FTC Staff Comment to Representative Elaine Nekritz of the Illinois General Assembly Concerning H.B. 5372 to Regulate Retail Health Facilities

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
May 29, 2008
Hon. Elaine Nekritz
State Representative
State of Illinois – 57th District
24 South Des Plaines River Road
Des Plaines, IL 60016
Dear Representative Nekritz:
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 your invitation for comments regarding Illinois House Bill 5372 (HB 5372
or the Bill) and the proposed regulation of retail health care facilities in Illinois.2 You
ask whether HB 5372 “contains provisions that would be considered anticompetitive.”
particular, you express concern about the Bill’s prohibition of the location of a retail
health care facility “in any store or place that provides alcohol or tobacco products for
sale to the public.”
In
Store-based health clinics – offering a small, fixed, and publicized range of basic
health care services3 – have the potential to expand access to health care by making very
basic medical care convenient and less costly.4 Retail clinics are often able to lower
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 Letter from the Hon. Elaine Nekritz to Maureen K. Ohlhausen, Director, Office of Policy Planning,
Federal Trade Commission (Apr. 9, 2008) (regarding Illinois House Bill 5372, 95th General Assembly
2007-08).
3 Typical services include, e.g., common adult vaccinations, basic triage and diagnosis, and basic treatment
of certain common ailments. See generally William Sage, The Wal-Martization of Health Care, 28 J. OF
LEGAL MED. 503, 504-7 (2007) (Describing the typical conditions LSCs treat and their physical design
located in retail settings); Mary Kate Scott, Health Care In the Express Lane: Retail Clinics Go
Mainstream, Prepared for California Health Care Found. (Sept. 2007), available at
http://www.chcf.org/topics/view.cfm?itemID=133464; Richard Bohmer, T HE RISE OF I N-S TORE C LINICS –
THREAT OR O PPORTUNITY , 356 N EW ENG . J. MED 765 (Feb. 22, 2007).
4 The American Medical Association has noted significant growth in 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
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costs – and prices charged to consumers – by offering a fixed, limited range of servic
existing retail settings.
es in
5 The use of a small leased space in an extant retail setting has
been identified as a particular factor in the lower cost structure of such clinics that tends
to reduce the prices they charge.6
The legislature’s attention to such clinics is therefore commendable. At the same
time, the FTC staff believes that certain provisions in HB 5372 need clarification because
certain interpretations of those provisions could excessively restrict retail clinics to the
detriment of Illinois health care consumers.7 In addition, because several of the Bill’s
requirements would pertain only to retail clinics – and not other health care facilities
offering the same services or staffing – those requirements could put retail clinics at a
competitive disadvantage without offering countervailing consumer benefits.
Interest and Experience of the Federal Trade Commission
The FTC is charged under the FTC Act with preventing unfair methods of
competition and unfair or deceptive acts or practices in or affecting commerce.8 Section
12 of the FTC Act specifically prohibits the dissemination of false advertisements for
foods, drugs, devices, services, or cosmetics.9
Anticompetitive conduct in health care markets has long been a target of the
FTC’s law enforcement mission.10 The FTC and its staff also have investigated the
competitive effects of restrictions on the business practices of health care providers. In
2003, the FTC and the Department of Justice Antitrust Division held twenty-seven days
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 (June 2006)
[hereinafter Council on Medical Service Report].
5 See, e.g., Mary Kate Scott, supra note 3, at 4-5; William Sage, supra note 3, at 504-07.
6 Mary Kate Scott at 4.
7 The Section 45 prohibition mentioned in your letter is one such restriction, as hospitals, pharmacies, and
physicians’ offices do not appear to be similarly restricted under Illinois law. Others include, for example,
restrictions on truthful and non-misleading advertising (HB 5372 § 105) and certain “operating
requirements” that would be imposed only on retail health care facilities, such as the requirement that each
facility’s staff include a receptionist (id. at § 35(4)) and the limit on the number of clinic affiliations for
medical directors (id. at § 25(a)(4)).
