The Covert Rationing Blog

The Practical Aspects of Fighting Confidentiality Clauses

November 19th, 2007 by DrRich

Last week, Roy M. Poses of Health Care Renewal asked the question: Why do physicians habitually sign contracts with health insurance companies, often without even reading them, when they know or suspect those contracts to contain language placing them or their patients at a disadvantage?

His question was prompted by a recent article in the LA Times documenting how Blue Cross of California had placed “confidentiality language” into contracts with physicians (and hospitals) that prevented them from publicly discussing fee negotiations, or even consulting with their attorneys for purposes of contract negotiation. According to the LA Times,

If they refuse to go along with the rules Blue Cross lays down for the negotiations, the providers say, the health plan threatens to stop sending them patients.

To his credit Dr. Poses is scandalized by such coercion. But to his greater credit he is even more nonplussed by the fact that physicians would cave in so readily to it:

I have personally witnessed several other anecdotes in which seemingly smart, dedicated physicians were willing to sign complex contracts which they clearly did not understand, usually with the excuse that “we would not be given this contract to sign if it were not in our best interest.” The contracts were long, written in complex legalese, and contained numerous questionable provisions, including provisions about confidentiality…

What is going on here? Were the physicians so conditioned by their prior hierarchical, ascetic training…that they really believed no one would ever give them a contract to sign that was not in their and their patients’ best interests? Were they too busy and tired to put in the effort to read the contract? Were they embarrassed to admit they did not understand it? Were they too conflict averse to contemplate refusing to sign the contract until they understood it and found it satisfactory?

He offers advice to these misguided physicians: don’t sign a contract until you really understand what’s in it, and you are confident that the contract is good for you and your patients. These doctors, he assumes, have just forgotten a fundamental business rule, and a pointed reminder will take care of it.

DrRich, being apparently (and sadly) more cynical than Dr. Poses, has another explanation.

When a health insurance company has gained complete control over a doctor’s access to patients, that company has also gained complete control over the doctor’s viability as a practitioner. From that moment, the doctor must do whatever he/she must to keep the insurance company satisfied. Under this sort of “business” arrangement, the concept of a “contract” takes on a whole new color.

When an insurance company (the party with absolute control) hands the doctor (the party subject to absolute control) a contract, they’re not offering a document that is subject to bilateral negotiation, with the idea of reaching an agreement that optimizes the the needs of both parties. No. They’re setting forth a list of infallible rules that are to be obeyed, rules no more subject to negotiation by individual doctors than the IRS regulations by individual taxpayers, or a Papal Bull by a humble nun. The doctor’s signature to that document is a mere kiss of the ring, a recognition of authority. To do otherwise than sign is to be excommunicated.

Faced with this reality, it is not surprising that doctors would sign insurance contracts without reading them, offering excuses like: “I’m too busy and important to waste my time with this tangled legalese,” or, “Since I’m a doctor and therefore pure in spirit, there’s nothing in here that can possibly be against my or my patients’ interests,” or even, “There are probably clauses in here that would give me an ulcer, but since I have to sign anyway I’d rather not find out about them.”

So while Dr. Poses’ advice to physicians is both wise and correct, DrRich suspects it will be received with the same sense of incredulousness that might have been expressed by Galileo if, at the time he was about to sign the forced recantation of his heliocentric ideas, a helpful bystander had tried to stop him with the admonition, “Wait, Galileo! Check your math; I think you may have had it right all along!”

Sometimes - and wishing to maintain one’s medical practice is one of those times - normal prudence and wisdom are not an option.

Posted in Gekkonian Rationing

7 Responses to “The Practical Aspects of Fighting Confidentiality Clauses”

1. Richard A Schoor MD wrote on 11/19/07 at 9:56 am :

   It is really that we have no leverage in the relationship. If United Health Care was to drop me, I’d go under. So as long as they pay me reasonably for my services, which they still do, I sign. Sad, but true.

2. Roy M. Poses MD wrote on 11/19/07 at 3:09 pm :

   First, note that was talking about all the sorts of contracts that physicians might be offered. In some such cases, the physician really does have a choice whether to sign the contract. In these cases, the physician really ought to make sure he or she fully understands the contract, and that the contract is in his or her best interests, and the best interests of his or her patients.

   But you (and the commentator above) seem to be arguing that physicians may not really have a choice whether to sign or not sign some managed care and/or insurance contracts.

