As workers of the world unite on May Day, many American physicians are beginning to wonder if they have more in common with traditional trade union workers such as plumbers and bus drivers than they do with employers.
David Feinwachs, JD, Ph.D.If physicians don’t quickly engage in efforts to ease federal antitrust rules against negotiating pricing with insurers, they will become, “medical sharecroppers on the ACO (Accountable Care Organization) medical plantation.”
That’s the opinion of David Feinwachs, JD, Ph.D., until recently the General Counsel and a veteran of 30 years of service for the Minnesota Hospital Association.
As the hospital association’s top lawyer, Feinwachs had a front line post in managing the hospital/physician relationship. He was fired from his job at the end of 2010 for saying the way insurers spend Medicaid dollars was a “black box.” He’s suing the insurers’ trade group, the Minnesota Council on Health Plans for tortious interference and defamation.
Opportunities for Change
Feinwachs and others say the recently proposed ACO rules and the introduction of legislation in Congress (H.R. 1409) to exempt physicians from federal antitrust laws hold the potential to change the relationships physicians have with hospital systems and insurance carriers.
The legislation is co-sponsored by the House Judiciary Committee’s Ranking Member, Democrat John Conyers and Republicans Ron Paul, M.D., and Jeff Miller.
Michael Connair, M.D.Michael Connair, M.D., Vice President of the Federation of Physicians and Dentists (FPD) a labor union affiliated with American Federation of State, County and Municipal Employees (AFSCME), reminded Congress in testimony in December that physicians in the U.S. have been under a 1996 Department of Justice/Federal Trade Commission (DOJ/FTC) “Statements of Antitrust Enforcement Policy in Health Care.” The policy prevents physicians from negotiating collectively with insurers.
Connair cited over 30 cases since 1996, where physicians around the country were sued by the government for alleged antitrust violations in trying to comply with a cumbersome third-party messenger model and other statements outlined by DOJ.
The prosecution of physicians, testified Connair, has made insurers, “downright arrogant in their treatment of physicians and patients…and has had a chilling effect on physicians’ willingness to resist substandard provider agreements either for their own financial survival or to protect the quality of patient care and the access to care.”
This is one of the main reasons Connair believes physicians need a trade union.
Combating the Monopsony
Connair, speaking for labor, and his colleague Pete Mandell, M.D., Chair of the Council on Advocacy for the American Academy of Orthopaedic Surgeons (AAOS), told Congress that the guidelines and the way the Justice Department has enforced the policy have distorted the economics of the healthcare market. They said insurance markets have become highly concentrated; and for the most part insurers possess market shares that are associated with monopsony power. A monopsony system is where one or very few buyers dominate.
Pete Mandell, M.D.Those guidelines, according to Melissa Maxman, JD, co-chair of the Antitrust Practice Group at the law firm of Cozen O’Connor in Washington, D.C., were enacted to protect end user patients, not physicians. “The antitrust laws generally try to keep costs down for end users—in this case, patients—and to encourage providers of services in the stream of commerce to employ cost savings measures without detracting from high quality of service. The theory is that if you can get the same good results while keeping prices down to consumers, you are benefitting the industry as a whole and protecting competition rather than protecting any one particular competitor or group of competitors.”
However, as industries evolve, Maxman notes unanticipated burdens and consequences arise. “The 1996 Guidelines, by not anticipating that individual doctors and providers might at some point need to work together to negotiate favorable contracts with hospitals, health systems, and insurers, eventually gave rise to the situation about which Drs. Connair and Mandell testified last December.”
Consolidation Trend
Feinwachs told OTW that the basic trend has been the consolidation of medical practice.
“The practice of medicine has gone from an individual entrepreneur-based business—an art of medical practice— to a corporate practice of medicine. We’ve seen that evolution over the last 50 years. The concept of a doctor practicing by himself or herself or with a group of partners is basically dying. Physicians are being employed by corporations such as hospitals and healthcare systems.”
The reason for that consolidation, said Feinwachs, is the need to achieve the proper economic size to try to contain costs.
The argument [made by hospitals and insurers] is that the healthcare system needs this to have efficiencies. The doctors are now viewed as glorified technicians and they will work for people who are trained in business.