8 Federal Trade Commission Act, 15 U.S.C. ' 45.
9 FTC Act, 15 U.S.C. § 52.
10 See F EDERAL TRADE C OMMISSION , FTC A NTITRUST A CTIONS IN H EALTH CARE S ERVICES AND P RODUCTS
(Mar. 2008), available at http://www.ftc.gov/bc/0608hcupdate.pdf; see also F EDERAL TRADE COMMISSION ,
FTC A NTITRUST A CTIONS IN P HARMACEUTICAL S ERVICES AND P RODUCTS (Mar. 2008), available at
http://www.ftc.gov/bc/0608rxupdate.pdf; Competition in the Health Care Marketplace: Formal Commission
Actions, available at http://www.ftc.gov/bc/healthcare/antitrust/commissionactions.htm. For a general
overview of enforcement actions, including merger review in pharmaceuticals and health care markets, see
Federal Trade Commission, Bureau of Competition Antitrust Enforcement Activities, Fiscal Year 2003-
February 29, 2008, available at http://www.ftc.gov/bc/0608rxupdate.pdf.
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of hearings on health care and competition law and policy.11 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.12
FTC has also used its law enforcement authority to maintain the integrity of
health care advertising. From April 2006 through February 2007, the FTC initiated or
resolved thirteen law enforcement actions involving allegedly deceptive health claims.13
The Commission and its staff have also undertaken research and advocacy directed
specifically at health care advertising issues.14 Those activities, like the hearings and
report,15 emphasized the importance of access to truthful and non-misleading health care
marketing information to consumers. 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,16 chiropractors,17 and optometrists.18
The FTC has also examined the emerging retail or limited service clinic market.
These clinics were the focus of a panel at a recent FTC public workshop.19 Last year,
FTC staff submitted comments on draft Massachusetts regulations regarding limited
service clinics. The draft regulations recognized that new models of health care delivery
11 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.
12 Federal Trade Commission and Department of Justice, IMPROVING H EALTH CARE : A D OSE OF
COMPETITION Chapter 7 (2004) [hereinafter A D OSE OF COMPETITION ], available at
http://www.ftc.gov/reports/healthcare/040723healthcarerpt.pdf.
13 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
(HAA) (D.N.J. filed Jan. 3, 2007) (consent decree) (One-A-Day), available at
http://www.ftc.gov/os/caselist/bayercorp/070104consentdecree.pdf.
14 See, e.g., F EDERAL TRADE C OMMISSION , B UREAU OF ECONOMICS R EPORT, THE EFFECTS OF
RESTRICTIONS ON A DVERTISING AND C OMMERCIAL P RACTICE IN THE P ROFESSIONS : T HE CASE OF
O PTOMETRY (1980) [hereinafter OPTOMETRY REPORT].
15 See, e.g., A DOSE OF COMPETITION , supra note 12, at Exec. Summary, p. 20 and C. 8, p. 16.
16 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.
17 See Texas Bd. of Chiropractic Examiners, C-3379 (consent order issued Apr. 21, 1992), 57 Fed. Reg.
20279 (May 12, 1992).
18 See, e.g., O PTOMETRY R EPORT, supra note 14.
19 The Workshop website, with links to panelist presentations, archived webcasts, transcripts, and other
materials, is available at http://www.ftc.gov/bc/healthcare/hcd/index.shtm.
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could make basic health care more accessible to consumers.20 The FTC staff comments
supported the goals of the regulation, but expressed concern that a proposed requirement
that all limited service clinic advertising B and no other clinic advertising B be pre-
screened and pre-approved, could deprive consumers of useful information about
available care and act as a barrier to entry for new competitors.21 Massachusetts adopted
the FTC staff’s suggestions in its final regulations.22
Discussion
As noted above, the legislature’s initiative to accommodate the potentially pro-
competitive development of retail clinics may be of substantial benefit to Illinois health
care consumers. At the same time, several provisions in HB 5372 raise competition
concerns. First, certain ambiguous provisions could be read in ways that harm health
care competition and consumers. For example, the proposed statutory definition of retail
health care facilities – read in conjunction with Illinois law regarding the corporate
practice of medicine23 – could be read to imply that the proposed clinic restrictions apply
according to clinic ownership or affiliation, rather than the nature of the services provided
or the licensed professionals providing them. If so, the restrictions could, individually or
collectively, work as a substantial barrier to entry for retail clinics in Illinois, which could
tend to restrict the supply of basic health care services or raise their prices.
Second, certain provisions appear to impose special and potentially burdensome
restrictions on the operation of retail clinics and, in some cases, on contracting between
retail clinics, health care consumers, and third-party payers. For example, the special
restrictions on retail clinic advertising may work to prohibit or chill consumer access to
truthful and non-misleading information about prices for basic medical services.
