Legal: Protect Yourself
Features
Written by Lorelei Van Wey   
Friday, 29 February 2008
Legal: Protect Yourself - Health Executive - RedCoat Publishing
Attorney Lorelei Van Wey says hospitals can take steps to prevent problems due to internal physician group disputes.
When a physician practice implodes, the hospital may be the only cool head in an otherwise heated, and often bitter, dispute. Hospitals that engage the physician practice group to be the exclusive provider of a hospital-based service should take care to protect the efficiency of the hospitals’ operations and ensure continuing quality of patient care.

Increasingly, hospitals are engaging a physician or a physician group to cover healthcare services that assist other physicians in their treatment of patients (e.g., radiology, pathology, and anesthesiology) or that facilitate the hospital’s ability to provide 24-hour coverage (e.g., ED and neonatology intensive care unit).

For the hospital, the advantages of entering into such contracts are numerous. Exclusive contracts help ensure 24/7 service, save critical time in consults, promote a more harmonious work environment by eliminating lobbying for referrals, promote better use of resources, facilitate heightened review of physicians, and provide for heightened requirements above the medical staff bylaws, such as board certification and board eligibility.

For the administration, exclusive contracts help delineate the hospital’s expectations for quality of care, coverage, and leadership. For cost containment, which benefits both patients and the hospital, exclusive contracts may be used to prevent balance billing of patients and overutilization of services.
     
Minimizing disruption
Of course, these advantages are jeopardized when the group of physicians holding the exclusive service contract ends up in an internal dispute, resulting in one set of physicians splitting from the group or the group completely disintegrating.

When this happens, the hospital should first determine whether or not the group holding the contract remains functional. In other words, can the remaining physicians fulfill the contract obligations to the hospital at a level acceptable to maintain the quality of patient care? The hospital should also determine whether the group remains as the business entity that entered into the contract initially. In other words, are the physicians still organized as the legal entity whose name is on the contract?

If the physician practice does not continue in business, or the group is no longer a viable entity able to provide the services required under the contract, the hospital should seek to terminate the contract.

If some physicians split from their group, leaving the practice group in business with the remaining physicians, the hospital may continue in the exclusive relationship with the group while ensuring that the departing physicians leave with the least disruption to the hospital and patient care.

The smoothest way to minimize the disruption and ensure the hospital does not get caught up in the group’s internal disputes is to put certain safeguards in place well before any disputes arise. This can be done through the exclusive contract itself and the medical staff bylaws at the hospital.

First, the hospital may want to require the contracting group to obtain waivers from each group member. The waivers would require any physician member who leaves the group to simultaneously resign his or her appointment to the hospital’s medical staff along with any privileges to practice in the service area covered by the exclusive contract.

Second, the hospital may want its medical staff bylaws to clearly set forth which service areas of the hospital are subject to exclusive contracts and what happens (1) when an exclusive contract is terminated or expires (all group members’ privileges in the contracted area likewise would expire and, if the physician holds no other privileges, his or her medical staff membership would expire, all without giving rise to any hearing rights) and (2) when a physician resigns from the exclusive contract group (the physician would simultaneously resign his or her privileges in the contracted services area and, if the physician holds no other privileges at the hospital, his or her medical staff membership as well).

Absent these types of safeguards, a hospital may handle the practice group’s split-up by drawing a distinction between a physician’s possession of staff privileges and the right to use the hospital’s facilities. Generally, courts have found that a hospital’s grant of privileges reflects only on a physician’s qualifications and competency and does not equate to the physician’s right to use the hospital’s facilities.

That is, the physician may hold privileges but be precluded from exercising them by the existence of an exclusive contract with a group to which the physician does not belong. The physician may maintain privileges as long as allowable under the medical staff bylaws and exercise those privileges in the event the physician rejoins the exclusive contract group or joins a group that obtains an exclusive contract.

Some physicians have argued that holding privileges without having the ability to exercise them offers no practical value, but courts have recognized that, as a member of the medical staff, the physician may continue to have the right to vote, hold office, and serve on medical staff committees. Moreover, any administrative decision to allow a physician to hold but not exercise privileges in no way signifies a negative assessment of physician competence.

Nonetheless, this method of administratively dealing with the effects of a group’s breakup on the staff privileges and membership of individual group members is more often challenged in litigation and more likely to result in disruption at the hospital than situations in which the hospital has provided for contractual waivers and clear bylaws procedures. Clearly, it’s better to have safeguards in place before a group breakup occurs.

Exclusive contracts should be reviewed by your legal department or counsel to ensure adherence with state law and conformity with the bylaws. The requirements for exclusive contracting, physician credentialing, and medical staff bylaws may differ under the laws of each state. This article does not explore the requirements for each state nor the process by which departments of hospitals may be closed or become subject to exclusive contracts.

With hospitals increasingly looking for the advantages brought by exclusive contracting, administrators would benefit from planning that would keep the internal disputes of physician practices from spilling over into the hospital.

Lorelei Van Wey is a partner at Lash & Goldberg LLP (www.lashgoldberg.com), which represents national and regional corporations and executives in all aspects of civil, commercial, and regulatory litigation and dispute resolution arising in healthcare.
 
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