Trawling for dollars nets unwelcome results

January 7, 2005

"Dr. Hart, I am sure you know that OctaMega Corporation expects an 18% return on its investment. By the end of this quarter, we will be at 17.9%. I can get to the required 18% if we allow one more professional group at this hospital to do its own studies. So . . ."

"Dr. Hart, I am sure you know that OctaMega Corporation expects an 18% return on its investment. By the end of this quarter, we will be at 17.9%. I can get to the required 18% if we allow one more professional group at this hospital to do its own studies. So . . ."

"What? You already let practically everyone else read whatever they order. All I've been left with is fluoro and mammo."

"But you told me you were so unhappy with the quality of fluoro equipment that you didn't want to use it until the machines were fixed."

"A patient was vaporized by radiation! You even joked about marketing our equipment to the military as a weapons system. Remember?"

"How do you think I got this hospital from a net loss to a 17.9% profit? Military royalties! As for the fluoro, I've already agreed to the change. You'll still be able to read the mammos, since no one else wants to read those. This group wants to do the fluoro, and I've agreed. They've made some concessions and will send all of their studies here. It's a win-win."

"Wait a minute. I spoke to the internists, gastroenterologists, and surgeons the last time you did this, and none of them wanted to do the fluoro. Who wants to do it now?"

"That really doesn't matter."

"Yes, it does. I'm not leaving your office until you tell me who."

"Plumbers' Union, Local 387."

"The Plumbers' Union! They don't know anything about doing UGI/BEs or radiation exposure."

"That's another great perk to this whole deal. I don't have to replace the equipment."

Every radiologist in the U.S. should visit There you will find a tragic tale of one radiology group and the consequences of economic credentialing. We should all learn from the dramatic collapse of a radiology group in Southern California. We can benefit from their sacrifices to avoid the same fate.

Economic credentialing is the new buzzword. The American Medical Association defines it as "the use of economic criteria unrelated to quality of care or professional competence in determining a physician's qualifications for initial or continuing hospital medical staff membership or privileges." The pressure to find ever-increasing profits or sources of revenue has heightened the tension between hospital administrators and medical staff. One of my clients had its hospital contract canceled because one of its members had taken the occasional call for another group across town. Another small group suddenly found that the administration had agreed to allow other specialties to read their own studies in the hospital in the hopes of bringing in additional work the clinicians may have been sending to outpatient imaging centers.

Why would any hospital risk eviscerating its own radiology department? Because highly sophisticated hospital-based information systems can rapidly profile physicians and the profitability of their outpatient visits, admissions, surgeries, and test ordering.

In Kouri et al's AJR article, "Physician self-referral for diagnostic imaging: review of the empiric literature" (2002;179[4]:843-850), the authors demonstrated that "self-referral constitutes approximately 60% to 90% of nonhospital radiography and sonography," while "self-referring physicians performed imaging 2.4 to 11.1 times as often as radiologist-referring physicians and generated 3 to 17.1 times as high imaging costs per episode." That's a pretty intoxicating cocktail for any CEO trying to find new sources of income. Unfortunately, the same study documented that "nonradiologists' interpretation of images is usually less accurate" and that deficiencies in image quality and patient safety are 10 times those of radiologist-performed studies.

Since hospitals are now awarding new privileges to clinicians based upon assurance of increased referrals, some watchdogs have come to the conclusion that this approach may violate federal anti-kickback and Stark regulations. Because of this trend, 19 states have enacted legislation limiting economic factors for credentialing, but eight states have passed laws allowing such behavior. To avoid running afoul of the law, many hospitals have tried a stealth approach by amending or changing bylaws to allow their direct control of the medical staff. That brings us to the saga of Community Memorial Hospital of Ventura County, CA.

In 2002, Community Memorial CEO Michael Bakst, in what some felt was a blatant attempt to wrestle direct control of the radiology department from radiologists, hired his own radiologist, Dr. Duke Bahn. He stipulated that the existing radiologists not only had to make Bahn an immediate full partner in their group and their director, they also had to put the group's contract in Bahn's name. Threatened with the loss of their jobs, the radiologists caved in to all of Bakst's demands, except for putting the contract in Bahn's name. Bakst said it was all or nothing. The group stood up to this power grab and refused. In 60 days, sadly, they all were gone.

Other medical staff felt that the radiology group had been terribly mistreated, but they were about to learn the same lesson. The CEO, with the support of the trustees, unilaterally altered the medical staff bylaws and implemented a code of conduct that would not allow any criticism of the board. It barred any physician with any outside financial interests from serving in any official capacity. The board also took control of all peer review.

The battle lines were drawn. The medical staff came out in favor of the radiology group and elected its own officers, which the hospital then refused to recognize. The CEO installed competing officers and confiscated the medical staff's $250,000 bank account. Threats and barbs flew. Lawyers were hired, and 128 of the medical staff joined in a lawsuit against the hospital. The CEO countersued, arguing that the medical staff was merely an extension of the hospital and therefore did not have the right to sue itself. Numerous doctors moved their patients to other hospitals, while others outright resigned.

In the end, the courts ruled in favor of the medical staff's right to sue as an independent entity. As of Jan. 1, 2005, California has a new law that enshrines those rights of independent self-governance. Bakst was eventually removed as CEO after 25 years, and the medical staff's authority was reaffirmed.

But medical staffs cannot be assured of similar results in all states. The lesson is that every radiology group has to participate in medical staff governance and needs to exert intense surveillance of any proposed changes to the bylaws to avoid any chance for economic credentialing, or it risks seeing its practice taken over.

Nurturing a positive relationship with the medical staff can save your butt. As for that group that had its contract terminated for one partner's moonlighting? It was reinstated after the medical staff applied pressure, something you probably could not expect from the Plumber's Union.

Dr. Trefelner is a radiologist and cofounder of NightShift Radiology. He invites comments by e-mail at or fax at 650/728-5099. He also answers questions posed by readers in the "Ask Eric" column on