[Federal Register Volume 63, Number 7 (Monday, January 12, 1998)]
[Notices]
[Pages 1867-1869]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-710]


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FEDERAL TRADE COMMISSION

[File No. 931-0028]


Urological Stone Surgeons, Inc., et al.; Analysis to Aid Public 
Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before March 13, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:
William Baer or Robert Leibenluft, FTC/H-374, Washington, D.C. 20580. 
(202) 326-2932 or 326-3688.
C. Steven Baker, Federal Trade Commission, Chicago Regional Office, 55 
East Monroe St., Suite 1437, Chicago, IL. 60603. (312) 353-8156.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of 
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby 
given that the above-captioned consent agreement containing a consent 
order to cease and desist, having been filed with and accepted, subject 
to final approval, by the Commission, has been placed on the public 
record for a period of sixty (60) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home page 
(for January 6, 1998), on the World Wide Web, at ``http://www.ftc.gov/
os/actions/htm.'' A paper copy can be obtained from the FTC Public 
Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, N.W., 
Washington, D.C. 20580, either in person or by calling (202) 326-3627. 
Public comment is invited. Such comments or views will be considered by 
the Commission and will be available for inspection and copying at its 
principal office in accordance with Section 4.9(b)(6)(ii) of the 
Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii).

Analysis of Proposed Consent Order to Aid Public Comment

    The Federal Trade Commission has accepted an agreement, subject to 
final approval, to a proposed consent order settling charges that 
Urological Stone Surgeons, Inc. (``USS''), Stone Centers of America, 
L.L.C. (``SCA''), and Urological Services, Ltd. (``USL'') (doing 
business as Parkside Kidney Stone Center (``Parkside'')), and Marc A. 
Rubenstein, M.D., and Donald M. Norris, M.D. (individually, and as 
officers, directors, and shareholders of USS, as shareholders of SCA, 
and as owners and officers of USL), violated Section 5 of the Federal 
Trade Commission Act by agreeing on prices to be charged for the 
physician services provided by urologists as part of performing 
lithotripsy.
    The proposed consent order has been placed on the public record for 
sixty (60) days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After sixty (60) days, the Commission will review the agreement and the 
comments received, and will decide whether it should withdraw from the 
agreement and take other appropriate action or make final the 
agreement's proposed order.
    The purpose of this analysis is to facilitate public comment on the 
proposed consent order. It is not intended to constitute an official 
interpretation of the agreement and proposed order, or to modify their 
terms in any way.
    The proposed consent order has been entered into for settlement 
purposes only, and does not constitute an admission by USS, SCA, USL, 
Dr. Rubenstein, or Dr. Norris that the law has been violated as alleged 
in the complaint.

The Complaint

    Extracorporeal shock wave lithotripsy (``lithotripsy'') is a non-
surgical alternative for treating kidney stones. It

[[Page 1868]]

