harm patients, employers, and employees in Albany, Georgia by allowing Phoebe/Palmyra to raise prices for general acute-care hospital services charged to commercial health plans. The complaint further alleged that Phoebe attempted to use the Hospital Authority of Albany-Dougherty County (the “Authority”) to shield the acquisition from federal antitrust scrutiny under the “state action” doctrine. The administrative proceeding was then stayed pending the outcome of a parallel federal action challenging the transaction. After the Commission was successful on appeal in the federal action, the Commission lifted the stay on the administrative proceeding. Following discovery, the parties entered a settlement. Under the terms of the consent order, Phoebe and the Authority must notify the Commission in advance of acquiring any part of a hospital or a controlling interest in other healthcare providers in the Albany, Georgia area for the next decade. The order further bars the respondents from objecting to any certificate of need applications made by potential new hospital providers for the next five years.

Participants For the Commission: Thomas H. Brock, Peter C. Herrick, Janet J. Kim, Sara Razi, Matthew Reilly, Scott Reiter, Mark Seidman, Joshua Smith, W. Stephen Sockwell, Matthew Tabas, Priya Viswanath, and Goldie V. Walker.

For the Respondents: Brian Burke, John Fedele, and Jennifer Semko, Baker & McKenzie LLP; Robert Baudino, Baudino Law PHOEBE PUTNEY HEALTH SYSTEM, INC. 1214 Complaint Group PLC; Emmet J. Bondurant, Michael A. Caplan, Ronan A. Doherty, and Frank M. Lowery, Bondurant, Mixson & Elmore, LLP; Kevin J. Arquit, Jeffrey Coviello, Abram Ellis, Jennifer Rie, and Peter C. Thomas, Simpson Thacher & Bartlett LLP; and Vadim Brusser, James Egan, Jr., Katherine Funk, Teisha Johnson, Jonathan Sickler, and Lee Van Voorhis, Weil, Gotshal & Manges LLP.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Respondents Phoebe Putney Health System, Inc. (“PPHS”), Phoebe Putney Memorial Hospital, Inc. (“PPMH”), Phoebe North, Inc. (“PNI”) (collectively, “Phoebe Putney”); Respondents HCA Inc. (“HCA”) and Palmyra Park Hospital, Inc. (“Palmyra”); and Respondent Hospital Authority of Albany Dougherty County (“the Authority”), having entered into an agreement pursuant to which control of Palmyra shall be transferred to Phoebe Putney (the “Transaction”), in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, and which if consummated would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the FTC Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint pursuant to Section 11(b) of the Clayton Act, 15 U.S.C. § 21(b), and Section 5(b) of the FTC Act, 15 U.S.C. § 45(b), stating its charges as follows: I.

NATURE OF THE CASE 1. The Transaction creates a virtual monopoly for inpatient general acute care services sold to commercial health plans and their customers in Albany, Georgia and its surrounding area. The Transaction will eliminate the robust competitive rivalry between Phoebe Putney and Palmyra – the only two hospitals in Albany and in Dougherty County – that has benefitted consumers for decades. The result will be significant increases in healthcare costs for local residents, many of whom are already struggling to keep up with rising medical expenses, and the stifling of beneficial quality improvements.

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1215 Complaint 2. Phoebe Putney and Palmyra knew that creating a virtual monopoly would not pass muster with the antitrust authorities; indeed, Palmyra conditioned the deal on [redacted]. So Phoebe Putney – without even informing the Authority that it was doing so – structured the Transaction in hopes of using the state action doctrine to shield the Transaction from potential antitrust challenges. The Transaction positions the Authority as a strawman to transfer control of Palmyra to Phoebe Putney in a three-step process: first, the Authority will purchase Palmyra’s assets from HCA using PPHS’s money; second, the Authority will immediately give control of Palmyra to Phoebe Putney under a management agreement; and third, Phoebe Putney will enter into a lease giving it control of the Palmyra assets for 40 years. In a nutshell, the Authority, using Phoebe Putney’s money, would buy Palmyra, and then upon closing, immediately turn it over to Phoebe Putney.

3. Thus, the Authority is the acquirer of Palmyra on paper only. By using the Authority as a strawman, Phoebe Putney sought to shield this overtly anticompetitive Transaction from antitrust scrutiny. The Authority played no meaningful role in the Transaction. Phoebe Putney initiated and negotiated the deal. The Authority undertook no substantive analysis of the Transaction or its effect on the community and played no independent role in negotiating it. The parties included the Authority at the eleventh hour solely in an effort to avoid antitrust enforcement by having the Authority rubber-stamp this sale from one private party to another. Indeed, the entire Transaction is premised on the immediate handover of Palmyra’s assets to Phoebe Putney; the Authority has considered no other options. 4. So certain was Phoebe Putney that the Authority would rubber-stamp the Transaction, that it [redacted] with Palmyra. Before the Transaction was even presented to the Authority, Phoebe Putney agreed with Palmyra that if the Authority failed to [redacted] Phoebe Putney would [redacted]. 5. Phoebe Putney’s confidence that the Authority would rubber-stamp the deal comes from years of operating without active supervision by the Authority under its long-term Lease and Management Agreement of the hospital’s assets to Phoebe PHOEBE PUTNEY HEALTH SYSTEM, INC. 1216 Complaint Putney’s subsidiary, PPMH (“the Lease”). As the [redacted] explained to a new Authority member and to Phoebe Putney’s CEO, [redacted]. The [redacted] has similarly expressed that he did not consider hospital oversight a function of the Authority. 6. Phoebe Putney, a private hospital system determined to increase its already dominant market share, acted alone when it sought out the Transaction. And Phoebe Putney alone will benefit from it at the expense of area businesses and residents. There is no bona fide state action whatsoever associated with the Transaction. Even under a new prospective lease arrangement, the [redacted] expects it to be business as usual, as the Authority does not plan to engage in any meaningful additional oversight of the de facto monopoly, falling far short of the active state supervision required to satisfy the state action doctrine. 7. Following the Transaction, Phoebe Putney will control 100% of the licensed general acute care hospital beds in Dougherty County. Even in an expansive geographic market encompassing the six counties surrounding Albany, Phoebe Putney’s pre-Transaction market share based on commercial patient discharges nears 75%. With the Transaction, this will jump to approximately 86%. The hospital with the next-largest share (of less than 4%) is located 40 miles from Albany. The Transaction dramatically increases concentration in an already highly concentrated market, giving rise to a presumption of unlawfulness by a wide margin under the relevant case law and the U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (“Merger Guidelines”). 8. Phoebe Putney and Palmyra are each other’s closest competitors, and they are regarded as closest substitutes for one another by both health plans and their members. The two hospitals have battled fiercely for inclusion in health-plan networks and have gone to great lengths to increase their appeal to health-plan members. While Palmyra has [redacted] relative to Phoebe Putney, the latter has for years offered its deepest commercial payor discounts to health plans that exclude Palmyra from their networks.

9. The Transaction will end that beneficial competition. The CEO of Phoebe Putney stated publicly that the Transaction PHOEBE PUTNEY HEALTH SYSTEM, INC. 1217 Complaint affords the opportunity to “get the rivalry behind us.” A requirement of the Transaction is that Palmyra drop its pending monopolization lawsuit against Phoebe Putney. 10. Other southwest Georgia hospitals offer scant competition to Phoebe Putney and Palmyra. The nearest independent hospitals, located over 30 miles from Albany, are small and serve only their own local communities. Given health-plan members’ unwillingness to travel significant distances for inpatient general acute care services, these hospitals are simply too distant to serve as practical substitutes for residents of the Albany area, even in the event of a small but significant price increase at the Albany hospitals. Health plans and local employers have testified that their networks must include PPMH or Palmyra, or both, in order to be commercially viable for Albany-area employers and other groups.

11. The Transaction greatly enhances Phoebe Putney’s bargaining position in negotiations with health plans, giving it the unfettered ability to raise reimbursement rates without fear of losing customers. Without Palmyra or any other independent competitive alternative to PPMH, health plans will be forced either to accept the higher rates or to exit the local marketplace. Higher hospital rates are ultimately borne by the health plans’ customers – local employers that pay their employees’ healthcare claims directly or pay premiums to health plans on their employees’ behalf – and by the individual health-plan members themselves. Those increased costs impact local employers’ ability to compete, expand, and remain vibrant. 12. The vigorous price and non-price competition eliminated by the Transaction will not be replaced by other hospitals in the next several years, if ever. Significant barriers to entry and expansion, including Certificate of Need (“CON”) and funding requirements, prevent other hospitals from extending their reach into the Albany area. Even Palmyra has struggled mightily to expand into new service lines, such as obstetrics, due to stringent CON requirements and fierce opposition from Phoebe Putney. Phoebe Putney has stated it would take many years to construct a new facility comparable to Palmyra. Any purported efficiencies associated with the Transaction are insufficient to offset the great anticompetitive harm almost certain to result from the Transaction. PHOEBE PUTNEY HEALTH SYSTEM, INC. 1218 Complaint II.

