By Christopher Guadagnino, Ph.D.

Published November 1999

• React to this article in the Discussion Forum.

Physicians, feeling increasingly powerless against the dictates of consolidated health insurers, are beginning to make some headway in gaining relief from federal antitrust restrictions against them banding together to level the playing field. Existing state laws that permit private physicians to negotiate jointly with health plans over contract issues free of antitrust obstacles are beginning to bear fruit, while a federal bill offering even more negotiating latitude for physicians is about to be amended and moved for a vote. In Pennsylvania alone, three antitrust waiver bills for health care professionals have been introduced in the state Legislature, while two more are expected to be introduced shortly.

Washington State

Washington state’s antitrust waiver legislation for physicians, implemented in 1995, has allowed a group of over 4000 private physicians to negotiate jointly with a major statewide Blue Cross health plan last summer and successfully change seven contract provisions to their complete satisfaction and five to their partial satisfaction, out of 23 provisions the group agreed to negotiate over, according to John Arveson, director of professional affairs of the Washington State Medical Association (WSMA).

The Washington measure allows physicians to negotiate jointly through the WSMA on non-fee-related health plan contract provisions, overseen by the state’s executive branch. The WSMA submitted the results of the negotiation to the state for approval in July, then distributed the final contract to participating physicians in August for them to decide which terms and conditions to accept or reject, says Arveson. The WSMA has made initial contacts with other health plans to pursue additional contract negotiations on behalf of the physicians, Arveson adds.

Texas

Texas legislation going into effect on Sept. 1 (SB 1468) has already prompted a group of 60 San Antonio orthopedic surgeons and subspecialists to apply to the state attorney general to enter into contract negotiations with several major health plans over fee and non-fee-related provisions, as the statute allows under state attorney general consent and oversight. Based on the Washington measure and using language from model legislation drafted by the AMA, the Texas statute is rooted in the "state action doctrine," first set forth in a 1943 Supreme Court decision indicating that antitrust laws do not apply to action by a state operating in its sovereign capacity, or to private conduct compelled or approved by the state.

The Texas attorney general rejected in mid-October the application it received from the San Antonio physicians, represented by the Federation of Physicians and Dentists (FPD), sending the application back to the group within 30 days of application, as the statute requires, with advice for remediation and resubmission, along with a draft set of application rules the attorney general plans to release statewide for public comment, according to FPD’s Executive Director Jack Seddon.

Finalized rules are expected by December of this year or later, depending on the timing of the input received by the Texas attorney general’s office, a spokesperson for the attorney general’s office said.

The Texas Medical Association (TMA) is developing a strategic plan to assist physicians in utilizing the state’s new law and will submit to its Board of Trustees at their mid-November meeting several options for assisting physicians in forming negotiating groups under the statute, according to Richard W. Johnson, Jr., TMA’s director of medical economics.

The Board will consider options such as having the TMA serve as the negotiating agent for physician groups or being the broker of resources for physicians to appoint their own agents, Johnson added.

The TMA, in cooperation with its affiliated county medical societies, also intends to offer a package of technical services to determine whether forming a joint negotiation group would best serve particular physicians’ interests, to help them evaluate contractual terms and market data, and to advise them how to conduct negotiations with health plans, Johnson said. The actual configuration of that joint initiative has yet to be determined by the TMA’s Board of Trustees, he added.

The TMA has not begun to organize physicians wishing to use the joint negotiation statute, following the advice given by the state attorney general’s office at a Sept. 8 stakeholder meeting urging potential applicants to wait for the office to release rules, noted Johnson. Among the application issues to be spelled out by the rules, Johnson added, are costs of applying, procedural details, what application information is required and how provider groups must document their market share.

Seddon’s group has already received the draft rules. Seddon characterized them as unreasonably onerous, requiring physicians to submit with their joint negotiation application reimbursement records specifically indexed to all health plans with which they have contracted for the past three years, as well as requiring a detailed explanation of how the requested negotiations will help patients.

The San Antonio physician group plans to include the requested enhancements in its amended filing, while the FPD is currently recruiting a group of 50 or more multispecialty physicians in the Dallas-Fort Worth area whom it hopes to represent under the joint negotiation statute, Seddon said.

Federal Legislation

A federal bill offering both nationwide antitrust exemption for joint negotiation by private health care professionals and considerably more procedural latitude than the state initiatives is about to be put into motion.

