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Medical Business Medical Business OrganizationsOrganizations

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Corporate Practice of Corporate Practice of MedicineMedicine

Physicians Working for Non-physiciansPhysicians Working for Non-physicians Real Concern Is Billing By A Non-Real Concern Is Billing By A Non-

physicianphysician Concerns About Professional JudgmentConcerns About Professional Judgment Cases From 1920 Read Like the Cases From 1920 Read Like the

HeadlinesHeadlines Banned In Most StatesBanned In Most States Missouri Is Very LaxMissouri Is Very Lax

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Physician Practices - Pre-Physician Practices - Pre-19901990

Shaped by Corporate Practice LawsShaped by Corporate Practice Laws Sole ProprietorshipsSole Proprietorships PartnershipsPartnerships Mostly SmallMostly Small Some Large GroupSome Large Group

• First Organized As PartnershipsFirst Organized As Partnerships• Then As Professional CorporationsThen As Professional Corporations

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Impact of Corporate BansImpact of Corporate Bans

Physicians Do Not Work for HospitalsPhysicians Do Not Work for Hospitals• Contracts Governed by Medical Staff BylawsContracts Governed by Medical Staff Bylaws• Sham of “Buying” PracticesSham of “Buying” Practices

Physicians Contract With Most InstitutionsPhysicians Contract With Most Institutions Charade of Captive Physician GroupsCharade of Captive Physician Groups

• Managed Care Companies Contact With GroupManaged Care Companies Contact With Group• Group Enforces Managed Care Company’s Group Enforces Managed Care Company’s

RulesRules Physicians Can Be As Ruthless As AnyonePhysicians Can Be As Ruthless As Anyone

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Where Do Physicians Get Where Do Physicians Get Business?Business?

Just Like Lawyers Outside of TexasJust Like Lawyers Outside of Texas No Referral or Finders FeesNo Referral or Finders Fees Unlike Lawyers, Docs Generally Do Unlike Lawyers, Docs Generally Do

Not Pay ThemNot Pay Them Goodwill, No Grief on Peer ReviewGoodwill, No Grief on Peer Review Now Patients Are Controlled by Now Patients Are Controlled by

Managed Care OrganizationsManaged Care Organizations

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Relationships With Relationships With HospitalsHospitals

Was Unethical to Own a HospitalWas Unethical to Own a Hospital Conflict of InterestConflict of Interest Exception for Small TownsException for Small Towns Changed When Hospitals Made MoneyChanged When Hospitals Made Money

• Characteristic of Medical EthicsCharacteristic of Medical Ethics• Lawyer Ethics Are Also Pretty FlexibleLawyer Ethics Are Also Pretty Flexible

HCA Was The Model - Interesting HCA Was The Model - Interesting TimesTimes

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Now Shaped by Stark and Now Shaped by Stark and Fraud and AbuseFraud and Abuse

Cannot Pay Incentives for ReferralsCannot Pay Incentives for Referrals Cannot Have Ownership Interests Cannot Have Ownership Interests

That Give the Doc an Incentive to That Give the Doc an Incentive to ReferRefer

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History of HospitalsHistory of Hospitals

From Hospital Deu to Chicago From Hospital Deu to Chicago HopeHope

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Religious InstitutionsReligious Institutions

Started in Europe in the Middle AgesStarted in Europe in the Middle Ages Some of the Oldest Institutions in Some of the Oldest Institutions in

Continuous OperationContinuous Operation Run by Nursing SistersRun by Nursing Sisters For the PoorFor the Poor More Egalitarian in the United More Egalitarian in the United

StatesStates

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Nursing OnlyNursing Only

Church Did Not Sanction Medical CareChurch Did Not Sanction Medical Care Goal Was to Alleviate SufferingGoal Was to Alleviate Suffering Ease the Transition to HeavenEase the Transition to Heaven Most Died From Their IllnessesMost Died From Their Illnesses

• Only the Very Sick EnteredOnly the Very Sick Entered• Excellent Environment for Infectious Excellent Environment for Infectious

DiseasesDiseases Did Not Really Change Until the 1800sDid Not Really Change Until the 1800s

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Reformation of HospitalsReformation of Hospitals

Paralleled Changes in the Medical Paralleled Changes in the Medical ProfessionProfession

Began in the 1880sBegan in the 1880s Shift From Religious to SecularShift From Religious to Secular

• Began in the Midwest and WestBegan in the Midwest and West• Not As Many Established Religious Not As Many Established Religious