BACKGROUND A. Respondents 13. All Phoebe Putney Respondents are not for profit corporations under Internal Revenue Code § 501(c)(3) and the Georgia Nonprofit Corporate Code, with their principal places of business at 417 Third Avenue, Albany, Georgia 31701. Respondent PPMH, directly or indirectly, is a Georgia corporation wholly owned or controlled by PPHS, a Georgia corporation. PPHS is responsible for the operation of all Phoebe Putney hospital facilities in Albany, Georgia as well as the hospital in Sylvester, Georgia (in the Albany Metropolitan Area), where Phoebe Worth Medical Center, Inc. is located. Respondent Phoebe North, Inc. is an entity that was created by PPHS in connection with the Transaction, to manage and operate Palmyra, under the control of PPHS and PPMH.

14. PPMH is a 443 bed hospital located at 417 Third Avenue, Albany, Georgia 31701. Opened in 1911 at its current site, the hospital offers a full range of general acute care hospital services, as well as emergency care services, tertiary care services, and outpatient services. PPMH serves its local community, but also draws tertiary-service referrals from a broader region. 15. Total annual patient revenues for Phoebe Putney for all services, at all facilities, are over $1.16 billion. Total discharges for all services are over 19,000. Phoebe Putney’s annual net income or surplus is over $19 million. General acute care hospital services account for the majority of its services and revenues. 16. Phoebe Putney’s reach extends beyond Dougherty County, operating, through its wholly owned subsidiary Phoebe Worth Medical Center, Inc., a 25 bed critical access hospital located at 807 S. Isabella Street, Sylvester, Georgia 31791, and Phoebe Sumter Medical Center, a 76-bed general acute care hospital located in Americus, Georgia.

17. Respondent HCA is a for-profit health system that owns or operates 164 hospitals in 20 states and Great Britain. Founded in PHOEBE PUTNEY HEALTH SYSTEM, INC. 1219 Complaint 1968, HCA is one of the nation’s largest health care service providers with almost 40,000 licensed beds. Total annual revenues for HCA for all services and facilities are over $30.68 billion. HCA is incorporated in the State of Delaware. Its offices are located at One Park Plaza, Nashville, Tennessee 37203. 18. HCA owns and operates Respondent Palmyra Park Hospital, Inc., doing business as Palmyra Medical Center, a 248 bed acute care hospital incorporated in the State of Georgia, and located at 2000 Palmyra Road, Albany Georgia 31701. Palmyra was built in 1971 in response to requests by local physicians and community leaders to broaden the healthcare options available to residents of Dougherty County and the surrounding counties. Palmyra provides general acute care services, including but not limited to services in non-invasive cardiology, gastroenterology, general surgery, gynecology, oncology, pulmonary care, and urology.

19. Respondent Authority is organized and exists pursuant to the Georgia Hospital Authorities Law, O.C.G.A. §§ 31 7 70 et seq., a statute which governs 159 counties over the entire state, where at least 92 hospital authorities currently exist. The Authority maintains its principal place of business at 417 Third Avenue, Albany, Georgia 31701, the same address as PPMH; it has no budget, no staff, and no employees. Phoebe Putney pays all the Authority’s expenses. The Authority’s nine unpaid/volunteer members are appointed to five-year terms by the Dougherty County Commission. The Authority holds title to the hospital’s assets, but leased them in 1990 to PPMH for $1.00 per annum under the Lease, which has been extended several times and will expire in 2042. The Lease establishes certain contractual rights, duties, and responsibilities PPMH and the Authority owe with respect to one another. PPHS itself is not a party to the Lease and does not report to the Authority. B. Jurisdiction 20. Respondents, and each of their relevant operating subsidiaries and parent entities are, and at all relevant times have been, engaged in activities in or affecting “commerce” as defined in Section 4 of the FTC Act, 15 U.S.C. § 44, and Section 1 of the Clayton Act, 15 U.S.C. § 12.

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1220 Complaint 21. The Transaction, including the Authority’s acquisition of Palmyra and lease of Palmyra’s assets to Phoebe Putney, constitutes an acquisition subject to Section 7 of the Clayton Act. C. Phoebe Putney’s Private Interests 22. Under the terms of the Lease, the relationship between the Authority and PPMH is defined as and limited to that of landlord and tenant. Section 10.18 reads in pertinent part that “no provisions in this Agreement nor any acts of the parties hereto shall be deemed to create any relationship between Transferor and Transferor [sic] other than the relationship of landlord and tenant.”

23. The Lease (and the attachments incorporated into the Lease as stipulated in Sections 4.02(h) and 4.15) provides that PPHS, through its Board of Directors, controls the assets and operations of PPMH. Under the terms of the December 3, 1990, Contract Between Dougherty County, Georgia and the Authority of Albany Dougherty County, an attachment to the Lease, the Authority and Dougherty County stipulate in paragraph no. 4, on page five, that PPMH “has the sole discretion to establish its rate structure.”

24. Since the Lease took effect in 1990, the Authority has not and does not countermand, approve, modify, revise, or in other respects actively supervise Phoebe Putney’s actions regarding competitively significant matters. It is Phoebe Putney’s executives, not the Authority, who control Phoebe Putney’s revenues, expenditures, salaries, prices, contract negotiations with health insurance companies, available services, and other matters of competitive significance. At no time, from the date the Authority and PPMH entered into the Lease, has the Authority exercised management, control, or active supervision over the affairs of PPMH. Indeed, during all those years, the Authority never asked once for lower prices at PPMH. 25. As if to illustrate its deference to Phoebe Putney, the Authority waived its right to acquire Palmyra or any other hospital in Albany as a term of the Lease. Section 4.21 of the Lease, at page 26, stipulates that “[d]uring the term of this Agreement, Transferor [Authority] shall not own, manage, PHOEBE PUTNEY HEALTH SYSTEM, INC. 1221 Complaint operate or control or be connected in any manner with the ownership, management, operation or control of any hospital or other health care facility other than the [Phoebe Putney Memorial] Hospital in Albany, Georgia . . . .” Once the Authority rubberstamped the Transaction and the Management Agreement that would put Phoebe Putney in control of its only Dougherty County competitor, however, PPMH agreed to waive this condition. D. The Transaction 26. In the Spring and Summer of 2010, two important events occurred: (1) in April, the Eleventh Circuit reinstated Palmyra’s antitrust suit accusing Phoebe Putney of using its monopoly power in obstetrics, neonatal and cardiovascular care to foreclose competition; and (2) in July, Mr. Joel Wernick, PPHS’s President and Chief Executive Officer, authorized Mr. Robert J. Baudino, a consultant and attorney engaged by PPHS, to begin discussions with HCA regarding the possible acquisition of Palmyra by Phoebe Putney.

27. Mr. Baudino played a number of roles in the Transaction. Through his Baudino Law Group, he provides legal counsel to PPHS with regard to the deal and other matters. He is also a member of the Sovereign Group which was engaged by PPHS to represent it in the Transaction in a non-legal capacity. The Sovereign Group is charging PPHS a fee of [redacted] percent of the $[redacted] million transaction value, plus expenses, the payment of which is contingent on closing the Transaction. More recently, Mr. Baudino has also claimed to represent the Authority as “special counsel” in the Transaction, although the Authority was unaware of his representation of PPHS or his nearly $[redacted] contingency fee.

28. Mr. Baudino and his Sovereign Group began negotiations on behalf of PPHS to acquire Palmyra in August 2010. At this point, Phoebe Putney had not notified the Authority that it was considering buying its rival. HCA, Palmyra’s owner, did not intend to sell the hospital and informed Mr. Baudino that “[redacted].” Palmyra’s business was improving, and HCA executives expected its financial performance to continue improving; they also expected to be successful in the battle with PHOEBE PUTNEY HEALTH SYSTEM, INC. 1222 Complaint Phoebe Putney in both the antitrust lawsuit and in obtaining Palmyra’s obstetrics CON.

