Labor Pains

Austin Emergency Physicians Form State's First Doctor Union

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Cover Story -- May 2001

By Walt Borges
Associate Editor

Almost two years ago, the American Medical Association House of Delegates voted to create Physicians for Responsible Negotiation (PRN), a bargaining unit for physicians. PRN's creation did not come easily. The AMA Board of Trustees resisted two previous calls from the house to form a bargaining unit, and some delegations -- including the one from Texas -- opposed the move.

The Texas delegation argued unsuccessfully in favor of the Texas Medical Association's strategy of using individual practice advocacy and joint negotiation legislation to promote the common interests of physicians. Unionization, the Texas delegates noted, would primarily benefit doctors employed by hospitals and practice management groups. It would offer little to the estimated 64 percent of postresidency physicians nationally who are self-employed and who usually cannot bargain collectively without violating federal antitrust laws.

Since that historic vote in June 1999, there has been no ground swell of unionization among Texas' employee physicians.

The sole example is the Seton Third Coast Emergency Physicians Association, now known as Austin Emergency Medicine Physicians for Responsible Negotiations (AEMPRN), a union of emergency room physicians working in the Seton hospital system in Austin. The doctors are employees of Third Coast Emergency Physicians, a private, physician-run practice management group that holds contracts to staff 11 Texas hospital emergency rooms. The union involves physicians employed at two emergency rooms.

AEMPRN, which represents about 20 employed physicians of Third Coast, is in the process of affiliating with PRN and has successfully defended its efforts in proceedings before the National Labor Relations Board (NLRB).

What is a physician union?

Robert Bernat, MD, JD, executive director of PRN, says there are three types of physicians -- two types can benefit from collective bargaining and one is prevented from unionizing -- that have an interest in conducting joint negotiations.

The first category includes residents and fellows who must negotiate with the hospitals that employ them. Residents at private hospitals won the right to collectively negotiate in a 1999 NLRB ruling that classified them as employees, reversing a 1976 ruling to the contrary and extending collective bargaining rights accepted in the public sector to private sector physicians. (See "Unionizing House Staff," June 2000 Texas Medicine , pages 56-58.)

The second category comprises employed physicians who negotiate with their employers. PRN was formed primarily to assist the first two groups, Dr. Bernat notes.

Self-employed physicians, the third group, are interested in negotiating jointly with insurers, health maintenance organizations, and hospitals, but they must be careful to avoid violating antitrust laws.

AMA estimated at the time of the 1999 vote that as many as 108,000 physicians -- 17 percent of the nation's doctors -- could take advantage of the collective bargaining rights of unions. AMA currently estimates that more than 100,000 residents also could use collective bargaining rights of unions.

"Over the recent history of medicine, there has been an unleveling of the playing field for employed doctors," said Dr. Bernat. "Employed physicians need a protected voice in dealing with management."

Nationally, he said, the trend "is that there are more and more employed physicians in the country who have less and less control over their own lives and the care of the patients. The idea is to restore balance to the way they are permitted to practice medicine."

In setting up PRN, the AMA House of Delegates stipulated several characteristics that separate the physician union from traditional labor unions. Strikes are prohibited, as is the denial of necessary medical services to patients. The AMA house also expected the new labor organization to include patients' rights and quality-of-care provisions in every proposal to employers.

A statement from then-AMA President Nancy W. Dickey, MD, in March 1999 summed up the concerns: "We do not believe that traditional trade union practices ensure the integrity of the patient-physician relationship or help physicians achieve the best decision for quality health care in this country."

John Calomeni, MD, JD, one of AEMPRN's five elected representatives, says the Seton Third Coast Emergency Physicians Association chose to affiliate with PRN because of the stigma that traditional labor unions carry. Images of strikes and labor unrest are unacceptable to the Seton union's concept of enhancing patient care, Dr. Calomeni says.

"We chose PRN because it was more acceptable to the rank-and-file physician," he said.