Although false or misleading marketing information can harm health care competition
and consumers, access to truthful and non-misleading information is important to
consumers’ effective participation in their health care and health care expenditures.
20 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”).
21 FTC Staff Comment Before the Massachusetts Department of Public Health Concerning Proposed
Regulation of Limited Service Clinics, 2 (Sept. 27, 2007), available at
http://www.ftc.gov/os/2007/10/v070015massclinic.pdf.
22 Memorandum from Paul I. Dreyer to Commissioner John Auerbach and Members of the Public Health
Council, re Request to Promulgate Amendments to 105 CMR 140.000 (Licensure of Clinics) Regarding
Limited Services Clinics 8 (Dec. 12, 2007) (staff heeding advice of Federal Trade Commission).
23 See, e.g., People by Kerner v. United Medical Service, Inc., 362 Ill. 442, 454-55 (Ill. 1936) (Corporate
practice of medicine barred by Medical Practice Act because only individuals can obtain license under
Act); cf. Berlin v. Sarah Bush Lincoln Health Ctr., 179 Ill. 2d 1, 4 (Ill. 1997) (general restrictions of
“corporate practice doctrine” inapplicable to licensed hospitals).
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A. 	Statutory Construction and Potential Competition Concerns
Certain provisions of HB 5372 could be read in ways that would discourage the
new health care competition promised by retail clinics. 24 First, it is unclear whether the
contemplated statutory restrictions on a “retail health care facility” apply to certain types
of health care services and professionals or certain types of clinic owners. On the one
hand the Bill states, “‘Retail health care facility’ or ‘facility’ means any institution, place,
or building, or any portion thereof, devoted to the maintenance and operation of facilities
for the performance of health care services located within a retail store or pharmacy at a
specific location.”25 To a lesser extent, the definition points to specific health care
services by excluding, e.g., general anesthesia from the menu of retail clinic services as a
matter of definition.26 To the extent that the definition of a “retail health care facility” is
supposed to identify particular health care services subject to the Bill’s restrictions,
independent of clinic ownership, those criteria could be clearer.
However, the Bill may restrict retail health care competition if interpreted to
exempt, e.g., physician-owned or hospital-owned clinics located in retail settings from its
substantive requirements.27 Under HB 5372, “[h]ospitals . . . ambulatory treatment
centers, . . . , and offices of physicians, advanced practice nurses, . . . , and physician
assistants, as well as pharmacies that provide pharmaceutical services, are not to be
construed to be retail health care facilities.”28 Traditional health care providers are
entering the retail clinic market – as clinic owners, operators, or affiliates – often offering
the same types of services as those offered by independent operators.29 That trend could
24 An additional statutory ambiguity of potential significance is discussed with substantively related
provisions below, at notes 58-60. Also potentially ambiguous is the requirement that each clinic “have on
hand at all times an operator adequately trained in the correct operation of the facility.” HB 5372 § 35. To
the extent that this represents an additional requirement to that requiring the presence of licensed health
care professionals “at the time the services are provided,” it could be made clearer. Id. at § 25(a)(2). In
addition, duplicating the more specific timing language of Section 25 may avoid any possible impression
that “at all times” implies that on-site staffing is required around the clock, independent of whether the
clinic or its larger retail home is open for business.
25 HB 5372 § 10.
26 Id. (excluding “surgical services or any form of general anesthesia,” as a matter of definition, from the
range of services provided by retail health care facilities, although we are unaware of retail or limited
service clinics offering such services. See generally supra notes 3-6, and accompanying text, regarding
features of retail clinics).
27 See, e.g., People by Kerner v. United Medical Service, Inc., 362 Ill. 442, 454-55 (Ill. 1936) (Corporate
practice of medicine barred by Medical Practice Act because only individuals can obtain license under
Act); cf. Berlin v. Sarah Bush Lincoln Health Ctr., 179 Ill. 2d 1, 4 (Ill. 1997) (general restrictions of
“corporate practice doctrine” inapplicable to licensed hospitals).
