Wednesday, June 11, 2003

Antitrust News: Half-Measures, continued

Picking up from Nick's post below, the thing that struck me about yesterday's D.C. Council hearing on physician antitrust is how little the main players—the local medical society and the councilmembers present—actually knew about the impact of antitrust on the medical profession. Since the council first considered a limited antitrust exemption for doctors four years ago, the FTC and Justice Department have become far more aggressive in pursuing physicians. One reason for this, I suspect, is that healthcare costs have been rising faster in the past few years, a point alluded to by a managed-care group lobbyist at yesterday's hearing. This increases the pressure on government officials, unwilling to admit the fundamental flaw of government-run healthcare, to find scapegoats, and the FTC in particular has carved out a fine niche for itself bullying doctor groups and, in effect, stealing their lunch money.

The Republican councilmember Nick talked about, David Catania, actually managed to personify the difficulty in pursuing the physician antitrust issue. Catania is by no means a bad guy; he's been a fairly consistent champion of lower taxes, not an easy task in the District, and most of his initiatives have been pro-business. But on the physician antitrust issue he was clearly ignorant. At the outset, he dismissed the physicians' concerns as a case of "wealthy people" arguing with other wealthy people, that is the health plans. This completely misses the point. Physicians generally do not seek to form labor union cartels; such structures tend to subsidize and promote mediocrity, as we've seen from many AFL-CIO unions that enjoy coercive power to force collective bargaining under the law. What doctors do want, however, is the ability to assert their economic interests against unilateral and unreasonable "efficiency measures" imposed by HMOs with the government's blessing.

One example: A healthcare management consultant recently told me that the physicians in her group were taking a financial bath on child vaccinations. Any pediatrician obviously will have to provide multiple vaccinations to their patients. Indeed, it's required by law in many cases. But the HMO the doctors dealt with wouldn't reimburse the physicians for the full cost of the vaccine; hence they were losing money on every patient for providing that particular service. Such is the nature of the "diagnosis-related group" structure of managed care; each procedure is assigned an arbitrary reimbursement value which need not conform to market realities.

Under antitrust law, it is illegal for independent physicians to get together and say to the insurer, "you need to raise our reimbursements for vaccines so we're not losing money." Indeed, it's arguably illegal for the physicians to have a conversation with one another about the issue, lest the HMO finds out and runs to the FTC. This is the principal reason why physicians are seeking an antitrust exemption. As the head of the D.C. Medical Society said yesterday, this is about the "financial viability" of physician practices, not a case of physicians seeking some unwarranted special favor from the government.

Councilmember Catania, however, appeared too blinded by his own prejudices to seriously consider the facts. He said it was an ineviatble fact of "human nature" that physicians would form price-fixing cartels and hold the District's insurance companies (and by extension, the city's Medicaid program) hostage to their supposedly insatiable greed.

But let's look at the bright side. The D.C. Council passed the limited antitrust exemption there years ago (only to be thwarted by the then-federal control board, which was basically corrupted by the insurance industry's lobbyists) and there is good reason to believe the exemption can pass now. Councilmember Phil Mendelson, a Democrat and the current bill's chief sponsor, provided a solid defense of the physicians yesterday. I was particularly impressed when he derided the use of the "loaded term" of "price-fixing" to smear the doctors' desire to exercise their right to collective negotiations. That shows Mendelson understands that antitrust, at its core, is an exercise in political power, not protecting the free-market.

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