Collective bargaining for doctors: The Texas law: On target, or firing blanks?

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A new law gives Lone Star doctors an antitrust shield. But are they really as safe as they think?

Special Report: Collective Bargaining for Doctors

The Texas law: On target, or firing blanks?

Jump to:Choose article section...David and Goliath battle, and lawmakers choose sidesInterest groups split on the law's real impactTexas doctors still run an antitrust risk

A new law gives Lone Star doctors an antitrust shield.But are they really as safe as they think?

This summer started off with a bang for doctors fighting the power ofinsurance companies.

On June 20, Texas Gov. George W. Bush signed a bill giving self-employedphysicians the right to negotiate collectively with HMOs. Three days laterin Chicago, delegates to the AMA's annual convention voted to establisha national collective bargaining unit for employed doctors. While that measuremight not seem to be aimed at health plans--which employ very few doctors--thevote did, in fact, express physicians' frustration with their lack of progressin gaining bargaining clout with HMOs .

These actions have drawn a mixed response inside and outside organizedmedicine. Some doctors dislike the idea of unionization. They view it asunprofessional and a threat to federal antitrust reform--which, in theirview, is needed to redress imbalances in the bargaining power of physiciansand health plans. The HMO industry condemns what it regards as doctors'efforts to circumvent the antitrust laws. The new Texas law legitimizes"the formation of physician cartels," charges the American Associationof Health Plans.

Actually, independent doctors generally have a right to negotiate jointlywhen they're taking financial risk together. But the Texas statute willallow up to 10 percent of the doctors in a market to bargain collectivelyon nonrisk fee-for-service contracts, if the state attorney general decidesthat the health plan has "substantial market power."

The heated battle over antitrust reform--with most doctors for it, insurersand employers against it--makes it the issue for physicians to watch inthe months ahead. To date, Florida, Maryland, Michigan, New Jersey, Pennsylvania,and the District of Columbia are considering legislation similar to Texas'.At least four additional states are rumored to be moving in this direction.And Washington state already permits doctors to negotiate jointly over noncompensationissues.

On a national level, Rep. Tom Campbell (R-CA) has introduced a bill thatwould give private-practice doctors collective bargaining rights under theNational Labor Relations Act. But it isn't expected to pass this year .

In Texas itself, meanwhile, doctors' post-victory euphoria has givenway to some tough questions: Will the law, which takes effect on Sept. 1,do what it was designed to do? Or will it open up doctors to future antitrustprosecutions?

David and Goliath battle, and lawmakers choose sides

To discover the roots of the Texas law, look no further than the disputesduring the last few years between that state's doctors and Aetna US Healthcare.The most recent of these--and the one most directly responsible for thebill--pitted Aetna against the Dallas-based Genesis Physicians PracticeAssociation.

The conflict reached a head last summer when the IPA, on behalf of 560of its doctors, ended its HMO risk contract with the giant insurer. Genesisclaimed that Aetna had failed to supply the clinical and financial dataneeded to manage utilization--a claim the insurer denies. In response tothe termination, Aetna invoked its controversial "all products"policy, which requires contracting physicians to accept patients on everyplan Aetna offers. As a result, the rebellious physicians also lost theirAetna PPO and POS patients, who had been covered under individual fee-for-serviceagreements with Genesis physicians.*

Most Genesis members withstood the economic pressure and elected notto sign individual all-products contracts with Aetna. The plan accused Genesisof exerting pressure on members, and threatened to bring an antitrust suitif it didn't desist. Aetna also threatened other groups that resisted itspolicies, according to the Texas Medical Association.

Alarmed, Texas doctors looked to their powerful medical society for assistance."We had to find some way to protect physicians from these and otherantitrust threats," says Connie Barron, one of the TMA's top lobbyists.


As the TMA knew, the AMA had recently proposed model legislation designedto do just that. The model bill is based on a court-created exemption tothe federal antitrust laws known as "state action doctrine." Itholds that these laws don't apply to collective action compelled or approvedby a state. But for the doctrine to take effect, two standards have to bemet: First, there must be a "clearly articulated and affirmativelyexpressed state policy to replace competition with regulation"; second,the collective effort must be supervised by a designated state agency.

The TMA persuaded state legislators to introduce a bill based on theAMA template in the Texas House and Senate. In the Senate, the measure movedquickly out of committee onto the floor, where it was approved on a voicevote. The bill passed the House by an overwhelming majority, and the governorsigned it into law.

The success of the bill left opponents shaking their heads. Certainly,the consumer backlash against HMOs made even conservative Texas lawmakerssympathetic to doctors' plight. But much of the credit for framing the issueas one of fairness for physicians must go to the TMA. As the society haddone in 1997, when it pushed through a law giving patients the right tosue their HMOs, the TMA called upon its formidable network of working doctorsto bombard the legislature with calls for reform. That grassroots lobbyingeffort--coupled with the TMA's generous contributions to the legislators'campaign war chests--proved a winning combination.