28 Id.
29 See, e.g., Mary Kate Scott, Health Care In the Express Lane, supra note 3, at 4-5 (regarding general
services and facilities for retail clinics) and 7 (regarding clinics affiliated with large traditional providers,
such as Aurora, AtlantiCare, Sutter, Geisinger, Memorial South Bend Indiana); cf. Milt Freundenheim,
Wal-Mart Will Expand In-Store Medical Clinics, N.Y. Times, Feb. 7, 2008, available at
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benefit consumers by improving competition on price or qualitative aspects of basic
medical services. At the same time, imposing different regulatory burdens on retail
clinics according to ownership or affiliation – independent of the particular health care
services provided or the types of professionals providing them – could deter the entry of
certain competitors into the retail clinic market in Illinois or raise their operating costs,
which could, in turn, limit the supply of basic health care services or raise their prices. If
there is no substantial basis for treating retail clinics differently based on the type of
ownership, the regulatory imbalance may harm competition without any countervailing
health or safety benefits for Illinois consumers.
Second, the requirement that “[a] physician may be a medical director of no more
than 2 facilities,”30 may be an undue and potentially costly limitation on the organization
and operation of retail clinics. The substantive obligations of a medical director, who
must be a licensed physician, appear to be limited to Sections 25 and 35 of HB 5372.31
Section 25 requires a clinic’s medical director to determine the limited set of medical
services to be provided by the clinic.32 Under Section 35, the medical director, and the
licensed health care professionals who staff the clinic, must approve the clinic’s operating
protocols.33
The health or safety rationale for limiting physicians so that they can be involved
in the design of protocols and procedures for only two clinic settings is unclear. It is
possible that these institutional design roles might best be served by more specialized
practice expertise than the two-clinic limit would permit. Moreover, the limitation could
give large, incumbent institutional health care providers a competitive edge to the extent
that such providers could leverage their existing physician staff to fill these limited,
annual administrative roles.
At the same time, the two-clinic limit could be read to impose special supervisory
requirements on licensed advanced practice nurses when those nurses provide limited
health care services in a retail setting. The Bill requires advanced practice nurses to
operate in accordance with a collaborative agreement under Section 65-35 of the Nursing
Practice Act,34 a requirement that appears to be redundant with the Nursing Practice Act
itself. The Nursing Practice Act does not generally appear to restrict collaborative
agreements so that a physician can only collaborate with some fixed small number of
advanced practice nurses. Staff recognizes the importance of minimum licensing and
http://www.nytimes.com/2008/02/07/business/07clinic.html?ref=business (regarding planned Wal-Mart
affiliations with hospitals).
30 HB 5372 at § 25(a)(4).
31 See id. (“The facility must have a medical director who is a physician licensed to practice medicine in all
its branches with active medical staff privileges to admit patients to a local licensed hospital.”)
32 Id. at § 25(a)(1) (scope of services “determined” by the medical director and “approved by the
Department”).
33 Id. at § 35(4).
34 Id. at § 25(a)(3).
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practice standards for various categories of health care providers. Nonetheless, the basis
for imposing special supervisory burdens in a retail setting – or perhaps in a retail setting
according to clinic ownership – is not clear. Such special requirements could potentially
restrict competition, as they might tend to suppress supply or raise prices without
conveying countervailing benefits to Illinois health care consumers.
Third, HB 5372’s “nondiscrimination” provision could potentially restrict payers
from using different copayments, deductibles, or co-insurance requirements in structuring
networks that include retail clinics.35 The provision might be read to restrict the ability
of third-party payers to negotiate favorable terms with retail clinics and to pass certain
savings on to health care consumers via reduced copayments. Under the
nondiscrimination provision, retail clinics “must be subject to the same co-payment,
deductible, or co-insurance requirements that are required of an insured or enrollee in the
case of services provided by a physician, advanced practice nurse, or physician
assistant.”36 In effect, this might prohibit payers from using incentives, such as lower
copayments, to encourage beneficiaries to use lower-cost providers for basic health care
services, if the lower-cost providers are retail clinics. It could also prohibit payers from
charging higher co-payments for retail clinic services if these services were found to
increase the payers' costs relative to visits to alternative providers. Illinois has broad
latitude to regulate the insurance industry within its borders and FTC staff does not intend
to comment generally on the basic standards for health care coverage in Illinois.
However, staff is concerned that this provision might ultimately reduce the benefits of
competition that Illinois health care consumers would otherwise enjoy.
