By Christopher Guadagnino, Ph.D.

Congressman Tom Campbell

Published April 2000

• Physician antitrust waivers gain momentum (Nov. 1999)

• Physicians seeks antitrust waiver (June 1999)

• React to this article in the Discussion Forum.

Until recently, seeking relief from federal antitrust restrictions seemed to be a novel approach used by physicians in their efforts to band together and level the playing field against the dictates of consolidated health insurers. That approach is now enjoying a groundswell of support, both at the federal and state levels, and appears to indicate a sea change in the politics of medicine.

Once isolated to Washington state and Texas, health care provider antitrust waiver legislation has thus far been introduced in at least 15 states and the District of Columbia, including Alaska, Arizona, California, Connecticut, Delaware, Florida, Illinois, Michigan, Missouri, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Tennessee.

Some versions of these bills are specifically designed to circumvent the weaknesses of legislation enacted in two states. Washington’s statue disallows fee negotiations and draft regulations released by Texas Attorney General John Cornyn make it difficult or even unrealistic for physicians to use the statute.

At the federal level, the House Judiciary Committee passed an amended version of The Quality Health Care Coalition Act of 1999 (H.R. 1304), sponsored by Rep. Tom Campbell (R-CA) by a vote of 26 to 2, staging it for consideration on the House floor.

In the midst of this flurry of legislative activity, Pennsylvania—touted as being the first state after Texas to draft its own health care provider antitrust waiver legislation—has been snagged by dissent from physician and non-physician organizations and has yet to achieve a unified coalition of supporters to produce movement in the Pa. General Assembly.

At the federal level, Rep. Campbell’s H.R. 1304, which would grant an exemption from federal antitrust law to health care professionals who jointly negotiate with health plans while prohibiting strikes, had three amendments added to it by the House Judiciary Committee on March 17:

• A prohibition against one type of health care professional negotiating with health plans to boycott any other type of health care professional, introduced by Rep. Jerrold Nadler (D-NY).

• A sunset provision that would require the bill to be re-introduced after three years to allow its impact to be assessed, introduced by Committee Chairman Henry Hyde (R-IL).

• Removal from the bill of references to Medicare and Medicaid in order to eliminate possible sequential referral to the Ways and Mean Committee or the Commerce Committee, introduced by Rep. John Conyers (D-MI).

Rep. Ed Pease (R-IN) introduced an amendment on March 30 mandating pre-negotiation certification by the Federal Trade Commission and Department of Justice to show that potential negotiations would improve the quality of patient care, but withdrew his amendment after the Committee passed a conditional amendment that would have weakened it. The conditional amendment by Rep. Goodlatte (R-VA) would have exempted from the Pease amendment provider groups that represent less than 20 percent of the health care profession in a given specialty in a given market. Goodlatte’s amendment would also have allowed the FTC to nullify that exemption if it found that a negotiation involving a provider group had not promoted competition or enhanced quality of patient care.

Pease said he had hoped his original amendment would strike a middle ground on the oversight issue and intends to pursue that goal further in the future.

The Judiciary Committee also passed on March 30 a second Conyers amendment that removes from the Campbell bill all references to any federal health programs, with the goal of further preventing sequential referral of the bill to the Ways and Means Committee or the Commerce Committee. The second Conyers amendment also designated that the General Accounting Office, rather than the FTC, conduct market impact assessments of the bill, as per the Hyde amendment.

Speaker of the House Dennis Hastert has promised that the Campbell bill would be quickly brought to the House floor for a vote, once passed by the Committee, according to Campbell’s legislative assistant Lori Kinder. A date had not been set at press time. The bill currently has 211 House co-sponsors, roughly half of whom are Democrats, and needs 218 votes to pass in the House, Kinder added.

According to American Medical Association President Thomas Reardon, M.D., the appearance of the Campbell bill and the state-level antitrust exemption legislation represents a major change for physicians. "The consolidation and integration on the payors’ side has become unhealthy. We’ve gone from some 18 major insurance companies down to six or seven, with some markets having two or three major insurers. Egregious, take-it-or-leave-it contracts are presented to physicians, many of whom can’t afford not to sign without losing a large percentage of their patients. We need to have a way of negotiating, which is something that has never been there," says Reardon.

The AMA regards the Campbell bill as the preferred approach, arguing that only federal legislation can uniformly address the disparity in negotiating power and can allow parties to deal with particular issues they face in their market on a voluntary basis without another regulatory bureaucracy. The AMA has also drafted model language for states to introduce legislation under the State Action Doctrine, which would grant antitrust exemption for negotiation of independent health care professionals under active state scrutiny.