29. HCA was open to hearing an offer for Palmyra, but it expected “[redacted],” “[redacted]” and “[redacted].” PPHS set out to meet those requirements and to acquire Palmyra. 30. The [redacted] was the easiest condition. Although it is a non-profit, PPHS operates the very lucrative PPMH, leased from the Authority for $1 per year. Phoebe Putney has cash reserves of over a quarter of a billion dollars.

31. As the negotiations progressed, HCA made clear that an [redacted] offer would have to meet or exceed [redacted] times Palmyra’s annual net revenue. HCA’s expectations were shared with PPHS’s bankers who analyzed similar transactions and found that HCA’s demand far exceeded [redacted]. HCA’s demand presented an obvious obstacle: it would be difficult to find an independent investment bank to issue a fairness opinion to PPHS opining that the price to be paid for Palmyra is fair, as is often done in significant transactions. But Mr. Baudino had a ready solution: structure the deal so that the Authority would acquire Palmyra, likely eliminating the need for a fairness opinion. Mr. Baudino was right. When Phoebe Putney finally presented the Transaction and the sale price to the Authority, the Authority neither sought a fairness opinion nor asked a single question about the price, despite never before having reviewed a transaction of this magnitude.

32. Mr. Baudino believed he had an easy answer to the antitrust risk as well. In a purportedly “[redacted]” method, Phoebe Putney would not buy Palmyra directly. Rather, it would structure the Transaction so that the Authority would acquire Palmyra, with PPHS guaranteeing the purchase price and the Authority’s performance under the purchase agreement. Once the Authority obtained title, it would simply lease Palmyra to PPHS for $1.00 per year for 40 years on terms similar to the PPMH lease. Subsequently, in an effort to head-off an antitrust enforcement action by the Commission and the State of Georgia, the Authority approved a term sheet prepared by Mr. Baudino for implementing the new lease with ostensibly more oversight than had been exercised in the past two decades under the original PHOEBE PUTNEY HEALTH SYSTEM, INC. 1223 Complaint 1990 Lease. But [redacted] admitted that the term sheet is a wish list, to which Phoebe Putney has not agreed, and that the Authority’s role after the Transaction will not differ meaningfully from its current one – i.e., it will continue to let Phoebe Putney do “whatever it takes to make the wheels turn.” 33. HCA’s demand that there not be any [redacted] until the Transaction was signed also did not pose a problem. PPHS does not consider itself subject to Georgia’s Open Meetings Act, and it strictly limited the knowledge of the Transaction to people with a “need to know.” Although PPHS was negotiating an agreement that included the Authority as a key party, PPHS did not consider the Authority to be among those with a “need to know.” 34. Unlike PPHS, the Authority must comply with Georgia’s Open Meetings Act. But PPHS sidestepped that problem by not presenting the Transaction to the Authority until all of its terms were definitively determined and the vote was a “[redacted].” The Authority could then rubber-stamp the completed deal at an open meeting, thereby addressing all of HCA’s antitrust and confidentiality concerns.

35. On October 7, 2010, PPHS’s board approved management’s recommendation that it make a formal offer to HCA for Palmyra.

36. PPHS’s negotiations for Palmyra were well underway before PPHS even mentioned them to any of the Authority’s nine members. On October 21, Mr. Wernick and Tommy Chambless, PPHS’s General Counsel, held a 30-minute informational session with two of the Authority’s members, Ralph Rosenberg and Charles Lingle. The Authority had neither delegated responsibility for the Transaction to them nor designated them to speak on its behalf. Mr. Wernick informed them that PPHS intended to acquire Palmyra, but gave them no documents explaining the acquisition or justifying the substantial premium PPHS was contemplating. Rosenberg and Lingle signed confidentiality agreements, which they understood prevented them from discussing the Transaction with other Authority members.

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1224 Complaint 37. Two weeks later, on November 4, 2010, the Authority had its regularly scheduled quarterly meeting. There was no discussion of the Transaction at that meeting. 38. On November 10, 2010, Mr. Baudino, acting as “counsel to Phoebe Putney Health System Inc.,” explained to HCA in a sixpage letter how PPHS would structure the Transaction to eliminate antitrust risks. He believed that, under the state action doctrine, having the Authority make the acquisition would insulate the deal from notice to, or antitrust law enforcement by, the Commission and the United States Department of Justice. Mr. Baudino went on to explain that “the Authority would acquire Palmyra and, after the acquisition, lease Palmyra to a non-profit corporation controlled by PPHS. That lease would be on substantially the same terms as the Authority’s existing lease of Phoebe Putney Memorial Hospital Inc.”

39. On November 16, 2010, PPHS made a formal offer to HCA for Palmyra for [redacted] its net patient revenue for the prior 12 months. The Authority did not review or approve the offer.

40. On December 2, the PPHS Board approved the final terms of the deal between PPHS and HCA. PPHS and HCA concluded their negotiations shortly thereafter. The Transaction had still not been presented to, or vetted by, the Authority. PPHS agreed to guarantee a $195 million payment, which according to reports generated by PPHS’s advisors, was [redacted]. The Authority played no role in negotiating that price, and the [redacted] prepared by PPHS’s advisors was not shared with the Authority. 41. PPHS also agreed to pay a $[redacted] million break-up fee, representing nearly [redacted]% of the purchase price. In addition, under Section 10.1(a) of the Respondents’ Asset Purchase Agreement, PPHS likewise agreed to pay HCA a $[redacted] million “rescission fee” if, after closing, there is a final court order rescinding the transaction. The Authority had no role in negotiating the break-up or rescission fees. 42. With the negotiations between PPHS and HCA concluded, it was time to present the Transaction to the Authority. But first, on December 20, 2010, the eve of the meeting at which it would PHOEBE PUTNEY HEALTH SYSTEM, INC. 1225 Complaint be presented to the Authority, PPHS [redacted] would approve the Transaction without any changes. [redacted]. If, once presented, the Authority failed to [redacted], PPHS would pay [redacted] within two business days’ time. During the preceding week, Mr. Wernick had met in small groups with other Authority members without the knowledge of the Authority Chairman. 43. On December 21, 2010, at a special meeting, the Transaction was presented to the Authority for the first time. In a 94-minute meeting, PPHS’s CEO and its advisor, Mr. Baudino (who appeared as special counsel to the Authority without addressing his work for Phoebe Putney or the Sovereign Group’s financial interest in the Transaction), presented the terms of the Transaction and the related transactions using a PowerPoint presentation recycled from PPHS’s December 2 Board meeting. [redacted] the Authority did just what PPHS expected it would do. The members did not seek to change a single term of the Transaction. Indeed, they asked no questions and sought no extra counsel or independent analysis. Having no reason to acquire Palmyra independent of PPHS’s desire to do so, the Authority rubber-stamped the Asset Purchase Agreement exactly as PPHS had negotiated it.

44. At that meeting, the Authority also approved a 17-page Management Agreement that will give Phoebe Putney control over Palmyra’s operations immediately upon closing the Transaction.

45. The Authority understood that the Transaction negotiated and entered into by PPHS was an integrated transaction which included the expected lease of Palmyra to Phoebe Putney. 46. On April 4, 2011, the Authority approved a lease term sheet prepared by Mr. Baudino that makes abundantly clear that the Authority’s plan remains to lease Palmyra’s and PPMH’s assets to Phoebe Putney under a single lease. The term sheet is a wish list that has not even been presented to Phoebe Putney, let alone agreed upon. But even assuming Phoebe Putney were to agree to every single proposed term, [redacted] does not expect the Authority to make significant changes from its current activities, such as hiring staff to oversee Phoebe Putney’s de facto monopoly or involving itself in Phoebe Putney’s pricing or PHOEBE PUTNEY HEALTH SYSTEM, INC. 1226 Complaint arrangements with commercial health-plan providers. In other words, Phoebe Putney will have free rein, just as it has for the last 20 years, only now it will operate as a virtual monopolist. III. THE RELEVANT SERVICE MARKET 47. The Transaction threatens substantial harm to competition in the relevant market for inpatient general acute care hospital services sold to commercial health plans. 48. Inpatient general acute care hospital services encompasses a broad cluster of basic medical and surgical diagnostic and treatment services that include an overnight hospital stay. It is appropriate to evaluate the Transaction’s likely effects across this cluster of services, rather than analyzing effects as to each service independently, because the group of services in the market is offered by Phoebe Putney and Palmyra under very similar competitive conditions. There are no practical alternatives to the cluster of inpatient general acute care hospital services. 49. The inpatient general acute care services market excludes outpatient services because health plans and patients cannot substitute them for inpatient care in response to a price increase. Similarly, the general acute care hospital services market does not include highly specialized tertiary or quaternary hospital services, such as those involving major surgeries and organ transplants, because they too are not practical substitutes for general acute care hospital services.

