February 2008
Volume 72 |
Number 2 |
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Evaluating Contracts for Anesthesiology
Services: Considerations and Pitfalls From the Clinician’s
Perspective
David A. Cross,
M.D.
Committee on Practice Management
  This
article is available in PDF format.
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the course of a practice, an anesthesiologist
may be requested to sign a contract with a group,
another anesthesiologist or a health care facility.
Through some 30 years of experience in practice
management and signing of numerous contracts,
there are considerations and recurrent “pitfalls”
I have found in contracts that warrant further
investigation and/or explanation. However, I would
like to make it clear that I am not an attorney,
and I would advise readers to get legal advice
from an attorney who is familiar with state
and federal health care law before signing
any contract. In addition, ASA has several resources
for your consideration.1-8
I recommend reading any contract carefully as
well as the medical staff bylaws of any health
care facility you may be considering.
Definition
A contract is any legally enforceable promise
or set of promises made by one party to another.
In medicine, it usually delineates the terms of
a business arrangement for the provision of medical
services, the price of those services or a method
of determining the price, and the conditions of
the agreement.
Why a Separate Contract?
The practice of anesthesiology is always governed
by rules and regulations, such as medical staff
bylaws, medical and specialty standards and guidelines,
ethics, regulatory agencies and legalities. Why,
then, is there often a perceived need for a separate
contract(s) governing your practice?
A. The medical staff bylaws constitute an agreement
between the medical staff organization and the
facility board. It may have the force of a contract
in some states but not in others.9
With the exception of the rules regarding departments,
the bylaws are not specialty-specific. The bylaws
and specialty practice standards and guidelines
deal with your professional obligations to your
facility and patients in broad generalities. They
do not deal with obligations between you and your
group or with remuneration for services you provide.
B. Third-party payer contracts deal with required
practice documentation for billing and reimbursement
but generally do not deal with other obligations
of your practice.
C. The peer-review process for disciplining a
physician is cumbersome and costly. Contracts
usually tie privileges to the contract.
D. The facility may desire coverage under its
contractual obligations for services that may
reimburse anesthesiologists poorly. The contract
may address subsidy options for some services.
This may be a negotiating point in the future.
Contracts, therefore, are a legal way to deal
with specific needs and obligations of the individual,
group and facility that are not otherwise addressed.
Types of Contracts
Contracts may define:
A. A scope of practice (partial
practice or total practice).
B. Relationships between parties (individual-group;
individual-individual; group-facility; individual-facility).
C. Both.
A. Part or all of a contract may
not be negotiable.
B. Relationships and mutual trust can never be
totally covered by contract.
C. The specifics of the contract are always essentially
financially driven, either directly or indirectly.
D. Your quality of care is never, ever a negotiating
tool — highest quality is a “given”
in the negotiating process.
Legality of “Exclusive Rights”
Provisions of Facility Contracts
The legality of exclusive contracts between health
care facilities and practitioners is largely based
on the Hyde Decision of the U.S. Supreme Court.10
The case was based on a facet of U.S. antitrust
law known as a “tying” arrangement,
whereby it is illegal for a company to tie the
purchase of its “high-demand” product
to the purchase of its “low-demand”
product. Dr. Hyde’s assertion was that his
being denied anesthesiology privileges required
patients receiving surgical care to accept services
from the hospital’s anesthesiology group,
which constituted a “tying” arrangement.
Dr. Hyde’s case eventually went before the
U.S. Supreme Court, which held that the exclusive
contract did not constitute a “tying”
arrangement because of the low market share of
the hospital. Although the Hyde decision has been
referenced in several lower court cases,11
no case involving a hospital with a larger market
share, and no case regarding exclusive health
care contracts on any other basis, has come before
the U.S. Supreme Court since the Hyde decision.
Nevertheless, health care facilities and practitioners
alike have considered the Hyde decision a carte
blanche legalization of exclusive contracts.
Contract Pitfalls
A. Contracts with health care facilities (if
practitioner is not an employee of the facility).
1. Vague language
— call and coverage expectations, reimbursement,
perception of “affordable” services,
conduct of behavior, “compatibility,”
“loyalty,” etc.
2. Antitrust issues —
get legal advice.
3. Affiliated service group
— IRS issues; may affect retirement plans
if group is not formally organized with common
retirement plans — get legal tax advice.
4. Initial privileges —
usually required to be granted through bylaws
process.
5. Privileges — exclusive
rights to practice, usually tied to the contract
without recourse through the protections of
the medical staff bylaws.
6. Hold-harmless clauses —
what exactly does this mean? It usually means
you or the group hold the health care facility
harmless for acts committed or omitted by you
or members of the group if the facility is named
in a resultant lawsuit. Might be O.K. for the
hospital to be held harmless from acts done
by group if group is also held harmless by acts
done by hospital employees under groups’
“supervision,” such as nurse anesthetists
and anesthesiologist assistants (AAs) and from
legal challenges to contract by other parties.
