A California bill that would allow physicians to collectively negotiate with health plans could let the plans band together and negotiate with physicians, an antitrust expert says.
"There's an issue as to whether this legislation might actually . . . authorize collaboration among competing plans," says lawyer Robert Enders, a member of the health law department at Foley and Lardner's Los Angeles office and a professor of business law at California State Polytechnic University. "This would be a disaster from the physician's perspective."
Assembly Bill 1600, which flew through committees and out of the Assembly, awaits assignment to Senate committees. It would allow physicians to individually or collectively negotiate rates and other terms with health plans.
It would, in effect, allow them to circumvent federal antitrust legislation that prohibits price fixing.
Enders also says AB1600 falls short of creating what's known as a state action exemption and would violate federal antitrust laws. He adds that it's unclear whether the bill violates state antitrust laws.
But the bill's supporters say they don't believe there are antitrust concerns.
"Our attorneys believe it meets California arbitration law," says Jack Lewin, M.D., CEO of the California Medical Association, which lobbied for the bill's passage. "(The bill) is somewhat state law specific . . . I really think this is an opportunity to get the doctors and the health plans to the table and allows physicians to use the class action" approach to do that.
The bill isn't about bringing physicians and health plans together, says Bobby Pena, spokesperson for the California Association of Health Plans, which opposes AB1600. "It's about bringing doctors together to fix prices and drive up the cost of healthcare," he says. "We would agree . . . that the bill is flawed and is bad public policy. We're not trying to seek (collective bargaining status). We're not trying to form cartels. This is not something we've sought."
State action exemption requires state agencies to actively supervise any activity so described. State officials can decide whether to have a competitive system or displace the competitive model with a regulatory one, Enders says. If they choose a regulatory model, state regulators must actively supervise the private parties in order to be immune from federal antitrust laws, Enders says.
"I don't see anything that requires the (state Department of Managed Health Care) to do anything with that," he says. "My question is, where's the supervision in that context? Without state supervision, then the state action exemption isn't going to apply. Of all the things, that's the biggest issue."
The way AB1600 is written, the DMHC would not become involved in any part of the process unless the two parties reach an impasse, Enders says. An amendment to the bill would require physicians to tell the DMHC who will represent them in negotiations. If DMHC officials find that the representation isn't in the best interest of the public, they would recommend how to improve that representation.
"It's clear under U.S. Supreme Court precedents that the states must exercise active, as opposed to reserving the right to intervene, supervision," Enders says. In other words, AB1600 would require the DMHC to be actively involved in any negotiations or processes.
Federal antitrust statutes allow states to replace competition with a regulatory model, he says. The Federal Trade Commission has consistently held that competitive models are the best ways to conduct business and has been skeptical about replacing a competitive model with a regulatory one, he says.
"The federal authorities take due cognizance in deference to states' rights," Enders says. "But they will not turn a blind eye to a state statute (if) state action is inadequate."