Dr. Bernat says PRN is organizing physicians in Illinois, Michigan, and New Jersey, and the Austin organization is set to become PRN's fourth affiliated group. He is quick to concede that other labor alternatives, such as the Committee of Interns and Residents (CIR) and the Federation of Physicians and Dentists, claim as many as 45,000 physician members nationwide. He adds that ethical considerations, among other things, set PRN apart from the other groups.

National figures from the AFL-CIO suggest that 35,000 postresident physicians are union members, but PRN is unsure whether those figures can be verified. Dr. Bernat says the numbers may include self-employed physicians who have affiliated with unions and those who are members of groups that serve as messengers in negotiations with insurers. One number that appears to be accurate is the number of medical residents -- 10,000 -- who are members of CIR, he says. The committee represents residents in California, Florida, Massachusetts, New Jersey, New York, and Washington, D.C., according to its Web site.

The low numbers for PRN successes leave Susan Rudd Wynn, MD, speaker of the TMA House of Delegates and a member of the Texas Delegation to the AMA since 1991, unpersuaded of the effectiveness of the union effort.

"The relative lack of activity has shown there is not a pressing need for physician unionization," said Dr. Wynn. "The PRN effort has been well-publicized, but there are only three or four instances where it has been successful." 

Physician owners versus employee doctors

Another of the five elected representatives of the Austin physician union, Manuel J. Martin, MD, says union organizing will be successful on a case-by-case basis. "Employer responsiveness is the issue," he said.

Unionization efforts are gaining importance because of changes in how medicine works, particularly emergency medicine, Dr. Martin says.

Traditionally, hospital emergency departments provided emergency and after-hours care. The use of emergency rooms, staffed by rotations of staff physicians, grew rapidly from the 1950s through the 1970s. With it grew the perception that using unsupervised interns and residents to cover the off hours and weekends could compromise patient care. The answer for many was physician practice management entities to provide staffing and, later, billing and other administrative services related to the employed physicians.

Dr. Martin says the founders and owners of Third Coast, Sam Roberts, MD, and Bruce Moskow, MD, were "two smart guys" who contracted to take the recruiting and staffing chores out of the hands of Seton administrators in 1988.

Unlike the specialty groups that operate within hospitals and usually are organized as partnerships, Dr. Martin and other Third Coast physicians were hired as independent subcontractors, then converted to employees in 1999. The employee physicians began considering formation of a union soon after, he says.

"What drove us to unionize was the lack of input for our ideas," Dr. Martin said during a joint interview with three of the five elected representatives of the physicians' association. "We had no access to the [hospital] administration, and though we could sit on different committees, we soon found out that we never made a difference. There was zero input into management, and the committees were there for appearance."

Dr. Roberts, the Third Coast president, says the demands for a greater management role were impractical. "They told us they wanted more say in how things are run," he said. "They wanted more input into the business aspect. We discussed it with them. We told them it was difficult for us because we had multiple locations with different issues."

Dr. Martin cites the recent election of union representative Dennis Watts, MD, as chief of the emergency section at Seton Northwest Medical Center, as an example of how the union works. Dr. Martin says Dr. Watts was elected with the mass support of the union physicians. His election as medical director gives them a limited but direct way to communicate with Seton management on medical practice issues.

Drs. Martin, Calomeni, and Watts agree that money was not the sole impetus for forming the union. However, Dr. Calomeni says the company's "unilateral decision to decrease the physicians' rate of compensation while increasing patient fees by 25 percent" was a significant factor in galvanizing support for the union effort. The physicians were particularly alarmed at these changes when they learned "that estimates of the two owners' profits at the two Seton hospitals were about $1.75 million," he said. Many of the employee doctors felt exploited by these excess profits and Third Coast's unwillingness to disclose patient collections and other financial information to the group so it could adequately evaluate the need for these unilateral changes, he says.

