Ethical Health Partnerships

  Take Action: Help Patients and Physicians Take Back Healthcare  through Negotiation with Health Plans

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Dawn Lipthrott, LCSW
Ethical Health Partnerships
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Physicians Hands Are Tied When it Comes to Negotiatiating for YOU
or for Themselves

This article talks about negotiation for more ethical health partnership by physicians for patients and for themselves. It includes points for letters YOU can write to your state legislators to help effect change.

Insurance companies and network management companies that they hire pride themselves in holding the power to continually restrict physicians fair reimbursement and refusing to negotiate about physicians concerns. Here is an example:

"Our unsurpassed growth equals power. As more customers choose PHCS as their health care cost management partner, we leverage the strength of their 15 million members to achieve the best savings in the industry. . . . we enjoy a very powerful position in the industry. . . ."

When talking about their fixed fee approach:
"Providers, on the other hand, request straight discounts or discount off of billed charges. . . .we are witnessing a growing trend as an increasing number of providers are threatening to terminate from our network if we do not accept new financial arrangements ­­ arrangements that are not in the interest of our customers Our position is to refuse to negotiate under the threat of termination." (Note: this company's 'customers' are insurance companies and employers, not patients. Patients are their members given to them by their 'customers'.).

"Milliman USA projected a composite unit cost increase of 7.4% for inpatient, outpatient, physician and ancillary services in 2003. While other health care organizations may accept a 7.4% increase as an unavoidable component of today's health care environment, we recognized that . . . we needed to set more aggressive goals. We challenged our contracting staff to keep cost increases far lower than the projected trend ­­ and they succeeded. . . . (and) . . . enabled us to keep average composite unit costs to just 2.6%."
(Since this 'composite unit cost' included hospital inpatient services, and hospitals have more negotiating power than individual physicians, I am curious how much more physicians were squeezed in this 'negotiation' process.

Tap the Power 2003 report.

If you do a web search on PHCS and other network management or health insurance companies, much of what comes up is their increasing acquisitions of other companies or their gain of power and market share.

Because of the extreme imbalance of power between health plans / network management companies and physicians, physicians cannot negotiate contractual issues which affect both their well-being aand ability to stay in practice, AND shape the kind and quality of care that physicians can provide to patients. Since most large plans offer a 'take it or leave it' approach with physicians, your doctors are caught between their ability to keep their practices open to provide you care and honoring unreasonable contracts which dictate what kind of care they can and cannot provide.

Physicians are bound by antitrust laws which prevent even a small group of physicians negotiating together with a health plan . . . about ANYTHING. The intent of the law was to keep competition open among physicians and at the same time to protect patients against a physician 'strike' or 'boycott'. A physician's professional ethics prevent them from doing anything that jeopardizes patient care. Most physicians would not be willing to strike. Most physicians do everything possible to provide quality patient care. It is part of their commitment, part of their ethical standards, and the reason they went into medicine in the first place. And yet, often in trying to walk the fine line with insurance companies, physicians are in a Catch-22. If they don't take plans, they cannot stay in practice or would exclude large numbers of covered patients . . . and they would end up limiting access only to small numbers of patients or to those who can afford to pay out of pocket. This is especially true when health plans continue to merge, forming bigger entities with millions more members and controlling more market share. (The same is true of network management companies.) Yet, if they do take plans and have no power to negotiate, they are stuck with whatever rules and restrictions the insurance company impose without any power to negotiate. They take it, with all of its rules, or they don't see those patients.

Contract rules can include utilization reviews which limits the kinds and amount of medical services a physician provides, discourages referrals to specialists, denies recommended medical tests or treatments (and which sometimes make the physician liable for any adverse consequences in order to protect the health plan who may be the one denying treatment), "gag clauses" which restrict the ability to fully discuss all possible treatment options, ability of health plans to change physician fees at will, and more. On top of the patient care decisions, insurance companies impose low payments and sometimes delayed payments on physicians. (Read the article on physician fees and expenses and see the charts.) (See the article about recent settlements by major insurance companies related to contractual issues that they impose on physicians.)

