Study hits physician collective bargaining

The FTC and Justice Dept. report also calls for reconsideration of certificate-of-need programs and re-examination of subsidies in health care markets.

By Tanya Albert amednews correspondent — Posted Aug. 9, 2004

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Government officials say more competition in the health care market and better information for consumers would improve quality and accessibility for Americans. In a new report, they offer physicians a little guidance on how to make that happen.

But they don't give as much advice or flexibility as some were hoping for in an era during which the health care industry has been under increasing federal antitrust scrutiny.

In a joint 300-plus page report issued July 23, the Federal Trade Commission and the Dept. of Justice reiterated their stance that collective bargaining by independent physicians would have a negative impact on competition. The report -- which addresses everything from hospitals to pharmaceuticals -- is the result of 27 days of joint FTC/Justice Dept. hearings on health care competition in 2002 and 2003.

"The concern is that they set the bar so high, physicians can't innovate," said Catherine Hanson, general counsel for the California Medical Assn., who testified during the hearings.

Under current law, only employed physicians and doctors in a handful of states that have passed their own physician collective bargaining laws can join together to negotiate with insurers without violating federal antitrust laws.

The American Medical Association disagrees with the FTC and is looking for support for the Health Care Antitrust Improvements Act of 2003, a House bill that would let doctors "plead their case" to get permission to negotiate collectively with insurers.

The measure also calls for limiting the amount physicians would have to pay in damages if they're found to have violated antitrust laws and for establishing demonstration projects that would allow doctors to negotiate more easily with health plans.

AMA Immediate Past President Donald J. Palmisano, MD, said the Association also was disappointed that the FTC and the Justice Dept. didn't recognize the negative long-term impact health insurance company consolidation would have on patients and physicians if allowed to continue.

"In many markets nationwide, physicians have no negotiating power with dominant insurers over contract terms that have a real impact on patient care," he said. "The AMA will continue to oppose health insurer mergers that reduce competition and will continue to seek legislative relief for physicians."

The report recommends that insurers and the government experiment with payment methods that would give physicians incentives to lower costs, improve quality and innovate.

"At present, for example, most payments to providers have no connection with the quality of care provided," the agencies state.

Questions to ponder

In addition, the report offers physicians six groups of questions to ask if they are considering clinical integration. The questions are ones FTC officials said they would look at when determining whether the integration was helping competition in the marketplace or instead creating price-fixing among physicians.

The agency is encouraging physicians to find a way to decrease costs and improve quality. "If it looks anticompetitive, but is increasing quality, we want to know about that," said FTC Chair Timothy J. Muris. "Partly, what we are trying to do here is to provide more discussion."

But R. Hewitt Pate, the Justice Dept.'s assistant attorney general in the antitrust division, said physicians still must understand that the Dept. of Justice and the FTC will continue to take "strong enforcements against competitors that collude."

Among the questions the report recommends that physicians ask when considering integrating:

  • What do the physicians plan to do together from a clinical standpoint? How does this differ from what each physician already does individually?
  • How do the physicians expect to actually accomplish these goals? What specific measures will there be to determine whether the program is working?
  • What basis is there to think that the individual physicians actually will attempt to accomplish these goals? How are individual incentives being changed and realigned?
  • What results can reasonably be expected from undertaking these goals?
  • How does joint contracting with payers contribute to accomplishing the program's clinical goals? Is joint pricing reasonably necessary to reach these goals?
  • To accomplish the group's goals, is it necessary or desirable for physicians to affiliate exclusively with one independent practice association or can they effectively participate in multiple entities and continue to contract outside the group? Why or why not?

While the questions are new, the CMA's Hanson said, they don't offer much concrete guidance. She also wonders whether physicians will innovate if they fear they could get in trouble.

"The question is, realistically, are people going to commit millions of dollars when there is uncertainty as to whether it would be allowed?" she said.

The broader picture

In all, the report makes six recommendations and 11 observations about health care competition. Among them:

  • States with certificate-of-need programs should reconsider whether the programs actually help. "The agencies believe that, on balance, CON programs are not successful in containing health care costs, and that they pose serious anticompetitive risks that usually outweigh their purported economic benefits," the report states.
  • The federal government and states should examine how health care subsidies might be inefficient and potentially distort competition.
  • Congress and state governments should not enact legislation that lets physicians bargain collectively.
  • Governments that are wondering whether to mandate particular health insurance benefits should consider that mandates are likely to reduce competition, restrict consumer choice, raise insurance costs and increase the number of uninsured Americans.

"Vigorous competition promotes the delivery of high-quality, cost-effective health care," said FTC Chair Muris. "This report provides guideposts for policy-makers who want to ensure access to quality care and help consumers to make informed choices."

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Big business

Americans spent $1.6 trillion on health care in 2002. Here's where the money went:

Prescription drugs 11%
Physician and clinical services 22%
Hospital care 31%
Other spending 36%

Note: Other spending includes long-term care, administrative and other expenditures. Source: Federal Trade Commission and Dept. of Justice

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External links

Federal Trade Commission and Dept. of Justice report, "Improving Health Care: A Dose of Competition," in pdf (link)

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