Chairman Timothy J. Muris Opening Remarks(1)

FTC/DOJ Hearings on
Health Care and Competition Law and Policy

February 26, 2003

Welcome to the new FTC Conference Center for our inaugural event in this facility and welcome to our hearings on health care and competition law and policy, jointly hosted with the Department of Justice. Over the next seven months, we will devote thirty days of hearings to a variety of subjects in the health care financing and delivery markets. Consistent with the broad mandate of the Federal Trade Commission, we will examine these issues through the lens of competition law and policy, encompassing antitrust, consumer protection, and competition advocacy.

Today, we are releasing a detailed agenda for the next month of hearings and an outline for the balance of the hearings. In brief, March will be devoted to hospitals, April to insurers, May to quality and consumer information, and June to physicians and non-price competition. July and September will cover a range of subjects, including pharmaceuticals, long-term care, Medicare, remedies for anticompetitive conduct, and international perspectives on competition law and policy. We will be holding three to five days of hearings each month.

In keeping with the basic medical insight that diagnosis must precede treatment, we will gather the information necessary to understand how the markets for the financing and delivery of health care currently work. We will identify and characterize particular examples of market and regulatory failure and evaluate the costs and benefits of various responses. Around the FTC, we refer to all of these activities as policy R&D. Our goals are information gathering, dialogue, and consensus building.

When these hearings are completed, we will use this information to prepare a comprehensive report. In the interim, we will post the testimony and documentation on the FTC web site within a few weeks of each set of hearings. The hearings will provide the most up-to-date and in-depth information available on the performance of various sectors of health care. The hearings should also help make our decisions regarding enforcement (and non-enforcement) more transparent, which will be of considerable benefit to the health care antitrust bar.

These hearings are not the first foray of the Federal Trade Commission into health care. In the mid-1970s, when I was an Assistant to the Director of the Planning Office, my first job at the Commission, we established a task force to investigate occupational regulation in several industries, including health care. In the intervening three decades, the FTC has been a constant presence in the health care marketplace, bringing enforcement actions against hospitals, physicians, trade associations, pharmaceutical companies, promoters of fraudulent cures, and a wide range of other individuals and entities.

These are also not our first meetings about health care and competition law and policy. In September 2002, we held a two-day workshop on health care and competition law and policy, in which we examined numerous issues. These are certainly our most ambitious hearings on the subject. Indeed, whether one judges by the number of days of hearings, the scope of subjects covered, or the commitment of Commission resources, these hearings are one of the most ambitious policy R&D initiatives in the history of the FTC.

I am particularly pleased that a full seven days of hearings will be devoted to consumer information issues in health care. In the past, the focus of our consumer protection initiatives in health care has been fraud and deception, including the deceptive advertising of diet supplements and miracle cancer cures. Yet, consumer information problems in health care are obviously not limited to fraud and deception. Informational asymmetries in health care are pervasive, particularly regarding quality. The hearings will accordingly address the availability of information regarding the quality of care provided by hospitals, physicians, nursing homes, and other providers of professional services. Measuring and disseminating information about health care quality raises complex issues that we will explore at length.

One of these issues is the historical opposition of professional organizations to the advertising of cost and quality information regarding professional services. The Commission has long advocated using competition to deliver truthful and accurate information to consumers and has consistently supported the voluntary disclosure of truthful, non-deceptive information by market participants. Our position is the same as that of Nobel Laureate George Stigler, who once observed that advertising is "an immensely powerful instrument for the elimination of ignorance."

These hearings also will help provide a factual foundation to respond to the Supreme Court's challenge in California Dental: our enforcement efforts involving advertising and the professions must be based on actual empirical evidence, not on assumptions and presumptions.

Quality is a crucial part of the competitive mix when purchasing health care. Competition law does not hinder the delivery of high quality care. The Commission will always consider arguments that a particular transaction or certain conduct will improve quality. Competition law also does not prevent efforts to disseminate information about what providers perceive to be barriers to enhanced quality. The favorable advisory opinion earlier this month from the staff of the Bureau of Competition, responding to the request of physicians in Dayton to collect and disseminate information regarding fees and quality, exemplifies our position in this area.

When the Federal Trade Commission began in 1915, it encompassed both research and enforcement. These hearings grow from the former, but we hope and expect that they will contribute to the latter. In particular, we want to know what we are doing that we should stop - and what we are not doing that we should begin. Our goal is to ensure that our enforcement uses the best available economic theory and the best possible understanding of the underlying facts. The hearings present a useful, non-adversarial setting to examine these issues.

There is no question that applying competition law and policy to health care is challenging, particularly when the issue is the quality of care. Yet, competition is the engine for ensuring that the one-seventh of our GDP spent on health care results in the efficient delivery of the services Americans desire. Aggressive competition promotes lower prices, higher quality, greater innovation, and enhanced access. More concretely, in health care, competition results in new and improved drugs, cheaper generic drugs, treatments with less pain and fewer side effects, and treatments offered in a manner and location consumers desire.

Competition law exists to stop those who would interfere with these outcomes, in favor of their own self-interest or their idiosyncratic view of what patients actually need. Theory and practice confirm that such interference with competition is far more likely to decrease consumer welfare than to increase it.

We do not have a pre-existing preference for any particular model for the financing and delivery of health care. Such matters are best left to the marketplace. What the Commission does have is a commitment to vigorous competition along both price and non-price parameters.

Let me close by acknowledging that hearings such as these do not take place at all - let alone include the talent we have assembled over the next three days and are assembling over the next seven months - without an extraordinary degree of hard work and commitment. As Chairman, my job is to pick the right people to make sure the work gets done and done well. Here at the FTC, those talented people include Bill Kovacic, general counsel; Susan DeSanti, the deputy general counsel for policy studies; David Hyman, special counsel, currently on loan to the Commission from the University of Maryland School of Law; Sarah Mathias from the General Counsel's Office; Nicole Gorham, a paralegal in the General Counsel's Office; and Angela Wilson, an administrative assistant from the Policy Studies group. I especially wish to thank my fellow Commissioners for supporting these hearings.

I hope you find these hearings to be both educational and enjoyable. As Bob Pitofsky noted in a speech he gave six years ago, "in health care as in no other area, there appears to be a recurring need to return to first principles, and to talk about why competition and antitrust enforcement make sense." These hearings mark our attempt to return to first principles, and talk (and listen) about why competition, antitrust enforcement, and consumer protection make sense in health care.

Endnote:

1. These remarks reflect the views of Chairman Muris, not necessarily those of the Commission or of any other Commissioner.