AMA Collective Bargaining as an AMA Advocacy Tool by WE2lkD


Collective Bargaining as an AMA Advocacy Tool
(Reference Committee I)

                                        EXECUTIVE SUMMARY

The arena in which physicians provide professional services to patients has changed radically in the past
two decades. In the past, individual and small groups of physicians have provided the majority of services
to patients. Now the system is becoming more integrated and consolidated, with many physicians finding
themselves in situations of employment, negotiating contractual terms with, or otherwise in situations with
larger integrated health systems and health maintenance organizations holding the balance of power over
patient care and workplace issues.

The House of Delegates at I-98 called for development of a negotiating unit within organized medicine to
help level the playing field with health care payors. Since that time, many steps have been taken in further
development of AMA’s private sector advocacy strategy and a risk assessment of other possible steps,
including formation of a collective bargaining unit, has been carried out. In the course of this work, a great
deal has been learned about who could use the services of a collective bargaining unit, who cannot, and for
what purposes.

The environment within which AMA’s private sector advocacy activities are pursued are complicated by
existing antitrust law which constrains the nature of what the AMA is allowed to do on behalf of physicians
and the number of physicians for which various advocacy tools can be used. Our current efforts are aimed
at maximizing the use of tools that are currently available to us, removing antitrust constraints in order to
expand the kinds of tools that may be employed, and constantly seeking creative new strategies.

Central to the Board’s discussions has been one key fact. Under current antitrust law, the only way
physicians can bargain collectively, regardless of what the activity is called, is in the context of a formal
employment relationship as defined under the National Labor Relations Act. Unless they are part of an
integrated group practice, self-employed physicians can not bargain collectively with payors, and doing so
would be a violation of antitrust laws that carry potential criminal penalties and treble damages. Given this
current reality, the Board’s work has focused on a two-pronged strategy of aggressively pursuing antitrust
relief in order to allow future collective action with payors, while at the same time pursuing a wide range of
currently permissible other advocacy initiatives on behalf of physicians, including possible mechanisms for
collective bargaining for those physicians who are employees.

This report considers the implications, benefits, and risks of a full continuum of actions, with or without a
collective bargaining unit that can or might be undertaken on behalf of physicians as they deal with the
complex issues of the current health care delivery system. At the conclusion of the report are
recommendations for the steps to be pursued to “level the playing field” for physicians.
                                     REPORT OF THE BOARD OF TRUSTEES

                                                                                 B of T Report 30 - A-99

     Subject:         Collective Bargaining as an AMA Advocacy Tool

     Presented by:    Randolph D. Smoak, Jr., MD, Chair

     Referred to:     Reference Committee I
                      (Edmund W. Jones, MD, Chair)

 3   The arena in which physicians provide professional services to patients has changed radically in the past
 4   two decades. As medical practice has evolved from predominantly small practice based to the current more
 5   consolidated practice environment, many physicians are finding themselves in situations where they are
 6   part of larger integrated health systems and health maintenance organizations. The balance of control of
 7   patient care and workplace issues has shifted to representatives of third party payors and institutions who
 8   are dictating the terms and conditions under which medical services are delivered.
10   Managed care has greatly accelerated the consolidation of the health care industry, and both the corporate
11   and institutional sectors of the health care market have consolidated much faster than has the professional
12   service sectors. This has produced a very difficult transition period in which some parts of the industry are
13   highly consolidated and others are not. Consolidated industries function differently from non-consolidated
14   industries. The dynamics and the strategies are vastly different. In an industry that is in transition, the
15   consolidated sectors have distinct advantages over sectors that have not yet consolidated. This is one
16   of the key reasons that physicians, other health professionals, and patients currently are in a
17   disadvantageous position in the current health industry.
19   Many physicians feel frustrated and disenfranchised in today’s environment, and feel a strong need to
20   “level the playing field”-- that is to restore their ability to deal on an equal footing with the organizations
21   that have an impact on how they deliver services to their patients and how they are paid for their services.
22   At the 1998 Annual Meeting, the AMA House of Delegates adopted Resolution 258 (A-98), including the
23   following action:
25   RESOLVED, That our American Medical Association develop a negotiating unit, within organized
26   medicine and with no affiliation with national trade unions, free of antitrust constraints for all of its
27   members in order to help level the playing field with health care payors.
29   Since the adoption of the resolution at A-98, the American Medical Association has proceeded to develop a
30   variety of activities to level the playing field as called for by the House:
32   1. The AMA’s private sector advocacy program was substantially intensified by the addition of staff
33      (from six to fifteen positions) and the development of a number of new initiatives such as the “rapid
34      response teams” (RRT), as elaborated later in this report.
36   2. Intensive work was done to identify responses to the House action specifically calling for a negotiating
37      unit, and a specific proposal was developed for how this could be implemented under current law.
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 1   3. Aggressive advocacy efforts have been pursued, in collaboration with federation partners, to ease
 2      antitrust constraints so that further steps may be taken in the future.
 4   This report sets out those actions and their results as well as the possible next steps. Pursuing the goal of
 5   empowering physicians within the current system is a complex matter involving complicated legal
 6   considerations, significant potential fiscal impact, potential membership issues, and potential implications
 7   for the nature and identity of the AMA as a professional association.
 9   Leveling the playing field and empowering physicians in the service of their patients is the overriding
10   objective of the AMA’s advocacy program. The ultimate purpose is assuring the highest quality of patient
11   care and fair treatment of physicians. Since the issues, restrictions, and possible solutions vary
12   substantially depending upon the EMPLOYMENT STATUS of a physician, this report discusses
13   particular employment situations and recommendations for action for the specific concerns faced by
14   physicians engaged in that particular professional activity. Specifically, the issues, circumstances,
15   and advocacy activities related to SELF-EMPLOYED physicians, EMPLOYED physicians, and
16   RESIDENT physicians are discussed separately due to the substantial differences in their
17   circumstances and the range of possible solutions available.
19   However, the AMA’s activities specifically in support of self-employed physicians, employed physicians,
20   and resident physicians should be understood in the context of the AMA’s overall private sector advocacy
21   program and the overall antitrust situation as it currently stands.
23   AMA’s Private Sector Advocacy Program
25   Since 1995, the AMA’s Private Sector Advocacy (PSA) Group has been actively assisting physicians and
26   medical societies in addressing a wide variety of issues related to managed care and the rapidly
27   consolidating health delivery environment. The AMA’s Private Sector Advocacy (PSA) Group, in
28   collaboration with other AMA resources, seeks to level the playing field in the marketplace for physicians
29   of all practice modes. The full scope of AMA resources are combined with partnerships with local, state,
30   and specialty medical societies to achieve the following objectives:
32          Expose and eliminate abusive and unfair contracting provisions and management practices
33          Strengthen physician negotiating leverage
34          Identify, respond to, and influence emerging trends and issues
36   Rapid Response Teams -To date, the PSA Group has responded to requests for assistance from physicians
37   and medical societies in 31 states regarding 24 private sector issues. The majority of AMA assistance has
38   been provided through interdisciplinary AMA staff Rapid Response Teams formed to address specific
39   circumstances. These teams, the AMA’s most visible tactic for advocating on behalf of physicians in the
40   marketplace, extend the work of the prior Division of Representation. Through an on-site presence, they
41   work actively with local and state medical societies to advocate for physicians at the “grassroots level” on a
42   variety of issues ranging from resolution of egregious contract provisions to mandatory hospitalist
43   programs. The Litigation Center and the Advocacy Resource Center are among the key resources that help
44   support these efforts.
46   General Antitrust Considerations - A major factor in the development and implementation of AMA’s
47   private sector advocacy strategy is the matter of what is and is not allowable under current antitrust
48   law. Some general background related to current antitrust law as it applies to all physicians is important to
49   understand. Specific applications of the law to self-employed, employed, and resident physicians were
50   discussed in a paper prepared by Ed Hirshfeld, who was the AMA Associate General Counsel and Vice
51   President for Private Sector Advocacy until his death in August, 1998 (see Appendix A).
                                           B of T Rep. 30 - A-99 -- page 3

 2   Because of the importance of understanding the specific meaning of certain terms used in this material, a
 3   glossary is provided in Appendix B. It is strongly recommended that members of the House of
 4   Delegates carefully read Appendix A, and become thoroughly familiar with the proper use of the
 5   terminology in Appendix B, in order to have a fully informed basis for understanding the remainder
 6   of this report.
 8      Purpose of the antitrust laws: The purpose of the antitrust laws is to promote competition, on the theory
 9       that competition leads to greater choice of products and services, better quality and lower prices for the
10       consumer. These laws prohibit collective action among independent competitors to fix prices or
11       otherwise set the terms of dealings. Under antitrust law, physicians who are not in an employment
12       relationship (e.g. self-employed physicians) are viewed as competitors, and therefore may not agree
13       on the prices they will charge for their services (see Appendix A, pages 23-25).
15      Labor exemption from the antitrust laws: Collective bargaining can only take place if there is an
16       exemption from the antitrust laws. The labor laws provide such an exemption by protecting the
17       legitimate activities of labor organizations and their members, to engage in collective negotiation over
18       terms and conditions of employment. To fall within the labor exemption, the conduct must arise out of
19       a labor dispute between an employer and its employees. In other words, the labor exemption is
20       contingent upon an employment relationship. Only employees who are not supervisors or managers
21       (“non-supervisory employees”) may form a collective bargaining unit to negotiate with their
22       employees under the labor laws (see Appendix A, pages 23-25).
24      What is a “labor organization”? A “labor organization” is a specific legal term under the National
25       Labor Relations Act (NLRA). It is not synonymous with “trade union.” A labor organization is defined
26       as any group certified by (i.e. recognized by and authorized to function under the auspices of) the
27       National Labor Relations Board (NLRB) in which employees participate for the purpose of dealing
28       with the employer about the terms and conditions of employment.
30       Any entity, including a medical society, can be certified as a collective bargaining agent on behalf of
31       the (non-supervisory) employees of a given employer if it meets that definition. In addition, a group of
32       non-supervisory employees may form a “labor organization” without affiliating with a traditional labor
33       union or any other organization. For example, a group of physicians employed by Blue Cross Blue
34       Shield of Massachusetts formed a collective bargaining unit with no other affiliation, certified by the
35       NLRB.
37       For the purposes of this discussion, “labor organization” and “collective bargaining unit” are
38       synonymous (see Appendix B, page 47).
40      Why is the protection of the labor laws so important? The National Labor Relations Act provides
41       significant protection for employees beyond the important protections from the antitrust laws. It
42       restricts the tactics that an employer can use to prevent the formation and operation of a collective
43       bargaining unit (such as retaliation), and it requires employers to bargain in good faith with a
44       duly-certified collective bargaining unit. Without this protection, employers can disregard, undermine,
45       or retaliate against the activities of an employee group that is not legally recognized as a collective
46       bargaining unit. This includes the ability to fire or demote the organizers.
48      Key point: The ability to collectively bargain under the NLRA requires an employment relationship.
49       Non-supervisory employees may engage in collective bargaining with their employer (and no other
50       party) through a collective bargaining unit certified by the NLRB. The relationship between an
                                           B of T Rep. 30 - A-99 -- page 4

 1       independently practicing physician and a payor is not an employment relationship. Within the context
 2       of negotiations under the National Labor Relations Act, it should be noted that physicians in a
 3       collective bargaining unit would not be allowed to negotiate with health care payors on the terms and
 4       conditions under which services are provided. Negotiations could only take place between physicians
 5       and their employers. In the case of physician employees of an HMO or other health plan, the physicians
 6       could negotiate collectively with the HMO or health plan related to their employment because the
 7       HMO or health plan is their employer, not in the capacity of the HMO or health plan as a payor. In this
 8       circumstance, the fact that the HMO or health plan is a payor is only a coincidental factor.
11                                      SELF-EMPLOYED PHYSICIANS
13   Circumstances and Issues
15   The most intense interest in leveling the playing field with payors has been expressed by independently
16   practicing physicians because in many markets managed care plans have obtained economic leverage over
17   physicians through their contracting practices. As large employers and payors have captured the market,
18   they have been able to substantially influence the volume and flow of patients to some physicians and away
19   from others. Patient volume is directed toward physicians who will accept reductions in payment, accept
20   the additional administrative burdens of the plan, and cooperate with the health plan in its cost reductions
21   and utilization controls.
23   This leverage has enabled health plans to assume substantial control over medical decision making, to drive
24   down the incomes of many physicians, and to threaten the viability of physician practices that will not
25   cooperate with them. Many physicians feel powerless to respond to the leverage exerted by health plans,
26   because the current legal landscape gives more power to the health plan. Federal and state antitrust laws bar
27   any collective action, such as collective negotiation or boycotts, that would enable self-employed
28   physicians to change the terms of a contract by collectively refusing to participate. These laws are designed
29   to be pro-competitive because, by enabling health plans to exert economic leverage over physicians, they
30   theoretically reduce the cost of health care to the consumer. Physicians acknowledge the need to constrain
31   the cost of medical care, but they are increasingly alarmed about the extent to which current market
32   imbalance affects clinical decisions and the quality of patient care.
34   In response to these market conditions, self-employed physicians are looking toward collective action to
35   provide them with a counter-weight to the economic leverage of health plans. AMA data estimate that there
36   are 325,000 self-employed physicians in the U.S. engaged in patient care as their primary professional
37   activity. While some are aware that the antitrust laws bar them from engaging in collective negotiations as
38   independent physicians, some have a mistaken belief that they can engage in collective bargaining if they
39   join a labor union. Others are working toward legislative reform, such as the Campbell Bill, that would
40   allow them to engage in collective bargaining with health plans. They are joining the AMA in lobbying
41   their federal representatives and senators to advance bills that would modify federal antitrust laws, labor
42   laws, or both to allow collective bargaining by self-employed physicians.
44   Applicability of Current Law
46   Under current law, self-employed physicians in independent practice may not engage in collective
47   bargaining, because they are considered independent contractors and competitors under the current
48   antitrust laws (see Appendix A, pages 29 - 34). Any attempt to collectively negotiate will be considered
49   price fixing by the Department of Justice (DOJ) and Federal Trade Commission (FTC) in violation of
50   the antitrust laws. This antitrust violation carries with it potential criminal penalties and treble
51   damages.
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 2   The fact that a union affiliated with the AFL/CIO holds itself out as representing self-employed physicians
 3   does not change the reality that self-employed physicians cannot legally engage in collective negotiations
 4   with payors. In fact, in 1998, the DOJ brought a complaint against the Federation of Physicians and
 5   Dentists (FPD), an AFL-CIO affiliate, alleging that it engaged in collective negotiations on behalf of a
 6   group of self-employed physicians in Delaware in violation of the antitrust laws.
 8      Can self-employed physicians use the “messenger model” to collectively bargain with health plans?
 9       No. The “messenger model,” which is outlined in the 1996 Department of Justice/Federal Trade
10       Commission Statements of Enforcement Policy and Analytical Principles Relating to Health Care and
11       Antitrust (“the Guidelines”), is not a tool for collective negotiation on fees or fee-related issues (see
12       Appendix A, pages 33 - 34). If it is used to collectively gain fee-related concessions from a health plan
13       or health system, this will be considered price-fixing under the antitrust laws.
15       The Guidelines permit the use of the “messenger model” to allow independent physicians to market
16       themselves as a network to health plans. However, the model requires each physician in the group to
17       act independently in his or her decision making. The physician cannot discuss contract proposals with
18       other physicians or share information with them, either directly or indirectly under the messenger
19       model. The third party messenger can only communicate between the payer and the physicians
20       individually, and accept offers on behalf of physicians individually. The messenger may not engage in
21       any negotiations.
23       Note: The DOJ complaint filed against the Federation of Physicians and Dentists involves what the
24       FPD describes as a “messenger model.” The DOJ alleges that the FPD was not acting merely as a
25       messenger, but was negotiating collectively in order to force price concessions from Delaware payors
26       in violation of the antitrust laws.
28      Can a health plan have such control over a self-employed physician that he/she can be considered a “de
29       facto” employee? Courts look beyond the label attached to a relationship to determine whether either
30       an independent contractor or an employment relationship exists (see Appendix A, pages 30 - 33). They
31       look at a number of criteria to make this decision. The general consensus among attorneys is that
32       although health plans are exerting more control over physicians practices today, the balance in most
33       cases still tips the relationship in favor of independent contractor status, particularly because most
34       physicians have contracts with a number of health plans and do not derive a majority of their
35       non-Medicare income from any given plan.
37       If the health care market continues to consolidate and physician practices depend heavily on a single
38       health plan, the balance may tip so that the independent self-employed physician could be viewed as an
39       employee for purposes of the labor laws. This concept was tested by Local 56 of the United Food and
40       Commercial Workers in New Jersey that filed a petition with the National Labor Relations Board
41       asking to be certified as the exclusive bargaining unit for a group of self-employed physicians in New
42       Jersey who participate in the Amerihealth HMO physician panel. A full panel of the regional NLRB
43       heard the case in November, 1998 and a decision was made in late May, 1999 finding that physicians
44       who are part of the AmeriHealth HMO network of health care providers in Cape May County and
45       Atlantic County, New Jersey are “independent contractors” and not AmeriHealth HMO employees.
46       The AFL-CIO petition seeking certification as these physicians’ bargaining representatives was
47       dismissed.
49       Physicians also may gain greater leverage with plans by forming more integrated networks and groups.
                                           B of T Rep. 30 - A-99 -- page 6

 1       Can a self-employed physician join a traditional trade union? Yes, a physician could become a member
 2       of the union. However, the union could not represent the physician in collective bargaining with
 3       payors.
 5   AMA Activities in Support of Self-Employed Physicians
 7   As indicated above, under current antitrust law self-employed physicians cannot engage in collective
 8   bargaining with payors. This is because payors are not their employers and collective bargaining may only
 9   be conducted between employees and their employers. This is a fundamental constraint which the whole
10   private sector advocacy strategy for self-employed physicians must acknowledge. Because of it, the AMA
11   addresses the needs of self-employed physicians in two major ways: One is to work aggressively to remove
12   the constraint on collective bargaining, and the other is to do everything possible in the meantime to legally
13   advocate for self-employed physicians.
15   To achieve this objective, the AMA has pursued the following initiatives:
17   Removing Antitrust Constraints:
19      Federal legislative solution through support of the “Quality Health Care Coalition Act of 1999,
20       H.R. 1304 (Campbell Bill)” - The AMA is working closely with the Federation to support legislation
21       introduced by Rep. Thomas Campbell (R. Cal), a former Stanford Law School professor and former
22       Director of the Federal Trade Commission Bureau of Competition. The proposed legislation would
23       change the antitrust laws to allow independent self-employed physicians to collectively negotiate with
24       health maintenance organizations and other health insurance issuers in the same manner that labor
25       organizations can bargain under the NLRA. However, the bill prohibits strikes or any other actions that
26       would interfere with patient care. In addition to aggressively advocating for this bill in Congress, the
27       AMA is pursuing an extensive grassroots campaign to rally support from physicians across the country.
29      State legislative activity: The State Action Doctrine: At its February, 1999 meeting, the Board of
30       Trustees approved model state legislation through which states could provide immunity for certain
31       collective activities by physicians. This legislation is modeled on the “state action doctrine,” a court
32       created exemption to the antitrust laws. Under the “state action doctrine” the antitrust laws do not apply
33       to collective action compelled or approved by a state, which is pursuant to “clearly articulated and
34       affirmatively expressed state policy.” The activity must be actively supervised by a designated state
35       agency. The AMA model legislation was distributed to the Federation within two weeks of approval by
36       the Board of Trustees.
38       The Texas Medical Association immediately introduced legislation, patterned on the AMA model, in
39       both the Texas House and Senate. The AMA testified at both the House and Senate hearings on the bill,
40       and the bill passed out of both committees. The bill was subsequently passed by both the Senate and the
41       House in late May, and final action by the Governor is imminent. The Pennsylvania Medical Society
42       has drafted legislation on this model, and Washington, DC and New Jersey are also considering
43       drafting similar legislation for this session. Georgia is considering such legislation for the 2000
44       legislative session.
46      Federal regulatory solution through dialogue with the Federal Trade Commission - Concurrent
47       with its work at the Congressional level in support of the Campbell bill, the AMA has ongoing
48       discussions with the Federal Trade Commission to push for revisions in the FTC/DOJ 1996
49       “Statements of Enforcement Policy and Analytical Principles Relating to Health Care and Antitrust”
50       permitting additional collective action by physicians within the current laws. In particular, the AMA is
51       seeking changes in FTC policy covering the application of the “messenger model.”
                                          B of T Rep. 30 - A-99 -- page 7

