| by Thomas J. Reed and Paul J. Voss
Today more than ever, radiologists across the country are confronting increasing pressures from hospitals to surrender substantial areas of their practice, to give in to deep discounts in their professional fees, to give up their outside practices and to submit to other unreasonable contract demands—“or else.” Radiologists are not just facing such demands when their contracts are up for renewal, but at any time during the term of the contract when changing contract terms fits within a hospital strategy such as placating another specialty seeking to expand into imaging or satisfies some other hospital objective.
It was 10 years ago this past December that the ACR’s excellent survey, “Radiology Practices and Their Contracts with Hospitals, 1989-1990: A Representative Sample Survey” (“ACR Survey”), appeared in AJR.1 The survey described the prevalence of contracts for hospital-based radiology services and typical terms that appeared in respondents’ hospital contracts in the years 1989 and 1990.
We have had the privilege of representing numerous individual radiologists and radiology groups from around the country in the 10 years since—and for 10 years prior to—the survey. We have seen regulatory and economic forces greatly alter the typical terms of hospital contracts described in the ACR Survey. Some of these changes have been positive ones while others have placed even more control in the hands of the hospital rather than the radiologists.
This article will review some of the basic contract terms described in the 1991 survey as they commonly appear in today’s hospital radiology contracts. Further, it will examine other problematic contract provisions encountered by radiologists today. Finally, the article will describe creative alternatives developed by some groups that might assist other radiologists in their hospital contract negotiations. With the reported current shortage of professional radiology manpower, radiologists may be in a better bargaining position today to negotiate favorable alternatives to the contract terms proposed by hospitals.i
“Why Contract at All?”
The ACR Survey reported that in 1989-1990, 43 percent of the responding radiology practices providing services in hospitals were not under contract. In our estimation, the number of radiology groups practicing in hospitals in 2002 without contracts is less than reported in the ACR Survey, but still represents a significant number of groups. These groups, along with some already under contract, often ask the same fundamental question that they asked 10 years ag “Why have a contract at all?”
One answer, though not satisfactory from the radiologists’ perspective, is that increasingly we have found more hospitals demanding that their hospital-based physicians be under contract as a condition of practicing in the hospital.ii With courts continuing to affirm a hospital’s legal ability to exclusively contract with the physicians of its choice, provided the hospital complies with its bylaws obligations with respect to any replaced radiologists in the implementation of such a contract,iii this answer may be compelling.
However, given the current favorable market conditions for radiologists and attendant difficulties some hospitals may encounter in replacing a group at the present time, particularly if trying to duplicate the subspecialty expertise (e.g., neuroradiology and interventional) offered by a larger group, what the hospital may do lawfully should not necessarily dictate radiologists’ decision making or their acceptance of objectionable or onerous contract terms proposed by the hospital.iv Radiologists often have bargaining power if for no other reason than hospitals often do not want to go through the difficulty of recruiting (especially given the present shortage of radiologists).
Basic economics dictate that when the supply of radiologists decreases but the demand for them remains constant (or even increases) the “price” for radiology services should also increase. In this case the price is the type of concessions a hospital is willing to give to secure the radiologists’ services and to facilitate attraction of talented recruits to the group. ACR research indicates “the current shortage of radiologists will likely intensify, since workloads are increasing faster than the workforce.”v Correspondingly, the leverage that radiologists have when negotiating a contract may also be on the rise. A hospital’s inclination to avoid turmoil with the group and the larger medical staff that can accompany a hospital’s decision to replace a proven incumbent group may also work in the radiologist’s favor in negotiations.
From the radiologist’s perspective, a more positive reason for a contract is that it can clearly define the group’s areas of exclusivity. With cardiologists, neurologists, orthopedists, vascular surgeons, obstetricians/ gynecologists and others eager to whittle away the radiologists’ exclusivity, a contract can and should describe with great precision which procedures belong exclusively to the radiologists. The hospital contract can and should extend the exclusivity beyond the hospital to present and future outpatient imaging centers of the hospital and its affiliates.vi Finally, the contract binds the hospital to the group for at least the term of the contract. This last reason, however, is substantially undercut if the contract has a very short duration or a provision for termination without cause on short notice.
