The following text is the June 10th oral testimony of CAC Chairman Nicholas Provenzo before the District of Columbia Council Committee on Consumer and Regulatory Affairs regarding The Physicians Joint Negotiating Act of 2003.

Madam chairman, members of the committee, good morning and thank your for your time. The Center for the Advancement of Capitalism and I are grateful that the Council has again taken up the issue of physician negotiating rights. However, we believe the Council is missing an opportunity to address the problem at a fundamental level. This debate is a question about rights: the rights of physicians to the full fruits of their hard-earned productivity.

The current regiment denies physicians the right to negotiate with health plans on par. This fundamental unfairness harms both physicians and their patients. By denying doctors the ability to act in their self-interest and negotiate fairly, current law removes the financial incentive for their continued excellence. This policy can only lead to a decrease in the quality of care for patients. To focus on potential short-term price increases to the exception of the long-term devastating effect antitrust has on doctors’ ability to reap the fairly-earned dividends of their work is not justice.

The bill before the committee is an implicit confession that the current regime has failed. Yet rather than address the source of that failure–which is a cornucopia of price control schemes over health care–this bill, in key areas, simply repackages that failure and tries to sell it as an improvement. Rather than acknowledge and protect the freedom of doctors to negotiate their own price terms, this bill subjects them to yet another set of complex and onerous regulations. To subject the exercise of a doctor’s legitimate rights to regulatory approval effectively denies these rights. Specifically, the bill denies doctors the unrestricted right to collectively negotiate price and compensation terms with health plans. Only if the health plan possesses a certain market share–a figure that has a history of being arbitrarily manipulated by hostile regulators–are doctors permitted to enjoy even limited rights to control their economic destiny.

Over the past year, our organization has closely monitored federal antitrust enforcement efforts against physicians. In at least seven cases, we have observed the systematic abuse of the basic constitutional liberties of physicians and their management consultants. Doctors live in fear of even speaking to one another about prices because the Federal Trade Commission and state regulators believe that the mere exchange of thoughts is dangerous and subversive to the interests of consumers. Based on this fear alone, without any supporting facts, antitrust regulators have concluded that there is no circumstance where independent physicians may join together in dealing with health plans. At the same time, antitrust regulators routinely ignore any evidence that it is the health plans–businesses that enjoy special government subsidies and protections–whose actions are causing the “anticompetitive” price increases that consumers face. The doctors have become an easy scapegoat for the problems created by health plans in association with their government benefactors.

For example, last year the FTC pursued a case against two physician groups in Denver and their common management consultant. The FTC alleged the groups were breaking the law by jointly negotiating price terms with several large HMOs. In fact, the groups were attempting to comply with extensive FTC regulations which specify how joint ventures may be conducted in limited circumstances. Despite their good-faith attempts to comply, they were ultimately punished, because in reality there was no way for them to meet the FTC’s arbitrary standards.

This is not an isolated case. Many physician groups nationally have tried to comply with the FTC’s regulatory scheme, and all have failed. This is not for want of trying or lack of good faith, but rather because the law itself is arbitrary. The interpretation of the antitrust laws is a constantly moving target. The moment a physician group complies with a new regulatory regime–be it the FTC’s, or the one proposed in this bill–the government officials in charge of the scheme can turn around and change the rules on a whim. It is a well know fact that on the federal level, antitrust is interpreted differently from administration to administration. The interpretation of this bill would be no different, and its effect on doctors would be to deny them the ability to know the law’s prohibitions in advance. We all know what constitutes murder, but by my observation of the history of antitrust and its current enforcement practices, doctors can never know what constitutes intent to monopolize the market with the same clarity and certainty.

The Council should not fear allowing doctors to act in their self-interest. When this Council champions the rights of doctors, it champions the rights of their patients. Every doctor has a selfish interest to provide his patients with the highest standard of care. It is only proper that a doctor seek remuneration commensurate with his efforts. But if it is the goal of this Council to turn healthcare into an unquestioned right by denying the rights of doctors to pursue their monetary interest, the end effect will be to weaken and destroy the incentive for doctors to continue to provide quality healthcare.

The Council can best serve the people by passing a modified version of the current bill that eliminates the distinction between collectively negotiating the terms of patient care–which the current bill exempts fully–and negotiating price and compensation terms. A doctor’s right to negotiate price and compensation terms should not be assigned to a regulatory ghetto, but should instead be affirmed proudly as the cornerstone of the doctor-patient relationship.

I thank the committee for its time and the Center and I would be happy to provide it with any further assistance that it may need as it reaches its decision.

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Nicholas Provenzo

Nicholas Provenzo is founder and Chairman of the Center for the Advancement of Capitalism.

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