50. Phoebe Putney and Palmyra negotiate reimbursement-rate contracts with commercial health plans. These contracts set the reimbursement rates that the health plans (and their self-insured customers) will pay the hospital for the services provided to health-plan members.

IV. THE RELEVANT GEOGRAPHIC MARKET 51. The relevant geographic market in which to analyze the effects of the Transaction is no broader than the six-county region consisting of Dougherty, Terrell, Lee, Worth, Baker, and Mitchell Counties in Georgia.

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1227 Complaint 52. Health-plan members strongly prefer to obtain inpatient hospital services close to their homes. Members’ physicians typically have admitting privileges at their local hospitals, but not more distant facilities. Close proximity provides convenience for patients and also their visiting family members. Members are generally unwilling to travel outside of their communities for inpatient general acute care services, unless a particular needed service is unavailable locally, or the quality offered by local facilities is perceived as insufficient. 53. The only hospitals available to health plans to serve residents of the Albany area are located in Dougherty County, in the City of Albany. Health plans must have either Phoebe Putney or Palmyra, or both, in their networks in order to offer commercially viable insurance products to residents of Albany and the six-county area.

54. The nearest independently owned hospitals located outside of Albany are Mitchell County Hospital (31 miles away), Crisp Regional Hospital (39 miles away), and Calhoun Memorial Hospital (39 miles away). Health plans and their members do not view these hospitals, given their distance and limited service offerings, as practical substitutes for Phoebe Putney or Palmyra. 55. Health plans could not steer their members to hospitals outside the six-county area in response to a small but significant rate increase at the hospitals within the area. It would therefore be profitable for a hypothetical monopolist controlling all hospitals in the relevant geographic market to increase commercial reimbursement rates by a significant amount. 56. As reflected by their ordinary-course documents and their actions, Phoebe Putney and Palmyra focus their competitive efforts and attention on one another, to the exclusion of any hospitals located outside the six-county area. Phoebe Putney’s longstanding contracting strategy was to require health plans to exclude Palmyra, but no other hospitals, from their provider networks.

57. Hospitals outside the six-county area do not regard themselves as, and are not, meaningful competitors of Phoebe PHOEBE PUTNEY HEALTH SYSTEM, INC. 1228 Complaint Putney or Palmyra for inpatient general acute care services as defined herein.

V. MARKET STRUCTURE AND PRESUMPTIVE ILLEGALITY 58. The Transaction is for all practical purposes a merger to monopoly, by any measure.

59. In addition to Phoebe Putney and Palmyra, there is only one other independently owned hospital located within the expansive six-county region set forth above. That is 25-bed Mitchell County Hospital, a very small limited care facility about 31 miles away. In addition, there are two hospitals located outside the six-county area – Tift Regional Medical Center and John D. Archbold Medical Center – which account for a small but nontrivial share of discharges for health-plan members residing within the six-county area. The two other hospitals mentioned above, Crisp Regional and Calhoun Memorial, are also located outside the six-county area and account for an insignificant share of the relevant market.

60. Under relevant case law and the Merger Guidelines, the Transaction is presumptively unlawful. PPHS’s post-Transaction market share, based on discharges for commercial patients residing in the six-county area, is approximately 86%. This extraordinarily high market share easily exceeds levels that the United States Supreme Court has found presumptively unlawful. 61. The Merger Guidelines measure market concentration using the Herfindahl-Hirschman Index (“HHI”). A merger or acquisition is presumptively likely to create or enhance market power (and presumed illegal) when the post-merger HHI exceeds 2,500 points and the transaction increases the HHI by more than 200 points.

62. The market concentration levels here exceed these thresholds by a wide margin. The post-Transaction HHI will increase by 1,675 points to 7,453, as shown in the following table: PHOEBE PUTNEY HEALTH SYSTEM, INC. 1229 Complaint Pre- Post- Transaction Transaction Hospital Discharges Share of Share of Discharges Discharges PPHS 6,662 74.9% 86.1% Palmyra 1,000 11.2% Tift Regional 351 3.9% 3.9% Medical Center John D. Archbold 218 2.5% 2.5% Memorial Hospital Others (each 1% 659 7.4% 7.4% or less) Total 8,890 5,778 Pre-Transaction HHI:

1,675 Delta:

7,453 Post-Transaction HHI:

VI. ANTICOMPETITIVE EFFECTS A. The Transaction Eliminates a Unique Pricing Constraint Upon Phoebe Putney 63. By eliminating vigorous competition between Phoebe Putney and Palmyra, the Transaction enhances Phoebe Putney’s ability and incentive to increase reimbursement rates for commercial health plans and their membership. 64. In its actions, documents, testimony, and public statements, Phoebe Putney has acknowledged the intense competition between it and Palmyra. For example, Phoebe Putney had a longstanding contracting strategy in which it offered substantially more attractive reimbursement rates to commercial health plans, including Blue Cross Blue Shield of Georgia, that were willing to enter into an exclusive in network relationship with Phoebe Putney but not Palmyra. In essence, Phoebe Putney recognized that its financial success depended on keeping healthplan members away from Palmyra, its only true competitor. PHOEBE PUTNEY HEALTH SYSTEM, INC. 1230 Complaint 65. Cognizant of Palmyra’s competitive threat, Phoebe Putney has repeatedly challenged Palmyra’s efforts to obtain a CON for obstetrics. Palmyra was initially granted a CON to build an obstetrics department, after which Phoebe Putney appealed the decision twice, and lost. Phoebe Putney then sued in state court to block Palmyra from going forward with its plans and was successful. Palmyra’s appeal of that decision is currently pending. Palmyra is also prosecuting an antitrust lawsuit against Phoebe Putney, alleging monopolization and illegal tying. 66. Palmyra has demonstrated the ability to capture market share from Phoebe Putney. [redacted] testified that Palmyra’s market share has increased during the last two years, while Phoebe Putney’s share has declined by an equal amount. And Mr. Wernick’s December 21, 2010 presentation to the Authority states that one of the strategic consequences to Phoebe Putney were it not to buy Palmyra is “[redacted].”

67. In a fact sheet prepared by Phoebe Putney, the Authority stated on December 21st:

[redacted] 68. The overt competitive rivalry between Phoebe Putney and Palmyra has yielded price benefits to health plans and their members. While Phoebe Putney has [redacted], Palmyra’s competitive strategy in the marketplace has been to [redacted] versus Phoebe Putney. As the two hospitals will operate as a single entity under one lease, the Transaction eliminates incentives for either hospital to discount its rates in an effort to gain business from health plans and their members. 69. Following the Transaction, the combined Phoebe Putney/Palmyra will become an absolute “must-have” hospital for health plans, which will have no available practical alternative hospitals to offer their members. This significant change in the negotiating dynamic will enhance Phoebe Putney’s ability and incentive to obtain rate increases for its own services, as well as for Palmyra’s services. Health plans anticipate that Palmyra’s rates will increase significantly, and that Phoebe Putney’s rates will rise incrementally as well, due to the elimination of its only significant competitor.

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1231 Complaint 70. Rate increases resulting from the Transaction ultimately will be shouldered by local employers and their employees. A significant percentage of the commercial health-plan membership in the Albany area is self-insured. Self-insured employers rely on health plans to negotiate rates and provide administrative support, while directly paying the full cost of their employees’ healthcare claims. As a result, self-insured employers and employees immediately and directly bear the full burden of higher rates, including higher premiums, co-pays, and out-of-pocket costs. Fully-insured employers also are inevitably harmed by higher rates, because health plans pass on at least a portion of hospital rate increases to these customers through premium increases and administrative fees. To avoid having to pay the higher prices, some Albany-area employers may opt no longer to provide healthcare coverage for their employees, and some Albany area residents may be forced to forego or delay healthcare services because of the higher prices.

