Hospital Responses to Physician Competition

• Published date: 01 September 2007
• Date: 01 September 2007
• Author: Dan Mulholland
• DOI: 10.1177/0003603X0705200304
• Subject Matter: Symposium: Health Care, Hospitals, Physicians, and Competition

THE

ANTITRUST

BULLETIN:

Vol.

52, Nos. 3&4/Fall-Winter 2007 393

HOSPital

responses

to physician competition

BY

DAN

MULHOLLAND*

I. INTRODUCTION

Full service hospitals

today

are faced with competition from all sorts of

entities. The most potent form of competition often comes from entities

that

are either wholly or

partly

owned

by physicians

who

also

have

privileges on the hospital's medical staff. A recent report by the Federal

Trade Commission

and

the Antitrust Division of the Ll.S,

Department

of

Justice on competition in health care suggested that this

phenomenon

had

both

pro-

and

anticompetitive

aspects.IHowever,

competition

from physician-owned entities often

puts

the hospital at a substantial

competitive disadvantage, since physicians

who

have financial relation-

ships with competitors

not

only

have

an incentive to divert business

away

from the hospital,

but

also continue to refer patients

with

less-

than-desirable

reimbursement

to the hospital. Financial relationships

with competitors can also interfere

with

and

sometimes compromise a

physician's ability to carry

out

his or

her

medical staff responsibilities,

such as emergency call or service on peer review committees.

*Senior Partner, Harty,

Springer

&Mattern,

r.c.,

Pittsburgh, PA.

AUTHOR'S

NOTE:

I

wish

to

acknowledge

all the attomeys of Harty Springer who con-

tributed tothis

article.

FEDERAL

TRADE

COMMISSION,

IMPROVING

HEALTH

CARE:

A

DOSE

OF

COMPETITION

17 (2004),

http://ftc.gov/reports/healthcare/040723

healthcarerpt.pdf [hereinafter

FTC/DO]

REPORT].

©:'007bll Fntrru!

Leg'"

Putdicntion», Inc.

394

THE

ANTITRUST

BULLETIN:

Vol.

52,

Nos. 3&4/Fall-Willter 2007

A

review

of

the

law

on

point

makes

it

clear

that

hospitals

may

adopt

policies

that

make

physicians

who

have

financial relationships

with

competing

entities

ineligible

for

medical

staff

appointment,

clinical privileges, or

other

prerogatives associated

with

medical staff

appointment

(e.g.,

eligibility

for

leadership

positions

or

financial

assistance

from

the

hospital).

Such

responses

can

constitute

a

legitimate

way

for hospitals to

carry

out

their legal

duty

to serve their

patients

and

the

community

as a whole.

I.

COMPETITIVE

RELATIONSHIPS BETWEEN

PHYSICIANS

AND

HOSPITALS

Traditionally, physicians

and

hospitals

have

peacefully coexisted

with

one

another

and

have

enjoyed

a

mutually

beneficial

relationship. Physicians

derived

most

of their income from

providing

professional services, while hospitals relied

on

"technical

revenue"

to

be

reimbursed

for

the

space,

equipment,

supplies,

and

personnel

used

by

the

physicians

to

treat

their

patients

in the facility.' In the

traditional

setting,

most

physicians are

not

employed

by a hospital,

but

instead

are

appointed

to the

hospital's

medical

staff

and

granted

clinical

privileges

to

treat

patients

at

the

hospital.

Unless

the

physician

performs

some

other

unique

service

for

the

hospital,

no

money

changes

hands

and

both

the

doctor

and

the

hospital

look to

their

own

separate

revenue

streams

for reimbursement.

In recent years, however, avariety of factors

and

trends have blurred

this

traditional

relationship.

In

some

situations,

in

order

to

assure

adequate

access to medical services in the community, hospitals have

provided

income guarantees to physicians recruited to their service area.

In

other

instances, hospitals or related organizations

have

employed

physicians to provide medical services to patients. But doctors too have

begun

to offer services that were historically only offered by hospitals.

As a result of

payment

policies

and

technological advances, there has

been

asignificant increase in investment by physicians in health care

facilities, including imaging facilities, ambulatory surgery centers,

and

even hospitals. This allows the physician-investor to supplement his or

her professional income with revenue from the facility services that he or

FTC/DO] REPORT,

supra

note 1, at

12.