FTC Staff Comment Before the Massachusetts Department of Public Health Concerning Proposed Regulation of Limited Service Clinics

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Office of Policy Planning
Bureau of Economics
Bureau of Competition
Bureau of Consumer Protection
September 27, 2007
LouAnn Stanton, Esq.
Office of the General Counsel
Massachusetts Department of Public Health
250 Washington Street
Boston, MA 02108
Dear Ms. Stanton:
The staffs of the Federal Trade Commission=s Office of Policy Planning, Bureau
of Economics, Bureau of Consumer Protection, and Bureau of Competition1 are pleased
to respond to the Department of Public Health’s invitation for testimony regarding the
proposed regulation of limited service clinics in Massachusetts.2 The Department of
Public Health (“DPH”) has undertaken an important initiative to facilitate the emergence
of new models of health care delivery.3 We agree with the DPH that a new category of
limited service medical clinics has the potential to expand access to health care by
making very basic medical care convenient and less costly.4 In addition, such clinics
1 This letter expresses the views of the Federal Trade Commission’s Office of Policy Planning, Bureau of
Economics, Bureau of Consumer Protection, and Bureau of Competition. The letter does not necessarily
represent the views of the Federal Trade Commission (“Commission”) or any individual Commissioner.
The Commission has, however, voted to authorize us to submit these comments.
2 Massachusetts Department of Public Health, MDPH Sets Public Hearings for Proposed Clinic
Regulations [hereinafter MDPH Hearings], available at
http://www.mass.gov/?pageID=pressreleases&agId=Eeohhs2&prModName=dphpressrelease&prFile=07
0815_clinic_regs_hearings.xml.
3 The American Medical Association has noted the growth of what it terms store-based health clinics –
generally located in pharmacies, shopping malls, and retail stores, and often staffed by nurse practitioners
and/or physician assistants – and has stated that, “[i]n general, store-based health clinics are able to fulfill
the immediate needs of patients with minor conditions with less waiting time, more flexible evening and
weekend hours, and in some cases, lower out-of-pocket expenses.” American Medical Association, Report
7 of the Council on Medical Service (A-06), Store-Based Health Clinics 1 [hereinafter Council on Medical
Service Report] (June 2006).
4 See Massachusetts Dept. Pub. Health, Commonwealth to Propose Regulations for Limited Service
Clinics: Rules May Promote Convenience, Greater Access to Care (Jul. 17, 2007), available at
http://www.mass.gov/?pageID=pressreleases&agId=Eeohhs2&prModName=dphpressrelease&prFile=0707
17_clinics.xml (Quoting the Commissioner of Public Health, “[i]f approved, these proposed regulations
will not only help make very basic medical care convenient, they could also expand access to health care to
very vulnerable populations.”) It has been reported that consumers most commonly cite convenience
factors such as clinic location, shorter wait times, and longer operating hours as advantages to store-based
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might spur price or quality competition with more traditional clinics or physician
practices.5 To that end, the DPH’s proposal to permit such clinics is commendable, and
its proposal of regulatory flexibility – such that the Secretary of DPH may waive certain
requirements as appropriate – might be especially helpful in an emerging market, as
health care providers explore different ways to deliver basic care on a competitive basis.
At the same time, the FTC staff believes that the proposed pre-screening
requirement for all limited service clinic (“LSC”) advertising may be overly restrictive,
and we recommend that it be struck. Requiring regulatory pre-approval of all advertising
materials might represent an undue burden on LSCs and deprive consumers of useful
information about basic health care services. In addition, requiring pre-approval for LSC
advertising alone, and not that of other health care clinics, might put LSCs at a
competitive disadvantage without offering countervailing consumer benefits.