71. Non-profit hospitals such as Phoebe Putney are no less likely than their for-profit counterparts to negotiate aggressively with health plans over reimbursement rates and to exercise market power gained through acquisition of a competitor. C. The Loss of Quality Competition 72. The Transaction will reduce the quality and breadth of services available in the Albany area.

73. Absent the Transaction, Phoebe Putney and Palmyra would continue to be close rivals with differentiated competitive offerings in the market for general acute care hospital services. Health plans perceive little quality difference between the two hospitals currently.

74. Competition between Phoebe Putney and Palmyra has spurred the two hospitals to offer additional services; it also has fostered other non price benefits for residents of the Albany area. For example, in response to Palmyra advertising its real-time emergency room wait times on its website and electronic billboards, Phoebe Putney executives sought to improve their own PHOEBE PUTNEY HEALTH SYSTEM, INC. 1232 Complaint services. After Palmyra was granted a CON for an obstetrics department, Phoebe Putney developed plans to increase the availability of private rooms to its obstetrics patients. If the Transaction moves forward, these benefits of competition will be lost.

VII. ENTRY BARRIERS 75. Entry by new hospitals will not deter or counteract the Transaction’s likely harm to competition in the relevant service market. There is little chance that other firms would be able to enter to counter Phoebe Putney’s anticompetitive practices. 76. The regulatory environment in which hospitals are permitted to operate prevents other institutions from entering. Under Georgia law, GA. Code Ann. §§ 31 6 42 (a)(3), only specially licensed facilities are permitted to offer general acute care hospital services, and before they may do so, the State must issue a CON before a new facility may be built. 77. Even if a CON were obtained, the construction of a new general acute care hospital comparable to Palmyra would cost millions of dollars and take well over two years – indeed, [redacted] years according to Phoebe Putney’s counsel – from initial planning to opening doors to patients. 78. The construction of Palmyra in 1971 was the last example of new hospital entry in the Albany area. No other hospitals in southwest Georgia – the most likely candidates for new entry or expansion – have stated they will enter, or even are considering entering, the relevant geographic market. VIII. ANTICIPATED AFFIRMATIVE DEFENSES A. State Action 79. The Transaction was motivated and planned exclusively by Phoebe Putney, which acts in its independent, private, and pecuniary interests. Rather than acting in furtherance of the public interest, or even evaluating those interests, the Authority served only as a strawman to permit Phoebe Putney to attempt to PHOEBE PUTNEY HEALTH SYSTEM, INC. 1233 Complaint shield this overtly anticompetitive Transaction from antitrust scrutiny.

80. The Authority engaged in no independent analysis to determine whether the Transaction would be in the public’s interest. Having no reasons for acquiring Palmyra other than those advanced by Phoebe Putney, it authorized a $195 million purchase of Palmyra – using Phoebe Putney’s money – without even considering: (i) the adverse effect this virtual merger to monopoly would have on healthcare pricing in the community; (ii) the valuation of Palmyra; (iii) alternatives to leasing Palmyra’s to Phoebe Putney; or (iv) who specifically from Phoebe Putney would run Palmyra immediately after the Transaction. 81. Just as it played no supervisory role in the Transaction, since at least 1990 when the Lease became effective, the Authority has not actively supervised Phoebe Putney in any sense, including with respect to strategic planning, pricing, and other competitively sensitive affairs. Rather, the Authority’s oversight is limited to conducting quarterly breakfast meetings (the minimum required by statute) lasting approximately one hour. The [redacted] testified that he cannot remember an instance in which a vote was less than unanimous, and he had never seen a price list for the services provided by the hospital, despite serving on the Authority for over five years. The [redacted] believes pricing is a function of the hospital board, not the Authority. Consistent with that belief, the Authority made no effort to challenge, or even evaluate, PPMH’s most recent price increases. The [redacted] testified that he was not aware of PPMH’s price changes in the last several years or how much PPMH’s prices have increased during his eight-plus years on the Authority. And, the Authority has no authority to oversee PPHS. 82. By contract, beginning immediately after the Transaction, Phoebe Putney will assume responsibility for setting prices for the services furnished at Phoebe North, the hiring and firing of Phoebe North employees, and other competitively significant decisions necessary for the operation of a hospital or hospital annex. The [redacted] does not expect any of that to change when it officially leases Palmyra’s assets to Phoebe Putney. PHOEBE PUTNEY HEALTH SYSTEM, INC. 1234 Complaint 83. In sum, there is no state action here. Rather, it is the private, self-interested Phoebe Putney that has agreed to purchase Palmyra and will exercise – unfettered and unchecked by the Authority or any hospital compettor – the extraordinary market power gained through the Transaction.

B. Efficiencies 84. Extraordinary efficiencies that cannot be achieved absent the merger are necessary to justify the Transaction in light of its vast potential to harm competition. Such efficiencies are lacking here.

IX. VIOLATION 85. The allegations of Paragraphs 1 through 84 above are incorporated by reference as though fully set forth. 86. The Transaction constitutes a violation of Section 5 of the FTC Act, as amended, 15 U.S.C. § 45.

87. The Transaction, if consummated, would substantially lessen competition in the relevant markets in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. § 45. NOTICE Notice is hereby given to the Respondents that the 19th day of September, 2011, at 10:00 a.m. is hereby fixed as the time, and Federal Trade Commission offices, 600 Pennsylvania Avenue, N.W., Room 532, Washington, D.C. 20580, as the place when and where an evidentiary hearing will be had before an Administrative Law Judge of the Federal Trade Commission, on the charges set forth in this complaint, at which time and place you will have the right under the Federal Trade Commission Act and the Clayton Act to appear and show cause why an order should not be entered requiring you to cease and desist from the violations of law charged in the complaint.

You are notified that the opportunity is afforded you to file with the Commission an answer to this complaint on or before the PHOEBE PUTNEY HEALTH SYSTEM, INC. 1235 Complaint fourteenth (14th) day after service of it upon you. An answer in which the allegations of the complaint are contested shall contain a concise statement of the facts constituting each ground of defense; and specific admission, denial, or explanation of each fact alleged in the complaint or, if you are without knowledge thereof, a statement to that effect. Allegations of the complaint not thus answered shall be deemed to have been admitted. If you elect not to contest the allegations of fact set forth in the complaint, the answer shall consist of a statement that you admit all of the material facts to be true. Such an answer shall constitute a waiver of hearings as to the facts alleged in the complaint and, together with the complaint, will provide a record basis on which the Commission shall issue a final decision containing appropriate findings and conclusions and a final order disposing of the proceeding. In such answer, you may, however, reserve the right to submit proposed findings and conclusions under Rule 3.46 of the Commission’s Rules of Practice for Adjudicative Proceedings. Failure to file an answer within the time above provided shall be deemed to constitute a waiver of your right to appear and to contest the allegations of the complaint and shall authorize the Commission, without further notice to you, to find the facts to be as alleged in the complaint and to enter a final decision containing appropriate findings and conclusions, and a final order disposing of the proceeding.

The Administrative Law Judge shall hold a prehearing scheduling conference not later than ten (10) days after the answer is filed by the last answering respondent. Unless otherwise directed by the Administrative Law Judge, the scheduling conference and further proceedings will take place at the Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Room 532, Washington, D.C. 20580. Rule 3.21(a) requires a meeting of the parties’ counsel as early as practicable before the pre-hearing scheduling conference (but in any event no later than five (5) days after the answer is filed by the last answering respondent). Rule 3.31(b) obligates counsel for each party, within five (5) days of receiving a respondent’s answer, to make certain initial disclosures without awaiting a discovery request. PHOEBE PUTNEY HEALTH SYSTEM, INC. 1236 Complaint NOTICE OF CONTEMPLATED RELIEF Should the Commission conclude from the record developed in any adjudicative proceedings in this matter that the Transaction challenged in this proceeding violates Section 7 of the Clayton Act, as amended, and Section 5 of the FTC Act, as amended, the Commission may order such relief against Respondents as is supported by the record and is necessary and appropriate, including, but not limited to:

1. If the merger is consummated, (a) rescission of the Asset Purchase Agreement and/or (b) divestiture of Palmyra, and associated assets, in a manner that restores Palmyra as a viable, independent competitor in the relevant market, with the ability to offer such services as Palmyra was offering and planning to offer prior to the Transaction. Any ordered divestiture may be to, among other entities, Respondents HCA and/or Palmyra.