 2   Advocacy Effort Under Current Antitrust Law:
 4      Managed care contracting campaign - The AMA has actively engaged health plans whose contracts
 5       exhibit unfair provisions that jeopardize patient care and compromise the physician’s role as patient
 6       advocate. Contractual provisions that the AMA has aggressively opposed include all-products clause
 7       requirements, medical necessity definitions, and plan requests to unilaterally change contract terms. In
 8       response to these egregious contract provisions, the AMA has developed the Model Medical Services
 9       Arrangement (i.e. model managed care contract), which serves as the cornerstone of AMA contractual
10       policy and the prototype managed care contract proffered to health plans during discussions.
12           --All products clause
13                   Most notably, the AMA has engaged Aetna U.S. Healthcare regarding its all-products
14                   policy. While national discussions with Aetna regarding this policy and other onerous
15                   contract provisions are ongoing, physician opposition to the all-products clause has served
16                   as the catalyst to call for several AMA Rapid Response Teams. For example, AMA staff
17                   worked in concert with the Texas and Dallas County Medical Societies in support of the
18                   Genesis Physician Practice Association’s contractual disputes with Aetna over the
19                   all-product clause. Similarly, the AMA has provided RRT assistance to the Kentucky
20                   Medical Association and the Jefferson County Medical Society over Aetna’s enforcement
21                   of the all-products clause.
23                   The AMA is also working to identify “best practices” in contracting and educate the plans
24                   and the profession about such practices. The AMA has entered into such preliminary
25                   discussions with United Healthcare.
27      Market-place solution through practice integration - Self-employed physicians may collectively
28       negotiate with payors if they have a level of clinical integration and financial risk sharing that is
29       consistent with existing antitrust guidelines. The AMA is actively working with physicians in Rhode
30       Island and New Jersey to develop an integration model with the minimum level of integration required
31       by current antitrust guidelines.
33      Reimbursement Related Issues - The AMA is actively investigating an increasing number of
34       concerns from physicians regarding such reimbursement issues as late claims payment, down-coding
35       and systematic denials of claims. The PSA Group has developed a protocol for processing complaints
36       regarding reimbursement related issues. Serving as the intake center for these marketplace concerns,
37       PSA staff conducts the initial fact-finding, including data collection and interviewing. Following an
38       investigation of the concern, if appropriate, the PSA Group works in concert with other AMA resources
39       such as the AMA/State Society Litigation Center, the Advocacy Resource Center, and other federation
40       entities.
42       The PSA group received numerous inquiries from Lee County, Florida Physicians regarding late claims
43       payment, downcoding, and systematic claims denials by numerous payors. Following an initial
44       investigation of the claims, the issue was introduced to the Litigation Center, which worked closely
45       with the Florida Medical Association toward a resolution. In addition, a February PSA fact-finding trip
46       to the Greater Albuquerque Medical Association (GAMA) revealed that late claims payment was the
47       primary concern of physicians in the area. Consequently, PSA staff brought the Advocacy Resource
48       Center’s Claims Payment Timeliness survey to GAMA to quantify the extent of the plans’ late
49       payment. The results of this survey will be unveiled at GAMA’s annual meeting in May.
                                           B of T Rep. 30 - A-99 -- page 8

 1   Discussion
 3   Clearly, the plight of self-employed physicians is the most difficult to deal with in the context of
 4   “bargaining,” especially as it relates to payors. The constraints of current antitrust law prohibit
 5   self-employed physicians from forming a labor organization that engages in collective bargaining,
 6   and allow for criminal penalties and treble damages for violations. The AMA private sector advocacy
 7   efforts outlined above pursue a two-pronged approach: actively seeking bargaining rights for
 8   self-employed physicians through antitrust reform, and doing everything possible in other
 9   (non-negotiating) areas until such time as antitrust relief is achieved. The Board of Trustees believes that
10   this approach maximizes the potential for impact under current circumstances, and recommends continuing
11   on this course. An ongoing process of seeking additional strategies will be pursued as well.
14                                          EMPLOYED PHYSICIANS
16   Circumstances and Issues
18   Employed physicians often choose employment both because they prefer that practice setting and to escape
19   the insecurity of being self-employed in the current market environment. Younger physicians often seek
20   employment because of educational debt and the lack of capital to invest in starting or buying into a
21   practice. They have sought security of position and income, and protection from abusive practices by
22   health plans. In a sense, the employer operates as a buffer between the physician and health plans.
24   Employed physicians are a large and diverse group. The varied and quickly changing nature of the
25   employed physician universe is demonstrated by statistics compiled annually by the AMA (See also
26   Appendix C):
28               Of the 620,876 physicians engaged in patient care activities in 1998, 135,144 (22%) are
29                post-resident physicians employed by institutions. These are employed as follows:
31                       32,270 (24%) are employed by hospitals
32                       36,797 (27%) are employed by medical schools and universities
33                       9,925 (7%) are employed by HMOs
34                       13,614 (10%) are employed by state and local government
35                       6,500 (5%) are employed by ambulatory sites
36                       35,588 (26%) are employed by other employers
38               It is estimated that of the 135,144 employed physicians in the U.S., up to 20% (27,000) are in
39                “supervisory” positions that make them ineligible to engage in collective bargaining. The
40                remaining 108,000 physicians would be eligible to engage in collective bargaining through the
41                potential AMA sponsored collective bargaining unit described later in this section of the report.
43               In addition, there are 47,731 physicians employed by physician-owned group practices that
44                would not be eligible for collective bargaining under the potential AMA collective bargaining
45                unit.
47   Typically, employed physicians become interested in collective bargaining when:
49   1. The employer sets goals for increased productivity without consulting the physicians about the likely
50      impact on the quality of patient care.
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 1   2. The employer makes significant changes in patient care facilities, staffing, or administrative
 2      procedures without consulting the physicians.
 3   3. The employer demands reductions in physician income.
 4   4. The employer breaks promises or uses heavy handed techniques to force physicians to make
 5      concessions.
 7   These practices usually arise from market pressures faced by the physician’s employer. While physicians
 8   are aware of these pressures and are willing to work with the employers up to a point, they become
 9   particularly concerned when changes are made without appropriate physician involvement and when these
10   changes adversely affect patients. When such circumstances become acute, physicians are increasingly
11   looking to collective bargaining as a tool that may be of help to them.
13   Applicability of Current Law
15   Only employed physicians who are not in management or supervisory positions may participate in a labor
16   organization to collectively bargain with their employer over terms and conditions of employment,
17   including compensation. This is estimated to be about one third of employed physicians (see Glossary in
18   Appendix B for detailed definitions of “employee” and “supervisor” under the NLRA).
20      Supervisory vs. non-supervisory employed physician: A critical determination in whether a
21       physician can become a member of a collective bargaining unit formed to negotiate with an employer is
22       whether he or she is in a supervisory or non-supervisory position. There is no clear guidance from the
23       courts or the National Labor Relations Board on this issue, and it depends on the facts in each case. No
24       single factor is determinative. Some courts have found that all physicians in a proposed bargaining unit
25       were supervisory because their decisions direct other members of the health care team, such as nurses,
26       technicians, and residents. However, in the past two years, the National Labor Relations Board has
27       taken a broader view, and has recognized three physician bargaining units. In all three cases,
28       department heads – who have greater supervisory roles – were not included in the units as members of
29       the bargaining unit.
31      Status of physicians in group practices: Physicians in group practices who have an ownership
32       interest in that practice are not considered employees of the practice. Physicians who do not have an
33       ownership interest are considered employees of the group practice.
35      Publicly-employed physicians: Collective bargaining on behalf of publicly-employed physicians has
36       been accepted in some parts of the country for years. These physicians generally are organized under
37       state labor laws that allow state and municipal employees to form labor unions. These physicians also
38       are protected by Federal law. The AMA believes that a substantial majority of the 42,000 physicians
39       who currently belong to traditional trade unions may be publicly employed.
41       Note: Since physician unions have been in existence for a long time and there are still a relatively small
42       number of physicians who are members, a question often arises regarding why unions are so interested
43       in organizing physicians. The total number of physicians who are eligible is relatively small by
44       comparison to the larger national unions (UAW, Teamsters, AFL-CIO). Among the possible
45       explanations of traditional union interest in organizing physicians is that if physicians are organized, it
46       will be easier to organize the millions of other health related workers. Traditional physician opposition
47       to such organizing of health workers would presumably be reduced. Another reason is that if
48       physicians were members of unions, organized labor’s traditional support of a single payor approach
49       might encounter less opposition from the medical community.
51   AMA Activities in Support of Employed Physicians
                                          B of T Rep. 30 - A-99 -- page 10

 2   The AMA is committed to developing strategies that provide employed physicians the tools to engage their
 3   employers in meaningful discussions regarding patient care and conditions of employment. To achieve this
 4   objective, the AMA public sector advocacy activity employs the following multi-faceted approach:
 6      Model employment contract
 7       Similar to the “Model Medical Services Agreement” available to self-employed physicians, the AMA
 8       will develop, maintain and distribute a model employment contract that will offer a reasonable and fair
 9       alternative to the unfair employment contracts offered by some healthcare organizations. Included in
10       the model agreement will be dispute resolution procedures whereby the parties shall utilize mediation
11       and/or arbitration as a means of resolving disputes arising under the agreement.
13      Alternative dispute resolution
14       In addition to developing the model employment contract, the AMA will actively engage employers of
15       physicians to address patient care and other issues through Rapid Response Teams (RRT). Central to
16       these discussions will be the development of dispute resolution mechanisms for physician concerns
17       regarding employment conditions. The use of dispute resolution mechanisms allows disputes to be
18       resolved in much less time and at much less expense. These mechanisms can greatly enhance the
19       employee-employer ongoing relationship, and provide the means to resolve differences fairly and
20       impartially.
22      Assistance in the formation of a labor organization
23       Employed physicians, excluding those deemed to be supervisory, are permitted under labor law to form
24       recognized labor organizations for the purpose of engaging in collective bargaining. The AMA is able
25       to provide advice and staff assistance to such groups, as evidenced by the AMA’s assistance, along with
26       the Illinois State Medical Society, to a group of physicians in Rockford (Illinois) who were interested
27       in negotiating improved contract terms with their clinic.
29      Potential Sponsorship of an AMA Affiliated Collective Bargaining Unit (CBU)
30       As discussed above, non-supervisory employed physicians may engage in collective bargaining under
31       current law. In response to the House of Delegates’ actions with respect to negotiations, the
32       groundwork has been completed for forming collective bargaining units for eligible physicians. A
33       preliminary Constitution has been drafted to support such an affiliated entity(s), operating as a “labor
34       organization(s)” under the National Labor Relations Act. The following material captures the essential
35       nature and characteristics of such a potential collective bargaining Unit (CBU).
37           Fundamental Operating Assumptions - The proposed CBU would operate under the following
38           parameters:
40                  Any collective bargaining activity that would be operated, supported, or endorsed by the
41                   AMA and/or an affiliate of the AMA, would be established as a professional alternative to
42                   organized labor.
44                  All members, officers, and units of an AMA CBU would follow the Principles of Medical
45                   Ethics and the opinions of the Council on Ethical and Judicial Affairs, including a specific
46                   provision not to strike, nor to affiliate with non-physicians.
48                  The AMA would encourage physicians to first seek resolution of their issues through
49                   models other than the CBU (e.g. assisted discussions, governance reforms, committee
                                  B of T Rep. 30 - A-99 -- page 11

 1           structures, mediation). The goal of the AMA is to resolve problems, not set up bargaining
 2           units.
 4          The CBU would not organize physician owned and operated group practices, so as not to
 5           represent some of our members against others.
 7          Any AMA CBU efforts would be undertaken in collaboration with our federation partners.
 9          The CBU would be established by the AMA and the AMA would appoint the CBU’s
10           Board for the first five years. The law calls for the members of the CBU to elect the Board
11           after five years. The CBU would be a legally distinct, separate entity from the AMA itself,
12           and the AMA would not be able to exert control over its policies and actions.
14          It would not be legal to require members of the CBU to be members of the AMA (although
15           a CBU could bargain for payment of AMA dues by employers as a benefit).
17   Issue Agendas - CBU’s could be used to address a wide range of issues on behalf of employed
18   physicians.
20          Appropriate role in governance
21          Quality/patient care concerns (e.g. support staff; closing of facilities)
22          Equipment and technology needs
23          Productivity Standards
24          Terms and conditions of employment
25          Hours
26          Coverage
27          Clinical autonomy
28          Respect
29          Legal and ethical responsibility to meet professional commitments
30          Evaluation criteria
31          Compensation
33   The way these issues wold be likely to come into play, and the relative emphasis among them,
34   would vary substantially from situation to situation. It is very difficult to predict which ones
35   would be more or less prominent.
37   Negotiating/Bargaining Tools and Tactics - Potential tactics and tools that the CBU could utilize in
38   addressing these issues and concerns include:
40          Collective negotiation and bargaining.
42          Informational pickets.
44          Non-disruptive public demonstrations.
46          Lobbying and publicity campaigns.
48          Unfair labor practice petitions.
                                          B of T Rep. 30 - A-99 -- page 12

 1                   Free days – provide free services to patients of the employers thereby reducing revenue to
 2                    employer without disrupting care.
 4                   For publicly traded entities, CBU could become involved in shareholder advocacy.
 6           These tactics and the specific tools related to them would have to be consistent with the AMA Code
 7           of Medical Ethics.
 9   The organizing of a collective bargaining unit is done in phases. The developmental phase involves fact
10   finding and analysis, a process of obtaining background about a group and using that information to
11   determine the advisability of attempting to organize the group as a local bargaining unit. The next step is
12   educating the group about the advantages of joining the labor organization, followed by an election in
13   which a majority of those voting must approve joining the labor organization. If a majority is achieved, the
14   final developmental step is to successfully negotiate a contract with management. If a contract cannot be
15   reached, the bargaining unit is dissolved. If a contract is negotiated, phase two consists of contract
16   administration, the monitoring and adjudicating of problems in accordance with the terms of conditions of
17   the contract.
19   It is estimated that an active model of an AMA affiliated CBU would complete, or be in the developmental
20   stage of completing, local bargaining units at 35 locations in the first five years. This will include 25
21   resident units and 10 units for employed physicians in hospitals and/or physician practice settings. After
22   five years, more than 2000 employed physicians and 7500 resident physicians will be members of AMA
23   affiliated CBU chapters. An additional 3000 former resident physician CBU members will have finished
24   their programs during this period of time. The total expenses for this five year model are $5.8 million while
25   dues revenues are more than $6.6 million. Assuming no further growth, revenues will exceed expenses by
26   $2.5million in succeeding years. These estimates are based on annual dues for employed physicians of
27   $720 and for residents of $300. Appendix G includes more specific cost information including potential
28   legal costs.
30   The relatively small number of physicians projected to be members of a proposed AMA sponsored CBU
31   (2000 employed physicians and 10,500 residents) is due to the philosophy the AMA Affiliated CBU would
32   embrace. While a traditional labor union’s focus is always on expansion and efforts to form new local
33   bargaining units, the AMA CBU would offer membership to groups of physicians as the last option in a
34   series of alternatives. AMA’s Private Sector Advocacy team is committed to assisting groups of physicians
35   through a variety of means up to and including mediation and arbitration. Only after it is determined that
36   the group of physicians feels that the CBU is the only effective alternative will membership in the AMA
37   Affiliated CBU be offered. Unlike traditional labor unions, solving physicians’ problems will be the
38   primary goal of the proposed CBU. In this regard, the success of the AMA Affiliated CBU should be
39   gauged by the number of physicians helped, not by the number of physician members of the unit.
41   Discussion
43   AMA private sector advocacy strategy for employed physicians is comprised of a variety of activities as
44   summarized above. One of them, collective bargaining as a labor organization under the National Labor
45   Relations act, would be a very substantial undertaking and a major departure from any other activities in
46   which the AMA has previously engaged. Consistent with its fiduciary responsibilities, the Board asked that
47   a risk assessment be conducted exploring the implications of the AMA engaging in collective bargaining.
48   Appendix E includes the risk assessment report that was prepared.
50   The risk assessment considered a wide range of possible implications of the AMA engaging in collective
51   bargaining as well as the implications of not doing so. It addressed such things as the likelihood of success,
                                           B of T Rep. 30 - A-99 -- page 13

 1   membership impact, the impact on professionalism, the impact on the image/identity of the AMA and of
 2   physicians, communication implications, financial impact, legal considerations, and the impact on other
 3   AMA activities.
 5   Clearly, there are strong arguments on both sides of the question of whether it is in the best interests of the
 6   AMA, members, physicians in general, and patients for the AMA to engage in collective bargaining on
 7   behalf of employed physicians. However, after considering all of the factors, the Board’s judgement is that
 8   it is not an advisable course of action for the AMA at this time. The reasons are as follows:
10      The potential impact on both the reality and the perception of professionalism as it applies to the AMA
11       and to physicians could be significant. It would be very difficult for a collective bargaining unit to
12       always put patient care issues first ahead of self-interest considerations, regardless of the sincerity of
13       intent.
15      The AMA would have considerable control of an AMA affiliated CBU for the first five years, but the
16       law requires self-governance after five years, and the safeguards the AMA would require to protect
17       professionalism and assure that the CBU functioned in concert with AMA policy could not be
18       guaranteed beyond that point.
20      Employed physicians who would be eligible to engage in collective bargaining are not generally the
21       physicians who are most in need of such services in today’s environment, and those who are most in
22       need (i.e. self-employed physicians) are not eligible.
24      Projected coverage, according to the proposal that was developed and in conformance with the
25       financial resources available, calls for only ten CBU’s to be formed in the first five years, covering
26       approximately 2,000 employed physicians. This is not enough critical mass or impact to warrant
27       assuming some of the risks that would be involved in such an undertaking.
29      There is considerable expense related to the development of the potential CBUs, even though there
30       would be projected net income if fully successful. Initially, organizing would be costly, and there is
31       the potential for a loss of up to $1.5 million if the venture proved to be not successful. In addition,
32       there could be liability exposure related to these activities that is not quantifiable in advance but which
33       could be substantial.
35      The AMA is not experienced in collective bargaining and would be competing with experienced labor
36       organizations. In addition, the AMA would have to adhere to a strict “no strike” clause (self-imposed
37       in the interest of professionalism) that would put it at a competitive disadvantage with other, more
38       traditional, labor organizations that are not so constrained.
40   Therefore, it is the recommendation of the Board that, in lieu of a CBU, other aspects of the private sector
41   advocacy strategy for employed physicians should be pursued vigorously.
                                          B of T Rep. 30 - A-99 -- page 14

 1                                            RESIDENT PHYSICIANS
 3   Circumstances and Issues
 5   AMA data show that there are 95, 808 resident physicians in the United States. Residents have a long
 6   history of raising patient care issues as well as issues related to their educational programs and working
 7   conditions. While many institutions have resolved these issues, others have failed to satisfactorily address
 8   them. After considerable developmental work, the AMA led an effort in 1998 to strengthen residents’
 9   rights under the ACGME Institutional Requirements. These new requirements became effective in
10   September 1998. Currently there are approximately 10,000 residents who are members of unions and there
11   is generally renewed interest in unions among residents. They believe that, as part of cost-cutting efforts,
12   hospitals are placing more work demands on them that are unrelated to their education. Hospitals have
13   reduced their non-professional staffs, especially at night, and are demanding that residents perform many of
14   the unskilled tasks formerly handled by orderlies and other non-professional staff. Residents find that these
15   demands detract from their education, place unreasonable burdens on them, and affect the care of patients.
17   AMA policy considers residents to be employees of the hospital or institution sponsoring the residency
18   program. The AMA also considers residents to be students. The AMA believes that residents are entitled to
19   collectively bargain over working conditions, but not over matters involving the content of their educational
20   program. The AMA argued this position in an amicus brief filed with the National Labor Relations Board
21   in the Boston Medical Center Case. (discussed below)
23   Applicability of Current Law
25   Resident physicians are a distinct group with regard to collective bargaining (see Appendix A, page 35).
27      Current view of the National Labor Relations Board: The NLRB has a long-standing policy that
28       resident physicians are students, not employees, and therefore are not entitled to protection of the
29       NLRA.
31      Boston Medical Center case: In 1997, the Committee on Interns and Residents, an affiliate of the
32       Service Employees International Unions and the AFL-CIO, filed a representation petition on behalf of
33       residents at the Boston Medical Center, asking the NLRB to hold that the residents are employees
34       entitled to collectively bargain under federal law. After the regional NLRB denied certification, citing
35       long-standing policy, the Committee on Interns and Residents filed an appeal to the NLRB. Many
36       believe that the NLRB may, in fact, reverse its position in the Boston matter. A ruling is expected at
37       any time.
39      Collective bargaining by residents permitted in some states: Most states already have labor laws which
40       allow employees of public institutions (i.e., municipal or state hospitals in this case) to form labor
41       organizations outside of the oversight of the National Labor Relations Board. The Committee of
42       Interns and Residents (CIR) and other resident unions have approximately 10,000 residents organized
43       currently under these state laws. The majority of resident union members are in New York, New
44       Jersey, California, Florida, and Massachusetts. The public/private distinction between state and federal
45       labor laws is at the heart of the Boston Medical Center case cited above. In essence, federal labor law,
46       which designates residents as students, applies at all private training hospitals at this time.
48      Voluntary recognition of housestaff organizations: A number of teaching institutions, such as Tulane,
49       have voluntarily recognized housestaff organizations as the representatives of residents. These
50       institutions engage in discussions with their housestaff over terms and conditions of employment and
                                           B of T Rep. 30 - A-99 -- page 15

