July 1997

Workplace Labor Update - Labor Pains in the Medical Profession – July 1997

9 min

John Sweeney, president of the AFL-CIO, has launched a drive to revitalize his faltering federation of 78 international labor organizations. Their representation share of the private sector workforce has dwindled from 40% in 1954 to 10% today. About 7.5 million members have been lost since 1970.

In order to increase Big Labor's economic and political clout, Mr. Sweeney is pumping mega-millions of union dues dollars into workplace drives to organize more employees and finance grassroots political campaigns to defeat his enemies and elect his friends to government office at all levels. He has pledged to exert confrontational tactics whenever necessary "to revitalize the labor movement and change its face to represent the faces of all American workers."

Although Mr. Sweeney enjoys active support from the current White House occupants and many legislators in the pursuit of his objectives, so far this militant labor leader has created more bluster than muster. On the other hand, he seems to be gaining candidates for his national face-lift from an unlikely but powerful new source: the medical profession.

No other industry in the U.S. marketplace has undergone as rapid and expansive a transformation in recent years as the nation's health delivery system, and an ominous backlash has begun. Long considered wealthy members of the entrepreneurial elite, doctors are reacting to the burden of compliance with complex government regulations and an erosion of their profit margins as health care becomes managed by third party payers. A major frustration is the expanding influence exercised by budget-driven hospital and health insurance plan administrators over independent physicians with respect to issues such as medical accessibility, doctor-patient decisions, applied research and new technologies, support personnel ratios, and methods of payment for services rendered. The bottom line: human wellness is becoming governed by its price tag. At risk - in the opinion of Ronald Peterson, President of the Johns Hopkins Health System - is "the crippling of a national treasure and major economic engine."

This dilemma, in turn, leads to another disturbing trend: thousands of disillusioned doctors are leaving the private practitioner ranks to become captive health care employees due to their loss of professional dedication, financial incentive and job security. About 43% of the physicians in the United States at this time are employed on a salaried basis by health provider plans, insurers, hospitals, nursing homes, medical schools and universities, business and industry, and government. Meanwhile the federal Health Care Finance Administration claims that there are too many doctors and proposes to pay teaching hospitals for reducing the number of graduates.

In this cost-conscious era of managed health care, the once-alien idea of union collectivism is creating an emotional and philosophical division among doctors traditionally trained to revere their Hippocratic Oath by providing -above all else - the highest quality patient care. Several medical societies that purport to be physicians' unions have emerged, and some of the old-line labor unions have formed special bargaining units for doctors. Aggressive organizational activities have surfaced throughout the country, including the nation's capital, New York, Florida and California.

While the legal, economic, logistic, and cultural hurdles in unionizing private practitioners are substantial, doctors who work as salaried institutional employees are more vulnerable. For example, 200 resident physicians at Howard University Hospital in Washington, D.C., recently turned off their pagers for three hours and staged a sit-in demonstration. Encouraged in this work stoppage by the New York-based Committee of Interns and Residents, the young medicos were protesting a lack of respect for their professional status as well as long hours, low pay, and poor working conditions. They sought to force the hospital's management to negotiate a collective bargaining agreement which would correct the alleged inequities.

On the other hand, one of the main obstacles to the formal unionization of individual fee-for-service physicians is federal law, which considers them to be "independent contractors" rather than "employees." The Labor-Management Relations Act forbids them the right "to engage in collective bargaining over wages, hours, and other terms and conditions of employment," while the Sherman Antitrust Act bars them from banding together to "restrain trade" by setting prices and other conditions of employment.

In the landmark case of Arizona v. Maricopa County Medical Society, 457 U.S. 332, a nonprofit Arizona foundation composed of 1,750 licensed doctors of medicine, osteopathy, and podiatry who were engaged in private practice decided to become incorporated. The stated purposes of this joint venture were the promotion of maximum fee schedules and providing the community with a competitive alternative to existing health insurance plans. It featured a choice of doctors (who, rather than patients or insurers, bore the economic risk) as well as complete insurance coverage and lower premium costs.

The State of Arizona was the Plaintiff in this case. Supported by the Attorneys General of 40 States and the Solicitor General of the United States as amicus curiae (friends of the court), the State convinced a federal district tribunal that this medical foundation was engaged in an illegal price-fixing conspiracy in violation of the Sherman Antitrust Act. On appeal to the United States Supreme Court, the Defendant Arizona Medical Foundation argued to no avail that an exception to the Court's general rule should be made "because the judiciary has little antitrust experience in the health care industry." But the Supreme Court responded negatively that:

The Sherman Act establishes one uniform rule applicable to all industries alike ... . In this case, the rule is violated by a price restraint that tends to provide the same economic rewards to all practitioners regardless of their skill, their experience, their training, or their willingness to employ innovative and difficult procedures in individual cases. Such a restraint also may discourage entry into the market and may deter experimentation and new developments by individual entrepreneurs. It may be a masquerade for an agreement to fix uniform prices, or it may in the future take on that character.

