Morning session on September 30, 2003 (reported on by Tracy Weir Madigan of Hogan & Hartson, L.L.P.) Sitesh Bhojani

Transcription

1 Morning session on September 30, 2003 (reported on by Tracy Weir Madigan of Hogan & Hartson, L.L.P.) The morning session of the FTC/DOJ Hearings on Health Care and Competition Law and Policy on September 30, 2003 focused on international perspectives on health care and competition law and policy. Sarah Mathias and Bruce McDonald moderated for the FTC and DOJ, respectively. Commissioner Mozelle W. Thompson opened the hearing by stating that America is not alone in examining health care competition and the unique aspects of the health care industry. Sitesh Bhojani Sitesh Bhojani, Commissioner, Australian Competition & Consumer Commission, discussed the Australian health care system and the role and enforcement actions of the Australian Competition & Consumer Commission ( ACCC ) within that system. Several sources fund the Australian health care system. The primary funding source is the Commonwealth government, which provides funding to both the public and private sectors. The Commonwealth accounts for approximately 48 percent of all health care expenditures, and also subsidizes private health insurance by providing citizens with rebates or incentive payments to encourage enrollment in private health plans. The state and territory governments account for approximately 20 percent of all expenditures. Self-insurance funds, third party insurers and citizens account for the remaining expenditures. The principal competition law in Australia is the Trade Practices Act (the Act ). Prior to 1996, the ACCC had no power to apply the Act to states and territories. In 1996, the states and territories agreed to health reforms that effectively empowered the ACCC to apply the Act to them. Although many of the jurisdictional issues surrounding the Act have been resolved, application of the Act to states and territories continues to be tested. Since 1996 (and universal application of the Act), the ACCC s primary role has been to educate Australians regarding the benefits of competition policy and law. Many Australians in the medical community remain skeptical about application of the Act to health care and the medical profession. A result of this skepticism is that the medical profession has not taken Australia s antitrust laws seriously. Alternatively, medical professionals have sought exemptions from those laws through various political means. The ACCC has responded by beefing up enforcement. Mr. Bhojani discussed several enforcement actions brought by the ACCC since For instance, the ACCC brought a price fixing case against the Australian Society of Anesthetists ( ASA ). Members of the ASA collectively agreed not to provide services to hospitals unless the hospitals agreed to pay a $25/hour on-call allowance. The ACCC successfully enforced the Act against the ASA, and required the ASA to declare that its action was unlawful and that it would not thereafter engage in the practice. The ACCC did not obtain penalties; however, the ASA paid the cost of enforcement. This case was largely responsible for the ensuing debate regarding whether medical professionals should be exempt from the antitrust laws. Mr. Bhojani

2 also illustrated several other health care related enforcement actions in which the ACCC successfully enjoined unlawful conduct (e.g., boycotts by obstetricians and unlawful bulk-billing covenants). In each of these actions, the ACCC obtained declarations and injunctions, or refunds. No penalties have been assessed. In addition to enforcement actions, the ACCC analyzes requests for authorization. The ACCC has the power, on a case-by-case basis, to exempt certain types of conduct from application of the Act where a public benefit arises from the conduct that outweighs any anticompetitive detriment. Mr. Bhojani illustrated several instances in which authorization has been sought in the health care industry. The ACCC has given authorization for some hospitals collective bargaining arrangements and for certain price-fixing agreements for physicians in rural areas. It also has given a limited authorization to the Royal College of Surgeons, which is responsible for training and placement of physicians, by requiring more transparency in the process of selecting physician trainees, training locations, and the overall number of training locations. Bruce Cooper Bruce Cooper, Director, Professions Compliance Unit, Enforcement and Coordination Branch, Australian Competition and Consumer Commission, discussed consumer protection aspects of the health care industry, including access to health plan information by consumers and distribution of such information by health funds. Mr. Cooper also discussed several consumer protection cases brought by the ACCC. Mr. Cooper suggested that a lack of consumer information might impede competition. In Australia, there is an oversupply of information regarding health products; however, comparing the products of different health funds is often difficult. Unlike the United States where employers serve as the distribution channels for health product information, Australian health plans advertise directly to the consumers. This makes comparisons among plans more complicated for consumers. The ACCC has encouraged health plans on a number of fronts to make health plan information more accessible. It has encouraged plans to issue a key features brochure with consumer information that is amenable to comparisons with other plans information. While health plans have complied, they have not made the brochures easily accessible to consumers. The ACCC has also endorsed electronic linkages developed by the health plans that provide consumers with access to health insurance status of the patient and their benefits. Mr. Cooper discussed several consumer protection cases brought by the ACCC. For example, he mentioned a misrepresentation case brought against the largest health insurance fund in Australia for misleading or deceptive advertising regarding premiums. The fund advertised that premiums would not increase in the calendar year (in fact, they had) and that it would allow one free month of switching (in fact, it did not). The ACCC s case against the health fund is ongoing. Due to interlocutory proceedings in the matter, the ACCC has not been able to obtain compensation for the aggrieved consumers. As a result, the ACCC is seeking specific performance on the advertised claims, injunctions on further misleading/deceptive claims and a declaration by the health insurance fund that its advertising had breached the law.

