Some surgeons can open centers or work at the local hospital, but not both

Economic credentialing comes to forefront at state, national level

A surgery center opens in a community, and rumors are spread about the quality of care provided by the physicians there.

  • Leaders of a state hospital association testify before a state group that hospitals have the right to offer credentials based on economic criteria or any other criteria.
  • A hospital CEO tells employees that they will lose their part-time jobs there if they work at a competing surgery center, and he tells them he intends to bankrupt the center.
  • A physician is denied re-credentialing privileges because he's told that he didn't fill out his forms correctly and that the hospital staff didn't think he would ever be able to fill out his forms correctly.
  • A hospital refuses to sign a transfer agreement with a competing surgery center, forcing the center to establish these agreements with hospitals more than 30 miles away.

Welcome to your worst nightmares, courtesy of the growing trend toward hospitals and surgery centers battling over outpatient surgery patients.

Recent national and state action

Part of the trend toward economic credentialing can be attributed to a shift in hospital ownership, says Jeff Turk, MD, president of Surgery Center of North Central Missouri in Moberly, which recently faced opposition from its local hospital, which refused to sign a transfer agreement with the new center.

"We're seeing more and more hospitals that are not particularly community-based and community Samaritans," Turk says. "If you have a publicly traded, for-profit corporation owning and operating local and rural hospitals, they want to make as much money as possible, pass it on to shareholders and corporate entities, and not have the one-on-one relationships with those individual in those communities that typically local ownership would provide."

For its part, Moberly Regional Medical Center released a statement saying, in part, "Moberly Regional Medical Center (MRMC) is not opposed to fair competition, but physician-owned surgery centers do not represent fair competition. Because physician owners of surgery centers pick and choose the services they provide as well as the patients they target for their facility — often referring only healthier, well-insured patients and providing only highly compensated services — they have an unfair advantage." 1

In another sign of the times, The U.S. Supreme Court let stand a lower court ruling that surgery centers are not entitled to protection under the antitrust laws until they open. 2 Also, the upheld ruling said that efforts by a hospital to limit the dissemination of truthful, nondeceptive comparative information by a physician who was opening his own surgery center to compete with the hospital had no meaningful effect on competition. The ruling came out of the Third Circuit, which includes Delaware, New Jersey, Pennsylvania, and the Virgin Islands.

Craig Jeffries, Esq., executive director of the American Association of Ambulatory Surgery Centers, says, "It was unfortunate that the U.S. Supreme Court did not take the case because it emboldens other hospitals in that region to take a similar tact. We strongly oppose this restraint on competition and will look for other opportunities to defeat the precedent."

In other action, the latest edition of the American Medical Association's (AMA's) AMA's Physician Guide to Medical Staff Bylaws state that economic credentialing is a "dangerous practice" for medical staffs and hospitals.3 Medical staff bylaws should bar credentialing based upon any criteria other than education, experience, and clinical competence, the guide says. "Utilization requirements imposed for the purpose of generating hospital revenue could also be seen as violating the Medicare fraud and abuse laws," according to the guide. (See sample bylaw that addresses the AMA's concerns.)

There has been dramatic action regarding competition between hospitals and surgery centers in several states. Here is a synopsis:

  • At press time, Massachusetts senators were debating their state budget bill. An amendment originally proposed would have placed a three-year moratorium on physician ownership of ASCs unless the surgery center was opened with an acute care hospital, a hospital affiliate, or the member of a hospital system. Also, no existing surgery center would have been allowed to expand or add services unless it was owned in part by a hospital, hospital affiliate, or part of a hospital system. The amendment was changed to require the inspector general to conduct a study, including a cost-benefit analysis, regarding the impact of services in physician-owned, multispecialty ambulatory surgical centers and the impact of new technology claims. At press time, the amendment was before a state legislative committee.

  • In New York, a surgery center and hospital settled a case in mid-2005 that involved several issues, including a bylaw provision that was enacted the month the surgery center went into business. The provision said that having an economic interest in a competitor was the basis for removal from the staff. The center went out of business 18 months after it started, about two months after the largest payer signed an exclusive contract with the hospital, according to William G. Kopit, JD, an attorney with Washington, DC-based Epstein Becker, who represented the center.