Rep. Tom Campbell’s (R-CA) bill to allow private health care professionals to engage in collective negotiations with health plans had been scheduled to be amended and voted on in the U.S. House Judiciary Committee on Oct 27, where initial amendments were expected to be introduced. The Quality Health Care Coalition Act of 1999 (H.R. 1304) would grant state and federal antitrust exemptions to private health care professionals and allow them to negotiate collectively on health plan contract provisions, while proscribing collective cessation of service to patients.

At press time, Speaker of the House J. Dennis Hastert (R-IL) requested that Committee Chariman Henry Hyde (R-IL) delay consideration of the bill, according to Campbell’s Press Secretary Suhail Khan. Campbell has worked out an agreement with Hastert to have the bill be marked-up in Committee during the first week in February and come up for a floor vote in the House the following week, reported the AMA.  Khan believes that the bill is likely to be voted out of Committee and reach the House floor, given that 20 of the Committee’s 37 members are co-sponsors.

Two amendments to the bill are expected to be introduced, says Khan:

• Campbell was expected to offer an amendment to prohibit any group of health care professionals from marginalizing or boycotting another group of health care professionals. For example, says Khan, a group of ob/gyns could not say that it will negotiate with a health plan only if the plan agrees not to negotiate with nurse midwives.

• House Judiciary Committee Chairman Henry Hyde (R-IL) said he would support the bill, Khan notes, provided that a sunset provision be included, which requires that the law be re-evaluated every three years in light of an assessment of the law’s impact on quality and cost of patient care. Hyde plans to draft the amendment, while Campbell hopes the re-evaluation will be required every five years instead of every three, Khan adds.

If passed, the bill would grant to the Federal Trade Commission and/or the Department of Justice oversight of health care provider negotiations. Either agency would issue guidelines for the bill’s implementation, Khan says. Among the possible issues to be addressed by guidelines include market power thresholds needed before collective negotiation is authorized; configuration of negotiating groups, e.g., whether they are specialty-based or regionally-based; and whether or not health plans would be required to negotiate with the health professional groups. Government regulators would have discretion over which issues they would detail in guidelines, Khan notes.

Whereas the Texas statute only mentions physicians, the Campbell bill would apply to a variety of health care professionals, including physicians, dentists, pharmacists, chiropractors, nurses, podiatrists, psychologists and home health care providers. It specifically rules out hospitals and applies only to individual health care professionals, says Khan.

The most effective lobbyists for the Campbell bill, according to Khan, have been individual physicians, dentists, pharmacists and other health professionals who have been calling and meeting with their representatives to encourage support for the bill. "That’s delivered the bulk of the co-sponsors," Khan says, which he notes include almost an even mixture of Republicans and Democrats.

Pennsylvania Initiatives

Pennsylvania has recently become a fertile battleground for legislation aimed at removing antitrust restrictions on groups of private physicians and other health care providers negotiating with health plans.

A total of three bills on the subject have thus far been introduced in the Pa. Legislature, with two more pending introduction once sponsors are secured.

Introduced in the Pa. House on August 30, Rep. Connie Williams’ (D-Montgomery) Health Care Provider Joint Negotiation Act (HB 1818) largely duplicates SB 1052, previously introduced in the Pa. Senate on July 23 by Sen. Richard A. Tilghman (R-Montgomery). Both bills were drafted by the Pennsylvania Medical Society.

Unlike Tilghman’s bill, Williams’ HB 1818 explicitly prohibits joint coordination by health care providers of any cessation of health care delivery services, such as strikes or job actions. Omitting a no-strike provision from the Tilghman bill is not tantamount to authorizing health care provider strikes, as strikes would not now be permitted under antitrust law, maintains PMS General Counsel Ken Jones, Esq.

Both bills include in the definition of "health care provider" the same list of physician and nonphysician professionals outlined by the Campbell bill, but also include licensed hospitals or health care facilities and medical equipment suppliers.

Both bills would allow independent health care providers to join together to negotiate non-fee-related contract terms with insurers, including, but not limited to:

• Definition of medical necessity.

• Utilization review criteria and procedures.

• Clinical practice guidelines.

• Preventive care and medical management policies.

• Patient referral standards and procedures.

• Drug formularies.

• Quality assurance programs.

• Liability issues.

• Payment methods and timing.

• Claim documentation requirements and administrative procedures.

• Credentialing standards and procedures.

• Dispute resolution mechanisms.

• "All products" clauses.

Regarding negotiation over fees and fee-related items, both bills authorize such negotiation only when health plans have "substantial market power," to be defined either of two ways:

• The health plan and its affiliates have a market share that exceeds either 25,000 covered lives in the providers’ geographic service area or 15 percent of the covered lives in that area.

