Exclusive: Do Hospital Physician and Resident Unions Deter Investors?

By Tami Kamin Meyer

Membership in labor unions for wage and salary workers shrank from 10.3% in 2021 to 10.1% in 2022, according to the U.S. Bureau of Labor Statistics,  However, the move to unionize has garnered growing attention among physicians, residents, nurses, and other healthcare staff who argue they are fighting for increased wages, better working conditions and more.

Matt Fontana, who specializes in Labor and Employment law as a partner in the Philadelphia office of Faegre Drinker, said it is actually not physicians who are increasing the ranks of unionized healthcare staff. Rather, it is residents and nurses. Resident organizing attracts “more ink” than physician staff unionizing because it has traditionally occurred less often, said Fontana.

With that in mind, will the unionization of hospital employees deter investment in those facilities?

Impact of physician or resident unionization on PE investment

“I don’t think investors shy away from hospitals where doctors are unionized,” said Rob Andrews, CEO of Health Transformation Alliance. Andrews, who is also a lawyer, served in the U.S. House of Representatives for 24 years. Upon his departure from Congress, then-President Barack Obama lauded him for his pivotal role in writing and implementing the Affordable Care Act.

In Andrews’ mind, “Doctors made recommendations, but patients make the decisions about care,” he said.

What patients want, he said, is excellent medical care. Therefore, the question of whether a physician, resident, or nurse is a union member is secondary to the experience a patient has when interacting with the hospital group, he said.

“Patient experience is even more important in medicine than restaurants,” he argued.

If Andrews’ contention is accurate, then the unionization of a hospital staff won’t deter investors because their interest in a facility is based on its profit and loss statements, not the employment status of its staff, he said.

However, if the unionization alters the ways medical care is dispensed in what is perceived by patients as negative, then an investor may think twice, he said.

“If cost structure goes up due to collective bargaining and profits don’t, [I, as an investor need to ask] did unionization impact costs?” said Andrews.

Still, Andrews does not believe investors shy away from purchasing medical facilities where the medical staff is unionized.

Why the uptick?

While the vast majority of physicians, nurses, and residents are not unionized, news of new healthcare groups seeking to organize is becoming more commonplace.

Fontana attributed that to several factors, which are not necessarily the same for physicians, residents, and nurses. While each group may seek collective bargaining for an increase in compensation, residents and nurses often have additional concerns, he said.

Among them are staffing concerns relating to hours a resident is on call and off-call. Others may seek better shift times or additional control over their work schedule. Many nurses are focused on the creation of patient-nurse ratios.

“Nurses are getting burned out but healthcare systems are fighting mandated ratios,” said Fontana.

Overall, the friction between medical staff and management can be attributed to a lack of communication, he said. “An overarching issue is the perception that management isn’t listening.”

The Structure of the Acquisition

According to Fontana, before an investor considers bankrolling the purchase of a hospital, healthcare facility or other medical entity, it is imperative to consult with an attorney specializing in labor and employment law. That’s because the verbiage and laws governing Collective Bargaining Agreements (CBAs) differ depending on whether the facility is a public health system or a private one.

State laws apply to CBAs for public health employers while Federal law governs them for private health entities. Moreover, state laws differ from one jurisdiction to the next. For example, in some states, a buyer may be authorized to renegotiate the terms of a CBA, if one exists.

Even if the doctors, residents, and/or nurses at whatever healthcare-related entity an investor wishes to purchase are not unionized at the time of the purchase, Fontana still urges additional due diligence.

“Sometimes investors want to conduct an analysis of the likelihood of unionization,” said Fontana. Questions to be answered include:

  • The culture of the medical staff, residents, and nurses.
  • Determining whether the medical staff has ever attempted to unionize.
  • The geographical location of the healthcare system that is targeted for investment. More entities are unionized in New York and California, for example, while fewer in the South are.
  • Developing a clear understanding of the history between the medical staff and management throughout the life of the facility or hospital system in question.

The potential impact of unionization on patients

Another consideration for investors when it comes to the unionization or possible future organization of the medical team is how patients are impacted by a CBA.

Said Andrews, “The unionization or lack thereof of physicians will not impact patient decisions where to go for care. What investors look at is the profit and loss statements” of the target of their acquisition attempt.

However, he noted that if patients are negatively impacted by some of the elements of a CBA, then the story might be different.

“If unionization results in a list of patient-facing changes, there may be a risk patients will stay away. If changes are better, more patients may come. It’s not the unionization itself,” said Andrews. Or, for example, if a CBA results in alterations like changed business hours, “a patient may go to another doctor. Or, a union member may decide to see a unionized doctor.” “Patient experience is even more important in medicine,” Andrews said, than in many other customer service scenarios.

Related Posts