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Chapter 3  Antitrust


Prohibited Activity
Permissible Activity
Networks Outside the Safety Zone
Large Networks



Basic Principles
Product Market Issues
Other Court Decisions
Geographic Market Issues
Constraints Imposed by Outside Sellers
Barriers to Entry
Efficiencies and Other Practical Considerations


Definition of Physician Union<
Self-employed Physicians’ Interest in Union Formation
Employed Physicians’ Interest in Union Formation
General State of Unions
Costs of Organizing a Union
The Labor Exemption from Antitrust Laws, as Applied to Physicians
Employed Physicians
Self-employed Physicians
Self-employed Physicians Do Not Qualify for Protection Under the
National Labor Relations Act
Success of Physicians in Tucson, Arizona
An AFL-CIO Affiliated Union May Not Collectively Negotiate on Behalf of Any One Individual
AMA’s Position on Physicians and Collective Bargaining



The antitrust laws can pose a barrier to physicians attempting to compete in the marketplace. Under current law, only physicians who are employees and who hold non-supervisory (or non-managerial) positions can organize a union to collectively negotiate in their behalf. Self-employed physicians in independent practices are considered competitors and may not organize to collectively bargain with entities such as health plans.
Antitrust laws exist to protect the free market and eliminate practices that interfere with open and free competition. Conduct that has unreasonably competitive effects is prohibited, so that each business has a fair opportunity to compete on the basis of price, quality, and service. The most relevant antitrust statute applying to physicians is Section 1 of the Sherman Anti-trust Act which states: Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is declared to be illegal.

Penalties for violating the antitrust laws are staggering. Criminal violations are felonies punishable by imprisonment and fines range up to $350,000 for individuals and $10 million for corporations per violation. As to civil liability for violations of the Sherman Anti-trust Act, a private party can recover treble damages, costs, and attorneys fees

Prohibited Activity

Section 1 of the Sherman Anti-trust Act generally prohibits conduct between two or more actors which constitutes an unreasonable restraint of trade. In order for an action brought against a physician under Section 1 to prevail, the existence of a contract, combination, or conspiracy must be established. Such an agreement does not need to be in writing or be part of a formal agreement. A simple, informal discussion between competing physicians at a social function expressing dissatisfaction about an HMOs payment schedule, followed by a mass withdrawal of physicians from an HMO could support a successful antitrust prosecution. Truly independent competing physicians, not integrated into a single entity, attempting to negotiate jointly for payment rates from third-party payors may be engaging in prohibited concerted activity. A physician should never, even if only acting independently, use the threat of collaborative action to enhance his bargaining power.

In order for an activity to constitute a restraint of trade it must be either (1) a restraint, which after balancing a number of factors, is unreasonable; or (2) a restraint that is so manifestly anti-competitive in nature that it is illegal per se requiring no balancing test or case-by-case evaluation. Unreasonable restraints often arise in the context of hospital privileges, standards of practice, or standards of minimum qualification for certification or membership. In evaluating the legality of a restraint, a court will attempt to balance factors such as the nature of the restraint and whether the restraint is related to reasonable objectives such as quality of care considering its pro-competitive and anti-competitive effects, its history, and market conditions.

Illegal per se restraints almost always lead to criminal prosecution. These restraints do not require a balancing test because they are conclusively presumed to be anti-competitive. The following activities are per se violations:

1)         Price Fixing: Agreements relating in any way to price, even those agreements that only indirectly affect price. Illegal price fixing includes agreeing on minimum or maximum prices or establishing uniform terms of sale or discount policies.

2)         Group Boycotts: Concerted refusals to deal where the boycotting competitors possess a dominant share of the market, or where competitors close access to a market that is necessary to compete. For instance, a groups agreement not to join an HMO unless it raises reimbursement rates, would constitute a group boycott.

3)         Market Allocations: An allocation or division of markets between two or more actual or potential competitors. For example, an agreement between two competing medical groups that neither group will participate in an HMO with which the other has already contracted, would violate this market allocation prohibition against restraint of trade.

