Additional Views of Congressman John Conyers, Jr.

H.R. 1304, the "Quality Health Care Coalition Act of 2000"

H.R. 1304, which is sponsored by Congressman Tom Campbell and myself, gives health care professionals immunity from antitrust laws when they negotiate as a group with health maintenance organizations ("HMOs") and other large health plans. This legislation responds to the unlevel playing field facing independent physicians engaged in negotiations with health insurers and other third party payers. H.R. 1304 enjoys bipartisan support and is strongly supported by a wide array of health care professional and trade organizations, including the National Medical Association, the American Medical Association, the American Federation of State, County and Municipal Employees, the National Community Pharmacists Association and the AFL-CIO Health Fields Division, among others.

The health provider market is heavily concentrated among health insurance companies, preferred provider organizations, HMOs and other third party payers, such as Blue Cross Blue Shield.⁽¹⁾ A recent study of market concentration by the Robert Wood Johnson Foundation found that "both the group and individual [health insurance] markets are heavily dominated by relatively few large insurers."⁽²⁾ At the same time, many doctors have opted to work directly for these insurance companies, rather than compete with them directly, with 56% of physicians currently treated as employees.⁽³⁾ The remaining doctors operate independently, but many have entered into contractual relationships with third party payers whereby they agree to work under specified fees, terms, and conditions in exchange for being placed on preferred physician lists. These physicians are often subject to one-sided "take it or leave it" contracts with insurers which not only offer inadequate fees, but severely limit their ability to service their patients.⁽⁴⁾ Since the case law has generally provided that medical professionals are not entitled to any benefit under the statutory labor exemption,⁽⁵⁾ H.R. 1304 responds by giving them the same statutory antitrust exemption that ordinary employees receive when they collectively bargain.⁽⁶⁾ I support this legislation for several reasons which I outline below.

I. An unlevel playing field exists.

First, an unlevel playing field exists between large insurance companies and independent health care providers. It is unrealistic to expect a local doctor to have anywhere near the financial capacity or legal wherewithal to negotiate fair or reasonable contract terms with a multibillion dollar health insurer. Because of current antitrust interpretations, physicians cannot even communicate with each other to discuss the one-sided contract terms which are being proposed to them. The result is that physicians often have little choice but to accept one-sided, non-negotiable service agreements. Along these lines, I would note that independent health care providers, although technically "independent contractors" are not in a significantly different position from ordinary "employees" negotiating with large employers in other industries because HMOs and other managed care companies exert an enormous amount of control over their practice of medicine.

A corollary problem is that these one-sided agreements are slanted in a manner which works to the disadvantage of patients. Such contracts include clauses which, among other things: (1) limit a doctor's ability to discuss medical issues and options with their patients (known as "gag clauses"); (2) discourage appropriate specialist referrals; (3) set forth unreasonable administrative barriers to appropriate tests and prompt and reasonable care; and (4) provide financial incentives which reward physicians for not treating patients.⁽¹⁰⁾ I agree with Representative Campbell who has stated that if they are given greater negotiating power, "first on the list of contractual terms that health-care professionals will demand is a greater right to prescribe and care for patients as they see fit."

II. H.R. 1304 also benefits non-physician providers.

In addition to protecting physicians, the legislation will also apply to protect other health care professionals who face unfair negotiating positions vis-a-vis the health insurance industry. For instance, community pharmacists have complained that they are not permitted to mutually discuss or respond to insurance company demands because they are independent, but that chain stores, representing thousands of outlets, can agree or disagree together when a third-party payer presents a contract to them.⁽¹¹⁾

Additional non-physician providers, such as nurse practitioners, nurse anesthetists, nurse midwives, physical therapists, optometrists, osteopaths, psychotherapists, and chiropractors, that practice independently, may encounter difficulties very similar to those encountered by independent physician providers when negotiating contract terms with health insurers. Thus, these providers may also benefit from this legislation. There were, however, concerns raised by these groups that H.R. 1304 could permit groups of physicians to negotiate unfair agreements with health plans that could put non-physician providers at a competitive disadvantage.⁽¹²⁾

