When Federal Trade Commission Chairman Timothy Muris titled a November 2002 speech to healthcare antitrust lawyers "Everything Old Is New Again," he wasn't just whistling a 1920s tune; he was observing the cyclical nature of healthcare antitrust enforcement.
Healthcare antitrust lawyers at the Chicago conference noted a certain deja vu with the return of Muris, who worked for the FTC in the 1970s and '80s. For Muris, the challenges in both eras are similar: how to maintain competition in healthcare markets while protecting consumers from unfair business practices that drive up healthcare costs.
Back in the '80s Muris prosecuted physician groups that had agreed to fix prices to negotiate higher reimbursements. Within the past year under his leadership, the FTC has settled price-fixing allegations with five physician groups and independent practice organizations, representing from eight to 1,200 doctors. At least three more cases remain under investigation, sources say.
"This conduct had everything to do with physician self-interest and little or nothing to do with monopsony power," Muris says, using a term referring to a situation in which there is only one buyer for a particular commodity. He notes he is sympathetic to physician complaints that large payers, sometimes the only insurers in a market, can exploit that negotiating pressure and leave physicians feeling powerless. "The conduct in question was naked price fixing."
In the '80s, Muris, a former law professor and then-interim dean of the George Mason University School of Law in Arlington, Va., wrote about the threat of hospital mergers on healthcare costs but generally saw those mergers as pro-competitive events that benefited providers and consumers through greater efficiencies. Muris, who now chairs the five-commissioner FTC, notes that hospital care has become the prime driver of increased healthcare costs.
Although Muris declines to specify what percentage of that increase was attributable to anticompetitive behavior, last year he established an FTC merger unit to better scrutinize current and past hospital dealmaking and learn more about what role consolidation and other factors play. The hospital merger section is reviewing at least eight previously consummated hospital mergers for anticompetitive effects, an effort never undertaken at this scope before, healthcare antitrust lawyers say.
Muris says the FTC will seek out the best cases and new strategies to challenge mergers that have had anticompetitive effects. If he finds any strong cases, Muris, armed with new and better information, says he believes the agency will be better able to withstand court challenges than in the past.
"We intend to evaluate the effects of mergers, and if they prove to be anticompetitive we will consider whether intervening is appropriate," Muris says. "We will get real-world information. If there are efficiencies, we will report those as well. "
Lots of changes
Muris has witnessed great changes in the mission and operations of the FTC. He began his career at the agency in 1974, when he served as assistant director of the planning office, where he helped formulate policy under President Ford.
He was at the agency when the U.S. Supreme Court ruled-in the landmark 1975 case Goldfarb v. the Virginia State Bar-that there is no "learned professions exemption" from antitrust scrutiny. That case opened the door for the FTC to examine anticompetitive conduct by physicians and others in healthcare. Muris re-joined the FTC in 1981 as director of the Bureau of Consumer Protection and later, from 1983 to 1985, served as the director of its Bureau of Competition, both under President Reagan.
"I think I've changed because I know more; I've grown more sophisticated in understanding the provider area," Muris says. "A lot of what we're seeing now is much more complex."
Muris says dramatic growth in healthcare costs and double-digit insurance-premium increases have galvanized the FTC's focus on healthcare. He cites government statistics showing that healthcare now constitutes 15% of the gross domestic product, with total healthcare spending at about $1.4 trillion.
He says managed care was supposed to curtail skyrocketing healthcare costs in the early '90s, and for a while it did. But that proved short-lived.
"That assessment was unduly optimistic," says Muris, a tall, preppy-looking man who, at 52, retains a boyish appearance that belies his age. He says the FTC commissioners have no pre-existing preference for any model for financing and delivering healthcare, but says competitive markets outperform all other methods of distribution.
"There is no inherent inconsistency between vigorous competition and the delivery of high-quality healthcare," he says.
Even though calling a laissez-faire Republican a radical activist sounds incongruous, some healthcare antitrust lawyers say Muris might qualify. He succeeded Robert Pitofsky, who observers say had little interest in hospital mergers or healthcare provider antitrust regulation and focused the agency on pharmaceutical cases. Muris is a throwback to, well, Muris himself.
"He is reshaping antitrust law," says David Balto, a former FTC lawyer now with the Washington office of White & Case.
Balto says Muris recognizes the role that hospital consolidation has played in skyrocketing healthcare costs and understands that courts have rejected previous federal antitrust challenges of hospital mergers. Neither the FTC nor the antitrust division of the U.S. Justice Department has challenged a hospital merger since 1998. The government has lost seven consecutive cases dating to the early '90s.
"He now seeks a better way," Balto says, noting that Muris hopes the "look-back" reviews supply evidence to bolster whatever challenges the FTC might bring. "Chairman Muris hopes by selecting and pursuing a very good case the FTC can create a foundation of law that will assist them in bringing future cases in federal court."
Muris would not publicly discuss his ideal test case, but Balto says evidence of anticompetitive conduct and post-merger hospital price increases would have to be strong. He says the agency, which has its own administrative process, would likely use that avenue first and hope to prevail.
Muris also has introduced another factor into the healthcare antitrust analysis process: quality. "Quality is a major item and we want to know how it should be considered in antitrust regulation," he says.
Muris, who refers to himself as a "recovering law professor," says the merger look-back reviews and the upcoming hearings are "efforts at finding the truth."
Thomas Campbell, a healthcare antitrust lawyer with the Chicago office of Gardner, Carton & Douglas, says Muris wants to go back to the root jurisprudence that the FTC created, with the power to investigate and report, in addition to its enforcement authority.
"FTC chairmen have come and gone for years without any of that introspection and research," Campbell says. "Muris believes that antitrust shouldn't be like the Holy Ghost-that you just have to believe. He wants to explore it. ... If he announces significant changes in enforcement policy, they will be tied to investigative searching, and he'll have a body of evidence supporting them."