Because of the wide variety of situations under which antitrust violations may occur, identifying every situation that could raise antitrust issues is impossible. The common theme throughout antitrust violations concerns individual competitors working together to impair free competition from other individuals or entities.

Permissible Activity

Despite the broad reach of the antitrust laws, there are a number of activities and strategies which physicians can safely use. Section 1 only affects contracts, combinations, or conspiracies, all of which require some sort of agreement, even if unwritten or tacit, between two independent actors. Therefore, activities undertaken by an individual or a single entity cannot violate anti-trust Section 1 prohibitions. A physician can:

  1. a) Make independent decisions.

Independent physicians can negotiate with individual payors on whatever price, quality, or other contract terms they feel are appropriate. A individual physician can also independently decide not to deal with a particular entity or provider as long as the decision is reached independently and based on the physicians judgment, not based on the physicians understanding of what other competing physicians do or plan to do. As long as they make independent decisions, individual competing physicians may commiserate over low fee schedules, or impugn the motives or integrity of health plans, assuming that they do not act collectively on their grievances. See United States v. Alston 974 F.2d 1206 (9th Cir. 1992). [Nevertheless, a physician should take special care not to defame a health plan; that is, make a statement regarding the health plan which is knowingly false or made in reckless disregard of the truth. Statements of opinion are generally not considered defamatory because they are not statements of fact.}

  1. b) Create a medical group or expand an existing one.

The law permits fully integrated medical groups to function as a single entity for all purposes. A fully integrated medical group may negotiate price terms and require its members to deal collectively with third-party payors. Medical groups are free to expand by employing more physicians or merging with other medical groups (assuming that they do not violate the prohibitions against monopolization).

  1. c) Use a broker.

Under certain conditions (see following subsections), physician network joint ventures that are not sufficiently integrated may wish to use an independent agent to assist them in their individual negotiations with third-party payors, so long as a number of safeguards are satisfied. This messenger model, liberalized in 1996, can both facilitate contracting between providers and payors and avoid price fixing agreements among competing network physicians and other providers. Permissible activities by the agent include:

1)         Conveying to purchasers information obtained individually from providers about the prices or price-related terms the providers are willing to accept;

2)         Convey to providers all contract offers made by purchasers;

3)            Help providers understand the contract offered by providing objective or empirical information about the terms of an offer (such as the comparison of the offered terms to other contracts agreed to by network participants); and

4)         Receive from individual providers some authority to accept contract offers on their behalf.

The broker or agent may not facilitate price fixing or impede individual providers from making their own separate decisions about a proposal. The agent or third-party payor may not:

1)         Coordinate the providers responses to a particular proposal;

2)         Disseminate to network providers the views or intentions of other network providers as to the proposal;

3)         Express an opinion on the terms offered;

4)         Collectively negotiate for the providers;

5)         Decide whether or not to convey an offer based on the agents judgment about the attractiveness of the prices or price-related terms; or

6)         Inform participants about others acceptance or rejection of contract offers.

Because this area is still open to legal interpretation and the line between a messenger and a collective negotiator is easily crossed, physicians should use great care and current legal advice when using an agent or broker.

  1. d) Create or join a physician network joint venture (PPOs, IPAs, etc.) that shares substantial risk.

The courts and the federal government have recognized that physician contracting networks can be pro-competitive. In general, exclusive physician network joint ventures comprised of twenty percent or less of physicians in a particular specialty with active hospital staff privileges who practice in the relevant geographic market and share substantial financial risk will not be challenged by the federal agencies as an illegal combination . Nonexclusive physician network joint ventures that comprise thirty percent or less of the physicians a particular physician specialty with active hospital staff privileges who practice in the relevant geographic market and share substantial financial risk will not be challenged by federal agencies, absent extraordinary circumstances. In relevant markets with fewer than four physicians in a particular specialty, a nonexclusive physician network joint venture otherwise qualifying for the antitrust safety zone may include one physician from that specialty, even though the inclusion of that physician results in the venture consisting of more that thirty percent (or more than twenty percent in the case of an exclusive network) of the physicians in that specialty.