3 Dr. Liu, Len-Yu Dr. Liu, Len-Yu, Commissioner, Taiwan Fair Trade Commission, presented competition law and policy in the health care market in Taiwan. Specifically, he discussed the Fair Trade Act (the Act ) that empowers the Fair Trade Commission ( FTC ) and the roles of the Department of Health ( DOH ) and the sole health insurer Bureau of National Health Insurance ( BNHI ) in Taiwan s health care system. Dr. Liu also presented several actions brought by the FTC. The Act is the predominant and underlying economic law in Taiwan. It applies to all industries and is intended to promote stability and prosperity for economic actors. Article 46 of the Act created the Taiwan FTC. Under that article, the FTC is empowered to focus on competitive issues and industrial policies of government agencies to ensure proper implementation of the Act. The DOH manages the establishment of medical organizations. It is also responsible for transferring patients among hospitals and the reasonable distribution of medical resources, among other things. In 1995, DOH implemented a mandatory insurance plan for all Taiwanese citizens. The sole insurer is BNHI, which pays medical organizations for most medical expenses. The government establishes the payment rates for BNHI. Patients are responsible only for a registration fee charged by the medical organization where they receive care. The FTC solicits advice from the DOH and BNHI in all health care related competition cases. Dr. Liu discussed a number of actions brought by the FTC. For instance, he illustrated a case regarding concerted action. The case involved a group of clinics that collectively agreed, by resolution, to close every other Sunday. The group closed the clinics that did not agree to the resolution. When the FTC learned about this conduct, it consulted with the DOH and the affected city governments, and decided that the closures would result in a decrease in medical services. The FTC concluded that the mandatory closures violated the Act, which states that no enterprise is allowed to take concerted action. The FTC required that the resolution be lifted and that each clinic be allowed to set its own schedule. Declan Purcell Declan Purcell, Member, Irish Competition Authority and head of the Authority s Advocacy Division, discussed Irish competition law and authority, provided an overview of the Irish health care sector, illustrated several competition issues in medical subsectors and concluded with comments regarding the future needs of competition policy in Ireland. Enacted in 2002, Ireland s Competition Act authorizes the Competition Authority to undertake enforcement actions for cartel and abuse of dominance cases, merger actions (through clearance requirements) and advocacy efforts primarily targeting regulated markets. Advocacy consists of advising members and government bodies regarding new and previously existing competition legislation, conducting studies of market sectors and undertaking educational efforts for the public good.

4 The health care sector represents 6.5 percent of Ireland s GDP or 10.5 billion in These statistics are climbing. Seventy-six percent of health care expenditures arise from public sources, while 21.5 percent come from private sources. Health care in Ireland is comprised of a public/private mix consisting of two categories. Category 1 represents the 31 percent of the population that has complete public coverage (i.e., entitlement) determined by income and age (e.g., everyone 71 years and up is entitled to public coverage). Public coverage includes free access to local hospital services, prescriptions and physicians. Category 2 represents the remaining percent of the population that has limited subsidized coverage for hospital stays and drugs. These coverage categories do not equate to timely access or quality. Timely access to care remains a key problem in Ireland s health care system. The principal health care agency in Ireland the Department of Health and Children ( DOHC ) is fragmented and old. The DOHC has ten regional state health boards and multiple semi-autonomous agencies. Overall, there are approximately 53 agencies with power. Mr. Purcell noted that there are more administrators than clinicians under this system and suggested an approximate ratio of 6:1. Public health care funding is predominantly (80%) driven by general taxation. The remaining funding (20%) comes from out-of-pocket expenses and revenues from public hospital beds used by private patients. Over the past five years, funding has increased by 125 percent with little improvement in performance and the continuation of long waiting lists for care. Some reports suggest the existence of five-year waiting list for elective surgery and that some patients have waited for three days on a trolley before receiving care. Mr. Purcell stated that the system requires radical overhaul with greater financial accountability, greater efficiency and fewer agencies. Private health insurance markets exist for general practice medicine and specialist services, pharmaceuticals and hospital care. There are two health insurance plans in Ireland, one of which is state-owned Voluntary Health Insurance ( VHI ), which has 87 percent of the market. The other BUPA Ireland has achieved a 13 percent share since its entry in The main difference between public and private funding sources for patients is the speed of access to care. Funding sources have no affect on the quality of care received. Ireland has both public and private hospitals. Twenty percent of public hospital beds have been designated for use by private patients and 15 percent of the total bed capacity is privately owned. Public beds available for private use are charged at a rate that is lower than the hospital s cost (i.e., $50.00 flat fee). The pharmaceutical sector includes retail pharmacies that are fairly un-concentrated, but are heavily regulated. There are restrictions on employment of overseas graduates (including Irish citizens trained overseas) and on establishing chain pharmacies. Additionally, the DOHC sets pharmaceutical prices at the import/wholesale level. Pharmaceuticals in Ireland are marked up by 50 percent, which represents the highest mark-up in the European Union. Medical professionals are also heavily regulated through restrictions on entry, behavior and organizational form. Entry barriers exist as to foreign trained medical professionals. Other