For most radiology groups, none of the foregoing reasons makes a contract more desirable today than in 1991, particularly when hospitals seek to impose unreasonable contract demands on a radiology group. Often, though, as the examples below illustrate, such unreasonable provisions are negotiable and a mutually satisfactory resolution can be reached. Thus, the central question may shift from “Why contract at all?” to “What kind of contract can we reasonably expect to obtain?” In this respect, there are certain key contract provisions that should be critically examined in addition to the appraisal made of the overall contract.
Contract Duration and Termination
The 1991 ACR Survey reported that the then-most frequent contract duration or “term” was one year, although as many as 20 percent of the reporting groups with contracts had agreements of 4-5 years. Seventy-three percent of the contracts involved had automatic renewal or “evergreen” provisions; 11 percent of contracts were noncancelable during their term, except, of course, for breach.
In 1993, the IRS issued Tax Revenue Procedure 93-19, which created a safe harbor for hospitals using tax-exempt bond financing. It required, among other things, that a hospital’s management contracts, including radiology contracts, have a term no longer than three years, and that they be terminable at the end of the second year without cause “or penalty” upon “reasonable” prior notice.vii
As a result of 93-19 and the IRS’s closely related follow-up Revenue Procedure 97-13, the 4-5 year contracts became much less common. In our experience, a three-year term appears most often. The ability of either party to terminate an agreement without cause seems to be even more prevalent than the survey recorded.viii
We, like many radiologists we have represented, view the contract term as a period of time in which the right to practice in the hospital is established (most often as exclusive in specific, well-defined areas). In addition, the group should be free from contract renegotiation and its attendant dissipation of time and energy during this period. Often it seems in each renegotiation that a hospital is trying to gain more concessions than it did in the prior contract. For these reasons, a longer term contract is most often preferred by radiologists.
In response to these negative, tax-related contract developments, some clever contract provisions have been developed to aid radiologists. A “rolling evergreen,” for example, can keep adding on another year to an agreement every time a year passes, unless a party actively seeks to terminate the agreement or let it expire, thus extending the time before renegotiation.ix
Of course, there is nothing precluding a hospital from seeking to renegotiate a contract, even while it is still in effect. Some hospitals attempt to do this particularly to carve out an exception to the group’s exclusivity for a physician or group of physicians who are financially attractive as potential referrers to the hospital.x
The ability of the hospital to seek renegotiation during the contract term is enhanced if the contract contains a provision allowing either party to terminate at any time without cause on relatively short notice. Although some radiologists, concerned about their group’s long-term ability to recruit and maintain the needed numbers to meet coverage obligations, have considered “without cause” provisions beneficial, most realize that these provisions give the hospital additional bargaining leverage and control over the group. This is particularly true when the provisions are coupled with “clean sweep” or co- termination of privileges or continuing postcontract noncompete provisions.
Many hospitals are willing to limit termination without cause to the end of the second year, as provided in the IRS safe harbor, and a few are even willing to operate outside of the safe harbor. Other hospitals, probably to maintain greater control, press for termination without cause at any time on shorter notice (6-, 9- or 12-months notice) or after a certain period of the contract has run (e.g., one year).
Some groups which were unsuccessful in negotiating termination without cause on short notice out of their contracts have been successful in negotiating correlated clauses that provide for maintaining their privileges, competing with the hospital or even reacquiring facilities or equipment they sold to the hospital if the hospital terminates without cause, rights the radiologists may not have if terminated for cause. These and other contract provisions, such as those lengthening the period of required prior notice of intent to terminate without cause, can soften proposed term and termination provisions.
It is also important to pay particular attention to the termination for cause provisions. Such termination should only apply in the event of a material breach, which should not include vague, subjective grounds (e.g., violation of hospital policy). Termination for cause should only apply when the group (not simply an individual member radiologist) has breached its obligations and only after specific notice has been given setting out in detail what the breach is and what action will be sufficient to cure it. Adequate time must then be allowed to cure the breach, and an opportunity should be afforded the group to meet with representatives of the hospital board, administration and medical staff prior to any contract termination.
