Federal Register, Volume 76 Issue 47 (Thursday, March 10, 2011)

[Federal Register Volume 76, Number 47 (Thursday, March 10, 2011)]
[Notices]
[Pages 13209-13226]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-5529]

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DEPARTMENT OF JUSTICE

Antitrust Division

United States and State of Texas v. United Regional Health Care
System; Proposed Final Judgment and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that a proposed Final
Judgment, Stipulation and Competitive Impact Statement have been filed
with the United States District Court for the Northern District of
Texas, Wichita Falls Division, in United States of America and State of
Texas v. United Regional Health Care System, Civil Action No. 7:11-cv-
00030-O. On February 25, 2011, the United States filed a Complaint
alleging that United Regional Health Care System has entered,
maintained, and enforced exclusionary contracts with commercial
insurers that effectively prevent those insurers from contracting with
United Regional's competitors in violation of Section 2 of the Sherman
Act, 15 U.S.C. 2. The proposed Final Judgment, filed at the same time
as the Complaint, prohibits United Regional from using agreements with
commercial health insurers that improperly inhibit insurers from
contracting with United Regional's competitors.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection at the Department of
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth
Street, NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-
2481), on the Department of Justice's Web site at http://www.usdoj.gov/atr, and at the Office of the Clerk of the United States District Court
for the Northern District of Texas, Wichita Falls Division. 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, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to Joshua H. Soven, Chief, Litigation I Section, Antitrust Division,
U.S. Department of Justice, 450 Fifth Street, NW., Suite 4100,
Washington, DC 20530 (telephone: 202-307-0827).

Patricia A. Brink,
Director of Civil Enforcement.

In the United States District Court for the Northern District of Texas,
Wichita Falls Division

United States of America and State of Texas, Plaintiffs, v. United
Regional Health Care System, Defendant.
Case No.: 7:11-cv-00030.
Judge: Reed C. O'Connor.
Filed: Feb. 25, 2011.
Description: Antitrust.

Complaint

The United States of America, acting under the direction of the
Attorney General of the United States, and the State of Texas, by and
through the Texas Attorney General, bring this civil antitrust action
to enjoin defendant United Regional Health Care System (``United
Regional'') from entering into, maintaining, or enforcing contracts
with commercial health insurers that effectively prevent those insurers
from contracting with United Regional's competitors, in violation of
Section 2 of the Sherman Act, 15 U.S.C. 2, and to remedy the effects of
its unlawful conduct. Plaintiffs allege as follows:

I. Nature of the Action

1. United Regional has monopoly power in two relevant product
markets in Wichita Falls, Texas and the surrounding area: (1) The sale
of general acute-care inpatient hospital services (``inpatient hospital
services'') to commercial health insurers, and (2) the sale of
outpatient surgical services to commercial health insurers. United
Regional has an approximately 90% share of the market for inpatient
hospital services sold to commercial insurers and a greater than 65%
share of the market for outpatient surgical services sold to commercial
insurers. All health insurance companies in the relevant geographic
market consider United Regional a ``must-have'' hospital for health
plans because it is by far the largest hospital in the region and the
only local provider of certain essential services.
2. United Regional has maintained its monopoly power in the
relevant markets by entering into contracts with commercial health
insurers that exclude United Regional's competitors in the Wichita
Falls area from the insurers' health-care provider networks
(``exclusionary contracts''). These exclusionary contracts effectively
prevent insurers from contracting with hospitals and other health-care
facilities

[[Page 13210]]

that compete with United Regional by requiring the insurers to pay a
substantial pricing penalty if they also contract with United
Regional's competitors. Most commercial health insurers must pay United
Regional 13% to 27% more for its services if they do not use United
Regional exclusively. The effects of this pricing penalty are to make
the cost of including a competing hospital or other health-care
facility in an insurer's network prohibitively expensive and not
commercially viable, and to exclude equally-efficient rivals.
3. United Regional's exclusionary contracts have reduced
competition and enabled United Regional to maintain its monopoly power
in the provision of inpatient hospital services and outpatient surgical
services. They have done so by (1) Delaying and preventing the
expansion and entry of United Regional's competitors, likely leading to
higher health-care costs and higher health insurance premiums; (2)
limiting price competition for price-sensitive patients, likely leading
to higher health-care costs for those patients; and (3) reducing
quality competition between United Regional and its competitors. In
this case, there is no valid procompetitive business justification for
United Regional's exclusionary contracts.
4. United Regional's exclusionary contracts unlawfully maintain
United Regional's monopoly power in the relevant markets in violation
of Section 2 of the Sherman Act, 15 U.S.C. 2.

II. Defendant, Jurisdiction, Venue, and Interstate Commerce

5. United Regional is a nonprofit corporation organized and
existing under the laws of the State of Texas, with its principal place
of business in Wichita Falls, Texas.
6. Plaintiff United States brings this action pursuant to Section 4
of the Sherman Act, 15 U.S.C. 4, and plaintiff State of Texas brings
this action pursuant to Section 16 of the Clayton Act, 15 U.S.C. 26, to
prevent and restrain United Regional's violations of Section 2 of the
Sherman Act, 15 U.S.C. 2.
7. This Court has subject matter jurisdiction over this action
under Section 4 of the Sherman Act, 15 U.S.C. 4; Section 16 of the
Clayton Act, 15 U.S.C. 26; and 28 U.S.C. 1331, 1337(a), and 1345.
8. United Regional maintains its principal place of business and
transacts business in this District. United Regional entered into the
agreements at issue in this District, and committed the acts complained
of in this District. United Regional's conduct has had anticompetitive
effects and will continue to have anticompetitive effects in this
District. Consequently, this Court has personal jurisdiction over the
defendant, and venue is proper in this District under Section 12 of the
Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 1391.
9. United Regional is engaged in, and its activities substantially
affect, interstate trade and commerce. It contracts with providers of
commercial health insurance located outside of Texas to be included in
their provider networks. These providers of commercial health insurance
make substantial payments to United Regional in interstate commerce.

III. Relevant Markets

A. Relevant Product Markets

(1) The Sale of Inpatient Hospital Services to Commercial Health
Insurers
10. The sale of inpatient hospital services to commercial health
insurers is a relevant product market.
11. Inpatient hospital services are a broad group of medical and
surgical diagnostic and treatment services that include an overnight
stay in the hospital by the patient. Inpatient hospital services
exclude (1) Services at hospitals that serve solely children, military
personnel or veterans; (2) services at outpatient facilities that
provide same-day service only; and (3) psychiatric, substance abuse,
and rehabilitation services. Although individual inpatient hospital
services are not substitutes for each other (e.g., obstetrics and
cardiac services are not substitutes for each other), the various
individual inpatient hospital services can be aggregated for analytic
convenience.
12. The market for the sale of inpatient hospital services to
commercial health insurers excludes outpatient services because health
plans and patients would not substitute outpatient services for
inpatient services in response to a sustained price increase. There are
no other reasonably interchangeable services for inpatient hospital
services.
13. Commercial health insurers include managed-care organizations
(such as Blue Cross Blue Shield, Aetna, United Healthcare, CIGNA,
Accountable, or other HMOs or PPOs), rental networks (such as Beech
Street, Texas True Choice, Multiplan, and PHCS), and self-funded plans.
Rental networks serve as a secondary network used by health insurance
companies looking for network coverage or discounts outside of their
own networks or by self-insured employers; they are used by small and
mid-sized health insurance companies to offer clients national
coverage. Self-funded plans may access provider networks through
managed-care organizations or rental networks. Although not all of
these are risk-bearing entities, they can be referred to collectively
as ``commercial health insurers.'' Commercial health insurers do not
include government payers (Medicare, Medicaid, and TRICARE).
14. The market for the sale of inpatient hospital services to
commercial health insurers excludes sales of such services to
government payers. The primary government payers are the federal
government's Medicare program (coverage for the elderly and disabled),
the joint federal and state Medicaid programs (coverage for low-income
persons), and the federal government's TRICARE program (coverage for
military personnel and families). The federal government sets the rates
and schedules at which the government pays health-care providers for
services provided to individuals covered by Medicare, Medicaid, and
TRICARE. These rates are not subject to negotiation.
15. In contrast, commercial health insurers negotiate rates with
health-care providers and sell health insurance policies to
organizations and individuals, who pay premiums for the policies.
Generally, the rates that commercial health insurers pay health-care
providers are substantially higher than those paid by government payers
(Medicare, Medicaid, and TRICARE).
16. There are no reasonable substitutes or alternatives to
inpatient hospital services sold to commercial health insurers. A
health-care provider's negotiations with commercial health insurers are
separate from the process used to determine the rates paid by
government payers, and health-care providers could, therefore, target a
price increase just to commercial health insurers. Commercial health
insurers cannot shift to government rates in response to an increase in
rates for inpatient hospital services sold to commercial health
insurers, and patients who are ineligible for Medicare, Medicaid, or
TRICARE cannot substitute those programs for commercial health
insurance in response to a price increase for commercial health
insurance. Consequently, a hypothetical monopolist provider of
inpatient hospital services sold to commercial health insurers could
profitably maintain supracompetitive prices for those services over a
sustained period of time.

[[Page 13211]]

(2) The Sale of Outpatient Surgical Services to Commercial Health
Insurers
17. The sale of outpatient surgical services to commercial health
insurers is a relevant product market.
18. Outpatient surgical services are a broad group of surgical
diagnostic and surgical treatment services that do not require an
overnight stay in a hospital. Outpatient surgical services are
typically performed in a hospital or other specialized facility, such
as a free-standing ambulatory surgery center that is licensed to
perform outpatient surgery. Outpatient surgical services are distinct
from procedures routinely performed in a doctor's office. Outpatient
surgical services exclude services at hospitals or other facilities
that serve solely children, military personnel, or veterans. Although
individual outpatient surgical services are not substitutes for each
other (e.g., orthopedic and gastroenterological surgical services are
not substitutes for one another), the various individual outpatient
surgical services can be aggregated for analytic convenience.
19. The market for the sale of outpatient surgical services to
commercial health insurers excludes inpatient hospital services;
because health plans and patients would not substitute inpatient care
for outpatient surgical services in response to a sustained price
increase. There are no other reasonably interchangeable services for
outpatient surgical services.
20. There are no reasonable substitutes or alternatives to
outpatient surgical services sold to commercial health insurers. A
health-care provider's negotiations with commercial health insurers are
separate from the process used to determine the rates paid by
government payers, and health-care providers could, therefore, target a
price increase just to commercial health insurers. Commercial health
insurers cannot shift to government rates in response to an increase in
rates for outpatient surgical services sold to commercial health
insurers, and patients who are ineligible for Medicare, Medicaid, or
TRICARE cannot substitute those programs for commercial health
insurance in response to a price increase for commercial health
insurance. Consequently, a hypothetical monopolist provider of
outpatient surgical services sold to commercial health insurers could
profitably maintain supracompetitive prices for those services over a
sustained period of time.

