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Economic Credentialing

Cathey v. Baptist Health (Pulaski Cty., Ark. Cir. Ct.)

Also under Hospitals and  Medical staff

Outcome:   Favorable

Issue

The issue in this case was whether a gynecologist on staff at a Baptist Health hospital could lose her privileges simply because her physician husband had an interest in a spine surgery hospital that competed with Baptist Health.

AMA interest

The AMA opposes economic credentialing and supports the enforceability of medical staff bylaws by medical staff members.

Case summary

This case arose from the Baptist Health Economic Credentialing Policy, which is intended to prevent physicians on the medical staff of any Baptist Health hospital from competing with Baptist Health.  Dr. Cathey had served on the medical staff at Baptist Health Medical Center – Little Rock for approximately 19 years before the incidents giving rise to the lawsuit, and no one questioned her clinical competence.  However, Baptist Health wanted to terminate her medical staff membership because her physician husband owned an interest in Arkansas Surgical Hospital, a hospital specializing in spinal surgery. 

Because Arkansas Surgical Hospital is not equipped for gynecological care, Dr. Cathey could not, absent extraordinary circumstances, refer her patients to it.  Thus, the sole purpose of the Economic Credentialing Policy, as applied to Dr. Cathey, was to thwart competition, rather than to protect legitimate commercial interests, such as trade secrets or patient relationships.

Dr. Cathey sued Baptist Health for a court order preventing the termination of her privileges.  Her complaint alleged several legal theories, principally that the Baptist Health Economic Credentialing policy was an unlawful restraint of trade and in violation of the Arkansas Deceptive Trade Practices Act.  The court temporarily enjoined Baptist Health from enforcing its Economic Credentialing Policy against Dr. Cathey.

The case ultimately settled.  Although the full settlement terms were confidential, as a result of the settlement, Dr. Cathey’s husband divested his interest in Arkansas Surgical Hospital, and Dr. Cathey was then allowed to remain on the medical staff at Baptist Health. 

Litigation Center involvement

The Litigation Center, along with the Arkansas Medical Society, provided financial support to Dr. Cathey’s lawsuit.  After her settlement with Baptist Health was finalized, Dr. Cathey refunded the money that the Litigation Center and the Arkansas Medical Society, had contributed toward her litigation costs.

Glusic v. Avera St. Luke's, 649 N.W.2d 916 (S.D. 2002)

Also under Hospitals and  Medical staff

Outcome:   Very unfavorable

Issue

The issue in this case was whether a hospital could terminate a physician’s staff privileges for reasons not set forth in the medical staff bylaws.

AMA interest

The AMA supports the enforceability of medical staff bylaws by medical staff members.

Case summary

Dr. John Gluscic applied to the medical staff at Avera St. Luke’s Hospital.  Although he satisfied the pertinent professional standards, the hospital denied his application because he did not meet its economic requirements.  The trial court ordered the hospital to admit him to the medical staff, and the hospital appealed.

The South Dakota Supreme Court reversed the lower court's ruling and held that, because the medical staff bylaws did not specifically prohibit it, the hospital could use economic credentialing in its staffing determinations. After the decision, Avera St. Luke's terminated Dr. Gluscic's medical staff privileges. 

Dr. Gluscic sued for reinstatement of those privileges, contending that, under the medical staff bylaws, he could not be discharged except for certain specified causes, none of which applied to him. The trial court, however, dismissed his complaint, finding that he had been admitted to the staff only by virtue of an injunction that was later found to have been erroneously entered. Therefore, although the medical staff bylaws did not explicitly state that Dr. Gluscic could be terminated because the injunction had been overturned, implicitly the appointment to staff privileges had been conditional on the viability of the lower court decision. That decision was found to have been improper, and so, according to the trial court, he should never have been appointed to the staff.

Dr. Gluscic appealed the trial court decision to the South Dakota Supreme Court, but the Supreme Court affirmed the trial court decision that Avera St. Luke's was entitled to terminate his staff privileges.

Litigation Center involvement

 

The South Dakota State Medical Association and the Litigation Center filed an amicus curiae brief in the South Dakota Supreme Court to support Dr. Gluscic.

 

Higgins v. Baptist St. Anthony's (Potter Cty., Tex. Dist. Ct.)

Also under Antitrust and Hospitals

Outcome:    Somewhat favorable

Issue

The issue in this case was whether a parent health care organization, its managed care network and its hospital violated a Texas antitrust statute by attempting to terminate (“deselect”) from the network two physicians who had invested in a competing surgical hospital.

AMA interest

The AMA opposes discrimination against physicians who have ownership interests in specialty hospitals.

Case summary

The case arose from the attempt by a managed care network to deselect the plaintiff physicians from the network’s provider panel, in retaliation for the physicians’ investment in a surgical hospital.  The surgical hospital competed with a general hospital that was owned by the parent of the managed care network.  Furthermore, the parent urged Blue Cross Blue Shield of Texas (“Texas Blue”) to deselect the physicians and other investors in the surgical hospital from the Texas Blue provider network. 