The safety zone that includes non-exclusive ventures covers only those networks that are truly non-exclusive, as tested through the following features of non-exclusivity:

1)         viable competing networks or other plans with adequate provider participation currently exist in the market;

2)         providers in the network actually participate in other networks or contract individually with health benefit plans, or there is other evidence of their willingness to do so;

3)         providers in the network earn substantial revenue outside the network;

4)         the absence of any indications of significant de-participation from other networks in a market; and,

5)         the absence of any indications of coordination among the providers in the network regarding price or other competitively significant terms of participation in other networks or plans.

In addition, if the provisions of a network significantly restrict the ability or willingness of a physician to join other networks or contract with other plans, the federal agencies will consider that network exclusive for the purposes of the safety zone.

In order to be eligible for the safety zone, the physicians in a network must share substantial financial risk in providing all the services that are jointly priced throughout the network. Although the precise definition of substantial risk remains unclear, the following situations indicate that substantial risk is shared:

1)         Capitation arrangements

2)         Percentage of premium or revenue compensation arrangements

3)         The creation of significant financial incentives for the ventures members as a group to achieve specified cost containment goals such as:

(a)        Withholding from all members a substantial amount of the compensation due to them, with distribution of that amount to members only if the cost containment goal are met; or

(b)        Subjecting members to substantial financial rewards or penalties based on group performance in meeting overall cost or utilization targets for the network as a whole.

4)         Global fee or all-inclusive case rate arrangements.

The safety zones were designed to protect networks, that is, organizations of physicians that market their services to health plans, not merely organizations of physicians that carry the appropriate title. Thus, two physicians who have contracted to share risk on a capitated basis could collectively consider strategies for providing that care in a cost-effective manner and could make joint agreement on contract terms, including price. The physicians could not, however, legally undertake these activities with respect to other plans with payment on a fee-for-service basis, unless there is some form of integration with respect to those other plans.

Networks Outside the Safety Zones:

Some physician joint networks that do not meet all the requirements of the safety zones may nonetheless be legal. In general, if the network produces significant efficiencies that benefit consumers by containing costs and assuring quality of care, they will then be analyzed for legality using the following four-step process:

1)         Define the relevant market. How many physicians (and, as recently clarified, non-physician providers) do health plans and their subscribers consider to be good substitutes for the physicians participating in the joint venture?

2)         Evaluate the competitive effects of the joint venture. Does the venture raise prices for physicians services unreasonably high, or does it otherwise prevent other physician joint ventures or plans from forming? If so, go to step 3; if not, go to step 4. The federal agencies will consider not only the percentage of physicians in the relevant market, but also the incentives provided to the different physicians in the network and whether any differences in incentives reduce the likelihood of anti-competitive conduct.

3)         Evaluate the pro-competitive efficiencies. How does the joint venture provide better and/or cheaper services through improved cost controls, case management, quality assurance, and economies of scale and reduced administrative costs?

4)         Evaluate any additional agreements. Does the joint venture also require the physicians to agree on prices to be charged patients who are not covered by plans contracting with the network, exclude competitors, or otherwise do things that may restrict competition?

Recent guidelines recognize that fee-for-service physician joint ventures are not automatically illegal, so long as the organization has an active and ongoing program to review and change practice patterns by member physicians and create significant interdependence and cooperation among physicians to control costs and quality. This program may include:

  1. a)Establishing mechanisms to control utilization of health care services that are designed to control costs and assure quality of care, including:

1)         Regular evaluation of the individuals and networks aggregate performance with respect to utilization goals (participation in the hospital peer review process alone is insufficient);

2)         The development of practice standards and protocols;

3)         Remedial action for those who fail to adhere to utilization review guidelines;

4)         Case management;

5)         Preauthorization of services;

6)         Concurrent and retrospective review of inpatient hospital services; and

7)         Providing payors with reports of cost and quality of services provided and on the networks success in meeting its utilization and quality goals.