This opportunity for a meeting prior to termination should also apply in the event of termination without cause and contract expiration, particularly if the group has agreed to a co-termination of privileges and a waiver of bylaw hearing process provisions. In addition, in all instances where the hospital is contemplating severing its relationship with a group of radiologists, a meeting involving both staff and hospital representatives ensures that the medical staff fulfills its important role in presenting to the board and hospital’s representatives the staff’s interests in continuing quality of care.xi
Exclusivity
Eighty-six percent of respondents to the ACR Survey who had contracts with hospitals reported that they were a party to “an exclusive contract.”xii Though we have found no recent hard statistics, there seemed to be a trend in the 1990s toward an even greater prevalence of exclusive contracts. However, though more hospitals appear to be moving toward exclusive agreements, at the same time we have seen more battles over what “exclusivity” does or should mean.
Though most hospitals seem willing to recognize the efficiencies that can come with one group being the only group of radiologists in the hospital, administrators and boards are less cognizant (or at least less willing to concede) that true exclusivity—with radiologists being the sole providers of all imaging services in the hospital—may maximize such efficiencies to the fullest extent. This “nonrecognition” seems to be driven by the fact that nonradiologists who can refer their patients to that hospital (or to another if they so choose) have increasingly been pressing to obtain hospital privileges in imaging modalities such as computed tomography or magnetic resonance imaging. Hospitals, in turn, have pressured radiology groups to “share” (or even turn over) imaging procedures with referrers. Thus, while we are seeing more exclusive contracts, we are also seeing more “carve-outs” for nonradiologists to do imaging both outside and inside the imaging department.
To limit this continuing erosion and its detrimental effect on departmental efficiency, some groups have negotiated contract provisions, such as a “grandfather clause” exception to exclusivity only for those nonradiologists who already have imaging privileges at the time of contract signing or by including provisions that use minimum numbers of procedures needed for already credentialed practitioners to maintain proficiency as a benchmark, so the hospital must review and evaluate or demonstrate a need before credentialing additional new physicians. Provisions that recognize exclusivity of the radiology group over new procedures brought about by changes in technology or require that call be shared and access to patients needing imaging procedures be randomly assigned (to prevent “skimming” of well-insured patients),xiii if the right to perform such procedures is shared, have also been employed to limit or discourage some of the whittling away of exclusivity that has taken place.
Managed Care Requirements
Observing that “the odds [were] particularly high in the Northeast” that [among other things] a hospital must be permitted to act as its radiologists’ agent in negotiating with HMOs and PPOs, and that a hospital will require its radiologists to participate in Blue Cross or Medicare, the ACR Survey stated:
Radiology practices in the Northeast may find it helpful in negotiating with hospitals to point out that these contractual arrangements are quite uncommon in the United States as a whole.
As many contracted radiologists know too well, this observation was recorded before the “managed care revolution” became really widespread. Requirements that radiology groups participate in hospital-negotiated managed care arrangements are now commonplace in many radiology contracts. Where managed care has deeply penetrated markets, some physicians have seen a serious impact on their bottom line.xiv
It is far preferable for radiologists to negotiate their own managed care contracts. However, hospitals are likely to mandate participation in contracts with managed care organizations. In such situations, radiologists should attempt to negotiate a right to approve/disapprove hospital-negotiated discounts or to use contractual protections to contain the discounts and to prevent radiology from being the “loss leader” through which a hospital obtains a contract at the expense of the radiologists’ revenues.
Among the simplest stop-gap measures are contract provisions that allow the group to draw the floor for managed care discounts from their usual and customary fees at a fixed level or percentage, or at the level of discount that the group has offered other major plans and such plans have accepted, with Blue Cross being a common benchmark. An obvious problem is that such a provision invites the hospital to “shop” the discount floor. Confidentiality provisions may put a check on such “shopping.” Other groups have negotiated more complicated measures against which their discount (or their patient volumes) will be compared or have even been willing to let arbitration settle conflicts when the hospital and the group cannot agree upon the discount the group will accept.
Still other radiologists have been willing to accept hospital negotiated discounts as long as they do not exceed discounts accepted by other hospital-based physicians under exclusive contracts with the hospital, or do not exceed the discount accepted by the hospital for certain services or overall.xv As managed care has grown so has its appearance as a major issue in most hospital contract negotiations over the last 10 years, and so has the number of creative contract approaches designed to deal with its effects.
