Mid-Atlantic Health Law TOPICS

Can physicians increase their bargaining power in negotiations with managed care plans (MCPs)? One way is for physicians collectively to negotiate their contracts with MCPs. However, since physicians are competitors, the antitrust laws significantly restrict this approach.

The basic antitrust principle is simple- competitors may not collectively agree on the prices at which they sell their services. This article explores the methods that physicians are presently permitted to use when negotiating collectively with MCPs. It also examines whether physician unions provide a viable means to expand or to enhance these alternatives.

A. Group Practices

The most straightforward way that physicians may legitimately engage in collective negotiations with MCPs is to merge their individual practices into a larger group practice. The antitrust laws view the group practice as a single economic entity, and physician members of the group practice may jointly negotiate with MCPs without fear of antitrust repercussions.

B. Economically Integrated Networks

Short of merging their practices, physicians may also form "economically integrated" networks through which they may contract with MCPs. Generally, the network is economically integrated if the doctors "share substantial financial risk." In that case, the network can negotiate competitively sensitive terms on behalf of its members.

C. Messenger Model Networks A network that is not economically integrated may not "negotiate" with an MCP on behalf of its members, but it may act as a "messenger" or conduit of information between the MCP and network members. Under the messenger model, the network may communicate MCP offers to individual network members; however, each network member must make his or her own unilateral decisions about MCP contract terms.

D. Physician Unions

Both group practices and networks, however, have serious drawbacks. Group practices that are large enough to exert leverage often bring new problems to physicians because of the difficulties of running such a large group. Similarly, the nuances of sharing substantial risk, or following the requirements of the messenger model, have limited the utility of networks. Therefore, physicians have begun to look to "unionizing" as a possible way to increase their negotiating strength.

At the beginning of this century, courts routinely held that efforts by employees to negotiate collectively with their employers violated the antitrust laws. In response, Congress enacted a statutory exemption from the antitrust laws for labor organizations.

The most significant limitation to both this statutory exemption, as well as to subsequent court expansion of the concept, is that a union may not negotiate on behalf of independent contractors. Therefore, the ability of physicians to unionize and to engage in collective bargaining with an MCP turns on whether the physician is an employee of the MCP.

E. Employee or Independent Contractor?

Whether an individual is an employee or an independent contractor is determined by a number of factors that measure the degree to which the individual's interests and activities are integrated with and controlled by the employer. Among these factors are whether the individual is engaged in a distinct occupation or business, and the extent to which the employer has the right to control and direct the individual's performance.

Some physicians believe that MCP's exert so much control over the manner in which they provide health care services to patients that the physicians should be treated as part-time employees of the MCP. This issue was recently considered by the National Labor Relations Board (NLRB) in connection with a petition filed by the United Food and Commercial Workers Union to be certified as the bargaining representative for a group of New Jersey physicians under contract with AmeriHealth HMO.

The NLRB Regional Director found that some factors supported a finding of employee status, such as the indefinite length of the contract between the physicians and AmeriHealth, and the variety of standards and guidelines to which AmeriHealth requires physicians to adhere.

The Regional Director distinguished, however, between AmeriHealth's right to control which particular health care services are covered by AmeriHealth's insurance plans, and the physician's substantial control over the actual performance of those services.

The Regional Director noted that the physicians: retain their economic separateness from AmeriHealth; do business and advertise in their own names; perform their services at their own facilities without AmeriHealth's supervision; exercise control over the means in which they examine patients, diagnose illnesses, perform procedures; and generally retain wide entrepreneurial discretion in how they run their practices and make profits. Their time and energies are devoted to the interests of their patients and their practices, not to the interests of Ameri -Health's enterprise.

The Regional Director thus concluded in May of 1999 that the physicians were not employees of AmeriHealth, but were independent contractors, and therefore, ineligible for certification as a bargaining unit.

F. Messenger Model Unions

A union that is unable to gain certification as a bargaining agent may still operate as a messenger for its private practice physician members. A messenger model union is subject to the same restrictions that apply to a messenger model network, including the prohibition against negotiating on behalf of its members.

The Department of Justice (DOJ) has recently leveled antitrust charges against two physician unions that purported to operate under the messenger model. A proposed consent judgment against the Federation of Certified Surgeons and Specialists, Inc., of Tampa, Florida was filed in January of this year. The Federation of Physicians and Dentists (FPD), on the other hand, is defending itself against a complaint filed by the DOJ in August of 1998, stemming from FPD's conduct in organizing orthopedic surgeons in Delaware.

The crux of each case is the allegation that the union, rather than acting as a neutral conduit of information between private practice union members and MCPs, instead engaged in negotiations with MCPs on behalf of union members. Further, when the MCP failed to cooperate in these negotiations, the union allegedly organized a coordinated withdrawal or threat to withdraw from the MCP by union members. These allegations describe collusive behavior among competitors constituting a per se violation of the antitrust laws.

G. Amendment of the Antitrust Laws

To ease current antitrust constraints facing physicians, the Quality Health-Care Coalition Act of 1999 has been introduced in Congress. It would require that physicians (and other health care professionals) be treated as employees when negotiating with MCPs, and entitle them to the same treatment under the antitrust laws as unions. The legislation does not require that health care professionals actually join a union to take advantage of its protections.

Other suggestions for legislative change include: (1) encouraging state officials to negotiate with MCPs on behalf of physicians, because state action is exempt from the antitrust laws; or (2) applying a "rule of reason" analysis to physicians' joint bargaining activities under the antitrust laws. Use of the rule of reason analysis would allow physicians to demonstrate that their collective bargaining resulted in competitive benefits and economic efficiencies that outweighed any anticompetitive effects.

H. Conclusion

Although unions may provide the means through which staff or salaried physicians may collectively bargain with an MCP employer, at this time unions do not alter the antitrust landscape for private practice physicians. Instead, physician unions must operate under the same antitrust constraints as non-organized physicians and physician networks.

Only a change in the antitrust laws or present enforcement policies will change this conclusion. Until then, without economic or clinical integration, private practice physicians must negotiate on their own -- physician unions are not the remedy to antitrust restrictions.