By Sharon H. Fitzgerald

Ken Larish, Bone McAllester Norton PLLC

Some Tennessee physicians continue their deliberate work toward a state law to allow joint negotiation with payers, and one of their objectives is to avoid the pitfalls into which similar organizations in other states have tumbled.

"One of the natural questions of the doctors who are seriously considering this is, 'How has this experience worked for doctors in states where this has passed?' Unfortunately, the answer is, 'Not so well,' " says Ken Larish, a Nashville attorney with Bone McAllester Norton PLLC. Larish is the lawyer and spokesman for the group, called the Tennessee Alliance for Patients (TAP). When founded earlier this year, the organization called itself the Tennessee Physician-Patient Alliance, but it has since changed its moniker.

Larish does acknowledge, however, that even faulty legislation in other states "clearly gives them tools that they didn't have before. If I had to have the Texas experience or nothing, I'd have the Texas experience."

Texas, in fact, was the first state to pass legislation that, despite federal antitrust laws, would allow physicians to ban together and negotiate with third-party payers for favorable contract provisions. Such legislation is called "safe harbor" legislation and is based on a strategy called the "state action doctrine." That's when a state clearly articulates its intention to override federal law and takes over enforcement responsibility.

The Texas law passed in 1999 and was championed by the Texas Medical Association (TMA) to give solo practitioners and small physician groups some "leverage" at negotiation time, recalls Darren Whitehurst, TMA director of public affairs. However, Texas' law doesn't mandate participation by health plans, and that is its downfall, he adds. "I think the piece that needs to happen is that participation needs to be mandated. If a physician is going to put forth the time and money to set one of these things up, if the health plan has been approaching these physician groups, then the health plan should be mandated to participate as part of that joint negotiation," Whitehurst contends.

The Texas law also is "onerous," he says, in that it requires a physician investment of "tens of thousands of dollars" and the submission of mountains of data to the attorney general, which would oversee the negotiation. "Also, the law doesn't prohibit the health plan, if it wants to, from going back around and talking to each one of those physicians independently. … Bottom line, we don't have physicians who are willing to invest that type of money for something that, at the end of the day, the health plan can just turn around and say, 'I'm not interested.' They could spend all this money and have nothing to show for it."

Whitehurst says a TMA ad hoc committee looking into managed-care issues will decide "how much capital we want to expend" on amending the physician negotiation law. He notes that Texas has been successful in passing patient protection and prompt payment legislation, yet he adds, "It seems for every issue we resolve with the health plans, they find two or three or more different ways to get around paying for care for the patients who are their enrollees."

New Jersey also has a joint negotiation law on the books, but it, too, is fraught with problems. "While the initial passage of joint negotiations was promising, the drafting of ensuing regulations made it clear that the current administration did not support the intentions of the legislation," says John Shaffer, senior manager of public affairs for the Medical Society of New Jersey. "They made it so onerous, both financially and in its complexity, on physicians that MSNJ has backed away from the topic, choosing largely to let it sunset and then try again."

Robert J. Mills, the American Medical Association's media outreach coordinator, says the AMA supports the notion of joint negotiations because "consolidation in the health insurance market makes it difficult for physicians to battle health insurers over unfair or unreasonable demands." He says no proposed joint negotiation legislation passed in any state during 2005.

In Rhode Island, Mills says a bill is in committee in both houses that would authorize providers to engage in joint negotiations with insurers with "substantial market power." Importantly, providers would have to obtain approval of the attorney general to proceed with negotiations. In Connecticut, bills "have made their way through both the House and Senate," he says. They allow two or more providers to apply to the AG for a "certificate of public advantage" to authorize a "cooperative arrangement." Managed care organizations are required to negotiate in good faith with such a cooperative arrangement that is blessed by the AG. Other states looking into the prospect include Massachusetts, Missouri, New York and Pennsylvania, Mills adds.

Larish says the TAP has "active support of high-level Democrats and Republicans on the Hill who are helping us figure out how to craft legislation properly so that it will be useful on the other end." He says already the group has decided that the attorney general will not be the arbiter designated in the TAP legislation and that the oversight agency should be one "susceptible to the oversight of the voters." Tennessee's attorney general is appointed, not elected.

"We want to be engaged in an iterative process," he says. "We are trying to do something that will create a long-term tool that turns out to be good public policy and turns out to be useful and turns out to be ultimately helpful to patients in Tennessee."

On the other hand, BlueCross BlueShield of Tennessee doesn't believe a joint negotiation law would help Tennessee patients at all. Mary R. Thompson, BCBST media relations manager, says the insurer believes such a law "would prove problematic for employers and consumers, leading to increased cost and reduced access to coverage for Tennessee's working families." To support her contention, Thompson points to "Improving Health Care: A Dose of Competition," a 2004 report prepared by the U.S. Department of Justice and the Federal Trade Commission. The document supports competitive market forces in the healthcare arena. It notes that spending on physician services accounts for 22 percent of the $1.6 trillion spent annually on healthcare. In addition, it says spending on physician services increased at an average annual rate of 12 percent from 1970 to 1993 and at 4 to 7 percent a year since then.

The report says, "Some physicians have lobbied heavily for an antitrust exemption to allow independent physicians to bargain collectively. They argue that payors have market power, and that collective bargaining will enable physicians to exercise countervailing marketing power. … The Congressional Budget Office estimated that proposed federal legislation to exempt physicians from antitrust scrutiny would increase expenditures on private health insurance by 2.6 percent and increase direct federal spending on health care programs such as Medicaid by $11.3 billion."

Adds Thompson, "We believe that current law allows doctors to adequately negotiate and that further action is not necessary."

The TAP is a nonprofit corporation that continues to garner members. In September, Dr. David E. McKee, a Nashville plastic surgeon, sent a letter to 5,600 physicians statewide who are members of the Tennessee Medical Association urging their membership in TAP. "We need you to join the Alliance so that we can carry a bigger stick on Capitol Hill," he said in the letter. "Our goal is to sign up 1,000 new members this fall." Larish says the organization so far is "thrilled with the response."