Interest and Experience of the Federal Trade Commission
The FTC is charged generally under the FTC Act with preventing unfair methods
of competition and unfair or deceptive acts or practices in or affecting commerce.6 In
addition, Section 12 of the FTC Act specifically prohibits the dissemination of false
advertisements for foods, drugs, devices, services, or cosmetics.7
For several decades, the Commission and its staff have investigated the
competitive effects of restrictions on the business practices of health care providers.8 For
example, in 2003, the FTC and the Department of Justice Antitrust Division held twenty-
health clinics, but that a significant minority cites cost issues as well. See Council on Medical Service
Report, supra note 3, at Executive Summary 1. Because of the limited services offered, and the reduced
facilities required to offer such services, and because of typical staffing by, e.g., nurse practitioners, certain
costs and prices may be lower. Some employers have reported better cost containment and store- and
work-based clinics, as well. See id. at Executive Summary 1 and 1-3. It has also been reported that
several major insurers cover RediClinic visits (store-based clinics in Wal-Mart, H-E-B, and some
Walgreens stores in five states); and that Wal-Mart stores report that between 25% and 40% of the clinic
visitors are uninsured. American Medical Association, Report of the Council on Medical Services, Update
on Store-Based Health Clinics [hereinafter CMS Update] (2007), available at http://www.ama-
assn.org/ama1/pub/upload/mm/372/a07cms5.pdf.
5 Council on Medical Service Report, supra note 3 (noting that, “[a]s a result of the emergence of store-
based health clinics, many physicians have begun to evaluate making changes to their practices in order to
become more accessible to patients.”) In addition, it has been reported that physicians have opened their
own basic care clinics, employing both nurse practitioner and physician staffing. See CMS Update, supra
note 4, at 3.
6 Federal Trade Commission Act, 15 U.S.C. ' 45; cf. MASS . A NN . LAWS ch. 93A (declaring unlawful under
state law “unfair or deceptive acts or practices in the conduct of any trade or commerce” and declaring that
the legislature intends the provision to be “guided by the interpretations given by the Federal Trade
Commission and the Federal Courts to section 5(a)(1) of the Federal Trade Commission Act”).
7 Id. at § 52.
8 See Federal Trade Commission, FTC Antitrust Actions in Health Care Services and Products (Aug.
2007), available at http://www.ftc.gov/bc/0608hcupdate.pdf.
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seven days of hearings on health care and competition law and policy.9 In 2004, the FTC
and the Antitrust Division jointly released a report – based on those hearings, an FTC-
sponsored workshop, and independent research – that covered diverse issues in health
care competition and delivery.10 Both the hearings and the report addressed, among other
things, the impact of regulation on the dissemination of useful health care information to
consumers and its impact on consumers’ access to care.
The Commission and its staff have also undertaken research and advocacy
directed specifically at health care advertising issues.11 For example, the FTC staff has
examined nutrition and health care issues in food product advertising12 and the direct-to-
consumer advertising (DTCA) of prescription drugs, dietary supplements, and medical
devices, and has filed comments with the Food and Drug Administration (“FDA”)
regarding DTCA and DTCA regulation.13
The FTC’s enforcement actions also have shown a special concern with the
integrity of health care goods and services advertising. From April 2006 through
February 2007 alone, the FTC initiated or resolved 13 law enforcement actions
(involving 25 products) involving allegedly deceptive health claims.14
9 Federal Trade Commission and Department of Justice, Joint Hearings on Health Care and Competition
Law and Policy (2003). Links to transcripts and other hearings materials are available at
http://www.ftc.gov/bc/healthcare/research/healthcarehearing.htm.
10 Federal Trade Commission and Department of Justice, IMPROVING H EALTH CARE : A D OSE OF
COMPETITION Chapter 7 (2004), available at
http://www.ftc.gov/reports/healthcare/040723healthcarerpt.pdf.
11 LSCs are, by definition, novel market entities and their putative advertising practices have not, to the best
of our knowledge, been the subject of systematic study. The FTC has, however, conducted and analyzed
research in other areas of health care goods and services advertising, including research regarding
restrictions on advertising by health care professionals. See, e.g., Federal Trade Commission, Bureau of
Economics Report, The Effects of Restrictions on Advertising and Commercial Practice in the Professions:
The Case of Optometry [hereinafter Optometry Report] (1980).