  1. b)Selectively choosing network physicians who are likely to further these efficiency objectives (having the network open to any licensed physician in the area will not be considered significantly exclusive)
  2. c)The significant investment of capital, both monetary and human, in the necessary infrastructure and capability to realize the claimed efficiencies.

In physician network joint ventures that do not share substantial financial risk, the venture should be structured so that the physicians do not share competitively sensitive information, thus reducing the likelihood of anti-competitive spillover effects outside the network, where the physicians still compete.

Large Networks

The 1996 Guidelines recognized that nonexclusive networks that exceed the thirty percent safety zone criterion may not be in violation of the antitrust laws, particularly in competitive markets. Recent settlements reached between physician networks and the DOJ have authorized networks to include a relatively large portion of physicians in a relevant market, where the joint pricing is accomplished through a qualified managed care plan (QMCP). The QMPC owners must share substantial financial risk, and the market share may only go higher than the twenty or thirty percent limits where the group subcontracts for services where there is a divergence of economic interests between the owners and the subcontracting physicians, such that the owners have the incentive to bring down the fees of the subcontracting physicians.

  1. d)Collectively provide medical and other non-price information to third-party payors.

A group of physicians may collect outcome data concerning a particular procedure they believe should be covered by a plan and communicate that information to a plan. In the course of providing medical data, physicians may collectively engage in discussions with purchasers about the scientific merit of that data. The federal agencies will not challenge the collective dissemination of underlying medical data that may improve purchasers resolution of issues relating to the mode, quality, or efficiency of treatment. The provision of data must be for informational purposes only and not for the purpose of coercion or boycott. Courts have also recognized the ability of individually competing physicians to collectively negotiate with third-party payors on additional non-price issues such as payment procedures, documentation requirements, methods of referring patients, and dispute mechanisms.

  1. e)Collectively provide fee-related information to third-party payors.

The collective provision of current or historical fees or other aspects of reimbursement, such as discounts, potentially raises some antitrust concerns. In order for this limited safety zone to apply, three conditions must be met: 1) the collection of the information must be managed by a third party, such as a purchaser, government agency, health care consultant, academic institution, or trade association; 2) although current fee-related information may be provided to purchasers, any information that is shared among or is available to the competing physicians furnishing the data must be more than three months old; and 3) there must be at least five physicians reporting data upon which each disseminated statistic is based, no individual physicians data may represent more that twenty-five percent of that statistic on a weighted basis, and any information disseminated must be sufficiently aggregated so that it would not allow recipients to identify the prices charged by any individual physician.

The safety zone is a limited one that does not cover a number of activities. It does not apply to collective negotiations between competing physicians and third-party payors. The collective fee information cannot be used with the explicit or implicit threat of a boycott, and it cannot be used for the provision of prospective pricing information. Because of the number of pitfalls in this limited safety zone, it should be employed with great caution and with competent advice.

  1. f) Collectively exchange price and cost information.

The participation of competing providers in surveys of prices for health care services, or surveys of salaries, wages or benefits or personnel does not necessarily raise antitrust concerns. In order to qualify for the safety zone, information exchanges of this type must meet the same requirements as for the provision of fee-related information to third-party payors. The survey must be managed by a third party, the information provided must be based on data more than three months old, and any information available must be sufficiently masked so that the source of the information cannot be traced to a specific provider.

The exchanges of future prices for provider services or future compensation of employees is not covered by the safety zone. In fact, if an exchange among physicians regarding future price or cost information results in an agreement among competitors concerning future prices for health care or future wages to be paid, the agreement will be unlawful per se price fixing.

  1. g)Enter into joint purchasing arrangements.

