By Robert M. Portman, JD, MPP, May 01, 2015
Dermatologists, like most other physicians, are under tremendous economic pressures. Actual and threatened cuts in the Medicare reimbursement, along with parallel reductions in private insurance reimbursement, as well as burgeoning rules, regulations, and red tape have caused physicians generally, and AADA members particularly, to ask whether they can form unions or otherwise take collective action against Medicare or third-party payers. The goal or hope is to even the playing field in negotiations with Medicare and private payers. The reality is that these options raise serious risks under the antitrust laws. Other less legally risky options are available, including forming large IPAs or networks, organizing grassroots campaigns by physicians and patients, or simply educating physicians about their options. The federal government has also created a broad exception to the antitrust laws for medical groups and others combining efforts to form accountable care organizations (ACOs) formed under the Medicare Shared Savings Program developed pursuant to the Affordable Care Act.
Can dermatologists form unions to negotiate with third-party payers?
The federal antitrust laws prohibit contracts, combinations, and other collective actions among buyers or sellers of goods that restrain trade. These laws have regularly been interpreted to preclude collective negotiations by independent groups of professionals, including physicians. Indeed, attempts by physicians to collectively negotiate with HMOs and other payers have been a prime target of enforcement actions by the Federal Trade Commission (FTC) in recent years.
Labor unions, through statutory exemptions in the federal labor laws, are permitted to collectively bargain on behalf of their members. But these exemptions apply only to employees. They do not cover independent contractors. In addition, unions may only bargain on behalf of non-supervisory employees.
Thus, unions like the Union for American Physicians and Dentists may negotiate on behalf of physicians employed by hospitals, HMOs, clinics, and the like. In 1999, the National Labor Relations Board (NLRB) ruled that residents and fellows in private hospitals may also bargain collectively. However, unions may not negotiate for self-employed physicians or physicians otherwise acting as independent contractors. Nor may they represent employed physicians with supervisory or managerial authority.
Many years ago, the American Medical Association created a quasi-union called Physicians for Responsible Negotiation or PRN. PRN is a physician-based labor organization of employed physicians whose members agree not to strike or withhold essential medical services. PRN, which has since been spun off into a separate entity, does not appear to have gained much of a foothold in the medical community, probably because it does not offer much, if anything, more than a state medical society or a specialty society in terms of advocating for physician interests.
There is very little chance that the NLRB or the courts will interpret the labor laws to allow self-employed physicians to collectively negotiate with hospitals, managed care, or other similar entities. Indeed, the NLRB has already rejected union petitions to organize and represent independent physicians. Likewise, the FTC has taken the position that unions may not bargain on behalf of self-employed physicians. The FTC has also repeatedly attacked efforts by local medical societies and other loosely knit groups of physicians to bargain collectively with managed care companies on behalf of otherwise independent physicians.
The fact that unions may collectively bargain only on behalf of residents, fellows, and employed physicians helps account for the fact that a very small percentage of physicians are members of unions today. Therefore, unions provide a very limited option for dermatologists who are in private practice or employed by non-union hospitals or academic medical centers. Unions might become a more viable option as more and more physicians give up private practice for hospital employment. Until then, physicians must look to other options.[pagebreak]
Short of forming a union, how can dermatologists even the playing field with third-party payers?
Unions are not the only way for physicians to gain economic leverage against Medicare or managed care. With respect to Medicare, the American Academy of Dermatology Association (AADA) and other medical societies are constantly working to advocate for more equitable reimbursement policies. In addition, physicians can engage in civil protests, such as marches, rallies, and short work slowdowns. They can also independently decide not to treat Medicare patients by opting out of the program, or they can limit the number of Medicare patients they treat. However, these actions must be taken carefully to ensure that each physician is acting independently and not as part of a group boycott.
With respect to private payers, group practices can merge to increase their market power, provided they do not create a threat to competition in their geographic area by doing so. Alternatively, physicians can create or join IPAs or physician networks that meet the antitrust guidelines for the health care industry that were first issued by the Justice Department and the Federal Trade Commission in 1994 and revised in 1996.
For instance, under the guidelines, IPAs that use the so-called “messenger model” are not subject to antitrust enforcement. The messenger model involves the use of an appointed individual or entity to act as an intermediary between individual physician members and the payer. The messenger may not negotiate rates, but may present proposals by payers to individual members for their acceptance or rejection.
An integrated physician network offers a more powerful option for physicians to collectively negotiate with managed care. Under the DOJ/FTC guidelines, the network will be protected from antitrust scrutiny if the members share substantial financial risk (e.g., by accepting capitation) and constitute less than either 20 or 30 percent of the physicians in the relevant geographic market practicing the same specialty, depending on whether the network is exclusive or not. In some limited circumstances, the network will be safe from antitrust scrutiny even if the members do not share substantial financial risk, as long as the network involves significant functional integration (e.g., utilization review and quality control features) and does not raise significant anticompetitive risks.