B. Relevant Geographic Market

21. The relevant geographic market for each of the relevant product
markets alleged above is no larger than the Wichita Falls Metropolitan
Statistical Area (``MSA''). The Wichita Falls MSA is comprised of
Archer, Clay, and Wichita counties. MSAs are geographic areas defined
by the U.S. Office of Management and Budget for use in Federal
statistical activities.
22. Wichita Falls is the largest city in the Wichita Falls MSA.
According to the 2008 estimates of the Census Bureau, the Wichita Falls
MSA has a population of about 150,000. About 100,000 of these people
reside in the city of Wichita Falls, which is located in Wichita County
near the border of the three counties that compose the Wichita Falls
MSA. Wichita Falls is in north central Texas, about a two-hour drive
from the nearest metropolitan areas: Dallas-Fort Worth, Texas, and
Oklahoma City, Oklahoma.
23. Commercial health insurers contract to purchase inpatient
hospital services and outpatient surgical services in the geographic
area in which their health plan beneficiaries are likely to seek
medical care. Health plan beneficiaries typically seek medical care
close to their homes or workplaces. Very few plan beneficiaries who
live in the Wichita Falls MSA travel outside its borders to seek
inpatient hospital services or outpatient surgical services. For
example, in 2008, only about 10% of inpatient discharges of residents
of the Wichita Falls MSA were from hospitals not located in the Wichita
Falls MSA. Commercial health insurers that sell policies to
beneficiaries in the Wichita Falls MSA cannot reasonably purchase
inpatient hospital services or outpatient surgical services outside the
Wichita Falls MSA as an alternative to serve those beneficiaries.
Consequently, hospitals and health-care facilities outside the Wichita
Falls MSA do not compete with health-care providers located in the
Wichita Falls MSA for the sale of the relevant products in a manner
that would constrain the pricing or other behavior of Wichita Falls
health-care providers.
24. Competition for the sale of inpatient hospital services to
commercial health insurers from providers located outside the Wichita
Falls MSA would not be sufficient to prevent a hypothetical monopolist
provider of inpatient hospital services to commercial health insurers
located in the Wichita Falls MSA from profitably maintaining
supracompetitive prices for those services over a sustained period of
time.
25. Competition for the sale of outpatient surgical services to
commercial health insurers from providers located outside the Wichita
Falls MSA would not be sufficient to prevent a hypothetical monopolist
provider of outpatient surgical services to commercial health insurers
located in the Wichita Falls MSA from profitably maintaining
supracompetitive prices for those services over a sustained period of
time.

IV. Hospitals and Outpatient Surgical Facilities in the Wichita Falls
MSA

A. Acute-Care Hospitals

26. There are two general acute-care hospitals in Wichita Falls--
United Regional and Kell West Regional Hospital (``Kell West''). Two
additional hospitals, Electra Memorial Hospital (``Electra Memorial'')
and Clay County Memorial Hospital (``Clay Memorial''), are outside
Wichita Falls, but within the Wichita Falls MSA.
(1) United Regional
27. United Regional is a 369-bed general acute-care hospital that
offers a wide range of inpatient and outpatient services. United
Regional has 14 operating rooms, a laboratory, a 24-hour emergency
department, and a Level III trauma center, among other facilities. It
offers comprehensive cardiac care and has a childbirth center. United
Regional is a private nonprofit hospital, not a public hospital. Its
net patient revenues for 2009 were approximately $265 million.
28. Commercial health insurers that offer health insurance within
the Wichita Falls MSA consider United Regional a ``must have'' hospital
because it is by far the largest hospital in the region and the only
provider of some essential services, such as cardiac surgery,
obstetrics, and high-level trauma care.
29. United Regional was formed in October 1997 by the merger of
what were then the only two general acute-care hospitals in Wichita
Falls--Wichita General Hospital (``Wichita General'') and Bethania
Regional Health Care Center (``Bethania''). To complete the 1997
merger, Wichita General and Bethania sought and obtained an antitrust
exemption from the Texas Legislature. The Legislature enacted Tex.
Health & Safety Code Ann. Sec. 265.037(d), which provides that a
county-city hospital board ``existing in a county with a population of
more than 100,000 and a municipality with a population of more than
75,000 * * * may purchase, construct, receive, lease, or otherwise
acquire hospital facilities,

[[Page 13212]]

including the sublease of one or more hospital facilities, regardless
of whether the action might be considered anticompetitive under the
antitrust laws of the United States or this state.'' In an attempt to
qualify for the antitrust exemption enacted by the legislature, Wichita
General and Bethania Regional entered into a leasing arrangement that
involved the Wichita County-City of Wichita Falls, Texas Hospital Board
(``County-City Board'').
(2) Kell West
30. Kell West Regional is a 41-bed general acute-care hospital that
opened in January 1999, partially as a competitive response to the
merger that created United Regional. Kell West provides a wide range of
inpatient and outpatient surgical and medical treatments. Kell West has
eleven operating rooms, a laboratory, four intensive care beds, and a
24-hour emergency department. Kell West currently does not provide
several services that United Regional provides, including, in
particular, cardiac surgery and obstetrics. However, United Regional
considers Kell West to be a significant competitor.
(3) Other Inpatient Facilities
31. Electra Memorial is a 22-bed hospital located in Electra,
Texas, more than 30 miles west of Wichita Falls. Electra Memorial
offers a much narrower range of inpatient hospital services and
outpatient surgical services than either United Regional or Kell West.
United Regional does not consider Electra Memorial to be a significant
competitor, but instead as a source of referrals.
32. Clay Memorial is a 25-bed hospital located in Henrietta, Texas,
more than 15 miles east of Wichita Falls. Clay Memorial offers a much
narrower range of inpatient hospital services and outpatient surgical
services than either United Regional or Kell West. United Regional does
not consider Clay Memorial to be a significant competitor, but instead
as a source of referrals.

B. Outpatient Surgical Facilities

33. United Regional, Kell West, Electra Memorial, and Clay Memorial
all provide outpatient surgical services, although those provided by
Electra Memorial and Clay Memorial are more limited than those provided
by United Regional and Kell West. Maplewood Ambulatory Surgery Center
(``Maplewood'') provides outpatient surgical services focusing solely
on surgical procedures for pain remediation. Texoma Outpatient Surgery
Center only performs eye surgeries. The North Texas Surgi-Center
provided some outpatient surgical services in Wichita Falls from 1985
to 2008. It was excluded from some commercial health insurers' networks
by United Regional's exclusionary contracts. The Surgi-Center closed in
December 2008.
34. There are no other providers of outpatient surgical services in
the Wichita Falls MSA.

C. Potential Expansion by Competitors

35. Both Kell West and Maplewood have significant excess capacity.
Kell West has the capacity to more than double the number of total
patients it serves without any additional physical expansion. In
addition, Kell West was intended by its owners to become a full-service
hospital. To this end, Kell West has devoted most of its surplus funds
to expansion projects. In 2002, Kell West nearly tripled in size,
expanding from 15 to 41 beds. In 2005, it added two emergency exam
rooms; in 2007, a four-bed intensive care unit; in 2008, an on-site
laundry facility; and in 2009, four additional operating rooms.
36. Kell West's owners originally intended to expand Kell West into
a 70-bed hospital with an intensive care unit, OB suite, and cardiology
department. Today, Kell West has 41 beds. As alleged below, likely
because of United Regional's exclusionary contracts, it has not been
able to expand into several service lines that it has considered
opening, including obstetrics, pediatrics, oncology, industrial
medicine, and neurology. Doctors in the Wichita Falls community have
expressed interest in treating additional patients at Kell West if it
could expand into new services.
37. Maplewood currently operates its outpatient surgery center only
three days per week and could easily add at least one day more per week
to its schedule to accommodate additional patients.

V. United Regional's Monopoly Power

A. United Regional has monopoly power in the two relevant product
markets in the Wichita Falls MSA: (1) The sale of inpatient hospital
services to commercial health insurers and (2) the sale of outpatient
surgical services to commercial health insurers. Since the 1997 merger
between Wichita General and Bethania, United Regional has dominated
both product markets in the Wichita Falls MSA, and its prices have
climbed. It is currently one of the most expensive hospitals in Texas.

B. Inpatient Hospital Services

38. United Regional is by far the largest provider of inpatient
hospital services in the Wichita Falls MSA. United Regional's share of
inpatient hospital services sold to commercial health insurers is
approximately 90% (based on admissions) in the Wichita Falls MSA.
39. An analysis prepared for United Regional by a major insurer
concluded that the payments from commercial health insurers for
inpatient hospital services in Wichita Falls are at least 50% higher
than the average amounts paid in seven other comparable cities in
Texas. Another commercial health insurer estimated that it pays United
Regional almost 70% more than what it pays hospitals in the Dallas-Fort
Worth area for inpatient hospital services. This insurer's analysis
found that the ``inpatient allowed per day adjusted for case mix'' (a
measure that adjusts for differences in the type and severity of
services performed) was $4,143 on average in Wichita Falls, compared to
$3,254 in Dallas-Fort Worth. The analysis also found that hospital
prices in Wichita Falls are, on average, significantly higher for
inpatient services than prices in five other comparable MSAs in Texas.
United Regional is also significantly more expensive than Kell West,
its primary competitor in Wichita Falls. For services that are offered
by both hospitals, United Regional's average per-day rate for inpatient
services sold to commercial health insurers is about 70% higher than
Kell West's.

C. Outpatient Surgical Services

40. United Regional is also by far the largest provider of
outpatient surgical services in the Wichita Falls MSA. United
Regional's share of outpatient surgical services sold to commercial
health insurers is more than 65% (based on visits) in the Wichita Falls
MSA.
41. United Regional's prices for outpatient surgical services are
also among the highest in Texas. One

[[Page 13213]]

commercial health insurer calculated that United Regional's prices for
all outpatient services were in the top 10% of the 279 Texas hospitals
that submitted outpatient claims to that insurer. Of the 100 Texas
hospitals submitting the largest number of outpatient claims to that
insurer in 2007, the insurer found that United Regional was the fourth
most expensive outpatient provider in the state. Another analysis by a
commercial health insurer shows that hospital prices in Wichita Falls
are, on average, significantly higher for outpatient services than
prices in five other comparable MSAs in Texas. Maplewood, a nearby
competitor, charges much lower prices for outpatient surgical services
than United Regional charges for the same services. Prices at the North
Texas Surgi-Center, an ambulatory surgery center in Wichita Falls that
performed a wide range of outpatient surgical services but closed in
December 2008, were also significantly lower than prices charged by
United Regional for identical procedures.
42. In the Wichita Falls MSA, significant barriers to the entry of
new hospital and outpatient facilities as well as barriers to the
expansion of existing facilities help preserve United Regional's
monopoly power. For hospitals, barriers to entry include the expense
and difficulty of building a hospital, recruiting and hiring qualified
staff and physicians, building a reputation in the community, and
gaining accreditation from relevant accrediting organizations. For
outpatient facilities, the same barriers exist, but to a lesser extent.
For both hospital and outpatient facilities, the barriers to entry are
substantial when combined with the additional entry barriers imposed by
United Regional's exclusionary contracts.