HospitalsHospitals Today, Religious Orders Still Control A Today, Religious Orders Still Control A

Majority of HospitalsMajority of Hospitals

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Hospital-Based MedicineHospital-Based Medicine

Started With SurgeryStarted With Surgery Medical LaboratoriesMedical Laboratories

• BacteriologyBacteriology• MicroanatomyMicroanatomy

RadiologyRadiology Services and Sanitation Attract PatientsServices and Sanitation Attract Patients

• Internal MedicineInternal Medicine• Obstetrics PatientsObstetrics Patients

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Post WW II TechnologyPost WW II Technology

Ventilators (Polio)Ventilators (Polio) Electronic MonitorsElectronic Monitors Intensive CareIntensive Care Shift From Hotel Services to Shift From Hotel Services to

Technology Oriented NursingTechnology Oriented Nursing

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Shift From Nuns to Paid Shift From Nuns to Paid StaffStaff

Advantages of NunsAdvantages of Nuns• Work CheapWork Cheap• Work Long HoursWork Long Hours• Well Organized and DisciplinedWell Organized and Disciplined• Keep Physicians In LineKeep Physicians In Line

Supply PlummetsSupply Plummets Replaced With Paid StaffReplaced With Paid Staff Not Many Nuns Even In Religious Not Many Nuns Even In Religious

HospitalsHospitals

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Implications of Staffing Implications of Staffing ChangesChanges

Old DaysOld Days• Charitable ImmunityCharitable Immunity• No Independent Liability for NursesNo Independent Liability for Nurses• No Liability for PhysiciansNo Liability for Physicians

After ProfessionalizationAfter Professionalization• Demise of Charitable ImmunityDemise of Charitable Immunity• Liability for Nursing StaffLiability for Nursing Staff• Negligent Selection and Retention Liability Negligent Selection and Retention Liability

for Medical Stafffor Medical Staff

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Joint Commission on Joint Commission on Accreditation of HospitalsAccreditation of Hospitals

1950s1950s• Now Joint Commission on Accreditation of Now Joint Commission on Accreditation of

Health Care OrganizationsHealth Care Organizations• American College of Surgeons and American College of Surgeons and

American Hospital AssociationAmerican Hospital Association Split The Power In HospitalsSplit The Power In Hospitals

• Medical Staff Controls Medical StaffMedical Staff Controls Medical Staff• Administrators Control Everything ElseAdministrators Control Everything Else

Enforced By AccreditationEnforced By Accreditation

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Contemporary Hospital Contemporary Hospital OrganizationOrganization

Classic Corporate OrganizationsClassic Corporate Organizations• CEOCEO• Board of Trustees Has Final AuthorityBoard of Trustees Has Final Authority

Medical Staff CommitteesMedical Staff Committees• Tied To Corporation by BylawsTied To Corporation by Bylaws• Headed by Medical DirectorHeaded by Medical Director

Constant Conflict of Constant Conflict of Interest/Antitrust IssuesInterest/Antitrust Issues

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Hospital Economics - Old Hospital Economics - Old DaysDays

Patients Are NecessaryPatients Are Necessary More Patients Meant More MoneyMore Patients Meant More Money Docs Admit PatientsDocs Admit Patients Insurance Was So Generous It Insurance Was So Generous It

Cross-subsidized Indigent CareCross-subsidized Indigent Care

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Hospitals Have High Fixed Hospitals Have High Fixed CostsCosts

Capital Costs - Not Build on the Capital Costs - Not Build on the Donations of the Faithful AnymoreDonations of the Faithful Anymore

Ancillary Services - Lab, Etc., Must Be Ancillary Services - Lab, Etc., Must Be up for Even One Patientup for Even One Patient

Nursing Can Be Cut Back, but Only by Nursing Can Be Cut Back, but Only by Closing UnitsClosing Units

Pretty Hard to Get Excited About Pretty Hard to Get Excited About Malpractice Risks Unless You Can Fill Malpractice Risks Unless You Can Fill Every Bed in the HospitalEvery Bed in the Hospital

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Value of An Admitting Value of An Admitting PhysicianPhysician

Only 2 Cases a Day, Average Stay a WeekOnly 2 Cases a Day, Average Stay a Week Each Case Is Worth $15,000 to the Each Case Is Worth $15,000 to the

Hospital Over the WeekHospital Over the Week 10 Beds Filled at Any One Time10 Beds Filled at Any One Time Take a Month Off, Have a Few Slow Days, Take a Month Off, Have a Few Slow Days,

Say Only 400 Patients a Year.Say Only 400 Patients a Year. $6,000,000 a Year$6,000,000 a Year If You Are Sloppy, They Just Stay in the If You Are Sloppy, They Just Stay in the

Hospital Longer.Hospital Longer.