The two physicians sued the parent organization, its managed care network, and its hospital for violations of the federal and Texas anti-kickback statutes and the Texas antitrust statute.  Before the case could be tried, it was settled and dismissed.  As part of the settlement, the parent health care organization bought a majority interest in the specialty hospital and agreed that it would not discriminate against physicians who had also invested in the specialty hospital.

Litigation Center involvement

The Litigation Center and the Texas Medical Association contributed toward the physicians' litigation expenses.

Mahan v. Avera St. Luke's, 621 N.W.2d 150 (S.D. 2001)

Also under Hospitals and  Medical staff

Outcome:   Very unfavorable

Issue

The issue in this case was whether a hospital could refuse medical staff applicants based on economic criteria.

AMA interest

The AMA opposes the “economic credentialing” of physicians.  More generally, the AMA supports the protection of the physician-patient relationship.

Case summary

The South Dakota Supreme Court, reversing the trial court, found that the hospital administration was entitled to refuse applicants to the medical staff based on economic criteria, including the hospital’s concern that physicians in one specialty might compete with physicians in a second specialty.  In South Dakota, therefore, physicians may be subject to economic credentialing by hospitals. 

In a footnote, the court also questioned the legal right of certain members of the medical staff to open an ambulatory surgery center in competition with the hospital.  The court observed that, although physicians are not necessarily employees of the hospital, their role is sufficiently similar to that of an employee that they should not be allowed to compete with the hospital.

Litigation Center involvement

The Litigation Center joined a brief of the South Dakota State Medical Association opposing the hospital’s decision to consider applicants to its medical staff based on economic considerations. The brief argued that the bylaws created a binding contract between the hospital and its staff under which staff membership should depend on medical competence, rather than economic profitability.  The brief also argued that the bylaw provisions apply to applicants for staff membership as well as current members. 

Murphy v. Baptist Health, 373 S.W.3d 269 (Ark. 2010)

226 S.W.3d 800 (Ark. 2006), 209 S.W. 3d 360 (Ark. 2005), 189 S.W.3d 438 (Ark. 2004)

Also under Hospitals and  Medical staff

Outcome:   Very favorable

Issue
The issue in this case is whether a hospital's economic credentialing policy is illegal because it is overbroad and unnecessarily interferes with the physician-patient relationship.

AMA interest
The AMA opposes the "economic credentialing" of physicians.  More importantly, the AMA supports the physician-patient relationship.

Case summary

Baptist Health, the largest hospital system in Arkansas, adopted a policy which it entitled "BAPTIST HEALTH CONFLICT OF INTEREST POLICY (Economic Credentialing)."  The economic credentialing policy provided that a physician who holds a direct or indirect ownership or investment interest in a competing hospital is ineligible for medical staff privileges at any Baptist Health hospital.  It broadly defined an indirect ownership or investment interest as including any unbroken chain of attributional relationships between the physician and the person or entity with the ownership or investment interests.  Also, ownership or investment could include such a tangential matter as ownership of the land under a hospital parking lot.

A number of physicians, in apparent violation of the economic credentialing policy, sued to have it declared invalid. The AMA and the Arkansas Medical Society on behalf of the Litigation Center intervened in the lawsuit as additional plaintiffs.  Following a two-week trial, the court ruled in favor of the plaintiffs, declaring the Baptist Health policy unconscionable and illegal and enjoining its enforcement.  The opinion stated: "The heart of this case is the patient-physician relationship.  The relationship is entitled to special protection."  Baptist Health appealed that ruling to the Arkansas Supreme Court.

On September 30, 2010, the Arkansas Supreme Court affirmed, finding that the hospital economic credentialing policy tortiously interfered with the physicians' existing and prospective business relationships.  It reversed on the finding of a violation of the Arkansas Deceptive Trade Practices Act, because, it held, there was no private right of action for injunctive and declaratory relief under that statute.

Litigation Center involvement
The AMA and the Arkansas Medical Society, representing the Litigation Center, intervened as additional plaintiffs in the lawsuit.  In addition to its direct participation in this case, the Litigation Center has financially assisted the plaintiff physicians.

Potvin v. Metropolitan Life Insurance Co., 997 P.2d 1153 (Cal. 2000)

Also under Due process and Termination of physician participation in provider networks

Outcome:   Very favorable

Issue

The issue in this case was whether a managed care organization could properly terminate a physician’s participation in its physician-provider networks without cause, notwithstanding an “at will” termination provision in the provider contract.

AMA interest

The AMA supports fairness in the relationship between managed care organizations and the physicians participating in their provider networks.

Case summary

Dr. Potvin sued MetLife, alleging a violation of statutory and common-law rights to “fair procedure,” when it terminated him without cause from participation in its physician networks.  The trial court entered summary judgment against Dr. Potvin.  However, the California Court of Appeal reversed, holding that Dr. Potvin had a right under California common law to fair procedure, notwithstanding an “at-will” termination provision in the contract.

On May 8, 2000, by a 4-3 decision, the California Supreme Court affirmed the Court of Appeal.

Litigation Center involvement

The Litigation Center paid a portion of Dr. Potvin’s legal fees.  Additionally, the Litigation Center, along with the California Medical Association, filed an amicus curiae brief with the California Supreme Court to uphold the appellate court’s ruling.