Hospital Privileges and Physician Employment Contracts

How do hospital privileges and physician employment contracts relate to each other? From a Physician's Attorney's Perspective.

What are Coterminous Provisions in a Physician Employment Contract? 

Most physician employment contracts that involve hospital privileges, have what is typically referred to as a coterminous provision.  The phrase “Incident to and Coterminous” is a provision or clause that is usually seen in a physician employment contract. In essence, this clause states that a physician's appointment and clinical credentials to perform treatments under the exclusive agreement are "incident to and coterminous."  This means that if the exclusive contract expires and is not renewed, the physician's appointment and clinical privileges will also end immediately. This will also be the case if the physician decides to leave the organization with whom he or she has the contract. It will immediately become ineligible for his or her position and privileges. 

Navigating Physician Privileges concerns is quite tricky, and not a well understood area of knowledge.  If you are not ready to retain an attorney and just wish to get some legal input, you may consider making a 1 hour appointment  to discuss the specifics of your situation with a Physician's Attorney, for a prepaid legal fee of $475 legal, click here: If you have concerns about your medical staff privileges, hearing process, or anything alike, our firm helps Physicians and other healthcare practitioners navigate that space for a fixed fee of $7,450.  

Community-based physicians with hospital privileges: 

Significant changes are being made to the relationship between hospitals and physicians. In the past, a physician maintained a private practice in the community and looked to the community hospital for auxiliary assistance when one of his or her patients was too unwell to stay at home. This community-based physician obtained medical privileges to gain entry to the hospital. These privileges permitted the physician to treat patients while they were at the hospital, admit them, and use the personnel and facilities. Throughout their active careers, physicians often had access to privileges; they were only revoked if they were determined to be incompetent. Nowadays, not all physicians still run a community-based practice. Instead, many are employed by hospitals to staff specific departments. Others enter into exclusive agreements, either individually or as a member of a practice group, to offer hospitals specific services. 

Trend toward hospital-based physicians and the Economics of the relationship: 

Compared to conventional community-based physicians, "hospital-based" physicians have a different financial/economic relationship with the hospital, but they typically enjoy the same medical staff privileges. But unlike physicians who practice in the community, they might not get to use their privileges all the time. Instead, due to hospital changes, these physicians may experience an actual or constructive termination. For this reason, physicians who lose their privileges or are unable to use them, thus they are having to sue hospitals more frequently to get their “seat at the table”.  

It is obvious that a hospital's relationship with a physician goes much further than the one established by medical staff privileges alone. Understanding the physician's right to exercise their privilege by having access to the hospital's resources and personnel/staff requires making a distinction between the parties' economic connection and the relationship established by the granting of privileges. The hospital and medical staff bylaws should expressly reserve to the hospital governing board the right to discontinue any health service or alter any method of providing such services, including exclusive contracting, and employing physicians directly. The bylaws should specify that this authority takes precedence/supersedes a physician's privileges. 

Where to turn to, to find the details of the hospital privileges arrangement: 

Physicians frequently forget to spell out in detail their agreement with their employers regarding privileges. As a result, contracts and bylaws that are ambiguous, silent, or contradictory on issues of privileges have been presented to courts. For instance, the parties' contract, (between the physician and his or her employer), might not address the subject of privileges or might disagree with the hospital's bylaws, which are typically not updated to reflect the contract between the parties. When confronted with ambiguous or conflicting evidence, courts have disregarded a significant and frequently controlling piece of evidence which is the financial/economic relationship between the physician and the hospital.  

Medical staff privileges are the means through which physicians gain access to the hospital, and the hospital regulates the quality and number of physicians who are allowed to practice there. The medical staff rules/bylaws contain information on how privileges are granted and revoked as well as the applicable norms of behavior for physicians. 

Purpose of a peer review committee: 

Peer review committees help monitor, investigate and enforce the standard of care and balance the division of powers between hospital insiders and outsiders.  Based on the standard of care, the hospital must regulate all physicians' access. The hospital exerts this control through the credentialing and privilege revocation procedures in its medical staff bylaws, which must include a peer review process and notice and opportunity for a hearing. The hospital may also impose access restrictions on its personnel and equipment based on its own financial concerns/interests. Through its contracts with physicians for specific services, rather than through the credentialing procedure, the hospital exercises this control. 

The hospital and the physicians' expectations should be clearly stated, along with their mutual understanding. The question is how much the physician should be informed about the extent of his or her rights/privilege to utilize the hospital's resources, including its staff, equipment, and facilities. The rights of the physician who has been given privileges should be specified in the medical staff bylaws. For instance, they should specify whether or not the privileges include the ability to use hospital resources like employees, buildings, and equipment for service delivery. If these rights differ, the bylaws should make a distinction between community-based physicians and those who work in hospitals or are otherwise associated with hospitals. 

Additionally, when an adverse action is submitted to the National Practitioner Data Bank, a due process requirement is applicable if a physician's professional behavior or competence is in the issue. 

Hospital Bylaws are extremely Important to the medical staff privileges relationship: 

Bylaws should make a distinction between the termination of privileges for competence or disciplinary reasons and the termination of privileges for business or economic reasons, providing notice, an opportunity to be heard, and peer review for the former but only a reasonable period of advance notice for the latter. 

The bylaws should provide that privilege-withdrawal clauses in employment and other contracts with physicians supersede or take precedence over any other bylaw rules that apply to privileges. Contracts that mandate the automatic revocation of privileges upon contract expiration or termination should be negotiated for by hospitals. When a physician group or corporation is the contracting party, the contractor should be obligated to uphold employment contracts with its physician employees that spell out automatic registration with the hospital in the event of termination of employment. 

Lastly, the biannual privilege renewal of the physicians should occur at the same time as, or immediately following, any material modifications to the bylaws. Privileges are arguably not subject to unilateral alteration throughout the duration for which they are granted because they are conferred. Giving physicians reasonable notice and complying with the rules of contract law, making such adjustments effective upon renewal. What is required are well-written drafts, current rules, and plaintiffs who can explain to the courts how hospitals and physicians make money. 

Here is an informative webinar on How to Navigate - Hospital Medical Executive Committees, Peer Reviews, Investigations and Bylaws, also see "So I Signed a Non-Compete, Now What?" and  How Experienced Physicians Negotiate Employment Agreements.

Hosted by the South Florida Hospital News and Reporter.

Ben Assad Mirza is a Florida attorney with a finance background, who has negotiated from both sides of the table; you can put Ben's team to work for you by calling or texting (954)634-2370 or email Ben at [email protected]

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