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Right to Die - Old DaysRight to Die - Old Days

Technological ImperativeTechnological Imperative Every DayEvery Day Every ProcedureEvery Procedure Every Increasing Stage of Intensive Every Increasing Stage of Intensive

CareCare Big MoneyBig Money Just Making It Past Midnight Might Be Just Making It Past Midnight Might Be

Worth Another $2,000.Worth Another $2,000.

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Medical Staff PrivilegesMedical Staff Privileges

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Medical Staff BylawsMedical Staff Bylaws

Contract Between Physicians and Contract Between Physicians and HospitalHospital

Not Like the Bylaws of a BusinessNot Like the Bylaws of a Business Selection CriteriaSelection Criteria Contractual Due Process For Contractual Due Process For

TerminationTermination Negotiated Between Medical Staff Negotiated Between Medical Staff

and Hospital Boardand Hospital Board

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State Actor HospitalsState Actor Hospitals

Special Concerns About Due Process Special Concerns About Due Process and Equal Protectionand Equal Protection

Cannot Delegate Some Decisions to Cannot Delegate Some Decisions to Special GroupsSpecial Groups• Cannot Require Medical Society MembershipCannot Require Medical Society Membership• May Be Restricted on Requiring Board May Be Restricted on Requiring Board

Certification Certification All Hospitals Must Follow General Anti-All Hospitals Must Follow General Anti-

discrimination Lawsdiscrimination Laws

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Review CriteriaReview Criteria

Decision Rests With Board of DirectorsDecision Rests With Board of Directors• Review Is Done by Medical Staff CommitteeReview Is Done by Medical Staff Committee• Increasing Pressure to Use Independent Increasing Pressure to Use Independent

ReviewersReviewers Medical EducationMedical Education

• There Are ImpostorsThere Are Impostors Medical LicensesMedical Licenses

• Verify With Every StateVerify With Every State• Problem With LiarsProblem With Liars

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Postgraduate TrainingPostgraduate Training

Most Hospitals Require Board Most Hospitals Require Board CertificationCertification• Board Certified Physicians Control The Board Certified Physicians Control The

ProcessProcess• Reduces Liability for Negligent SelectionReduces Liability for Negligent Selection

Letter From ResidenciesLetter From Residencies Evidence of Board CertificationEvidence of Board Certification "Board Eligible”"Board Eligible”

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Other HospitalsOther Hospitals

Every Hospital You Ever Applied toEvery Hospital You Ever Applied to Circumstances of TerminationsCircumstances of Terminations Withdrawn ApplicationsWithdrawn Applications Should CheckShould Check

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Acceptable GroundsAcceptable Grounds

CompetenceCompetence JudgmentJudgment Getting Along With OthersGetting Along With Others

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LiabilityLiability

Independent Contractor RelationshipIndependent Contractor Relationship• Negligent SelectionNegligent Selection• Negligent SupervisionNegligent Supervision• Hospitals Are Attractive TargetsHospitals Are Attractive Targets

Scope of PrivilegesScope of Privileges• Limited to Areas of Proven ExpertiseLimited to Areas of Proven Expertise• Should Be Supervised When Expanding Should Be Supervised When Expanding

PrivilegesPrivileges

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ReviewReview

Privileges Can Be LimitedPrivileges Can Be Limited Can Require SupervisionCan Require Supervision Can Refuse to Renew PrivilegesCan Refuse to Renew Privileges Can Terminate PrivilegesCan Terminate Privileges Can Do an Emergency SuspensionCan Do an Emergency Suspension

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What Is the Impact of What Is the Impact of Adverse Privilege Adverse Privilege Determinations?Determinations?

If Every One Uses the Same Criteria and If Every One Uses the Same Criteria and Relies on Previous History, You Are DeadRelies on Previous History, You Are Dead

Parallel ActionParallel Action The National Practitioner DatabankThe National Practitioner Databank

• National Clearing HouseNational Clearing House• Why Have One?Why Have One?• Problem of LiarsProblem of Liars

Malpractice And Peer ReviewMalpractice And Peer Review Will It Be Opened up?Will It Be Opened up?