  • In an Arkansas court decision earlier this year, the court held that a hospital that refused to allow a qualified physician to renew with the hospital on economic grounds committed a "tortuous interference" with the doctor/patient relationship,4 says Tim Markham, JD, director of government relations at the Colorado Ambulatory Surgery Center Association in Denver. "We're hopeful that there will now be more widespread recognition that economic credentialing is a heavy-handed and misguided retaliatory tactic that interferes with the patient/doctor relationship and the development of innovative surgical techniques," Markham says.

  • In Colorado, a committee defeated legislation that would have prevented hospitals from refusing to award, retain, or renew medical staff membership, clinical privileges, or other credentialing to health care practitioners because of his or her financial interest in another health care facility, according to Markham.

  • In Missouri, the governor intervened and assisted a surgery center that initially was denied full licensure because the administrators at the town's only hospital refused to sign a transfer agreement. The center responded by obtaining transfer agreements with other hospitals in the region.

Also in Missouri, the state hospital association has posted three publications on its web site: "Limited Service Providers: An Overview," "The Public's Concerns About Limited Service Providers," and "Physician's Concerns about Limited Service Providers." In those publications, the association says it contracted with two national polling firms to survey likely Missouri voters about limited service providers, including ambulatory surgery centers, outpatient medical imaging facilities, and radiation therapy facilities. The papers present the results those surveys, which the association says indicate voters and physicians are concerned about providers such as surgery centers. (To view the publications, go to, and click on the report names.)

As the issue grows, surgery centers are examining how best to respond.

Outpatient surgery managers should join their state associations and become leaders in those groups, says Jeffries. Keep your state and national associations apprised of battles you are facing, he says. Additionally, managers should participate in the Ambulatory Surgery Center Political Action Committee, he says. (Web:

Make sure the general population understands that it is to their benefit to have access to ambulatory surgery centers, Turk advises. "Make sure legislators understand it is good thing, and ask them to protect further access to health care and be actively involved in health care cost containment," he says. "Surgery centers are effective in providing efficient access and cost-effective access to health care."

Send out press releases and hold press conferences detailing the issue, Markham suggests. "Health care is complicated, and many members of the public and even many legislators don't have any idea that this is happening," he says.

Bring legislators into your surgery center for a tour, and have your doctors brief them on the issue, Markham advises. Also, consider introducing legislation to end the practice of economic credentialing, he says. "If you can educate the public, the political fights become easier," Markham says. (Editor's note: The American Hospital Association did not respond by deadline to requests for interviews for this story. For more resources on economic credentialing, go to In the "State Resource Library" chart, see column on "physician ownership.")


  1. Moberly Regional Medical Center. Statement issued by MRMC on Surgical Center facility in Moberly. Moberly, MO; 2006. Accessed at
  2. Alan D. Gordon, MD, Alan D. Gordon, MD, PC, Mifflin County Community Surgical Center, Inc. v. Lewistown Hospital, No. 05-1000, U.S. Supreme Court (March 13, 2006).
  3. Office of General Counsel, Organized Medical Staff Services, American Medical Association. Physician's Guide to Medical Staff Organization Bylaws, Third Edition. Chicago; 2005.
  4. Baptist Health v. Bruce E. Murphy, MD, Scott L. Beau, MD, David C. Bauman, MD, D. Andrew Henry, MD, David M. Mego, MD, and William A. Rollefson, MD, Baptist Health v. Murphy, No. 04-430, Supreme Court of Arkansas (Feb. 2, 2006).


For more information on economic credentialing, contact:

  • Craig Jeffries, Esq., Executive Director, American Association of Ambulatory Surgery Centers (AAASC), PO Box 5271, Johnson City, TN 37602. Phone: (423) 915-1001. E-mail: Web:
  • Tim Markham, JD, Director of Government Relations, Colorado Ambulatory Surgery Center Association, 6825 E. Tennessee Ave., Suite 510, Denver, CO. Phone: (303) 761-3596. E-mail:
  • Jeff Turk, MD, President, Surgery Center of North Central Missouri, 1509 Silva Lane, Moberly, MO 65270. Phone: (660) 263-8986 or -1266.

For information sheets on ambulatory surgery centers, go to the web sites for the following organizations:

  • American Association of Ambulatory Surgery Centers. Web: Under "Advocacy," click on "About Advocacy" and "ASC Fact Sheets."
  • Federated Ambulatory Surgery Association. Web: Click on "FAQs about ASCs."