Dr. Roberts holds another view. "Some of it is the money, although they recognize that they are very well paid," he said. "Benefits are not an issue; we pay for their CME [continuing medical education], licensing, and health insurance cafeteria plan, and we provide a 15-percent pension.

"They utilized their legal right to unionize when it became available," Dr. Roberts continued. "But their goals are not attainable through a union. They are a group of doctors who want to be owners without a buy-in."

The partnership dispute

Dr. Roberts says the Third Coast doctors who organized the union refused to discuss partnership options when the Third Coast owners made it clear they would have to buy into the partnership in the same way partnerships are handled in other professional arrangements.

"Most of our physicians feel that the administrative fees have been so substantial that the partnership should have been granted. We probably already paid for it," said Dr. Watts.

Dr. Watts says that no serious offer has been made to convert the practice management group into a partnership. "There's been no 'buy-in' offer put in writing," he said. "We have asked them for an offer -- for a contract offer -- for partnership. … I said to them, 'All you have to do is make us an offer for partnership and all this will go away.' They chose not to."

Begging for collections

Dr. Martin says the employee physicians need more information about their billings and collections for two reasons. First, the Health Care Financing Administration (HCFA) says individual physicians are responsible for the amounts billed in their names. Second, he says, physicians are concerned that recent 25 percent increases in patient fees may be excessive if the increased revenues are being channeled into profits.

Dr. Watts describes the emergency room doctors as "beggars" when it comes to seeking information about their finances.

A Third Coast physician for eight years, Dr. Watts says union members do have access to their billings, but they want to know how much of the gross billings are collected. "We can't arrive at a fair administrative cost without that information," he said. "We don't know the overhead costs or the insurance costs. From the information we were able to garner, they [the two owners] received more than 40 percent of the net collections, with the practicing physicians receiving the balance."

"The issue isn't what we're making; it's what they are making off of us," Dr. Watts said.

A letter from the union to Seton staff physicians indicates that new emergency physicians are paid 25 percent of their billings, while senior physicians net 28 percent. The union estimates Third Coast's profit at $1.75 million per year for the two Seton hospitals.

Dr. Roberts says the estimates are excessive, and he questions the need for employee physicians to view the collection data.

"What HCFA says is that they are responsible for billing things out correctly," Dr. Roberts said. "They get full information on their billings. What they don't get is collections."

Dr. Calomeni countered that "the only obvious reason to hide the collections is because the profits extracted from the physicians are excessive, and Drs. Roberts and Moskow do not want the physicians to understand the true extent they are being exploited by their arrangement with their employer."

Dr. Roberts said compensation for the employee doctors is based solely on a percentage of gross billings and does not depend on how much is collected. "We pay the employees the same percentage on a person with no insurance as they get for a person whose insurance company paid in full," Dr. Roberts said. "Their pay is not based on collections. Even though the volume of indigent care is rising and our collection percentage is falling, our doctors are getting more money than ever before. They got a raise of about 5 percent about a year ago."

However, Dr. Calomeni said, "The percentage of gross billings paid to the physicians depends entirely on the amount collected from the patients, which is well-documented in correspondence Third Coast has had with its employees. So it is impossible to adequately and reasonably negotiate about compensation without having information about collections. The amount collected varies from hospital to hospital and region to region, so using other emergency physicians' compensation rates is not a reasonable starting point for negotiation purposes. Only the collection rates for our specific hospitals are relevant."

Becoming employees

Administrative costs absorbed by Third Coast on behalf of the employees include the cost of medical liability insurance, overhead costs, the costs of billing and collection, and the cost of financing accounts receivables, Dr. Roberts says.

He says the conversion of the Third Coast physicians from independent contractors to employees occurred after HCFA stopped issuing Medicare numbers to physicians billing through groups unless the physicians were employees of the group. While other business structures were considered for Third Coast, the least complex solution was to make the emergency doctors employees, Dr. Roberts says.