The federal agencies generally will not challenge a joint purchasing agreement among health care providers where: 1) the purchases account for less than thirty-five percent of the total sales of the purchased product or service in a relevant geographic market; and 2) the cost of the products and services purchased jointly accounts for less than twenty percent of the total revenues from all products and services sold by each competing physician in the joint purchasing agreement. Other factors which would minimize antitrust liability (even perhaps for joint purchasing agreements that do not explicitly fall within the above safety zone), include situations where members of a group are not required to use the group for all purchasing needs. Also, if negotiations for purchases are conducted by an independent agent rather than an employee of a participant, and if communications between the purchasing group and individual participants are kept confidential and not discussed with or disseminated to other participants, antitrust liability may be minimized or eliminated.

  1. h) Jointly petition the government.

Physicians are generally free to advocate their views collectively on economic matters in good faith and in a non-coercive manner, so long as the activity is directed to the government. Physicians may therefore lobby the federal or state government or any federal or state administrative agency, file lawsuits, or support or oppose legislation. Physicians may not, however, collectively threaten to boycott governmental programs. Physicians may also not engage in the use of the government process for the purpose of interfering directly with a competitors business.


The DOJ has provided three basic rules for physicians to avoid criminal liability under the antitrust laws:

First, do not agree with any competing independent physicians on any term of price, quantity, or quality, including fee schedules and relative value schedules.

Second, do not agree with any competing independent physicians on the patients you are willing to serve, the locations from which you are permitted to draw patients, or where you will locate your offices.

Third, do not agree with any competing independent physicians to refuse to offer your services to alternative delivery systems.

Physicians should seek an advisory opinion with respect to the governments enforcement intentions regarding proposed conduct that may have questionable antitrust consequences. The federal agencies have stated their intentions to work closely with the health care industry to provide guidance and reduce uncertainty in this complex area. Physicians should also seek the advice of an attorney competent in the areas of health care and antitrust whenever they venture into any situation that could potentially lead to antitrust violations.

Further information may be obtained from the following sources:

The Antitrust Division for business review letters:

Legal Procedure Unit, Antitrust Division

U.S. Department of Justice

Suite 215, 325 7th St., NW

Washington, D.C. 20530

(202) 514-2481

The Federal Trade Commission for advisory opinions:

Health Care Division

Bureau of Competition

Federal Trade Commission

Washington, D.C. 20580

(202) 326-2756

For public documents on the Internet:



Enforcement officials treat the labor of physicians as they would any other article of commerce. Thus, the starting point for an antitrust analysis of a merger of physician clinics is the same antitrust standards that apply to any other merger or combination of competing entities.

With the increase of consolidation in physician markets, officials have become skeptical as to whether traditional rules can be applied in traditional ways. The sole published case analyzing substantive issues regarding a proposed merger of physician groups applies the traditional rules with skepticism. The court found that these principles would not interfere with the ability of physicians to combine their practices where small numbers of individuals assets were being merged. The court found it inconceivable that Congress intended the Clayton Act to prohibit two urologists in Vicksburg, Mississippi, from practicing together under the same roof. (HTI Health Services, Inc. v. Quorum Health Group, Inc., 960 F.Supp. 1104, 1128 (S.D. Miss. 1997).

Basic Principles

The most logical starting point from which to predict the analysis is the five step process for analyzing a horizontal merger set forth in the DOJ/FTC Horizontal Merger Guidelines:

  1. The agency assesses whether the merger would significantly increase concentration and result in a concentrated market, properly defined and measured.
  2. The agency assesses whether the merger, in light of market concentration and other factors that characterize the market, raises concern about potential adverse competitive effects.
  3. The agency assesses whether entry would be timely, likely, and sufficient either to deter or to counteract the competitive effects of concern.
  4. The agency assesses any efficiency gains that reasonably cannot be achieved by the parties through other means.
  5. The agency assesses whether, but for the merger, either party to the transaction would be likely to fail, causing its assets to exit the market.