• The Pa. Attorney General determines that the health plan’s market power in the providers’ geographic area "significantly exceeds the countervailing market power of the providers acting individually."

The bills use the "either/or" test in order to make it more difficult for joint negotiation applications over fee items to be rejected, inasmuch as the specific threshold figures switch the burden of proof on the attorney general to demonstrate that a health plan has insufficient market power to warrant granting the joint negotiation application, according to Jones. The attorney general still retains the ultimate authority to reject or accept negotiation applications, Jones concedes.

Both bills further require the Pa. Insurance Commissioner to calculate by March 31 of each year the number of covered lives of health care insurers and their affiliates, excluding traditional Medicare and Medicaid, in each relevant market segment for each county of the Commonwealth.

The bills require that joint negotiations be conducted by a representative appointed by the providers and approved by the Pa. Attorney General.

Neither HB 1818 nor SB 1052 puts a limit on what proportion of health care providers of the same type and specialty in a given geographic service area may jointly negotiate, although the bills do require that percentage to be reported to the Attorney General for approval. Imposing such a limitation (the Texas statute limits negotiating groups to no more than ten percent of physicians in the same specialty in a given practice area) does not adequately level the playing field for physicians, believes Jones, who admits that will be a point of contention, should amendments be offered for the bills.

Both bills also declare that health care insurers shall negotiate in good faith with health care providers regarding the terms of provider contracts. That provision, not enjoyed by Texas physicians under their statute, would prevent health plans from declining to negotiate, much as labor law requires employers to come to the bargaining table.

Also introduced in the Pa. House on August 30 was Rep. John Yudichak’s (D-Luzerne) Physician Collective Negotiation Act (HB 1816), which precludes joint negotiation over the following fee and compensation-related contract items unless expressly requested by a managed care company:

• Fees or prices, including those arrived at by applying any reimbursement methodology.

• Conversion factors in a RBRVS or similar methodology.

• Discounts on the price of services by health care professionals.

• Capitation or fixed payment amounts.

HB 1816 permits joint negotiation for a more limited set of contract terms and conditions than permitted by HB 1818 or SB 1052:

• Clinical practice guidelines and coverage criteria.

• Dispute resolution procedures.

• Patient referral procedures.

• Quality assurance and utilization review procedures.

• Managed care plan network credentialing procedures, including criteria used to measure provider performance.

• Performance incentives and withholding practices.

HB 1816 also explicitly prohibits collective retaliatory actions, such as strikes or work actions, among health care providers.

Unlike HB 1818 and SB 1052, which permit each health care provider to agree to be bound by the negotiation outcome, Yudichak’s HB 1816 stipulates that each "shall be bound by the terms and conditions negotiated by the third party authorized to represent their interests." That provision would preclude health care providers from having the choice selectively to accept or reject negotiated contract items, a choice that the Washington state and Texas physicians enjoy under their statutes.

The Yudichak bill limits its applicability to competing health care professionals who do not practice together in a group practice or any other form of business partnership recognized under Pa. law and includes only physicians, podiatrists, psychologists, optometrists and chiropractors.

The bill does not mandate health plan participation and includes a nonbinding arbitration mechanism.

The bill would also give the Pa. attorney general authority to approve or reject the contractual outcome.

Rep. Yudichak says that the intent of making his bill more restrictive than Williams’ or Tilghman’s was to give it a greater chance of passage by blunting some of the anticipated opposition and still offering greater health care decision-making authority to physicians.

The bills face considerable hurdles in the Republican-controlled Legislature, but may spark a debate that puts their issues on the public agenda.

Tilghman’s SB 1052 has been referred to the Public Health and Welfare Committee, chaired by Sen. Harold F. Mowery, Jr. (R-Cumberland), who is a cosponsor of the bill but says he reserves support for it until more is learned about the issues it addresses.

Mowery expresses concern that the bill "comes awful close to collective bargaining," but acknowledges that it reflects justifiable physician frustration and that the bill is needed to "focus on how physicians are being compensated today in Pa. to get more of a level playing field and to come up with some kind of realistic payment plan" in light of public perceptions that quality of medical service delivery under managed care is not what it should be.

"Before considering hearings or pushing the legislation, I want to wait and see whether or not this bill, by its own introduction, is going to get the attention of many groups involved in health care delivery," says Mowery, who adds that the bill is not currently a high priority of the committee and has not yet been brought to a level of informal inquiries among committee members to determine their thoughts on it.