 1       patient care issues on a voluntary basis outside the framework of the NLRA.
 3      Impact of reversal of NLRB position on voluntary housestaff organizations: If the NLRB reverses its
 4       position and holds that residents are employees entitled to collectively bargain over non-educational
 5       aspects of their employment relationship, the voluntary housestaff organizations automatically become
 6       eligible to petition for certification as collective bargaining units under the NLRB.
 8   AMA Activities in Support of Resident Physicians
10   The AMA is committed to advocating on behalf of resident physicians to respond to patient care and other
11   issues. The AMA private sector advocacy program is actively pursuing the following strategies to ensure
12   the accomplishment of this objective.
15      Assist in the development of Independent Housestaff Organizations
16       The AMA is committed to assist residents develop Independent Housestaff Organizations (IHOs) that
17       will allow them to voice their concerns regarding patient care and resident quality of life issues to
18       institutional leaders. An IHO is an organization that is: 1.) comprised of a multi-disciplinary
19       representation of residents and fellows; 2.) charged with effectively representing patient and
20       resident/fellow interests within a site of graduate medical education; 3.) not affiliated with a traditional
21       trade union; and 4.) committed to refraining from engaging in strikes or other actions that could
22       negatively affect the substantial well-being of patients.
24       Through an IHO, residents maintain a unique position in the institutional hierarchy, positioned at the
25       interface of care provision between attending physicians, ancillary care providers, and patients. Thus,
26       their input is invaluable in improving patient care and identifying operational efficiencies. The IHO
27       may develop an advisory committee which works collaboratively with hospital administration in
28       identifying and creating solutions to patient, resident and hospital concerns. In summary, by creating a
29       housestaff organization, residents can achieve the following objectives:
31           --Improve standards for quality patient care within their institution
32           --Protect and enhance the educational experience
33           --Assume a role in policy-making decisions
34           -- Groom future physician leaders
35           --Create services and benefits that assist residents
36           --Develop protections such as due process for resident physicians
38       Recognizing the benefits of IHOs, the AMA has developed and distributed a publication, entitled
39       “Independent Housestaff Organizations: A Win/Win Opportunity,” which outlines a process and
40       structure for developing IHOs. This guide is designed to educate both residents and institutional
41       leaders on the benefits and limitations of IHOs. One weakness of this model is that an institution must
42       agree to cooperate voluntarily with the group of residents looking t start an IHO. It is our experience
43       that not all training institutions will be agreeable to members of their housestaff forming such an
44       organization and may protest if the AMA is asked by their residents to assist in the formation of an IHO
45       at their hospital.
47      ACGME Actions
49       The AMA has worked with the ACGME to institute new protections and benefits for resident
50       physicians at their institutions. These new benefits include requiring resident membership on every
51       Residency Review Committee (RRC), every institution’s GME committee and other institutional
                                          B of T Rep. 30 - A-99 -- page 16

 1       committees relating to resident training. Restrictive covenants are now banned, anonymous
 2       evaluations of faculty are now required, and many residents’ rights and responsibilities are now
 3       specified for inclusion in resident contracts. Most importantly, the following language was approved to
 4       improve communication avenues and the climate for residents within their teaching institutions. This
 5       includes:
 7                1. Assurance of an educational environment in which issues can be raised and resolved
 8                   without fear of intimidation or retaliation.
 9                2. Provision of an organizational system for communication and exchange of information on
10                   all issues pertaining to residents and their educational programs. This can be accomplished
11                   through a resident organization or through other forums to facilitate regular assessment of
12                   resident concerns.
13                3. Procedures to address concerns of individual residents in a confidential manner, protected
14                   as by the use of an ombudsman.
15                4. Establishment and implementation of institutional policies and procedures for discipline.
16                5. Establishment and implementation of institutional policies and procedures for adjudication
17                   of resident complaints and grievances.
19   The AMA recommends continued promotion of Independent Housestaff Organizations in accordance with
20   the above ACGME recommendations.
22      Potential Sponsorship of an AMA Affiliated Collective Bargaining Unit (CBU)
24       The follow-up to House of Delegates actions at A-98 and I-98 included developmental work on a
25       potential collective bargaining unit for resident physicians. This would be very similar to the potential
26       CBU for employed physicians as described above. It would be subject to the same overall operating
27       assumptions and self-imposed restrictions regarding strikes, and would use a similar set of tools and
28       tactics. However, the issues on which collective bargaining would take place would be different for
29       residents in some respects, and would include the following:
31          Work hours, taking into account the educational needs of the residents and patient safety
32          Work environment issues regarding safety and general well-being of residents
33          Grievance procedures
34          Fairness in evaluations
35          Support staff
36          Closing of facilities and residency programs
37          Equipment and technology needs
38          Productivity standards
39          Quality of the educational experience
40          Relationships with the faculty and administration
41          Compensation
43   The proposal for the CBU would project the organization of 25 CBUs for residents, covering an estimated
44   10,500 resident physicians during the first five years.
46   Discussion
48   The Board’s risk analysis of collective bargaining units considered the pros and cons of this kind of activity
49   for residents. The same concerns that the Board has regarding AMA engaging in collective bargaining on
50   behalf of employed physicians also apply to resident physicians. In addition, there is concern that HCFA,
                                          B of T Rep. 30 - A-99 -- page 17

 1   which is already trying to reduce Medicare’s support for graduate medical education, may interpret more
 2   widespread collective bargaining by residents as evidence to support the contention that residents are
 3   employees rather than students, and thus justify further reduction in support of the educational component.
 4   Lastly, feedback from the academic community, especially among the leadership ranks, indicates strong
 5   opposition to the AMA engaging in collective bargaining for residents, and membership fallout within the
 6   academic community is a strong concern. On the other hand, not pursuing collective bargaining will likely
 7   result in membership fallout among other physicians, especially residents and young physicians.
 9   The Board believes that the existing strategies for assisting resident physicians, without the addition of an
10   AMA sponsored collective bargaining unit, can achieve for residents as much as collective bargaining units
11   would.
14                                            OTHER ACTIVITIES
16   In addition to the private sector activities described above that are specifically targeted to assisting
17   self-employed physicians, employed physicians, and resident physicians, there are some activities that
18   apply to physicians across these groups.
20   Responding to Emerging Issues
22   The AMA makes an active effort to identify and respond to emerging trends within the healthcare
23   marketplace. Two of the most recent trends, plan consolidation and bankruptcies, have stirred significant
24   concern within the physician community. The AMA has developed advocacy campaigns aimed at assisting
25   physicians in addressing these marketplace changes.
27      Health Plan Consolidation: The pace of health plan consolidation has accelerated across the course
28       of the past year, exacerbating the inequity of market power between physicians and plans. Mergers of a
29       certain magnitude may jeopardize patient care. The prospective Aetna-Prudential acquisition is the
30       most prominent example of potential anti-competitive effects of health care mergers. In response to
31       this proposed acquisition, the AMA took the precedent-setting action of voicing its concerns to the
32       Department of Justice. Following its initial correspondence to the Department of Justice (DOJ), the
33       AMA has assisted the DOJ in its scrutiny of the acquisition. Most notably, the AMA produced a “white
34       paper,” which laid out the concerns of organized medicine about the anti-competitive effects of
35       excessive market share and unfair contractual practices. In addition, the AMA has coordinated support
36       for local and state societies in markets most impacted by the acquisition. As of May 10, the DOJ
37       continues to investigate the acquisition and turns to the AMA for information regarding its marketplace
38       implications. While aggressively opposing this specific acquisition, the AMA concurrently is keeping
39       track of other plans that have followed Aetna’s consolidation strategy. For example, the AMA is aware
40       of Blue Cross/Blue Shield plans that maintain excessive market share. In these markets, the AMA is
41       initiating discussions with local societies aimed at creating a balanced marketplace.
43           --Public Awareness: The AMA’s advocacy against the Aetna-Prudential acquisition has provided
44           a forum for educating the public about the implications of plans possessing excessive market share.
45           For example, in local markets such as Dallas, Houston and New Jersey, the AMA and local
46           societies have advanced the “Wallstreet, not Mainstreet” and “Bigger is not Better” messages about
47           plan consolidation.
49           --Monopsony Argument: With the recent trend toward plan consolidation, the AMA has identified
50           the need to develop a body of evidence and academic literature to document why plan consolidation
51           is anticompetitive and deleterious for patients. The AMA is working with the AMA’s Center for
                                         B of T Rep. 30 - A-99 -- page 18

 1           Health Care Policy Research and a team of external economists to explain the anti-competitive
 2           effects of concentrated buyer power (monopsony). The work produced by this team will prove
 3           invaluable for the AMA in advancing numerous advocacy reforms, including objections to mergers
 4           and support of legislation such as the Campbell Bill.
 6      Health Care Organization Bankruptcy: While health plans have aggressively moved to consolidate,
 7       the health care marketplace has witnessed a series of bankruptcies that have impacted physicians of all
 8       practice modes. No healthcare organization has been immune. Well known examples are Allegheny
 9       Health, Education and Research Foundation (health system), HIP of New Jersey (health plan) and FPA
10       Medical Management, Inc. (practice management firm) all of whom filed for bankruptcy within the
11       past year.
13       To protect the interests of patients and physicians, the AMA has responded through a
14       two-pronged strategy. In its initial response to these bankruptcies, the AMA has provided financial and
15       legal support to state medical societies such as the California Medical Association to advance the
16       interests of physicians in state-held bankruptcy proceedings. In addition, the AMA is working to
17       develop educational materials to assist physicians should a financial intermediary with whom they have
18       a relationship go bankrupt. This piece, to be distributed at A-99, will also educate physicians about
19       how to evaluate the financial stability of a company before entering into an arrangement and how to
20       provide maximum protection through contractual provisions.
23                                          RECOMMENDATIONS
25   This report considers the major strategies within the AMA’s private sector advocacy program, including the
26   specific question of whether to support an AMA sponsored collective bargaining unit. The Board believes
27   that the House of Delegates’ consideration of this issue will be more focused if it has specific
28   recommendations to act upon. As always, the Board will actively implement whatever decisions the House
29   of Delegates makes.
31   Recommendation: It is recommended that the AMA:
33                   1. Aggressively implement the current, multidimensional AMA private sector advocacy
34                      program.
36                   2. Actively promote the Campbell Bill and be ready to assist self-employed physicians in
37                      negotiating with third party payors if it passes.
39                   3. Actively support the formation of independent housestaff organizations.
41                   4. Not form or sponsor any “labor organization” (as defined by the National Labor
42                      Relations Act).
                                  B of T Rep. 30 - A-99 -- page 19


1. Appendix A -- “Physicians, Unions, and Antitrust” by Ed Hirshfeld (1998)
      Pages 22-43

2. Appendix B -- Glossary
      Pages 44-50

3. Appendix C -- Summary data on physicians related to professional activity
      Pages 51-53

4. Appendix D -- Summary of AMA private sector advocacy activities
      Page 54

5. Appendix E -- Risk Assessment of AMA’s Collective Bargaining Unit Proposal
      Pages 55-65

6. Appendix F -- Stakeholder analysis on collective bargaining
      Pages 66-69

7. Appendix G -- Financial summary related to sponsoring collective bargaining units
      Pages 70-73
                                               B of T Rep. 30 - A-99 -- page 20

                                                                                                               APPENDIX A

                                      PHYSICIANS, UNIONS, AND ANTITRUST
                                              Edward B. Hirshfeld*


The past two years have seen an upsurge of physician interest in unionization. That interest is now present
along the full range of physician practice settings. Two developments during the latter part of 1996 spurred
this interest. One was the August, 1996 announcement of the American Podiatric Medical Association that
it was working with the Office Professionals Employees International Union (OPEIU) to form a union for
podiatrists. This received widespread national media attention, and other trade unions began targeting
physicians for membership.

The other development was the November 8, 1996, ruling of a regional director of the National Labor
Relations Board (NLRB) that physicians employed by the Thomas-Davis Medical Centers, P.C. in Tucson,
Arizona could form a bargaining unit and engage in collective negotiations with their employer.1 This
ruling also received widespread national media attention. Since that time, the NLRB has approved two
more physician collective bargaining units, one in Massachusetts and one in Washington state.

Physicians have responded with interest to this pair of developments. Unionization has become a common
topic of discussion when physicians meet at state and county medical societies and the like. Numerous
state, county, and specialty medical societies have heard presentations from the principal physician unions
advocating affiliation with them; to date, however, no allopathic medical society has chosen such an
affiliation. The American Medical Association (AMA) has handled numerous inquiries about the law of
union formation, the activities unions are allowed to engage in on behalf of physicians, the activities of
existing physician unions, whether medical societies can organize unions, and what activities medical
societies can engage in to assist physicians other than starting a union.

The AMA has also promulgated a formal policy on unionization, which supports the right of physicians to
engage in collective bargaining, and it is AMA policy to work for expanding of the numbers of physicians
eligible for that right under federal law.1 However, AMA policy strongly opposes physicians withholding
care from patients for purposes of gaining leverage in collective bargaining.2 Other kinds of job actions
designed to give the physicians leverage are permissible provided that they do not endanger patient care.
The American Medical Association also opposes requirements that compel physicians to join a union
against their wishes.

    Mr. Hirshfeld was Associate General Counsel and Vice President for Private Sector Advocacy at the American Medical Association at
    the time of his death in August 1998. This article was originally written to support Mr. Hirshfeld’s July 1998 presentation to the
    American Health Lawyers Association. Special thanks to Helen Jameson, Division Counsel, American Medical Association, who
    assisted in editing and updating the article for publication following Mr. Hirshfeld’s death. Questions about this article should be
    addressed to Ms. Jameson at 515 N. State St. Chicago, IL 60610, Telephone: 312-464-4271, E-mail:
Underlying the entire discussion is the fact that many physicians feel they must collectively react to the
coercive economic power wielded by HMO’s and other managed care organizations. This economic power
has substantially modified the traditional methods of practice for many, if not most independent
self-employed physicians. The self-employed (or small group) physician1 is the one most at the mercy of
                                      B of T Rep. 30 - A-99 -- page 21

the insurers’ economic juggernaut; unfortunately, however, the self-employed physician is also the one at
most risk from the antitrust laws when attempting to counter-balance the power of the HMO’s.

This article will review the history of the interaction between the antitrust and labor laws, analyze the
current status of physician ability to unionize, and survey the present status of physician unions.


The Labor Exemption from the Antitrust Laws

The primary impediments to physician unionization are the antitrust laws and their applicability to joint
action by independent economic entities. These laws effectively bar “self-employed” physicians, or any
independent physician group, from acting collectively with other physicians or groups in negotiating
economic terms with health plans. The core problem is that there is a conflict between the goals of the
antitrust laws and the labor laws.2 The purpose of the antitrust laws is to promote competition among
providers of goods and services as a way to enhance consumer welfare. Competition leads to greater
diversity among products and services, better quality, and lower prices. Therefore, the antitrust laws bar
combinations and other collective actions among sellers or buyers of goods and services to raise prices or
otherwise set the terms of dealing.

In contrast, the purpose of the labor laws is to keep human labor from being treated as a mere “commodity”,
and to permit collective agreements and action among workers to raise and standardize wages and improve
their working conditions. Strikes, boycotts, and other collective activity to raise wages are permitted and
even favored by the labor laws to protect and enhance the economic power of the worker.

The antitrust laws, on their face, are broad enough to cover human labor; thus, early federal cases held that
collective labor activities designed to pressure employers were illegal. Congress, however, determined that
such labor activities were appropriate, and enacted legislation expressly exempting them from the antitrust

History of the Exemption

There is both a statutory labor exemption to the antitrust laws, and nonstatutory elucidation and
interpretation of that exemption. The exemption is the product of five sets of statutes. After the antitrust
laws were passed, they were considered applicable to labor organizing and were used to enjoin strikes.3
Subsequently, Congress passed the Clayton Act, which provides in pertinent part that “the labor of a human
being is not a commodity or an article of commerce,” and that “nothing contained in the antitrust laws shall
be construed to forbid the existence and operation of labor ... organizations.”3 In addition, section 20 of the
Act specified certain activities, such as strikes, picketing, and boycotts, which cannot be enjoined by a
federal court when conducted as part of “a dispute concerning the terms of conditions of employment.”4

Notwithstanding the apparent clarity of the Clayton Act, the federal judiciary was reluctant to acknowledge
the full scope of the labor exemption. Consequently, in 1932, Congress passed the Norris Laguardia Act,5
which declared a national public policy in favor of labor unions and stated that collective bargaining and
union organization are protected activities. This Act also defines “labor activities” and “parties” to a labor
dispute, and it specifically designates nine categories of activities that are protected from judicial
intervention if they arise from a labor dispute and the defendant is a party to the dispute. When read
together with the Clayton Act, it is clear that these nine activities are exempt from the antitrust laws.
                                      B of T Rep. 30 - A-99 -- page 22

In 1935 Congress passed the National Labor Relations Act (also known as the Wagner Act),6 which created
the National Labor Relations Board, and is the basis for today’s comprehensive federal labor regulation.
This Act does not contain an express exemption from the antitrust laws; rather, it was designed to protect
the activities of labor organizations and the persons that participate in them. Nonetheless it is a reference
point for defining the legitimate labor activities that are exempt from the antitrust laws. The Act created a
legally enforceable right for employees to organize, required employers to bargain with employees through
employee elected representatives, and gave employees the right to engage in concerted activities for
collective bargaining purposes or other mutual aid or protection.

Two subsequent pieces of legislation are of lesser importance for analyzing the antitrust exemption, but
should still be borne in mind. The Labor Management Relations Act7 (also known as the Taft-Hartley Act),
enacted in 1947, expands upon the National Labor Relations Act and corrected problems and inequities that
had developed in the enforcement of that Act. Finally, in 1959, Congress passed the Labor Management
Reporting and Disclosure Act8 (also known as the Landrum-Griffin Act). This Act corrected problems and
inequities that had developed in the enforcement of the National Labor Relations Act and the Labor
Management Relations Act. While neither of these acts have an express antitrust exemption, they are used
to interpret the scope of the exemption in the Clayton Act.

In addition to the text of these statutes, the exemption has a judicial aspect, arising from decisions
interpreting the scope of the exemption when the four labor relations statutes do not provide enough
guidance, or when they do not apply to the workers who want to engage in collective bargaining. The rules
of law developed in these cases are referred to as the “non-statutory” exemptions. These exemptions
primarily stem from the fact that the statutory labor exemption covers the unilateral acts of labor
organizations. However, some labor organizations began making agreements with employers that could be
classified as restraints of trade. The non-statutory exemption was developed by federal courts to define
when these agreements were exempt from the antitrust laws.9

When the Labor Exemption Applies

To fall within the Clayton Act’s labor exemption, the activities involved must meet the following criteria:

•       The conduct must arise out of a “labor dispute” and must be the conduct of a “labor organization.”

•       The labor organization must be acting in its own self-interest--it should be acting to further its goals
        as a labor organization as opposed to the goals of another entity.

•       The activities must involve the unilateral conduct of the labor organization. Collective action
        carried on with other entities, especially if those entities are not labor organizations, may violate the
        antitrust laws.

Pending Legislation

In June 1998, a bill that would provide a broad antitrust exemption for physicians was introduced into
Congress by Rep. Tom Campbell (R-Ca), a former Stanford University economics professor and former
head of the FTC Bureau of competition. “The Quality Health-Care Coalition Act of 1998,” and reads as

                To ensure and foster continued patient safety and quality of care, any
                group of health care professionals, negotiating with a health maintenance
                organization, insurer, retail state-licensed payor, or any other purchaser
                exempt from state licensure under ERISA, shall, in connection with such
                                     B of T Rep. 30 - A-99 -- page 23

                negotiations, be entitled to the same treatment under the antitrust laws
                accorded to members of a bargaining unit recognized under the National
                Labor Relations Act.

In July 1998, the House Judiciary Committee heard testimony in support of the bill from the American
Medical Association and other organizations. At the end of the hearings, the Chairman of the Committee
instructed the FTC to study the extent of leverage held by health plans in the market.

Although the Campbell bill did not proceed beyond the initial hearing stage in the 105th Congress, Rep.
Campbell plans to reintroduce a similar bill in the 106th Congress. The AMA and a coalition of specialty
societies are working with Rep. Campbell’s staff to provide input on proposed legislation. In addition,
some observers believe that in light of the aggressive consolidation strategy of the nation’s large health
plans, regulators, legislators, and the public will become increasingly concerned that health plan power is
becoming anticompetitive and is limiting consumer choice. However, a discussion of health plan market
power is beyond the scope of this article.


All physicians are not equal when it comes to collective bargaining. The applicability of the labor
exemption varies widely depending upon the employment status of the particular physician. Thus, the
analysis of this section proceeds separately with respect to the different modes of physician practice.