"Some states are not going to wait for national legislation on this issue," Reardon predicts, pointing to how some 40 states have already enacted HMO patient protection legislation while Congress continues to try to hammer out a federal version. "Until something happens on a national level, you’re going to see state medical societies do this individually. Their effectiveness will depend a bit on how aggressive they are and how effective they are at working with their state legislators," Reardon adds.

Texas’ SB 1468, which took effect last September, has been met with frustration and disappointment by the Texas Medical Association (TMA), which regards the Texas Attorney General’s draft implementation rules for the statute as overly burdensome and unrealistic for physicians to meet, according to TMA lobbyist Kim Ross.

The TMA submitted its comments on the draft rules to the attorney general in January with a cover letter declaring: "It would be prohibitively expensive for a negotiation group to amass and submit the immense amount of information and documentation the Attorney General proposes to require for approval of a negotiation group’s representative." The TMA maintains that the information is not required under either state or federal law to meet state supervision requirements. "Simply put," the TMA letter concludes, "If the Attorney General does not reconsider its position and modify the proposed rules, SB 1468 will be needlessly defeated because no physicians’ group will be able to comply with the unnecessarily onerous rules."

The Federation of Physicians and Dentists, which organized the first group of physicians seeking to negotiate under the statute, submitted comments to the Texas Attorney General arguing that that the application documentation required by the rules—including copies of insurer contracts from the past three years for every participating physician—not only can entail reams of paper, but can be impossible to obtain, given that copies of signed contracts may sometimes reside only with the insurer.

Even if physicians successfully clear the documentation and fee hurdles required by the attorney general for application under the statute, there is no guarantee that negotiations will automatically occur between a health plan and a physician group. Comments filed by the Texas Association of Health Plans (TAHP) not only call attention to the lack of language in the statute that would require health plans to negotiate with physician groups, but actually recommend that language be included to clarify that a health plan may be a party to a joint negotiation at its discretion.

TAHP also recommended that required physician group application fees—set at $4000 for a proposed fee-related negotiation plus $1000 for each new, modified or renewed contract achieved through negotiation—may not be adequate.

"The pioneers get all the arrows," says TMA lobbyist Connie Barron, conceding that Texas is struggling with state legislation that has not been tried before. She notes that the information requirements of the draft rules would be especially difficult for solo or small group practice physicians to meet—the very ones the statute was designed to help. In hindsight, she adds, more detailed language in the bill could have left less discretionary latitude in the attorney general’s implementation regulations.

Barron is optimistic that the Texas attorney general will make some desired revisions to the regulations, but notes other avenues of recourse, including litigation to restrain the attorney general’s use of the regulations, and going back to the legislature to draft changes to the statute’s language.

As for the statute’s lack of requiring good faith negotiation by health plans, Barron says it is unlikely that they will consistently refuse to come to the table when they know they are under the scrutiny of consumers, employers, other physicians, the press and members of the legislature. "If they continue to turn their back on physicians, then they’re going to get a tougher law, or its going to fuel the issue at the federal level. It would be wise for health plans to participate," Barron believes.

The statute’s very existence may have had a market effect already, says Ross, describing how one health plan that had recently broken off negotiations with a large physician IPA in Austin relented after the TMA notified the press and engineered fresh negotiations with voluntary oversight of the attorney general.

According to the AMA, it was difficult for Texas to predict that their statue would become encumbered by onerous regulations, given the favorable standing Attorney General Cornyn and his predecessor had with the TMA. More detailed language in the bill aimed at narrowing the scope of attorney general discretion could draw more objections from health plans and other parties, making the bill all the more difficult to pass.

Another challenge physicians in other states face in drafting their version of the bill, says the AMA, is how to define a health plan’s market share, a threshold that is used to warrant negotiations. A percentage-based market share calculation can be diluted if defined across an entire state, while a number of covered lives may be more concrete but less indicative of market dominance. The AMA recommends that physicians first decide which health plans they hope to target, and assess the histories of health plans’ relationship with the attorney general and insurance department before deciding how specifically to draft the bill’s language and what market dominance index to use.

States in which several efforts to redress egregious insurer practices have failed, e.g., complaints to the insurance department or the attorney general, or discussions with health plans themselves, are the most likely to see a joint negotiation bill introduced, the AMA noted.

The AMA also recommends that state medical societies sponsoring a joint negotiation bill immediately differentiate between state-supervised joint negotiation and collective bargaining through labor unions. The campaign must emphasize in a fundamental way what independent physicians can and cannot do under current law, both to establish a need for the bill and to distance it from being mislabeled by health plans, physicians and consumers as a unionization bill. Republican support for a joint negotiation initiative, the AMA adds, waxes and wanes based on how closely it is associated with a union initiative.

