Hospital Administrative Issues: What is “Economic Credentialing”

Traditionally, physician credentialing was mainly an administrative and clerical process, with hospital committees granting privileges based on a physician’s medical education, board certification, licensure, and quality scores. However, this process has been made more complex in recent years by several new factors: the increase of nurse practitioners, physician assistants, and telemedicine providers with separate credentialing requirements; more stringent certification pathways; and moving from a file cabinet and paper system to a digital system.

In addition to the above factors, there are additional “economic: factors that may become factors as well. According to the American Medical Association, economic credentialing is “the use of economic criteria unrelated to the quality of care or professional competence in determining a physicians’ qualifications for initial or continuing hospital medical staff membership or privileges.”

Economic factors in the credentialing process may be used to exert control over physicians or contain costs. This practice came into play during the recent case of Comprehensive Neurosurgical P.C. (NJBSC) Vs. The Valley Hospital in New Jersey. In the case, the NJBSC argued that Valley engaged in an exclusive agreement with a competing neurosurgery practice and then shut NJBSC out of the emergency department and operating room, preventing them from treating patients and delivering care.

In 2015, the hospital did not renew privileges to NJBSC and subsequently created a new, exclusive arrangement with the Neurosurgical Associates of New Jersey (Columbia Group). Columbia Group was allowed exclusive privileges for equipment and allowed access to patients in the emergency department. NJBSC group sued Valley, with the complaint including contract and tort claims such as breach of contract, with a jury finding in favor of NJBSC. They cited that the group was instrumental in acquiring specialized equipment for the hospital, which allowed Valley Hospital to treat stroke patients rather than transferring those cases. The case underscored the concept of “implied covenant of good faith and fair dealing”, that a hospital will act in good faith toward those it enters into a business relationship. The verdict is significant because it opens the door for physician and medical groups to challenge executive actions by a hospital credentials committee that are motivated by economic considerations rather than quality of care.

Hospitals cannot simply grant privileges to those groups referring more patients or performing more procedures. The ruling casts greater scrutiny on hospitals that may use the credentialing process as a means to leverage anti-competitive behavior amongst physician groups and even calls into question Stark and Anti Kickback Law.

Vipul Kella, MD MBA FACEP is a Board-Certified Emergency Physician and physician executive who consults with some of the nation’s top corporations and legal firms on best practices.

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