Neither this antitrust decision nor federal labor law exempting independent contractors from unionization have discouraged many private fee-for-service doctors from trying to join the ranks of unionized registered nurses and staff support personnel to gain collective economic leverage. "Medicine has become a commodity and what you're seeing is the blue-collaring of the white coats," observes Dr. Barry Liebowitz, a pediatrician and president of the Doctors Council of New York, a sizable labor organization of attending physicians. And about 2100 doctors - part of physician-owned MDNY Healthcare, Inc. on New York's Long Island - have affiliated with the Office and Professional Employees International Union.

A closely watched experiment in the State of Florida involves 1,900 private practitioners who have joined the Tallahassee-based Federation of Physicians and Dentists, paying $520 a year in dues to have the union represent them. "There's no doubt that managed-care companies are providing the impetus for our growth here," says Federation Executive Director Jack Seeon, a former labor representative for air-traffic controllers. He has created an Independent Practitioners Association which aims to set minimum fees and practice conditions for members-while hoping not to run afoul of federal antitrust and labor laws. The 5,000 member California-based Union of American Physicians and Dentists also takes a two-pronged approach. Its public sector "employee" doctors belong to a conventional labor organization and its independent private sector practitioners pay a $250 service charge to join a separate nonprofit network which negotiates directly with large patient care groups, bypassing health maintenance plans and other managed-care middlemen. An Oakland neurologist who has headed this union since 1990 asserts that the network arrangement has survived a government audit of its legal status.

In August of 1996, another important health care event occurred. The Justice Department and the Federal Trade Commission issued revised antitrust "safety zone" guidelines for the medical profession which they declare are "flexible and resilient in response to consumer demand for cost effective and high quality performance in the rapidly changing health care industry." Private fee-for-service physicians seem to be allowed to create "new innovative arrangements" by forming joint venture networks that contract with health plans.

Although doctors in the aggregate control how nearly 80% of all health care dollars are spent (by authorizing tests, prescriptions, and procedures), three quarters of them work in groups of less than ten. As they face powerful health maintenance organizations bent on reducing medical costs while inevitably lowering the level of patient care, some independent physicians see the new anti-trust safety zone as permitting a viable alternative to unionization by joining huge physician practice management (PPM) companies. These firms act as "messengers" between the providers of health care (doctors) and the payers (HMOs, PPOs, insurers and employers).

Several leading PPMs - such as Phy Cor and Med Partners - are giving these private practitioners what appears to be a legal opportunity to ban together by the thousands and thereby provide member doctors with a competitive edge. Their operational cost is spread over a much larger organization, insurance alternatives imposed by managed care are assessed, and patients are retained by medical referrals within the PPM's network. Other joint ventures offer stock ownership shares to doctors in exchange for the assets of their practices and/or authority to act as their negotiating agent. "We'll listen to any sensible argument that a group is really offering something good for consumers," responds Mark Whitener, deputy director of the Federal Trade Commission's Bureau of Competition. "But if doctors are just trying to keep prices up and control the market, that's illegal."

As medicos throughout the United States struggle to cope with the sweeping changes brought about by managed care and increasing operational costs, podiatrists have formed a nationwide labor organization which they call the First National Guild for Health Care Providers of the Lower Extremities. Its veteran union organizers say they will negotiate traditional labor contracts wherever a group of the foot specialists works as salaried employees of a hospital or government agency. And the majority of their fee-for-service members - who historically have been treated as independent contractors legally exempt from unionization - reportedly will be represented by this pedal union in similarly aggressive collective bargaining with the managed care organizations. The Guild also will lobby to achieve its goals in the halls of Congress and America's statehouses. With 6,500 members and based in Harrisburg, Pennsylvania, it has become affiliated with the Office and Professional Employees International Union.

Not to be outdone, the influential American Medical Association has proclaimed that it favors expansion of the collective bargaining rights of doctors "in appropriate settings." Although AMA voices opposition to the legendary union strike tactic (described as "withholding medical services from patients"), its Board of Trustees recently adopted a six-page resolution (No. 708A-96) covering three categories of active support for the unionization of its 300,000 members. They are: (1) policy about the use of bargaining mechanisms; (2) policy that the AMA advocates changes in laws and regulations to facilitate collective bargaining with managed care health plans; and (3) policy that the AMA provides assistance to medical societies and physicians that wish to engage in collective bargaining.

AFL-CIO President John Sweeney must be gleeful over these surprising events. Nervous patients can only hope he doesn't try to organize surgeons for membership in a revived Amalgamated Meat Cutters and Butchers Union.