Challenged Practices Affected Two-Thirds of Lithotripsy Procedures in Metro Area
Approximately two-thirds of the Chicago metropolitan-area patients who undergo lithotripsy -- a non-surgical, shock-wave treatment for stones -- are treated at one or the other of two Parkside Kidney Stone Centers. Today the Federal Trade Commission announced that three firms and two doctors behind the Parkside ventures have settled charges that they illegally fixed the prices for professional urologist services for lithotripsy procedures performed at Parkside facilities over the past several years. The settlement agreement would prohibit similar price- fixing activity in the future, and bar the Parkside owners from renewing contracts with insurance companies and other third-party payers that include the fixed fees. The settlement also would require the respondents to notify the Commission 45 days before entering into certain future agreements or ventures.
The FTC alleged in its complaint that through Urological Stone Surgeons, Inc. (USS), which operates the first Parkside facility that opened in Park Ridge in 1986, and Stone Centers of America, L.L.C. (SCA), which operates the Parkside LaGrange facility that opened in 1995, Chicago-area urologists agreed to use a common billing agent and to establish a uniform price for their professional services for lithotripsy. The uniform professional fee (which was initially $2,000) was raised on an annual basis until the proposed respondents learned of the Commission’s investigation. The third company named in the FTC’s complaint, Urological Services, Ltd., (USL) is the billing agent. The individual respondents named in the case are Drs. Donald M. Norris and Marc. A. Rubenstein, owners of and/or officers in the three firms. The price-fixing agreements restrained competition both among the urologists who are owners of the Parkside venture, and among non-owner urologists who used the Parkside facilities, resulting in higher prices, the FTC alleged.
Parkside, which accounts for more than 2,500 lithotripsy procedures a year, is one of about eight lithotripsy centers in the Chicago metropolitan area. Parkside is owned by 101 urologists (35 have jointly invested in USS which, along with 66 additional urologists, owns SCA) who constitute about 45 percent of the urologists in the area. Parkside facilities are used by more than 140 urologists, about 65 percent of the urologists in the area.
According to the FTC complaint detailing the charges in this case, USS first informed the urologists who were its investors that patients would be charged a set price for urologists’ services and that USS or its agent would bill and collect for the service. The urologists agreed to use USL as their billing agent, and each urologist who provided lithotripsy services at Parkside facilities was required to sign an agreement with USL prohibiting independent billing of patients and requiring acceptance of the sum paid by USL. USL distributed fee schedules to the urologists, revising the schedules annually to reflect increased prices. The owners of USS and SCA have financially integrated by jointly investing in the purchase and operation of the two lithotripsy machines that Parkside operates. However, the collective setting of the price for their professional lithotripsy services, or for other non-investor urologists using Parkside facilities, is not reasonably necessary to achieving efficiencies from their legitimate joint ownership and operation of the machines, and is illegal under federal antitrust laws, according to the FTC.
The complaint also alleges that USL negotiated contracts with insurance companies and other third-party purchasers of lithotripsy services under which these purchasers agreed to a payment based on either a negotiated uniform percentage discount off the urologist’s charge for professional services, or a negotiated uniform “global” fee that covered the use of the lithotripsy machine, the urologist’s fee and the anesthesiologist’s services. These contracts represent agreements among the urologists to collectively offer their services at a fixed price or discount. Where such a global fee arrangement involves the sharing of financial risk among the participants and provides incentives for them to use the most efficient treatment plan for each case, the fixed global fee can be legal. In this case, however, there was no such sharing of financial risk and, therefore, the fee as it relates to urologist professional services violates antitrust laws, according to the FTC.
The proposed consent agreement to settle these charges, announced today for public comments, would:
- prohibit the respondents from agreeing or attempting to agree to fix or negotiate prices, discounts, or other terms of sale or contract for lithotripsy services;
- require USS, SCA, and USL to terminate third-party payer contracts that include the challenged fees at contract-renewal time, or upon the written request of a third-party payor; and
- require USS, SCA, USL, and Drs. Norris and Rubenstein to notify the FTC at least 45 days before forming or participating in an integrated joint venture to provide lithotripsy professional services.
The proposed settlement also includes various record keeping and reporting provisions designed to assist the FTC in monitoring the respondents’ compliance with the order.
This case was investigated by the FTC’s Chicago Regional Office and its Health Care Division.
The Commission vote to announce the complaint and proposed consent agreement for public comment was 4-0, with Commissioner Orson Swindle not participating. Commissioner Mary L. Azcuenaga issued a statement in which she concurred in part and dissented in part. Commissioner Azcuenaga agreed with the provisions of the order requiring the respondents to cease and desist from fixing the price of lithotripsy services, but dissented as to the order provision requiring the respondents to give 45 days notice before forming or participating in an integrated joint venture that deals on collectively determined terms for lithotripsy services, saying "it is unjustified and unnecessary." Azcuenaga stated, “The prior notice requirement departs from the Commission's policy adopting a presumption against prior approval and prior notice provisions in merger and joint venture orders." She noted that an exemption to the policy may be appropriate "if there is a credible risk that prior notice is necessary to prevent repetition of the unlawful conduct." Azcuenaga concluded, “Given the express prohibition in the proposed order of the allegedly unlawful conduct, the potential liability for civil penalties, and the periodic reports of compliance that may be required under the order, no such necessity appears."
A summary of the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Copies of the complaint, consent agreement, an analysis of the agreement to assist the public in commenting, and Commissioner Azcuenaga's statement are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326- 3128; TTY for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. 931 0028)
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