This guideline focuses upon defining product and geographic markets, measuring those markets and calculating market concentration.

Product Market Issues

Defining the product market involves looking for products which may be acceptable consumer substitutes for the product in question. The guidelines describe a product market as a product or group of products such that a profit maximizing firm that was the only present and future seller of those products would impose a small but significant increase in price.

There is no problem in narrowly defined markets, because the identification of participants can be broadened to include those who are likely to modify their practice in response to a price incentive. In HTI Health Services Inc. v. Quorum Health Group, Inc., the only published case analyzing substantive issues of a physician group merger, the court included an evaluation of product markets for physician services. The court concluded that various specialties constituted separate product markets and found four subcategories of physician product markets — primary care, general surgery, urology, and otolaryngology. Categorizing urology and otolaryngology as separate product markets from primary care or other specialties suggests that the courts are willing to focus on narrowly defined physician markets due to the lack of cross elasticity of demand for different types of physician services.

Other Court Decisions

Cases actually litigated apparently lead to broader product market definitions. For example, in Blue Cross and Blue Shield United of Wisconsin v. Marshfield Clinic (7th Cir. 1995) 65 F.3d 1406, the court explicitly refused to allow segregation of physicians into separate product markets based upon perceived quality, stating:

The suggestion that the price of being the best is to be brought under the regulatory aegis of antitrust law and stripped of your power to decide whom to do business with does not identify an interest that the antitrust law protects. The successful competitor, having been urged to compete, must not be turned upon when he wins.

The process of attempting to segregate a market based upon interviews with witnesses describing their preferences, particularly in a personal service context, have been discouraged because the views of market participants are not always sufficient to establish a market. See FTC v. Freeman Hospital 911 F.Supp. 1213, 1220 (W.D. Mo. 1995).

Geographic Market Issues

The geographic market is technically defined from the perspective of the consumer and described as the geographic area to which consumers can practically turn for alternative sources of product and in which the antitrust defendants face competition. While the consumer may be limited to dealing with physicians in a narrow area, the ability of other physicians to relocate to that area in response to a price incentive must be taken into account. Although physicians of all specialties can exhibit mobility, this has been given little weight when physician mergers are analyzed.

There have been many different approaches in determining a geographic market. The HTI case used the primary service area for the physicians. The primary service area was defined as an area from which 80% to 90% of the patients are drawn. Another approach has been to use the primary service area of the hospital at which the physicians practice. Other cases have described a geographic market as an entire city, a 25-mile radius around the hospital at which the physicians practice, and an area from which a clinic draws their patients. However, none of these approaches give significant weight to the possibility that hospital physicians could relocate or expand their practice to include these areas. Although the recent HTI case found narrow product and geographic markets, and high concentration, the case offers hopeful caveats for merging physicians by finding reasons to allow all aspects of the merger to proceed.

Constraints Imposed by Outside Sellers

The court found that surgeons located inside the market area could not successfully engage in anti-competitive behavior because their conduct would be constrained by general surgeons located at hospitals slightly outside the market. The surgeons in these outside hospitals were making inroads into the community, thus creating increased competition, which the local surgeons could not prevent.

Barriers to Entry

When barriers to entry are low, a high market share will not permit the post-merger entity to exercise market power. Therefore, no lessening of competition is implied.

Efficiencies and Other Practical Considerations

Although the HTI Court found the proposed merger would create a 100% of market share in urology, the efficiencies created by working together were so substantial that this was a natural monopoly that justified a combined practice.

With respect to the otolaryngology market, the court found that competition presented by one remaining physician was sufficient to defeat any attempt by the merged group to exercise market power.


A recent court ruling that physicians employed by a medical center could form a bargaining unit and engage in collective negotiations with their employer has spurred the interests of many physicians.

Under current law, unions cannot collectively bargain about fees for a group of independent private physicians. To lawfully negotiate as a group, independent physicians must be organized in a network where they share substantial financial risk or where substantial clinical or functional integration exists.