While Pennsylvania was credited with introducing the first joint negotiation bill after Texas passed their bill, and one which overcomes some weaknesses of the Texas statute, the Pa. initiative has become mired in divisions among physicians and other health care professionals.

And now, political progress of similar bills in other states, some with even stronger language than the Pa. version, has exceeded the progress in Pa.

A Senate version in New Jersey has the support of New Jersey Senate President Donald T. DiFrancesco, a strong Republican contender in New Jersey’s upcoming gubernatorial election, who called on New Jersey’s Senate Health Committee, where the bill resides, to present their recommendations for action by June.

Another New Jersey version of the legislation has been introduced by two state representatives, one of whom is a physician who says the issues raised by the bill concern him professionally.

A version of the bill introduced early this February in Illinois actually passed out of its House committee and reached the House floor in March, where it was amended. The bill’s sponsor says he was able to move the bill out of committee quickly with the help of the House Speaker, a Democrat, and the Republican minority leader.

A version introduced in California includes a finding of health plan market dominance in its preamble, obviating the need for further market power determinations as a precondition to certify the need for negotiations. The bill also requires health plans to pay the negotiation fees, requires health plan participation and explicitly prohibits plans from including in their contracts the following policies and practices: all products, hold harmless, non-compete, medical necessity, unilateral contract amendments and nondisclosure of fee schedules. The bill has the support of organized labor in a state with a Democratic governor and a Democrat-controlled legislature, as well as the support of the Senate president.

Pennsylvania’s two largest metropolitan areas have long been distinguished by highly consolidated insurance markets. The Pennsylvania Medical Society (PMS) and the AMA have jointly asked the U.S. Justice Department to investigate the market power of Independence Blue Cross and Highmark, Inc., alleging anti-competitive practices. The request marks the second time the AMA has asked the Justice Department to investigate marketplace dominance by an insurer: a request in Dec. 1998 regarding Aetna U.S. Healthcare resulted in Aetna divesting some of its contract holdings in the Dallas and Houston markets as a condition of its merger with Prudential, Inc.

The PMS has been collecting health plan market data for several years to support initiatives seeking to redress power imbalances between physicians and health insurers, says PMS Executive Vice President Roger Mecum, who describes the requested market power investigation as parallel to PMS efforts to push the Campbell bill and Pa.’s SB 1052, sponsored by Sen. Richard A. Tilghman (R-Montgomery).

SB 1052 is similar to the Texas joint negotiation statute, but does not prohibit strikes, mandates that health plans participate in good faith negotiations, does not limit the size of the physician negotiating group and expands the definition of health care provider to include an array of non-physician providers as well as hospitals.

The bill was introduced last July and has remained in the Senate Public Health and Welfare Committee since. According to Tilghman, prospects for the bill’s passage are realistic, but not any time soon. "It could be some years," he says, given that much of the legislature’s attention will be devoted to the state budget for the remainder of the current session, an election year approaches, fierce opposition is anticipated from the health insurance industry and the need remains to educate consumers, employers and legislators about the issues involved. Tilghman adds that there has not been much discussion by either party’s leadership about their stance on the bill.

The PMS held a "Healthcare Stakeholders Summit" to discuss the Tilghman bill last December, which was attended by a number of medical specialty societies and non-physician health care provider groups. While nearly all medical specialty societies have since declared support for the bill, a number of health provider groups covered under the bill, including the Pa. Optometric Association, the Pa. Psychological Association and the Pa. Chiropractic Association have withheld their endorsement unless an anti-discrimination amendment is added to the bill prohibiting one type of health care professional negotiating with health plans to boycott any other type of health care professional, as was recently amended to the Campbell bill at the federal level.

The Pa. State Nurses Association flat out opposes the Tilghman bill, believing that physicians view nurse practitioners as competitors and that the bill would likely have a negative impact on the association’s members, according to its Executive Administrator Jessie Rohner, R.N., Dr.PH. The association opposes the Campbell bill for the same reason. Instead of joint negotiation rights, the group is focusing its energies on supporting scope of practice legislation such as Pa.’s HB 50, sponsored by Rep. Pat Vance (R-Cumberland County), says Rohner.

Although hospitals are included among the list of providers who would be eligible to negotiate jointly under the Tilghman bill, the Hospital & Healthsystem Association of Pennsylvania (HAP) was not even invited to the PMS stakeholder summit, says HAP Senior Vice President for Legislative Services Jim Redmond, who adds that HAP was not consulted about the legislation and is not enthusiastic about it. HAP agrees with PMS that the playing field is tilted away from the provider, but favors solutions that seek to enforce antitrust laws, and is anxious to see the results of market conduct studies currently underway by the Pa. Insurance Department, says Redmond. HAP believes that the Tilghman bill would weaken antitrust law by leading to more consolidation of provider groups, which could lead to big corporations and unions, he adds.