“We have seen the development of managed care, which is basically leveraged contracting. It is making purchasers large enough to force economic concessions to the point where they no longer make economic sense. You can just get them because you’re a behemoth.”
“There are now very few buyers, ” agreed Feinwachs, “There’s the government and then there are three or four HMOs nationally.”
Accountable Care Organizations
Now, says Feinwachs, ACOs, which are simply HMO’s on steroids, are being proposed.
Part of what fuels consolidation, according to Feinwachs, is that government has imposed requirements which basically make it impossible to remain free standing.
He cites the electronic health records requirement as an example. “The concept is sound and will improve lots of things, but groups of physicians, large and small, don’t have the money to access this technology. This is a thing that requires a significant investment. So if the government requires you to have it and you can’t afford it, you have no choice but to be consolidated and bought up.”
“You are looking at a future where once they own you, it’s like anything else. They will dictate the terms because if you can’t practice independently and you can only practice in one of these settings and you choose to leave, you better look for another occupation.”
Petition Government
Feinwachs offers some advice.
If physicians are currently employed by an entity, they can unionize now. “But most physicians won’t be employed directly, ” added Feinwachs, “they are going to have a contractual and business relationship with ACOs where their biggest fear in life is to be excluded from the network, which is the same as an economic death sentence.”
He urges physicians to petition the government under the ACO proposed regulations to permit something like unionization given the nature of these organizations.
Feinwachs says the other strategy is to seek an anti-trust exemption, given that the ACO rules contemplate various kinds of exemptions. The only way the ACOs can work is with exemptions from anti-kickback laws, fraud and abuse laws, civil monetary penalty laws and anti-trust laws.
Physicians need to do this or they are, “just grist for the mill…they haven’t got a chance.”
“You have to ask yourself, how friendly is a healthcare system sound to you that’s based on waivers of four criminal statutes currently designed to protect consumers, ” added Feinwachs.
Physicians have until May 11 to make public comments on the proposed ACO rules.
Smaller is Better
Maxman told us she understands the fear that ACOs will become huge behemoths that will wield unbridled market power through sheer scope and size. However she continues, “Any fair reading of the proposed joint DOJ/FTC ACO regulations issued March 31, makes clear that, as to the antitrust analysis, the government agencies were attempting to induce precisely the opposite result.”
Melissa Maxman, JDBy carving out “Safety Zones” only for smaller ACOs—which are measured by market share, by avoiding oversaturation or exclusivity in any particular practice area, and by rewarding savings shared among doctors through sharing tests and other information across practice areas—the government, says Maxman, is encouraging ACOs to remain as small as possible.
“By exempting only the smaller ACOs from antitrust scrutiny, the Government clearly intends to address the ‘behemoth ACOs’ specter by actively encouraging many smaller ACOs to compete vigorously in the new healthcare market.”
Avoiding antitrust scrutiny requires an ACO to remain small enough to remain in the safety zone. “If they choose not to do so, the theory goes, it’s a business decision, with predictable consequences, ” added Maxman.
Maxman and Feinwachs both say the best way to have an impact on the rules for ACOs is for physicians and their societies to make their views known to the government by May 11. AAOS’ Mandell told us that the Academy will be issuing comments.
Unions, Physicians and Collective Bargaining
Which brings us back to May Day, unions and collective bargaining.
As business people signing paychecks, physicians have not had a reason or opportunity to join unions. AAOS is not ready to jump on that bandwagon. Mandell said the Academy believes the antitrust laws should be changed to allow physicians to collectively negotiate with health plans and insurers without the necessity of joining a labor union.
However as physicians increasingly collect a paycheck, that may change. We found two physician unions, both affiliated with AFSCME. We will report on those organizations in the future.
As we approach May Day, physicians have before them opportunities to change the relationships that govern their practice of medicine with patients, payers and regulators.
First, make sure your medical societies are petitioning the government on the ACO proposed antitrust exemption rules. Second, get involved in making sure that your Congressmen and Senators supports H.R. 1409, and third, consider joining a union.
Happy May Day, Physicians Unite
