October 1998 Bulletin

U.S. says union formed illegal boycott on fees

After months of investigation and depositions, the U.S. Department of Justice (DOJ) has filed a suit against the Federation of Physicians and Dentists, an AFL-CIO affiliate, in what could be a decisive court case on the third-party messenger model strategy used to help orthopaedic surgeons and other physicians negotiate with insurers.

Joel I. Klein, Assistant Attorney General in charge of the Justice Department's Antitrust Division, said "the Federation organized an illegal boycott designed to insulate doctors' fees from market forces and led the doctors well over the line into anticompetitive conduct."

The DOJ suit focuses on activities of orthopaedic surgeons in Delaware, where the Federation assisted orthopaedists in refusing contracts offered by Blue Cross and Blue Shield of Delaware. The DOJ said the union "organized and became the hub of a conspiracy to oppose and prevent reductions in payments for orthopaedic services…. The Federation and its members reached a common understanding that Federation members would deal and communicate with Blue Cross only through the Federation's officials, thereby facilitating a boycott to extract artificially high fees from Blue Cross and to prevent other health care insurers in Delaware from reducing fees paid to these surgeons."

The result, said the Justice Department, is "collusive distortion of what should have been independent negotiations between Blue Cross and each of several independent orthopaedic surgeons in Delaware."

The suit says that the Statement of Antitrust Enforcement Policy in Health Care, issued August 1996, discussed the use of messenger model arrangements "in which third parties act merely as ef-ficient conduits for information and communications between insurers and individual physicians or physician group practices. But nothing in the Statements suggests a messenger may negotiate on behalf of competing independent physicians or in any way enhance the bargaining leverage of such physicians."

Self-employed physicians with contracts to treat patients covered by an insurer are not considered employees of the insurer and cannot bargain collectively, even if they join a union. The union uses a third-party messenger model strategy to represent each physician individually in negotiations with the insurer. The union contends this avoids antitrust problems, even if all the physicians act in the same manner, such as rejecting a contract from the same insurer.

Citing a Supreme Court ruling that independent lawyers could not engage in a group boycott to extract higher fees, the Justice Department said antitrust laws prevent similar conduct by physicians.

The suit hasn't deterred the union. In Philadelphia, just days after the Justice Department filed its suit, the Federation sent letters and membership applications to 19,000 doctors in the city and suburbs asking if they are interested in having the union represent the physicians in negotiating with insurance carriers.

Private practice, independently-contracting physicians received a questionnaire asking if they wanted the union to provide services, including acting as third-party messenger in dealing with Independence Blue Cross, Aetna-U.S. Healthcare or other insurers. Salaried physicians received a questionnaire asking if they wanted the union to analyze the terms of their contract and to be represented by the union for collective bargaining on employment issues.

The letter was signed by Michael P. Connair, MD, a Connecticut orthopaedic surgeon who is the physician-coordinator and organizer for the union; Jack Seddon, executive director of the Federation; and Henry Nicholas, president of the National Union of Hospital and Health Care Employees.

Dr. Connair said the Federation, which is active in 13 states and the District of Columbia, plans to send similar letters to physicians in other cities and the District of Columbia, where he said the action may get the attention of legislators.

Meanwhile, the House Judiciary committee has held hearings on the Quality Health Care and Coalition Act (H.R. 4277) which would make antitrust laws apply to groups of doctors and other health care professionals in the same manner as the laws apply to collective bargaining by labor organizations. Dr. Connair and the AMA supported the bill. Robert Pitofsky, chairman of the Federal Trade Commission, opposed the legislation.

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