2. A ban, for a period of time, on any transaction involving Phoebe Putney, the Authority, or Palmyra through which Phoebe Putney would acquire, manage, or control the operations of Palmyra or which would combine Phoebe Putney’s and Palmyra’s businesses in the relevant market, except as may be approved by the Commission.

3. A requirement that, for a period of time, Phoebe Putney provide prior notice to the Commission of acquisitions, mergers, consolidations, or any other combinations of its hospital or other health facilities in the relevant market with other hospitals or health facilities in the relevant market.

4. A requirement to file periodic compliance reports with the Commission.

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1237 Decision and Order 5. Any other relief appropriate to correct or remedy the anticompetitive effects of the Transaction or to ensure the creation of one or more viable, competitive independent entities to compete against Phoebe Putney and Palmyra in the relevant market.

IN WITNESS WHEREOF, the Federal Trade Commission has caused this complaint to be signed by its Secretary and its official seal to be hereto affixed, at Washington, D.C., this 19th day of April, 2011.

DECISION AND ORDER The Federal Trade Commission (“Commission”) having heretofore issued its Complaint charging Respondent Phoebe Putney Health System, Inc. (“PPHS”), Respondent Phoebe Putney Memorial Hospital, Inc. (“PPMH”), Respondent Phoebe North, Inc. (“PNI”), (hereinafter collectively referred to as “Respondent Phoebe Putney”), Respondent HCA Inc. (“HCA”), Respondent Palmyra Park Hospital, Inc. (“Palmyra”), and Respondent Hospital Authority of Albany-Dougherty County (“Hospital Authority”), with a violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Respondents having been served with a copy of that Complaint, together with a notice of contemplated relief and having filed their answers denying said charges; and Respondents, their attorneys, and counsel for the Commission having thereafter executed an Agreement Containing Consent Order (“Consent Agreement”), containing an admission by Respondents of all the jurisdictional facts set forth in the aforesaid Complaint, a statement that the signing of said Consent Agreement is for settlement purposes only and does not constitute an admission that the facts as alleged in such Complaint, other than jurisdictional facts, are true, and waivers and other provisions as required by the Commission’s Rules; and PHOEBE PUTNEY HEALTH SYSTEM, INC. 1238 Decision and Order The Secretary of the Commission having thereafter withdrawn the matter from adjudication in accordance with § 3.25(c) of its Rules; and the Commission having thereafter considered the matter and having thereupon accepted the executed Consent Agreement and placed such agreement on the public record for a period of thirty (30) days, and having duly considered the comments filed by interested persons pursuant to Commission Rule 2.34, 16 C.F.R. § 2.34, now in conformity with the procedure prescribed in § 3.25(f) of its Rules, the Commission hereby makes the following jurisdictional and factual findings and enters the following Order:

1. Respondent PPHS is a not-for-profit corporation organized, existing and doing business under and by virtue of the laws of the State of Georgia, with its headquarters address located at 417 Third Avenue, Albany, Georgia 31701.

2. Respondent PPMH is a not-for-profit corporation organized, existing and doing business under and by virtue of the laws of the State of Georgia, and is a 691bed general acute care hospital located at 417 Third Avenue, Albany, Georgia 31701.

3. Respondent PNI is a corporation organized, existing and doing business under and by virtue of the laws of the State of Georgia, and was created for the purpose of managing the Palmyra assets during the interim period after Respondent Hospital Authority acquired Respondent Palmyra Hospital, with its headquarters address located at 417 Third Avenue, Albany, Georgia 31701.

4. Respondent Hospital Authority is organized and exists pursuant to the Georgia Hospital Authorities Law, O.C.G.A. §§ 31-7-70 et seq., a statute that governs 159 counties over the entire state of Georgia, where at least 92 hospital authorities currently exist. Respondent Hospital Authority maintains its principal place of business at 417 Third Avenue, Albany, Georgia 31701. PHOEBE PUTNEY HEALTH SYSTEM, INC. 1239 Decision and Order 5. Respondent HCA is a for-profit health system that owns or operates 167 hospitals in 20 states and Great Britain. HCA is incorporated in the State of Delaware. Its offices are located at One Park Plaza, Nashville, Tennessee 37203.

6. Respondent Palmyra was a corporation named Palmyra Park Hospital, Inc., and was, prior to the acquisition by Respondent Hospital Authority, a 248bed general acute care hospital owned by Respondent HCA, incorporated in the State of Georgia, and was located at 2000 Palmyra Road, Albany, Georgia 31701.

7. Respondent Hospital Authority proposed to acquire nearly all of the assets of Respondent Palmyra from Respondent HCA (the “Transaction”).

8. Respondents admit all of the jurisdictional facts set forth in the Complaint.

9. For the sole purpose of this proceeding and achieving compromise through the Consent Agreement, Respondent Phoebe Putney and Respondent Hospital Authority have stipulated that the effect of the consummated Transaction may be substantially to lessen competition within the relevant service and geographic markets alleged in the Complaint. ORDER I.

IT IS ORDERED that, as used in this Order, the following definitions shall apply:

A. “PPHS” or “Respondent PPHS” means Phoebe Putney Health System, Inc., its directors, officers, employees, agents, representatives, successors, and assigns; and its joint ventures, subsidiaries, divisions, groups, and affiliates controlled by Phoebe Putney Health System Inc., and the respective directors, officers, employees, PHOEBE PUTNEY HEALTH SYSTEM, INC. 1240 Decision and Order agents, representatives, successors, and assigns of each.

B. “PPMH” or “Respondent PPMH” means Phoebe Putney Memorial Hospital, Inc., its directors, officers, employees, agents, representatives, successors, and assigns; and its joint ventures, subsidiaries, divisions, groups, and affiliates controlled by Phoebe Putney Memorial Hospital, Inc., and the respective directors, officers, employees, agents, representatives, successors, and assigns of each.

C. “PNI” or “Respondent PNI” means Phoebe North, Inc., its directors, officers, employees, agents, representatives, successors, and assigns; and its joint ventures, subsidiaries, divisions, groups, and affiliates controlled by Phoebe North, Inc., and the respective directors, officers, employees, agents, representatives, successors, and assigns of each.

D. “Respondent Phoebe Putney” means, collectively, Respondent PPHS, Respondent PPMH, and Respondent PNI.

E. “HCA” or “Respondent HCA” means HCA Inc., a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its headquarters address located at One Park Plaza, Nashville, Tennessee 37203. F. “Palmyra” or “Respondent Palmyra” means Palmyra Park Hospital, Inc., which was a corporation organized, existing and doing business under and by virtue of the laws of the State of Georgia, with its headquarters address located at 2000 Palmyra Road, Albany Georgia 31701.

G. “Hospital Authority” or “Respondent Hospital Authority” means Hospital Authority of Albany- Dougherty County, its directors, officers, employees, agents, representatives, successors, and assigns; and its joint ventures, subsidiaries, divisions, groups, and PHOEBE PUTNEY HEALTH SYSTEM, INC. 1241 Decision and Order affiliates controlled by Hospital Authority of Albany- Dougherty County, and the respective directors, officers, employees, agents, representatives, successors, and assigns of each.

H. “Commission” means The Federal Trade Commission. I. “CON” means a certificate of need issued by the Georgia Department of Community Health as provided by O.C.G.A. §§ 31-6-1 to 31-6-70.

J. “General Acute Care Hospital” means an inpatient general acute care hospital that provides a broad cluster of basic medical and surgical diagnostic and treatment services that include overnight hospital stay, as described in Paragraph 48 of the Complaint. K. “Physician” means a doctor of medicine (“MD”) or a doctor of osteopathic medicine (“DO”).

L. “Physician Group Practice” means a bona fide, integrated firm in which five (5) or more Physicians practice medicine together as partners, shareholders, owners, members, or employees.

M. “Six-County Region” means the six-county region of Dougherty, Terrell, Lee, Worth, Baker, and Mitchell Counties in Georgia, as described in Paragraph 51 of the Complaint.

II.

IT IS FURTHER ORDERED that for a period of ten (10) years from the date this Order becomes final Respondent Phoebe Putney and Respondent Hospital Authority shall not, without providing advance written notification to the Commission in the manner described in this Paragraph II., directly or indirectly, acquire:

A. All or any part of a General Acute Care Hospital in the Six-County Region;

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1242 Decision and Order B. All or a controlling interest in any inpatient or outpatient clinic or facility in the Six-County Region that (1) may not be part of a General Acute Care Hospital but provides any of the services provided by Respondent Phoebe Putney or Respondent Hospital Authority in the Six-County Region, and (2) may or may not require a CON; and C. All or a controlling interest in a Physician Group Practice in the Six-County Region.