5 barriers include general prohibitions on any advertising that includes comparisons, specialists expertise or solicitations. Additionally, medical professionals may not practice through limited liability corporations or through multi-disciplinary practices. In conclusion, Mr. Purcell stated that despite Ireland s small economy, there is a big role for competition authority in health care. Advocacy will be a primary tool to persuade regulators to allow an increase in competition to arise from reducing the many statutory restrictions on the medical community. Michael Jacobs Mr. Michael Jacobs, Professor, DePaul Law School, framed the presentations of the other panelists by suggesting two overall issues. First, Professor Jacobs stated that very little thought had been given to industrial policy with regard to health care markets. He suggested that there is no clear notion of where regulators should take competition laws and policies. Moreover, while it is good to enforce against bad behavior, there must be a goal for purposes of assessing the outcomes of enforcement. Second, Professor Jacobs suggested that there is a tension between the culture of competition in health care and the role of antitrust enforcement in that industry. For instance, in Australia, there is an ongoing battle between the enforcement agencies and the medical professionals who are regulated by those agencies. There is a similar battle in the United States. Professor Jacobs suggested further that advocacy efforts directed at the health care industry and its consumers are needed to achieve change. Moderated Session Bruce McDonald, DOJ, noted that there is a perception among providers and the public that health care is different and that antitrust laws should not apply in certain health care markets. McDonald asked the panelists, what is it about health care that is different? Mr. Purcell stated that there is a mysticism about liberal professionals in general. He added that there are three groups of professionals in the local community that most people respect physicians, priests and bank managers. Although priests and bank managers may now be less revered, physicians continue to hold a unique place in society. Mr. Purcell suggested that physicians unique status might arise from the notion that people are at their most vulnerable when they go to doctors, and, as a result, may not use their best judgment in making economic decisions regarding health care. Mr. Bhojani suggested that the answer to why health care is different is not only found in issues of perception. He stated that there is a societal expectation that the government will be involved in the funding of health care and that health care will be personalized. By way of example, Professor Jacobs added that in the United States, payors expand geographic markets by including incentives to utilize services and providers that are located in other areas. In other countries, expectations and perceptions stop people from traveling distances for health care

6 services. Mr. Bhojani agreed and stated that rural Australians do not expect to travel long distances for care. Sarah Mathias, FTC, asked the panelists whether there has been any consideration given to tiering by insurance companies for use of standard or Cadillac prosthetics. Mr. Cooper stated that the Australian government covers all appropriate devices. The issue, therefore, becomes controlling what is appropriate or what is needed. Mr. Bhojani added that the real issue is out-of-pocket expenses. The Australian public will not stand for out-of-pocket expense addons. McDonald asked the panelists if there is any benefit to moving toward private competition, and, if so, what would need to change to make that possible. Mr. Bhojani suggested that Australia s government subsidy of private health insurance has made the system more highly regulated. There is a need to analyze what, if any, benefits would arise from changing the current system in light of Australian citizens strong opposition to American-style managed care systems. He also stated that there is a large leap of faith associated with the notion that health insurers would represent the best interests of patients. Mr. Jacobs added that the insurer would have to look out for the collective well being of its members. This collective focus is generally not appealing to the minority. Mr. Purcell stated that movement toward private competition in Ireland would require removing the regulatory restraints on suppliers, the most excessive controls on advertising and the state controlled restrictions on the organizational structures through which medical professionals practice.