Definition of Physician Union

A unions main goal is to collectively bargain on behalf of employees. The National Labor Relations Act only applies to non-supervisorial (non-managerial) employees. A supervisor is defined as:

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 responsibility to direct them or to adjust their grievances, or effectively to recommend such action, is 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.

Thus, a physician union comprising private practice non-employee status physicians would be unable, as a matter of law, to bargain collectively on behalf of their non-employee physician members because the physicians are defined, under current law, as supervisors rather than employees..

Self-employed Physicians Interest in Union Formation

Self-employed physicians are solo practitioners, or partners or shareholders in group practices. Shareholders may technically be employees of the medical corporation involved, but they are also owners of the group practice, and are considered to be self-employed.

Managed care health plans have a significant amount of economic leverage over physicians which has enabled them to take substantial control over medical decision making for patients, drive down income of physicians, and threaten the viability of some physician practices. Federal and state antitrust laws bar any collective action that would allow physicians to force out health plans out of a market. This has led self-employed physicians to explore whether union formation will allow them to respond to the economic leverage of health plans.

Employed Physicians Interest in Union Formation

Some employed physicians have become disenchanted with practices of their employers. Some employers are demanding reductions in income, or have issued non-negotiable directives to their employed physicians. For this reason, employed physicians have explored union formation to engage in collective bargaining with their employers.

General State of Unions

Increased competition from cheaper foreign labor and advances in technology has made it difficult for unions. Generally, unions have been unable to assure job security and have had difficulty maintaining pay for their constituency.

Physician unions have been receiving increased scrutiny.   In August, 1998, the Justice Department sued the Federation of Physicians and Dentists in Delaware, alleging the union had arranged an illegal buyout by nearly all orthopedic surgeons in the state against Blue Cross. The complaint states that these FPD members are not employees, but independent practitioners. The matter is still being litigated, however, it would appear that the orthopedic surgeons will lose their lawsuit based on the law as discussed above..

Costs of Organizing a Union

The cost of organizing and maintaining a union can be substantial. The union needs to be staffed. The union needs to work with lawyers, economists, and accountants. Conducting elections to become certified as a bargaining unit is a costly process. The AFL-CIO has told physicians considering organizing a union that the physicians should have 50 charter members contribute $1,000 each and commit to pay $100 a month to the union for a year.

The Labor Exemption, From Antitrust Laws, As Applied to Physicians

The exemption is the product of five sets of statutes and judicial case law:

  1. The Clayton Act, which states 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. 15 U.S.C. 17.
  2. The Norris Laguardia Act, which declared a national public policy in favor of labor unions and stated that collective bargaining and union organization are protected activities. 29 U.S.C. 101-115.
  3. The National Labor Relations Act which creates a legally enforceable right for employees to organize, requires employers to bargain with employees through employee elected representatives, and gives employees the right to engage in concerted activities for collective bargaining purposes other mutual aid or protection. 29 U.S.C. 141 and following sections (for full text see
  4. The Labor Management Relations Act, passed in 1959, which builds on the National Labor Relations act and corrects problems and inequities which had developed in the enforcement of that Act.

Case law interpreting the scope of the examination when the labor relations statutes do not provide enough guidance.

Employed Physicians

Physicians who are employees fall under the labor exemption to the antitrust laws as long as they are not found to be supervisory employees. Supervisory employees do not qualify for the protection of the National Labor Relations Act. Employers of supervisory employees do not have to recognize their union, do not have to bargain with the union, and the employer is not restrained by the regulations of the National Labor Relations Act in how it can attempt to break up the union.

Self-employed Physicians

There must be a labor dispute before employees can engage in collective bargaining. Also, the collective bargaining must concern the terms and conditions of employment. Therefore, the physicians must be employees. For purposes of the labor exemption, there is no labor dispute if the physicians are independent contractors, entrepreneurs, or independent businesses. Since self-employed physicians are not in an employment relationship, they are considered to be independent contractors, entrepreneurs, or independent businesses.