VI. United Regional Has Willfully Maintained Its Monopoly Power Through
the Use of Anticompetitive Exclusionary Contracts

A. The Exclusionary Contracts and Their Terms

43. All of United Regional's exclusionary contracts share the same
anticompetitive feature: a pricing penalty ranging from 13% to 27% if
an insurer contracts with Kell West or other competing facilities.
Specifically, the contracts provide for a higher discount off billed
charges (e.g., 25%) if United Regional is the only local hospital or
outpatient surgical provider in the insurer's network. The contracts
provide for a much smaller discount (e.g., 5% off billed charges) if
the commercial health insurer adds another competing local health-care
facility, such as Kell West or Maplewood. A penalty that reduces an
insurer's discount from 25% to 5% (for adding a rival facility)
increases the insurer's price from 75% to 95% of billed charges--a 27%
increase over the discounted price.
44. The 13% to 27% pricing penalty applies if an insurer contracts
with competing facilities within a specific geographic area delineated
by each contract. Though the scope of the geographic limitation differs
between contracts, every exclusionary contract designates an area that
is no larger than Wichita County, and prevents commercial health
insurers from contracting with competing facilities within that area.
For example, one contract prevents the commercial health insurer from
contracting with competing facilities within ten miles of the City of
Wichita Falls. Two contracts describe the geographic limitation as
within 15 miles of the City of Wichita Falls. One contract designates
certain zip codes located within Wichita County, and three contracts
designate Wichita County in its entirety. In every case, Kell West,
Maplewood, and the now-closed Surgi-Center fall within the geographic
zone of exclusion defined by the contracts.
45. United Regional adopted the exclusionary contracts in direct
response to the competitive threat presented by Kell West, the North
Texas Surgi-Center, and other local outpatient surgical facilities to
United Regional's monopoly position in the Wichita Falls MSA. United
Regional began considering the possibility of moving to exclusionary
contracts at around the time Kell West began operations. Shortly
thereafter, United Regional began entering contracts with commercial
health insurers that effectively prevented them from contracting with
Kell West and other local health-care facilities for both inpatient and
outpatient services.
46. By 1999, within three months after Kell West opened for
business, United Regional had obtained exclusionary contracts from five
commercial health insurers. United Regional has continued to enter into
exclusionary contracts with insurers up to the present day. As of 2010,
United Regional had entered into exclusionary contracts with a total of
eight commercial health insurers. In each instance, it was United
Regional that required the exclusionary provisions in the contract--not
the insurer.
47. One of the earlier contracts provides as follows:

Exclusive Agreement. The rates set forth in Exhibit A [80% of
billed charges] are contingent upon [INSURER] not entering into
another agreement with an acute care facility, hospital or
ambulatory surgery center, directly or indirectly, for the provision
of inpatient services and/or outpatient services in Wichita Falls,
Texas or within ten miles of Wichita Falls, Texas. If [INSURER]
enters into another agreement with an acute care facility, hospital,
or ambulatory surgery Center for the provision of inpatient services
and/or outpatient services in Wichita Falls, Texas or within a ten
mile radius of Wichita Falls, Texas, Clients shall immediately and
automatically begin reimbursing Hospital, for Covered Services
rendered by Hospital to Participants, one hundred percent (100%) of
Hospital's billed charges . * * *

48. A more recent agreement between United Regional and another
insurer describes a similar arrangement:

At this time, [INSURER] elects the Tier 1 Option (defined
below). Hospital shall be compensated at seventy-five percent (75%)
of billed charges for covered services. However, upon the Effective
Date and during the term of this Agreement, if [INSURER] elects to
enter into a new contract with another general acute care facility,
ambulatory surgery center or radiology center in [a] 15 mile radius
of United Regional Health Care System (``Hospital'') located at 1600
11th St., Wichita Falls, Texas, [INSURER] shall notify Hospital
thirty (30) days in advance of the effective date of such new
contract. On the effective date of such contract, the Tier 1 Option
Hospital Reimbursement Schedule shall be void and the reimbursement
rates will revert to 95% of billed charges for all inpatient and
outpatient services at United Regional Health Care System, its
affiliates, and joint ventures [] where United Regional has a
majority ownership interest.
1. Tier One Option: Hospital is the sole in-network facility
(including only general acute care facilities, ambulatory surgery
centers or radiology center[s]) within a 15 mile radius of Hospital
located at 1600 11th St., Wichita Falls, Texas and Hospital shall be
compensated at seventy-five percent (75%) of billed charges for
covered services. Payor will deduct any applicable Copayments,
Deductibles, or Coinsurance from payment due to Hospital.
2. Tier 2 Option: Hospital is not the sole in-network facility
for general acute care, ambulatory surgery center or radiology
center within a 15 mile radius of Hospital located at 1600 11th St.,
Wichita Falls, Texas and Hospital shall be compensated at ninety-
five percent (95%) of billed charges for covered services. Payor
will deduct any applicable Copayment, Deductibles, or Coinsurance
from payment due to Hospital.

49. United Regional has broadened the scope of the exclusionary
provisions over time. All eight of the exclusionary contracts
effectively prevent the commercial health insurer from contracting with
hospital competitors (for inpatient or outpatient services) within a
certain geographic proximity to United Regional. Seven of the eight

[[Page 13214]]

exclusionary contracts also effectively prevent the commercial health
insurer from contracting with outpatient surgery centers. United
Regional added provisions excluding additional outpatient facilities
such as radiology centers to five of the more recent contracts.
50. Although the earlier contracts (signed before 2001) describe
the pricing in these agreements in terms of ``exclusivity'' or an
``exclusive agreement,'' more recent contracts use the phrase ``tiered
compensation schedule.'' Regardless of the label, the contracts share
the same anticompetitive feature; they impose a significant pricing
penalty if an insurer does not enter into an exclusive arrangement with
United Regional.
51. Every commercial health insurer that has entered into one of
United Regional's exclusionary contracts would prefer an open network
in which its customers have a choice of hospitals and outpatient
surgical facilities. Most, if not all, of these insurers have sought to
add Kell West or another outpatient provider to their networks. In
every case, United Regional has threatened the insurer with prices so
high that the insurer would not be able to compete with other health
insurers offering insurance in the Wichita Falls area. As a result,
notwithstanding their preferences, each health insurer contracted
exclusively with United Regional because the insurer could not offer a
commercially viable product if it paid the higher prices that United
Regional would charge if the insurer chose to include in its network
one or more of United Regional's competitors. One national commercial
health insurer, for example, agreed to enter into an exclusionary
contract in 2010 because it determined that it could not otherwise
offer a commercially viable product in the Wichita Falls MSA.
52. United Regional has entered into exclusionary contracts with
most commercial health insurers currently providing health insurance to
residents of the Wichita Falls area. For more than twelve years, the
only major insurer without an exclusionary contract has been Blue Cross
Blue Shield of Texas (``Blue Cross''), the largest commercial health
insurer in Wichita Falls and in Texas. For two rental networks, which
combined account for less than 5% of the commercially insured lives in
Wichita Falls, United Regional offered only the higher nonexclusive
rates without an exclusive provision. In late 2010, after plaintiffs
began their investigation, one other rental network switched from an
exclusive agreement with United Regional to a non-exclusive
arrangement.
53. All exclusionary contracts entered into between 1998 and 2010
are still in force and are essentially ``evergreen'' contracts,
automatically renewed yearly unless terminated by one of the parties.

B. United Regional's Exclusionary Contracts Foreclosed Its Rivals From
the Most Profitable Health-Insurance Contracts

54. United Regional has effectively foreclosed its rivals from many
of the most profitable health-insurance contracts in Wichita Falls--
contracts that are crucial for its rivals to effectively compete.
55. Inclusion in health insurer networks is critical because
patients generally seek health-care services from ``in-network''
providers and thereby incur substantially lower out-of-pocket costs
than if the patients use out-of-network providers. Patients do so
because, typically, a health insurer charges a member substantially
lower co-payments or other charges when the member uses an in-network
provider.
56. By effectively denying its competitors critical in-network
status, United Regional likely substantially reduces the number of
patients who would otherwise use Kell West and other United Regional
competitors. More importantly, United Regional's contracts effectively
deny access to a substantial percentage of the most profitable
patients--those with commercial health insurance.
57. It is substantially more profitable for hospitals to serve
patients with commercial health insurance than Medicare, Medicaid, or
TRICARE patients, because government plans pay significantly less than
commercial health insurers. This is true in the Wichita Falls MSA. All
commercial health plans in the Wichita Falls MSA pay United Regional at
least double the Medicare payment rate, and all but one insurer (Blue
Cross) pay United Regional more than triple the Medicare payment rate.
58. Consequently, patients covered by government plans are not
adequate substitutes for commercially insured patients. In fact, United
Regional, like many other hospitals, depends on payments from
commercial health insurers to compensate for the comparatively low
payments it receives from government payers. The low payment rates from
government payers provide little or no contribution margin to offset
United Regional's overhead expenses.
59. By 2010, the insurers that had exclusionary contracts with
United Regional accounted for approximately 35% to 40% of all payments
that United Regional received from commercial health insurers.
60. Most of the remaining commercial payments are attributable to a
single commercial health insurer--Blue Cross--which has a 55% to 65%
share of the commercially insured lives in the Wichita Falls MSA. In
the relevant market, serving Blue Cross patients is far less profitable
than serving patients covered by other commercial health insurers.
Because of its size, Blue Cross negotiates the deepest discounts; thus,
it pays United Regional and other providers in the relevant market
substantially less than other commercial health insurers.
61. Because the insurers that have exclusionary contracts with
United Regional pay the highest rates, these insurers account for a
substantial share of the profits that would otherwise be available to
competing health-care providers. In particular, these insurers account
for approximately 30% to 35% of the profits that United Regional earns
from all payers--including government payers such as Medicare,
Medicaid, and TRICARE--even though they account for only about 8% of
United Regional's total patient volume.
62. If the commercial health insurers that have exclusionary
contracts with United Regional added Kell West and other health-care
providers to their networks, these providers would earn substantially
higher profits than they do now. For example, if only 10% of these
insurers' patients switched from United Regional to Kell West, and
these insurers paid Kell West 30% less than they currently pay United
Regional, Kell West's profits would still likely increase by more than
40%.

C. United Regional's Exclusionary Contracts Likely Have Caused
Substantial Anticompetitive Effects

63. United Regional's exclusionary contracts have reduced
competition and enabled United Regional to maintain its monopoly power
in the provision of inpatient hospital services and outpatient surgical
services. By effectively preventing most commercial health insurers
from including in their networks other inpatient and outpatient
facilities, such as Kell West, the North Texas Surgi-Center, Maplewood,
and others, United Regional has (1) delayed and prevented the expansion
and entry of United Regional's competitors, likely leading to higher
health-care costs and higher health insurance premiums; (2) limited
price competition for price-sensitive patients, likely leading to
higher health-care costs for those

[[Page 13215]]