In health care services markets, differential payments, copayments, and deductible
requirements are common across diverse payment and reimbursement arrangements
employed by third-party payers, such as “preferred provider organizations.”37 Often, the
promise of such differential payments is critical to the ability of third-party payers to
negotiate discounted provider fees.38 To undercut that ability would diminish the power
of third-party payers to manage costs for covered services. That could, in turn, have a
pernicious effect on the prices that consumers pay for such services – perhaps especially
35 HB 5372 § 50.
36 Id. The provision does permit different copayments for in-patient and outpatient services, but the
significance of this is unclear given the Bill’s stipulation in § 10 that retail clinics “may not provide beds or
other accommodations for either long-term or overnight stay of patients.”
37 See generally A D OSE OF COMPETITION, supra note 12, at Exec. Summ. 6-13. Such incentives also are
broadly applied with regard to pharmacy benefits. See F EDERAL TRADE COMMISSION, P HARMACY BENEFIT
MANAGERS : O WNERSHIP OF MAIL-O RDER P HARMACIES , 17-19 (Aug. 2005) (“PBM S TUDY”), available at
http://www.ftc.gov/reports/pharmbenefit05/050906pharmbenefitrpt.pdf (regarding, e.g., differential
copayments for mail order pharmacies). See also FTC Staff Comment to the Hon. Nelie Pou Concerning
New Jersey A.B. A-310 to Regulate Contractual Relationships Between Pharmacy Benefit Managers and
Health Benefit Plans, 6-8 (Apr. 2007) (regarding pharmacy plan copayments and “any willing provider”
requirements), available at http://www.ftc.gov/opp/advocacy_date.shtm; Letter from FTC staff to Patrick
C. Lynch, Attorney General, and Juan M. Pichardo, Deputy Senate Majority Leader, State of Rhode Island
and Providence Plantations, 4 (Apr. 8, 2004), available at http://www.ftc.gov/os/2004/04/ribills.pdf.
38 A D OSE OF COMPETITION, supra note 12, at Exec. Summ. 12.
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for those Illinois consumers for whom copayments and deductibles represent an
increasing burden.39 The Bill’s “non-discrimination” provision would be problematic –
for competition and consumers – if it were to restrict such incentives with regard to retail
clinics. It could also prevent payers from negotiating favorable terms with retail clinics
in the first place, if contracts could not be based on the volume of business that might be
anticipated with discounted copayments. The rationale for prohibiting lower copayments
or deductibles when consumers receive lower-cost basic medical care from licensed
health care professionals, in the particular setting of a retail clinic, is unclear.40
Finally, the Bill’s requirement that a retail clinic provide “separate restrooms”
may increase costs for retail clinics.41 If existing restrooms in the retail settings housing
retail clinics satisfy this requirement, retail clinics can easily meet this requirement, so it
is unlikely to have a substantial impact on costs. However, to the extent that “separate
restrooms” is read generally to require new construction of restrooms within a clinic
space, it may represent a significant additional sunk cost for new clinics.42 In that case,
the legislature should determine what benefits, if any, the restroom requirement has and
weigh them against the requirement’s additional costs.
B. 	Competition Concerns Raised by Special Clinic Requirements
1. 	Advertising Restrictions
Some of the advertising restrictions under HB 5372 may unduly restrict consumer
access to truthful and non-misleading information about basic health care services. In
particular, staff is concerned about the Bill’s restrictions on advertising price information.
Under HB 5372, it would be “unlawful for a facility to advertise comparisons of its fees
for available services with the fees of other facilities with respect to which a permit has
been issued under this Act or that are licensed or otherwise authorized to operate under
39 See, e.g. Reed Abelson and Milt Freudenheim, Even the Insured Feel the Strain of Health Costs, N.Y.
Times, May 4, 2008, available at http://www.nytimes.com/2008/05/04/business/04insure.html?th&emc=th.
40 A related concern is the Bill’s restriction on a facility advertising that it “will accept as payment for
services rendered . . . the amount the third party payor covers as payment in full.” HB 5372 at at § 105(d).
If the provision is intended as a special case of the Bill’s Section 105(c) advertising restrictions, staff
suggests that it be clarified as such. That is important because the provision could be read to prohibit
truthful advertising of discounts for certain insured consumers if, for example, a clinic would waive a
copayment otherwise required under a consumer’s health benefit plan. Restricting such information could
prove not just a competitive disadvantage for clinics having such prices to advertise, but a loss for Illinois
health care consumers for whom insurance copyaments or deductibles are a significant burden. If there is a
basis for restricting such advertising in certain limited circumstances -- if, for example, certain sorts of
copayment advertisements prove to be misleading -- the Legislature should consider a provision more
narrowly tailored to that basis and those circumstances.