On an even less optimistic note, Mowery says, "I have been trying to keep government and new laws and new regulations out of administration of health programs to allow the private sector to try to solve those issues. I can’t help but have a lot of the same feelings regarding this bill." On the other hand, he admits, the bill brings to the attention of HMOs and the entire health care delivery system that physicians are getting more aggressive and represent a group that will have to be dealt with and listened to.

Williams’ HB 1818 faces an even chillier reception in the Pa. House Insurance Committee, where it currently resides. Committee Chair Nicholas Micozzie (R-Delaware) flatly declares that he does not plan to hold hearings on the bill unless the Pa. Senate passes Tilghman’s SB 1052.

Micozzie believes HB 1818 would raise medical costs and could lead to price-fixing, with no appreciable benefit to patients. "The reason that health care costs have risen out of sight is because providers had an open checkbook. They decided what medical necessity was. I fear we might go back to that with this bill. There has to be some controls," says Micozzie, who believes that Pa.’s Act 68, which he played a role in drafting, preserves necessary managed care cost-control mechanisms while mitigating key abuses.

Micozzie is not confident that attorney general oversight required by the bill is meaningful, noting that "the attorney general is a political animal and we don’t want a political animal to be making decisions on these types of issues."

The Yudichak bill currently resides in the Pa. Committee on Professional Licensure.

Democratic House leaders considered the Williams bill to be a high enough priority to try to have it attached as an amendment to another House bill (HB 854, a prescription drug coverage bill) on Oct. 19, but the attempt failed when House Republicans offered HB 854 one day earlier than expected, invalidating the amendment attempt, according to Dave Meyers, author of the Yudichak bill and staff member of Pa. Democratic Whip Mike Veon (D-Beaver).

Both the Williams and Yudichak bills will be considered at hearings held by the Pa. House Democratic Policy Committee in November, Meyers says. Although the Policy Committee does not have authority to bring the bills to the floor for a vote, its hearings can help to publicize the bills and attempt to create legislative momentum for them, notes Meyers.

A fourth joint negotiation bill for Pa. was drafted in late October by a coalition of unions and a physician group, including the Federation of Physicians and Dentists, the Doctors Council, Service Employees International Union, Office and Professional Employees International Union, National Union of Hospital and Healthcare Employees, and the Pennsylvania Orthopaedic Society.

The latest version of the coalition’s Health Care Provider Joint Negotiation Act resembles SB 1052 and HB 1818 in that it requires health plans to negotiate in good faith, authorizes joint negotiations by health care providers on the same non-fee-related health plan contract items as those two bills and requires similar attorney general oversight for negotiation on fee items. The coalition bill, however, excludes hospitals, health care facilities and medical equipment suppliers from its definition of "health care provider."

The bill has other significant differences from SB 1052 and HB 1818 that are specifically designed to build in less opportunity for health plans or state regulators to manipulate the process. Drawing on the FPD’s experience and difficulties with the Texas statute, the union coalition incorporated into its bill a formula used by the FTC and the Department of Justice to determine what marketplace threshold constitutes substantial market power of a health plan, resulting in a more objective criterion with which to authorize physicians to form joint negotiating groups than relying on the discretion of the attorney general, notes FPD’s Seddon.

The coalition bill also includes an impasse provision that authorizes the providers or insurers to request that a panel of arbitrators be created, composed of one member chosen by the provider group, one chosen by the health plan and one jointly chosen. The panel’s ruling on unresolved negotiation disputes would be binding.

Finally, the bill includes a no-strike clause similar to that in HB 1818, but which is invalidated if a court of jurisdiction rules that a violation occurs regarding either the bill’s good faith provision, the appointment of the arbitration panel or the outcome of the arbitration panel.

The coalition plans to approach the PMS with its bill to see if the PMS is willing to amend SB 1052 or HB 1818, and also plans to mail copies of the bill to its physician members to help push it in the Pa. Legislature, according to Seddon.

The Pa. Orthopaedic Society, a supporter of and participant in the drafting of the union coalition bill, plans its own initiative, according to its President John D. Kelly, IV, M.D. The Orthopaedic Society differs with the PMS-sponsored SB 1052 because it covers all health care providers and does not prohibit physician strikes, says Kelly.

Instead, the Orthopaedic Society’s bill seeks to amend Pennsylvania’s Labor Relations Act to grant the same joint negotiation rights to private physicians as is currently enjoyed by employees. The Society hopes to attract sponsors for the bill.

Kelly is not certain whether the bill’s success would depend on federal enabling legislation such as the passage of the Campbell bill, but he believes that the bill’s very existence will attract attention to physicians’ desire to be able to negotiate collectively with health plans in Pa.