7. Right to audit books —
might be O.K. if contract calls for guarantees
from hospital based on your collections. Be
sure you have right to audit books if hospital
does your billing.
8. Payments to hospital, which
could be construed as “kickbacks”
for exclusive rights to practice; can be hidden
in the form of requirements to purchase equipment
or supplies, “safe harbors”; get
legal advice.
9. Requirements for higher professional
liability limits than required under
the bylaws.
10. Terms of medical direction
of hospital-employed nurse anesthetists and
AAs that violate professional standards and
open the practitioner to medicolegal issues.
11. Non-competes — limit
your practice locations — enforcement
is very specific state-to-state; get legal advice.
May want to link to case volume, limit facilities
to which it applies.
12. Dispute resolution —
Who determines breach of contract? What is the
process for resolution? Binding versus nonbinding
arbitration? Terms of arbitration? When is legal
action appropriate, and what are the consequences?
13. Term of the contract —
consider the financial impact of being “locked
in” to any long-term reimbursement arrangement.
Usual term of a contract is one year.
14. Termination and renewal of the contract
— “for cause” versus “not
for cause.” A three-year contract is meaningless
if it can be terminated “not for cause”
in 60 days. If required, “not for cause”
should be available to both parties.
15. Terms of compensation —
Guarantees and/or stipends paid how? When?
16. Terms of expansion of services
— May link to case volume, increased stipend,
right of first refusal for services in new facilities.
17. Requirements to participate in third-party
payer contracts — Medicare, Medicaid,
facility “packaged services” and
“product lines,” other managed care
contracts; make sure you have independent negotiating
rights for reimbursement under these plans where
possible.
B. Additional pitfalls of contracts between
you and your employer (individual, group or
facility).
Many of the pitfalls listed above also may be
found in contracts between you and a prospective
employer, but some additional pitfalls need
to be mentioned:
1. Call responsibilities —
specific to group.
2. Length of time as “employee?”
3. “Buy-in” into practice? —
tax implications, depending on how structured.
Fair? Get legal/tax advice.
4. “Buy-out” of practice? Tail coverage
on liability insurance?
5. Method of “partnership” election.
6. Benefits — insurance (liability limits),
overhead, accident, health, life. Who owns life
insurance and who is beneficiary? Pension contributions
and vesting, paid time off.
7. Different terms of compensation — flat
salary? Percentage of collections? Paid when?
Bonuses? Depending on what? Withholds?
What Do You Want to See in a Contract?
A. Layman’s language.
B. Clearly defined responsible agents.
C. Enforceable legality.
D. Fairness to both parties.
E. Clearly defined obligations and expectations
of both parties.
F. Does not obligate either party to a weaker
negotiating position in the future.
G. Based on assumption of verifiable good faith
from both parties.
H. Contains fair in-house conflict resolution
provisions.
References:
1. Bierstein K. How
many anesthesiology practices have exclusive contracts?
ASA Newsl. 1997; 61(7):29-31.
2. Bierstein K. Hospital
contracts four years later.
ASA Newsl. 2001; 65(8):25-27.
3. Bierstein K. The
pros and cons of exclusive contracts.
ASA Newsl. 2006; 70(8):36-37.
4. Bierstein K. Can they really terminate us?
Revisiting the law. ASA Practice Management Conference
Abstracts 2007, Chapter 17.
5. Semo JS. Exclusive contracts for anesthesiologists.
Navigating the minefield of exclusive contracts:
What you need to know. ASA Practice Management
Conference Abstracts 2007, Chapter 4.
6. Eckhout GV. Exclusive contracts for anesthesiologists.
He who pays the piper calls the tune. ASA Practice
Management Conference Abstracts 2007, Chapter
5.
7. Stead SW. Exclusive contracts for anesthesiologists.
Replanting the rainforest: Hospital view of stipends.
ASA Practice Management Conference Abstracts 2007,
Chapter 6.
8. Lockhart A. Exclusive contracts for anesthesiologists:
When there is a changing of the guard and your
group has been voted off the island. ASA Practice
Management Conference Abstracts 2007, Chapter
16.
9. Classen HW. Tying staff privileges to physician
employment contracts: An erosion of due process
rights or a necessary evil? Seton Hall Law Review.
1988; 18:4-29.
10. 466 US 2 (1984).
11. Forrest CL. Exclusive agreements between hospitals
and anesthesia providers after Jefferson Parish:
Situation inflammatory or merely volatile? Health
Matrix. 2004; 14:371-392.
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David
A. Cross, M.D., is Associate Professor of
Anesthesiology, Texas A&M Health Science
Center, Scott and White Memorial Hospital
and Clinic, Temple, Texas. |
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