Robert W. Geist, M.D.
N Engl J Med 1978; 299:483-486 August 31, 1978
A campaign against the American Medical Association’s bans on commercial advertising opened in December, 1975, when Mr. Alfred Dougherty, a deputy director in the Federal Trade Commission’s (FTC) Bureau of Competition, held a news conference.1 He said that advertising would create an informed public, beneficially affect prices and create competition.
The AMA subsequently explained that advertising is permitted when the effect is to inform (such as listing telephone numbers and office locations).2 In contrast, solicitation is not permitted because the form and intent are self-serving (as in testimonials and other self-laudatory “commercials”). Then, on June 27, 1977, the United States Supreme Court decided that a lawyer may advertise the price of routine services in a newspaper.3 The Court said that it expects that the Bar will have a special part to play in assuring that advertising by attorneys “flows both freely and cleanly” and further said that there may be “reasonable restrictions on the time, place and manner of advertising.” Announcing fees appears to differ little from announcing a new place of business or a telephone listing; reasonable restrictions appear to imply that advertising may be regulated to prevent solicitation.
In September, 1977, the FTC brought an antitrust suit against the AMA. It charged that the AMA “takes the law into its own hands by promoting ethical standards on advertising for its own members.”4 Apparently, the FTC’s belief in the benefits of any kind of advertising and the FTC’s desire to control the costs of medical care through antitrust litigation5 did not coincide with the AMA distinctions and the Supreme Court’s implicit restrictions on advertising.
To help understand the conflict better, this paper will analyze the functions of commercial advertising (i.e., solicitation), will observe whether competition exists now in the medical profession in the absence of “commercials” and will note whether professional bans on commercial advertising have purposes other than the self-serving purposes projected onto the profession by the FTC.
The Functions of Commercial Advertising
Commercial advertising is primarily and legitimately an attempt to gather business for one’s self. If it results in destroying one’s competition, the attempt is just more successful than usual. A company in a competitive industry like processed foods or textiles and apparel certainly does advertise and indeed may fail without advertising. But the competition exists before the advertising, and prices are determined by the reality of the competition itself rather than by any imaginative announcement of the product and its cost. Even when competition is marginal, as in concentrated industries like rubber goods, electrical products and oil, advertising not only persists but is massive and may effectively obliterate small competitors. Finally, franchised public utilities, despite having no competition, budget generously for commercial advertising.
One may conclude that the function of commercial advertising in competitive industries is survival and in noncompetitive industries is protection of a corporate image and preservation of market power. In either instance, the price of the product to the consumer must bear the cost of the “commercials.” Commercial advertising thus appears to be a sometimes costly manifestation of commerce in general, rather than being informative or creative of competition in particular.
Commenting on the absence of commercial advertising in medicine, the FTC’s Mr. Dougherty said, “The Principles [of Medical Ethics] put forth a message that competition, whether it be in price or service is somehow unethical among doctors.”1 Since this message is not contained in the Principles of Medical Ethics one must see if the FTC’s charge applies to the real world of medicine by observing the medical marketplace for evidence of competition or its absence. If competition exists in a profession it would be in timeliness, personalization, expertise and price of service. And if competition is present in the medical profession, how and why does it differ from commercial competition?
Timeliness, Personalization and Expertise
Any doctor who furnishes a poor service to his patients or to consulting physicians soon finds that competition exists in medicine — his patients go, or are sent, elsewhere. The public can judge professional competition in timeliness and personalization of care and may react accordingly. Medical expertise, on the other hand, can best be judged by medical experts and is guaranteed, as much as possible, by the excellence of medical schools and their standards for admission, by state licensure controls, by in-hospital committee controls and by professional associations. Commercial advertising could not exert similar controls on any of these quality aspects of professional service and would, therefore, be superfluous for all but self-serving purposes.
