1 Medical Business Organizations

2 Corporate Practice of Medicine b Physicians Working for Non-physicians b Real Concern Is Billing By A Non-physician b Concerns About Professional Judgment b Cases From 1920 Read Like the Headlines b Banned In Most States b Missouri Is Very Lax

3 Physician Practices - Pre-1990 b Shaped by Corporate Practice Laws b Sole Proprietorships b Partnerships b Mostly Small b Some Large Group First Organized As PartnershipsFirst Organized As Partnerships Then As Professional CorporationsThen As Professional Corporations

4 Impact of Corporate Bans b Physicians Do Not Work for Hospitals Contracts Governed by Medical Staff BylawsContracts Governed by Medical Staff Bylaws Sham of “Buying” PracticesSham of “Buying” Practices b Physicians Contract With Most Institutions b Charade of Captive Physician Groups Managed Care Companies Contact With GroupManaged Care Companies Contact With Group Group Enforces Managed Care Company’s RulesGroup Enforces Managed Care Company’s Rules b Physicians Can Be As Ruthless As Anyone

5 Where Do Physicians Get Business? b Just Like Lawyers Outside of Texas b No Referral or Finders Fees b Unlike Lawyers, Docs Generally Do Not Pay Them b Goodwill, No Grief on Peer Review b Now Patients Are Controlled by Managed Care Organizations

6 Relationships With Hospitals b Was Unethical to Own a Hospital b Conflict of Interest b Exception for Small Towns b Changed When Hospitals Made Money Characteristic of Medical EthicsCharacteristic of Medical Ethics Lawyer Ethics Are Also Pretty FlexibleLawyer Ethics Are Also Pretty Flexible b HCA Was The Model - Interesting Times

7 Now Shaped by Stark and Fraud and Abuse b Cannot Pay Incentives for Referrals b Cannot Have Ownership Interests That Give the Doc an Incentive to Refer

8 History of Hospitals From Hospital Deu to Chicago Hope

9 Religious Institutions b Started in Europe in the Middle Ages b Some of the Oldest Institutions in Continuous Operation b Run by Nursing Sisters b For the Poor b More Egalitarian in the United States

10 Nursing Only b Church Did Not Sanction Medical Care b Goal Was to Alleviate Suffering b Ease the Transition to Heaven b Most Died From Their Illnesses Only the Very Sick EnteredOnly the Very Sick Entered Excellent Environment for Infectious DiseasesExcellent Environment for Infectious Diseases b Did Not Really Change Until the 1800s

11 Reformation of Hospitals b Paralleled Changes in the Medical Profession b Began in the 1880s b Shift From Religious to Secular Began in the Midwest and WestBegan in the Midwest and West Not As Many Established Religious HospitalsNot As Many Established Religious Hospitals b Today, Religious Orders Still Control A Majority of Hospitals

12 Hospital-Based Medicine b Started With Surgery b Medical Laboratories BacteriologyBacteriology MicroanatomyMicroanatomy b Radiology b Services and Sanitation Attract Patients Internal MedicineInternal Medicine Obstetrics PatientsObstetrics Patients

13 Post WW II Technology b Ventilators (Polio) b Electronic Monitors b Intensive Care b Shift From Hotel Services to Technology Oriented Nursing

14 Shift From Nuns to Paid Staff b Advantages of Nuns Work CheapWork Cheap Work Long HoursWork Long Hours Well Organized and DisciplinedWell Organized and Disciplined Keep Physicians In LineKeep Physicians In Line b Supply Plummets b Replaced With Paid Staff b Not Many Nuns Even In Religious Hospitals

15 Implications of Staffing Changes b Old Days Charitable ImmunityCharitable Immunity No Independent Liability for NursesNo Independent Liability for Nurses No Liability for PhysiciansNo Liability for Physicians b After Professionalization Demise of Charitable ImmunityDemise of Charitable Immunity Liability for Nursing StaffLiability for Nursing Staff Negligent Selection and Retention Liability for Medical StaffNegligent Selection and Retention Liability for Medical Staff

