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Economic Credentialing

In Murphy v. Baptist Health, a case hailed as a victory for the preservation of the patient-physician relationship, the Arkansas Circuit Court of Pulaski County permanently enjoined Arkansas's largest hospital system from enforcing its economic credentialing policy.

A. The Litigation
In 2003, Baptist Health adopted an economic credentialing policy under which any practitioner who held an ownership or financial interest in a competing hospital was not eligible to apply for staff appointments or clinical privileges at any Baptist Health hospital. Cardiologists who owned an interest in a private specialty hospital sued Baptist Health because the cardiologists were denied privileges at a Baptist Health Hospital.
The doctors alleged that their denial of privileges tortiously interfered with their relationships with patients and referring physicians. Additionally, the doctors alleged that the economic credentialing policy was an unconscionable business and trade practice that violated the Arkansas Deceptive Trade Practices Act.
The Arkansas court agreed, and enjoined Baptist Health from denying professional staff appointments and clinical privileges on the basis of its economic credentialing policy.

B. The Law
Under Arkansas law, tortious interference occurs when a person, with knowledge of another's contractual or business relationship, induces or causes a breach in that relationship intentionally and "improperly."
The Arkansas court first focused on the cardiologists' relationship with their patients. After noting that continuity of care is vitally important, the court found that preserving the patient-physician relationship creates a legitimate business expectancy with reasonable economic expectations.
Further, noting that referrals are often the lifeblood of specialists, the court found that the cardiologists also had a legitimate business relationship and resulting business expectancy with referring general physicians.
Not only did the court find that Baptist Health's economic credentialing policy interfered with the doctor's patient and referral relationships, but the court also found that the interference as "improper" because it conflicted with Arkansas public policy. More particularly, the court noted that Arkansas public policy gives patients the right to choose their physicians, and favors both competition and the establishment of specialty hospitals.
The court dismissed Baptist Health's argument that its economic credentialing policy protected patients from "selective referrals" by physicians who have an ownership interest in a hospital. The court reasoned that, even if the credentialing policy afforded patients some protection in that regard, that protection was overshadowed by other aspects of Arkansas public policy.
In addition, the court found that Baptist Health's economic credentialing policy was overbroad by applying the restriction to family members of physicians that have an interest in a competing hospital, by defining a "competing hospital" as any hospital in Arkansas, and by not allowing physicians to rebut the presumption that they engaged in unethical referrals.
The court also held that the policy violated the Arkansas Deceptive Trade Practices Act, which prohibits "unconscionable" acts or practices in business, commerce or trade. The court reasoned that Baptist Health's economic credentialing policy was unconscionable because it impinged on the important public policies mentioned above without adequate countervailing justifications.

C. Conclusion
Although the decision in Murphy v. Baptist Health is not binding in Maryland or other states, it may prompt hospitals with economic credentialing policies to reevaluate those policies.

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Date

06.23.09

Type

Publications

Authors

Rosen, Barry F.

Teams

Health Care