Insurance companies are exempt from antitrust laws and can create situations that in essence fix fees and prohibit competition. They also know that they can manipulate physicians with little or ineffective resistance because of the lack of power and the threat of antitrust violations . We need to empower ourselves and our physicians as healthcare advocates.

To help preserve patient access to care and to help physicians promote the highest quality and ethical standards of care and to make clinical decisions, treatment options, and referrals based on their best medical judgement instead of the rules of insurance or network management companies, we patients need to join to strengthen the core patient-physician relationship.


Write to your Insurance Commissioner and your state legislators.

Suggestions for points to include in your letters:

1. Physicians need more balance of power in negotiating with health plans and network management companies in order to provide quality and continued access to patients.

2. Recommend the creation and passing of legislation modeled on successful legislation in Texas and other states. Provisions of that law and similar laws passed in other states include:

a) antitrust laws do not apply to action by a state operating in its sovereign capacity.

b) provisions can be created for physician negotiation that protects patients and at the same time is fair to physicians

b) physicians can communicate with each other and appoint a third party representative to negotiate health plans or network management contractors with respect to health plan (or network management) contract terms including:

* clinical practice guidelines and coverage criteria
* administrative procedures, including methods and timing of physician payment for services
* dispute resolution procedures
* patient referral procedures
* quality assurance programs
* formulation and application of physician reimbursement methods
* health service uitilization review procedures
* health plan physician selection and termination criteria
* inclusion or alteration of contract terms and conditions subject to government regulation prohibiting or requiring them
* practices and procedures to assess and improve preventative health care services,
* patient education and treatment compliance
* medical malpractice liability issues with health plans
*outpatient surgery
* clincial criteria for disease management programs

At the discretion of the state attorney general, competing physicians who make up no more than 30% of physicians in a health plan's defined geographic service area, can meet and communicate for the purposes of jointly negotiating through a third party:

* fees or prices for services, included those determined by any reimbursement method procedures
* conversion factors in an RBRVS reimbursement method
* amount of discount on price of physician services
* the dollar amount of capitation or fixed payment for physician services

This negotiation of fees would be allowed only with larger health plan or network management companies that control a substantial portion of the insurance market in an area.

To protect all parties, the third party representative of physicians must file with the state attorney general information about the proposed subject matter of the negotiation, the expected impact of the negotiations on the quality of patient care, and a copy of any proposed contract agreed upon by the health plan or network management company and the physician's representative. The attorney general has 30 days to approve or disapprove the initial filing or a proposed contract and is required to explain how an issues related to disapproval can be corrected.

This legislation does not allow physician unions and allows limited joint negotiation procedures. In unions, group action is determined by majority vote. In contrast, this legislation allows each physician to determin whether or not he or she wants to agree and be bound by terms negotiated. There is no permission to strike because there is no union. Patients are protected by the boundaries of the law.

If health plans or network management companies claim they are not financially able to meet the proposals, and cannot come to agreement, they can be required to open their books to an administrative law judge or impartial third party.

For more information on this type of legislation, read this article from Physician's News Digest that serves Pennsylvania and Texas.

Help create more ethical health partnerships with insurance companies/network management companies and the patients and doctors who are the core of the healthcare system. We need to take back our healthcare.

Remember FLOODING with letters from patients is what will create change. Become part of the flood and write today!

Resources to Help You Take Action:

Suggestions for Writing Insurance Companies

List of Insurance Companies

State Insurance Commissioners

See the section of this site on Reimbursement for more articles and info.

As always, I welcome your constructive comments and suggestions about the material on this website and how we can all be most effective in co-creating the kind of healthcare system we all want. E-mail me at

© Dawn Lipthrott, Ethical Health Partnerships, 2004
May be copied and distributed as long as this identifying information is retained on copies.)