Bill Would Give Doctors New Negotiating Power

When Dr. Marcy Zwelling-Aamot and her fellow physicians negotiate with health plans, she says, the two sides come armed entirely differently.

“The health plans have an AK-47 and we have a sign that says, ‘Please don’t shoot me,’ ” said Zwelling, a solo practitioner from Los Alamitos and secretary of the Los Angeles County Medical Assn.

Zwelling is one of the proponents of a bill in the California Legislature that would allow independent doctors to jointly negotiate fees and other contract provisions with insurers. Such collective bargaining is now illegal under federal antitrust laws because of concerns that it could destroy competition.

The bill, passed by the Assembly in June, will be considered by the Senate Judiciary Committee this month.

Its prospects are uncertain because it is strongly opposed by health plans, business groups and some consumer advocates. They say doctors already have other ways to increase their bargaining clout, such as forming medical groups in which they share financial responsibility for patient care.

“The impression people have is that there are all these Goliath health plans out there and all these David physicians,” said Walter Zelman, president of the California Assn. of Health Plans. “It’s not true.”

The collective bargaining bill is the latest salvo in a long-simmering war between health plans and doctors, particularly the California Medical Assn. Doctors complain that insurance companies have eroded their control, imposed restrictions on them and their patients, and taken the joy out of practicing medicine.

The impact of HMO cost-cutting has resonated in California because health maintenance organizations play such a prominent role here.

The collective bargaining bill is notable because doctors and other health professionals have historically been loath to unionize, seeing themselves more as professionals than laborers. But as medicine becomes a more competitive business dominated by for-profit corporations, doctors too have begun to embrace the philosophy of strength in numbers.

Zelman and other critics of the legislation say immunity from antitrust laws would give doctors carte blanche to form cartels that could extract higher fees from health plans. Those expenses would be passed along to patients and employers, he said.

Doctors have tried other means to negotiate with health plans. In the past decade, most physicians have joined independent practice associations, which negotiate with HMOs to accept the financial risk of caring for patients. These groups accept a set fee from the HMOs to care for each patient, and if treatment costs more, the associations have to cover the difference.

Dozens of these groups have gone bankrupt, though, unable to pay doctors millions of dollars. The payments they receive, physicians say, have been too low to cover their costs.

The bill would allow groups of doctors to negotiate with health plans without assuming the financial risk of care.

Physicians argue that their bargaining power affects patient care. One of Zwelling’s biggest frustrations is that some health plans reduce doctors’ payments for referring patients out of their designated networks.

“If the best specialist is someone outside the network and I want the patient to get the best care, must I pay a penalty for that?” Zwelling said.

Insurers counter that such controls are necessary to keep costs down.

Doctors are concerned about their own costs--especially for prescription drugs. They don’t want to accept the financial risk because under some HMO contracts they may lose money when they prescribe costly, but necessary, medications.

The answer, doctors say, is not as easy as dropping out of managed care, because that forces patients to find new caregivers.

Doctors argue that they should not be treated like other businesses in which the products and services are more or less optional; their services can save patients’ lives.

Physician collective bargaining is legal in only one other state--Texas. There, partly because of the large amount of documentation involved, physicians have made few attempts to use it.

In California, the Senate Judiciary Committee’s chief counsel, Gene Wong, said he’s worried that the bill will harm, rather than help, consumers.

Although doctors are probably being treated unfairly by the HMO system, Wong said, “I’m not sure that this fix is the right fix. Right now, I am inclined to believe that it will result in higher costs.”

Under the legislation, independent doctors would be required to seek permission from the state Department of Managed Care to negotiate with a particular health plan. The doctors could select a representative to negotiate.

If these negotiations failed, both sides would be able to submit their dispute to a mediator. If that didn’t work, an independent arbitrator would make non-binding recommendations.

At any point in the process, the health plan could refuse to negotiate--and the process would end. But doctors say HMO rejections would give them ammunition to go back to the Legislature to compel HMO participation.

The original California bill contained no limit on how many doctors could band together.

But the California Medical Assn. and the bill’s sponsor, Assemblyman Fred Keeley (D-Boulder Creek) have drafted a series of amendments designed to assuage critics’ concerns.

For instance, they would allow the Department of Managed Care to prevent bargaining by a group if regulators determined that it dominated the market.

In addition, they have agreed to only allow negotiations with health plans that control more than 10% of the statewide market. But Kaiser Permanente, the state’s largest HMO, would be excluded because it works with its own exclusive physician group.

Affected plans would include Blue Cross of California, Health Net, Blue Shield, PacifiCare, and perhaps Aetna U.S. Healthcare and Cigna HealthCare.

Some physician groups say that rather than bargaining collectively, individual doctors can gain more leverage by shunning insurance companies that won’t make concessions.

“They have preyed on our naivete or our desire to work in the patients’ best interests and they have taken advantage of us,” said Dr. Brian Roach, president and chief executive of the 350-member Mills-Peninsula Medical Group in San Mateo County.

“We don’t take bad contracts anymore, and as long as the plans know that, we’re fine.”