Provisions Requiring Radiologists to Provide or Share Services, Personnel and Fees In Return for Privileges
Besides managed care, few forces have had as much impact on the provision of health care over the decade since the ACR Survey as has the government’s heightened scrutiny of fraud and abuse compliance. As part of their compliance plan development, some radiology groups have begun to ask counsel to identify and clean-up provisions in their contracts that may raise issues under the anti-kickback laws and numerous other regulations that govern this area.
The ACR Survey spoke of contract provisions requiring radiology groups to provide or share services, personnel and even part of their fees with hospitals in exchange for the referrals the groups received under the given hospital contract. A 1991 HHS OIG Management Advisory Report, Financial Agreements between Hospitals and Hospital-Based Physicians, educated many in hospital-based health care as to the fraud and abuse pitfalls that many radiology/ hospital-based groups/hospitals may fall into; however, provisions are still proposed that are surprising. An example is this recent draft provision received from a hospital attorney:
In consideration of the exclusivity provisions set forth in this Agreement, Group agrees to perform the designated Medical Director Services and Administrative Services pursuant to this Agreement, at no additional cost or expense to Hospital.xvi
More common and more subtle, but still problematic, are contract provisions that require radiologists to provide “professional courtesy care,” uncompensated exam interpretations for hospital employeesxvii or other uncompensated valuable services for which others receive payment. Heightened fraud and abuse scrutiny has been a somewhat positive force for radiologists’ contracts, giving the radiologists a persuasive argument against contractually required practices that had once been common (such as professional courtesy care), while also supporting compensation for some services (such as residency program administration and teaching) that radiologists once provided without compensation, as the ACR Survey noted.
Indemnification
Forty-three percent of the survey respondents who were under a contract were required by their agreement to indemnify the hospital and hold it harmless for professional liability of the radiology group’s physicians. While indemnification does not appear in every radiology contract today, it is quite commonly sought by hospitals, at least in initial contract drafts. By adopting the clause as part of a contract, radiologists are “contractually assuming” a liability. Frequently, contractually assumed liabilities are excluded from coverage under professional liability policies, meaning that the group or individual radiologist will have no insurance coverage for claims brought by hospitals under those contract indemnification provisions.
Often, alternative provisions, such as clauses providing for indemnification by one party of the other for the first party’s failure to maintain insurance or providing that each party will be responsible for its own acts to the fullest extent of the law, are acceptable substitutions.
A more disturbing development is a provisions appearing in a minority of contracts requiring the radiology group to indemnify the hospital for losses related to sanctions (including exclusion from Medicare) if radiologists violate (even negligently) Medicare laws and the hospital is implicated. If exclusion of the hospital were to result, indemnifying for the losses related to the hospital’s Medicare participation could be devastating to a group.
Though not discussed in the ACR Survey, a few other issues have come to the forefront of hospital/radiologist negotiations over the past 10 years. These issues are discussed below.
Coverage and Scheduling
One of the primary reasons hospitals enter into exclusive contracts (and frequently noted by courts as one of the factors justifying their validity) is the assurance they bring of continuous 24-hour-a-day, 7-day-a-week coverage. The problem in some contract negotiations is that the hospital may seek to unilaterally determine the schedule of required on-site coverage without tying it to the needs of patients and the medical staff.
Because the radiologists are best suited to know the demands of the radiology department, the radiology group should determine the hours of on-site coverage required in consultation with (or if necessary, jointly with) the hospital. Yet, even though hospitals have ample other contract protections to require the group to deliver the proper quantity and quality of service, many press for a specific provision allowing them to make scheduling and coverage decisions either with or without required input from the radiology group.xviii
Co-Termination
More and more exclusive hospital-based physician contracts provide for simultaneous termination of medical staff appointment and clinical privileges with termination or expiration of the contract and for waiver of any applicable bylaws hearing process. Some groups have been able to negotiate exceptions to co-termination where the hospital terminates without cause or to secure provisions that the surrender of privileges and waiver of due process will not take effect unless and until the hospital enters into another exclusive contract with a new group.