patients; and (3) reduced quality competition between United Regional
and its competitors.
(1) The Exclusionary Contracts Likely Delayed and Prevented Expansion
and Entry
64. The exclusionary contracts have likely delayed and prevented
competitors from expanding in or entering the relevant markets, leading
to higher health-care costs and higher health-insurance premiums. As
alleged above, United Regional's exclusionary contracts effectively
prevent virtually all commercial health insurers from contracting with
many of United Regional's competitors, including Kell West. If United
Regional had not imposed its exclusionary contracts, these insurers
likely would have contracted with Kell West, Maplewood, and other
competitors in the Wichita Falls MSA (and with providers that otherwise
might have entered the market), giving the competitors in-network
access to the patients covered by commercial health insurers--the
patients that are the most profitable to health-care providers.
65. Furthermore, physicians treating patients covered by commercial
health insurers that have been effectively prevented from contracting
with United Regional's competitors would likely have referred more
patients to these competitors, and more patients would likely have
chosen to use them. In addition to referrals of patients insured by
commercial health insurers with exclusionary contracts, such referrals
would have likely included additional referrals of Blue Cross patients
and patients covered by Medicare, Medicaid, and TRICARE. Many doctors
engage in ``block-booking,'' finding it most efficient to perform all
of a given day's surgeries and other procedures at the same facility.
This, in turn, would have given United Regional's competitors higher
patient volumes and utilization, increased revenues, and substantially
higher profits.
66. The higher volumes and profits obtained from serving additional
patients insured by commercial health insurers--the patients that are
the most profitable to health-care providers--as well as additional
Blue Cross patients and additional Medicare, Medicaid or TRICARE
patients, likely would have allowed Kell West and other competitors to
expand. This expansion would enable the competitors to compete more
effectively with United Regional, likely resulting in more competition
and lower health-care costs.
67. Kell West likely would have expanded sooner into certain
services, and would also likely have added more beds and additional
services, such as additional intensive care capabilities, cardiology
services, and obstetric services. Kell West has considered expansion
into these additional services on numerous occasions, but has been
limited in its ability to expand due to its lack of in-network access
to commercially insured patients. Kell West also would likely fill its
significant excess capacity for the services it already provides if it
had access to the commercial health insurers that currently have
exclusionary contracts with United Regional.
68. If Maplewood had similar in-network access to those commercial
health insurers, it would likely add one or more days to its schedule
in order to serve additional patients. Maplewood currently operates
only three days a week.
69. The lack of in-network access to commercially insured patients
also likely has delayed and prevented Kell West from expanding by
attracting an outside investor or buyer. For example, with in-network
access to commercial health insurance contracts, Kell West would be
more attractive to a larger hospital system, which would invest in the
expansion of Kell West's services. As a physician-owned hospital, Kell
West became subject in March 2010 to certain restrictions on expansion
imposed by federal health-care reform legislation, see 42 U.S.C.
1395nn(i)(1)(B), that would not apply if Kell West were acquired by a
non-physician investor. The existence of the exclusionary contracts
makes such an acquisition less likely.
70. United Regional's exclusionary contracts also inhibit new
providers from entering the market. Potential entrants are dissuaded
from entering the market because they cannot obtain contracts with many
of the commercial health insurers who have customers in that market. At
least one potential entrant that is considering entering the outpatient
surgical services market believes that it will not be able to do so
without contracts with virtually all area commercial health insurers.
United Regional's exclusionary contracts currently prevent such access.
71. By limiting the expansion or entry of competitors, United
Regional's exclusionary contracts have helped it to maintain its
monopoly and likely increased the cost of providing medical care to
residents in the Wichita Falls area. Because the exclusionary contracts
likely limited competitors' expansion and entry, and thereby reduced
insurers' bargaining leverage with United Regional, the contracts
likely have enabled United Regional to continue to demand higher prices
from commercial health insurers free from competitive discipline.
72. The costs of medical care are typically 80% or more of an
insurer's costs, and hospital costs are a substantial portion of
medical care costs. The price of hospital services at individual
hospitals directly affects health insurance premiums for the customers
that use those hospitals. Accordingly, insurers' hospital costs are an
important element of insurers' ability to offer competitive prices.
73. The higher payment rates demanded by United Regional from
commercial health insurers are borne in part by Wichita Falls employers
and residents in the form of higher insurance premiums. Insurance
premiums in Wichita Falls are among the highest in Texas. Blue Cross's
premiums in Wichita Falls exceed its premiums anywhere else in the
state, including Dallas, and its employee premium rate in Wichita Falls
is significantly higher than in Amarillo and Odessa, two cities similar
in size to Wichita Falls.
(2) The Exclusionary Contracts Likely Have Limited Price Competition
for Price-Sensitive Patients
74. United Regional's contracts have also likely reduced
competition for price-sensitive patients in the relevant markets.
Certain patients select a hospital based on price because the prices
charged can affect the patient's out-of-pocket costs. For example, in
2008, United Regional lowered its list price for gynecological
surgeries because it was concerned that too many price-sensitive
patients were choosing Kell West or the North Texas Surgi-Center for
these surgeries to avoid United Regional's high prices. Exclusionary
contracts that effectively prevent insurers from including providers
such as Kell West in commercial health insurers' networks make it less
likely that a commercially insured patient would switch to Kell West in
response to a price increase by United Regional, and hence reduce this
constraint on United Regional's prices. Consequently, the exclusionary
contracts likely enable United Regional to charge higher prices for
many services.
(3) The Exclusionary Contracts Likely Have Reduced Quality Competition
Between United Regional and Its Competitors
75. Patients and physicians often choose among hospitals and other
health-care providers based on the

[[Page 13216]]

provider's quality and reputation, including quality of care (reflected
in past performance on clinical measures such as mortality rates) and
quality of service (reflected in non-clinical characteristics that may
appeal to patients, including amenities such as physical surroundings,
staff hospitality, and other services). Because there is a financial
penalty for using out-of-network providers, patients with health
insurance provided by insurers with exclusionary contracts are less
likely to choose out-of-network providers, even if the patient believes
the out-of-network provider offers superior quality to United Regional.
76. If United Regional's competitors became in-network providers
for more commercially insured patients, each of those competitors would
have the incentive to make additional improvements in quality to
attract those patients to its facility. United Regional, in turn, would
also have the incentive to improve its quality in order to keep
patients from choosing Kell West or another competitor. Therefore,
without the exclusionary contracts, United Regional and its competitors
would have increased incentives to make additional quality
improvements, and the overall level of quality of health care in the
Wichita Falls area likely would be higher. Moreover, such quality
improvements would benefit all patients, not just those with commercial
health insurance.

D. United Regional's Exclusionary Contracts Have the Potential To
Exclude Equally-Efficient Competitors

77. United Regional's exclusionary contracts have likely excluded
equally-efficient competitors. When the entire ``discount'' that a
commercial health insurer receives in exchange for agreeing to
exclusivity is allocated to the patient volume that United Regional
would likely lose to a competitor in the absence of the exclusionary
contracts (the ``contestable patient volume''), it is clear that United
Regional is selling services to commercial health insurers for the
contestable volume at a price below its own marginal costs. A competing
hospital, therefore, would need to offer a price below United
Regional's marginal cost to induce a commercial health insurer to turn
down exclusivity.
78. Put differently, because the contestable patient volume is
likely a small portion of a commercial health insurer's total volume at
United Regional and because the pricing penalty in United Regional's
contracts is so large, a commercial health insurer would not find it
commercially reasonable to enter into a contract with a competing
hospital in the Wichita Falls area, unless that hospital were to offer
a price below United Regional's marginal cost. As a result, United
Regional's exclusionary contracts likely exclude equally-efficient
competitors.

E. The Exclusionary Contracts Lack a Valid Procompetitive Business
Justification

79. In this case, there is no valid procompetitive business
justification for United Regional's exclusionary contracts. United
Regional did not use the contracts to achieve any economies of scale or
other efficiencies as a result of any additional patient volume that it
obtained from the contracts. Moreover, as alleged above, United
Regional's contracts set prices for the contestable patient volume at a
level below its own incremental costs, which (1) illustrates that the
contracts are not simply lower prices in exchange for volume, and (2)
cannot be justified by economies of scale in any event.

VII. Violations Alleged

Monopolization in Violation of Sherman Act Sec. 2

80. Plaintiffs repeat and reallege the allegations of paragraphs 1
through 80 above with the same force and effect as though said
paragraphs were set forth here in full.
81. United Regional possesses monopoly power in the relevant
product markets in the Wichita Falls MSA.
82. United Regional has willfully maintained and abused its
monopoly power in the relevant markets through its exclusionary
contracts with commercial health insurers.
83. Each exclusionary contract between United Regional and a
commercial health insurer constitutes an act by which United Regional
willfully exploits and maintains its monopoly power in the relevant
product markets in the Wichita Falls MSA.
84. In this case, there is no valid procompetitive business
justification for United Regional's use of the exclusionary contracts
described above.
85. United Regional's exclusionary contracts violate Section 2 of
the Sherman Act, 15 U.S.C. 2.

VIII. Request For Relief

Wherefore, Plaintiffs request:
(a) That the Court adjudge and decree that United Regional acted
unlawfully to maintain a monopoly in violation of Section 2 of the
Sherman Act, 15 U.S.C. 2;
(b) That the Court permanently enjoin United Regional, its
officers, directors, agents, employees, and successors, and all other
persons acting or claiming to act on its behalf, directly or
indirectly, from seeking, negotiating for, agreeing to, continuing,
maintaining, renewing, using, or enforcing, or attempting to enforce
exclusionary contracts with health insurance companies and others;
(c) That the Court reform existing contracts to remove the
exclusionary provisions; and
(d) That Plaintiffs be awarded the costs of this action and such
other relief as may be appropriate and as the Court may deem just and
proper.

Dated: February 25, 2011.

Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA
Christine A. Varney,
Assistant Attorney General for Antitrust.

Joseph F. Wayland,
Deputy Assistant Attorney General.

Patricia A. Brink,
Director of Civil Enforcement.

Joshua H. Soven,
Chief Litigation I Section.

Peter J. Mucchetti,
Assistant Chief Litigation I Section.

Scott I. Fitzgerald (WA Bar 39716)

Andrea V. Arias,
Amy R. Fitzpatrick,
Adam Gitlin,
Steven B. Kramer,
Richard Liebeskind,
Richard D. Mosier,
Mark Tobey,
Kevin Yeh,

Attorneys for the United States, United States Department of
Justice, Antitrust Division, Litigation I Section, 450 Fifth Street,
NW., Suite 4100, Washington, DC 20530.

Telephone: (202) 353-3863.
Facsimile: (202) 307-5802.

FOR PLAINTIFF STATE OF TEXAS
Greg Abbott,
Attorney General of Texas.

Daniel T. Hodge,
First Assistant Attorney General.

Bill Cobb,
Deputy Attorney General for Civil Litigation.

John T. Prud'homme, Jr.,

Chief, Antitrust Division, Office of the Attorney General, 300 W.
15th St., 7th floor, Austin, TX 78701.

Telephone: (512) 936-1697.
Facsimile: (512) 320-0975.

In the United States District Court for the Northern District of Texas,
Wichita Falls Division

[[Page 13217]]

Competitive Impact Statement

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

I. Nature and Purpose of the Proceeding

On February 25, 2011, the United States and the State of Texas
filed a civil antitrust lawsuit against Defendant United Regional
Health Care System (``United Regional'') challenging United Regional's
contracts with commercial health insurers that effectively prevent
insurers from contracting with United Regional's competitors
(``exclusionary contracts''). The Complaint alleges that United
Regional has unlawfully used these contracts to maintain its monopoly
for hospital services, in violation of Section 2 of the Sherman Act, 15
U.S.C. 2.
With the Complaint, the United States and the State of Texas filed
a proposed Final Judgment that enjoins United Regional from using
exclusionary contracts. The United States, the State of Texas, and
United Regional have stipulated that the proposed Final Judgment may be
entered after compliance with the APPA, unless the United States
withdraws its consent. Entry of the proposed Final Judgment would
terminate this action, except that the Court would retain jurisdiction
to construe, modify, or enforce the provisions of the proposed Final
Judgment and to punish violations thereof.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendant and the Challenged Conduct

This case is about competition for the sale of hospital services in
Wichita Falls, Texas, and its surrounding areas. The Defendant, United
Regional, is a general acute-care hospital located in Wichita Falls.
With 369 beds, United Regional is by far the largest hospital in the
region and the only provider of some essential services, such as
cardiac surgery, obstetrics, and high-level trauma care.
United Regional was formed in October 1997 by the merger of Wichita
General Hospital and Bethania Regional Health Care Center. At the time
of that merger, there were no other general acute-care hospitals in
Wichita Falls and only one small outpatient surgery center. Soon after
the merger, however, a group of doctors began planning for a competing
hospital called Kell West Regional Hospital (``Kell West''). Kell West
opened in January 1999 and is now a 41-bed general acute-care hospital,
located about six miles from United Regional. Kell West provides a wide
range of inpatient and outpatient procedures, but does not provide some
key services offered by United Regional such as cardiac surgery and
obstetrics.
Beginning in 1998, United Regional responded to the competitive
threat posed by Kell West and other outpatient-surgery facilities by
systematically entering into exclusionary contracts with commercial
health insurers. The precise terms of these contracts vary, but all
share the same anticompetitive feature: a significant pricing penalty
if an insurer contracts with competing facilities within a region that
is no larger than Wichita County.\1\ In general, the contracts offer a
substantially larger discount off billed charges (e.g., 25%) if United
Regional is the only local hospital or outpatient surgical provider in
the insurer's network; and the contracts provide for a much smaller
discount (e.g., 5% off billed charges) if the insurer contracts with
one of United Regional's rivals.\2\
---------------------------------------------------------------------------

\1\ One contract excludes facilities within ten miles of the
City of Wichita Falls; two contracts exclude facilities within
fifteen miles of the City of Wichita Falls; one contract excludes
facilities within certain zip codes in Wichita County; and three
contracts exclude facilities located anywhere in Wichita County.
Some contracts also exempt specific facilities that would otherwise
be covered by the exclusionary provisions; for example, some
contracts allow insurers to contract with Electra Memorial Hospital,
a small hospital located more than 30 miles from Wichita Falls (but
within Wichita County) that would have otherwise been excluded.
\2\ Hospitals and insurers often negotiate contracts in which
the price that the insurer pays is expressed as a discount off the
hospital's list prices (also called ``chargemaster'' or ``billed
charges''). Thus, a penalty that reduces an insurer's discount from
25% to 5% (for adding a rival facility) increases the insurer's
price from 75% to 95% of billed charges--a 27% increase.
---------------------------------------------------------------------------

Within three months after Kell West opened in January 1999, United
Regional had entered into exclusionary contracts with five commercial
health insurers, and by 2010, it had exclusionary contracts with eight
insurers. In each instance, it was United Regional that required the
exclusionary provisions in the contract--not the insurer. The only
major insurer that did not sign an exclusionary contract with United
Regional was Blue Cross Blue Shield of Texas (``Blue Cross''), by far
the largest insurer in Wichita Falls and in Texas.
The Complaint alleges that because United Regional is a ``must
have'' hospital for any insurer that wants to sell health insurance in
the Wichita Falls area, and because the penalty for contracting with
United Regional's rivals was so significant, most insurers entered into
exclusionary contracts with United Regional. Consequently, United
Regional's rivals could not obtain contracts with most insurers, except
Blue Cross, which substantially hindered their ability to compete and
helped United Regional maintain its monopoly in the relevant markets,
to the detriment of consumers.
The Complaint alleges that by effectively preventing most
commercial health insurers from including in their networks other
inpatient and outpatient facilities, United Regional has (1) Delayed
and prevented the expansion and entry of United Regional's competitors,
likely leading to higher health-care costs and higher health insurance
premiums; (2) limited price competition for price-sensitive patients,
likely leading to higher health-care costs for those patients; and (3)
reduced quality competition between United Regional and its
competitors.