Said advance written notification shall contain (i) either a detailed term sheet for the proposed acquisition or the proposed agreement with all attachments, and (ii) documents that would be responsive to Item 4(c) and Item 4(d) of the Premerger Notification and Report Form under the Hart-Scott-Rodino Premerger Notification Act, Section 7A of the Clayton Act, 15 U.S.C. § 18a, and Rules, 16 C.F.R. § 801-803, relating to the proposed transaction (hereinafter referred to as “the Notification”). Provided, however, that (i) no filing fee will be required for the Notification, (ii) an original and one copy of the Notification shall be filed only with the Secretary of the Commission and need not be submitted to the United States Department of Justice, and (iii) the Notification is required from Respondent Phoebe Putney and Respondent Hospital Authority and not from any other party to the transaction. Respondent Phoebe Putney and Respondent Hospital Authority shall provide the Notification to the Commission at least thirty (30) days prior to consummating the transaction (hereinafter referred to as the “first waiting period”). If, within the first waiting period, representatives of the Commission make a written request for additional information or documentary material (within the meaning of 16 C.F.R. § 803.20), Respondent Phoebe Putney and Respondent Hospital Authority shall not consummate the transaction until thirty days after submitting such additional information or documentary material. Early termination of the waiting periods in this Paragraph may be requested and, where appropriate, granted by letter from the Bureau of Competition.

Provided further, however, that prior notification shall not be required by this paragraph for a transaction for which Notification PHOEBE PUTNEY HEALTH SYSTEM, INC. 1243 Decision and Order is required to be made, and has been made, pursuant to Section 7A of the Clayton Act, 15 U.S.C. § 18a. Provided further, however, that prior notification shall not be required by this Paragraph II. for an acquisition, if (1) Respondent Phoebe Putney or Respondent Hospital Authority will hold, following the acquisition, no more than one percent of the outstanding securities or other equity interest in an entity described in this Paragraph II., or (2) Respondent Phoebe Putney or Respondent Hospital Authority acquires any additional ownership interest in an entity that it already controls. III.

IT IS FURTHER ORDERED that until the earlier of five (5) years from the date this Order becomes final or the issuance of a CON for a General Acute Care Hospital in the Six-County Region, Respondent Phoebe Putney and Respondent Hospital Authority shall not file, formally or informally, directly or indirectly, with the Georgia Department of Community Health, its members, the Attorney General or any person in the Georgia Attorney General’s office, objections to or negative comments about, an application by any person or entity for a CON filed with the Georgia Department of Community Health – or any successor department or organization – or any appeals therefrom, for a General Acute Care Hospital in the Six-County Region. Provided, however, that nothing in Part III. of this Order shall prohibit Respondent Phoebe Putney and Respondent Hospital Authority from providing information in response to a formal request from the Georgia Department of Community Health. Provided further, however, that Respondent Phoebe Putney and Respondent Hospital Authority shall submit to the Commission (i) the request for comments from the Georgia Department of Community Health within ten (10) days of its receipt, and (ii) a copy of the response to such request, within five (5) days of its submission to the Georgia Department of Community Health.

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1244 Decision and Order IV.

IT IS FURTHER ORDERED that for a period of five (5) years from the date this Order becomes final, if Respondent Phoebe Putney or Respondent Hospital Authority file objections to an application by any person or entity for a CON filed with the Georgia Department of Community Health – or any successor department or organization – or any appeals therefrom, for an inpatient or outpatient clinic, facility or service in the Six-County Region, that may or may not be part of a General Acute Care Hospital, but provides any of the services provided by Respondent Phoebe Putney or Respondent Hospital Authority in the Six- County Region, such Respondent shall submit such objection to the Commission within five (5) days of its submission. V.

IT IS FURTHER ORDERED that beginning twelve (12) months after the date this Order becomes final, and annually thereafter on the anniversary of the date this Order becomes final, for the next nine (9) years, Respondent Phoebe Putney and Respondent Hospital Authority each shall submit to the Commission a verified written report setting forth in detail the manner and form in which they have complied, are complying, and will comply with this Order. Respondent Phoebe Putney and Respondent Hospital Authority each shall include in their compliance reports, among other things that are required from time to time, a full description of the efforts being made to comply with the Order and copies of all written communications to and from all persons relating to this Order. Additionally, Respondent Phoebe Putney and Respondent Hospital Authority each shall include in their compliance reports whether or not they made any acquisitions pursuant to Paragraph II, including acquisitions subject to the final proviso to Paragraph II, and shall include a description of such acquisitions. VI.

IT IS FURTHER ORDERED that Respondent Phoebe Putney and Respondent Hospital Authority each shall notify the Commission at least thirty (30) days prior to: PHOEBE PUTNEY HEALTH SYSTEM, INC. 1245 Decision and Order A. Any proposed dissolution of such Respondent; B. Any proposed acquisition, merger or consolidation of Respondent; or C. Any other change in the Respondent including, but not limited to, assignment and the creation or dissolution of subsidiaries, if such change might affect compliance obligations arising out of the Order.

VII.

IT IS FURTHER ORDERED that, for purposes of determining or securing compliance with this Order, and subject to any legally recognized privilege, and upon written request and upon five (5) days’ notice to Respondent Phoebe Putney and Respondent Hospital Authority, Respondent Phoebe Putney and Respondent Hospital Authority shall, without restraint or interference, permit any duly authorized representative(s) of the Commission:

A. access, during business office hours of Respondent Phoebe Putney or Respondent Hospital Authority and in the presence of counsel, to all facilities and access to inspect and copy all books, ledgers, accounts, correspondence, memoranda and all other records and documents in the possession or under the control of Respondent Phoebe Putney and Respondent Hospital Authority relating to compliance with this Order, which copying services shall be provided by Respondent Phoebe Putney and Respondent Hospital Authority at its expense; and B. to interview officers, directors, or employees of Respondent Phoebe Putney and Respondent Hospital Authority, who may have counsel present, regarding such matters.

VIII.

IT IS FURTHER ORDERED that this Order shall terminate on March 31, 2025.

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1246 Statement of the Commission IX.

IT IS FURTHER ORDERED that the Complaint is dismissed as to Respondent HCA and Respondent Palmyra. By the Commission, Commissioner Wright and Commissioner McSweeny not participating. STATEMENT OF THE COMMISSION Our challenge to this anticompetitive hospital acquisition resulted in an important Commission victory at the Supreme Court regarding the application of state action immunity. By reaffirming that state action immunity from the antitrust laws only applies where states have clearly intended to restrain competition, the Court’s decision will benefit competition and consumers throughout the economy in the future. Regrettably, however, that victory did not alleviate the significant concerns we have about the anticompetitive effects of this merger on the citizens of Albany, Georgia.

Today we finalize a consent agreement with the Respondents1 to settle the administrative litigation challenging the Hospital Authority’s acquisition of Palmyra from HCA and subsequent transfer of all management control of Palmyra to Phoebe Putney under a long-term lease arrangement (the “Transaction”) that closely mirrors the consent agreement the Commission accepted for public comment in this matter in 2013. Notably, this final order, like the originally proposed version, does not require a divestiture. While it would have been the most appropriate and 1 Respondents include Phoebe Putney Health System, Inc. (“PPHS”), Phoebe Putney Memorial Hospital (“PPMH”), Phoebe North, Inc. (“Phoebe North”) (collectively “Phoebe Putney”), HCA Inc. (“HCA”), Palmyra Park Hospital, Inc. (“Palmyra”), and the Hospital Authority of Albany-Dougherty County (“Hospital Authority”).

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1247 Statement of the Commission effective remedy to restore the lost competition in Albany and the surrounding six-county area from this merger to monopoly, Georgia’s certificate of need (“CON”) laws and regulations unfortunately render a divestiture in this case virtually impossible, leading us to accept this less-than-ideal remedy. The Commission first challenged this Transaction in April 2011, alleging that the combination of Phoebe Putney with Palmyra, its only rival in Albany, would create a monopoly in the provision of inpatient general acute-care hospital services sold to commercial health plans in Albany and its surrounding six-county area, in violation of Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act. In addition to issuing an administrative complaint, the Commission authorized staff to file a complaint for temporary and preliminary relief in federal district court. In June 2011, the district court granted the defendants’ motion to dismiss, holding that the state action doctrine immunized the Transaction from federal antitrust scrutiny.2 On appeal by the Commission, the U.S. Court of Appeals for the Eleventh Circuit affirmed the district court’s dismissal on state action grounds, but agreed that “on the facts alleged, the joint operation of [PPMH] and Palmyra would substantially lessen competition or tend to create, if not create, a monopoly.”3 Following its ruling, the Eleventh Circuit dissolved the injunction pending appeal that had prevented the parties from merging, and the parties consummated the Transaction in December 2011. The Commission filed a petition for certiorari, which the Supreme Court granted in June 2012.