A. Employed Physicians

Background. Employed physicians often chose employment both because they prefer that practice setting
and to escape the insecurity of being self-employed in the current market environment. They have sought
security of position and income, and protection from abusive practices by health plans. In a sense, the
employer operates as a buffer between the physician and health plans.
                                     B of T Rep. 30 - A-99 -- page 24

Nonetheless, employed physicians are a large and diverse group. The number of employed physicians has
increased significantly over the past fifteen years, with the largest increases being among physicians
employed by hospitals. There is still a wide variation in employment settings, which poses challenges for
traditional labor unions seeking to organize physicians. For example in the case of large groups and
medical schools that employ large number of physicians, those physicians have a tradition of collegiality
and an infrastructure that has not provided fertile ground for organizing. However, the rapid changes in the
market raise the possibility of altering the dynamic of all employment settings--especially when employers
unilaterally change policies and procedures impacting physicians and their patients.

The varied and quickly changing nature of the employed physician universe is demonstrated by statistics
compiled by the AMA:10

•       The total percentage of patient care physicians (excluding resident physicians and those employed
        by the federal government) who were employed in 1997 was 43.3%. The percentage employed in
        1983 was 32.9%. However, this percentage has been stable since 1994.

•       The total percentage of patient care physicians (excluding those employed by the federal
        government) in practice for 5 years or less who were employed in 1997 was 64.6%. The percentage
        employed in 1983 was 37.2%.

•       The total percentage of patient care physicians (excluding those employed by the federal
        government) who were employed by “institutional employers” (i.e. hospitals, state and local
        governments, staff model HMOs) in 1997 was 32.6% (compared to 2 1.3% in 1988).

•       The total percentage of patient care physicians (excluding those employed by the federal
        government) who were employed by physician-owned groups in 1997 was 10.6% (compared to
        6.5% in 1988).

•       The 32.6% of patient care physicians who-were employed by institutions in 1997 were distributed
        as follows (reported as a percentage of the total physicians employed by institutions):

        •       Hospitals: 22.3% (compared to 15.8% in 1988)

        •       Medical Schools or universities: 21.2% (compared to 22.1% in 1988)

        •       Independent contractors (this category includes physicians such as emergency room
                physicians and radiologists who resemble employees in that they contract out services to
                large organizations, typically hospitals, and for whom a case can be made that they are in
                fact employees): 14.2% (compared to 2 1.3% in 1988)

        •       State and local governments: 8.6% (compared to 18.4% in 1988)

        •       Staff model HMOs: 8.3% (compared to 9.2% in 1988)

        •       Ambulatory care, surgical care, emergency care centers: 4.1% (compared to 3.5% in1988)

        •       Other: 21.3% (compared to 9.7% in 1988). The AMA speculates that physicians
                employed by hospital affiliates, such as management services organizations (MSOs), may
                account for a significant part of the growth in this area. If that is the case, then hospital
                employment, directly or indirectly, has accounted for a very substantial part of the increase
                                      B of T Rep. 30 - A-99 -- page 25

                in the employment of physicians. However, we do not know for sure. Future surveys by
                the American Medical Association’s Center for Health Care Policy Research will try to
                obtain more specifics about this category.

Interest in Collective Bargaining. Generally speaking, employed physicians are usually less concerned
about the leverage exerted by managed care plans than are solo and small group practitioners. They usually
are more comfortable with managed care and often believe that they are able to provide better quality of
care by working for an entity with the managerial capacity to apply principles of continuous quality
improvement and other techniques designed to improve quality and reduce costs.

Nonetheless, a significant impetus for unionization arises when employed physicians become disenchanted
with practices of their employers. Typically, employed physicians become interested in collective
bargaining when : (1) the employer sets goals for increased productivity without consulting the physicians
about the likely impact of those goals on the quality of patient care; (2) the employer makes significant
changes in the patient care facilities, staffing of the facilities, or administrative procedures used in the
facilities without consulting the physicians, (3) the employer demands reductions in physician income, or
(4) the employer breaks promises or uses heavy handed techniques to force physicians to make concessions.
When these changes come on the heels of a change in ownership, there is little or no residual trust to
cushion the blow, and the physician response is more acute.

Typically, these practices arise from market pressures faced by the employer. The employer needs to
reduce costs and improve efficiency to remain competitive. Physicians usually are aware of the market
pressures faced by the employer, are concerned about the viability of the employer, and are willing to work
to achieve greater efficiency, higher quality, and lower costs. But, the physicians become upset when they
feel that they have no influence or control over key decisions made by the employer that affect them and
their patients. The physicians are willing to face and deal with market pressures as a group, but they do not
like the sense of vulnerability and lack of control that occurs when the employer does not adequately
involve them in key decisions.

As a result, some employed physicians have become interested in forming unions to engage in collective
bargaining with their employers. In the past two years, there have been a number of newsworthy organizing
efforts among employed physicians.11 As mentioned previously, the National Labor Relations Board has
approved collective bargaining units at the Thomas Davis Medical Center in Tucson, Arizona, Medical
West Associates in Springfield, Massachusetts, the Medalia HealthCare in Seattle, Washington. In
addition, physicians at the Rockford Memorial Health Services Corporation in Rockford, Illinois filed a
petition for recognition with the NLRB, but withdrew the petition with leave to refile after their employer
made some changes in response to the organizing drive.

Although the interest among employed physicians in union formation is generally much less than it is
among self-employed physicians, it is certainly possible that given the volatility of the health care industry,
circumstances may change in such a way to substantial increase the number of organizing efforts by
employed physicians.

The Law’s Impact on Unionization. Physicians who are employees fall within the labor exemption to the
antitrust laws, and may engage in collective bargaining with their employers. Notwithstanding this clear
legal path, however, physician employees who have attempted to form unions have not always had an easy
go of it. Some courts have found that physicians are supervisory employees because their decisions direct
other members of the health care team, such as nurses and technicians. When physicians are found to be
supervisory employees as opposed to non-supervisory employees, then they do not qualify for the
protection of the National Labor Relations Act (“NLRA”).12
                                       B of T Rep. 30 - A-99 -- page 26

Loss of the protection of the NLRA is a significant handicap. That Act is designed to protect and enhance
the ability of employees to engage in collective bargaining by restricting the tactics that an employer can
use to prevent the formation and operation of a union. For example, the Act requires employers to
recognize a union and to bargain with it. When physicians are classified as supervisory employees their
employer does not have to recognize their union, does not have to bargain with it, and the employer is not
restrained by the regulations of the NLRA in how it can attempt to break up the physician bargaining group.

Fortunately, the past two years have brought positive developments on the legal front. Recognition of the
physician bargaining unit at Thomas-Davis Medical Centers, P.C. by the National Labor Relations Board
was a significant victory for physicians,13 followed by the recognition of the bargaining units at Medical
West Associates in Massachusetts, and Medalia Health Care In Seattle. The physicians were not
categorized as supervisory and now have the protection of the National Labor Relations Act. In both cases,
department heads were not included in the bargaining units.

In both the Thomas-Davis case and the Medalia Health Care Case, the employer challenged the decision of
the National Labor Relations Board by disregarding it and refusing to bargain with the union. The outcome
of these cases will have important ramifications as more physicians seek to form collective bargaining

The employer did not challenge the decision in favor of the employed physicians at Medical West
Associates, a clinic in Springfield, Massachusetts that was owned by a Blue Cross and Blue Shield
organization operating in Massachusetts. The physicians began organizing efforts when Blue Cross
announced plans to sell the clinics but failed to involve the physicians in selection of a purchaser. The
physicians organized themselves without the assistance of a major trade union, and the physician organizers
attribute their success in part to a strong physician infrastructure that has existed for years at the clinic. The
Medical West Associates physicians had a seat at the table during the negotiations for sale to

Options for Employers: Obviating the Need for Unionization. In the experience of the AMA,
employers of physicians can avoid a collective bargaining drive by setting up processes and procedures
within the employer’s organization to give physicians a role in decision making. These processes and
procedures should give the physicians meaningful influence in the employer’s organization. Committees
and councils that are for show only, and whose recommendations or decisions are rarely, if ever, carried
out, are not adequate for this purpose. Physicians quickly figure out that the committees or councils do not
carry any weight and are a waste of time.

However, if the physicians are given a meaningful role, they identify with the goals of the organization and
are more enthusiastic participants in efforts to make it a success. Employers whose managers are highly
autocratic, excessively control oriented, or are simply too disorganized or lazy to set up procedures that
include physicians in decision making are the ones likely to experience organizing drives. In addition, if
there is a change in ownership or management, practicing physicians should have a seat at the table and an
opportunity for meaningful input to increase the likelihood of a smooth transition.

Resistance by Employers: The Impact on Unionization Efforts. The employers of physicians who have
engaged in recent organizing drives have put up an enormous amount of resistance.15 Like other employers
facing an unwanted organizing drive, they tend to use every litigation tool available, including litigation
over the configuration of the bargaining unit and other issues. They will litigate these issues as far as
possible, starting with a Regional Director of the NLRB, then the NLRB, then a federal Circuit Court of
Appeals, and then the Supreme Court. In addition, these employers spend heavily on consultants and
organizers whose job is to discourage interest among physicians in the organizing drive.
                                      B of T Rep. 30 - A-99 -- page 27

As a result, a successful organizing drive can take up to three years to complete, and can be very expensive.
Therefore, physicians contemplating an organizing drive must be motivated enough to tolerate the long
delays, have sufficient solidarity to withstand the efforts to discourage participation, and must be
adequately funded.

B. Self-Employed Physicians

Background. The primary interest in union formation has come from independent, self-employed
physicians in solo practice or small groups. Unionization has become a subject of interest for many such
physicians because, in many markets, managed care health plans have obtained a material amount of
economic leverage over physicians. Their leverage comes from their ability to direct large volumes of
patients to selected physicians, and to deny those patients to other physicians. The health plans direct
patient volume to those physicians who will accept reductions in payment and cooperate with the health
plan in its cost reduction efforts, especially in reducing the utilization of health care services.

This leverage has enabled health plans to assume substantial control over medical decision making, to drive
down the incomes of many physicians, and to threaten the viability of physician practices that will not
cooperate with them. Many physicians feel powerless to respond to the exertion of leverage by health plans
because the current legal landscape favors health plan power. Federal and state antitrust laws bar any
collective action, such as boycotts, that would enable self-employed physicians to change the terms of
dealing (or even force health plans out of a market) by collectively refusing to participate on a panel.
Supporters of these laws believe that the laws are pro-competitive because by enabling health plans to exert
economic leverage over physicians they theoretically reduce the cost of health care to the consumer.

Both the United States Department of Justice and the Federal Trade Commission have sections dedicated to
enforcing the antitrust laws in the health care industry, and historically their focus has been on providers of
health care – not health plans. One of the primary purposes of these dedicated efforts is to ensure that
combinations of providers do not thwart the evolution of new ways of financing and delivering health
care.16 The antitrust enforcers, by their very nature bring this same viewpoint to bear on collective
bargaining by self-employed physicians. In doing so, however, they overlook the fact that physician
interest in unions goes beyond economic issues. Many self-employed physicians have become concerned
about the quality of care that they are able to provide to patients. They feel that the economic demands of
managed care plans and the protocols used by such plans are degrading the quality of care.

As an example, the contracts that major managed care health plans are offering to physicians are becoming
increasingly one-sided. For example, a contract being offered by Aetna U.S. Healthcare, Inc. allows Aetna
to change the fee schedule at will, requires the physicians to participate in all health benefits plans offered
or managed by Aetna now or in the future regardless of the terms of those product lines, and allows Aetna to
change at will important procedures for interactions between Aetna and the physicians, such as the manner
of filing claims, utilization review procedures, and protocols. Because Aetna is one of the nation’s largest
managed care companies17, other plans are adopting Aetna’s contracting practices, in particular the “all
products clause” requiring participation in all present or future health benefit plans.

In a self-protective response to such unsheathed economic power, self-employed physicians are giving
serious thought to whether unionization would provide them with a counter-weight to economic leverage of
the major health plans. While most are aware that the antitrust laws bar them from engaging in collective
negotiations as a group of independent physicians, some have a mistaken belief that they can engage in
collective bargaining if they joined a labor union authorized to represent individuals in collective
bargaining procedures. Generally, most self-employed physicians lose interest in union formation when
they find out that the antitrust laws do not allow them to engage in collective bargaining even if they are part
of a union.
                                     B of T Rep. 30 - A-99 -- page 28

However, in the face of a market place dominated by large health plans that essentially can dictate the terms
and conditions of dealing, many self-employed physicians are demanding legislative reform, similar to
Representative Campbell’s “Quality Health Care Coalition Act” that would allow them to engage in
collective bargaining with health plans. They are lobbying their associations, including the AMA, and their
federal representatives and senators, to advance bills that would modify federal antitrust or labor laws or
both to allow collective bargaining by self-employed physicians.

Applicability of the Law. In the absence of legislative action, however, self-employed physicians face an
uphill battle if they wish to engage in collective activity. There are, however, several avenues available for
use, in selected circumstances, that could enable some “self-employed” physicians to engage in collective
economic activity.

1. Is the physician truly “Self-employed”? Before physicians can engage in collective bargaining under the
labor exemption, the bargaining process must be part of a labor dispute. For there to be a labor dispute, the
collective bargaining must concern the terms and conditions of employment. Therefore, the physicians
must be employees and the dispute must be with the employer. Unfortunately, the law generally views
self-employed physicians as independent contractors, entrepreneurs, or independent businesses who do not
qualify for the labor exemption. Because they are not viewed legally as employees, they cannot engage in
collective bargaining.

However, the fact that persons who seek to engage in collective bargaining are not in a formal employment
relationship does not conclusively disqualify them from the labor exemption. Courts will look at the nature
of the relationship to determine whether the persons are employees in substance even though they do not
have a formal employment relationship. Employers cannot escape the labor exemption and the protection
extended to employees by the National Labor Relations Act and its successor statutes by calling their
workers independent contractors instead of employees.

Because of the changing dynamics of the marketplace, some physicians contend that health plans now exert
so much control over their independent practices that they are no longer truly “independent,” and should
qualify for the labor exemption. This is a legitimate argument, but a review of the law reveals that it is not
likely to succeed under current law.

While courts are willing to look at the substance of the relationship to determine whether a person is an
employee for purposes of the antitrust and labor laws, the concept of an employee still is restricted largely
to the traditional salaried or hourly employee who works during designated times at a designated place.
There was a time when the definition of employee seemed to be more expansive. In NLRB v. Hearst,18 the
Supreme Court said that protection of the National Labor Relations Act is “not confined exclusively to
‘employees’ within the traditional legal distinctions separating them from ‘independent contractors.’” The
court went on to say that inequalities in bargaining power in controversies over wages, hours, and working
conditions may as well characterize the status of independent contractors as employees, and that the
National Labor Relations Act may protect persons who, under traditional concepts and common law
definitions, are technically independent contractors.

However, not long after Hearst, Congress enacted the Labor Management Relations Act, which made clear
that the National Labor Relations Act was restricted to the traditional meaning of “employee,” and that
independent contractors do not qualify for its protections.19 Since that time, the courts have applied
common law principles of agency to distinguish between an independent contractor and an employee.
These common law principles are guided by an analysis of the following criteria:
                                     B of T Rep. 30 - A-99 -- page 29

•      The extent of control which, pursuant to the agreement between them, the alleged employer may
       exercise over the worker. The greater the amount of control, such as the hours of work required and
       the time and place of work, the more likely it is that the individual is an employee. Independent
       physicians that contract with a health plan are almost never subjected to the same kind of controls
       that an employer places on employees, such as hours of work, vacation time, work rules, and many

•      Whether the worker is engaged in a distinct occupation or business. If so, that is more indicative of
       independent contractor than employee status. Physicians are clearly engaged in a distinct
       occupation or business.

•      The kind of occupation and whether the work involved is usually done under the direction of an
       employer. If the occupation is normally done by self-employed individuals, then that indicates
       independent contractor status. Historically, physicians have been self-employed, although that is
       changing -- according to AMA surveys about 45% of physicians are now employed.

•      The skill required for the work involved. The higher the degree of skill, the more likely it is that the
       individual is an independent contractor. There are few occupations that require a higher degree of
       skill than being a physician.

•      Whether the alleged employer supplies the instrumentalities, tools, and the place of work. If so,
       that indicates employed status. However, physicians in independent practice normally own or rent
       their own office space and equipment, and employ their own staff.

•      The length of time for which the worker is hired. Indefinite and long term relationships are more
       indicative of employed status. Physician contracts with health plans are normally on an annual

•      Whether the pay is by time period or by the job. Physicians in independent practice are normally
       not paid a salary by health plans. They receive a fee for each service, capitation, or some blend of
       the two.

•      Whether the work is part of the regular business of the employer. If so, then the person is more
       likely to be an employee. There was a time when health care delivery was not part of the business
       of an insurer, but that is changing. Delivery is becoming an increasingly important part of the
       business of a health plan.

•      Whether the alleged employer and the worker believe that they have created an employment
       relationship. Normally health plans and physicians do not believe that they have an employment

Unsurprisingly, when analyzed under these criteria, the relationship between a self-employed physician and
a hospital or health plan generally is that of an independent contractor.

A 1997 consent order between the Federal Trade Commission and the College of Physicians-Surgeons
Puerto Rico demonstrates the applicability of the common law criteria--as well as the impact of
self-employed physicians being unable to rely upon the labor exemption. In 1994, the legislature of Puerto
Rico authorized the creation of the College, a quasi-public organization. Under the law, membership in the
College is mandatory for Puerto Rican physicians, and the Puerto Rican government is required to consult
with the College on medical issues that affect the College and its members.
                                     B of T Rep. 30 - A-99 -- page 30

Subsequently, the legislature of Puerto Rico passed a health reform law that is designed, in part, to provide
health care services to indigent persons in Puerto Rico. The College felt that the new program had a
capitation rate that was too low, and that it had other defects. After the Puerto Rican government failed to
modify the program in response to the College, the College held a seventy-two hour protest, and a number
of physicians refused to provide services except on an emergency basis. The Federal Trade Commission
investigated, alleged that the College had sponsored a boycott, and offered to settle with a consent order.
The College accepted the terms of the order, which bars the College from leading subsequent boycotts and
requires the College to pay a $300,000 fine.20

Notwithstanding the foregoing precedents, however, a case currently before the full panel of the regional
National Labor Relations Board presents some hope for self-employed physicians. A union representing a
group of independent self-employed physicians in New Jersey who participate in an Amerihealth HMO
physician panel is arguing that the physicians are de facto employees of the HMO because the HMO (a Blue
Cross affiliate) controls material aspects of the physicians’ practices. Local 56 of the United Food and
Commercial Workers Union in New Jersey21 filed a petition with the National Labor Relations Board
asking to be certified as the exclusive bargaining agent for physician.

On January 8, 1998, the Regional Director of the National Labor Relations Board, Dorothy L.
Moore-Duncan, denied the union’s petition for certification of representation without a hearing on January
8, 1998.22 The regional director found that the weight of the evidence was substantially more in favor of
finding the physicians to be independent contractors than employees for purposes of the National Labor
Relations Act. She specifically noted both the fact that the contract stated that the physicians were
independent contractors and that the physicians have substantial contracts with and receive a substantial
portion of their income from other health plans.
                                      B of T Rep. 30 - A-99 -- page 31

To the surprise of many, in August 1998, the NLRB ruled that the regional director must grant the union a
hearing to determine whether in practice, Amerihealth exerts enough control over the physicians to warrant
their being considered employees entitled to collectively bargain. That hearing was held in November
1998, and as of March 1999, a decision had not been rendered. The consensus in the health law community
seems to be that Local 56 and the physicians face an uphill battle; nonetheless, if the regional NLRB should
rule in their favor it would give significant impetus to physicians wishing to balance the economic power of
health insurers. Regardless of the decision, it is likely that the losing side will continue to appeal and that
this case will remain in the spotlight.

In summary, under current law, self-employed physicians in independent practice do not qualify for the
labor exemption from the antitrust laws and do not qualify for the protection of the National Labor
Relations Act. They are classified as independent contractors, not employees. Therefore, they may not
engage in collective bargaining with health plans.

2. Exception to the Independent Contractor Rule. There are some occupations in which “non-employees”
have been allowed to engage in collective bargaining. Examples include truckers who own and drive their
vehicles,23 musicians,24 and screen directors.25 The occupations involved in these areas, however, are
generally not comparable to independent physicians. They involve workers who are frequently in an
employment relationship, but where some portion of the workers in the occupation operate as independent
contractors. The independent contractor relationship is generally closer to an employment relationship than
physicians because of a higher degree of control, the independent contractors tend to come to the place of
the party that hire them, and they tend to work for one person at time. The courts have allowed unions to
engage in collective bargaining on behalf of both the employed members of the occupational group and the
independent contractors.

The reason that this is permitted is to preserve the integrity of the collective bargaining on behalf of the
employed workers. If the independent contractors, who are in competition with the employed workers,
were excluded from the collective bargaining process, that could undermine the bargaining agreements
reached about pay and terms of employment. In other words, the courts allow this bargaining on behalf of
independent contractors not to protect the independent contractors, but to protect the members of the
occupation who are in fact employees. These kinds of conditions generally do not occur in physician
relationships with health plans and hospitals.