B. The Relevant Markets

The Complaint alleges two distinct relevant product markets: (1)
the market for general acute-care inpatient hospital services
(``inpatient hospital services'') sold to commercial health insurers,
and (2) the market for outpatient surgical services sold to commercial
health insurers. In each case, the relevant geographic market is no
larger than the Wichita Falls Metropolitan Statistical Area (``MSA'').
1. The Sale of Inpatient Hospital Services to Commercial Health
Insurers
The sale of inpatient hospital services to commercial health
insurers is a relevant product market. Inpatient hospital services are
a broad group of medical and surgical diagnostic and treatment services
that include an overnight stay in the hospital by the patient. For
purposes of the Complaint, inpatient hospital services exclude (1)
Services at hospitals that serve solely children, military personnel or
veterans; (2) services at outpatient facilities that provide same-day
service only; and (3) psychiatric, substance abuse, and rehabilitation
services. There are no reasonable substitutes for inpatient hospital
services.
As alleged in the Complaint, the term ``commercial health
insurers'' refers to private third-party payers that provide access to
health-care providers, such as managed-care organizations, rental
networks, and self-funded plans. The term does not include sales to
public

[[Page 13218]]

third-party payers--Medicare, Medicaid, and TRICARE.
There is a key difference between the government plans and
commercial health insurers. The government unilaterally sets the rates
that it pays for Medicare, Medicaid, and TRICARE beneficiaries--rates
that are non-negotiable. In contrast, commercial health insurers
negotiate their rates with individual health-care providers. Therefore,
health-care providers can target a price increase to commercial health
insurers, and these insurers cannot avoid the price increase by
shifting to government rates. Furthermore, patients who are ineligible
for Medicare, Medicaid, or TRICARE cannot substitute into those
programs in response to a price increase for commercial health
insurance. Thus, a hypothetical monopolist provider of inpatient
hospital services sold to commercial health insurers could profitably
maintain supracompetitive prices for those services over a sustained
period of time.
2. The Sale of Outpatient Surgical Services to Commercial Health
Insurers
The sale of outpatient surgical services to commercial health
insurers is also a relevant product market. This market is distinct
from the market for inpatient hospital services because, as alleged in
the Complaint, inpatient hospital services are not reasonable
substitutes for outpatient surgical services, and there are no other
reasonable substitutes for outpatient surgical services. Furthermore,
as with inpatient hospital services, the prices of outpatient surgical
services sold to commercial health insurers are determined by
negotiations between health-care providers and insurers, while the
government unilaterally sets the rates that it pays for outpatient
surgical services for Medicare, Medicaid, and TRICARE beneficiaries.
Thus, a hypothetical monopolist provider of outpatient surgical
services sold to commercial health insurers could profitably maintain
supracompetitive prices for those services over a sustained period of
time.
3. Relevant Geographic Market: No Larger Than the Wichita Falls MSA
The relevant geographic market for both inpatient hospital services
and outpatient surgical services is no larger than the Wichita Falls
MSA, which comprises three counties in north central Texas: Archer,
Clay, and Wichita. Wichita Falls--the largest city in the MSA, with a
population of about 100,000--is more than a two-hour drive and at least
100 miles from the nearest metropolitan areas: Dallas-Ft. Worth, Texas,
and Oklahoma City, Oklahoma. Because patients typically seek medical
care close to their homes or workplaces, very few patients who live in
the Wichita Falls MSA travel outside its borders to seek inpatient
hospital services or outpatient surgical services; and providers of
those services located outside the Wichita Falls MSA do not compete to
any substantial degree in the Wichita Falls MSA for the sale of those
services. Thus, as the Complaint alleges, competition for the sale of
inpatient hospital services and outpatient surgical services to
commercial health insurers from providers located outside the Wichita
Falls MSA would not be sufficient to prevent a hypothetical monopolist
provider of those services in the Wichita Falls MSA from profitably
maintaining supracompetitive prices for those services over a sustained
period of time.

C. Monopoly Power

Section 2 of the Sherman Act, 15 U.S.C. 2, makes it unlawful for a
firm to ``monopolize.'' The offense of monopolization under Section 2
has two elements: ``(1) the possession of monopoly power in the
relevant market and (2) the willful * * * maintenance of that power as
distinguished from growth or development as a consequence of a superior
product, business acumen, or historic accident.'' United States v.
Grinnell Corp., 384 U.S. 563, 570-71 (1966). The Supreme Court has
defined monopoly power as ``the power to control prices or exclude
competition.'' United States v. E. I. du Pont de Nemours & Co., 351
U.S. 377, 391 (1956).
Monopoly power may be established by evidence that a firm has
profitably raised prices above the competitive level. See United States
v. Microsoft Corp., 253 F.3d 34, 51 (D.C. Cir. 2001). In the absence of
such direct proof, monopoly power may be inferred from circumstantial
evidence, including ``a firm's possession of a dominant share of a
relevant market that is protected by entry barriers.'' Id. When
evaluating monopoly power, relying on current market share alone can
sometimes be misleading. But generally, evidence of dominant market
share, without countervailing evidence of the possibility of
competition from new entrants, is sufficient to show monopoly power.
Id.
In this case, there is strong direct and circumstantial evidence
that United Regional has monopoly power in the relevant markets. First,
there is direct evidence that United Regional has charged
supracompetitive prices for a sustained period of time. As explained
above, United Regional was formed in 1997 by the merger of Wichita
General Hospital and Bethania Regional Health Care Center, a merger
that eliminated competition between what were then the only two general
acute-care hospitals in Wichita Falls. Since that merger, United
Regional has been the ``must-have'' hospital for insurers in the
Wichita Falls MSA and has increased its prices to the point that it is
now one of the most expensive hospitals in Texas. One commercial health
insurer estimated that it pays United Regional almost 70% more than
what it pays hospitals in the Dallas-Fort Worth area for inpatient
hospital services. In Wichita Falls, United Regional's average per-day
rate for inpatient hospital services sold to commercial health insurers
is about 70% higher than Kell West's for the services that are offered
by both hospitals. Similarly, the Complaint alleges that United
Regional's prices for outpatient surgical services are also among the
highest in Texas. Yet, despite United Regional's supracompetitive
prices, neither Kell West nor other smaller facilities has had a
significant competitive impact on United Regional.
Second, market-share data provide circumstantial evidence of United
Regional's monopoly power. The Complaint alleges that United Regional
has a dominant share of the markets for both inpatient hospital
services and outpatient surgical services sold to commercial health
insurers. United Regional's share of inpatient hospital services sold
to commercial health insurers is approximately 90% in the Wichita Falls
MSA, and its share of outpatient surgical services sold to commercial
health insurers is more than 65% in that same region. These shares have
remained relatively constant for more than a decade while United
Regional's prices have risen. Furthermore, as the Complaint alleges,
both relevant product markets have significant barriers to entry--
including United Regional's exclusionary contracts. During the last
twelve years, no new firms other than Kell West have entered the
relevant product markets in the Wichita Falls MSA.

D. Exclusionary Conduct

Possessing monopoly power does not by itself constitute
``monopolization.'' See Grinnell, 384 U.S. at 570-71. Rather, Section 2
of the Sherman Act makes it unlawful to maintain monopoly power through
exclusionary conduct. See Verizon Commc'ns, Inc. v. Law Offices of
Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004); Microsoft, 253 F.3d at
58.

[[Page 13219]]

The general test for exclusionary conduct is set forth in United States
v. Microsoft Corp. First, a plaintiff must show that a monopolist's
conduct has had an ``anticompetitive effect.'' Id. Second, if a
plaintiff proves an anticompetitive effect, the monopolist may proffer
a non-pretextual ``procompetitive justification'' for its conduct. Id.
at 59. Third, if the monopolist's procompetitive justification is
unrebutted, the plaintiff ``must demonstrate that the anticompetitive
harm of the conduct outweighs the procompetitive benefit.'' Id.
The Complaint alleges that United Regional's exclusionary contracts
reduced competition and enabled United Regional to maintain its
monopoly in the relevant markets by foreclosing its rivals from many of
the most profitable health-insurance contracts in Wichita Falls--
contracts that are crucial for its rivals to effectively compete.
1. The Exclusionary Contracts Likely Caused Anticompetitive Effects by
Foreclosing United Regional's Rivals From the Most Profitable Health-
Insurance Contracts
A competitor is ``foreclosed'' from competition when it is denied
or disadvantaged in its access to significant sources of input or
distribution. See United States v. Dentsply Int'l, Inc., 399 F.3d 181,
189-90 (3d Cir. 2005). In this case, the foreclosure analysis properly
focuses on the profitability of the various payment sources available
to health-care providers. Thus, while the relevant product markets are
limited to hospital services sold to commercial patients, the
foreclosure analysis in this case must account for the ability of
health-care providers to serve patients covered by other sources of
payment (most significantly, the government plans). If United
Regional's competitors could easily replace the profits lost by the
exclusionary contracts with additional profits from patients covered by
government plans or other payment sources, it is unlikely that the
exclusionary contracts would produce anticompetitive effects.
But as the Complaint explains, profits from the government plans
are not an adequate substitute for the lost profits from the excluded
insurers, making the excluded insurers ``significant sources of input
or distribution.'' Id. Commercial health insurers pay hospitals and
other health-care providers substantially more than the government
plans: in the Wichita Falls MSA, all commercial health insurers pay
United Regional at least double the Medicare payment rate, and all but
one insurer (Blue Cross) pay United Regional more than triple the
Medicare payment rate. Consequently, to simply calculate the percentage
of the total commercial and public-payer lives that the exclusionary
contracts deny United Regional's competitors is not an accurate method
to assess the contracts' effect on competition. Rather, a more
appropriate approach is to assess the degree to which the contracts
have foreclosed access to payments for commercially insured patients
and account for the foreclosed percentage of profits from all payers.
As the Complaint alleges, by 2010, the insurers that had
exclusionary contracts with United Regional accounted for approximately
35% to 40% of all payments United Regional received from commercial
health insurers.\3\ Most of the remaining commercial payments are
attributable to just one insurer--Blue Cross, which pays the lowest
rates due to its size.
---------------------------------------------------------------------------