"There was skepticism about the conversion, but the union thing wasn't on the table at that time," he said. "We always thought that unions were for people who had been mistreated."

Dr. Watts confirms the shift to employees from independent contractors was not popular. He also questions the necessity of the move, especially after Third Coast acquired the franchise to operate the emergency medical services at Brackenridge Hospital, a city-owned hospital managed by the Seton system. Emergency department doctors at Brackenridge remain independent contractors, he says.

Dr. Watts says the use of a billing agency to collect bills was suspect because the employee doctors are not told what percentage of billings goes to the agency. He notes, however, that Drs. Moskow and Roberts have assured the union physicians that they do not have an ownership interest in the billing company.

Dr. Watts says Third Coast provided the full billing information for four months, but the information stopped flowing when the union publicly announced its estimate of Third Coast's profits.

Dr. Roberts says union organizers are adept at waging a public campaign against the management group in an effort to force Third Coast to concede the issues. One example is the accusation that the owners spend so much time as medical directors and administrators that they are out of touch with what goes on in the emergency rooms they run.

"They try to picture us as nonpracticing physicians," Dr. Roberts said. "We do see patients regularly in addition to managing all of the administrative functions.

"They try to paint us as greedy and unfair," the Third Coast founder continued. "They try to create pressure in the media to get Seton to ask us to settle the issues."

Legal warfare

AEMPRN was certified as the bargaining agent for the 23 emergency physicians working for the Seton hospitals in Austin on March 17, 2000, by a tally of 12 for the union, 6 against, and 5 ballots that were challenged. The ballots had been scheduled for counting Jan. 26 but were impounded when Third Coast challenged the election before the NLRB, arguing that the physicians were supervisors not covered by the National Labor Relations Act. Third Coast also argued that Third Coast emergency physicians in Burnet and Kerrville should be included in the bargaining unit vote.

On Feb. 29, 2000, the NLRB rejected the Third Coast arguments, holding that hiring, discipline, and evaluation functions were retained by medical directors, not by the employee physicians.

The legal dispute has been contentious enough to draw charges from AEMPRN that Third Coast engaged in unfair labor practices. The union's attorney, Martha Owen, JD, says the alleged violations include the company's refusal to provide the collections and other information relevant to the union's role as the physicians' representative, Third Coast's alleged refusal to bargain in good faith with the union, and Third Coast's alleged retaliation against the physicians for forming a union by eliminating a bonus traditionally paid in April of each year.

On May 14, an administrative law judge from the NLRB is scheduled to hold a hearing on several charges made by the union.

"Several of the charges have already been thrown out, and some were found by the NLRB to have possible merit," Dr. Roberts said.

One of the alleged unfair practices was the elimination of one component of a bonus Third Coast paid its physicians in April 2000 and December 2000, Dr. Roberts says. The April component of the discretionary bonus originally was designed to ease employee finances when taxes were due, but was eliminated in favor of giving the full amount in December, the traditional bonus period for most businesses. After employee doctors complained of the new arrangement, the full bonus was paid, Dr. Roberts says.

However, the union contends the full amount has not been paid and several doctors who were working in April 2000 had still not been paid any of their April bonus.

Dr. Roberts also says the union is seeking employee files for all physicians who work for Third Coast, which Dr. Roberts says would violate the privacy of employees.

He suggests that Third Coast is prepared to fight the legal battle through the courts if the NLRB does not find in their favor in May. "The NLRB -- they kind of have an agenda, but the law is clear and we are prepared to take them on," Dr. Roberts said.

The union representatives are prepared to continue the fight and not just on the legal front. They want other physicians to understand what they are doing and why.

"We need other physicians to understand that it's not about the AFL-CIO," says Dr. Martin. "It's about their rights and their careers."

SIDEBARS

Henderson physicians seek joint negotiations
Unions on the Web

May 2001 Texas Medicine Contents
Texas Medicine Main Page


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