12 See, e.g., P. Ippolito & J. Pappalardo, Advertising Nutrition & Health: Evidence from Food Advertising
1977-1997 (2002) (FTC Bureau of Economics Staff Report), available at
http://www.ftc.gov/opa/2002/10/advertisingfinal.pdf; P. Ippolito & A. Mathios, Information & Advertising
Policy: a Study of Fat and Cholesterol Consumption in the United States, 1977-1990 (1996) (FTC Bureau
of Economics Staff Report), copies available upon written request, with executive summary available at
http://www.ftc.gov/be/hilites/fatexsum.shtm; J. Calfee & J. Pappalardo, How Should Health Claims for
Food be Regulated? An Economic Perspective (1989).
13 Comments of the FTC Staff Before the FDA In the Matter of Request for Comments on Consumer-
Directed Promotion [hereinafter 2003 DTCA Comments] (Dec. 1, 2003), available at
http://www.ftc.gov/be/v040002text.pdf; Comments of the FTC Staff Before the FDA In the Matter of
Request for Comments on Agency Draft Guidance Documents Regarding Consumer-Directed Promotion
[hereinafter 2004 DTCA Comments] (May 10, 2004), available at
http://www.ftc.gov/os/2004/05/040512dtcdrugscomment.pdf.
14 See, e.g., FTC v. Window Rock Enters., Inc., No. CV04-8190 (JTLx) (C.D. Calif. filed Jan. 4, 2007)
(stipulated final orders) (Cortislim), available at
http://www.ftc.gov/os/caselist/windowrock/windowrock.htm; In the Matter of Goen Techs. Corp., FTC File
No. 042 3127 (Jan. 4, 2007) (consent order) (TrimSpa), available at
http://www.ftc.gov/os/caselist/goen/0423127agreement.pdf; United States v. Bayer Corp., No. 07-01
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At the same time, the Commission has long expressed concern with
anticompetitive restrictions on advertising by health care professionals. Because
consumers need access to information to be effective market participants and to play an
active role in their own health care, it is important to avoid overly broad or otherwise
excessive restrictions on consumer access to truthful and non-misleading information.
Over several decades, the FTC has sought to limit the anticompetitive and anti-consumer
effects of unnecessary restrictions on truthful and non-misleading advertising by, among
others, physicians,15 chiropractors,16 and optometrists.17
Discussion
A. 	Overview: The DPH has proposed various amendments to its health
clinic licensing regulations to permit the licensing of a new class of limited service
clinics.18 Most of the proposed amendments appear designed to apply general licensing
requirements – including the procedural requirements of licensing, minimum standards
for facilities, record keeping, and emergency transfer arrangements – to LSCs.19 In some
cases, certain modifications have been made to accommodate the more limited nature of
(HAA) (D.N.J. filed Jan. 3, 2007) (consent decree) (One-A-Day), available at
http://www.ftc.gov/os/caselist/bayercorp/070104consentdecree.pdf; FTC v. Chinery, No. 05-3460 (GEB)
(D.N.J. filed Dec. 26 , 2006) (stipulated final order) (Xenadrine), available at
http://www.ftc.gov/os/caselist/chinery/070104stipulatedfinalorder.pdf; FTC v. QT, Inc., No. 03 C 3578
(N.D. Ill. Sept. 8, 2006) (memorandum opinion and order), available at
http://www.ftc.gov/os/caselist/0323011/060908qt-qraymemoopinionandorder.pdf.
14 See Prepared Statement of the Federal Trade Commission, Before the S. Comm. on Commerce, Sci., &
Trans., 110 th Cong., 14 (Apr. 10, 2007), available at
http://www.ftc.gov/os/testimony/P040101FY2008BudgetandOngoingConsumerProtectionandCompetitionP
rogramsTestimonySenate04102007.pdf.
15 See, e.g., In re American Medical Ass’n, 94 FTC 701 (1979) (final opinion & order) (regarding
restrictions on truthful and non-misleading advertising by member physicians); Response from FTC Staff
to Ms. Katherine M. Carroll, Executive Director of the Medical Practitioner Review Panel in New Jersey,
concerning one of the advertising regulations of the New Jersey Board of Medical Examiners (Sept. 7,
1993), available at http://www.ftc.gov/be/healthcare/docs/AF%203.PDF.