   I’m no lawyer, but that seems equivalent to arguing that they are signing such contracts under duress. Contracts signed under duress can be voided in a court of law.

   Furthermore, if physicians are really being forced to sign contracts under these circumstances, wouldn’t that be a national scandal? And aren’t you actually charging that crimes were committed, on a national scale, perhaps involving national conspiracies?

3. DrRich wrote on 11/19/07 at 5:07 pm :

   Dr. Poses,

   Thanks for your comment. I agree with your main observation.

   My belief is that, as you suggest, physicians are indeed signing insurance contracts (both with private insurance companies and with Medicare) under duress (i.e., take it or leave it), and that it is a national scandal.

   But alas, it is not a crime, nor is it really a conspiracy. The health insurance companies and the feds are really just doing what we (i.e., society) have deputized them to do - to covertly ration our healthcare. To do that, they absolutely must gain control over the behavior of physicians.

   Accordingly these “contracts” are merely tokens of the authority insurance plans have gained over physicians, authority that has been sanctioned by society, legislated by Congress, and upheld by the Supreme Court.

   It is a chief source of the frustration being expressed by American doctors, in my opinion, and it poses a risk to patients, whose designated advocates so clearly have been forced to answer primarily to another master.

4. Vickie Pynchon wrote on 11/19/07 at 8:16 pm :

   The type of contracts you are describing are called “adhesion” contracts under the law.

   Although the law generally frowns on these non-negotiable agreements, it will enforce them (at least here in California) unless they are BOTH procedurally “unconscionable”(i.e., one-sided and “offered” on a take it or leave it basis to someone with very little or no bargaining power) AND substantively unconsionable (i.e., so unfair that it shocks the conscience).

   Several adhesion contracts have recently been found to be unenforceable by the California Supreme Court.

   In analyzing an arbitration agreement imposed upon its employees by a major international law firm, for instance, the Supreme Court recently found a confidentiality provision unenforceable.

   The provision at issue prohibited mention of the required mediation or arbitration “to anyone not directly involved” in those proceedings.

   As the Court explained:

   “Such restrictions would prevent an employee from contacting other employees to assist in litigating (or arbitrating) an employee’s case. An inability to mention even the existence of a claim to current or former O’Melveny employees would handicap if not stifle an employee’s ability to investigate and engage in discovery.

   “The restrictions would also place O’Melveny “in a far superior legal posture” by preventing plaintiffs from accessing precedent while allowing O’Melveny to learn how to negotiate and litigate its contracts in the future.

   “Strict confidentiality of all “pleadings, papers, orders, hearings, trials, or awards in the arbitration” could also prevent others from building cases. . . It might even chill enforcement of Cal. Labor Code § 232.5, which forbids employers from keeping employees from disclosing certain “working conditions” and from retaliating against employees who do so.”

   This doesn’t mean that all unfair confidentiality agreements contained in adhesion contracts would be considered substantively unconsionable. But I wouldn’t assume that the particular provision you mention might not “shock the conscience” of the Court.

   For more information on enforceable AND unenforceable adhesion contracts see http://www.negotiationlawblog.com/articles/adr-updates/new-cases-on-arbitration/ and the links contained there.

   Best, Vickie Pynchon, Settle It Now Dispute Resolution Services

5. DrRich wrote on 11/19/07 at 9:55 pm :

   Ms. Pynchon,

   After reading your comment and checking your website, it is clear to me that you really know what you’re talking about. So can we explore for a moment the theory that one particular type of insurance contract that doctors commonly sign under duress may meet the criteria you lay out for an unenforceable adhesion contract? I speak, of course, of Medicare.

   To be an unenforceable adhesion contract, you have pointed out, that contract must be “BOTH procedurally ‘unconscionable’(i.e., one-sided and ‘offered’ on a take it or leave it basis to someone with very little or no bargaining power) AND substantively unconscionable (i.e., so unfair that it shocks the conscience).

   There can be little doubt that there is virtually no choice for the average primary care doctor to opt out of Medicare, since the vast majority of his/her patients are enrolled in Medicare, and without those patients medical practice would be nearly impossible. So the Medicare contract is clearly take-it-or-leave-it, and so (I conclude) is procedurally unconscionable.

   Is it also substantively unconscionable? That is, is it so grossly unfair as to shock the conscience?

