07 June 2010

Follow-up on the declaration of war on doctors

Just wanted to add something to my post from the other day about physicians and collusion in bargaining.
1.  Nothing in my post was intended as a defense of the status quo.  The landscape in negotiating with insurers is so tilted away from physicians it's not even funny.  This is even more problematic in states where balance billing has been banned.  In those states the insurers have no incentive to negotiate at all with physician groups, since they can simply dictate rates.  In states with more open contracting rules, there is still no truly open and fair market for physician services. There are a few causes that contribute to this condition:
- Asymmetry of size.  Insurers are huge organizations with enormous market power. The typical physician group is either a solo practitioner or a small group. The insurer can afford to drop a provider or group with little more than inconvenience to their enrollees, but when a doctor or group drops an insurer they run the risk of a large slice of their business evaporating. Larger medical groups can operate on a more even footing with insurers, which is one reason among many that the trend towards large group practices has been accelerating.
- Resources. Insurers have a department that exists solely to maintain their provider networks. They have people who do nothing but negotiate contracts on a daily basis every day of the year. Doctors or their business managers do so maybe once a year or less often. That sort of experience and skill also helps depress the prices physicians can command for their services.
- Asymmetry of knowledge.  The insurer has contracts with hundreds if not thousands of doctor groups. They know what they pay every doc in the state, and they know the high-end and the low-end and their profit point. Doctors know only what their contracts are.  Not only that, we are prohibited from knowing what other groups are contracted at, because of collusion rules. This also puts doctors at an incredible disadvantage in negotiating reasonable reimbursement rates.

2. There is a way around this handicap. As one commenter points out, there is a large multi-specialty surgical group called Proliance which does very well (I hear) with their contracts because they are tenacious and skilled negotiators.  However, they can do this because although each doc in Proliance is a member of a true group practice.  Which means that they all share a common tax ID number and share revenues.  How they internally divvy up the money is their business.  But since they took the risky and difficult step of truly and legally integrating their practices into a single corporation, they are legally a single entity and thus their acting as a group is legal -- you can't collude with yourself, or there's no such thing as a conspiracy of one. 
This is also why the members of the IPA ot smacked down by the FTC in the other case cited by the Mise Blog. They got cute and tried to affiliate without incorporating, and that doesn't pass muster. If you want to have the market clout of size, you need to be willing to take the significant step (and risk) of joining your practices more or less permanently.

3.  Government fee schedules are a joke when it comes to competitive marketplaces. They are truly contracts of adhesion -- no negotiating permitted. I'm all for physicians dropping them to make the point that the rates are unrealistically low, and it's a pity that it can be necessary because it really does hurt patients. But you still can't boycott them as a group.

4.  Unions -- doctors are not allowed to join/form them.  I think it's because we are considered management, but I am not sure. Anyone else know the background on this one?

Thanks for all the thoughtful feedback on this interesting issue. 


  1. A partial answer regarding unionization doctors can be found in a paper written by a one Col. Stewart L. Baker, Jr. MC (US Army Heroin Use Identification, AJPH, June 1972):

    "Doctors, lawyers, and ministers belong to the so-called 'free professions' because their work is of a highly personal nature and, generally speaking, they are freer to act individually. This relationship is exemplified by the doctor-patient relationship, a relationship that can be voluntary terminated by either."

    The less free a person is to act individually in terms of one's work, the more likely that person is (or can be) easily organized into unions. Going forward with the US health care initiatives, doctors may find themselves in a position where they are "less free" to act individually in the workplace, and perhaps will be more likely a target of union organizing efforts.

  2. Doctors ARE allowed to join unions. There are at least two of them that I know of -- Doctors Council represents about 4,000 attending physicians in hospitals primarily in New York City, New Jersey, and Chicago. The Committee of Interns and Residents represents 13,000 resident physicians in Massachusetts, New York, New Jersey, DC, Florida, New Mexico, and California. There are a few small pockets of unionized attendings belonging to other locals.

    Granted, add 'em all up and you get maybe 15% or so of physicians. But there's nothing in labor law preventing others hospitals' physician staff from unionizing. The only condition is that supervisors cannot be in the same local as the employees they supervise -- an attending couldn't be in the same bargaining unit as the residents she oversees. But there's nothing to prevent an attending from being in Doctors Council and the resident from being in CIR, for example. In fact, that happens in some hospitals in NYC.

  3. Proliance -- Dr. Bruckner there worked on my hip, and I am grateful for his excellent care -- no longer contract with BCBS here, meaning they are out-of-network for Microsoft employees since mid-2009. I am curious how this has worked out for Proliance after a year ....

    Felix Kasza.

  4. Not sure how current/correct this is, but:

    Most physicians are unable to take collective action to counteract the effects of managed care. Physician unionization is prohibited by the antitrust laws, which apply to collective action by sellers or purchasers of goods and services to restrain trade through such means as, for instance, price fixing. [FN50] Specifically, the Sherman Act “seeks to safeguard competition by assuring that market participants do not injure consumers by making agreements that illegally restrain trade.” [FN51] The Clayton Act, on the other hand, provides an exemption to the antitrust laws by allowing labor unions to collectively bargain on behalf of their members. [FN52] The National Labor Relations Act (“NLRA”) builds on the Clayton Act by further defining the labor exemption from the antitrust laws and establishing the National Labor Relations Board. [FN53]
    Physicians who are employed by the federal government, hospitals or health maintenance organizations, for example, are covered by the Clayton Act and therefore, in general, are permitted to bargain collectively. [FN54] Employed physicians have had difficulty organizing, however, in that they are frequently considered to be independent contractors or supervisory employees and are, thus, exempt from the NLRA. [FN55] Approximately fifteen percent of all patient care physicians are employed and eligible to join unions. [FN56] It is the remaining majority of physicians, those in private practice, to whom federal physician unionization legislation would apply.


  5. See also DON'T SHOOT THE MESSENGER: INDEPENDENT PHYSICIANS AND JOINT PAYMENT CONTRACTING USING THE MESSENGER MODEL, 32 U. Mem. L. Rev. L. Rev. 927 (2002), which seems more on point on the issue of the difficulties faced by individual providers trying to negotiate with insurers.

  6. Haven't checked in for a while, but I see that you're providing more evidence that the Left flunks Econ 101. You have completely missed the point of this Idaho episode. It has nothing to do with physician collusion or the size of insurance companies. It's all about transforming the delivery model.

    Your masters inside the Beltway WILL tell you what you may charge for your services, which serves the larger purpose of forcing vertical integration on the whole health care system. They plan to herd you into the arms of some corporate octopus like (fill in the name of the largest hospital system in your region).

  7. Catron,

    It's refreshing to see that you're still out there slinging insults and paranoiac conspiracy theories in equal measure.

    Many nutty theories have a basis in reality and I agree that bundling in particular may be a huge driver of vertical integration. I'm pretty ambivalent about this: my wonky side thinks this might be a great thing for quality and efficiency; my entrepreneurial side wants nothing at all to do with it. Of course I've been around long enough to remember how managed care and capitation were going to transform medicine, too. So we will see what happens, but I am cynically skeptical it'll play out as your fever dreams suggest.

    Oh, and the DoJ still has nothing to do with changing the delivery model. You need to use a higher grade of tinfoil in your hats.

  8. As a guy who no doubt still believes Iraq was a dark plot to fill the pockets of Cheney’s friends at Halliburton, you’re probably a better judge of quality tinfoil than I.

    But if you actually believe that the current regime would hesitate to use the DOJ as an instrument of health care (or any other) policy, please (for the good of the species) get a vasectomy.


Note: Only a member of this blog may post a comment.