41 HB 5372 § 35(a)(3).
42 It has been reported, for example, that clinics “are typically between 200 and 500 square feet” and that
retailers have a “one-time cost of about $20,000 - $100,000 dollars to make the space ‘broom ready,” with
average setup costs of about $50,000. Mary Kate Scott, Health Care in the Express Lane, supra note 3, at
4. In that context, new construction of separate restroom facilities could represent a significant barrier to
entry for retail clinics.
Page 8 of 13

any other Illinois law.”43 Fee comparisons are potentially objective, truthful, and non-
misleading information of significant value to health care consumers and health care
competition. Such information may be especially important for those Illinois consumers
who may be uninsured, underinsured, or otherwise subject to limited access to basic
medical care.
As the FTC staff has observed in other contexts, “The 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.”44 Those benefits apply equally to the
advertising of professional health care services.45 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 care46 or
price advantages for marginal health care consumers.47
The Commission has the authority under the FTC Act to pursue false or
misleading advertisements.48 Illinois may also have an interest in the enforcement of
general state law prohibitions against deceptive advertising.49 It is important, however,
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.50
Consumers’ interests in access to truthful and non-misleading information about
goods and services in the market have been at the core of the Supreme Court’s
43 HB 5372 at § 105(b).
44 P. Ippolito & J. Pappalardo, Advertising Nutrition & Health: Evidence from Food Advertising 1977-1997
E-20 (2002) (FTC Bureau of Economics Staff Report), available at
http://www.ftc.gov/opa/2002/10/advertisingfinal.pdf.
45 See, e.g., Terry Calvani, James Langenfeld & Gordon Shuford, Attorney Advertising and Competition at
the Bar, 41 V AND . L. REV. 761, 779-81 (1988) (surveying empirical evidence regarding advertising in
health care professions as an example of advertising for professional services outside the legal
environment).
46 See Council on Medical Service Report (A-06), supra note 4, at 1.
47 Id. at 1.
48 See, e.g., supra notes 8-10 (FTC authority and enforcement actions). The threat of enforcement acts, in
conjunction with market forces, as a deterrent to the dissemination of false or misleading advertising.
49 In addition, the state may have a basis for reinforcing general state law prohibitions against deceptive
advertising (see 720 ILCS 295/1a (2008)) with sector-specific provisions, such as a prohibition of “false,
fraudulent, deceptive, or misleading material” regarding retail clinic services. HB 5372 § 105(c).
50 For that reason, FTC staff expressed concern that a proposed Massachusetts requirement that limited
service clinic advertising be pre-screened and pre-approved, could deprive consumers of useful information
about available care and act as a barrier to entry for new competitors. FTC Staff Comments, supra note 21,
at 2.
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commercial speech jurisprudence since Virginia State Board of Pharmacy.51 If
commercial speech is not false or misleading, and does not concern unlawful activities,
restrictions on that speech must satisfy two conditions: they must serve a substantial
government interest; and they may not be more extensive than necessary to serve that
interest.52 Illinois’ interest in isolating its own consumers from objective and truthful
price information is unclear. To the extent that evidence emerges that certain particular
ways of framing price information are inherently misleading, FTC staff suggests that the
state consider regulations more narrowly tailored to such types of statements.
2. 	Alcohol and Tobacco
The Bill’s prohibition against locating a clinic “in any store or place that provides
alcohol or tobacco products for sale to the public” may also limit competition.53 FTC
staff recognizes the state’s interest in safeguarding the health and welfare of its citizens
and the fact that such interests may prompt regulatory restrictions that guard against, for
example, the sale of otherwise lawful alcohol and tobacco products to minors.54
However, the rationale for not allowing a clinic in a retail store that also sells tobacco or
alcohol is unclear. At the same time, this restriction could limit the supply of retail
clinics and the basic medical services they would provide if retail stores were to decide
sales of tobacco and alcohol were more profitable than having a retail health clinic. Or,
the requirement could raise the retail clinic’s costs55 and increase prices for those
services.