requires the services of a urologist (a physician specializing in the 
diagnosis and treatment of diseases or medical conditions of the 
urogenital system) to operate a lithotripsy machine, which shatters the 
kidney stones into sand-like particles by means of high-energy pressure 
waves. The complaint charges that the five proposed respondents, and 
other unnamed urologists agreed to fix the price for their professional 
services in providing lithotripsy (``lithotripsy professional 
services'') at Parkside.
    Parkside is one of about eight providers of lithotripsy in the 
Chicago metropolitan area. Parkside operates two lithotripsy 
facilities: one in Park Ridge, Illinois; and a second in LaGrange, 
Illinois. The owners of USS and SCA, who constitute approximately 45 
percent of the urologists in the Chicago metropolitan area, have 
jointly invested in the purchase and operation of the two lithotripsy 
machines that Parkside operates. USS, which is owned by 35 urologists, 
including Drs. Rubenstein and Norris, purchased and provides the 
lithotripsy machine for Parkside's Park Ridge facility. SCA, which is 
owned by USS and approximately 66 additional urologists, purchased and 
provides the lithotripsy machine for Parkside's LaGrange facility.
    The complaint alleges that, beginning in 1985, the proposed 
respondents and unnamed urologists agreed to fix the price of 
lithotripsy professional services delivered at Parkside, and in 
furtherance of that agreement: (1) Agreed to use a common billing agent 
and to establish a uniform charge for lithotripsy professional 
services; (2) prepared and distributed fee schedules for lithotripsy 
professional services at Parkside; (3) billed a uniform amount, either 
the amount listed in the fee schedules or an amount negotiated on 
behalf of all urologists at Parkside.
    In particular, in March 1985, USS informed its prospective 
investors, all of whom were urologists, that USS or its agent (USL) 
would bill and collect an estimated $2,000 professional fee for each 
lithotripsy professional service provided at Parkside, and remit such 
fee to the provider urologist. In April 1985, in furtherance of this 
agreement, USS agreed to use its best efforts to establish a 
lithotripsy professional fee of $2,000, subject to annual increases to 
reflect the changes in the cost of medical services in the Chicago 
metropolitan area. USL produced and disseminated to the urologists a 
fee schedule that included an initial lithotripsy professional fee of 
$2,000. The urologists, in turn, agreed to accept the amount 
established by USL and to use USL as their common billing agent for all 
services provided at Parkside. Each year thereafter, pursuant to the 
April 1986 agreement, USL increased the charges for lithotripsy 
professional services and distributed revised fee schedules.
    The complaint further alleges that USL, acting in accordance with 
this series of agreements, uniformly billed the then-current fee 
schedule amount for lithotripsy professional services regardless of 
which urologist provided the service. In addition, USL, on behalf of 
all the urologists providing lithotripsy professional services at 
Parkside, negotiated contracts with puchasers of lithotripsy services. 
Pursuant to these contracts, each purchaser agreed to reimburse for 
such services on the basis of either a negotiated uniform percentage 
discount from charges, or a negotiated uniform bundled or ``global'' 
fee (which included the fee for use of the lithotripsy machine, the 
urologist's professional fee, and the fee for the anesthesiologist's 
services in the lithotripsy procedure). Through each such contract, the 
urologists effectively agreed collectively to offer their lithotripsy 
professional services to each purchaser at a fixed price or discount.
    The ``global fee'' established at Parkside merely aggregates three 
uniformly necessary inputs to a single medical procedure--lithotripsy--
where the usage, costs, and relative proportions of the inputs do not 
vary substantially from case to case.\1\ Thus, the ``global fee'' used 
at Parkside is unlike arrangements in which health care providers, for 
a fixed, pre-determined ``global fee'' (sometimes called an ``all-
inclusive case rate''), agree to provide all needed services for a 
patient's complex or extended course of treatment, such as cardiac care 
or cancer treatment. This type of global fee arrangement, in contrast 
to the arrangement used by Parkside, may involve the sharing of 
substantial financial risk by the participants, and provide incentives 
for them to determine and use the most efficient combination of 
treatment inputs for each case. Under these circumstances, their 
collective setting of the global fee may be reasonably necessary for 
them to achieve significant efficiencies, and therefore judged under 
the rule of reason rather than treated as unlawful price fixing.\2\
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    \1\ Anesthesia charges may vary somewhat, if a procedure takes 
slightly more or less time. However, even this variation is quite 
limited, since there are limits set on how much exposure to the 
shock waves generated by lithotripsy that patients may receive at 
any treatment.
    \2\ See U.S. Department of Justice and Federal Trade Commission 
Statements of Antitrust Enforcement Policy in Health Care (Aug. 
1996) at 68-69, 71-72; 107-110.
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    The complaint charges that, while the owners of USS and SCA have 
financially integrated by joint investing in the purchase and operation 
of the two lithotripsy machines that Parkside operates, collective 
setting of the price for their lithotripsy professional services, or 
for other non-investor urologists using Parkside, is not reasonably 
necessary (or ``ancillary'') to achieving any efficiencies that may be 
realized through their legitimate joint ownership and operation of the 
machines.\3\ Moreover, the complaint alleges that the urologists 
providing lithotripsy professional services at Parkside, which also 
includes urologists who are not investors in the machine joint venture, 
have not substantially integrated their professional practices so as to 
justify respondents' agreement to fix the price for urologists' 
lithotripsy professional services at Parkside.
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    \3\ Id. at 18-19
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    About two-thirds of the lithotripsy procedures performed in the 
Chicago metropolitan area are, and for several years have been, 
performed at Parkside. The complaint charges that the agreement to fix 
the price of lithotripsy professional services at Parkside has injured 
consumers by restraining competition among urologists in the provision 
of lithotripsy professional services and fixing or increasing the 
prices for such services.