In defending the challenged transaction, Respondents argued that the manner in which it was structured—whereby the Hospital Authority took title to Palmyra and then turned operational control over to PPHS—rendered it immune from the federal antitrust laws under the state action doctrine. Respondents contended that since the legislature gave hospital authorities broad general corporate 2 FTC v. Phoebe Putney Health Sys. Inc., 793 F. Supp. 2d 1356, 1381 (M.D. Ga. 2011).

3 FTC v. Phoebe Putney Health Sys. Inc., 663 F.3d 1369, 1375 (11th Cir. 2011).

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1248 Statement of the Commission powers, including the power to acquire hospitals, the challenged conduct was a foreseeable result of the law. In February 2013, a unanimous Supreme Court ruled in favor of the Commission and reversed the dismissal of the complaint, holding that the state action doctrine did not bar the Commission from taking action.4 Notably, the Court found that Respondents’ interpretation of the state action doctrine was overbroad and inconsistent with the principle that “state-action immunity is disfavored.”5 We thereafter determined to proceed with the administrative action that had been stayed pending the collateral federal court appeals.

In August 2013, although we still had reason to believe the transaction created an unlawful monopoly, the Commission accepted for public comment a proposed non-structural remedy in light of the apparent unavailability of a practical and meaningful structural remedy. In particular, we provisionally accepted the consent based on an understanding that Georgia’s CON laws likely would have prevented a divestiture of hospital assets, even assuming a finding of liability following a full merits trial and appeal.

In September 2014, we withdrew our provisional acceptance of the 2013 consent agreement in response to new information received, including through public comments, suggesting that the CON laws might not bar a structural remedy. Additionally, in March 2014, North Albany Medical Center, LLC (“North Albany”), a then newly formed health care entity, expressed an interest in acquiring Palmyra and operating it as a competing general acute-care hospital, believing it could do so consistent 4 FTC v. Phoebe Putney Health Sys. Inc., 133 S. Ct. 1003, 1011 (2013). 5 Id. at 1010 (citing FTC v. Ticor Title Ins. Co., 504 U.S. 621, 636 (1992)). The Supreme Court reiterated this principle in its recent North Carolina Dental decision, in which the Court affirmed the Commission’s ruling that state regulatory boards comprised of individuals participating in the market they are regulating must demonstrate active supervision by the state to enjoy state action immunity. See N.C. State Bd. of Dental Exam’rs v. FTC, No. 13-534, slip op. at 7 (U.S. Feb. 25, 2015) (“[G]iven the fundamental national values of free enterprise and economic competition that are embodied in the federal antitrust laws, ‘state action immunity is disfavored, much as are repeals by implication.’”) (citations omitted).

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1249 Statement of the Commission with Georgia’s CON laws. Seeking clarification on whether those laws would impede such an acquisition, North Albany filed a “request for determination” with the Georgia Department of Community Health (“DCH”) on the issue. DCH staff issued an initial determination in June 2014 finding, among other things, that “returning Phoebe North to its status as a separately licensed . . . hospital for divestiture would not require a prior CON review and approval.”6 The initial DCH staff determination was on appeal when we withdrew acceptance of the consent agreement. We believed that allowing the administrative and DCH proceedings to continue in parallel would avoid further delay in restoring competition to Albany if the Commission found liability on the merits and DCH determined that Georgia CON laws would not bar divestiture.

Unfortunately, developments occurring since we returned this matter to administrative litigation now appear to preclude structural relief. In October 2014, following review of the June DCH staff determination, a DCH Hearing Officer issued a written finding that the CON laws would apply to the proposed sale of Phoebe North. Shortly after this ruling, DCH Commissioner Clyde L. Reese III, who would have decided any appeal from the Hearing Officer’s ruling, stated publicly that he was “in full support of and in agreement with the Hearing Officer decision.”7 Neither North Albany nor DCH staff chose to appeal the decision, rendering the Hearing Officer’s ruling final. While we continue to have reason to believe that Phoebe Putney’s acquisition of Palmyra violated Section 7 of the Clayton Act and Section 5 of the FTC Act, any relief attempting to restore the competition lost as a result of the merger is precluded by Georgia’s strict CON requirements. Specifically, the fact that the 6 See Letter from Matthew Jarrad, Deputy Division Chief/Health Planning Dir., Healthcare Facility Regulation Div., Ga. Dept of Cmty. Health, to G. Edward Alexander, President and CEO, North Albany Medical Ctr. 4 (June 3, 2014).

7 See Complaint Counsel’s Memorandum Relating to Respondent’s Unopposed Motion for Temporary Stay, Ex. 1, Georgia Health Commissioner Agrees Certificate Needed For Phoebe Putney Breakup, MLEX MARKET INSIGHT, Oct. 8, 2014, In re Phoebe Putney Health System, Inc., Docket No. 9348.

PHOEBE PUTNEY HEALTH SYSTEM, INC. 1250 Statement of the Commission Albany region is deemed “over-bedded” makes it unlikely that any divestiture buyer could obtain the necessary CON approval to operate an independent hospital. Indeed, the Hearing Officer’s ruling effectively ensures any prospective buyer intending to operate a competing hospital would have to endure a lengthy legal battle with, at best, an uncertain outcome. Thus, divestiture—the Commission’s preferred remedy to restore competition—is simply unavailable.

In light of these developments, we believe it is unlikely that continuing with the administrative proceeding, even after a finding of liability, would yield a substantially different outcome than is available through this consent. For this reason, we now make final the consent agreement settling the administrative litigation in this matter.

Under the final consent agreement, Phoebe Putney and the Hospital Authority will be required to give the FTC prior notice of certain future transactions and will be barred from opposing certain applications by potential competitors seeking state certification to enter local health care markets. The order also includes a stipulation by Phoebe Putney and the Hospital Authority that the Transaction was anticompetitive. The outcome in this case underscores the importance of obtaining preliminary injunctive relief prior to the consummation of a transaction. By maintaining the status quo, injunctive relief prevents the possibility of competitive harm—sometimes, as in this case, irremediable harm—from occurring during the Commission’s administrative proceedings and any appeals. Moreover, this case also illustrates how state CON laws, despite their original and laudable goal of reducing health care facility costs, often act as a barrier to entry to the detriment of competition and healthcare consumers.8 8 The Commission has long advocated that states consider the costs that CON laws may impose on consumers. See, e.g., Joint Statement of the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission Before the Illinois Task Force on Health Planning Reform 1-2 (Sept. 15, 2008), available at https://www.ftc.gov/policy/policyactions/advocacy-filings/2008/09/ftc-and-department-justice-writtentestimony-illinois (“The Agencies’ experience and expertise has taught us that Certificate-of-Need laws impede the efficient performance of health care PHOEBE PUTNEY HEALTH SYSTEM, INC. 1251 Statement of the Commission As noted above, notwithstanding the unsatisfactory remedial outcome in this case, the Commission nevertheless achieved a significant victory in the Supreme Court with respect to the state action doctrine. By ensuring that state action immunity remains true to its doctrinal foundation of protecting the deliberate policy choices of sovereign states and is applied in a manner that promotes competition and enhances consumer welfare, this important win will unquestionably benefit competition and consumers going forward.

markets. . . . Together, we support the repeal of such laws, as well as steps that reduce their scope.”); FED. TRADE COMM’N & U.S. DEP’T OF JUSTICE, IMPROVING HEALTH CARE: A DOSE OF COMPETITION Ch. 8, p. 6 (July 2004), available at https://www.ftc.gov/reports/improving-health-care-dosecompetition-report-federal-trade-commission-department-justice (“[T]he Agencies urge states with CON programs to reconsider whether they are best serving their citizens’ health care needs by allowing those programs to continue.”).

NOVARTIS AG AND GLAXOSMITHKLINE, PLC 1252 Complaint