Interest groups split on the law's real impact

While the TMA views the quick passage of the joint negotiation bill as"a matter of fairness," industry and business groups have a verydifferent view. The TMA, they say, hoodwinked lawmakers--not only by overstatingAetna's market clout, but by masking the true nature of the bill. Accordingto the business organizations, while the TMA emphasized the elements ofthe measure allowing doctors to negotiate with plans over contractual issues,the real aim of the bill's backers was to allow doctors to bargain collectively,with or without a union.

"Call it joint negotiation, collective action, what have you,"says Jerry Patterson, executive director of the Texas Association of HealthPlans. "It was really a collective bargaining bill. The TMA knew itall along and perpetrated a hoax." Patterson sees the AMA's vote tocreate a national doctor union as confirmation of his charges against theTMA, although Texas delegates opposed the resolution as a distraction fromthe need for antitrust reform.

The state's most influential business group also scoffs at claims madeby the bill's backers that doctors wanted the legislation so they couldnegotiate better patient care provisions. "The bill's really aboutmoney," says Bill Hammond, president of the Texas Association of Business& Chambers of Commerce. "Doctors wanted an exemption to antitrustto allow them to negotiate higher fees, and that could raise costs all around."

Industry and business groups weren't the only ones worried about risingcosts. Some consumer groups--including Consumers Union--took no positionon the bill. They want to "wait and see" how doctors use theirnew bargaining power, says Senior Policy Analyst Lisa McGiffert of ConsumersUnion.

Other consumer groups saw the bill's potential downsides, but supportedit anyway. They argued that it would give doctors the collective muscleto negotiate changes in financial incentives, which in turn would reducewhat they saw as economic pressure on physicians to compromise care. "Theindustry has an economic motive not to lower those withholds on its own,"says Cindy Leiferman, an attorney affiliated with Advocacy Inc., an Austin-basedgroup representing disabled patients.

Groups like Leiferman's also view collective bargaining by unaffiliateddoctors as an alternative to physician-run IPAs, which they see as bad forconsumers. Physician organizations can reduce patient access to care, argueLeiferman and other consumer advocates. If a patient's primary care doctorjoins an IPA taking full professional risk, they point out, the patientcould lose access to non-IPA specialists.

IPAs also increase costs, consumer groups claim, by imposing an additionaladministrative layer between doctors and patients. And IPAs are often lessaccountable for their actions than HMOs are, these critics contend.

Still, many doctors will turn to IPAs and PHOs as their natural collectivebargaining representatives, health care observers say. But will other doctorsband together in ad hoc bargaining units represented by a lawyer or someother appointed negotiator? It's possible, says Elizabeth R. Rogers, a healthcare attorney with Vinson & Elkins in Austin, TX. And that, she says,could upset the precariously balanced managed care applecart.

"IPAs and other physician groups that take financial risk servean important function," notes Rogers. "They do claims handling,utilization review, and the like. But if collective bargaining takes off,we may see more direct contracting between HMOs and physicians who cometogether only to bargain collectively. Such loosely associated physicianswon't be organized to pay claims or perform UR functions, which will, therefore,end up staying with the HMOs."

Texas doctors still run an antitrust risk

Doctors may be more vulnerable to antitrust violations under the newlaw than its proponents claim they are.

That's because the law might not meet the two state-action standardsfor antitrust immunity, says Neil W. Imus, an antitrust attorney in theWashington, DC, office of Vinson & Elkins. Of special concern is therole of the state as supervisory agent. In Texas, that responsibility willfall to the attorney general, who must develop procedures to carry out thelaw. If those don't meet the stringent "active supervision" requirementsof the state-action doctrine, says Imus, the law might not survive a courtchallenge. That could leave doctors who engaged in collective bargainingout on a limb.

As crafted, the law gives the state attorney general the power to authorizejoint negotiation over fees under certain conditions. (Collective bargainingover nonmonetary issues needn't meet these conditions.) The first requirementis that the health benefit plan in question must have "substantialmarket power." Second, "no more than 10 percent of the physiciansin a health benefit plan's defined geographic area" would be allowedto bargain as a unit.

That leaves a lot of questions unanswered, Imus and others point out.What exactly does "substantial market power" mean? The attorneygeneral is authorized to make that determination, but devising yardstickswill be difficult. Similarly, when it comes to assessing the number of physiciansincluded in the negotiation, what does the 10 percent figure really mean?One hundred percent of cardiologists in a certain area, for instance, maybe less than 10 percent of the total number of physicians, but they wouldmonopolize the market for cardiovascular services.

Finally, what happens if doctors fail to reach an agreement with an HMO?If they collectively reject a contract, are they participating in an illegalboycott? No, say TMA officials. Doctors have that right under state law.What they can't do after negotiations have ended, however, is communicatewith each other for the purposes of dissuading individual doctors from signingwith the HMO. But attorneys see this as a gray area that the attorney general--andpossibly the courts--may need to referee.

Whatever regulations emerge from the attorney general's office, someobservers think the law's still likely to be challenged over the issue ofstate oversight.

"I wouldn't want to be among the first doctors out of the gate onthis," says Imus, "unless I had someone funding the litigationwar chest."

*See "Say No to health plans? These doctors did," Aug. 9, 1999(available at

By Wayne J. Guglielmo, Senior Editor

Wayne Guglielmo. Collective bargaining for doctors: The Texas law: On target, or firing blanks?.

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