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Hospitals Hiring Physicians: What Could Go Wrong?

Bylaws can—and should—support AMA principles By Elizabeth A. Snelson, JD

Is there a difference between going to work at the hospital and going to work for the hospital? The answer—legally, technically, and practically—is yes. The benefit of being just a doctor taking care of patients without the hassles of hiring staff, billing patients, and running a practice is apparent to most physicians, and constitutes the primary reason so many are abandoning the independent practice of medicine. However, going to work for the hospital brings its own problems. Complications run from getting hired to getting fired, and everything in between.

To assist physicians who are considering working for a hospital or in the throes of hospital employment, the American Medical Association (AMA) adopted Principles for Physician Employment (available at at its November 2012 Interim Meeting. The Principles provide the guidance needed by medical staffs, physicians and hospitals on the inherent ethical issues and public policy challenges surrounding employment.

While hospitals have to make money to continue to function, their boards and CEOs are not licensed to practice medicine. They still need physicians to admit and attend to patients, and thereby generate revenue. However, hospital boards and administrators, for the very same reasons, cannot tell physicians how to practice medicine. Medical staff organizations set the standards for the practice of medicine in the hospital. The clash over control that physician employment creates will give the new Principles for Physician Employment a workout in America’s hospitals.

Helpful as the AMA’s adoption of policy may be, it does not automatically put principles into practice. To assure that obligations of employment do not interfere with professionalism and other medical staff duties, hospital medical staff should fine-tune their medical staff bylaws, rules and regulations, and policies. Here are specific friction points and possible medical staff bylaws solutions you may want to consider:


The medical staff organization sets the clinical criteria for privileges, which must be uniformly enforced under Joint Commission Standard MS.06.01.07 Element of Performance 5. Therefore, no job description or administrative desperation should authorize exempting potential employees from meeting the set criteria. Medical staff bylaws should clearly provide as much.

A bylaw for this requirement could read: Physicians and other medical staff members employed by the hospital to provide clinical services in a full-time or part-time capacity must apply for and be granted medical staff membership and privileges pursuant to the same process and meet the same requirements as members who are not employed by or under contract with the hospital.

Patients First

Physicians who are hospital employees do not relinquish their professional responsibility towards patients when they take that paycheck. The Principles states, “In any situation where the economic or other interests of the employer are in conflict with patient welfare, patient welfare must take priority.” Medical staff bylaws should reiterate that this general principle applies—no matter who pays the physician.

A bylaw for this requirement could read: Physicians who are employed by or under contract with the hospital to render clinical services shall comply with all standards, cooperate with all peer review, and otherwise be subject to the medical staff bylaws, rules and regulations, and policies of the medical staff, in the same manner and to the same degree as physician members of the medical staff who are not employed by or under contract with the hospital.

Medical Staff Leadership

Beyond direct patient care, physicians’ professional responsibilities include serving on medical staff committees, participating as proctors and as other peer reviewers, and stepping up as department chiefs or in other leadership positions. The AMA Principles encourage employed physicians to participate, stating, “Employed physicians who are members of the organized medical staff should be free to exercise their personal and professional judgment in voting, speaking, and advocating on any matter…” In those unusual occasions where the hospital position deviates from that of the medical staff, employed physicians in medical staff leadership positions should be confident in speaking their minds, and protected against job retaliation. Bylaws language is necessary to assure employed physicians they are not at risk, and to assure independent physicians their employed colleagues will not be subject to manipulation.

A bylaw for this requirement could read: Medical staff members cannot be fired from their hospital employment or be terminated from hospital contracts because they participate in medical staff activities in good faith consistent with this section and these bylaws.


Physician contracts frequently use incentive payments to encourage employed physicians to comply with the hospital’s practice goals, such as reducing the length of stay per diagnosis. The AMA Principles reiterate that ethical requirements place a distinct burden on the employed physician to prevent incentives from influencing decision-making, stating, “Divided loyalty can create conflicts of interest, such as financial incentives to over- or under-treat patients, which employed physicians should strive to recognize and address.” A review process in medical staff bylaws can promote the primacy of patient care.

A bylaw for this requirement could read: Hospital administration shall share all financial and other incentives offered to physicians and other medical staff members for patient care-related actions, such as referrals, admission quotas, lengths of stay, and other utilization or criteria that have or could have an effect on patient care quality, and shall provide this to the Medical Executive Committee to assess any adverse effect on the quality of patient care.

Conflict of Interest

Physicians’ financial relationships can create a conflict of interest that interferes with medical staff decision-making. Medical staff bylaws should provide for disclosure of conflicts of interest in elections and, particularly, in peer review, to make medical staff decision-making processes transparent. While conflict of interest processes ask whether the physician has a financial relationship with peers and with competing hospitals, they frequently fail to require disclosure of the physician’s financial relationship with the hospital, despite the fact that employment can certainly prove influential. Bylaws should provide that while disclosure affects participation in decision-making, it cannot affect membership or privileges.

A bylaw for this requirement could read: Members’ financial interests are unrelated to qualifying for and maintaining medical staff membership and privileges. However, financial interests could be an issue when the member serves as a peer reviewer, in medical staff leadership, and on committees. Those financial interests that may influence or appear to influence members in certain leadership or decision-making situations must be disclosed in those circumstances in which the interests are or could be involved, including:

• Hospital contracts, employment, lease, ownership interest, joint venture, or other financial relationships with the hospital or hospital system or any management company operating the hospital.

• Employment, partnership or other economic affiliation with individuals or entities involved in the subject matter of the review or other medical staff activity.

Financial information so disclosed shall be used solely to determine any conflict of interest and shall be kept confidential.

Peer Review

Employed physicians are members of the medical staff, which should mean that their services are under the same review processes as those of all other medical staff members. Some hospital administrators could be surprised to learn that someone outside of the employment chain of command could effectively fire a hospital employee. This would have essentially the same effect as summary suspension by the chief of the medical staff. The AMA Principles hold that, “Peer review should follow established procedures that are identical for all physicians practicing within a given health care organization, regardless of their employment status.” To prevent confusion and smooth out any perceived differences, medical staff bylaws can clarify that peer review is for every medical staff member.

A bylaw for this requirement could read: Peer review activity and actions, including focused and ongoing professional practice evaluation, summary and automatic suspension and other corrective action, apply to all medical staff members. Physicians shall not be exempt from participating in or being subject to peer review because of their employment or contract status.

Exclusive Membership and Privileges

Hospital employment developments may have the effect, intended or not, of closing departments or services to physicians who practice independently, or to unduly limit their practices. Bylaws can stipulate that general aspects of practice such as admitting patients and covering the emergency department are not exclusive to employees.

A bylaw for this requirement could read: Admitting privileges and services on call shall not be exclusive to hospital employees, members with hospital contracts, or to any single specialty.

Most hospital medical staffs will continue to include both employed and “unemployed” physicians for the foreseeable future. Neither need be exclusive. These proposals should assist medical staffs in effectively integrating the continuously evolving financial arrangements and practice modes necessary in the current climate to provide quality care for patients in the hospital.

Elizabeth “Libby” Snelson is legal counsel for Medical Staff PLLC, assisting medical staff with bylaws and other challenges. She may be reached at

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