Rights and limitations in "exclusive provider" contracts

Contract Language. By Steven M. Harris, AMNews contributor. June 7, 2004.

CONTRACT LANGUAGE

A column examining the ins and outs of contract issues

SEE ARCHIVES

Physicians enter into so-called "exclusive provider" contracts with hospitals when a particular physician or, more typically, a physician practice group, has the exclusive right to exercise certain medical staff privileges in exchange for guaranteeing the hospital 24-hours-a-day, seven-days-a-week coverage for such services.

But exclusive provider contracts have been the source of litigation regarding the issue of economic credentialing. Economic credentialing occurs when hospital and medical staff privileging decisions are based on economic considerations such as the terms offered to a group practice by a hospital, rather than on traditional credentialing criteria.

While courts have ruled that hospital bylaws permit economic credentialing -- and there is no public policy that prohibits economic criteria -- exclusive provider contracts have nevertheless come under scrutiny. Still, these contracts are not going away.

The focus on economic credentialing has increased due to the impact of privileging on credentialing decisions in relation to the delivery of service, cost-control measures and other reimbursement mechanisms.

The hospital must notify the physician who no longer will practice in the designated department. Sometimes the physician is given the chance to enter into a relationship with the provider to whom the exclusive contract was given. You might decide to challenge the hospital's decision to close a department and limit your privileges if you are not offered or are unable to obtain an opportunity to provide such service under the exclusive provider contract.