Economic credentialing refers to the use of economic criteria unrelated to quality of care or professional competence in determining a physician’s qualifications for hospital medical staff membership or privileges. Many hospitals have created “conflict of interest” policies, “loyalty oaths” or analogous directives prescribing restrictions that result in the refusal to grant or renew staff privileges to physicians who own, have financial interests in, retain leadership positions at, or refer patients to competing entities. The AMA strongly opposes the use of economic criteria unrelated to quality of care to determine an individual physician’s qualifications for the granting or renewal of medical staff membership or privileges. (AMA Policy H-230.976).
- Anti-Kickback Implications
The AMA believes that the granting of medical staff privileges by a hospital to a physician in exchange for the referring of patients to the hospital could be considered “remuneration” under, and then may violate, the Anti-Kickback Statute. In both December 1999 and September 2002, the AMA asked the Office of Inspector General (OIG) to issue a fraud alert on economic credentialing. In 2004, the OIG issued Draft Supplemental Compliance Program Guidance for Hospitals, 69 Fed. Reg. 32012, in which it stated that discretionary decision making related to economic credentialing appeared to raise substantial Anti-Kickback Statute risks.
2. Case Law and AMA Action
In recent years, several states have enacted legislation opposing economic credentialing to some degree, including Idaho, Illinois, Massachusetts, Rhode Island and Tennessee. There have also been numerous lawsuits challenging hospitals’ engagement in economic credentialing, including one notable case in which the AMA has successfully opposed the practice: Murphy v. Baptist Health.
a. Murphy v. Baptist Health, 373 S.W. 3d 269 358 (Ark. 2010)
The Case: Baptist Health, the largest hospital system in Arkansas, adopted an economic credentialing policy, under which a physician who held a direct or indirect ownership or investment interest in a competing hospital would be ineligible for medical staff privileges at any Baptist Health hospital. A number of physicians, who were in apparent violation of the policy, sued to have the policy declared invalid. 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 to the Arkansas Supreme Court. The Arkansas Supreme Court affirmed, finding that the hospital economic credentialing policy tortiously interfered with physicians' existing and prospective business relationships.
AMA/Litigation Center support: The AMA and the Arkansas Medical Society, represented by the Litigation Center, intervened as additional plaintiffs in 2007 in the lawsuit. In addition to its direct participation in the trial of this case, the Litigation Center provided financial assistance to the physician plaintiffs.
Please visit the Litigation Center website for descriptions of additional economic credentialing cases with AMA involvement.
A subset of economic credentialing, exclusive credentialing, refers to any policy adopted by a hospital that effectively requires physicians on staff to refer only to that hospital.
The mechanisms of exclusive credentialing include conflict of interest policies, conditioning staff membership and privileges on promises not to refer to competing facilities, and pronouncements from a hospital board of trustees forbidding staff physicians from having financial relationships with competing facilities.
- Anti-Kickback Implications
Exclusive credentialing may violate the Anti-Kickback Statute. Prohibiting physicians from referring patients to competing institutions is essentially indistinguishable from an affirmative requirement to make referrals. When a hospital effectively requires physicians to refer patients to it by prohibiting referrals to other facilities as a condition to granting or renewing privileges, it follows that the hospital is offering remuneration (privileges) with the intent to induce referral. There is no safe harbor to the Statute that protects the exchange of remuneration for referrals.
2. Dangers of Exclusive Credentialing
The AMA believes that exclusive credentialing harms patients, federal health care programs, and the health care marketplace. Not only does it restrict a physician’s ability to provide health care based on his/her professional judgment and the patient’s best interests, but it significantly undermines quality of care and results in higher costs. Furthermore, exclusive credentialing can chill the development of new surgery centers, specialty hospitals, or other facilities. Hospitals should be encouraged to address economic realities in today’s health care environment through innovation and fair competition, rather than by using internal economic factors to dictate how physicians practice medicine.
Affordable Care Act (ACA) Implications
The effects of the ACA on economic credentialing will likely be felt through the development and implementation of Accountable Care Organizations (ACOs). Specifically, the ACA’s Medicare Shared Savings Program offers physicians incentives to enhance accountability for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to them. ACO participants will in turn share in the savings they achieve. Due to this increased focus on cost-control, the ability of providers to meet financial benchmarks will play a critical role in the success of an ACO and therefore put increased pressure on the consideration of economic factors when choosing and maintaining a physician panel.
Consequently, there will be a substantial need for governmental guidance, either through statutory enactment or CMS rulemaking to prevent economic credentialing in this arena. In the interim, the Joint Commission has created a model for startup ACOs and mandated in its Ongoing Professional Practice Evaluation that health systems and hospitals credential their physicians on the basis of professional practice trends that impact quality of care and patient safety. The AMA fully supports this position and opposes economic credentialing in regards to ACOs.
Strategies for Hospitals
When developing medical staff bylaws, the AMA encourages the following practices:
- Develop bylaw provisions which clearly articulate membership and privilege criteria, including a provision prohibiting economic credentialing.
- Provide for medical staff membership and privileges to be granted, continued, modified, or terminated by the Board only upon recommendation of the medical executive committee for reasons directly related to quality of patient care and other provisions of the medical staff bylaws.
- Provide that under no circumstances shall economic criteria unrelated to quality of care be used to determine qualification for initial or continuing medical staff membership or privileges.
- Encourage medical staff involvement in the development of medical staff development plans and strategic planning activities.
- Encourage medical staff involvement in the development of conflict of interest policies.
- Encourage membership in the AMA and the Organized Medical Staff Section (OMSS) in order to raise awareness of the many issues affecting medical staffs and to utilize the advocacy resources of the AMA.
- Notify the AMA of economic credentialing practices or policies implemented by hospitals.
- Establish a dispute/conflict resolution process in the medical staff bylaws whereby the medical staff and hospital governing body can discuss and resolve issues that affect the medical staff.
Please refer to the AMA Physicians Guide to Medical Staff Organization Bylaws, 5th Edition for additional guidance.
Strategies for Physicians
The AMA encourages the following physician practices regarding economic credentialing:
- Work with hospital boards and administrators to develop appropriate uses of physician hospital utilization and related financial data; ask that any such data collected be reviewed by professional peers and shared with the individual physicians from whom it was collected.
- Attempt to assure a provision in the hospital medical staff bylaws of an appropriate role for the medical staff in decisions to grant or maintain exclusive contracts or to close medical staff departments.
- Communicate its policy and concerns on economic credentialing on a continuing basis to the American Hospital Association, Federation of American Health Systems and other appropriate organizations.
- Encourage state medical societies to review their respective state statutes with regard to economic credentialing and, as appropriate, seek modifications therein.
- Explore the development of draft model legislation that would acknowledge the role of the medical staff in the hospital medical staff credentialing process and assure various elements of medical staff self-governance.
- Study and address the issues posed by the use of economic credentialing in other health care settings and delivery systems. (AMA Policy H-230.975)
For further information, contact the OMSS staff office or call the AMA Office of General Counsel at (312) 464-7521.