Wrong message delivered in bargaining effort
April 1, 1999
Wrong message delivered in bargaining effort
Misuse of messenger model’ can bring trouble
Fed up with managed care’s typical "take it or leave it" attitude regarding contract terms, 29 general and vascular surgeons in Tampa, FL, formed the Federation of Certified Surgeons and Specialists in August 1997.
The Federation’s goal was to give the physicians more bargaining leverage when negotiating with health plans. At first the idea worked well. The group even got United HealthCare Plans of Florida to sweeten proposed fees on one contract by 30% over its original proposal.
But the group effort began to fall apart in January when the federal government charged the federation with violating antitrust regulations. Specifically, the U.S. Department of Justice alleged that the federation was involved in illegal collective bargaining and improper use of the "messenger model" method of setting fees and contract terms.
The problem: Collective bargaining by competing physicians who do not share some kind of risk sharing or common clinical integration is illegal, even when a third-party messenger is used. Plus, a messenger can only relay objective information about proposed terms and offers between the two parties, without making recommendations or influencing price and contract terms.
Messengers also are not allowed to actively bargain with payers on behalf of competing physicians and practice groups, and cannot strategize with providers about how to improve their negotiating positions. In the federation’s case, for instance, its third-party messenger allegedly told local payers that if they did not improve their contract terms, the federation’s affiliated surgeons were prepared to resign en masse from their plans.
"All we did was stop the bleeding," says Joseph F. Diaco, MD, one of the federation’s original organizing members. "We didn’t raise our prices; we said we are not going any lower." Despite the fact they feel they are not guilty of the charges, federation members decided to avoid possible lengthy litigation by signing a consent decree that bars them from further collective negotiations.
"We don’t agree with the government’s allegations, but their position was either spend a lot of time and money on an investigation or accept this. The doctors felt they couldn’t afford it, so they accepted it," says David Ettinger, JD, a Detroit antitrust attorney who represented the group.
In the settlement, the group and its consultants, Pershing Yoakley and Associates, P.C., in Knoxville, TN, admit no wrongdoing. But they agree not to share competitively sensitive information, including contract terms that affect fees, duration of individual commitments to health plans, notice of termination, utilization review, and resolution of fee disputes.
Despite the settlement, many of the doctors involved in the federation still feel their collective-bargaining efforts were not improper.
"Everything [the antitrust enforcement agencies] do is by the book and for the insurance companies. They don’t care about individual doctors and they don’t care about patient care," says Diaco.
The cans and can’ts of messengers
As a general rule, federal antitrust rules prohibit competing physicians who are not already formally financially integrated from agreeing on what fees they will charge payers or otherwise acting in concert to affect reimbursement payer rates, notes Daniel B. Vukmer, an attorney with the Pittsburgh law firm of Houston Harbaugh.
The classic violation occurs when two or more physicians or practice groups meet to determine what fees they will charge. The law also prohibits two or more non-integrated competing practices from using a third party to negotiate payer contracts on their collective behalf.
However, under the messenger model, a third-party negotiator can be used by competing groups, provided the negotiator does not share financial information among the groups.
Under a messenger model, a third party collects price and other proposed contract terms from individual providers in a network. The third party then conveys this information to potential payers, who relay their counteroffers back to the providers through the messenger. Each provider member then makes an individual decision to accept or reject the proposed contract terms.
As long as members do not coordinate their actions in any way, antitrust problems should not arise, says Vukmer.
Messenger arrangements may take a number of forms. The most simple one is where the messenger, who may be an employee of the network or an independent third party, merely receives offers from payers and communicates these to each network provider individually.
Messengers also are permitted to accept contract offers on behalf of a provider and explain the contents of the proposal to the physician.
A messenger also may obtain a schedule of fees from each provider and a fee schedule from the payer and compare the two. The messenger then may make a recommendation regarding whether each provider should accept or reject the contract offer based on guidelines each individual provi der gives the messenger. For instance, a provider may say it is only interested in contracts in which at least 80% of the payer’s CPT code fees are equal to or greater than its current corresponding fee schedule.
"Regardless of which model is used, the messenger is prohibited from providing an opinion on the terms of the offer, nor may the messenger make an independent determination regarding whether a contract offer should be presented for consideration," says Vukmer.
Also, if the messenger coordinates provi ders’ responses, disseminates to network members the views or intentions of other provi ders, or expresses a personal opinion on the terms offered, government antitrust lawyers could see this as a per se illegal price-fixing agreement.
For instance, in the Federation of Certified Surgeons and Specialists settlement agreement, the Department of Justice said the messenger is allowed to:
• communicate accurate and objective information about a proposed contract, including comparisons with terms offered to that doctor by other payers;
• engage in activities to facilitate lawful activities by physician network joint ventures and multiprovider networks, as those terms are defined by the federal antitrust enforcers.
However, a messenger is precluded from:
• facilitating any agreement between competing physicians;
• encouraging any agreement among competing physicians to deal with any payer only through a messenger;
• negotiating, collectively or individually, with payers on behalf of competing physicians;
• making any recommendation about actual or proposed contract terms, including whether to accept or reject the terms.
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