It may be that in the future there are large numbers of physicians who are employees, and that it may be
possible to demonstrate that a union must negotiate on behalf of both the employed and independent
physicians in order to protect the employed physicians. However, we have not yet reached that point.

3. The use of the messenger model by self employed physicians. The “messenger model” is the most
widely available means for independent physicians to engage jointly in a modicum of negotiating with a
health plan. Generally speaking, the Messenger Model is a means for a group of independent contractors to
negotiate in a legal manner with an entity that deals with each of them. The model is particularly applicable
to physicians because of the fragmented nature of their practices--especially when compared to the
increasingly consolidated insurance arena. The messenger model as outlined by the Federal Trade
Commission and Department of Justice is intended for use by self- employed physicians who wish to form
a network that can be marketed to payers. It would be illegal for the self-employed physicians to agree on
fees to charge and engage in joint negotiations with payers based on those agreements. That would
constitute price fixing, which is a criminal violation of the federal antitrust laws. The messenger model is
designed to allow self-employed physicians to market themselves as a network without engaging in price
fixing by agreeing among themselves about fee levels.
                                     B of T Rep. 30 - A-99 -- page 32

The messenger model is a process whereby providers can gather and present future fee-related information,
meaning fees and fee-related terms that providers are willing to accept, to purchasers and agree upon fees
with purchasers. It allows the physicians in the network to arrive at a fee schedule with payers without the
physicians agreeing among themselves about what fee schedule they will accept.

This is done by having a messenger manage a process whereby each of the physicians in the network arrive
at individual agreements with the payer as opposed to having a representative of the physicians negotiate a
fee schedule on behalf of all of the physicians. The process works as follows:

•       The messenger communicates with each physician individually about what fee-range the physician
        is willing to accept.

•       Each physician may give the messenger the prices and other terms that the physician is willing to

•       The messenger then aggregates the information obtained from each individual physician. In doing
        so, the messenger may develop a schedule showing what percentage of physicians in the network
        would accept offers at various fee levels. However, the messenger may not share this information
        with the physicians.

•       The messenger then presents the schedules to payers. Any payer may then make an offer to the
        physicians in the network. The offer is most likely to be in the form of a fee schedule.

•       The messenger may accept the offer on behalf of any physician who has given the messenger
        authority to accept offers within the fee range offered by the payer. The messenger may also accept
        offers on behalf of any physician that are better than any offer previously accepted by that
        physician. However, the messenger may not engage in any negotiations with the payer on behalf of
        the physicians.

•       Any offer that is not within the fee range authorized by a physician must be forwarded to that
        physician for acceptance or rejection.

•       The messenger may provide objective information to physicians in the network about a contract
        offer made by a payer, such as the meaning of terms and how the offer compares to offers made by
        other payers. However, the messenger may not give advice about whether to accept the offer or
        not, and physicians in the network may not communicate with each other about whether to accept a
        given offer or not. The messenger may not, directly or indirectly, lead or facilitate a boycott of a
        payer that is designed to influence the terms of dealing offered by the payer. After establishing
        whether a physician will accept the offer, that information is then communicated back to the payer.

As is apparent from a reading of the foregoing points, effective compliance with the messenger model is no
easy matter. Moreover, the government keeps a close eye on physicians employing this model. Indeed, the
DOJ’s complaint against the Federation of Physicians and Dentists shows the thin line that exists between
the messenger model and an illegal group boycott or conspiracy.

C. Resident Physicians

Resident physicians are graduates of medical school who are in a graduate medical education program
sponsored by a hospital or another institution in affiliation with a medical school. In the view of the AMA,
residents are employees of the hospital or institution sponsoring the residency program, and they are also
students. Because of their demanding working conditions and low pay, resident physicians have long been
                                      B of T Rep. 30 - A-99 -- page 33

interested in unions. The largest physician union, the Committee on Interns and Residents, specializes in
representing residents.

Currently there is renewed interest in unions among residents. They allege that hospitals are placing more
work demands on them that are unrelated to their education as part of cost-cutting efforts. Residents claim
that hospitals have reduced their non-professional staffs, especially at night, and that they are demanding
that residents perform many of the unskilled or menial tasks formerly handled by orderlies and other
non-professional staff. Residents claim that these demands detract from their education and that they place
unreasonable burdens on them.

The National Labor Relations Board has a long standing policy that resident physicians are students, not
employees, and therefore are not entitled to protection by the National Labor Relations Act.26 The
Committee on Interns and Residents has filed a representation petition on behalf of residents at Boston
Medical Center, which asks the National Labor Relations Board to revisit that policy, and hold that
residents are employees entitled to collectively bargain under federal law.27 This petition has attracted a lot
of attention among resident physicians and in the legal community, and a decision is expected in the near

In California and New York, state law allows residents employed by state institutions to organize collective
bargaining units.29 In addition to the resident unions organized under state laws, a number of institutions
with resident programs have voluntarily recognized resident organizations as the bargaining agents of
residents. In fact, the residents’ union at issue in the CIR petition mentioned above is voluntarily
recognized by the Boston Medical Center.

Generally speaking, no antitrust issues arise from the collective bargaining efforts of residents. In an
economic sense (even if not in the eyes of the NLRB), they are not actors independent of the hospitals, and
they are not in competition with other residents on an economic level. Consequently, they are not hindered
by any fears of antitrust liability.

D. Summary

Employed physicians generally fall within the labor exemption from the antitrust laws and may engage in
collective bargaining with employers. Whether or not employed physicians have the protection of the
National Labor Relations Act when they attempt to engage in collective bargaining depends on whether
they are classified as supervisory or non-supervisory employees.

Self-employed physicians in independent practice do not fall within the labor exemption from the antitrust
laws and are not entitled to the protection of the National Labor Relations Act. As a general matter, they
may not engage in collective bargaining with health plans. On a case by case basis, it is possible, albeit
unlikely, that some such physicians may be found to not be “independent contractors,” in which case they
could collectively bargain. More likely, the best route for such physicians, under current law, is to proceed
under a messenger model in negotiating with health plans--with the all important caveat that the
implementation of the model should be guided (and overseen) by experience antitrust counsel – or to pursue
more complex forms of integration.

Resident physicians, on the other hand, have little or no worry about antitrust exposure, due to the
dependent nature of their practice/education.

                                     B of T Rep. 30 - A-99 -- page 34

Despite the recent media attention, the number of unionized physicians remains small. According to AMA
information, there are 756,710 practicing physicians in the United States (that figure includes physicians in
residency).30 According to the Department for Professional Employees at the AFL-CIO, about 42,000
physicians are members of unions.31 Of the 42,000 physician union members, about 6,000 to 9,000 are
resident physicians employed at hospitals, and presumably a large number of the remaining members are
publicly-employed physicians who have been represented by unions for years.

A. What Type of Organizations may be Recognized as Unions?

Some physicians believe that a union affiliated with the AFL-CIO that has been certified to represent an
occupation in labor disputes can engage in collective bargaining on behalf of self-employed physicians in
independent practice. That is not the case. The ability of any group of individuals to fall within the labor
exemption and gain the protection of the National Labor Relations Act depends on the status of the
individuals, not on the status of the organization that seeks to represent them. Since under current law,
self-employed physicians in independent practice are independent contractors, not employees, no person or
entity can engage in collective bargaining on their behalf.

Unions and other organizations – including medical associations – may engage in collective bargaining on
behalf of employed non-supervisory physicians. In fact, a group of employees may form an independent
single employer bargaining unit without any outside affiliation, as with the physicians at Medical West
Associates in Massachusetts. To qualify for the ability to represent physicians in collective bargaining
under the protection of the National Labor Relations Act, the association must qualify as a “labor
organization” as defined by that act and be certified by the National Labor Relations Board.

Under the National Labor Relations Act, a “labor organization” is defined as any group, agency, committee,
panel, or plan in which employees, as defined in the National Labor Relations Act, participate, and which is
established at least partially for the purpose of dealing with the employer concerning grievances, conflicts,
wages, rates of pay, hours, or other conditions of work. An entity does not have to have a formal internal
structure to constitute a labor organization under the Act.

Therefore, it is possible for a medical society to become certified under the NLRA to act as a collective
bargaining agent on behalf of the employees of a given employer. Some medical societies are exploring
this option. However, there are a number of legal issues that must be addressed, including potential
conflicts of interest that might arise, and possible issues relating to the tax-exempt status of a medical
society. One option may be to form a separate organization to act as the union.
                                     B of T Rep. 30 - A-99 -- page 35

B. Physician Unions

The major organizations, which are discussed herein, essentially fall into two categories: Those historically
devoted to representing physicians, and large, AFL-CIO trade unions that are now extending their scope to
include physicians.

Physician unions are not a new phenomenon--they have existed for decades. For example, the Committee
of Interns and Residents (CIR), which primarily represents residents employed by hospitals, was founded in
1957. Of the two largest unions that represent exclusively practicing physicians, one, the Union of
American Physicians and Dentists (UPD), was founded in California in1972, and the other, the Federation
of Physicians and Dentists (FPD), was founded in Florida in 1981.

In fact, the 1970s were a period during which there was a substantial amount of interest among physicians
in unionization.32 At that time, regulations developed by the Medicare program to reduce costs were
beginning to have a substantial impact for the first time. Medicare used hospitals as a vehicle for
implementing regulations, and hospitals had to make demands on physicians in order to comply.
Physicians resented the intrusion of hospital management on their practices. In addition, in some parts of
the country, especially California, managed care began to become a significant factor in the market.
However, after a few years of intense interest and dialogue, interest among physicians in unions faded. Of
26 physician unions in existence in 1975, only two remain — the Union of Physicians and Dentists and the
Doctors Council of New York.33

The two primary unions that specialize in representing practicing physicians, UPD and FPD, engage in
collective bargaining for employed physicians, primarily publicly employed physicians.34 In addition, they
operate independent practice associations for self-employed physicians. The UPD is currently the largest
physician union, with about 5,000 members.35 According to its staff, about 55% of the members are
employed physicians (primarily publicly-employed) and about 45% are self-employed in independent
practice. Dues are $700 a year for employed physicians and $420 for self employed physicians. The
disparity is attributed to the fact that the union can engage in collective bargaining for the employed
physicians, but is barred by federal antitrust laws from bargaining on behalf of self-employed physicians.
Self-employed physicians also pay a one-time membership fee to become part of an IPA that is managed by
the union. The IPA claims that it has three million covered lives.

The FPD is the second largest physician union and has about 2500 members.36 FPD represents both
employed and self-employed physicians, and annual dues are $520. Among the employed physician
members are the physicians employed by the Thomas Davis Clinic in Tucson, Arizona, whose unionization
was recognized by the NLRB in 1997.

FPD is in the forefront of efforts to utilize the messenger model to negotiate contracts on behalf of
self-employed physicians. It has developed and employs an IPA to negotiate contracts using that
messenger model. In the past year, however, FPD has been in the unwelcome glare of the spotlight for its
implementation of the messenger model. It has claimed success in raising payment levels for
self-employed physicians participating in these IPAs. In response, certain payers complained that the union
was in fact engaging in price-fixing, and the United States Department of Justice began an investigation of
FPD activities in Connecticut, Delaware, Florida, and Ohio. In July 1997, DOJ filed suit alleging that in
Delaware FPD is, in fact, engaging in price-fixing and signaling physicians to boycott payers.37 FPD claims
that it has been complying with the guidelines for the messenger model.38 The investigations in the other
three states are ongoing.39

The third largest physician union is the Doctors Council of New York (DCNY),40 which represents 3,300
attending physicians, dentists, podiatrists, and veterinarians employed by New York City agencies,
                                     B of T Rep. 30 - A-99 -- page 36

hospitals, and clinics. In 1991, this union led a strike at New York’s Woodhull Medical Center to prevent
layoffs of hospital personnel and to restore certain services. A settlement was reached. At one time DCNY
represented 10,000 physicians in six states, but halted activities outside of New York when the Federal
Trade Commission warned of possible antitrust violations. However, according to an article in the
November, 1996 Crain’s New York Business, DCNY plans to recruit members more aggressively and has
started meeting with group practices in New York City.

While the foregoing unions devote their attention to practicing physicians, there are also two substantial
unions of resident physicians. The largest is the Committee on Interns and Residents (CIR), which
represents 5,000-7,000 residents at about 50 hospitals.41 CIR organizes residents in collective bargaining
units in those states that permit such activity. It has lead strikes and engaged in collective bargaining on
behalf of those residents. CIR also organizes bargaining units that are voluntarily recognized by residency
program. As noted above, CIR has filed a petition with the National Labor Relations Board to certify a
residents’ union in Massachusetts.42 The other major union of residents is the California Association of
Interns and Residents, which has 1,000-2,000 members.43

C. Traditional Trade Unions

In addition to the more or less exclusively physician unions, traditional trade unions have begun to target
physicians, especially self-employed physicians, for membership. These unions are aware that the antitrust
laws bar them from engaging in collective bargaining on behalf of self-employed physicians. With some
exceptions, the unions do not attempt to mislead the physicians into believing that they can bargain for
them. Instead, they emphasize that they are aggressive advocates who can help physicians at the local level.
They highlight their affiliation with the AFL-CIO, and the lobbying clout in Washington and state capitols
that the AFL-CIO has garnered. Some observers note that because unions have often been on the opposite
side on issues critical to physicians, such as tort reform, the advocacy angle may have limited appeal to
many physicians.

The unions also emphasize that AFL-CIO affiliated unions control many self-funded health plans organized
under the Employees Retirement Income Security Act (ERISA), and that AFL-CIO affiliated unions
negotiate collective bargaining agreements with employers that control many other ERISA plans.
Notwithstanding ERISA’s bars on self-dealing and its imposition of high fiduciary standards, they state or
imply that this influence over self-funded plans can benefit physicians. To date, it is unclear whether the
unions have gained any concessions for physicians. Finally, they promise that they will work to obtain an
exemption from federal antitrust laws to allow self-employed physicians to bargain

The three major AFL-CIO unions to move into the physician field are the Office Professional Employees
International Union (OPEIU),44 the Service Employees International Union (SEIU),45 and the American
Federation of State, County, and Municipal Employees (AFSCME). To facilitate their entry in to this
market, AFSCME and SEIU have affiliated with existing physician unions, AFSCME with UPD and FPD,
and SEIU with CIR.

Of these three unions OPEIU has had the most reported success to date. It has formed an affiliation with the
American Podiatric Medical Association, and has formed the First National Guild for Providers of the
Lower Extremities. State chapters of the Guild have been formed in Pennsylvania, California, Michigan,
and New Hampshire, and expected to form chapters in at least three other states. OPEIU expects to enroll
10,000 out of the nation’s 14,000 podiatrists. OPEIU also is targeting allopathic physicians for

OPEIU does not plan to engage in collective bargaining on behalf of self-employed podiatrists or
physicians. This fact was key to a finding by the FTC that OPEIU was not in violation of the antitrust
                                     B of T Rep. 30 - A-99 -- page 37

laws.46 To attract members, it emphasizes its relationship with the AFL-CIO and the influence of that
organization in the Democratic Party, and claims that it will be an effective lobbyist. It also emphasizes its
relationship with union sponsored and Taft-Hartley health plans through the AFL-CIO, and its influence
over the health benefits plans of large, self funded employers through collective bargaining agreements
negotiated by other AFL-CIO unions. OPEIU hopes to assure coverage for podiatry services through these

Another major union that seeks to represent physicians is SEIU, which has 1.2 million members
nationwide, of whom about 600,000 are health care workers. SEIU’s organizing activities with hospital
workers may have led to its interest in representing physicians and it currently represents some physicians
employed by public hospitals. SEIU is the exclusive bargaining agent for the employed physicians at
Medalia HealthCare in Seattle, Washington whose bargaining unit was recognized by the NLRB.
Moreover, in the past year, SEIU has successfully pursued formal affiliations with the Committee on
Interns and Residents and the United Salaried Physicians and Dentists, which represents about 700
physicians in the New York City area.


The current physician interest in unions is an understandable reaction to the powerful positions some health
plans have staked out in many markets and the heavy-handed tactics that often follow. Because of the
pressures facing physicians in the current environment, the AMA is working in partnership with state,
county, and specialty societies to reinforce its traditional function of aggressive advocacy on behalf of
physicians and patients before the legislatures and the courts and to expand its aggressive advocacy in the
private sector, within the limits of the antitrust laws, both with health plans directly and with the public.
                                     B of T Rep. 30 - A-99 -- page 38


         1. Even though they are “employees” as a matter of corporate law, both the AMA and the
discussion in this Article characterize individuals who are major shareholders and have substantial
influence in the management of a group practice to be “owners” of that group and thereby be
“self-employed.” For the purposes of the AMA statistics, a “major shareholder” includes a physician but
who has the ability and opportunity to exert a meaningful role in the management of the group practice,
regardless of the percentage of shares that he owns. An interesting question is whether physicians who are
employees or shareholders of entities that are designed to circumvent the bar on the corporate practice of
medicine (such as medical service corporations established by physician practice management companies
or hospitals) are “employees” for purposes of federal antitrust and labor laws. The physicians selling their
practices may get non-controlling shares in the medical service corporation and enter into an employment
contract or a long-term independent contractor arrangement with it. The relationship between the
physicians and the medical service corporation and the controlling entity is confusing, and is subject to a
high degree of variation. It will be interesting to see whether in light of the favorable NLRB rulings,
physician practice management companies, hospitals and other institutions attempt to structure these
relationships to avoid jurisdiction of the labor laws.

        2. See Daniel J. Gifford, “Redefining the Antitrust Labor Exemption,” 72 Minn. L. Rev. 1379
(1988), for a discussion of the conflict between the purposes of the federal antitrust laws and the federal
labor laws.

        3. Clayton Act § 6, 15 U.S.C. § 17.

        4. 29 U.S.C. § 52.

        5. 29 U.S.C. § 101-115.

        7. 29 U.S.C. § 151 et seq.

        8. 29 U.S.C. § 401 et seq.

       9. See Earl W. Kintner and Joseph P. Bauer, Federal Antitrust Laws, Vol. IX § 72.7 at pp. 311-324,
Anderson Publishing Co. (1989).

       10. More information about employed physicians, including the survey techniques and other
information about employed physicians, can be obtained by contacting Phillip Kletke at the American
Medical Association, 515 N. State Street, Chicago, Illinois 60610. Mr. Kletke’s telephone number is (312)

        11. Unions have played an important role in collective bargaining on behalf of publicly employed
physicians for years. These physicians generally are organized under state labor laws that allow state
employees to form labor unions.

       12. Supervisory employees do not qualify for the protection of the National Labor Relations Act.
29 U.S.C. § 152(3).

        13. See footnote 1, supra.
                                     B of T Rep. 30 - A-99 -- page 39

          14. (see Physicians Find Power in Unions, Modern Health Care, October 6, 1997.)

        15. The participation of physicians in unions is well accepted by public employers, particularly
where the bargaining unit covers many other occupations.

       16. Current policy of the United States Department of Justice (DOJ) and the Federal Trade
Commission (FTC) is found in the “Statements of Antitrust Enforcement Policy in Health Care,” issued by
the DOJ and the FTC in August of 1996.

         17. If Aetna’s acquisition of Prudential Health Care is approved, Aetna will be the largest health
plan in the country, providing health care services to 10% of the United States. (“Aetna to Acquire
Prudential Health Unit,” Wall Street Journal, December 11, 1998.)

          18. 322 U.S. 111 (1944).

        19. The term employee “shall not include…any individual having the status of an independent
contractor…” 29 U.S.C. § 152(3).

          20. College of Physicians-Surgeons Puerto Rico, 5 Trade Reg. Rep. [CCH] § 335 (10/2/97).

          21. The Local 56 Web Site is at

          22. Docket No. 4-RC-19260, decided 1/8/98.

          23. Local 24, Int’l Brotherhood of Teamsters v. Oliver, 358 U.S. 283 (1959).

          24. American Federation of Musicians v. Carroll, 391 U.S. 99 (1968).

        25. Home Box Office Inc. v. Directors’ Guild of America, Inc., 531 F. Supp. 578 (S.D.N.Y. 1982),
affd, 708 F.2d95 (2d Cir. 1983).

          26. Cedars-Sinai Medical Center and Cedars Sinai Housestaff Association, 223 N.L.R.B. 251

       27. In the Matter of Boston Medical Center and Committee of Interns and Residents, Case No.
1-RC-20574, currently pending before the National Labor Relations Board.

        28. While the AMA believes that resident physicians qualify as employees for purposes of the
National Labor Relations Act, it is concerned about the potential for residency programs, which should be
primarily of an educational nature, to become mandatory subjects of collective bargaining. Therefore, it is
attempting to persuade the Accreditation Council for Graduate Medical Education, a not for profit
association that accredits almost all residency programs in the United States, to adopt a requirement that
residency programs allow residents to form organizations for their mutual benefit and protection and
engage in good faith negotiations with those organizations. Such organizations would be barred from
engaging in strikes and could not force any resident to participate who did not wish to be involved.