One helpful provision in this area, as noted earlier, is a clause giving the group the right to meet with the hospital board and medical executive committee (or representatives thereof) prior to the hospital giving the group any notice of termination or expiration.xix By involving the board in the process, the group will at least have the opportunity to address the ultimate governing authority of the hospital—the same body that would have made the final decision regarding loss of privileges if the bylaw hearing procedure was not waived. Involvement of the medical executive committee, representing the interests of the staff in assuring quality of care in the hospital’s decision-making, with the board can also be helpful.
Noncompete/Joint Ventures
One of the most contentious issues between some hospitals and radiologists today is the right of the radiologists to maintain an independent practice outside the hospital at a private office, radiologist-owned imaging facility or other hospitals.
This issue is being resolved in a number of ways. Some hospital contracts will narrowly define the geographic scope of any non-compete and allow the radiologists to continue to provide services at their private office or other hospitals if the contracting hospital does not view them as a competitive threat and as long as the group continues to meet its obligations to the contracting hospital. Where a hospital views a radiology group’s independent office or imaging facility as a competitive threat, a group will sometimes enter into a joint venture with the hospital to set up a jointly owned limited liability company or other legal entity, which will own the outside office or imaging facility. A joint venture, by definition, involves surrender of some level of control, though the radiologists can maintain majority ownership and management authority.xx Some groups find such a venture beneficial by binding their practice and the hospital together in a business relationship, even when they may not have a hospital contract.
In other situations, hospitals have purchased radiologists’ independent facilities outright but with the group retaining a contractual right to purchase them back if ousted from the hospital under certain circumstances or within certain time periods. Finally, some hospitals have leased radiologists’ private offices with or without an option to purchase.
Prioritizing Contract Issues
Prioritizing the foregoing issues should be an essential part of each radiology group’s preparation for hospital contract negotiations. The priority assigned will vary for each group depending on its particular circumstances and objectives.
However, five of the issues discussed in this article rank near the top of a list of those most important to the majority of radiology groups and should therefore be the primary focus of attention in contract negotiations:
1. Exclusivity. Exclusive radiology agreements typically place full accountability for imaging quality, call and indigent care on the radiologists, while allowing certain nonradiologists to perform limited imaging, even in the radiology department. Narrowly tailored exceptions to the radiologists’ exclusivity, if necessary, can create “carve-outs” satisfying the hospital’s desired objectives to allow for imaging privileges for some nonradiologists without turning the radiology department into “Grand Central Station” (as one court recently warned can happen when all specialties share the imaging department.)xxi At the same time, the provisions for exceptions can and should parcel out some of the call, indigent care and accountability to those nonradiologists enjoying imaging privileges, to avoid the problems and inequities associated with those nonradiologists “free-riding” on the radiologists’ duties and obligations in the department. It should also be clear in the contract that authority for scheduling all procedures in the department, even those performed by nonradiologists, resides with the radiology department chair.
2. Managed Care. Along with exclusivity, this area potentially can have the most impact on radiologists’ revenues during the life of the contract. If radiologists are unsuccessful in obtaining the right to directly negotiate with managed care payers or the right to approve or disapprove discounts negotiated by the hospital, well-crafted contract provisions can still be used to limit the level and impact of discounting. As discussed above, this can be done in a number of ways including limiting the discount to what the group currently contracts for in its own agreements with managed care organizations.
3. Termination Without Cause. Since the period in which a party can exercise its right to terminate without cause and the period of prior notice required to exercise such right can effectively define the “solid term” of an agreement, these terms are critical. It is in the best interests of most radiology groups to seek to eliminate the right to terminate without cause or, at a minimum, to limit its exercise to the end of the second year of the given term (to allow the hospital to comply with the IRS safe harbor). The period of required prior notice should be long to provide the parties time to possibly renegotiate or, worst case, time for the members of the group to relocate.
4. Noncompete. Increasingly, hospitals frequently view a radiology group’s independent practice as a competitive threat, except when it is located beyond the hospital’s service area. On the other hand, many radiology groups strongly value their outside practices not only because of the revenues such practices bring but because of the gaps in the hospital’s imaging capabilities that the practices fill (often when the hospital will not spend the money to fill those gaps). Some radiologists have been successful in grandfathering their existing outside practice locations out of the noncompete provision. When a group’s independent practice is located at a group-owned office or facility, some other groups have entered into a joint venture with the hospital to co-own and thereby preserve the group’s outside practice facility. Other groups have leased or sold such facilities to the hospital, with or without an option to repurchase if the hospital terminated the hospital contract.