16 Joint Commission on Accreditation of Hospitals b 1950s Now Joint Commission on Accreditation of Health Care OrganizationsNow Joint Commission on Accreditation of Health Care Organizations American College of Surgeons and American Hospital AssociationAmerican College of Surgeons and American Hospital Association b Split The Power In Hospitals Medical Staff Controls Medical StaffMedical Staff Controls Medical Staff Administrators Control Everything ElseAdministrators Control Everything Else b Enforced By Accreditation

17 Contemporary Hospital Organization b Classic Corporate Organizations CEOCEO Board of Trustees Has Final AuthorityBoard of Trustees Has Final Authority b Medical Staff Committees Tied To Corporation by BylawsTied To Corporation by Bylaws Headed by Medical DirectorHeaded by Medical Director b Constant Conflict of Interest/Antitrust Issues

18 Hospital Economics - Old Days b Patients Are Necessary b More Patients Meant More Money b Docs Admit Patients b Insurance Was So Generous It Cross- subsidized Indigent Care

19 Hospitals Have High Fixed Costs b Capital Costs - Not Build on the Donations of the Faithful Anymore b Ancillary Services - Lab, Etc., Must Be up for Even One Patient b Nursing Can Be Cut Back, but Only by Closing Units b Pretty Hard to Get Excited About Malpractice Risks Unless You Can Fill Every Bed in the Hospital

20 Value of An Admitting Physician b Only 2 Cases a Day, Average Stay a Week b Each Case Is Worth $15,000 to the Hospital Over the Week b 10 Beds Filled at Any One Time b Take a Month Off, Have a Few Slow Days, Say Only 400 Patients a Year. b $6,000,000 a Year b If You Are Sloppy, They Just Stay in the Hospital Longer.

21 Right to Die - Old Days b Technological Imperative b Every Day b Every Procedure b Every Increasing Stage of Intensive Care b Big Money b Just Making It Past Midnight Might Be Worth Another $2,000.

22 Medical Staff Privileges

23 Medical Staff Bylaws b Contract Between Physicians and Hospital b Not Like the Bylaws of a Business b Selection Criteria b Contractual Due Process For Termination b Negotiated Between Medical Staff and Hospital Board

24 State Actor Hospitals b Special Concerns About Due Process and Equal Protection b Cannot Delegate Some Decisions to Special Groups Cannot Require Medical Society MembershipCannot Require Medical Society Membership May Be Restricted on Requiring Board CertificationMay Be Restricted on Requiring Board Certification b All Hospitals Must Follow General Anti- discrimination Laws

25 Review Criteria b Decision Rests With Board of Directors Review Is Done by Medical Staff CommitteeReview Is Done by Medical Staff Committee Increasing Pressure to Use Independent ReviewersIncreasing Pressure to Use Independent Reviewers b Medical Education There Are ImpostorsThere Are Impostors b Medical Licenses Verify With Every StateVerify With Every State Problem With LiarsProblem With Liars

26 Postgraduate Training b Most Hospitals Require Board Certification Board Certified Physicians Control The ProcessBoard Certified Physicians Control The Process Reduces Liability for Negligent SelectionReduces Liability for Negligent Selection b Letter From Residencies b Evidence of Board Certification b "Board Eligible”

27 Other Hospitals b Every Hospital You Ever Applied to b Circumstances of Terminations b Withdrawn Applications b Should Check

28 Acceptable Grounds b Competence b Judgment b Getting Along With Others

29 Liability b Independent Contractor Relationship Negligent SelectionNegligent Selection Negligent SupervisionNegligent Supervision Hospitals Are Attractive TargetsHospitals Are Attractive Targets b Scope of Privileges Limited to Areas of Proven ExpertiseLimited to Areas of Proven Expertise Should Be Supervised When Expanding PrivilegesShould Be Supervised When Expanding Privileges

30 Review b Privileges Can Be Limited b Can Require Supervision b Can Refuse to Renew Privileges b Can Terminate Privileges b Can Do an Emergency Suspension

31 What Is the Impact of Adverse Privilege Determinations? b If Every One Uses the Same Criteria and Relies on Previous History, You Are Dead b Parallel Action b The National Practitioner Databank National Clearing HouseNational Clearing House Why Have One?Why Have One? Problem of LiarsProblem of Liars b Malpractice And Peer Review b Will It Be Opened up?