Prices are another and legitimate way in which professionals compete. Price competition for physicians’ services still exists, since the public is aware of the cost of such services. For example, increases in professional fees have been much less than the increases in price of the more fully insured hospital bed.6
Price competition for a hospital bed is weak because private and government insurance programs have resulted in coverage of about 90 per cent of all hospital bills. As hospital services have appeared relatively “free,” demand for care has been skewed into the hospital, where out-of-pocket costs have been the least; cost-price inflation has ensued to meet the demand.7 When the patient did not need to ask the price, hospital competition was shifted to fulfilling his desire for comfort and the best quality in diagnostic and therapeutic services. In the end, the public bought a medical product more expensive and complex than it might have desired if it had felt the cost — a cost hidden by powerful tax subsidies for health fringe benefits. It is curious that the FTC thinks commercial advertising can affect this classic demand inflation in some beneficial way when “commercials” are intended to increase demand and demand, itself, has no visible limits if the patient is not aware of the cost.
If price competition is proper and exists among medical practitioners, advertising prices would seem as proper as publishing one’s place of business or telephone number. One can therefore agree with the United States Supreme Court decision. The problem left for the profession is to determine and implement what the Court meant by reasonable restrictions on “time, place and manner,” so that price advertising will not become improper commercial solicitation. For example, would a 5-by-5-cm column in a local newspaper run for three days be proper but television coverage of the same material running indefinitely be improper? Who should write the guidelines and enforce the regulations?
Although the United States Supreme Court has given the responsibility of regulating professional advertising to the states, the ramifications for law and medicine differ. The legal profession is regulated by individual state supreme courts having strong constitutional prerogatives. Since medicine has no similar constitutional counterpart, it is likely that states will give regulation of advertising to agencies established for other purposes. In any event, the power of some state agency will be necessary to write regulations and monitor advertising since a professional society doing the same thing would probably be viewed (by the FTC and others) as a trade-association conspiracy. The medical profession should work with state legislators to devise appropriate mechanisms to regulate and oversee professional advertising.
Commercial vs. Professional Enterprise
Why should there be restrictions on advertising in a profession if commercial enterprise is not similarly restricted from solicitation? First of all, one must understand the different goals of commercial and professional enterprise and the practical reasons why these different goals are prescribed by the public.
Commercial enterprise deals with buying and selling goods, and the primary goal is to serve the economic interests of the entrepreneur or the enterprise; public service is secondary. As long as commercial enterprise is perceived as the most efficient way to sell and service ordinary goods, public policy condones the primarily self-serving methods of commerce. Solicitation, though self-serving, is therefore tolerated in commercial enterprise.
In contrast, professional enterprise has the primary goal of serving the public. Physicians are professionals not because of some salable expertise but rather by “professing” always to hold their patients’ interests first.8 For practical implementation of this policy, laws and ethics limit a physician’s economic gain to reimbursement for the services that he renders. Profits are condemned by statutes that prohibit various forms of fee-splitting, lest patients, instead of services, become the commodity sold in the medical marketplace. Solicitation has been disdained for professional enterprise since it would be incompatible with the profession’s goal of serving people without profit.
A doctor may pervert the professional relation with his patient into a commercial relation by making a profit (i.e., payment contingent on something other than the services that he has delivered), and by gaining power to manipulate the patient’s health care.9 For example, a profit may be turned when a doctor accepts an “incentive” payment from a consultant (a “split fee”) or from an HMO company (a “bonus reward”) contingent on how much, or from whom, care is ordered. And power over the patient is manifest in either instance since the patient can be sold to the best bidder. It is logical to expect entrepreneurs who might sell their patients like ordinary commodities in a commercialized medical marketplace to opt for solicitation as a means of gaining business and manipulating patient care for a profit. It is logical, as well, for the FTC to push solicitation when it confuses conventional commercial enterprise with competition.
What might happen to the nature and form of medicine if commercial solicitation is not restricted or is actually imposed as the result of activities by the FTC? Large sums of money would be necessary to participate in solicitation for a share of the market. Consortiums of providers (hospitals, physicians and so forth) and insurers could best develop the financial resources needed. Some people see the HMO “alternative” as the ideal mechanism to form a consortium by the ability of HMO’s to forge firm financial links and similar financial interests among providers and between providers and insurers. Surviving HMO consortiums would have power to obliterate their old or new rivals by solicitation and would have power to manipulate public franchising agencies for preservation or expansion of their share of the market. The counterforce to such commercial power in the medical marketplace would no doubt appear to be government regulation of medical consortiums as public utilities.
