Cashing Out

Should economic-credentialing policies leave radiologists out in the cold? Many hospitals — and courts — say 'yes.'cashing out

A recent court decision has raised visibility of the legal and ethical debate about economic credentialing.

In Baptist Health v. Murphy, the Arkansas Supreme Court held that a hospital's policy of denying staff privileges to any physician who "holds or acquires an ownership or investment interest in a competing hospital" violated the state's public policy by wrongly interfering with the physicians' contractual relation with their patients. In that case, members of a cardiology group were denied privileges at Baptist Medical Center based on their ownership interests in the Arkansas Heart Hospital®. The group sought an injunction against the hospital, and the trial court issued the injunction, which on appeal, the Arkansas Supreme Court upheld.

Economic credentialing is generally definedEconomic credentialing is generally defined as "the use of economic criteria unrelated to quality of care or professional competency in determining an individual's qualifications for initial or continuing hospital medical staff membership or privileges." This definition reflects organized medicine's position that admission to medical staff membership and the granting of practice privileges are medical staff functions that should be guided entirely by the obligation to provide safe, effective medical care to patients of the facility.

On the other hand, hospitals argue conflict of interest and portray economic credentialing as a way to prevent physician conflicts that might affect patient care. Otherwise, they assert, it creates incentives for physicians to inappropriately refer patients to a competing facility in which the physicians have an interest. Hospitals also argue that granting physicians hospital privileges when they hold a financial interest in a competing facility allows the physicians to "cherry pick" patients for treatment at that facility. They further contend that this leaves indigent and less lucrative patients to be treated at the hospital. Also, some hospitals argue that they simply must be able to control the number of physicians who have access to their facilities and equipment.

Physicians oppose economic-credentialing policies on a number of bases. Some file federal or state antitrust actions against their hospital; others cite public policy favoring no interference in the doctor-patient relationship; and some point to specific state statutes, such as consumer-protection or deceptive-practice laws. In this regard, the AMA reports that 13 states now have laws that address economic credentialing.

Most state and federal courts have dismissed economic-credentialing lawsuits based on antitrust or public policy grounds, but every case is decided on its own facts. However, Baptist Health v. Murphy is the first decision by a state supreme court that may serve as precedent for physicians seeking to oppose economic-credentialing practices.

Constrictive Contracts

So, what does this mean for radiologists? Radiology groups that open, or acquire an interest in, freestanding imaging centers could be affected by hospital economic-credentialing policies in the same way as any other physicians seeking to acquire or maintain hospital medical staff membership and practice privileges. Additionally, some consider exclusive contracts to be a form of economic credentialing. In fact, when exclusive contracts with radiologists, pathologists, anesthesiologists, and emergency physicians have been challenged on this basis, as well as an antitrust violation, most state and federal courts have upheld them as a reasonable, necessary means for hospitals to provide all necessary services while managing scheduling and equipment usage.

However, in U.S. ex rel. Kosenske v. Carlisle HMA Inc., a whistleblower lawsuit under the False Claims Act, the U.S. Court of Appeals for the Third Circuit found that an exclusive hospital contract with an anesthesiology group violated both the anti-kickback and Stark laws because of the arrangement for referrals to the hospital. Fortunately, radiology groups are seldom in a position to violate federal laws based on payment for, and volume of, referrals.

Ultimately, radiology takes the position that properly negotiated, freely entered, exclusive contracts should be based primarily on ensuring high-quality, 24/7 care for all hospital patients and are therefore not a form of economic credentialing. Nor are they a violation of federal antitrust or other laws, even when they may affect the privileges of other physicians seeking to perform radiological procedures at that facility.


By Bill Shields, J.D., LL.M., CAE, and Tom Hoffman, J.D., CAE
Bill Shields, J.D., LL.M., CAE (This email address is being protected from spambots. You need JavaScript enabled to view it.) is ACR general counsel.
Tom Hoffman, J.D., CAE (This email address is being protected from spambots. You need JavaScript enabled to view it.) is ACR associate general counsel.

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