To address this issue, Representatives Nadler, Frank, and Jackson-Lee offered an amendment at the Full Committee markup which stated that "nothing in this section shall exempt from the application of the antitrust laws any agreement or otherwise unlawful conspiracy that excludes, limits the participation or reimbursement of, or otherwise limits the scope of services to be provided by any health care professional or group of health care professionals with respect to the performance of services that are within their scope of practice as defined or permitted by relevant law or regulation."⁽¹³⁾ The amendment clarifies an important point in connection with the legislation to which it is attached: that H.R. 1304 does not exempt from the antitrust laws negotiations which lead to agreements or conspiracies to exclude or limit the role of competitive health care providers in managed care and insurance arrangements. More specifically, it does not, in the name of "collective bargaining" or otherwise, enable some classes of health care professionals to attempt to exclude others from access to health care markets, or to deprive consumers of the choice of and access to the wide range of high quality and cost-effective health care professionals. This should address the concerns raised by non-physician health care providers.

Over the years, the antitrust laws have, in fact, been enforced in various cases to prohibit specific anti-competitive actions of physicians or other health care professionals. I regard it as essential that the antitrust laws remain effective to maximize consumer choice among all segments of the health care provider community, and this will clearly be the case under H.R. 1304.

III. Current law favors insurance companies.

Finally, I support H.R. 1304 because current law unfairly favors insurance companies. Not only can insurance companies require health care professionals to sign unfair contracts, but they also benefit from the 1945 McCarran-Ferguson Act, which partially exempts the insurance industry from the federal antitrust laws.⁽¹⁴⁾ This law, which this Committee had voted to scale back under Chairman Brooks,⁽¹⁵⁾ means that huge insurance companies may be permitted to conspire together to limit health care competition, but that the independent physicians cannot develop any sort of coordinated response.

Conclusion

As Dr. Fitzhugh Mullan wrote in an issue of the Washington Post, "No one is in a better position than medical professionals to point out where the system is being stretched thin, where health plans are stinting on patient care or where people lack care altogether. .... Physicians are ideally placed to serve as monitors and watchdogs of the commercial forces that determine so many clinical decisions these days."⁽¹⁶⁾ Under H.R. 1304, health professionals will have the right to collectively bargain with health care service plans and the ability to reach more equitable and fair agreements with HMOs for the purpose of achieving improved health care for the American consumer. For the reasons discussed above, I strongly support this legislation.

John Conyers, Jr.

1. See Milt Freudenheim, Concern Rising About Mergers In Health Plans, N.Y. Times, January 13, 1999, at A1.

2. See Deborah J. Chollet et al., Mapping Health Insurance Markets: The Group and Individual Health Insurance Markets in 26 States (October 1997). The report noted that in North Dakota, Blue Cross Blue Shield controlled 93% of the market in 1995 and that in Illinois the largest insurers held 60% of the individual market in 1995. Id. at ii, 13, 21.

3. AMA Socioeconomic Monitoring Survey: Physician Marketplace Statistics (1997).

4. See Steven Greenhouse, Angered by H.M.O.'s Treatment, More Doctors Are Joining Unions, N.Y. Times, January 13, 1999, at A1.

5. H.A. Artists & Associates, Inc. v. Actors' Equity Association, 451 U.S. 704, 717 (1981) (where union members customarily secure employment through negotiating agents whose fees are calculated as a percentage of union members' wages, agents not considered independent contractors, but a genuine labor group exempt from antitrust violations); Columbia River Packers Association v. Hinton, 315 U.S. 143 (1942) (arrangement by which fisherman's union acted as a bargaining agent for selling fish to packers and canners found not to be exempt because the fishermen were independent businessmen and the dispute involved the sale of fish rather than wages, hours, or other conditions of employment). However, the exemption will apply in cases where the individuals are truly comparable with and competing with other groups of employees. See e.g., American Federation of Musicians v. Carroll, 391 U.S. 99 (1968) (independent contractor band leaders treated as labor group because where there was job or wage competition or some other economic inter-relationship affecting legitimate union interests between the union members and the independent contractors).