         29. See University of California v. Public Employment Relations Board, 715 P.2d 590 (1986). For
a discussion of state laws that allow residents to form unions under state labor laws applicable to employees
of state and local units of government, see Daniel W. Srsic, “Collective Bargaining by Physicians in the
United States and Canada,” 15 Comp. Lab. L. 89, 105-107 (1993).
                                     B of T Rep. 30 - A-99 -- page 40

        30. For information about the manner in which this statistic was gathered, or for breakdowns,
contact Kevin Kenward of the American Medical Association, 515 N. State Street, Chicago, Illinois 60610.
Mr. Kenward’s telephone number is (312) 464-4919.

        31. The unions included in the AFL-CIO’s count include the Federation of Physicians and
Dentists, which is affiliated with the American Federation of State, County, and Municipal Employees
(AFSCME), the Union of Physicians and Dentists, also affiliated with AFSCME, the Federation of Nurses
and Health Professionals, which is a division of the American Federation of Teachers, Physicians Union of
New Jersey, which is affiliated with the International Association of Machinists, the National Guild for
Medical Providers, which is affiliated with the Office of Professional Employees International Union, and
the Committee on Interns and Residents, which is affiliated with Service Employees International Union.
The AFL-CIO Department for Professional Employees is located at 815 16th Street, NW, Washington, DC
20006, and its phone number is (202) 638-0230, and its E-mail is The AMA, relying
on press reports, had previously estimated that no more than 20,000 physicians were union members. The
AMA is now relying upon the AFL-CIO count.

        32. For an account of this era, see Grace Budrys, When Doctors Join Unions, Cornell University
Press (1997).

       33. Id. at 16-17. The Doctors Council of New York represents primarily salaried physicians
employed by health facilities operated by the City and County of New York.

         34. Although the AMA considers residents to be “employees,” because they are also students they
are considered in a separate category for the purposes of this analysis. As noted above, the Committee on
Interns and Residents has represented residents in collective bargaining for many years.

         35. UPD is affiliated with the American Federation of State, County, and Municipal Employees
(AFSCME), a very substantial union affiliated with the AFL-CIO. AFSCME apparently became interested
in representing physicians because it has organized unions of various workers at hospitals owned by state or
local units of government. Rules of the National Labor Relations Board allow physicians to be separate
bargaining units at hospitals. 29 C.F.R. § 103.30. The UPD Web Site is at

       36. FPD is affiliated with the National Union of Hospital and Health Care Employees, the
American Federation of State, County, and Municipal Employees (AFSCME) and the AFL-CIO. The FPD
Web Site is

        37. Sarah A. Klein, “Physicians’ Union Feels Antitrust Scrutiny,” American Medical News, March
9, 1998 at 3.

       38. Guidelines for the legal operation of messenger model networks are set forth in the “Statements
of Antitrust Enforcement Policy in Health Care,” issued by the United States Department of Justice and the
Federal Trade Commission in August of 1996, at pgs. 125-127 and 138-140.

        39. Sarah A. Klein, “Physicians’ Union Feels Antitrust Scrutiny,” American Medical News, March
9, 1998 at 3.

        40. The Doctors Council of New York Web Site is

        41. CIR’s Web Site is
                                     B of T Rep. 30 - A-99 -- page 41

        42. See footnote 2, supra.

         43. It is affiliated with the Hospital and Health Care Workers Union Local 250 based in Oakland,
California, which is in turn affiliated with SEIU. No Web Site was found for this union, but there is a Web
Site for an affiliate, UCAIR, University of California Association of Interns and Residents, at

        44. The OPEIU Web Site is at

        45. The SEIU Web Site is at

        46. See letter of Robert F. Liebenluft, Assistant Director for Health Care, Bureau of Competition,
Federal Trade Commission of Melvin S. Schwarzwald, dated Ma 22, 1997.
                                     B of T Rep. 30 - A-99 -- page 42

                                                                                        APPENDIX B

                                        GLOSSARY OF TERMS

The following glossary of terms covers many of the legal and technical distinctions that relate to the
proposal for a collective bargaining unit and topics related to physician negotiations.
                                      B of T Rep. 30 - A-99 -- page 43


AMA Advocacy Agenda: Broad, multifaceted approach to provide physicians with on-site assistance and
tools to help them address professional issues and concerns with entities (health plans, employers,
hospitals, etc.) that now have substantial control over the healthcare delivery system.

Antitrust Violation: Conduct that unreasonably restrains trade or has the purpose or effect of
monopolizing competition. For this report, antitrust issues generally refer to agreements to fix prices,
boycott payers, etc.

Bargaining Unit: The National Labor Relations Act does not specifically define “bargaining unit.”
Section 9(a) of the Act states only that the employees may select an exclusive bargaining representative in a
“unit appropriate for such purposes.” The National Labor Relations Board has expanded on this minimal
statutory pronouncement to provide that a bargaining unit is a group of two or more employees aggregated
for the assertion of organizational rights or for collective bargaining. The basic test for determining what is
an “appropriate” unit is whether the employees share a “community of interests.” Under this test the Board
looks at five factors: (1) similarity of duties, skills, interests, and working conditions of the employees, (2)
organizational structure of the employer, (3) desires of the employees, (4) extent and type of union
organization of the employees, and (5) bargaining history in the industry.

        Steps To Develop A Physician Bargaining Unit

        Fact Finding And Analysis: Gather information about the physician group including size,
        demographics, major problems, previous efforts to rectify problems, previous labor union activity,
        level of dissatisfaction, and other pertinent information and determine the eligibility, advisability,
        and likelihood of success of attempting to form a local bargaining unit.

        Organizing: Stage an informational campaign regarding the reasons and benefits of forming a
        bargaining unit while collecting signed cards from at least 50-66% of the group indicating interest
        in the unit. After completion of card signing, continue with an intense informational campaign
        culminating in a NLRB sponsored election needing a majority to become certified as a bargaining

        Contract Negotiations: Conduct good faith negotiations with the administration resulting in a
        contract ultimately agreed to and signed by both parties. A bargaining unit is only deemed
        successful, functional and dues collecting following the joint approval of formal labor contract.

        Contract Administration: Oversee the administration of the contract and take appropriate action
        should employer undertake actions in violation of the contract.

Campbell Bill: Federal legislation, HR 1304, introduced this year by Representative Tom Campbell
(R-CA). This bill would create an exemption from antitrust laws for self-employed and small groups of
physicians to collectively negotiate with health plans.
                                               B of T Rep. 30 - A-99 -- page 44

Collective Bargaining/Negotiate*: To bargain collectively is the performance of the mutual obligation of
the employer and the representative of the employees to meet at reasonable times and confer in good faith
with respect to wages, hours, and other terms and conditions of employment, or the negotiation of an
agreement, or any question arising thereunder, and the execution of a written contract incorporating any
agreement reached if requested by either party, but such obligation does not compel either party to agree to
a proposal or require the making of a concession. 29 U.S.C. 158(d).

The NLRB has promulgated formal rules specifically defining appropriate units only with regard to “acute
care hospitals.” 29 C.F.R. § 130.30 Acute care hospitals are those in which (1) the average patient stay is
less than 30 days or (2) over 50 percent of all patients are admitted to units in which the average length of
stay is less than 30 days. The Board rule establishes eight units that are appropriate in acute care facilities:
(1) physicians, (2) registered nurses, (3) all other professionals, (4) technical employees, (5) skilled
maintenance employees, (6) business-office clericals, (7) guards, and (8) all other non-professionals.

          Good Faith: The term “good faith” has been further defined as “an obligation to participate
          actively in the deliberations so as to indicate a present intention to find a basis for agreement.”
          NLRB v. Montgomery Ward & Co. 133 F.2d 676 (9th Cir. 1958). Except in cases where the
          conduct fails to meet the minimum obligations imposed by law or constitutes an outright refusal to
          bargain, relevant facts and the “totality of the circumstances” must be studied to determine whether
          the employer or the union is bargaining in good or bad faith.

          Mandatory Subjects of Bargaining: The Act requires employers to bargain over wages, hours,
          and working conditions. Various Board pronouncements have elaborated upon each of these terms.
          Wages include but are not limited to the basic hourly rates of pay, overtime, bonuses, incentive
          plans, shift differentials, pension plans, health and welfare plans, profit sharing plans, paid
          vacation, paid holidays, call-in pay, severance pay, employer-provided living accommodations,
          meals and services. Hours include but are not limited to the hours of work each day, the days that
          will be worked each week, specific employee work schedules, overtime requirement, break periods
          and lunch periods. Working conditions is the generic catchall that defies specific definition.
          Examples include grievance procedures, layoff and recalls, discharge, workloads, sick leave, work
          rules, use of bulletin boards, change of payment schedules, definition of bargaining unit work,
          allocation of duties and assignments, seniority, promotions, transfers, union security, management
          rights clauses, employee drug and alcohol testing, safety rules, no strike/no lockout clauses,
          non-discrimination provisions, change in operating procedures, relocation of work, cessation of

          Permissive Subjects of Bargaining: The Board has recognized certain subjects that are not
          mandatory but which the parties can bargain over if they choose. Examples of items which are
          permissive include: the definition of the bargaining unit, settlement of unfair labor practice charges,
          union label, internal union affairs and interest arbitration.

* The phrase “collective negotiations” has been used with some frequency during informal discussions. This is not, however, a term of art
  which is defined by the law or by the NLRB.
                                      B of T Rep. 30 - A-99 -- page 45

        Prohibited Subjects of Bargaining: Employers and labor organizations are prohibited from
        bargaining and agreeing to certain subjects. The subjects include: certain types of closed
        shop agreements, agreements which require the parties to discriminate against certain
        protected classes (e.g. race), agreements which require employers to discriminate in favor of
        union members, agreements which require an employer to impose certain wages on non-unit

Collective Bargaining Unit (CBU): Not a legal term but used by AMA to denote a national labor
organization formed under the National Labor Relations Act (NLRA) under which eligible physicians
(employed) can receive the benefits and protections of the NLRA. The CBU would also provide an
organizational structure for self-employed physicians upon the enactment of the Campbell Bill and in states
where state action doctrine legislation would allow.

Department of Justice (DOJ): The “law firm” for the United States that is one of two government
agencies that enforces federal antitrust laws.

Employees and Management

        Employee: The term “employee” shall include any employee, and shall not be limited to the
        employees of a particular employer, unless the Act explicitly states otherwise, and shall include any
        individual whose work has ceased a consequence, of, or in connection with, any current labor
        dispute or because of any unfair labor practice, and who has not obtained any other regular or
        substantially equivalent employment, but shall not include any individual employed as an
        agricultural laborer, or in the domestic service of any family or person at his home, or any
        individual employed by his parent or spouse, or any individual having the status of an independent
        contractor, or any individual employed as supervisor, or any individual employed by an employer
        subject to the Railway Labor Act, as amended from time to time, or by any other person who is not
        an employer as herein defined. 29 U.S.C. § 152(3).

        Supervisor: The term ‘supervisor’ means any individual having authority, in the interest of the
        employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline
        other employees, or responsibly to direct them or to adjust their grievances, or effectively to
        recommend such action, if in connection with the foregoing the exercise of such authority is not of
        a merely routine or clerical nature, but requires the use of independent judgment. 29 U.S.C. §

        Managerial Employees: Like supervisors, managerial employees are excluded from the
        definition of employee under the Act and, thus, may not become part of a recognized bargaining
        unit. Managerial employees are those who formulate, determine, and effectuate employer policies
        and those whose positions with the employer presents a potential conflict of interest between the
        employer and the employees. An attending physician in a hospital has been found to be a
        non-managerial employee while doctors employed by an HMO who participated on committees
        dealing with issues at the core of the HMO’s operations were found to be managerial. Joint
        Diseases, North General Hospital, 288 NLRB 291, rev. den. 875 F.2d 350 (D.C.Cir. 1989); FHP.
        Inc., 274 NLRB 1141 (1985).
                                      B of T Rep. 30 - A-99 -- page 46

Employer: The term ‘employer’ includes any person acting as an agent of an employer, directly or
indirectly, but shall not include the United States or any wholly owned Government corporation, or any
Federal Reserve Bank, or any State or political subdivision thereof, or any person subject to the Railway
Reserve Bank, or any State or political subdivision thereof, or any person subject top the Railway Labor Act
[45 USC 151 et seq.], as amended from time to time, or any labor organization (other than when acting as an
employer), or anyone acting in the capacity of officer or agent of such labor organization. 29 U.S.C. §

Federal Trade Commission (FTC): An independent agency of the Executive Branch of the Government
whose five members, appointed by the President, enforce federal antitrust laws. It also has authority to
enforce numerous consumer protection laws.

Guild: Historically, an association of skilled craftsmen, usually with an apprenticeship and performance
standards as a condition to participation. Many “guilds,” particularly those who represent professionals, are
“labor organizations” but not all, and many labor organizations do not call themselves “guilds”.

Labor Organization: The term ‘labor organization’ means any organization of any kind, or any agency or
employer representation committee or plan, in which employees participated and which exists for the
purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates
of pay, hours of employment, or conditions of work. 29 U.S.C. § 152(5).

Messenger Model: The “messenger model” refers to a model for independent physicians to jointly market
their services to payers through a third-party “messenger” without violating the antitrust laws. The
messenger model does not permit collective negotiations by physicians on fees. The model is a process
whereby each of the physicians in the network arrives at an individual agreement with a payer through a
common messenger. The messenger communicates with each physician individually about what fee
schedule the physician in willing to accept as well as other terms. The messenger aggregates the
information from the physicians and may develop a fee schedule to show the payer what percentage of
physicians in the network would accept various fee levels. However, the messenger may not share this info
with the physicians. The payor may then make an offer to the physicians in the network. The messenger
may accept the offer on behalf of any physician who has given the messenger authority to accept offers
within the fee range offered by the payor. If the offer is not within the fee range authorized by an individual
physician, it must be forwarded to the physician for acceptance or rejection. The messenger may provide
objective information to the physicians in the network about a contract offer, but may not give advice
whether or not to accept an offer.

National Labor Relations Act (NLRA): Also known as the Wagner Act, this Act establishes an
exemption to antitrust laws for labor organizations acting on behalf of employees to collectively bargain
and created the National Labor Relations Board to interpret labor laws.

National Labor Relations Board (NLRB): Independent agency of the executive branch with five
members, appointed by the President, to interpret national labor laws.
                                     B of T Rep. 30 - A-99 -- page 47

Negotiating Unit: Not defined by the National Labor Relations Board or law, this generic term can be used
to describe any body involved in facilitating settlements through conference, discussion or compromise.
Per this definition, a negotiating unit could include labor organizations, independent housestaff
organizations, highly integrated physician groups or entities involved in assisting physicians in this
negotiating process. This assistance could take such forms as providing educational materials on issues of
concern, engaging in research or fact finding missions, provide training in negotiating techniques or even
assisting groups of physicians in forming recognized labor organizations. Because of the generic nature of
this definition, it is suggested that additional adjectives or descriptive phrases be used in conjunction with
this term to clarify intent.

Physician Classification for Collective Negotiations

        Self-employed: A physician who practices either independently of an employer or as part of a
        group in which he/she has ownership.

        Employed: See “Employee”.

        Resident: A physician in post graduate training usually recognized by the Accreditation Council
        for Graduate Medical Education

State Action Doctrine: The state action doctrine provides an exemption to the antitrust laws for activities
taken pursuant to clearly and affirmatively expressed state policy and which are subject to active state
supervision. The state must clearly intend to supplant competition with In the health care arena, the state
action doctrine has been used by states in certificate of public advantage legislation to protects the
collaborative activities of rural public hospital districts. The AMA’s model “state action doctrine”
legislation would permit collective negotiations among independent physicians in certain circumstances,
and under the direct and active supervision of an appropriate state agency.

Strike: A work stoppage by a body of workers to gain compliance with demands made on an employer

Supervisor or Supervisory: See “Employees and Management” above.

Trade Union: A non-legal term used to identify labor organizations representing unskilled and
semi-skilled laborers.
                                    B of T Rep. 30 - A-99 -- page 48

Union: The National Labor Relations Act does not specifically define “union.” The then Chief Justice of
the U.S. Supreme Court, William H. Taft, described in American Steel Foundries v. Tri-City Central Trades
Council, 257 U.S. 184, 209 (1921), the essential components of a “union”:

        Union was essential to give laborers opportunity to deal on equality with their employer. They
        united to exert influence upon him and to leave him in a body in order by this inconvenience to
        induce him to make better terms with them. They were withholding their labor of economic value
        to make them pay what they thought it was worth. The strike became a lawful instrument in a
        lawful economic struggle or competition between employer and employees as to the share or
        division between them of the joint product of labor and capital.

        A “union,” as described by Chief Justice Taft is always a “labor organization” as that term is
        defined by the NLRA, although not all labor organizations call themselves “unions”.
      B of T Rep. 30 - A-99 -- page 49

                                         APPENDIX C

                                       B of T Rep. 30 - A-99 -- page 50

          1998 Distribution of Patient Care Physicians
                     by Employment Status
            Patient Care MDs

                              Non-fed Post-GME

16,947      Non-Fed GME                        Non-fed Post GME MDs
(2.7%)         95,808
                                                              Self-employed MDs
                                             Institutional Employees

               Institutional Employees                                             Employees of
                                                                                  MD-owned groups
                            Med Schools & Univ’s                                      47,731
             Hospitals             36,797                                             (9.4%)
              32,720              (27.2%)
             (24.2%)                                                  State & Local Govt.
                                    Other Employers                          13,614
                                         35,588                             (10.1%)

    9,925        Ambulatory sites
   (7.3%)            6,500

                                                       Prepared by the AMA Center for Health Policy Research
                      B of T Rep. 30 - A-99 -- page 51

       1998 Distribution of the Practice Sizes
          of Self-employed Physicians and
of Physicians Employed in Physician-owned Groups

                            S elf E mp loyed M D s


    20%                          14.9%     14.5%

                                                          2.0%        2.0%
          1       2 to 4       5 to 9    1 0 to 4 9    5 0 to 9 9    100+
                            # of MDs in Practice

                       E mp loyees of M D -ow n ed G rou p s
                   27.1%                    26.3%


          2.4%                                             4.3%

              1    2 to 4       5 to 9    1 0 to 4 9    5 0 to 9 9   100+
                            # of MDs in Practice

                                         Prepared by the AMA Center for Health Policy Research
                                                                 AMA PRIVATE SECTOR ADVOCACY
                                                                       GLOBAL STRATEGY
The primary mission of the AMA’s Private Sector Advocacy (PSA) initiative is to level the playing field for physicians and their patients with
health care organizations. In coordination with state, local, and specialty societies and other units of the AMA, a global strategy is being
pursued that addresses the marketplace issues of all physicians regardless of their mode of practice and includes deploying multi-disciplinary
Rapid Response Teams (RRTs).

Objectives                                     Self-Employed Physician                           Employed Physician                             Resident Physician

Expose and eliminate abusive and unfair           Develop tools to assist physicians in            Develop, maintain and distribute model        Develop, maintain and distribute a
contracting provisions and management              their practices (“AMA Model Medical               employment contract                            model organization structure for
practices                                          Services Agreement”)                                                                            residents (Independent Housestaff)

                                                                                                                                                                                                B of T Report 30 - A-99 -- page 54
                                                                                                     Engage employers of physicians to
                                                  Aggressively engage managed care                  address patient care and quality of life      With AMA staff and appropriate
                                                   plans to change provisions and behavior           issues                                         Federation organizations respond to
                                                  Provide on-site assistance (Rapid                Provide on-site assistance (RRTs)              resident patient care and quality of life
                                                   Response Teams (RRTs)                            Educate the public/employers on issues         issues
                                                  Educate the public/employers on issues
Strengthen the negotiating leverage for           Develop clinical integration models that         Develop alternative models for                Assist in the development of
physicians                                         meet antitrust laws                               resolving disputes                             independent housestaff organizations
                                                  Pass the Campbell Bill to reform                 Educate the public on issues                  Develop alternative models for
                                                   antitrust laws                                   Under consideration by the AMA is              resolving disputes
                                                  Support state action doctrine legislation         an AMA affiliated collective                  Educate the public on issues
                                                   for collective negotiations                       bargaining unit (CBU) under the               Under consideration by the AMA is an
                                                  Push revisions to restrictive FTC                 National Labor Relations Act                   AMA affiliated collective bargaining
                                                   antitrust guidelines                                                                             unit (CBU) if the National Labor
                                                  Educate the public/employers on issues                                                           Relations Board (NLRB) finds residents
                                                                                                                                                    are employees
Identify and respond to emerging trends and       Challenge mergers/acquisitions that           Same as Self-Employed Physician                Same as Self-Employed Physician
issues                                             create market dominance
                                                  Develop an early warning system and

                                                                                                                                                                                                APPENDIX D
                                                   response to bankruptcies
                                                  Improve market research and data base
                                                   on key issues
                                                  Educate the public/employers on issues
Work collaboratively with the Federation and      Coordinate all activities with state, local   Same as Self-Employed Physician                Same as Self-Employed Physician
patient advocacy groups                            and specialty societies
                                                  Develop input and feedback system
                                      B of T Rep. 30 - A-99 -- page 55

                                                                                          APPENDIX E

                             COLLECTIVE BARGAINING UNIT

At the 1998 Interim Meeting the House of Delegates instructed that the AMA conduct a risk assessment of
activities and proposals that have major implications for the organization or its members. Accordingly, The
Board of Trustees had a formal risk assessment be conducted of as a basis for its discussion of forming a
collective bargaining unit(s). The following is the result of that assessment.

