1. TEACHING HOSPITALS OF TEXAS 2013 HEALTH LAW SEMINAR Physician Employment: Peer Review and Other Concerns for Hospitals October 13, 2013 Brandy Schnautz Mann Jackson Walker L.L.P. bmann@jw.com

2. Corporate Practice of Medicine Corporate practice of medicine prohibition –Prohibits practice of medicine by unlicensed persons – including entities such as corporations –Effectively prohibits direct employment of physicians by non-physicians Includes lay individuals and entities Applies to governmental entities unless excepted from the rule

3. Corporate Practice of Medicine Unlike some states, Texas does not exempt hospitals or other licensed health care entities from the prohibition* Today, however, more hospitals in Texas than ever before can directly employ physicians

4. Physician Employment Hospital direct employment of physicians* –Statutes for particular hospital districts e.g., Dallas County Hospital District, Maverick County Hospital District –Repeated legislative attempts in the last decade to exempt certain classes of hospitals

5. Physician Employment Hospital direct employment of physicians –Since 2011, critical access hospitals, sole community hospitals, and hospitals in counties of 50,000 or fewer can employ physicians* Health & Safety Code Chapter 311, Subchapter E for hospitals listed above

6. Physician Employment Hospital direct employment of physicians –Other bills passed in 2011 for larger hospital districts Harris, Bexar, El Paso, and Tarrant County Hospital Districts and Scottish Rite Hospital in Dallas –New requirements for 501(a) corporations to ensure physician independence

7. Employment Limitations* Even with exemptions, hospital employment is limited Governing body of hospital not authorized to supervise or control the practice of medicine

8. Employment Limitations Chief Medical Officer (CMO)* Policies to ensure independent medical judgment* No discrimination between employed and not employed physicians with respect to privileges Physician involvement in liability issues* Non-competes limited*

9. Chief Medical Officer The CMO is the hospital’s designated contact with the Texas Medical Board –Must report that hospital is hiring physicians –Must report any action or event CMO reasonably believes in good faith compromises independent medical judgment of a physician

10. Employment Policies Written policies must cover: Credentialing and privileges Quality assurance Utilization review Peer review and due process* Medical decision-making Complaint mechanism to process and resolve complaints regarding interference with medical judgment

11. Peer Review Laws Chapter 161 of the Health & Safety Code Chapters 151 and 160 of the Occupations Code (Medical Practice Act) Federal Health Care Quality Improvement Act of 1986 (HCQIA) Intended to work in concert, but they are distinct laws*

12. Peer Review Laws “Medical peer review committee” or “professional review body” defined in the Occupations Code “Medical committee” defined in the Health and Safety Code “Professional review body” defined in HCQIA

13. Peer Review Purposes Quality assurance/utilization review Review of medical staff applications and requests for reappointment Disciplinary actions involving physicians

14. Peer Review Purposes Considerations for public hospitals, hospital authorities, and hospital districts –Contracts with health care facilities* –Applicability of Public Information and Open Meetings Acts –Immunity

15. Due Process for Physicians* Triggered by adverse review action –Notice and hearing –Right to counsel –Recording –Witnesses –Statement –Review of written decision

16. Confidentiality Intended to encourage discourse and candor among participants Protects records and proceedings from –Discovery –Subpoenas (civil litigation v. TMB)* –Public Information Act (open records requests) –Open Meetings Act*

17. Confidentiality Limitations –Does not apply to records made or maintained in the regular course of business –May be waived –Permissive disclosures* –Defense of committee or members* –Some reporting is required and does not constitute a waiver*

18. Immunity Participants in the peer review process are protected from civil liability and discipline or discrimination –Committee members and employees –Witnesses –Reporting parties

19. Immunity Limitations –Good faith –Without malice or knowledge of falsity –Reasonable belief that action or recommendation is warranted by the facts –Does not apply to some actions Civil rights suits or actions by the United States or a state’s attorney general

20. Reporting Requirements To the TMB –Certain adverse actions taken by the committee* –Physician posing a continuing threat to the public welfare through the practice of medicine TMB reports to the Data Bank* Duty may not be nullified through contract*

21. TEACHING HOSPITALS OF TEXAS 2013 HEALTH LAW SEMINAR Physician Employment: Peer Review and Other Concerns for Hospitals October 13, 2013 Brandy Schnautz Mann Jackson Walker L.L.P. bmann@jw.com