5. Pretermination Opportunity to Meet with Hospital Board. Clinical privileges to perform imaging services in the hospital are critical to hospital-based radiologists. Nearly all hospitals are insistent upon co-termination of the radiologists’ privileges with the contract and waiver of due process provisions as a part of any exclusive contract. It is difficult, though not impossible, in most cases to successfully negotiate such provisions out of exclusive contracts. Yet, it can be negotiated that such provisions are inapplicable when the hospital terminates the agreement without cause, particularly where it is the first time the group is asked to agree to such a provision. Valuable concessions should be sought from the hospital if the provision is to be accepted. Such concessions, at a minimum, should include a provision for the opportunity of the group to meet prior to any notice of termination or expiration of the contract with the hospital board, along with members of the medical staff executive committee representing the views of the staff, so that the group may present reasons why the contract should continue to those who have the power to continue the agreement.
Conclusion
Though more than 10 years have passed since the ACR survey of radiology practices and their contracts with hospitals and its accompanying analysis appeared in AJR, many of the provisions upon which the survey focused are still quite relevant and are, along with the other areas discussed above, among the primary areas of discussion in today’s hospital contract negotiations. Legal, regulatory and economic forces continue to greatly impact the dynamic relationship between hospitals and radiologists. Where contentious issues have arisen in this relationship, many radiology groups have been successful in developing creative alternatives to otherwise unacceptable hospital contract provisions. Resolutions to these issues do exist and they are often arrived at in a manner satisfactory to both the group and the hospital. With the present difficulties many hospitals are aware they are likely to face in recruiting “replacement” radiologists, radiology groups may be in a better position to obtain favorable resolution of these and other issues they face in today’s hospital contract negotiations.
Endnotes
The authors have a Chicago-based national health law practice, Law Offices of Thomas J. Reed, representing and advising physicians and medical staffs, primarily radiology groups and individual radiologists and radiation oncologists, on a variety of legal matters including hospital contract, managed care, group practice, antitrust, fraud and abuse and staff privilege/credentialing issues. The firm has also represented professional societies including the Illinois Radiological Society, American Medical Association and the American Academy of Orthopedic Surgeons. This article is not intended as legal advice and should not be used as a substitute for consulting an experienced health care attorney familiar with these kinds of issues.
1 Sunshine S, Chan WC, Kassing PJ. Radiology practices and their contracts with hospitals, 1989-1990: A representative sample survey. AJR Am J Roentgenol. 1991:157:1341-1347.
i From a hospital’s perspective, a contract means a greater and more direct level of accountability to the hospital administration for professional and administrative services in the imaging department (rather than, for example, through the medical staff bylaw obligations).
ii Some courts have even permitted hospitals to take away, without the process seemingly available under the bylaws, the medical staff privileges of group physicians who are replaced by virtue of a new exclusive contract, reasoning that bylaws process is intended to apply to quality of care/competence questions, not “administrative decisions” to replace a group. (e.g., Bartley v. Eastern Maine Medical Ctr., 617 A.2d 1020 (Me. 1992); Gonzalez v. San Jacinto Methodist Hosp., 880 S.W.2d 436 (Tex. App. 1994), but see Lewisburg Community Hosp., Inc. v. Alfredson, 805 S.W.2d 756 (Tenn. 1991); Spunberg v. Columbia/JFK Medical Ctr., 1997 WL 868607 (Fla. Cir. Ct. Dec. 23, 1997)), reversed and remanded on other grounds University of Miami, Inc. and Columbia/JFK Medical Ctr., Inc. v. Spunberg, 784 So. 2d 541 (Fla. Dist. Ct. App. 2001); Palm Springs Gen. Hosp. v. Valdes, 784 So. 2d 1151 (Fla. Dist. Ct. App. 2001). This development is perhaps best countered with medical staff bylaw changes that are designed to block the circumvention of hearing rights in such instance.