The pitfalls and ultimate public expense of using commercial enterprise to deliver medical care is beyond the scope of this paper. But one must carefully calculate the overt and hidden price to be paid both in dollars and in quality if utility-style regulation is used as a counterforce to a commercial consortium’s power, or costs are transferred from the consortium to the public by queuing, or industrial action by organized personnel in an essential “industry” paralyzes delivery of services. One should also note the increased use of commercial rhetoric (market, franchise, industry, profit and so forth) that accurately characterizes the attempt to replace the professional contract between patient and doctor with a commercial contract between “buyer of care” and an HMO-type insurance company. If the substitution is successful, government, corporate and labor bureaucracies — masquerading as the “buyers of care” — will have acquired a powerful contractual “handle” with which to manipulate medicine for the goal of decreasing their own costs. The real patient will be left to bargain for quality of care from a company doctor who has the same financial interests as the “buyers” and insurer to decrease spending dollars from a fixed budget. Solicitation to manipulate the “customers” further — for expansion, for profit or for acceptance of a consortium being the best-of-all-possible medical worlds — is a predictable consequence of commercial medicine.
Professional Bans on Commercial Advertising
How, in contrast, do professional bans on commercial advertising protect the public from manipulation? For one thing, commercial advertising seeks to woo a public lacking the expertise to judge professional competence. Professional controls (state licensure, hospital committees, professional societies and so forth) may make errors, but commercial advertising would not correct them; errors would more probably be enhanced by “commercials” when one considers that physicians wishing to solicit have historically been unable to compete professionally through their own incompetence in either timeliness, personalization or expertise of service. Secondly, not one dollar spent on solicitation is spent on health care. Solicitation is, by its very nature, self-serving and in no way can be called equivalent to public-service announcements to vaccinate, stop smoking, drive more slowly and so forth. Thirdly, the function of commercial advertising as an attempt to overcome competition and preserve monopoly would conflict with the public’s desire for a large number of providers from whom to choose care.
Self-serving commercial solicitation can be distinguished from professional advertising, which informs the public as by advertising place of business and prices, and can be distinguished from public-service announcements. The attempt of the FTC to impose on medicine a legal requirement to permit commercial solicitation would not create an informed public or produce competition but would hasten a change from professional to commercial enterprise for delivering medical services. A choice between professional and commercial enterprise for medicine becomes either a choice of wages for services delivered and professional competition or a choice of profits and consortiums grappling for market power through politics and the mass media. Since solicitation is only intended to create, enhance or preserve commercial profits and market power, it is not surprising that solicitation is absent in a profession dedicated to compensation only for medical services and dedicated to freedom of the patient from being manipulated like an ordinary commodity.
The medical profession should work with state legislators to devise appropriate mechanisms to regulate and oversee professional advertising so that problems from solicitation can be avoided.
Robert W. Geist, M.D.
St. Paul, MN 55102
- Washington Post News Service: FTC challenges medical ad prohibition. St Paul Pioneer Press, December 23, 1975, p 2
- American Medical Association Judicial Council: Opinions and reports. Chicago, American Medical Association, 1977, p 30
- Bates and Van Osteen vs. State Board of Arizona . US Law Week 45:4895–4910, 1977
- Petty R: AMA, FTC lawyers clash as trial begins . American Medical News, September 12, 1977, pp 1, 18
- Health care “our business,” says FTC head . American Medical News, June 6, 1977, pp 1, 6
- Theodore CN, Warner JS: Physicians fees and the source of their increase, Health: A victim or cause of inflation? Edited by M Zubkoff. New York, PRODIST, 1976, pp 149–163
- Feldstein MS: The medical economy . Sci Am 229(3): 151–159, 1973 CrossRef | Web of Science | Medline
- Magraw RM: Language of medical care . N Engl J Med 279:383–384, 1968 Full Text | Web of Science | Medline
- Geist RW: Incentive bonuses in prepayment plans . N Engl J Med 291:1306–1308, 1974 Full Text | Web of Science | Medline
- Brett, Allan S., . (1992) The Case against Persuasive Advertising by Health Maintenance Organizations. New England Journal of Medicine 326:20, 1353-1357 Full Text
- Curtis E. Margo. (1988) Advertising in ophthalmology. Survey of Ophthalmology 33:3, 211-214 CrossRef
- Reade, Julia M., Ratzan, Richard M., . (1987) Yellow Professionalism. New England Journal of Medicine316:21, 1315-1319 Full Text