\3\ These ``foreclosure'' percentages likely underestimate the
impact of the exclusionary contracts on United Regional's
competitors. As the Complaint alleges, some doctors engage in
``block booking,'' performing surgeries and other procedures at the
same facility on a given day. Without the exclusionary contracts,
these doctors could be able to refer all their patients on a given
day--including patients covered by Blue Cross or the government
payers--to one of United Regional's rivals.
---------------------------------------------------------------------------

Because the excluded insurers pay the highest rates, these insurers
account for a substantial share of the profits that would otherwise be
available to competing health-care providers. In particular, these
insurers account for approximately 30% to 35% of the profits that
United Regional earns from all payers--including the government
payers--even though they account for only about 8% of United Regional's
total patient volume. The Complaint alleges that if the excluded
insurers added Kell West and other health-care providers to their
networks, these providers would earn substantially higher profits than
they do now, increasing their ability to compete against United
Regional. For example, if only 10% of these insurers' patients switched
from United Regional to Kell West, and these insurers paid Kell West
30% less than they currently pay United Regional, Kell West's profits
would still likely increase by more than 40%.
2. The Exclusionary Contracts Have Led to Higher Prices and Reduced
Quality Competition in the Relevant Markets
By denying United Regional's competitors access to the most
profitable commercial insurance contracts, United Regional has
increased prices and reduced quality competition in the relevant
markets in three ways.
First, the exclusionary contracts have likely delayed and prevented
the expansion and entry of United Regional's competitors. For example,
without the exclusionary contracts, Kell West likely would have used
the profits that it obtained from contracts with the excluded
commercial health insurers to expand sooner, and would also likely have
added more beds and additional services, such as additional intensive-
care capabilities, cardiology services, and obstetric services. Kell
West has considered expansion into additional services on numerous
occasions, but has been limited in its ability to expand due to its
lack of access to commercially insured patients. This effect on entry
and expansion has reduced the options available to insurers, likely
leading to higher prices for hospital services and higher health-
insurance premiums.
Second, the exclusionary contracts have likely limited price
competition for price-sensitive patients. Even with the exclusionary
contracts, some price competition has already occurred. For example, in
2008 United Regional lowered its list price for gynecological surgeries
because it was concerned that too many price-sensitive patients were
choosing Kell West and the North Texas Surgi-Center to avoid United
Regional's high prices. But because insured patients generally avoid
obtaining health-care services from out-of-network providers, the
exclusionary contracts make it less likely that many commercially
insured patients would switch to another provider in response to a
price increase by United Regional. In the absence of the exclusionary
contracts--with the risk that United Regional would lose some of its
most profitable patients--this type of price competition would likely
increase.
Third, the contracts have likely reduced quality competition
between United Regional and its competitors. Just as the exclusionary
contracts make it less likely that some patients will choose rival
facilities based on price, they have also made it less likely that some
patients will choose other providers based on quality. If United
Regional's competitors became in-network providers for more
commercially insured patients, each of those competitors would have the
incentive to make additional improvements in quality to attract those
patients to its facility; and United Regional, in turn, would also have
the incentive to improve its quality in order to keep patients from
choosing Kell West or another competitor. Therefore, as the Complaint
alleges, without the

[[Page 13220]]

exclusionary contracts, United Regional and its competitors would have
increased incentives to make additional quality improvements, and the
overall level of quality of health care in the Wichita Falls area
likely would be higher.
3. The Exclusionary Contracts Fail an Appropriate Price-Cost Test
The exclusionary contracts challenged in this case closely resemble
de facto exclusive-dealing arrangements. Although the contracts
technically offer commercial health insurers a choice between non-
exclusivity and exclusivity, in reality the non-exclusive rates were
not a commercially feasible option for insurers, and not one insurer
opted for the non-exclusive rate for more than twelve years. Thus, as
with exclusive dealing, the primary concern is not with the
relationship between United Regional's prices and costs, but with the
degree of economic foreclosure caused by its contracting practices.
Yet, while United Regional's contracts resemble exclusive dealing,
they do not achieve economic foreclosure through purely exclusive
contracts, but through pricing terms--discounts tied to exclusivity. In
general, these types of discounts can be either procompetitive or
anticompetitive. Discounts tied to exclusivity can be procompetitive if
they result from ``competition on the merits,'' in which rival
suppliers compete on price so that the most efficient firm will win
additional consumers. In contrast, they can be anticompetitive if they
would prevent equally or more efficient rivals from attracting
additional consumers. Given that such discounts can either benefit or
harm consumers, it is useful to analyze them with a ``price-cost''
test, which helps distinguish between procompetitive and
anticompetitive discounts.
In this case, the appropriate price-cost test resembles the
``discount-attribution'' test adopted in Cascade Health Solutions v.
PeaceHealth, 515 F.3d 883 (9th Cir. 2008). The discount-attribution
test applies when a defendant faces competition for only a portion of
the services that it sells, but offers a discount that applies to all
of its services. In PeaceHealth, the court warned that such discounts
``can exclude a rival [] who is equally efficient at producing the
competitive product simply because the rival does not sell as many
products as the bundled discounter.'' Id. at 909. Thus, in the context
of bundled discounts, the court held that the proper test requires
``the full amount of the discounts given by the defendant on the bundle
[to be] allocated to the competitive product or products.'' Id. at 906.
If the resulting prices are still above the defendant's incremental
cost for providing those services, the discount is likely
procompetitive. By contrast, if the prices are below the defendant's
incremental cost--and would therefore tend to exclude an equally-
efficient provider of those services--the ``anticompetitive-effects''
prong of the Microsoft framework would be satisfied.
To accurately determine whether United Regional's discounted prices
are above cost, however, the entire discount should be attributed not
to the entire volume of the ``competitive product[s],'' as suggested by
the court in PeaceHealth, id. at 909, but rather to the patients that
United Regional would actually be at risk of losing if an insurer were
to choose non-exclusivity (the ``contestable volume'').\4\ Under some
factual circumstances, the contestable volume may consist of the entire
volume of the overlap services (those services that both the defendant
and its competitors provide). This would be the case if a customer that
chooses non-exclusivity would likely obtain all of its purchases of the
competitive products from a rival supplier. Under other circumstances,
however, such as in this case, the contestable volume is likely smaller
than the entire volume of the ``competitive product'' because ``the
rival producer of the competitive product cannot contest all of the
monopolist's sales of that product.'' See Mark S. Popofsky, Section 2,
Safe Harbors, and the Rule of Reason, 15 Geo. Mason L. Rev. 1265, 1294
(2008).
---------------------------------------------------------------------------

\4\ See Gianluca Faella, The Antitrust Assessment of Loyalty
Discounts and Rebates, 4(2) J. Compet. L. & Econ. 375, 379 (2008)
(``A useful indicator of the practice's foreclosure effect is the
incremental price of the contestable portion of the customer's
demand.'').
---------------------------------------------------------------------------

Though measuring the contestable volume may in some cases be
impractical, here the contestable volume can be estimated by examining
patient usage patterns from Blue Cross and Medicare, two major payers
that are not subject to exclusivity. Based on the share of patient
volume that United Regional receives from Blue Cross and Medicare, the
likely contestable volume is approximately 10% of the patient volume
that United Regional receives from the payers that have signed
exclusionary contracts. This is partly because competing providers
offer a more limited portfolio of services, and partly because, as
usage patterns from Blue Cross and Medicare patients suggest, many
patients are likely to choose care at United Regional even for services
that competing providers offer.
When, for each of United Regional's exclusionary contracts, the
entire discount that the insurer receives in exchange for exclusivity
is applied to the contestable volume, the resulting price is below any
plausible measure of United Regional's incremental costs. In other
words, because the contestable volume is small relative to the large
difference between the exclusive and non-exclusive rates in United
Regional's contracts, a competing hospital would need to offer a price
below United Regional's incremental costs for an insurer to profitably
turn down United Regional's offer of exclusivity. As a result, United
Regional's discounts would likely exclude an equally-efficient
competitor.
4. The Exclusionary Contracts Lack a Valid Procompetitive Business
Justification
As stated above, ``even if a company exerts monopoly power, it may
defend its practices by establishing a business justification.''
Dentsply, 399 F.3d at 196. The plaintiff bears the burden of
establishing that ``the monopolist's conduct * * * has the requisite
anticompetitive effect''; when that burden is met, it shifts to the
defendant to ``proffer a `procompetitive justification' for its
conduct.'' Microsoft, 253 F.3d at 58-59. A business justification will
not be accepted where it is pretextual, see, e.g., Eastman Kodak Co. v.
Image Technical Servs., Inc., 504 U.S. 451, 484 (1992), nor is the fact
that the action was taken ``in furtherance of [the company's] economic
interests'' sufficient to meet this burden, see, e.g., LePage's Inc. v.
3M, 324 F.3d 141, 163 (3d Cir. 2003) (en banc).
Here, the Complaint alleges that there is no valid procompetitive
business justification for United Regional's exclusionary contracts,
making it unnecessary to determine whether ``the anticompetitive harm
of the conduct outweighs the procompetitive benefit.'' Microsoft, 253
F.3d at 59. United Regional did not use the contracts to achieve any
economies of scale or other efficiencies as a result of the additional
patient volume that it obtained from the contracts. Moreover, as
described above, United Regional's contracts set prices for the
contestable patient volume at a level below its own incremental costs,
which (1) illustrates that the contracts are not simply lower prices in
exchange for volume, and (2) cannot be justified by economies of scale
in any event.

III. Explanation of the Proposed Final Judgment

The prohibitions and required conduct in the proposed Final
Judgment

[[Page 13221]]

achieve all the relief sought from United Regional in the Complaint,
and thus fully resolve the competitive concerns raised by the
exclusionary contracts challenged in this lawsuit.

A. Prohibited Conduct

Section IV of the proposed Final Judgment seeks to restore
competition between health-care providers in the Wichita Falls MSA by
prohibiting United Regional from using exclusivity terms in its
contracts. In particular, Section IV.A prohibits United Regional from
(1) conditioning the prices or discounts that it offers to commercial
health insurers on whether those insurers contract with other health-
care providers, such as Kell West; and (2) preventing insurers from
entering into agreements with United Regional's rivals. Section IV.B
prohibits United Regional from taking any retaliatory actions against
an insurer that enters (or seeks to enter) into an agreement with a
rival health-care provider.
In addition to prohibiting United Regional from conditioning its
discounts on exclusivity, Section IV.C prohibits United Regional from
offering other types of ``conditional volume discounts'' that could
have the same anticompetitive effects as the challenged conduct.
``Conditional volume discounts'' are prices, discounts, or rebates
offered to a commercial health insurer on condition that the volume of
that insurer's purchases from United Regional meets or exceeds a
specified threshold. For example, United Regional may not offer
discounts that are applied retroactively when a customer reaches a
specified threshold (sometimes referred to as ``first-dollar''
discounts). The retroactive nature of these discounts can disguise
below-cost pricing that excludes equally-efficient competitors and
smaller entrants, resulting in a loss of competition and harm to
consumers. Similarly, United Regional may not offer market-share
discounts, i.e. discounts conditioned on an insurer's purchases at
United Regional meeting a specified percentage of that insurer's total
purchases, whether they apply retroactively or not, because such
discounts can also be a form of anticompetitive pricing. By contrast,
as explained further below, United Regional may offer incremental
discounts that apply solely to purchases above a specified threshold if
those discounts are above cost.\5\
---------------------------------------------------------------------------

\5\ As specified in Section II.F, however, an incremental volume
discount may not be a market-share discount.
---------------------------------------------------------------------------

Finally, United Regional may not use provisions in its insurance
contracts that discourage insurers from offering products that
encourage members to use other in-network providers (besides United
Regional). Although United Regional did not include these types of
provisions in the contracts at issue in this case, this section of the
proposed Final Judgment is designed to make the proposed remedy more
effective.