The Pennsylvania Orthopedic Society (POS) does not support the current version of the Tilghman bill and is negotiating with the PMS to try to make changes, according to POS President Lewis S. Sharps, M.D. Key changes sought by the POS are as follows:

• The POS does not believe that the bill is politically viable unless it includes a clause, currently absent from the bill, prohibiting strikes or collective job cessations.

• Whereas the bill currently uses percentages as the formula to determine a health plan’s market dominance, a more objective market share index calculation would narrow attorney general discretion when making the calculation, which is one factor that affects whether the attorney general will authorize a provider group’s application to negotiate with a health plan.

• Attorney general discretion needs to be narrowed on other issues, such as terms for approving negotiation applications and products, and eligibility requirements for negotiating agents.

• Hospitals and health care facilities should be removed from the list of providers eligible to negotiate jointly with health plans, since physicians could find themselves on opposite sides of the negotiating table with those entities.

These changes are incorporated in another version of the legislation drafted by the POS along with a coalition of unions, including the Federation of Physicians and Dentists (FPD), the Doctors Council, Service Employees International Union, Office and Professional Employees International Union, National Union of Hospital and Healthcare Employees.

The draft bill addresses the defects of the Texas legislation, according to FPD Executive Director Jack Seddon, who notes that the coalition has found a Pa. Senator and a Pa. Representative, both Republicans, who have expressed an interest in sponsoring the bill. Seddon hopes to see the bill introduced in Pa. in April. The coalition was successful in having a similar bill, HB 1589, introduced in Florida in early March.

The bill also includes an impasse provision that would invoke a binding arbitration mechanism to resolve stalemated negotiations. The Pa. Podiatric Medical Association, which also supports the union coalition bill, has withheld support for the current version of the Tilghman bill unless such a provision is added, along with a non-discrimination clause, a modified market dominance index and removal of hospitals from the list of eligible providers, according to the association’s Executive Director Michael Davis.

To call more attention to the problem of health insurer market power and avenues of redress, the POS was successful in having a bill introduced in the Pa. legislature that would amend the Pennsylvania Labor Relations Law and provide physicians and other health care providers the same collective bargaining protections offered other employees, but would prohibit strikes, notes Sharps. Introduced by Rep. George Kenney (R-Philadelphia) last October, HB 1997 would also establish unfair labor practices on the part of insurers. Implementation of HB 1997, however, is dependent on a change in the National Labor Relations Act and federal antitrust laws.

Having HB 1997 introduced helped the POS negotiate a House Republican Policy Committee meeting to discuss the general issues provoking joint negotiation bills, says POS lobbyist Jonathan Bigley. POS hopes the meeting will help to bring those issues to the attention of the legislators and the public, including the message that Pa.’s Managed Care Patient Rights legislation, Act 68, does not adequately address the problems associated with health plan market dominance, adds Bigley.

The POS will support an amended Tilghman bill that includes the items contained in the union coalition bill and has successfully negotiated with the PMS on as many as 10-15 points of agreement, with four or five yet to be gained, says Bigley. Says Sharps, a weak bill like the one in Texas is worse than no bill, and the POS is trying to keep that from happening in Pa.

On a separate front, a House Democrat Policy Committee hearing is scheduled to be held in Philadelphia in mid-April to take testimony on HB 1818, introduced by Rep. Connie Williams (D-Montgomery), which essentially duplicates the Tilghman bill while prohibiting strikes, according to Dave Meyers, staff member of Pa. Democratic Whip Mike Veon (D-Beaver).

Meyers has authored yet another Pa. joint negotiation bill, HB 1816, introduced by Rep. John Yudichak (D-Luzerne), which differs from the other two by narrowing the list of health care professionals, excluding fee negotiation, not mandating health plan participation, making negotiation outcomes binding and includes a nonbinding arbitration mechanism. Meyers says the sponsors of HB 1816 are content to see how PMS promotion of the Tilghman bill plays out, with the possibility that HB 1816 could serve as a fallback source of compromise language.

The PMS says it is proceeding cautiously to make sure physicians will actually end up with a bill that they will benefit from, says Dennis Olmstead, PMS chief economist and senior director of representation. He concedes that PMS did not consult with the various provider groups before drafting the Tilghman bill and says that PMS will probably be willing to make some changes to address key concerns that have materialized. Among the issues under consideration as the PMS continues to communicate with provider groups are whether to add no-strike and non-discrimination clauses, says Olmstead.

The PMS plans to begin promoting the Tilghman bill in various public forums, including the upcoming House Policy Committees, and will present its health plan market data to state leaders, Olmstead adds.