Antitrust

From the first days of the current health system reform debate to the present, physicians have frequently asked for a better way to deal with the health plans that control so much of our business today. Between 1994 and 2001, there were 275 mergers and acquisitions of health plans nationwide and many more since. Now the overwhelming majority of insured patients are insured by one of five or six plans in California and by only one or two in some states.

How can the individual physician ever expect to effectively negotiate contract terms or fee schedules against such mega-companies? And why is it reasonable that the antitrust laws should apply to us and not to the payers who have the control of a virtual oligopsony? The battle between organized medicine and the government to allow collective bargaining by physicians and thereby level the playing field with those who dictate their terms to us has literally gone on for decades.

Let’s look at what the laws actually say, why we can’t be a union, what we can and can’t do, and what efforts have been made to improve the bargaining power of physicians.

The Laws

Section 1 of the Sherman Anti-Trust Act says, “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is declared to be illegal.” Penalties for violation of this act are huge, imprisonment up to three years and/or fines up to $350,000 per violation!

“Contracts” can be oral or implied, even just from a verbal agreement among a group of “competitor” physicians in a private meeting, if that leads to a joint withdrawal from a plan contract or an effort to strengthen a negotiation by group action. “Combinations/trusts” can be any organization formed that is made up of competitors. “Restraints of trade” can be “per se” illegal if they so clearly are anti-competitive (price fixing, group boycotts, market allocations) or else can be judged by “the rule of reason” after a balancing of the anticompetitive effects against the pro-competitive benefits. There is a wealth of case law dealing with attempts by physicians to form systems that improve their ability to manage contracts without running afoul of these laws.

The Clayton Act, the Norris LaGuardia Act, the National Labor Relations Act, the Labor Management Relations Act (Taft-Hartley), and the Labor Management Reporting and Disclosure Act all pertain to what a group of employees can do in collective bargaining, but the key word is “employees.” AMA surveys as of 2008 estimated that 45 percent of U.S. physicians are now employed (as opposed to self-employed), and the SEIU says that that number is 48 percent. In any case, the percentage is increasing each year. So 52–55 percent of physicians are unable even to consider collective action right from the start. But what about the ones who are employed?

Even if they could form a bargaining unit to negotiate with their employers, physicians face several nearly impossible hurdles. Many of the “employed” physicians are employed by their own physician organizations, hence “owner-employers” as well as employees. Most of the rest of us are considered to be in the role of supervisors because we oversee the work of those to whom we give medical orders. The labor laws cited above pertain to the supervised, not the supervisors. Very few among the employed then can qualify to do collective bargaining. State and other governmentally employed physicians, some residents in training, and some employees of companies who can demonstrate that they are not supervisors can consider joining or forming a union.

Most importantly, the concept that physicians might be considered “employees” of the insurers who pay our fees through HMO, PPO, or FFS contracts has been tested and does not pass the test of the labor laws. So the laws currently offer no hope for those of us who would like the ability to collectively bargain in order to resist the downward pressure on incomes by too powerful payers. AMA spent $3.6 million in the early part of this decade forming “Physicians for Responsible Negotiation (PRN)” to attempt to organize the physicians and residents who could qualify as “non-supervisory” into bargaining units, and then abandoned the effort by 2004, apparently because there weren’t any.

What Can You Do?

Most of this article is drawn from CMA ON-CALL documents #0210 (“The Antitrust Laws: What Physicians Can Do”), #0211 (“The Antitrust Laws: Analysis of Physician Group Mergers”), and #0212 (“Physicians and Unions”). Document #0210 gives explicit detail on what physicians can do legally:

1. Act independently.
2. Make your own decision (we can talk to each other about low fee schedules, the motives of the health plans, and about the need to change the system, as long as we don’t collectively act on those discussions).
3. Create a medical group or expand an existing one (being careful not to be so large as to be anticompetitive, estimated to be more than 60–70 percent of the market share in a given area).
4. Use a broker/“messenger model.” Care must be taken here as well, but a messenger can a) Convey to purchasers information obtained individually from providers about the prices or price-related terms the providers are willing to accept; b) Convey to providers all contract offers made by purchasers; c) Help providers understand the contract offered by providing objective or empirical information about the terms or an offer; and d) Receive from individual providers some authority to accept contract offers on their behalf. There are many examples of successful “messenger models” in California. Bay Area Preferred Physicians in Northern California is one good example, and there are some in San Diego and other Southern California counties as well.
5. Create or join a physician network joint venture (PPO, IPA, etc.) as long as the physicians in it share “substantial” financial risk or otherwise clinically integrate so that the network is considered a single entity.

Most importantly, get expert legal advice whenever attempting to do anything collectively. This is a very specialized area of the law, and, just like in Medicine, sometimes we need to get the help of only the most experienced and skilled when the risk is high. Mergers of physicians’ practices or groups of practices are a special consideration as well and addressed in detail in ON-CALL document #0211.

So Where Is Organized Medicine in All This?

Many things have already been done, including the passage in California of the CMA-sponsored Healthcare Provider’s Bill of Rights (see ON-CALL document #1070, “Managed Care Contractual Protections”) and CMA-sponsored AB 1455, the Unfair Payment Practices Act (see ON-CALL document #1051, “Physicians Complaints About Managed Care Plans”).

Former California congressman Tom Campbell authored HR 1304 and introduced it with CMA and AMA support in early 1999. It was a bill with simple language to declare physicians as not exempt from the labor laws applying to employees and, therefore, eligible for collective bargaining. While there was little difficulty getting passage in the House of Representatives, there was not a second democratic senator to support our own Diane Feinstein to allow passage in the Senate.

With the even greater current dominance in Washington, DC, of those who favor the regulation of our profession, the climate is not good for any change to the labor or antitrust laws in the near future, though the federal enforcers have increasingly been willing to allow combinations where there is clinical integration that promotes quality. Hopes were dimmed further by declarations in 2004 by both the Federal Trade Commission and the Department of Justice that “governments should not enact legislation to permit independent physicians to bargain collectively” as this activity would “harm consumers financially and is unlikely to result in quality improvements.”

Conclusion

While we are not likely to be unionists any time soon, there is much that we can do. Please read the CMA ON-CALL documents mentioned above for much greater detail on these issues. Feel free to contact me or any of your SDCMS or CMA leaders if you have questions or feedback. <end>

CMA ON-CALL Documents: Free to Members

SDCMS-CMA member physicians can access — free of charge — thousands of pages of medical-legal, regulatory, and reimbursement information, through CMA’s online library. For further information about CMA ON-CALL, contact CMA at (415) 882-5144, at legalinfo@cmanet.org, or visit CMAnet.org. To access your CMA website username and password, contact CMA or Marisol Gonzalez, your SDCMS physician advocate, at (858) 300-2783 or at MGonzalez@SDCMS.org.

ON-CALL Documents Mentioned in This Article:

• Document #0210, “The Antitrust Laws: What Physicians Can Do”
• Document #0211, “The Antitrust Laws: Analysis of Physician Group Mergers”
• Document #0212, “Physicians and Unions”
• Document #1070, “Managed Care Contractual Protections”
• Document #1051, “Physicians Complaints About Managed Care Plans”