Further, there is no such general restriction that applies to other health care
services, such as a prohibition on tobacco sales in doctors’ buildings or free-standing
pharmacies, or on the placement of pharmacies and pharmacy services in establishments
such as grocery stores or big-box retailers that also sell tobacco products.56 The rationale
for restricting tobacco sales in proximity to one particular type of health care service
provider is also unclear.
51 Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748, 770 (1976)
(state’s interest in integrity of pharmacy profession does not justify unnecessary suppression of truthful
advertising under First Amendment).
52 Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of N.Y., 447 U.S. 557, 564 (1980).
53 HB 5372 § 45.
54 F EDERAL TRADE C OMMISSION, P OSSIBLE A NTICOMPETITIVE B ARRIERS TO E-COMMERCE: W INE, FTC
Staff Report, 11-12 (July 2003), available at http://www.ftc.gov/os/2003/07/winereport2.pdf. Regarding
Illinois law, see generally Illinois Liquor Control Act of 1934, § 235 ILCS 5 et seq. (2008) and Tobacco
Products Tax Act of 1995, § 35 ILCS 143 et seq. (2008).
55 For example, certain retail settings might demand different lease terms if forced to abandon alcohol or
tobacco revenue to house retail clinics.
56 Cf., e.g., § 35 ILCS 130/4(c) (regarding persons ineligible for cigarette distributor’s license); id. at §
143/10-20 (pesons ineligible for tobacco products licenses). Staff does note that sales of alcoholic liquor
within 100 feet of a hospital are generally prohibited, albeit subject to certain restrictions, but that those
restrictions do not appear to pertain more generally to providers of health care services. See § 235 ILCS
5/6-11 (sale near churches, schools, and hospitals).
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Finally, to the extent that hospital-owned or physician-owned retail clinics might
be exempted from the Bill’s requirements independent of location or services provided,
this provision could place significant restrictions on certain competitors but not others,
within the same market. If so, the provision would be a further barrier to competition
among providers of such basic medical services, to the potential detriment of Illinois
health care consumers.
3. 	Facilities and Operating Requirements
There are several other provisions of the Bill that may impose special operating
burdens on retail clinics. For example, each clinic “must have a designated receptionist
and waiting area.”57 Certain retail health care clinics in other states appear to operate
without the services of a separate receptionist and waiting area.58 The requirement of a
designated receptionist, separate from those licensed health care professionals providing
care at the facility, could impose a significant additional operating cost on certain small
clinics.59 At the margin, such added costs could reduce the supply of basic medical
services or increase the prices at which they are offered. At the same time, the
requirement appears unrelated to any specific health concerns about the care such clinics
would deliver.
Conclusions
The Commission staff recognizes that important health and safety concerns may
be raised by the marketing or provision of health care services. At the same time, it
appears that retail health care facilities have the potential to expand access to basic health
care services. Illinois’ initiative to provide for the emergence of this new model of health
care delivery, within the bounds of responsible practice and professional licensing
standards, is to be encouraged. However, several of HB 5372’s provisions could harm
health care competition – and the emergence of new clinics – without providing
countervailing benefits for Illinois health care consumers.
Staff suggests the Legislature considering clarifying those provisions in the Bill
that may be subject to interpretations that would limit health care competition so that they
are not erroneously interpreted or applied in ways that unnecessarily put retail clinics at a
competitive disadvantage to other providers of similar services. Second, as several of the
Bill's provisions appear on their face to place undue regulatory burdens on retail clinics
relative to other providers of the same or similar services, staff suggests that the
Legislature consider eliminating such unequal treatment of retail clinics. If there is
evidence that specific health, safety, or other risks to consumers are associated with
particular features of retail clinics in providing services, staff suggests that remedial
regulations be narrowly tailored to address those risks in as competitively neutral a
57 HB 5372 § 35(a)(5).
58 Many employ, for example, electronic check-in at kiosks or check-in terminals. See, e.g., Vimo
Research Group, Retail Health Care Clinics Overview and Atlas 9 (Sept. 2007).
59 See supra notes 3-6, 41-2, and accompanying text.
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manner as is feasible. Absent these suggested changes, HB 5372 could substantially limit
the potential benefit of retail clinics to Illinois health care consumers, especially those
with inadequate access to basic medical services, by making it more difficult to open and
operate such clinics, or by raising their costs of doing so, which likely would raise the
costs of their services to consumers.
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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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