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An Examination of the Right of Hospitals to Engage in Economic Credentialing

52 Pages Posted: 17 Dec 2009  

Beverly Cohen

Albany Law School

Date Written: 2004

Abstract

Hospitals have historically engaged in "credentialing" physicians before granting them staff privileges. Recently, however, some hospitals have begun to expand the credentialing practice to include criteria related to the economic performance of physicians, known as "economic credentialing." Recent filings of several court cases challenging economic credentialing signals a renewed focus on this practice. In these cases, hospitals terminated physicians' staff privileges because the physicians had ownership interests in competing facilities. The plaintiff physicians assert that their terminations violate antitrust laws, breach the hospitals' bylaws, violate the physicians' rights, or offend public policy. In one case, the plaintiff physicians assert that the hospitals' termination of the physicians' practice privileges violates the fraud and abuse laws. This Article will review economic credentialing and provide an update on this controversial practice. Ultimately, this Article will conclude that economic credentialing has a limited potential to violate the law. On the judicial front, courts have allowed physicians to block the hospitals' use of economic credentialing only in narrow circumstances. Where states have passed laws that address economic credentialing, the Article observes that none flatly prohibit the practice. Further, recent reports on specialty hospitals tend to show that specialty hospitals admit only profitable surgery cases, thus supporting general hospitals’ concerns that physician owners of competing facilities retain the profitable cases and refer the less profitable cases to general hospitals. Finally, the Article concludes that physicians’ challenge to economic credentialing - that it violates the fraud and abuse laws - is unlikely to succeed. The picture that emerges is that, to a large extent, there are few legal impediments to hospitals' use of economic credentialing. If the narrow risk areas are avoided, hospitals are generally able to consider economic criteria when they make credentialing decisions.

Suggested Citation

Cohen, Beverly, An Examination of the Right of Hospitals to Engage in Economic Credentialing (2004). Temple Law Review, Vol. 77, pp. 705-756, 2004. Available at SSRN: https://ssrn.com/abstract=1523375

Beverly Cohen (Contact Author)

Albany Law School ( email )

80 New Scotland Avenue
Albany, NY 12208
United States

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