South Dakota hospitals can choose which physicians get privileges, state Supreme Court rules

The state's highest court says hospitals don't have to extend privileges to every qualified physician; organized medicine says limitations ultimately hurt doctors and patients.

By Tanya Albert, amednews staff. Feb. 5, 2001.

Just because a doctor is medically qualified to practice in a hospital doesn't mean administrators have to open their doors to that physician, the South Dakota Supreme Court said in a January ruling.

Hospitals have the right to limit the number of specialists to whom they'll extend privileges so they can ensure economic survival, the court said. And the medical facility can make the decision without looking at a particular doctor's credentials or abilities.

Case at a glance

The American Hospital Assn. says the ruling lets its members make the decisions needed to keep hospitals solvent and provide the best care to the community. But the American Medical Assn. says the ruling makes it difficult for doctors to practice in a given community and limits patients' access to quality medical care.

Both sides filed briefs in the South Dakota case, which they believe will have statewide and nationwide implications. It is one form of a nationwide trend of hospitals' denying privileges based on economic reasons rather than qualifications.

"Hospital boards have a responsibility to meet the needs of their community, and the court said they have the authority to make those decisions," said Maureen Mudron, Washington, D.C., counsel for the American Hospital Assn.

"It's a huge inconvenience for a physician to try to practice in the community and it may put patients at risk," said Randolph D. Smoak Jr., MD, president of the AMA and a South Carolina surgeon.

It is particularly worrisome in rural areas where there is only one hospital serving a large geographic area. If a physician can't practice at the only hospital in the community, doctors may be forced to practice in other communities where they can get hospital privileges, Dr. Smoak said.

As a result, patients have fewer health care options.

Economic credentialing

Tying hospital privileges to economic factors can take on several forms. For example, some hospitals have said physicians will be granted privileges only if they agree not to have privileges at any other area hospitals. Other hospitals have said privileges are contingent on the doctor's using the hospital for a certain percentage of his or her needs.

Avera St. Luke's Hospital -- the only hospital in a 90-mile radius -- closed its medical staff to doctors applying for orthopedic surgery privileges after a group of doctors built a new outpatient surgery center, Orthopedic Surgery Specialists.

None of the doctors who had privileges lost them. But the hospital denied privileges to a new orthopedic surgeon with the Orthopedic Surgery Specialists. The doctors said the hospital closed the staff as punishment for building the outpatient center.

The hospital said it closed the staff for economic reasons. In the first seven months that the Orthopedic Surgery Specialists' surgery center was open, the hospital lost 1,000 hours in operating room usage and the revenue that goes along with it, according to the documents.

The hospital board of directors decided credentialing more orthopedic surgeons in such a small community would hurt the nonprofit hospital's chances of survival. With too many doctors performing spinal procedures in Aberdeen, the hospital wouldn't be able to recruit its own neurosurgeons, according to court documents. Neurosurgeons in small communities often supplement their practices by performing back and spine surgeries. And if the hospital failed and had to cut back services, that would hurt the community of about 25,000, the hospital said.

The physicians said the hospital doesn't have the right to deny privileges without even looking at the qualifications of the doctor who's applying, and they said the hospital violated its bylaws when it decided to close privileges for all orthopedic surgeons.

A lower court agreed with Orthopedic Surgery Specialists that the hospital should have to extend privileges. But the South Dakota Supreme Court sided with the hospital.

"The board specifically determined that the staff closures were in the Aberdeen community's best interests and were necessary to ensure 24-hour neurosurgical coverage for the Aberdeen area," the justices wrote.

Medical societies say the hospital's rationale for denying privileges is wrong.

"Hospitals shouldn't be allowed to close staff privileges," Dr. Smoak said. "The staff should be open to all physicians who are qualified."

The AMA last year adopted a policy against hospitals' using economic criteria unrelated to quality of care or professional competency to decide whether a physician should be given staff privileges, a practice commonly called economic credentialing.

Also last year, the AMA asked the Dept. of Health and Human Services' Office of Inspector General to look at exclusive credentialing and to issue a fraud alert warning hospitals and physicians about the practice. Exclusive credentialing takes the focus off what's best for the patient, the AMA said, and therefore is among the most flagrant types of kickbacks.

In South Dakota, physicians say the next step is to ask state legislators to pass a law barring hospitals from making staff privilege decisions based on economic reasons.

"If there are quality factors that need to be considered, we don't have a problem with that," said L. Paul Jensen, CEO of the South Dakota State Medical Assn. "We don't feel [economic reasons] are appropriate criteria to make that decision."

ADDITIONAL INFORMATION:

Case at a glance

Drs. John Mahan, James MacDougall, Michael Holte, Chester Mayo, Matthew Reynen, and Donald Frisco, individuals, and residents of Aberdeen, S.D., and Orthopedic Surgery Specialists, LTD v. Avera St. Luke's, a South Dakota nonprofit community hospital

Venue: South Dakota Supreme Court
At issue: Can a hospital deny a doctor the right to practice in the hospital if he or she is medically qualified to do so?
Ruling: Yes, the court said. Just because someone is medically qualified to practice in a hospital doesn't mean hospital executives have to give that physician privileges. Hospitals are allowed to make decisions that ensure economic survival; the court said that was the case here.
Potential impact: Organized medicine worries that decisions based on a hospital's bottom line limit a patient's access to quality medical care and hurt the doctor-patient relationship.