   Let us see. Physicians accepting Medicare have their pay rate determined not by market forces, but arbitrarily, by acts of Congress. Congress has famously been dialing back physician fees lately, so that, to make ends meet, doctors have to make it up with volume, moving from patient to patient every 7.5 minutes. Further, Medicare has fallen in love with something called Pay For Performance, whereby the feds get to script for the doctor exactly what he/she must spend those 7.5 minutes doing “for” the patient (no matter what the patient’s actual medical priorities). Medicare has in addition promulgated thousands of pages of arcane rules, regulations, guidelines and hints for proper medical behavior that are far less clear than, say, the IRS code. And it has launched a major Fraud Reduction program such that any minor violation of any of those impossible-to-interpret rules, regulations, etc., etc. are regarded as Healthcare Fraud, which (Congress has ruled) is now a federal crime, punishable by triple damages, $10,000 per “violation” and jail time. One form of such Healthcare Fraud would be to offer a patient a medical service that the doctor thinks the patient needs, but that Medicare has decided not to cover. Giving the Medicare patient the means to purchase desired medical services with his/her own money, in other words, is a barred and punishable activity (See Section 4507 of the Balanced Budget Act of 1997). Medicare has not come after huge numbers of doctors for fraud, but it seems to have done so arbitrarily, and when it points its fickle finger at you, well, given the tangled web of regs, you’re always guilty of something.

   I could go on. But haven’t we by now established that the Medicare contract (which is offered in a procedurally unconscionable way) is also substantively unconscionable? And if so, that it is unenforceable? This would be a most interesting proposition indeed.

   Now, which of you docs out there are going to defy Medicare, and undertake to formally establish the gross unenforceability of its adhesion agreement?

   Go ahead. I’ll hold your coat.

6. Vickie Pynchon wrote on 11/19/07 at 11:47 pm :

   You have the best chance of obtaining a ruling that an adhesion contracts is both procedurally and substantively unconscionable (and hence unenforceable) if you are a member of a certain class of people for whom the common (judge-made) law has special solicitude (i.e., employees) or for whom regulatory laws provide special protections, i.e., consumers who are party to credit card or cell phone contracts.

   The recent California Supreme Court case law is developing in response to employers, banks and cell phone companies’ attempts to deprive employees and consumers of their Constitutional right of access to the Courts by way of arbitration clauses contained in contracts of adhesion.

   Despite physicians’ reputation for general incompetence in their business and financial affairs (deserved or not) I do not believe the courts would treat them with special concern when it concerns their entry into contracts — adhesion or otherwise. They would, I presume, be treated as highly sophisticated “consumers” of insurance programs who could, if they wished, simply opt out of an insurance-based practice for a cash-on-the-barrell-head means of earing their compensation.

   To alert you to how difficult it is to convince a court to declare an adhesion contract uneforceable, you should be aware that HMO patients, for instance, such as those who are members of Kaiser Permanente, are bound by contracts of adhesion that deprive them of their right to seek recompense for the malpractice of a Kaiser physician in a court of law.

   Despite the fact that these are procedurally unconscionable contracts, the Courts have upheld their enforceability against charges that they are also substantively unconscionable.

   State courts now also have the added burden of overcoming the presumption created by the Federal Arbitration Act that all State laws — both regulatory and judge-made — are preempted by the federal law favoring the arbitration of disputes.

   You’d have to ask a lawyer with a much greater knowledge of the entire area to answer the question that you raise. I am afraid that I am something of an amateur in the law of arbitration since the bulk of my ADR work is as a mediator, not as an arbitrator.

   More importantly, my “ADR neutral” insurance policy does not permit me to actually PRACTICE LAW anymore. Therefore, no one reading this comment should rely upon these observations in planning their business or legal affairs. Anyone considering attempting to void a contract based upon its adhesive nature and potentially unconscionable terms, should consult an attorney who would carefully analyze the contractual terms, the conditions under which the complaining party was induced to enter into the contract and the emerging case law — both state and federal — that might apply.

   They don’t pay lawyers the big bucks because answers to these questions are easy to come by!

   Best of luck to you with your blog and all your other interesting projects.

   Best, Vickie Pynchon

7. The Covert Rationing Blog » Blog Archive » Let’s You Sue Medicare wrote on 11/26/07 at 7:45 am :

   […] A post on this site last week provoked an enlightening discussion, which DrRich will now summarize for you, following which he will solicit a volunteer for a noble but dangerous mission. […]

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