• About Health Care (Conflicts Credentialing)
  • November 14, 2006 | Author: Lester Wayne Johnson
  • Law Firm: McGlinchey Stafford, PLLC - New Orleans Office
  • One of the most interesting types of disputes that arise out of the credentialing process are those that involve challenges to a hospital’s use of “conflict of interest” criteria. Although every policy is different, “conflicts credentialing” generally involves a hospital refusing to grant clinical privileges, or staff leadership positions, to any physician that holds an ownership interest in any of the hospital’s competitor businesses. Most of these cases involve the excluded physician alleging violations of antitrust laws, fraud and abuse statutes, constitutional due process rights, or breach of contract. Although hospitals have had great success in defending against these types of suits in years past, one case that made its way to the Arkansas Supreme Court earlier this year illustrates that hospitals may want to be more careful in the future.

    The dispute in Baptist Health v. Murphy began in February 2004, when two cardiologists received notice that Baptist would not renew their privileges because they violated a new “Economic Conflicts of Interest Policy” by holding ownership interests in a competing heart hospital. The two cardiologists filed suit alleging that Baptist’s actions tortiously interfered with the doctor-patient relationship by violating the Federal Anti-Kickback statute, the Arkansas Medicaid Fraud and False Claims Acts, and the Arkansas Deceptive Trade Practices Act (ADTP).

    The circuit court found that Baptist was substantially certain that its policy would interfere and perhaps even sever the doctor-patient relationship because many of the doctors’ patients were covered by health plans with whom Baptist had exclusive contracts and that require treatment at Baptist’s facilities. According to the court, Baptist’s conduct satisfied the impropriety requirement for intentional interference claims because the policy violated federal and state laws, including the Anti-kickback statute. The circuit court granted the plaintiff preliminary injunctive relief, and Baptist appealed.

    Eventually, the Arkansas Supreme Court granted writs to review the circuit court’s decision to issue the preliminary injunction. While the Supreme Court agreed with Baptist’s argument that the policy did not violate the Anti-kickback statute, it found no error in the circuit court’s finding that the policy violated the ADTP, which makes illegal any trade practice that is unconscionable, including “conduct violative of public policy or statute.”

    The danger for hospitals lies in the scores of state or federal laws that plaintiffs have at their disposal, which, if violated, can be used to support tortious interference and other claims. Laws like the one relied on in Murphy are especially dangerous because of their broad scope, in this case relying on such far-reaching and difficult to define concepts as “unconscionable trade practices,” and “conduct violative of public policy.”

    While the Supreme Court refused to let Baptist off the hook, it is important to remember that this decision does not speak to the actual merits of the interference claim. Technically, all the court did was allow a preliminary injunction to stand. However, what is important here is that the Arkansas Supreme Court found that the plaintiffs showed a probability of success in a type of case that plaintiffs rarely win.