With regard to the health care field, see e.g., Michigan State Medical Society, 101 F.T.C. 191 (1983) (FTC found that Michigan State Medical Society in encouraging its members to withdraw from Blue Cross and Blue Shield of Michigan as a method of pressuring Blue Cross during negotiations over its reimbursement policies violated antitrust; La Association Medical, 60 Fed. Reg. 35, 907 (FTC July 12, 1995) (resolving claims that a medical association, its psychiatry section, and individual physicians conspired to organize a concerted boycott by psychiatrists of a government insurance program in an attempt to obtain higher reimbursement rates and adoption of exclusive referral rules).

6. Because Congress was concerned with using capital in an anticompetitive manner, rather than labor, it has enacted a statutory exemption to the antitrust laws with respect to labor activities.⁽⁷⁾

7. A nonstatutory labor antitrust exemption has also developed to protect certain provisions in collective bargaining agreements from antitrust scrutiny. See Connell Construction Company v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616, 622 (1975) ("the nonstatutory exemption has its source in the strong labor policy favoring the association of employees to eliminate competition over wages and working conditions. . . . [L]abor policy requires tolerance for the lessening of business competition based on differences in wages and working conditions."). " "⁽⁸⁾

8. 15 U.S.C. § 17. - ' ⁽⁹⁾

9. 29 U.S.C. §§ 101-115. Section 13 of the Norris-Laguardia Axt defines "labor dispute" to include "any controversy concerning terms or conditions of employment, or concerning the association of representation of poersons in negotiating, fixing, maintaining, changing, or seeking to arrange terms or conditions of employment, regardless of whether or not the disputants stand in the proximate relation of employer and employee."

10. See generally, The Quality Health Care Coalition Act of 1999: Hearing on H.R. 1304 Before the House Comm. on the Judiciary, 106^th Cong. (1999) (statement of Ratcliffe Anderson, Jr., M.D., Executive Vice President and Chief Executive Officer, American Medical Association) [hereinafter Quality Health Care Coalition Act Hearing].

11. See generally, Quality Health Care Coalition Act Hearing (statement of John Rector, Vice President, National Community Pharmacists Association).

12. The particular concern alleged was regarding contract terms: (1) that require a physician to be present for certain procedures, even though non-physician providers can furnish the procedures independently under state and federal law; (2) that impose "quality" standards that forbid or discourage referrals to non-physician providers; (3) that mandate certain educational or experience requirements that typically can be met by most physicians, but by only few or no non-physician providers; or (4) that establish reimbursement rates that are so low for non-physician providers that it is not viable for any of them to participate with health plans as independent providers. This kind of anti-competitive behavior may threaten to raise prices of health care services and to restrict consumer choice of those services.

13. Sec. 2(e).

14. In reaction to United States v. South-Eastern Underwriters Association, 322 U.S. 533 (1944), holding that the insurance industry was a business in interstate commerce subject to the Sherman Act, Congress enacted the McCarran-Ferguson Act, which created a statutory antitrust exemption for insurance companies. In order to qualify under the McCarran exemption from federal antitrust liability, the insurance company must be able to prove that the challenged activity is a part of "the business of insurance," the activity is regulated by state law, and the activity does not constitute an agreement or act to boycott, coerce, or intimidate. Although many thought the exemption was intended to be temporary, it has continued unabated for more than 50 years.

Health insurers also benefit from an exemption from liability suits for their failure to provide care because of ERISA law as well. Courts have consistently held that ERISA preempts state law medical malpractice claims against entities involved in the administration or delivery of health care benefits under an ERISA plan. Thus, while an injured person typically sues an HMO in state court, arguing that it is an ordinary malpractice case, the HMO typically removes the case to Federal court, arguing that it is governed by the Federal law on employee benefits. The HMO contends that it makes "benefit decisions" (rather than medical decisions) in the course of managing employee benefit plans and that it, therefore, should not be held responsible for any negligence by a physician.

15. See H.R. 9, approved by the Committee in 1994 and 1992. Neither bill was taken to the House floor.

16. Fitzhugh Mullan, A Look at...Unionizing Doctors; I Joined Once. Now I'm Not So Sure, The Washington Post, July 18, 1999, at B3.