As part of the risk assessment process, and in order to provide additional perspective, surveys were done of
both the public and the physicians to assist in assessing the impact of AMA developing a collective
bargaining unit for physicians. Findings from the surveys will be shared with the members of the House as
soon as they are complete.

It is important to emphasize that this risk analysis is aimed specifically at facilitating an informed decision
regarding the proposal to establish a collective bargaining unit (CBU). It does not assess the entire AMA
private sector advocacy program.

The analysis that follows is by topic. For each of the topics, as much input as possible has been compiled,
and both the potential risks and the potential benefits have been summarized. The discussion of the risks
and benefits attempts to provide context and a basis for interpretation. As is always the case, many
elements of risk and benefits assessment are, in the final analysis, subjective in nature. Consequently, a
clear “thumbs up vs. thumbs down” bottom line is, in many cases, not possible. In addition, there is risk and
benefit related both to doing the CBU as well as not doing the CBU. The analysis covers both

A danger in risk assessment is that it is always easier to identify potential problems than to forecast
or guarantee future success. This analysis attempts to provide some balance between potential risks
and potential benefits as well as identify mitigating arguments in both instances where it seems
appropriate. In some instances, an item may not be either a risk or a benefit per se, but just a factor
to be noted and considered. Many of the potential risks and benefits that have been identified as part
of this assessment are expressed as questions rather than statements because of the nature of the
topic and the lack of hard data to support competing views or suppositions. The purpose of the
analysis is as much to stimulate thought on these matters as to provide definitive judgements.

Likelihood of Success in Meeting the Key Objective

What is the likelihood of an AMA sponsored CBU being successful in “leveling the playing field”?

The “pro” arguments on this question include the following:

           An AMA sponsored CBU would be much more credible than a traditional labor organization in
            addressing patient oriented issues, and thus could be more effective in bargaining on key health
            related issues, especially those directly affecting patient care. It would have the opportunity to
            redefine the nature of what a bargaining unit can do and thus be the leader in that redefined
                                      B of T Rep. 30 - A-99 -- page 56

           The AMA is a physician organization, and therefore an AMA affiliated CBU would be more
            attractive to physicians. They would trust it to understand their issues better. In an activity
            where overall critical mass is a key factor in potential leverage and impact, this would be an
           This would be a dramatic move and make a big statement to physicians (even those not covered
            directly by the CBU) that the AMA has entered a new era of highly intensified advocacy, by
            adding a tool that is the most direct way to address the needs of employed physicians in
            situations where employers refuse to address issues. It would “jump start” AMA’s advocacy
            image and thereby add to the potential strength of the CBU itself. To not make some kind of
            dramatic “action statement” to America’s physicians in today’s challenging environment is in
            itself a risk.

The “con” arguments are as follows:

           The AMA is a newcomer to the field of collective negotiations and is restricting its potential
            effectiveness up front through the no strike clause. What makes the AMA think it will be able
            to compete with established labor organizations that have decades of experience, and why
            would those on the other side of the bargaining table take such a newcomer seriously?
           The effectiveness of the “labor movement” has been in decline for years. Why would we pick
            this arena as the place to expand our advocacy capability?
           Advocacy is a “ results oriented” type of activity. There is a risk that if the new CBU does not
            have several early and big wins, this particular advocacy approach will be discounted as
            “beyond AMA’s capability” and that could be worse than not having done it in the first place.

Another aspect of assessing the likelihood of success relates to scope. The current proposal focuses on
residents and some “employed” physicians under current legal definitions. The data indicate that about
50% of physicians are employed, and of these, some portion (one-third to one-half?) are non-supervisory.
While this is a substantial number of physicians, there are many more who would not be covered and would
remain frustrated by the current environment. What about the small, independent (i.e. self-employed)
practitioners who are the “victims” of the current environment who are most in need of help, but who would
not be helped directly by a CBU unless further antitrust relief is achieved (i.e. Campbell Bill)? Does
“success” require an assumption of expanded scope in the future or not? Under current expectations of
scope, will it meet the expectations of the principal groups that are asking for collective bargaining to be
made available?

Impact on Professionalism

Professionalism is a founding and enduring concept for the AMA, and is central to its vision and strategic
plan. Would the formation of CBU(s) enhance, detract from, or have no effect on the AMA as a
professional association, or on physicians as a “profession”? The CBU proposal explicitly rules out the
strike as a tool, declares the code of medical ethics as fundamental principles that must be honored. It
strongly states that never compromising patient interest, the most fundamental requirement of
professionalism, would be vigorously adhered to. These dimensions of the proposed CBU are there to
protect professionalism. If they are adhered to, and the interests of patients are placed in a paramount
position so that they are never compromised, professionalism would be protected.

A related concern is that under the antitrust laws one of the requirements is that “the labor organization must
be acting in its role as a “labor organization” acting in the interests of its members. This can be interpreted
as a direct threat to the requirement of professionalism that patient interest must always be subservient to
self-interest. However, the requirement of the Clayton Act is that “the goals” of the members must be
                                      B of T Rep. 30 - A-99 -- page 57

served, and if those goals are directed at patient care issues the requirements of professionalism may be
served by the CBU.

Given the stated intent that professionalism would be the framework within which the AMA-sponsored
CBU would function, the risk then comes down to whether these fundamental protections for
professionalism can be maintained in reality, and the likely impact this would have on effectiveness of the
CBU and on the image of the AMA as a professional association or of physicians as a profession.

With regard to effectiveness, under these rules what tools are available to the CBU, how effective would the
AMA’s CBU be in competition with more traditional CBU(s) that do not have these restrictions and can use
more aggressive tools? One argument is that the AMA would have a hard time competing in a “hardball”
situation. The counter argument is that physicians would not respect or affiliate with other CBU(s) that
refuse to prohibit strikes and do not conform to the code of medical ethics, and thus would have a
competitive advantage.

The other risk that is cited is whether the “no strike” and other restrictions can be assured for the longer
term. If a CBU is formed under these rules and proves to be not effective because of them, would pressure
build to change the rules? This is the “slippery slope” argument, which always involves speculation. It is a
concern that some hold as a serious question, however, because it puts in question how realistic it would be
to expect a CBU to be able to maintain professionalism in the face of increasingly hostile pressures.

With regard to the professionalism image of the AMA and physicians, the question is whether either would
be viewed as less “professional” if the AMA is affiliated with a CBU. The most important dimension of the
perception issue as it relates to professionalism is what impact an AMA sponsored CBU, or any other CBU,
would have on the perception of physicians by patients (in their role as patients, not as the general public).
If physicians are seen by their patients as “members of a union,” would it negatively affect the trust
relationship with their physician? If patients see their physicians as “members of a bargaining unit that
fights for patients’ interests,” would it strengthen the trust relationship? If either of these trust effects is
realized, then professionalism itself will be affected. It is a factor that cannot be adequately assessed but
which at least must be considered.

The bottom line on professionalism comes down to a question of whether there is or is not a fundamental
inconsistency between professionalism and being “a labor organization.” Some believe that these are
fundamentally different things conceptually, and one organization cannot be both at the same time. For
those who hold this view, the technical distinction between the AMA and the CBU (i.e. legally separate
organizations) is not a compelling distinction. Others believe that it may be conceptually possible to be
both, but that in reality it would be difficult, if not impossible, to maintain that compatibility in practice.
This view is based on the premise that a CBU, by its nature, would gravitate inexorably toward more
self-interest issues and increasingly aggressive tactics, and would incrementally move toward “strike-like”
behavior. Still others are very comfortable with the conceptual compatibility of professionalism and the
nature of the proposed CBU(s), and are confident in the AMA’s ability to stick to the rules. This view
supports the eventual transformation of the “traditional labor movement” based on the proposed design as
truly pioneering work. Unfortunately, there is no simple formula for selecting among these views. It
depends on what you believe and what you think the “realities” will produce.

Identity of physicians

There are two issues related to the identity of physicians that should be considered. One is that physicians
who bargain through a CBU may be viewed as less than professional. Will physicians be considered just
another traditional labor group like the autoworkers or the teamsters? One view of this is that they will be,
and that is undesirable. The other view is that the public will as easily make the distinction between a
                                      B of T Rep. 30 - A-99 -- page 58

physician and an autoworker as they do between a teamster and a teacher. It can be argued that if the CBU
is successful in addressing patient related concerns, it might actually enhance the public view of physicians.

The other identity issue relates to how physicians are perceived by those with whom they will be
bargaining. One of the key concerns of physicians is that managed care firms and hospitals have stopped
relating to them as real professionals, and consider them “just another factor of production in the medical
care machine.” If physicians bargain collectively through what are generally viewed as labor organization
approaches, will they, in effect, be acknowledging this status? In order to qualify under the labor laws,
physicians must not be considered “supervisors”, and thus may reinforce the view that they are just another
group in the generic category of “providers?” On the other hand, is that necessarily a problem if that is how
the people on the other side of the table think about them already? A dimension of this that bears thinking
about is whether physicians will begin to think of themselves in this way, and what the implications of that
may be to the future of medicine as a profession.

Identity of the AMA

Identity is a big part of the potential benefits and risks of the proposed CBU(s). A key assumption is that
even though the CBU is organizationally distinct from the AMA, it will be AMA sponsored and most
observers will not make the distinction between the AMA and the CBU. The major upside potential of the
CBU for AMA’s identity is with physicians who are feeling under siege and desperately want someone to
come to their aid with new approaches that hold some real promise for enhancing their position. The CBU
proposal, even though limited to certain groups, would send a strong signal that “the AMA is stepping up to
the plate in a new and tangible way.” The identity of the AMA as “a real player” would be enhanced among
those physicians.

The downside risk relates to the identity of the AMA as a professional association and of physicians as a
profession (see discussion of professionalism). Some will take the view that “a union is a union even if you
call it a CBU,” and the AMA cannot be both a professional association and a union at the same time. This
concern goes to the issue of perception. Even if the AMA can defend on intellectual grounds the CBU as
not being a threat to professionalism, if the perception is there the damage will follow. A complicating
factor here, of course, is that the perception “on the street” will likely be that “the AMA has become a
union.” Those who want to make this case will do so, and those who don’t will likely be silent. Hence, the
decision to go ahead with the CBU does carry with it a predictable risk of AMA’s identity as a professional
association being challenged.

There are counter arguments. One is that after an initial flurry of publicity, no one will really care. The dust
will settle and the perceptions of the AMA will turn out to be not significantly different than they are now.
The other counter argument is that establishing the CBU will be interpreted by some as simply “confirming
that the AMA has been a union all along, it just hasn’t called itself that until now.” This latter view, while
not very palatable, does mitigate the concern related to a CBU changing the AMA’s image.

A possibly relevant fact related to the image issue: in a 1998 Harris poll of 1,013 adults conducted to assess
the public’s trust in people in various professions, 83% indicated that they would trust “doctors” (ranked
third behind teachers and clergy) and 37% indicated that they would trust “trade union leaders” (ranked
eleventh). Based on this finding, a key to making sense out of the various arguments related to the impact
on image is the extent to which we think the CBU could be successfully distinguished from other labor
organizations as something different and special. It should be noted, however, that teachers were one of the
two groups rated above physicians in the findings, and teachers are one of the most prominent examples of
a profession whose professional association is a formal labor organization under the NLRA and bargains
collectively on behalf of its members.
                                     B of T Rep. 30 - A-99 -- page 59


The potential impact of any proposed new activity on future AMA membership is a major consideration.
The CBU proposal has potential positive and negative membership implications. The survey results may
provide helpful input on this. However, care should be exercised in interpreting the survey results, because
it is likely that many, possible most, respondents to the survey are not well versed in the many technical
distinctions and detailed considerations attendant to the AMA engaging in collective bargaining activity. In
addition to the survey work, a stakeholder analysis was conducted informally among the staff and
leadership of councils and sections which provides some insight into how certain subgroups of physicians
might view active pursuit of a CBU (see Appendix F). The stakeholder analysis indicates that:

   Residents and young physicians in particular (approximately 80,000 members in total) are likely to
    strongly favor collective bargaining as a tool that could give them an additional way of addressing
    needs and concerns.
   Feedback from the Medical Student Section, IMG Section, and Organized Medical Staff Section
    suggests that these constituency groups support the effort.
   The strongest opposition would be in the academic community. An assessment of opinions from the
    Council on Medical Education, Section on Medical Schools, and American Association of Medical
    Colleges indicates strong opposition to AMA organizing a CBU for residents (they did not express their
    views on collective bargaining for non-resident physicians). This assessment includes deans, other
    administrators, and general faculty. The survey results will shed additional light on this factor.

However, these stakeholder views do not translate automatically, one way or the other, to
membership impact for the AMA. In general, support or opposition to a particular AMA policy or action
has tended to have more impact in the form of members leaving than joining. If the AMA sponsors CBU(s),
those directly benefiting from the action might be inclined to express their appreciation by joining or
maintaining their membership in larger numbers. It is important to note that retention is the key
dimension of membership impact that is expected in relation to the CBU proposal. However, since
the CBU would be a separate organization whose membership cannot be legally linked directly to AMA
membership, and since the CBU will involve dues also, there is a price barrier in the form of the combined
dues of the CBU and AMA. With price sensitivity by physicians already an issue in today’s economic
climate, assuming short term upward movement of AMA membership in the absence of a more formal
membership linkage between the CBU and the AMA is difficult to defend. It should be noted, however,
that the price issue will be there regardless of whether the AMA sponsors CBU(s). If others provide these
services, they also will be competition for the dues dollars of physicians.

If we look beyond those physicians who would be directly affected by the CBU, we might project a positive
membership response as physicians see the AMA taking a strong and aggressive step to fortify physicians
against the pressures they are facing. This would be a response to the “step up and do something”
expectation of physicians. Here again, however, recent experience suggests caution in assuming
appreciation will translate to sending in a dues check.

If the AMA establishes a CBU for residents, it is very likely that there would be some membership fallout in
the academic community, at least in the short term and possibly longer. The strength of opposition, at least
among the academic leadership group, regarding the AMA supporting a CBU for residents is difficult to
overstate, at least based on the stakeholder analysis, and would likely translate into some membership loss.
How widespread and long-term it would be is hard to estimate. Although academia has not traditionally
been viewed as a stronghold of support for the AMA, the data indicate that actual membership market share
among academic physicians is not significantly different from overall market share.
                                      B of T Rep. 30 - A-99 -- page 60

However, it is equally likely that there would be membership fallout among residents and young physicians
if the AMA decides not to establish a CBU. These groups as well as the Organized Medical Staff Section
were among the key sponsors of the HOD actions that led to the CBU proposal, and they have substantial
expectations that the response will focus on how, not whether, this will be done.

Longer term membership impact could be different from the likely short-term impact, but there is no way of
specifically predicting that. If the AMA forms CBU(s) and they are very successful, it would enhance the
AMA’s advocacy profile, and more physicians may support the AMA as a result. The potential for this
would increase if the Campbell Bill is passed and more physicians (i.e. self-employed physicians) become
eligible for formal bargaining rights. For the longer term prospects, the question of linkage between the
CBUs and the AMA, either formally or by association in the minds of physicians, would continue to be a
key determining factor in this regard. In summary, overall membership impact is not a “take it to the bank”
proposition by any means at this point, either on the upside or the downside.


The five year financial projections call for expenses of $5.8 million to develop 35 CBU’s (10 for employed
physicians and 25 for resident physicians) covering approximately 12,500 physicians (2,000 employed
physicians and 10,500 resident physicians). Revenue of $6.6 million is projected from dues ($720 per year
from employed physicians and $300 per year from resident physicians). Expenses include an assumption of
a 50% success rate in forming CBU’s (i.e. one half of organizing attempts will be successful). If the whole
venture turned out to be not successful for some reason, that would be known by the end of year two, and
the sunk costs at that point are estimated at under $1.5 million.

Clearly, however, the primary reason for considering this proposal is not financial. The question is what the
subsidy tolerance for this activity is in relation to the non-financial benefits it could generate. In the early
stages of development, the CBU(s) will not have their own experienced staff and will have to rely on
outside expertise, making the costs somewhat higher. As the CBU(s) develop their own staff expertise,
these costs will come down.

The analysis of the likely membership impact does not suggest that the CBU venture should be relied on as
a source of increased net dues revenue, at least in the short term. Longer term impact on dues revenue
would depend on the relative success of the CBUs (both scope and impact), and on the AMA’s ability to
creatively translate that into membership impact in the absence of a formal linkage between CBU
membership and AMA membership.

The impact on non-dues revenue is highly uncertain. The AMA publishing staff have expressed a concern
that the potential negative reaction from the academic community could translate into a reduced flow of
high quality manuscripts for the AMA journals, since academia is the principal source. If this happens to
the point that advertisers become concerned, it could damage AMA’s competitive position in a tight
advertising market. If, as a result, readership scores dropped, the impact would be accentuated.


During the first five years, the linkage between the AMA and the CBU(s) would be close, and the legal
exposure of the CBU(s) would be shared by the AMA. It would be critical, therefore, that the CBU(s)
adhere strictly to the legal requirements under the NLRA. Subsequent to the initial five year period, the
AMA’s legal exposure would depend on how the formal linkage between the AMA and the CBU(s)
                                      B of T Rep. 30 - A-99 -- page 61

As legal questions surface which go beyond the labor law expertise directly available from the AMA’s
Office of General Counsel, appropriate outside expertise will be consulted.


The communications arena is where many believe some of the greatest challenges would manifest
themselves if the CBU proposal is approved and implemented. Many of the relevant points related to
communications impact in general are covered under the “identity” discussions above. There are two
principal challenges to a successful communications effort related to the CBU proposal. The first is to
make sure that the agendas of the CBU(s) really do maintain a critical focus on quality of care and
patient-physician relationship issues. This is not to the exclusion of physician interest issues, but the higher
ground issues must be in the lead, must be real, and must never be compromised. If this reality is not there,
no communications effort will make it appear to be. As discussed above, there is some concern that the
basic nature of a “labor organization” will tend to gravitate toward putting physician interest agendas in the
lead. The ability of the AMA sponsored CBU(s) to prevent this from happening would require pursuing the
CBU(s) as a “new model” of a labor organization that redefines and redirects traditional labor organization

It is very important to understand that the communications activities related to implementation of the CBU
proposal would have to be broad-based and diverse. The principal focus of this risk assessment is on the
constituencies within medicine, and on the general public perception. However, it is critical to understand
that keen interest in such an AMA initiative would include the business community in general, opinion
leaders throughout society, and a wide variety of other interests outside of health care. We would need to
make sure that there is in place a total communications strategy, based on careful market research with
many audiences, and which includes carefully developed, credible messages that can be consistently and
skillfully delivered.

The second communications challenge will be communicating the “new reality” described in the preceding
paragraph. Eventually, the “show me” test would be applied, but initially there would be a high level of
skepticism. The timing of this initiative, following two years of challenging coverage for the AMA, means
that we would be launching this effort in a climate that will not be inclined to give the AMA the benefit of
the doubt. Those who are most skeptical will be the most vocal, and others will be quiet and wait to see
what happens. Overcoming this initial negative coverage tendency will require very well thought out
messages, complete consistency, and thick skin in the early phases.

The AMA is in the process of implementing a communications program that positions the simple question:
“Is it good medicine?” as a key theme and criterion for assessing health policies, programs, and practices. It
is critical that the implementation of the collective bargaining activity and the new communications theme
be totally synchronous in every way – in substance, in implementation strategy, and in execution. If the
CBU reality is different (i.e., self-interest dominated), it will severely jeopardize the credibility of AMA’s
communications efforts.

Impact On Other AMA Activities

There are both positive and negative potential impacts of the CBU activity on other AMA activities. The
following are some of the more prominent areas of such impact.

Advocacy – The CBU proposal is designed as a new dimension of AMA’s broad based advocacy program,
and is obviously designed to complement and add to AMA’s overall advocacy impact. A possible risk
factor is whether other players in the advocacy arena (allies or opponents) would view the AMA differently
as a result of involvement in collective bargaining. For example, would Democrats tend to view AMA
                                        B of T Rep. 30 - A-99 -- page 62

more as a potential ally and Republicans view us as more of an opponent as a result of having what may be
seen as a “labor” affiliation? If either or both happens, it is good, bad, or just different? Would the addition
of a major new advocacy tool position the AMA as a more respected player in the advocacy arena? Would
it affect relationships with other private sector players such as business, consumer groups, and organized

Medical Education, Science, and Public Health – Given the predicted negative reaction of the academic
community to a CBU for residents, what, if any, spin-off impact would this have on participation in and
relationships around AMA’s education, science, and public health programs, especially related to the
activities of the Liaison Committee on Medical Education and the Accrediting Council on Graduate
Medical Education? Is there any way to predict or mitigate any such impact?