16 See Texas Bd. of Chiropractic Examiners, C-3379 (consent order issued Apr. 21, 1992), 57 Fed. Reg.
20279 (May 12, 1992).
17 See, e.g., Optometry Report, supra note 11.
18 An announcement of the proposed amendments to 105 CMR 140.000, together with a link to the
proposed amendments, is available at
http://www.mass.gov/?pageID=pressreleases&agId=Eeohhs2&prModName=dphpressrelease&prFile=0708
08_limited_service_clinics.xml.
19 See, e.g., Proposed 140.020 (defining a new category of “limited services” such that the “requirements of
105 CMR 140.100 through 140.109 are applicable to all clinics” – including LSCs).
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LSCs.20 Several proposed regulations – such as the required pre-screening of all LSC
advertising21 – appear to impose novel requirements on LSCs.22
B. 	Advertising: Proposed section 140.1001 would require, among other
things, that “[i]f a limited service clinic provides any form of advertising, the clinic must
submit all advertising materials to the Department for prior approval. A limited service
clinic may not use any advertising materials, including internet sites, that have not been
reviewed and approved by the Department.”23 As written, the provision appears likely to
raise the costs of operating LSCs and to delay or suppress their truthful and non-
misleading advertising. To the extent that the proposed pre-screening requirement
imposes significant burdens on LSCs, but on no other type of licensed health care clinic
or physician practice, the requirement might raise competition issues for new health care
service entities seeking to enter and compete in the market. Finally, because the
proposed rule would require that “any” material be pre-screened (or else prohibited), and
because “internet sites” are included among such materials, it is possible that the pre-
screening requirement could act as an operational burden on small LSCs if, for example,
minor changes of hours or staffing could not be announced without regulatory delay or
other regulatory costs.
Truthful advertising performs an indispensable role in the allocation of resources
in the market. As the FTC staff has observed in other health-related advertising research,
“[t]he economics literature contains considerable evidence that the introduction of
advertising into markets can have a positive effect on market performance, through lower
prices, product improvements, or beneficial changes in consumer purchases, for
instance.”24 That general finding about advertising goods and services has been found to
apply equally to the advertising of professional health care services,25 and to the
20 See, e.g., Proposed 140.099 (providing that the “Commissioner [of Public Health] may waive the
applicability to a particular clinic of one or more of the requirements,” under certain conditions).
21 Proposed 105 C.M.R. 140.1001(I)(2).
22 We note that the scope of the proposed regulations might be clarified further. Proposed section 140.020
defines “Limited Services” as “[a] prescribed set of preidentified diagnostic and treatment services not
otherwise defined as a Specific Service in 105 CMR 140.020 that do not require a complete physical
examination and that may make use of CLIA-waived tests only.” The list of specific services includes
“Medical Service,” defined as “service that provides diagnosis or treatment of illness or other medical
services that are distinct from the services provided under other ‘specific services’ set forth herein.”
“Medical Service” thus appears to be a catch-all category, including health care clinic services not
otherwise enumerated as specific services. If so, these various provisions of proposed section 140.020
could be read jointly to preclude any area of healthcare service for LSCs. Because that reading is
inconsistent with the stated purpose of the proposed regulations, further clarification may be warranted.
23 Proposed 105 C.M.R. 140.1001(I)(2).
24 Advertising Nutrition & Health, supra note 16, at E-20.
25 See, e.g., Terry Calvani, James Langenfeld & Gordon Shuford, Attorney Advertising and Competition at
the Bar, 41 Vand. L. Rev. 761, 779-781 (1988) (surveying empirical evidence regarding advertising in
health care professions).