The Proposed Consent Order

    Part II.A. of the proposed consent order would prohibit the five 
proposed respondents from engaging in any agreement with each other or 
with any other urologist: (1) To fix the price for lithotripsy 
professional services; and (2) concerning any other term of sale for 
lithotripsy professional services. In addition, under Part II.B. of the 
proposed consent order, USS, SCA, and USL would be required to 
terminate any agreement with any third-party payer for the provision of 
lithotripsy professional services that does not comply with Part II.A. 
of the order at the earlier of: (1) The termination or renewal date of 
the agreement; or (2) receipt of a written request from the third-party 
payer to terminate such agreement.
    Despite these provisions, however, the proposed consent order would 
not prevent the five proposed respondents from providing lithotripsy 
professional services pursuant to any existing

[[Page 1869]]

agreement with any third-party payer until the earlier of (1) the 
termination or renewal date of the agreement, or (2) receipt of a 
written request from the third-party payer to terminate such agreement, 
In addition, the proposed consent order would not prevent either Dr. 
Rubenstein or Dr. Norris from entering into an agreement with any other 
physician with whom he practices in partnership or in a professional 
corporation, or who is employed by the same person as Dr. Rubenstein or 
Dr. Norris, to deal with any patient, purchaser, or their-party payer 
on collectively determined terms.
    Nothing in the proposed order would prevent USS, SCA, or USL from 
offering a bundled or ``global'' fee that included the lithotripsy 
machine fee and the anesthesia fee, without the lithotripsy 
professional service fee, since such an arrangement would not involve 
any agreement on fees of lithotripsy professional services. Likewise, 
the proposed order would not prohibit them from contracting with 
purchasers of payers using a ``messenger model'' arrangement that did 
not involve any explicit or implicit agreement among urologist 
regarding the prices, discounts, or other terms of sale or 
reimbursement of their services.
    The proposed consent order also would not prohibit any of the 
respondents from dealing through an integrated joint venture with any 
purchaser on collectively determined terms regarding lithotripsy 
professional services, provided that the respondent first notifies the 
Federal Trade Commission of any such joint venture activity in writing 
at least forty-five (45) days prior to the activity.
    Part III of the proposed consent order would require USS, SCA, and 
USL to distribute copies of the proposed order and accompanying 
complaint to (a) persons whose activities are affected by the order, or 
who have responsibilities with respect to the subject matter of the 
order, and (b) each urologist who provides lithotripsy professional 
services at Parkside. In addition, the proposed consent order would 
require USS, SCA, and USL to distribute copies of the proposed order 
and accompanying complaint, together with the NOTICE attached to the 
order, to each third-party payer with whom they have an agreement that 
does not comply with Part II.A. of the order.
    Parts IV, V, and VI of the proposed order impose certain reporting 
requirements in order to assist the Commission in monitoring compliance 
with the order.
    The proposed consent order would terminate 20 years after the date 
it is issued.
Donald S. Clark,
Secretary.

Separate Statement of Commissioner Mary L. Azcuenaga Concurring in Part 
and Dissenting in Part in Parkside Kidney Stone Center, File No. 391-
0028

    I agree that an order requiring the respondents to cease and desist 
from fixing the price of professional lithotripsy services is 
warranted, but the requirement that the respondents, for ten years, 
give the Commission 45 days notice before ``forming or participating in 
an integrated joint venture'' that deals on collectively determined 
terms for lithotripsy services is unjustified and unnecessary.\1\ 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.\2\ An exception to the policy may be 
appropriate, if these is a credible risk that prior notice is necessary 
to prevent repetition of the unlawful conduct. Given the express 
prohibition in the proposed order of the allegedly unlawful conduct, 
the potential liability for civil penalties for a violation, and the 
periodic reports of compliance that may be required under the order, no 
such necessity appears. I dissent from the prior notice requirement.

    \1\ The prior notice requirement is inconsistent with the weight 
of Commission precedent. Similar cases in the health care field 
typically have not imposed any notice requirements or have required 
notice within 30 days after certain joint venture activity. See 
e.g., Physicians Group, Inc., Docket C-3620 (Aug. 11, 1995); Trauma 
Associates of North Broward, Inc., Docket C-3541 (Nov. 1, 1994); 
Southbank IPA, Inc., 114 F.T.C. 783 (1991); Preferred Physicians, 
Inc., 110 F.T.C. 157 (1988); Medical Staff of Doctors' Hospital of 
Prince George's County, 100 F.T.C. 476 (1988). But see Montana 
Associated Physicians, Inc., Docket C-3704 (Jan 13, 1997) (20-year 
prior approval); College of Physicians-Surgeons of Puerto Rico, File 
No. 971-0011 (filed D. Puerto Rico Oct. 2, 1997) (Commissioner 
Azcuenaga concurring in part and dissenting from perpetual prior 
approval requirement).

    \2\ Prior Approval Policy Statement (June 1955), Reprinted in 4 
Trade Reg. Rept. Rep. (CCH) para.13,241.
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[FR Doc. 98-710 Filed 1-9-98; 8:45 am]
BILLING CODE 6750-01-M