iii Radiologists we have represented from around the country in diverse markets have spoken of recent difficulties in recruiting new physicians. This is consistent with the shortage of radiologists the ACR identified in the recent study. See ACR-assisted study warns of "genuine shortage" of radiologists. ACR Bulletin 2002(2);58:9.
iv ACR research examines the radiologist shortage. ACR Bulletin 2002(3);58:11.
v If a group is concerned about coverage obligations at outside facilities that could be established at a substantial distance from the hospital, it may want to consider a right of first refusal to serve the facilities instead of being automatically obligated to cover such distant locations. Some groups have negotiated the right to use locum tenens coverage and teleradiology, as determined medically appropriate by the group medical director, to cover remote sites when manpower is short or driving distances long.
vi Although earlier guidance from the IRS had suggested these parameters, 93-19 and the subsequent 97-13 Revenue Procedure provided more formal regulatory action that hospitals and their counsel began to rely on more heavily in contract drafting and negotiation.
vii Some draft hospital contracts do not even offer the right to terminate without cause reciprocally, reserving the right only to the hospital.
viii In some instances where the contract has an evergreen instead of a fixed expiration date, some hospitals desire to renegotiate but forget until after the contract has already been renewed automatically.
ix A recent industry survey indicated that cardiovascular surgeons, neurosurgeons, vascular surgeons and cardiologists are the four highest revenue generating specialty groups for their affiliated hospitals. See Surveyputs a price tag on doctors' value to hospitals. American Medical News. April 15, 2002:20. Not surprisingly, radiologists with exclusive contracts who are asked mid-contract (as well as at renewal time) to "make an accommodation" to their exclusivity are, in our experience, most often asked to do so to permit these very specialists to perform imaging procedures.
x See ACR Policy on Medical Staff Privileges, Exclusive Contracts and Economic Credentialing; see also AMA HOD Policy 225.985 Medical Staff Review of Quality of Care Issues Prior to Exclusive Contract, which calls for such staff input in these hospital decisions.
xi Apart from traditional exclusive contracts and open staff radiology departments, some other practice models include: purely administrative (or medical director) contracts; on-call coverage agreements (with hospital subsidy); nonexclusive professional service agreements; and joint venture contracts for imaging and medical director services at jointly-owned facilities, but without any contract at the hospital. The pros and cons of such arrangements are beyond the scope of this discussion but will be addressed in a future article.
xii Radiologists have noted that other specialists sometimes only see patients with good insurance, while the radiologists have contractual obligations to treat all patients regardless of ability to pay.
xiii See A dubious distinction. American Medical News. March 4, 2002:20, which discusses, among other things, the impact of high managed care penetration on revenues for physicians in metropolitan areas with the greatest percentage of residents in HMOs (private pay and Medicaid).
xiv The problem with the latter provisions is that the hospital's discounts may be greater than physician discounts.
xv Although radiologists commonly provide administrative services without compensation, this is considered to be part of the responsibilities that come with being the exclusive group in the department rather than the provision of valuable services in return for the hospital's guaranteed referrals, as the cited provision suggests.
xvi See Professional courtesy payments may contain risks. ACR Bulletin. 1997(9);53: 7. See also ACR Compliance Program Guidelines for Radiologists and Radiation Oncologists, page 65.
xvii A related issue for some radiologists and other physicians is the question of uncompensated on-call responsibility, particularly at hospitals with a high degree of indigent care.
xviii Such a meeting at this point in the decision process can arguably be viewed as better than bylaws hearing processes, which take place only after a decision is made and is thus harder to reverse.
xix OIG Advisory Opinion 97-5, October 6, 1997, made such joint venturing more attractive and feasible by outlining a structure that, under the given facts, received a qualified endorsement of the OIG to proceed with a contemplated radiology imaging center joint venture between a radiology group and a hospital.
xx A Colorado state trial court recently observed this in its grant of summary judgment in favor of a hospital sued by a neurologist who was denied MR privileges based on an exclusive contract with the radiologists. (Ryals v. St. Mary-Corwin Reg. Med. Ctr., et al, Case No. 97CV0207, D. Ct. Pueblo City, Colo., 2/25/02).
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