Medical Business Organizations
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Corporate Practice of Medicine
 Physicians Working for Non-physicians
 Real Concern Is Billing By A Non-physician
 Concerns About Professional Judgment
 Cases From 1920 Read Like the Headlines
 Banned In Most States
 Missouri Is Very Lax
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Physician Practices - Pre-1990
 Shaped by Corporate Practice Laws
 Sole Proprietorships
 Partnerships
 Mostly Small
 Some Large Group
• First Organized As Partnerships
• Then As Professional Corporations
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Impact of Corporate Bans
 Physicians Do Not Work for Hospitals
• Contracts Governed by Medical Staff Bylaws
• Sham of “Buying” Practices
 Physicians Contract With Most Institutions
 Charade of Captive Physician Groups
• Managed Care Companies Contact With Group
• Group Enforces Managed Care Company’s
Rules
 Physicians Can Be
As Ruthless As Anyone
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Where Do Physicians Get
Business?
 Just Like Lawyers Outside of Texas
 No Referral or Finders Fees
 Unlike Lawyers, Docs Generally Do Not Pay
Them
 Goodwill, No Grief on Peer Review
 Now Patients Are Controlled by Managed
Care Organizations
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Relationships With Hospitals
 Was Unethical to Own a Hospital
 Conflict of Interest
 Exception for Small Towns
 Changed When Hospitals Made Money
• Characteristic of Medical Ethics
• Lawyer Ethics Are Also Pretty Flexible
 HCA Was The Model - Interesting Times
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Now Shaped by Stark and Fraud
and Abuse
 Cannot Pay Incentives for Referrals
 Cannot Have Ownership Interests That Give
the Doc an Incentive to Refer
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History of Hospitals
From Hospital Deu to Chicago Hope
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Religious Institutions
 Started in Europe in the Middle Ages
 Some of the Oldest Institutions in
Continuous Operation
 Run by Nursing Sisters
 For the Poor
 More Egalitarian in the United States
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Nursing Only
 Church Did Not Sanction Medical Care
 Goal Was to Alleviate Suffering
 Ease the Transition to Heaven
 Most Died From Their Illnesses
• Only the Very Sick Entered
• Excellent Environment for Infectious Diseases
 Did Not Really Change Until the 1800s
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Reformation of Hospitals
 Paralleled Changes in the Medical
Profession
 Began in the 1880s
 Shift From Religious to Secular
• Began in the Midwest and West
• Not As Many Established Religious Hospitals
 Today, Religious Orders Still Control A
Majority of Hospitals
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Hospital-Based Medicine
 Started With Surgery
 Medical Laboratories
• Bacteriology
• Microanatomy
 Radiology
 Services and Sanitation Attract Patients
• Internal Medicine
• Obstetrics Patients
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Post WW II Technology
 Ventilators (Polio)
 Electronic Monitors
 Intensive Care
 Shift From Hotel Services to Technology
Oriented Nursing
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Shift From Nuns to Paid Staff
 Advantages of Nuns
•
•
•
•
Work Cheap
Work Long Hours
Well Organized and Disciplined
Keep Physicians In Line
 Supply Plummets
 Replaced With Paid Staff
 Not Many Nuns Even In Religious Hospitals
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Implications of Staffing Changes
 Old Days
• Charitable Immunity
• No Independent Liability for Nurses
• No Liability for Physicians
 After Professionalization
• Demise of Charitable Immunity
• Liability for Nursing Staff
• Negligent Selection and Retention Liability for
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Medical Staff
Joint Commission on
Accreditation of Hospitals
 1950s
• Now Joint Commission on Accreditation of
Health Care Organizations
• American College of Surgeons and American
Hospital Association
 Split The Power In Hospitals
• Medical Staff Controls Medical Staff
• Administrators Control Everything Else
 Enforced By Accreditation
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Contemporary Hospital
Organization
 Classic Corporate Organizations
• CEO
• Board of Trustees Has Final Authority
 Medical Staff Committees
• Tied To Corporation by Bylaws
• Headed by Medical Director
 Constant Conflict of Interest/Antitrust
Issues
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Hospital Economics - Old Days
 Patients Are Necessary
 More Patients Meant More Money
 Docs Admit Patients
 Insurance Was So Generous It Cross-
subsidized Indigent Care
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Hospitals Have High Fixed Costs
 Capital Costs - Not Build on the Donations of
the Faithful Anymore
 Ancillary Services - Lab, Etc., Must Be up for
Even One Patient
 Nursing Can Be Cut Back, but Only by
Closing Units
 Pretty Hard to Get Excited About
Malpractice Risks Unless You Can Fill Every
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Bed in the Hospital
Value of An Admitting Physician
 Only 2 Cases a Day, Average Stay a Week
 Each Case Is Worth $15,000 to the Hospital
Over the Week
 10 Beds Filled at Any One Time
 Take a Month Off, Have a Few Slow Days, Say
Only 400 Patients a Year.
 $6,000,000 a Year
 If You Are Sloppy, They Just Stay in the
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Right to Die - Old Days
 Technological Imperative
 Every Day
 Every Procedure
 Every Increasing Stage of Intensive Care
 Big Money
 Just Making It Past Midnight Might Be
Worth Another $2,000.
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Medical Staff Privileges
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Medical Staff Bylaws
 Contract Between Physicians and Hospital
 Not Like the Bylaws of a Business
 Selection Criteria
 Contractual Due Process For Termination
 Negotiated Between Medical Staff and
Hospital Board
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State Actor Hospitals
 Special Concerns About Due Process and
Equal Protection
 Cannot Delegate Some Decisions to Special
Groups
• Cannot Require Medical Society Membership
• May Be Restricted on Requiring Board
Certification
 All Hospitals Must Follow General Anti-
discrimination Laws
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Review Criteria
 Decision Rests With Board of Directors
• Review Is Done by Medical Staff Committee
• Increasing Pressure to Use Independent
Reviewers
 Medical Education
• There Are Impostors
 Medical Licenses
• Verify With Every State
• Problem With Liars
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Postgraduate Training
 Most Hospitals Require Board Certification
• Board Certified Physicians Control The
Process
• Reduces Liability for Negligent Selection
 Letter From Residencies
 Evidence of Board Certification
 "Board Eligible”
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Other Hospitals
 Every Hospital You Ever Applied to
 Circumstances of Terminations
 Withdrawn Applications
 Should Check
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Acceptable Grounds
 Competence
 Judgment
 Getting Along With Others
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Liability
 Independent Contractor Relationship
• Negligent Selection
• Negligent Supervision
• Hospitals Are Attractive Targets
 Scope of Privileges
• Limited to Areas of Proven Expertise
• Should Be Supervised When Expanding
Privileges
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Review
 Privileges Can Be Limited
 Can Require Supervision
 Can Refuse to Renew Privileges
 Can Terminate Privileges
 Can Do an Emergency Suspension
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What Is the Impact of Adverse
Privilege Determinations?
 If Every One Uses the Same Criteria and
Relies on Previous History, You Are Dead
 Parallel Action
 The National Practitioner Databank
• National Clearing House
• Why Have One?
• Problem of Liars
 Malpractice And Peer Review
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