August 1999 Bulletin

Texas approves 1st collective negotiation law

By Carolyn Rogers

The Lone Star State sealed its reputation as the country's leader in HMO reform in late June when Texas Gov. George W. Bush signed legislation making Texas the first state in the nation to allow doctors to negotiate collectively with health plans. The new law gives independently practicing physicians an antitrust exemption to bargain collectively with health plans over contract and reimbursement issues.

In 1997, Texas passed a host of consumer protection laws, including the nation's first HMO liability law, which allows patients to sue health plans for malpractice.

Why is Texas leading the way?

"It's kind of wild and wooly here," says Donna Parker, executive director of the Texas Orthopaedic Association. "I think the doctors in Texas are more active and aggressive, more proactive with their needs than in other states. We've built a pretty good relationship with our legislators over the years. I definitely get the impression that we have their ear more than we used to."

Under the new law, which goes into effect in September, physicians will have to ask approval of the state's attorney general to negotiate and will have to submit the results of the negotiation to the Texas attorney general's office. When a plan has substantial market power-as determined by the state attorney general-up to 10 percent of physicians in a given market will be allowed to negotiate fees, discounts, and capitation rates. A long list of other contract terms can be negotiated jointly regardless of market share. Union-like activities-such as collective slow-downs, strikes or boycotts-are expressly prohibited.

"Under Governor Bush's leadership, Texas is becoming a beacon state for restoring competitive balance in health care markets," says Alan C. Baum, MD, president of the Texas Medical Association (TMA). "This law will empower physicians to advocate for their patients, encourage competition among health care plans and restore some semblance of fairness in a market place that is careening dangerously out of control."

Dr. Baum is careful to point out that this is not a labor law. "It's an antitrust reform that allows doctors to stand up to the big HMOs-without the threat of antitrust complaints that carry federal criminal and civil penalties," he said.

The bill was drafted from AMA model legislation rooted in the "state action doctrine," first set forth in a 1943 Supreme Court decision, indicating that antitrust laws do not apply to action by a state operating in its sovereign capacity, or to private conduct compelled or approved by the state. AMA's model legislation was based on actual legislation implemented in Washington state in 1995. The Washington state measure allows competing physicians to negotiate jointly with health plans over contractual issues, not including fees.

Mobilizing physician support for the legislation in Texas was not difficult, according to Alfred D. Gilchrist, TMA's director of the legislative affairs.

"Believe me, motivating the physicians on this issue was not a problem," Gilchrist says. "The TMA utilized its grassroots, its lobby team and its public relations effort. We left no stone unturned in getting out the message about the bill, but only because the business community took such an aggressive stand against it."

An intense propaganda campaign by health plans and business groups that mislabeled Senate bill 1468 as a "doctor union" bill created sufficient confusion among members of the legislature to slow down progress on the bill. By playing the "union card," the Texas Association of Business and Chambers of Commerce's (TABCC) campaign-which included phone banks, radio advertisements, and direct mail pieces-initially had the desired effect on many legislators.

"It took time for physicians to methodically and patiently dismantle this propaganda with their legislators," said Kim Ross, TMA vice president for public policy. "Many physicians contacted local employers who had responded to the TABCC faxes and phone banks."

In the end, SB 1468 passed the Senate by a convincing 28-1 margin and later, on May 25, it passed the House by a vote of 119-20. Governor Bush signed the bill on June 20, 1999.

Gilchrist credits the AMA for playing a major role in the bill's passage.

"The AMA was extremely helpful with legal work, background, research," Gilchrist says. "They made numerous trips down here, and they actually paid for some newspaper advertising. We were very grateful for their assistance."

Now that Texas has beaten the path, other states plan to follow it. A similar bill was introduced, but not passed, in Delaware, and Pennsylvania is working on a collective negotiation bill that could be unveiled as early as this fall. Washington D.C. and New Jersey are considering drafting similar legislation for the fall session. Similar legislation also is said to be under consideration in Georgia, Ohio and New York.

Gilchrist predicts that groups of doctors will be formed and ready to request permission to negotiate from the Texas attorney general when the law goes into effect on September 1. A court challenge by the insurance industry, he says, is also inevitable.

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