Integrated physician networks can provide their members with substantial leverage against managed care companies and other payers when they are well organized and include a substantial number of physicians with large patient rosters. However, physician networks can also be difficult to organize and sustain, and too often do not produce substantial financial returns for their members.
Short of joining IPA or networks, dermatologists can work through the AADA to advocate for legislation or regulations to prevent or punish managed care payment abuses or to fight Medicare cuts. Medical societies or other groups of physicians can also meet with private payers and try to educate them about the effects of restrictive reimbursement policies. These advocacy efforts do not implicate the antitrust laws as long as the societies or groups do not threaten to take coercive action against payers if they refuse to change their policies in the manner requested by the societies/groups. The AADA and its dermatologist leaders have had great success over the years in counteracting threatened private payer policy changes that would have had serious adverse effects on AADA members and their patients in areas like narrowing networks, restricted criteria for performing Mohs surgery, and attempts to impose certification requirements for office-based surgery.
In addition, medical societies and other groups of physicians can file lawsuits against private payers to fight abusive payment practices. For instance, state and national medical societies have filed several class action lawsuits on behalf of physicians seeking damages and injunctive relief against managed care companies who have engaged in patterns of downcoding, delayed payment, and other abuses. Most of those cases have settled in ways that led to substantial improvements in the methods some private payers use to process claims and pay for medical services.[pagebreak]
What are the prospects for creating an exception to the antitrust laws for collective bargaining by physicians with third-party payers?
Despite these alternatives, many physicians believe the only truly effective way of standing toe to toe with managed care is through collective bargaining. Thus, organized medicine has made concerted efforts in recent years to obtain federal and state legislation to permit collective bargaining by independent or self-employed physicians.
For instance, bills have been proposed in the House of Representatives to permit collective bargaining by physicians through an exception to the federal antitrust laws, although such bills would not have permitted physicians to strike. Federal legislation has also been proposed to apply the so-called “rule of reason” standard to negotiations between a health plan and two or more physicians, and to award attorneys’ fees to substantially prevailing plaintiffs in certain actions against health plans that act unreasonably or in bad faith. None of these bills has come close to passing.
At the state level, Texas passed a law allowing self-employed physicians to jointly negotiate patient care and other issues, including fees, with state supervision of the process. This law takes advantage of the “State Action Doctrine,” an exception to federal antitrust laws under which such laws do not apply to a state acting in its sovereign capacity or to private conduct that is mandated or actively supervised by a state. Similar legislation has been passed in New Jersey and Washington. These state laws are considered to be much more cumbersome than a federal exception as they require close state supervision of the collective negotiation process.
How can physicians form ACOs without violating the antitrust laws?
Dermatologists may be wondering whether they would be violating the antitrust laws by forming ACOs to collectively negotiate with third-party payers, hospital systems, and other purchasers of their services. The answer is that the Federal Trade Commission and Department of Justice issued “safety zones” in 2012 that outline the circumstances in which otherwise independent physicians and other health care providers can form ACOs under the Medicare Shared Savings Program without violating the antitrust laws. (View the specific requirements of the safety zones in their entirety.) While joining an ACO may create a different set of concerns for dermatologists, being part of one does create the potential for collective negotiation and for dermatologists to be prepared as Medicare looks to pay for more services through alternative payment models. The Academy provides a wealth of information about ACO participation on its online ACO Resource Center.
The bottom line
In the absence of federal or state legislation, dermatologists will rarely be able to form unions to negotiate with managed care and other payers. Without the ability to collectively negotiate, physician unions can do little more than offer the same kind of advocacy provided by medical societies. Dermatologists should, therefore, focus their efforts on alternatives to unions, including creating large, integrated networks, supporting the efforts of the AADA to work for better reimbursement policies, as well as efforts to lobby for legislation at the state and federal level that allows for collective negotiations by groups of physicians, and supporting the efforts of patient advocacy groups. (See the From the President column for more on this topic.)
Supreme Court antitrust ruling restrains states’ ability to enforce scope of practice limits
A ruling by the Supreme Court in February (North Carolina State Bd. Of Dental Examiners v. FTC) could make it harder for state medical boards to enforce scope of practice limits on non-physicians — and expose physicians who serve on such boards to legal risk.
The Court ruled that a medical board controlled by “active market participants” could not use the “state action” doctrine to avoid antitrust scrutiny. The decision is likely to lead to states asserting greater control over medical boards, which currently operate in a quasi-sovereign manner in many states; in the future they are likely to be organized as divisions of state health departments or similar agencies. They may also include fewer “active market participants” to avoid antitrust concerns.
Moreover, the Court’s ruling in favor of the FTC is a win for that agency’s campaign to ensure that professional regulatory bodies like medical boards do not stifle competition in health care services — including competition between physicians and other providers.
Physicians who serve on such boards or are considering serving may wish to protect themselves from potential liability by securing state obligations to defend and indemnify board members.