Spurred by pressures on their income a group of orthopedic surgeons decide to open their own surgery center to compete with the community hospital in town. The surgeons direct their best payer mix patients to their surgery center and their Medicare/Medicaid patients to the hospital. The avaricious surgeons rake off the revenue cream and the hospital, which used its much needed surgical revenues to finance its emergency rooms and other services that do not directly pay for themselves are left holding the bag as their revenues drift south.
Hard ball community hospital sitting 300 miles from any competing facility maintains a virtual monopoly and stangle hold on the health care of a small inter-mountain community. It's "our way or the highway." The hospital demands absolute loyalty from its physicians and punishes those who have the temerity to suggest competition might be healthy to the community, because of business and consumer complaints about the high cost of medicine in the community. Any hint that a physician might be contemplating an alternative or office venue for surgery is met with suspension of privileges for violation of the hospital's conflict of interest policy.
Welcome to the brave new world of economic credentialing. Can hospital's rely on the use economic factors rather than quality skill assessment to make membership decisions concerning its medical staff? The short answer is that nobody has stopped them yet. In 1991, the South Dakota Supreme Court in Mahan v. Avera St. Luke's, 621 N.W. 2d 150(S.D. 2001), affirmed a non-profit hospital's "medical staff development plan" which effectively prohibited physicians associated with a competing surgery center from obtaining medical staff membership at the hospital. The Court based its decision in large part on the hospital boards fiduciary obligation to act in the best interests of the community. What if the hospital had beem a for profit facility with a virtual monopoly in the community and was sending its "margin" back to a large private hospital corporation based in another state? Perhaps the result would have been different.
Economic credentialing does raise both anti-competive concerns under state and federal antitrust laws and fraud and abuse concerns over the applicability of the federal antikickback statute. 42 U.S.C.A. Section 1320a-7b(7). The Office of the Inspector General undertook a review of economic credentialing a number of years ago at the request of the American Medical Association. It has been largely silent on the issue, although some guidance is expected in 2004. One of the fundamental issues is whether or not hospital privileges are some form of "remuneration" in exchange for referrals that would implicate the antikickback statute. It appears likely that a credentials policy that categorically excludes from the medical staff any physician who has significant conflicts of interest would probably not implicate the antikickback statute. When a hospital policy provides for greater hospital discretion in selecting who is in and who is out problems arise because volume of referrals becomes more central.
A private hospital in a small western community recently decided to implement a blind deselection process based upon the existence of conflict and a percentage change in volume of referrals to the hospital and percentage change in patient mix. They discovered to their surprise and horror that they had removed one of the hospital's busiest surgeons (despite the alleged conflict). Ouch! Maybe we should aim at the other foot.
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