Ethics - The AMA ethics activities will also come into play if AMA pursues collective bargaining activity.
Inevitably, ethical considerations will surface that will have to be addressed quickly and thoroughly. In
addition, employees in the AMA’s Ethics Institute may feel that an AMA affiliation with a labor
organization may create a credibility issue related to their work.

Existing and Potential Business Ventures – As the AMA pursues increased non-dues revenue through
appropriate business ventures, it would have to consider the impact of its collective bargaining activities on
its business relationships. For example, how would this affect a business relationship with an insurance
company that might, in another context, be on the other side of the bargaining table from an AMA CBU?


This assessment would be incomplete without considering competitors. To some extent, this is covered
under “Prognosis” above. Clearly, the established labor organizations would be competition for any AMA
affiliated CBU(s), and the pros and cons of AMA being able to compete effectively with them is a factor
that must be considered and for which there must be a strategy if the decision is to go ahead.

Two other dimensions of competition should be noted. One is the interest that has been expressed by state
societies (see section II above). If their interest in collective bargaining is translated into action, will it be in
competition with the AMA or as partners? What is our level of expectation that we could make it a
partnership rather than a competitive situation? What are the implications of this for the AMA’s overall
relationships with the federation? Could the CBU activity be a basis for joint efforts within the federation,
or would it tend to be a divisive force?

The second issue is the potential for an AMA sponsored CBU itself to become a competitor with the AMA.
One of the concerns that has surfaced is what happens after five years if the CBU members voted in a totally
new Board that wanted much more independence from the AMA or wanted to pursue a different bargaining
philosophy that the AMA might take issue with? If the CBU spins off, will it become another one of the
various organizations that the AMA has had a hand in creating only to find itself competing with? What, if
any, safeguards can be built into the design to minimize this risk? If the AMA sponsors multiple CBU(s),
what if some spin off and others do not? What would this do to the “critical mass dimension” of being in the
collective bargaining arena? These are downstream risks, but should be considered in the design phase of
the work.


The AMA is a private employer that employs some physicians. Would AMA physician employees be
permitted to form or join a CBU? What impact, if any, would this have on the AMA as a workplace? What
if this extended to AMA employees in general in the form of a desire to collectively bargain with the AMA
                                     B of T Rep. 30 - A-99 -- page 63

on the grounds that if the AMA is supportive of collective bargaining by its members, why not also by its

Aside from the above specific questions, there is the general impact on employees of AMA sponsoring a
“labor organization.” AMA employees probably reflect the same range of views on this idea as do other
groups, including AMA senior management and the Board. It is possible that some employees might be
very uncomfortable working in an organization that may be viewed by some as a “labor organization.” This
is one of the things that an employer must be prepared for in the normal course of business as organizations
implement change. The other employment dimension may be that in order to successfully pursue collective
bargaining activities, staff with new skills may be required. Even though the CBU(s) would be separate
organizations and would have their own staff support, AMA may need some additional skills to help
manage the relationship with them.
                                      B of T Rep. 30 - A-99 -- page 64


Many factors have been covered in this risk assessment. What do they all add up to? This is truly a “mind
of the beholder” circumstance in many respects, but some key themes do come through.

   Arguments in support of implementing the CBU proposal center around the needs of physicians in a
    changing and hostile environment. As the least centralized and most oversupplied sector of a rapidly
    centralizing industry, physicians are at an extreme disadvantage and are looking to the AMA to help.
    Collective action is a logical response if effectiveness in a centralized environment is the nature of the
    new game. This would be a key addition to AMA’s other advocacy skills and tools that are aimed at
    leveling the playing field.

   But collective bargaining is not among the AMA’s core competencies, and our fundamental
    commitment to professionalism will deny us use of some of the most powerful traditional tools of
    collective bargaining. We therefore would have to invent a new approach to collective bargaining that
    focuses on putting self-interest in second place behind patient interest, and uses different tools and
    tactics, the specifics of which have yet to be fully developed. We would also have to be prepared to
    deal with the inevitable external skepticism this would generate in the early stages.

   Confidence is high among some that these challenges not only can be overcome, but can be translated
    into an opportunity to send a clear signal to the medical profession that the AMA recognizes the need
    to change and expand its already broad advocacy agenda and skills mix.

   Others find it very difficult to reconcile the fundamentals of professionalism with what are viewed as
    the inevitable tendencies of labor organizations to gravitate toward self-interest agendas, because that is
    what they are fundamentally designed to do. And there is concern that because of the limitations of
    antitrust, we are putting our professional identity and heritage at risk to help a relatively small number
    of physicians, while many self-employed physicians who are among those most desperately in need of
    help would not be covered by this activity.

   Probability of success in reinventing what labor organizations do and how they do it is central to
    reconciling the different views of the CBU proposal and its implications. If implemented, the risk
    of failure in this regard includes alienation of the academic community, potential damage to our image
    as a professional association, and disillusionment of physicians related to a hope that may not be
    realized. On the other hand, if we can successfully invent a new approach to collective bargaining as
    outlined in the proposal, the AMA will have made major inroads in repositioning physicians as a
    “power player” in the new environment in a way that has tangible and visible impact for physicians, and
    thus will have added materially to its range of advocacy capability for the future.

   A further complication is that there is also risk in not implementing the CBU. Physicians are under
    extreme pressure in today’s environment and are desperately in need of assistance. They look to the
    AMA and organized medicine to “do something about it.” Many feel that traditional advocacy efforts
    are helpful up to a point, but that today’s environment presents different challenges that require a new
    set of advocacy tools. They are looking for additional tools and approaches, and collective bargaining
    is a tool that many physicians believe to be appropriate to add at this time. Residents, young physicians,
    and members of the Organized Medical Staff Section in particular, strongly hold this view and were
    among the sponsors of the HOD resolutions asking for development of the CBU. A risk of not pursuing
    the CBU, therefore, would be a high level of disappointment among these constituency groups at
    having passed up what is perceived as a real opportunity to extend AMA’s advocacy capability in
    tangible ways. And if the AMA does not establish a CBU it will likely be in competition with other
                                 B of T Rep. 30 - A-99 -- page 65

CBU(s) (sponsored by organized labor or others – some possibly within organized medicine) for the
allegiance and dues dollars of physicians in any case. Lastly, time is a risk of not proceeding. This is a
choice that must be made in the near term or this particular opportunity will be lost. It will be hard to
enter this field at a later time if significant organizing takes place in the next year, which is likely.
                                     B of T Rep. 30 - A-99 -- page 66

                                                                                          APPENDIX F


To support the Board of Trustees discussions of the collective bargaining proposal, an informal stakeholder
analysis was conducted among staff and leaders of AMA councils and sections. This was done to collect
impressions and anecdotal reactions to the proposal, and is not a scientific survey. Nevertheless, it provides
some impressions of the kinds of support and/or concerns that might be expected from various groups.
                                                                  AMA STAKEHOLDER ANALYSIS
                             AMA              % Change in
                             Members/         Membership                       Basis for          Relative Impact of            Assessment
Stakeholder     Number                                            Attitude
                             Market           Over Last 5                      Assessment         Stakeholder for AMA           (Taken from staff Risk Assessment Profiles)
                                                                  on CBU
                             Share            Years
Medical         68,000       38,000 /         Slightly            Support      Section Staff /    Crucial for Future            “Proceed forward carefully with an emphasis on
Students                     56%              Increasing                       Leadership /                                     education and positive communications.”
Resident        100,000      31,000 /         Relatively          Strong       Section Staff /    Crucial to Future             “If we don’t proceed now, the unions that take
Physicians                   31%              Stable—Slightly     Support      Leadership /       Large Universe                over organizing residents will use our retreat as
                                              Decreasing                       Assembly                                         a recruiting tool by saying ‘even the AMA
                                                                                                                                won’t help you.’”
Young           167,000      52,000 /         Declining—37%       Strong       Section Staff /    Crucial to Future             “AMA should proceed to develop a union for
Physicians                   31%              Share in ’92        Support      Leadership /       Large Universe                employed physicians, but should not place its
                                                                               Review of HOD                                    primary focus only on the organization of

                                                                                                                                                                                    B of T Rep. 30 - A-99 -- page 67
(Co-author of                                 Decline even                     Actions            Need to reverse declining     residents. Those practicing physicians who are
HOD Res 258,                                  greater in states                                   membership-Section has        employed must be focused on as well. Need to
A-98)                                         with high                                           indicated need for strong     also strongly implement activities that focus on
                                              managed care                                        advocacy for Young            self-employed physicians.”
                                              penetrations                                        Physicians and patients
Organized       90%          20% of           N/A                 Strong       Section Staff /    Important, and Key Target     “Proceed with implementation of CBU for
Medical Staff                hospitals are                        Support      Leadership /       for this Activity             physicians, but carefully target selection of
Section         Physicians   represented in                                    Assembly Over                                    Resident Physician and Employed Physician
                have         Section                                           Last 2 Years       While difficult to define     groups. The AMA must have successful initial
(Co-author of   medical                                                                           constituency, this group      experience.”
HOD Res 258,    staff                                                                             reflects majority of
A98)            privileges                                                                        physician population.
House of        585          100%             N/A                 Strong       Staff              Critical                      “Though it may cause problems, the AMA must
Delegates                                                         Support      Discussions with   Principle Policy-Making       take its place at the table.”
                                                                               Delegates          Body
                                                                                                  Broad Based Representation
                                                                                                  of Medicine
Women           105,700      43,800 /                             Support      Staff              Important, and may be         “Except for the costs, seem to be fewer risks in
Physicians                   26%                                                                  over-represented as           proceeding than not proceeding.”

                                                                                                  Represents 24% of physician
Minority        96,700       29,000 /         N/A                 No           Staff              Important                     “Focus AMA collective bargaining efforts on
Physicians                   30%                                  Statement—                                                    residents and pursue other aggressive forms of
                                                                  Have Not                                                      action to help physicians in managed care
                             (Estimated                           Addressed                                                     arena.”
                                                            B of T Rep. 30 - A-99 -- page 68

                               AMA            % Change in
                               Members/       Membership                   Basis for         Relative Impact of              Assessment
Stakeholder      Number                                     Attitude
                               Market         Over Last 5                  Assessment        Stakeholder for AMA             (Taken from staff Risk Assessment Profiles)
                                                            on CBU
                               Share          Years
International    131,900       44,200 /                     Strong         Section Staff     Important                       “Go forward. Representing physicians in this
Medical                        34%                          Support                                                          tangible way could go a long way toward
Graduates                                                                                    25% of physicians               reconnecting us with physicians in some
                                                                                             15% of AMA members              settings.”
Self Employed    295,000       122,000 /      Decreasing    Mixed—Wou      Staff
                               41%                          ldn’t Impact
Employed-Sup     Unknown       Unknown        Unknown       Mixed—         Staff

                                                                                                                                                                            B or T Rep. 30 - A-99 -- page 68
ervisors                                                    Wouldn’t
                                                            Impact Them
Employed-Clin    213,000       61,000 /       Decreasing    Strong         Staff / HOD       Important Segment
ical                           28.6%                        Support—Tar    Research to
                                                            get of         follow
Medical          95            35%            Unknown       Mixed—Prim     Staff, Medical    Very Important to Have          “A mixed bag based on interests of various
Specialty                                                   arily Along    Society Staff     Them Engaged / Involved on      specialties.”
Societies        Largest 15    Specialty                    Academic                         This
                 Represent     Society                      Lines
                 About 80%     Members are
                 Physicians    AMA
State and        52 State      65% of State   Stable        Support        Staff / Medical   Critical to Have Them           “The only risk is not to proceed.”
County                         Society                                     Society Staff     Engaged / Involved In This.
Medical          4000          Members are
Societies        County        AMA                                                           Critical Partners in Ensuring
                               Members                                                       Success
                               (1998 Data)

Group Practice   17            5 of the 17    Increasing    Strongly       Staff Meeting     Significant                     “Strongly opposed to this concept and many
Advisory                       practices                    Opposed        with Group                                        have indicated membership withdrawal.”
Committee        Represent-i   have 100%                                   Practice
                 ng Large      AMA                                         Advisory
                 Group         Membership                                  Committee
                 Practices     (n=2,200)
AMA              N/A           N/A            N/A           Mixed                            Critical to Ensuring Success
                                                            B of T Rep. 30 - A-99 -- page 69

                                AMA        % Change in
                                Members/   Membership                       Basis for    Relative Impact of             Assessment
Stakeholder       Number                                    Attitude
                                Market     Over Last 5                      Assessment   Stakeholder for AMA            (Taken from staff Risk Assessment Profiles)
                                                            on CBU
                                Share      Years
AMA Staff         N/A           N/A        N/A              Mixed                        Critical to Ensuring Success
Public            N/A           N/A        N/A              Refer to
Hospitals         N/A           N/A        N/A              Oppose          Staff        Questionable Allies

                                                            Will Directly
                                                            Be Target of

                                                                                                                                                                      B or T Rep. 30 - A-99 -- page 69
Contributors to                                             Oppose          Staff
AMA Journals
Academic          30,373        9191 /     Significant      Resident        Staff        Impact on Student / Resident
Physicians-Pri                  30.3%      Decrease—32.8%   Activity—Str                 Attitude
mary              (Per Self                in 1993          ongly Oppose
Employment is     Designation
Medical School    on AMA                                    Employed
                  Masterfile)                               Physician
Academic          70,000        Unknown    Unknown          Resident        Staff
Physicians-Full                                             Activity—Str
-time Faculty     (Estimate                                 ongly Oppose
                  Based on
                  LCME                                      Employed
                  Annual                                    Physician
                  Survey)                                   Activity—Un
Figures based on 1997 data unless otherwise noted.
                                     B of T Rep. 30 - A-99 -- page 70

                                                                                        APPENDIX G

                                FINANCIAL FORECAST

This document forecasts the projected expenses and revenues associated with the formation of an AMA
affiliated CBU for its first five years. The document covers projections for what is considered an active
model and later predicts the financial implications of a very slow growing model.

In order to create and monitor successful individual bargaining units, an AMA affiliated CBU must conduct
two phases of activity: the developmental stage (includes fact finding and analysis, organizing, and
completed contract negotiations) and the contract implementation stage. The developmental stage can take
between 9 and 24 months and must be successfully completed before members begin paying dues to the
CBU. This will account for a considerable delay in accumulating revenues vs. upfront costs to that labor

                                            5-Year Projections

It is anticipated that an active model of an AMA affiliated CBU will complete or be in the developmental
stage of completing, successful local bargaining units at 35 locations in the first five years. This will
include 25 resident units and 10 units for employed physicians in hospitals and/or physician practice
settings. After five years, more than 2000 employed physicians and 7500 resident physicians will be
members of AMA affiliated CBU chapters. An additional 3000 former resident physician CBU members
will have finished their programs during this period of time. The total expenses for this five year model are
$5.8 million while dues revenues are more than $6.6 million. Assuming no further growth, revenues will
exceed expenses by $2.5million in succeeding years.

                                          Active Growth Model

Following are more detailed financial predictions and assumptions for an AMA affiliated CBU that project
the flow of costs and revenues based on successfully developing 5 new housestaff and 2 new employed
physician groups each year. These numbers and projections for a more slowly growing CBU model are
fully detailed on the attached chart.


   Based on the success rates of traditional labor organizations, the figures assume that approximately
    50% of all developmental efforts will result in the formation of a bargaining unit that successfully
    negotiates a contract.
   Dues are only paid by members of successfully developed bargaining units. Costs related to failed
    developmental attempts are included in these figures.
   In some cases, the development process and the accompanying costs can span three fiscal years.
   Fixed costs include management and secretarial salaries (through the vice president level), benefits,
    legal fees, overhead, postage, printing and Board costs. They are adjusted +5% each year for inflation.
   Salary, benefits and travel costs of contract and staff organizers/negotiators are in the developmental
                                     B of T Rep. 30 - A-99 -- page 71

   All figures are based on an average of 250 employed physicians at a hospital, 100 employed physicians
    in a practice group, and 300 housestaff per institution.

   Revenues are based on $60 dues per month for employed physicians and $25 per month for residents
    for basic development and contract implementation. When revenues exceed costs, they can be used to
    provide additional services to the members or the individual bargaining units including dues reduction
    and supplemental payments for AMA/state and county dues.
   Per unit developmental costs will be highest in the first two years as the AMA affiliated labor
    organization contracts with professional labor organizers to conduct the developmental phases and train
    in-house staff.
   In year two, the CBU’s staff will begin conducting the developmental stages independently from
    contract staff and will be totally self-sufficient at the end of that year.

Financial Predictions

   In the first year, fixed costs will be $415,000 plus developmental costs of $535,000. These figures are
    based on contracting with professional organizers and one full-time organizer employed by the AMA
    affiliated CBU.
   In year two, additional in-house organizers will be added, as the use of outside contract staff will
    diminish. Fixed costs will be $405,000 as developmental expenses are $847,000.
   Total expenses for these two years including $35,000 for contract implementation for those units
    successfully organized, is about $2.2 million.
   Dues from established bargaining units would offset these expenses in year two by approximately
   In year three, fixed costs of $425,000, developmental costs of $625,000 and $70,000 in contract
    implementation costs yield total operating expenses of slightly more than $1.1 million.
   Year three dues revenues will total about $1.4 million. Exceeding expenses by almost $300,000 in year
    three as the staff will now be functioning independently of outside contract organizers.
   Developmental and fixed costs will remain fairly stable in subsequent years with contract
    implementation costs increasing $35,000 per year as additional local bargaining units are added to the
    AMA affiliated CBU.
   As additional units are added, dues revenues will continue to increase. The labor organization will be
    able to repay AMA for all of its start-up costs and retain almost $900,000 for distribution in member
    services and benefits by end of year five.

                                           Slow Growth Model

The preceding model assumes a fairly active rate of growth in a market where resident physicians are
considered employees by the NLRB and eligible for the protections of the NLRA. If the NLRB rules that
residents are students and ineligible for the protections of the NLRA, residents at public institutions will
still be eligible to join a labor organization and collectively bargain in most states. Residents at private
institutions would not be eligible to bargain under an AMA affiliated CBU, but would continue to be
encouraged to form independent housestaff organizations. Following is a very slow growth model for the
AMA affiliated CBU that would anticipate the successful development of only one resident bargaining unit
per year and only one employed physician group per year.


   This model uses the same basic assumptions as the preceding model except as noted.
                                     B of T Rep. 30 - A-99 -- page 72

   The employed physician group would be hospital based in years 1,3 & 5 and physician practice group
    based in years 2 & 4.
   Fixed cost would remain largely unchanged but only one staff organizer/negotiator would be needed.
   Because fewer units being organized equates to less/slower on-site training for staff, consultant
    organizers/negotiators will continue to be used into year three.

Financial Predictions

   Development costs would be $280,000 the first year and $328,000 the second including $10,000 in
    contract administration costs.
   Dues revenues will off-set $135,000 in the second year so total net costs less revenues for the first two
    years will be about $1.3 million.
   In year three the use of contract organizers/negotiators will diminish and organizing costs will drop to
    $200,000-$240,000 for that and subsequent years.
   Total expenses will exceed revenues by approximately $200,000 in year three and $160,000 in year
    four. In year five the CBU will break even and will realize a positive cash flow of $60,000 in its sixth
    year. Subsequent years will result in annual six figure surpluses.
   The total financial liability until revenues match costs in year five is less than $1.7 million.

                                                 Exit Strategy

The preceding figures represent a fairly successful as well as a very slow growth model of an AMA
affiliated CBU. If the AMA affiliated CBU wants to close operations, it may do so at any time and its local
chapters can assume control of the CBU or affiliate with another existing labor organization.

Should the AMA institute an affiliated CBU that is a complete and total failure that is unable to establish a
single successful local bargaining unit, the additional financial jeopardy to the AMA would be $1.0-$1.4
million for two years of operation at which point the organization would likely be shut down.
                                       B of T Rep. 30 - A-99 -- page 73

                                               AMOUNTS IN (000s)

                                    ACTIVE MODEL
      YEAR                               1          2         3            4       5       6*
     Fixed Costs                        415        405       425          450     475     500
     Development Expenses               535        847       625          625     625     270
     Contract Implementation                        35        70          105     140     175

Total Expenses                           950       1287     1120          1180    1240    1030

Dues Revenue                                        350     1400          2100    2800    2500

Total Gain / Loss                      (950)       (937)      280          920    1560    2470

                             SLOW-GROWTH MODEL
      YEAR                               1           2        3            4       5       6*
     Fixed Costs                        415        405       425          450     475     500
     Development Expenses               280        318       240          189     189     117
     Contract Implementation                        10        20           30      40      50

Total Expenses                           695        733       685          669     704     667

Dues Revenue                                        135       486          513     702     729

Total Gain / (Loss)                    (695)       (598)     (199)        (156)     (2)     62

    No new bargaining units being developed

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