B. Permissible Conduct

To ensure that United Regional can engage in procompetitive
discounting and other pricing practices, Section V.A(1) of the proposed
Final Judgment allows United Regional to sell its hospital services at
any price or discount, provided that such prices or discounts do not
violate the prohibitions in Section IV. United Regional may still offer
different prices to different commercial health insurers, and it may
consider an insurer's previous or anticipated overall size or volume
when negotiating prices or discounts.
Section V.A(2) allows United Regional to offer above-cost
incremental volume discounts, a certain type of conditional volume
discount that is unlikely to cause anticompetitive harm. By permitting
above-cost incremental volume discounts, the Final Judgment ensures
that United Regional can engage in procompetitive efforts to compete
for additional patient volume, while preventing United Regional from
offering discounts that have the potential to exclude an equally-
efficient competitor. Furthermore, unlike other kinds of conditional
discounts, it is feasible to determine whether an incremental volume
discount is above cost simply by comparing the incremental prices with
the incremental costs without also having to determine the magnitude of
the contestable volume.
Under the terms of the proposed Final Judgment, an incremental
volume discount is deemed above cost if the discounted prices for each
service line, expressed as a percentage of billed charges, are greater
than United Regional's Cost-to-Charge Ratio, defined as the ratio of
total costs (for all services) to total charges, as reported to the
Centers for Medicare and Medicaid Services. For example, United
Regional may offer to accept payments equal to 75% of billed charges
for the first $10 million of gross charges from a particular insurer,
and 40% of billed charges for any charges in excess of $10 million. In
2009, United Regional reported total charges of approximately $807
million, and total costs of approximately $207 million, implying a
Cost-to-Charge Ratio of approximately 26%. Because the discounted
prices for each service line (40% of billed charges) exceed the
hospital's Cost-to-Charge Ratio (26% of billed charges), this offer
would be above cost and permitted under the proposed Final Judgment.
Section V.D allows United Regional to renegotiate or terminate its
contracts according to the provisions in those contracts. However,
United Regional may not terminate a contract because an insurer
contracted with another health-care facility, and, as required in VI.B,
United Regional must honor the discounts conditioned on exclusivity--
regardless of whether an insurer contracts with another health-care
facility--unless or until United Regional's existing contracts are
renegotiated or terminated. If United Regional notifies the insurer of
its intent to renegotiate, United Regional is not required to provide
that discount for more than 270 days after the notice is given.

C. Required Conduct

Section VI.A requires United Regional to (1) notify in writing each
commercial health insurer that has an agreement with United Regional
that the Final Judgment has been entered, and (2) send each of these
insurers a copy of the Final Judgment.
As discussed above, Section VI.B requires United Regional to honor
its current discounts conditioned on exclusivity unless or until such
contracts are renegotiated or terminated. For example, if, when the
Complaint is filed, an agreement allowed for a 25% discount with
exclusivity and a 5% discount without exclusivity, United Regional must
offer its services to that insurer at the 25% discount--even if the
insurer contracts with other health-care facilities--until the
agreement is renegotiated or terminated. However, as explained above,
if United Regional notifies the insurer of its intent to renegotiate,
United Regional is not required to provide the discount for longer than
270 days after the notice is given.

D. Compliance

Section VII of the proposed Final Judgment contains several
provisions to ensure United Regional's compliance with the proposed
Final Judgment. First, under Section VII.A, United Regional is required
to designate an antitrust compliance officer. That officer is required
to provide a copy of the Final Judgment to key United Regional
personnel and develop procedures to ensure United Regional's compliance
with the Final Judgment.

[[Page 13222]]

Second, to facilitate monitoring of United Regional's compliance
with the proposed Final Judgment, Section VII grants the United States
and the State of Texas access, upon reasonable notice, to United
Regional's records and documents relating to matters contained in the
proposed Final Judgment. Within 270 days after the entry of the Final
Judgment, United Regional is required to submit a written report
explaining the actions it has taken to comply with the Final Judgment,
including the status and results of its negotiations with commercial
health insurers. Furthermore, for one year after entry of the Final
Judgment, United Regional must provide the Department of Justice and
the State of Texas copies of all new or revised agreements with
insurers within fourteen days of such agreements being executed. United
Regional must make its employees available for interviews or
depositions about such matters. Moreover, upon request, United Regional
must answer interrogatories and prepare written reports relating to
matters contained in the proposed Final Judgment.

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 will neither
impair nor assist 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, the State of Texas, and United Regional 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 United States Department of Justice, which remains
free to withdraw its consent to the proposed Final Judgment at any time
before the Court's entry of judgment. The comments and the response of
the United States will be filed with the Court and published in the
Federal Register.
Written comments should be submitted to: Joshua H. Soven, Chief,
Litigation I Section, Antitrust Division, United States Department of
Justice, 450 Fifth Street, NW., Suite 4100, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

As an alternative to the proposed Final Judgment, the United States
considered proceeding to a full trial on the merits against United
Regional. The United States is satisfied, however, that the
prohibitions and requirements contained in the proposed Final Judgment
will fully address the competitive concerns set forth in the Complaint
against United Regional. The proposed Final Judgment achieves all or
substantially all of the relief the United States would have obtained
through litigation against United Regional and 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); see also United States v. SBC
Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public-
interest standard under the Tunney Act); United States v. 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 the 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 mechanisms to enforce
the final judgment are clear and manageable.'').\6\
---------------------------------------------------------------------------

\6\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for courts to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns,
489 F. Supp. 2d at 11 (concluding that the 2004 amendments
``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------

As the United States Court of Appeals for the District of Columbia
Circuit has held, a court considers under the APPA, among other things,
the relationship between the remedy secured and the specific
allegations set forth in the United States' complaint, whether the
decree is sufficiently clear, whether enforcement mechanisms are
sufficient, and whether the decree may positively harm third parties.
See Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the
relief secured by the decree, a court may not ``engage in an
unrestricted evaluation of what relief would best serve the public.''
United States v. BNS Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th

[[Page 13223]]

Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62; InBev, 2009 U.S.
Dist. LEXIS 84787, at *3; United States v. Alcoa, Inc., 152 F. Supp. 2d
---------------------------------------------------------------------------
37, 40 (D.DC 2001). Courts have held that:

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

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\7\ In
determining whether a proposed settlement is in the public interest, a
district court ``must accord deference to the government's predictions
about the efficacy of its remedies, and may not require that the
remedies perfectly match the alleged violations.'' SBC Commc'ns, 489 F.
Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 (noting the need
for courts to be ``deferential to the government's predictions as to
the effect of the proposed remedies''); United States v. Archer-
Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.DC 2003) (noting that the
court should grant due respect to the United States' ``prediction as to
the effect of proposed remedies, its perception of the market
structure, and its views of the nature of the case'').
---------------------------------------------------------------------------

\7\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass''); see generally Microsoft, 56 F.3d at 1461
(discussing whether ``the remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest' '').
---------------------------------------------------------------------------

Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[A] proposed decree must be approved
even if it falls short of the remedy the court would impose on its own,
as long as it falls within the range of acceptability or is `within the
reaches of public interest.''' United States v. Am. Tel. & Tel. Co.,
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky.
1985) (approving the consent decree even though the court would have
imposed a greater remedy). To meet this standard, the United States
``need only provide a factual basis for concluding that the settlements
are reasonably adequate remedies for the alleged harms.'' SBC Commc'ns,
489 F. Supp. 2d at 17.
Moreover, 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 InBev, 2009
U.S. Dist. LEXIS 84787, at *20 (``the `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.
As the United States District Court for the District of Columbia
recently confirmed in SBC Communications, courts ``cannot look beyond
the complaint in making the public interest determination unless the
complaint is drafted so narrowly as to make a mockery of judicial
power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of using consent decrees in antitrust
enforcement, adding the unambiguous instruction that ``[n]othing in
this section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2). This language effectuates what
Congress intended when it 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
Senator Tunney). Rather, the procedure for the public-interest
determination is left to the discretion of the court, with the
recognition that the court's ``scope of review remains sharply
proscribed by precedent and the nature of Tunney Act proceedings.'' SBC
Commc'ns, 489 F. Supp. 2d at 11.\8\
---------------------------------------------------------------------------

\8\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.DC 2000) (noting that the ``Tunney Act expressly allows the court
to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ]
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt
failure of the government to discharge its duty, the Court, in
making its public interest finding, should * * * carefully consider
the explanations of the government in the competitive impact
statement and its responses to comments in order to determine
whether those explanations are reasonable under the
circumstances.''); S. Rep. No. 93-298 at 6 (1973) (``Where the
public interest can be meaningfully evaluated simply on the basis of
briefs and oral arguments, that is the approach that should be
utilized.'').
---------------------------------------------------------------------------

VIII. Determinative Documents

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

Respectfully submitted,

Scott I. Fitzgerald (WA Bar 39716),
Andrea V. Arias,
Amy R. Fitzpatrick,
Adam Gitlin,
Steven B. Kramer,
Richard L. Liebeskind,
Richard D. Mosier,
Mark Tobey,
Kevin Yeh,

Attorneys for the United States, U.S. Department of Justice,
Antitrust Division, Litigation I, 450 Fifth Street, NW., Suite 4100,
Washington, DC 20530.
Dated: February 25, 2011.

Certificate of Service

On February 25, 2011, I, Scott I. Fitzgerald, electronically
submitted a copy of the foregoing document with the clerk of court for
the U.S. District Court, Northern District of Texas, using the
electronic case filing system for the court. I hereby certify that I
caused a copy of the foregoing document to be served upon Defendant
United Regional Health Care System electronically or by another means
authorized by the Court of the Federal Rules of Civil Procedure.

Scott I. Fitzgerald (WA Bar 39716),

Attorney for the United States, U.S. Department of Justice,
Antitrust Division, Litigation I, 450 Fifth Street, NW., Suite 4100,
Washington, DC 20530.

In the United States District Court for the Northern District of Texas,
Wichita Falls Division

United States of America and State of Texas, Plaintiffs, v. United
Regional Health Care System, Defendant.
Case No.: 7:11-cv-00030.
Judge: Reed C. O'Connor.

[[Page 13224]]

Filed: Feb. 25, 2011.
Description: Antitrust.

[Proposed] Final Judgment

Whereas, Plaintiffs, the United States of America and the State of
Texas, filed their Complaint on February 25, 2011, alleging that
Defendant, United Regional Health Care System, has unlawfully
maintained its monopoly by entering into exclusionary agreements with
commercial health insurers, harming competition and consumers in
violation of Section 2 of the Sherman Act, 15 U.S.C. 2; and
Whereas, Plaintiffs and Defendant, by their respective attorneys,
have consented to the entry of this Final Judgment without trial or
adjudication of any issue of fact or law; and
Whereas, Plaintiffs require Defendant to agree to undertake certain
actions and refrain from certain conduct for the purpose of remedying
the anticompetitive effects alleged in the Complaint;
Now therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, without this Final Judgment
constituting any evidence against or admission by Defendant regarding
any issue of fact or law, and upon consent of the parties to this
action, it is ordered, adjudged, and decreed:

I. Jurisdiction

This Court has jurisdiction over the subject matter of this action
and over Defendant. The Complaint states a claim upon which relief may
be granted against Defendant under Section 2 of the Sherman Act, 15
U.S.C. 2.