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advertising of other professional services.26 The free flow of truthful advertising can be
equally critical to both providers and consumers, and might be especially important
where emerging health care entities offer novel and more convenient access to care27 or
price advantages that might be critical to marginal health care consumers.28 Such
interests have, too, been at the core of the Supreme Court’s commercial speech
jurisprudence since Virginia State Board of Pharmacy.29
Hence, it is important that regulations aimed at protecting consumers from false
or misleading information avoid unnecessarily impeding consumer access to truthful,
non-misleading information about the range of available health care services.30 The FTC
has stated that targeted remedies addressing deceptive advertising generally are
preferable to broad pre-market approval of health care claims.31 As noted above, the
FTC Act provides the FTC with enforcement authority in the event that false or
misleading advertisements do arise, and the FTC has substantial interest and experie
in the exercise of that authority in health care markets.
nce
ising.
32 The Commonwealth, too, can
enforce state law prohibitions against deceptive advert 33
Because the DPH has not yet specified either the process whereby pre-screening
is to take place, or the institutional resources to be devoted to such pre-screening, it is
difficult to predict the extent to which the proposed regulation would burden truthful and
non-misleading commercial speech. Nonetheless, we are not aware of any evidence
supporting a special need for pre-screening for LSCs. In the absence of such evidence,
general prohibitions against false or misleading advertising are preferable to overly broad
restrictions that might prove costly for Massachusetts health care consumers, independent
of the DPH’s implementation costs.
26 See id. (comparing evidence regarding health professions advertising to evidence regarding attorney
advertising); Timothy Muris & Fred McChesney, The Effect of Advertising on the Quality of Legal
Services, 65 A.B.A. J. 1503, 1506 (1979).
27 See MDPH Hearings, supra note 2; see also Council on Medical Service Report (A-06), supra note 3 at
1.
28 Report 7 of the Council on Medical Service (A-06), Store-Based Health Clinics, supra note 4 at 1.
29 Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748, 770 (1976)
(state’s interest in integrity of profession does not justify unnecessary suppression of truthful advertising
under First Amendment).
30 Cf. 2003 DTCA Comments, supra note 13, at 37 (encouraging FDA to consider ways to facilitate the
flow of truthful and non-misleading information in direct to consumer advertisements for prescription
drugs).
31 See, e.g., Comments of the Federal Trade Commission Staff Before the Dept. of Health and Human
Services Food and Drug Administration, In the Matter of Request for Comment on First Amendment
Issues, 13 (Sept. 13, 2002), available at http://www.ftc.gov/os/2002/09/fdatextversion.pdf.
32 See, e.g., supra notes 6-7 and 14 (regarding FTC authority and enforcement actions, respectively). The
threat of enforcement acts, in conjunction with market forces, as a deterrent to the dissemination of false or
misleading advertising.
33 See, e.g., supra note 6 (regarding MASS . A NN. LAWS ch. 93A).
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If there is evidence that certain claims are likely to mislead or confuse consumers,
DPH may want to consider measures – such as agency guidance or mandatory disclosures
– that are narrowly tailored to avoid serious harms, but preserve the flow of truthful and
non-misleading information.34
Conclusions
The Commission staff agrees with the Department of Public Health that a new
category of limited service medical clinics has the potential to expand access to health
care. The DPH has undertaken an important initiative to facilitate the emergence of this
new model of health care delivery within the bounds of responsible practice and
professional licensing standards. At the same time, the staff has some concern that
certain provisions of the proposed LSC regulations might be unclear or unduly restrictive
of emerging clinic practices. In particular, the proposed requirement that all LSC
advertising be pre-screened by the DPH is likely to prove an impediment to the
dissemination of truthful and non-misleading information about health care alternatives
for Massachusetts consumers. For that reason, the staff recommends that the pre-
screening requirement be struck, especially as there appears to be no evidentiary basis for
requirements above and beyond a prohibition of false or misleading advertising.
34 See id. at 16-17 (regarding the Food Copy Test and FTC guidance on the qualification of certain health
claims); see also id. at 21 (regarding certain mandatory disclosures).
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Respectfully submitted,
Maureen K. Ohlhausen
Director
Office of Policy Planning
Michael R. Baye
Director
Bureau of Economics
Jeffrey Schmidt
Director
Bureau of Competition
Lydia B. Parnes
Director
Bureau of Consumer Protection
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