Self-employed Physicians Do Not Qualify for Protection Under the National Labor Relations Act

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.

The criteria that courts look at to determine whether workers are employees or independent contractors are as follows:

  1. a) 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, the more likely it is that the individual is an employee. Independent physicians who contract with a heath plan are almost never subjected to the same kind of controls that an employer places on employees.
  2. b) Whether the worker is engaged in a distinct occupation or business. Those engaged in a distinct occupation, such as physicians, are more indicative of independent contractor status.
  3. c)The kind of occupation and whether work involved is usually done under the direction of an employer.
  4. d) The skill required for the work involved. The higher the degree of skill, the more likely that individual is an independent contractor.
  5. e)Whether the alleged employer supplies the instrumentalities, tools, and the place of work. Physicians in independent practice normally own or rent their own office space and equipment.
  6. f) The length of time for which the worker is hired. Indefinite and long term relationships are more indicative of employed statues.
  7. g) Whether the pay is by time period or by the job.
  8. h) Whether the work is part of the regular business of the employer. If so, then the person is more likely to be an employee.
  9. i) Whether the alleged employer and the worker believe they have created an employment relationship.

Success of Physicians in Tucson, Arizona

In a case involving a Tucson Medical Center, the National Labor Relations Board recognized the physicians bargaining unit as being appropriate and took the Medical Center to court to force it to recognize and collectively bargain with physicians union. The Medical Center believed that the physicians were supervisors, not employees, and therefore not entitled to bargain collectively. The U.S. Court of Appeals for the District of Columbia affirmed the boards decision to refuse to reopen the evidentiary record to consider the supervisory status argument that had been waived in a prior representation. See Thomas-Davis Medical Center v. NLRB, 157 F.3d 909 (D.C. Cir. 1998).

An AFL-CIO Affiliated Union May Not Collectively Negotiate on Behalf of Any One Individual

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. An AFL-CIO affiliated union is not permitted to engage in collective bargaining on behalf of any individuals, regardless of whether they are employees or not. Since self-employed physicians in independent practice are independent contractors, not employees, no person or entity may engage in collective bargaining on their behalf.

AMAs Position on Physicians and Collective Bargaining

The American Medical Association supports the right of physicians to engage in collective bargaining as long as physicians do not withhold care from patients to gain leverage for collective bargaining. The AMA also works for expansion of the numbers of physicians eligible for that right under federal law.


The AMA Code of Medical Ethics, Opinion No. 9.025, reads as follows:

Collection action should not be conducted in a manner that jeopardizes the health and interests of patients. Formal unionization of physicians and physicians-in-training may tie physicians interests to the interests of workers who may not share physicians primary and overriding commitment to patients and the public health. Physicians should not form workplace alliances with those who do not share these ethical principles.

Strikes reduce access to care, eliminate or delay necessary care, and interfere with continuity of care. Each of these consequences is contrary to the physicians ethic. Physicians should refrain from use of the strike as a bargaining tactic.

These are some measures of collective action that may not impinge on essential patient care. Collective activities aimed at ultimately improving patient care may be warranted in some circumstances, even if they create inconvenience for the management.

Physicians and physicians-in-training should take full advantage of the tools of collective action through which to press for needed reforms. Informational campaigns, non-disruptive public demonstrations, lobbying and publicity campaigns, and collective negotiations are among the options available which do not limit services to patients.

Physicians collective activities should be in conformance with the law.


The full text of Nevada Revised Statutes (NRS) and Nevada Administrative Code (NAC) can be found at:

The full text of federal statutes (laws), also known as the U.S. Code (U.S.C. or U.S.C.A.), or federal rules, also known as the Code of Federal Regulations (C.F.R.), may be found through many internet cites, one of which is: AND

The full text of any cases cited in this chapter may be found through the county legal library or through the UNLV law library.