II. Definitions

As used in this Final Judgment:
A. ``Commercial Health Insurer'' (or ``Insurer'') means a Person
providing commercial health insurance or access to health-care provider
networks, including but not limited to managed-care organizations,
rental networks (i.e., Persons that lease, rent, or otherwise provide
direct or indirect access to a proprietary network of healthcare
providers), and self-funded plans, regardless of whether that Person
bears any risk or makes any payment relating to the provision of health
care. The term ``Commercial Health Insurer'' (or ``Insurer'') includes
Insurers that provide Medicare Advantage plans, but does not include
Medicare, Medicaid, or TRICARE, or entities that otherwise contract on
their behalf.
B. ``Conditional Volume Discount'' means a price, discount, or
rebate that is offered to a Commercial Health Insurer on condition that
the volume of that Insurer's Purchases from Defendant meets or exceeds
a specified threshold.
C. ``Cost-to-Charge Ratio'' means the ratio of Defendant's total
operating expenses to its total patient charges, for all service lines
in aggregate, as reported to the Centers for Medicare & Medicaid
Services pursuant to 42 U.S.C. 1395g and 42 CFR 413.20(b).
D. ``Hospital Services'' include (1) acute-care diagnostic and
therapeutic inpatient services and (2) acute-care diagnostic and
therapeutic outpatient services, including but not limited to
ambulatory surgery and radiology services.
E. ``Hospital-Services Provider'' means any provider of Hospital
Services, including but not limited to facilities that provide Hospital
Services solely on an outpatient basis.
F. ``Incremental Volume Discount'' means a Conditional Volume
Discount that is offered to a Commercial Health Insurer for which the
price, discount, or rebate applies only to Purchases above the
specified threshold. For purposes of this Final Judgment, the term
``Incremental Volume Discount'' does not include any price, discount,
or rebate that is offered on condition that the Insurer's Purchases of
Hospital Services from Defendant meet or exceed a specified percentage
threshold of that Insurer's Purchases of Hospital Services in a defined
geographic area.
G. ``Person'' means any natural person, corporation, company,
partnership, joint venture, firm, association, proprietorship, agency,
board, authority, commission, office, or other business or legal
entity, whether private or governmental.
H. ``Purchase,'' when used in reference to a Commercial Health
Insurer's purchase of Hospital Services, includes but is not limited to
arrangements between Commercial Health Insurers and Hospital-Services
Providers pursuant to which the parties agree to the prices, discounts,
and other terms on which Hospital Services are to be provided to
patients, insurers, and self-funded employers, regardless of whether
the Commercial Health Insurer that is party to the arrangement directly
receives or pays for the Hospital Service.
I. ``Service Line'' means (1) for inpatient services, each of the
mutually-exclusive major diagnosis categories (MDCs) as defined by the
Centers for Medicare & Medicaid Services, and (2) for outpatient
services, the ``admit service area'' as used in the Defendant's course
of business to identify outpatient service lines.
J. The terms ``and'' and ``or'' have both conjunctive and
disjunctive meanings.

III. Applicability and Interpretation

A. This Final Judgment applies to the Defendant; its directors,
officers, managers, agents, employees, successors, and assigns; its
controlled subsidiaries, divisions, groups, affiliates, and
partnerships; and all other Persons in active concert or participation
with the Defendant who receive actual notice of this Final Judgment by
personal service or otherwise. For purposes of this Final Judgment, an
entity is controlled by Defendant if Defendant holds 50% or more of the
entity's voting securities, has the right to 50% or more of the
entity's profits, has the right to 50% or more of the entity's assets
on dissolution, or has the contractual power to designate 50% or more
of the directors or trustees of the entity.
B. The purpose of this Final Judgment is to prevent and remedy the
use by Defendant of allegedly unlawful exclusionary agreements that
limit competition for the sale of Hospital Services. This Final
Judgment shall be interpreted to promote that purpose and not to limit
it.

IV. Prohibited Conduct

A. Defendant shall not enter into, adopt, maintain, or enforce any
term in any agreement that directly or indirectly:
(1) Conditions any price or discount offered to or paid by any
Commercial Health Insurer on that Insurer's not entering into an
agreement for the Purchase of Hospital Services from, or including in a
provider network, another Hospital-Services Provider; or
(2) Prohibits any Commercial Health Insurer from entering into an
agreement for the Purchase of Hospital Services from, or including in a
provider network, another Hospital-Services Provider.
B. Defendant shall not take, or threaten to take, any actions to
discriminate, retaliate, or punish any Commercial Health Insurer
because that Insurer agrees, obtains, or seeks to agree or obtain
Hospital Services from another Hospital-Services Provider, including
but not limited to:
(1) Terminating any agreement with the Commercial Health Insurer;
(2) Offering less favorable terms and conditions to the Commercial
Health Insurer; or
(3) Refusing to enter into an agreement with the Commercial Health
Insurer.
C. Defendant shall not offer or agree to sell Hospital Services to
any Commercial Health Insurer at a Conditional Volume Discount, except
as allowed by Section V.A(3).

[[Page 13225]]

D. Defendant shall not offer or agree to any term in an agreement
with a Commercial Health Insurer that prohibits the Insurer from
offering products that encourage members to use other in-network
Hospital-Services Providers; nor shall Defendant take, or threaten to
take, any actions to discriminate, retaliate, or punish any Commercial
Health Insurer for offering such products, including but not limited to
the retaliatory actions listed in Section IV.B(1)-(3).

V. Permitted Conduct

A. Nothing in this Final Judgment shall prohibit Defendant from
offering or agreeing to sell Hospital Services to:
(1) Any Commercial Health Insurer at any price or discount,
provided that such prices or discounts do not violate the prohibitions
in Section IV;
(2) Different Commercial Health Insurers at different prices or
discounts, provided that such prices or discounts do not violate the
prohibitions in Section IV;
(3) Any Commercial Health Insurer at an Incremental Volume
Discount, provided that the discounted prices are above cost. For
purposes of this decree, this above-cost requirement is satisfied if
the discounted prices for each Service Line that apply to purchases
above the specified threshold, expressed as a percentage of billed
charges (the ``discounted prices''), are greater than the Defendant's
Cost-to-Charge Ratio based on the most recent report submitted to the
Centers for Medicare & Medicaid Services before the date on which the
Insurer and Defendant executed the contract. Provided, however, that
after three years from the date the contract is effective, and for
every three-year period thereafter, the discounted prices must be
greater than the Defendant's Cost-to-Charge Ratio based on the most
recent report submitted to the Centers for Medicare & Medicaid Services
before the beginning of the three-year period.
B. Nothing in this Final Judgment shall prohibit Defendant from
considering a Commercial Health Insurer's previous or anticipated
overall size or volume when negotiating a price or discount.
C. Nothing in this Final Judgment shall prohibit Defendant from
participating in a Commercial Health Insurer's preferred provider
network or other forms of limited-provider panels provided that such
activity does not violate the prohibitions in Section IV.
D. Except as prohibited by Section IV.B, and subject to the
requirement in Section VI.B, Defendant and any Commercial Health
Insurer may renegotiate or terminate their agreements according to the
notice and termination provisions in such agreements.

VI. Required Conduct

A. Within 15 days after entry of this Final Judgment, Defendant
shall notify in writing each Commercial Health Insurer with which
Defendant has an agreement that this Final Judgment has been entered,
enclosing a copy of this Final Judgment.
B. Defendant shall provide Hospital Services to each Commercial
Health Insurer at the discount previously conditioned on exclusivity,
even if any such Insurer enters into agreements with other Hospital-
Services Providers, unless and until such discount is renegotiated
according to Section V.D; provided, however, that Defendant is not
required to provide such discount for greater than 270 days after
Defendant notifies Insurer of its intent to renegotiate the contract.

VII. Compliance and Access

A. Defendant shall appoint an Antitrust Compliance Officer within
seven days of entry of this Final Judgment, and a successor within
thirty days of a predecessor's vacating the appointment, with
responsibility for implementing an antitrust compliance program to
ensure Defendant's compliance with this Final Judgment.
B. Each Antitrust Compliance Officer appointed pursuant to Section
VII.A shall:
(1) Within 15 days after this Final Judgment takes effect, provide
a copy of this Final Judgment to each of Defendant's directors and
officers, and to each employee whose job responsibilities relate in any
substantive way to negotiating or reviewing agreements with Commercial
Health Insurers for the Purchase of Hospital Services;
(2) Distribute in a timely manner a copy of this Final Judgment to
any Person who succeeds to, or subsequently holds, a position of
director or officer or an employee whose job responsibilities relate in
any substantive way to negotiating or reviewing agreements with
Commercial Health Insurers for the Purchase of Hospital Services; and
(3) Within 60 days after this Final Judgment takes effect, develop
and implement the procedures necessary to ensure Defendant's compliance
with this Final Judgment. Such procedures shall ensure that questions
from any of Defendant's directors, officers, or employees about this
Final Judgment can be answered by counsel as the need arises.
C. For purposes of determining or securing compliance with this
Final Judgment, or of determining whether the Final Judgment should be
modified or vacated, and subject to any legally-recognized privilege,
from time to time authorized representatives of the U.S. Department of
Justice or the Office of the Texas Attorney General (including their
consultants and other retained persons) shall, upon written request of
an authorized representative of the Assistant Attorney General in
charge of the Antitrust Division or the Office of the Texas Attorney
General and on reasonable notice to Defendant, be permitted:
(1) access during Defendant's office hours to inspect and copy, or,
at the option of the United States or the State of Texas, to require
Defendant to provide hard copy or electronic copies of all books,
ledgers, accounts, records, data, and documents in the possession,
custody, or control of Defendant, relating to any matters contained in
this Final Judgment; and
(2) to interview, either informally or on the record, Defendant's
officers, employees, or agents, who may have their counsel present,
regarding such matters. The interviews shall be subject to the
reasonable convenience of the interviewee without restraint or
interference by Defendant.
D. Within 270 days after the entry of this Final Judgment,
Defendant shall submit to the United States and the State of Texas a
written report setting forth its actions in compliance with this Final
Judgment, specifically describing (1) the status and results of all
negotiations with Commercial Health Insurers, and (2) the compliance
procedures adopted pursuant Section VII.B(3) of this Final Judgment.
For any new or revised agreement with any Commercial Health Insurer
that is executed within one year of the entry of this Final Judgment,
Defendant shall submit to the United States and the State of Texas a
copy of such agreement within fourteen days from the date the agreement
is executed.
E. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division or the
Office of the Texas Attorney General, Defendant shall submit written
reports or respond to written interrogatories, under oath if requested,
relating to any of the matters contained in this Final Judgment.
Written reports authorized under this paragraph may, at the sole
discretion of the United States, require Defendant to conduct, at its
cost, an independent

[[Page 13226]]

audit or analysis relating to any of the matters contained in this
Final Judgment.
F. No information or documents obtained by the means provided in
this section shall be divulged by the United States or the State of
Texas to any Person other than an authorized representative of (1) the
executive branch of the United States or (2) the Office of the Texas
Attorney General, except in the course of legal proceedings to which
the United States or the Office of the Texas Attorney General is a
party (including grand jury proceedings), or for the purpose of
securing compliance with this Final Judgment, or as otherwise required
by law.
G. If at the time information or documents are furnished by
Defendant to the United States or the State of Texas, Defendant
represents and identifies in writing the material in any such
information or documents to which a claim of protection may be asserted
under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure, and
Defendant marks each pertinent page of such material, ``Subject to
claim of protection under Rule 26(c)(1)(G) of the Federal Rules of
Civil Procedure,'' then the United States and the State of Texas shall
give Defendant fourteen days' notice prior to divulging such material
in any legal proceeding (other than a grand jury proceeding), except as
otherwise required by law or court order.

VIII. 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.

IX. Expiration of Final Judgment

Unless this Court grants an extension, this Final Judgment shall
expire seven years from the date of its entry.

X. 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' response to comments. Based
upon the record before the Court, which includes the Competitive Impact
Statement and any comments and response to comments filed with the
Court, entry of this Final Judgment is in the public interest.

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

Court approval subject to procedures set forth in the Antitrust
Procedures and Penalties Act, 15 U.S.C. 16.
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United States District Judge

[FR Doc. 2011-5529 Filed 3-9-11; 8:45 am]
BILLING CODE P