5530: Chapter 5


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5530: Chapter 5

  1. 1. Chapter 5Contracts and Antitrust 2
  2. 2. ContractA special agreement, written or oral, thatinvolves legally binding obligations betweentwo or more parties. 3
  3. 3. Purpose of a Contract• To specify, limit, & define agreements that are legally enforceable.• A contract forces the participants to be specific in their understandings and expectations of each other.• Contracts serve to minimize misunderstanding & offer a means for parties of a contract to resolve any disputes that may arise. 4
  4. 4. Types of Contracts - I• Express – Oral – Written• Implied• Voidable• Executed 5
  5. 5. Types of Contracts - II• Enforceable• Unenforceable• Realty – Goods – Services 6
  6. 6. Elements of a Contract• Offer/Communication• Consideration – Adequacy• Acceptance – Meeting of the Minds – Definite & Complete – Duration 7
  7. 7. Breach of Contract• Occurs when there is a violation of one or more of the terms of the contract.• Elements necessary to establish a breach – A valid contract was executed. – The plaintiff performed as specified in the contract. – The defendant failed to perform as specified in the contract. – The plaintiff suffered an economic loss as a result of the defendants breach of contract. 8
  8. 8. Competent Parties• Corporate Contracts• Partnerships – Apparent Agent/Ostensible Agent• Independent Contractor – Hospital Liable for Physician’s Negligence – Agency Liable for Negligent Hiring 9
  9. 9. Legality of ObjectTo be a valid contract, the contract must not violate any federal or state statute, law, rule or regulation. 10
  10. 10. ConditionsAct/s or event/s that must occur or be performed by one party before the 2nd party has any responsibility to perform under the contract. 11
  11. 11. PerformanceSubstantial performance by one party to a contract will obligate the other parties to perform. 12
  12. 12. Nonperformance Defenses• Fraud• Mistakes – Mistake of Fact – Mistake of Law• Duress• Illegal Contract• Impossibility• Statute of Limitations 13
  13. 13. Remedies• Specified Performance• Monetary Damages• General & Consequential Damages• Duty to Mitigate Damages• Arbitration 14
  14. 14. Employment Contracts• Express Agreement• Implied Contracts 15
  15. 15. Text Cases: Employment Contracts• Nurse Breaches Contract: Repayment of Tuition Required• Geographic Limitations on Practice Reasonable• No Express Agreement: Right to Terminate• Breach of Employment Contract• Restrictive Covenant Enforceable• Restrictive Covenant Not Enforceable 16
  16. 16. Employee Handbook– Elements necessary to establish employee handbook as a contract: • A policy statement that clearly sets forth a promise that the employee can construe to be an offer. • Policy statement must be distributed to the employee, making him or her aware of the offer. • After learning about the offer & policy statement, the employee must “begin” or “continue” to work.– Employee Handbook: Considered a Contract 17
  17. 17. Medical Staff Bylaws a Contract• Applicants for appointment to a medical-dental staff submit a signed application attesting that he or she has read & agree to accept & abide by the provisions & directives in the bylaws.• The physician promises to abide by the medical staff bylaws in exchange for medical staff privileges.• This exchange of promises, constitutes consideration to support any contract of this bilateral nature. 18
  18. 18. Exclusive ContractsAn organization often enters into an exclusive contract with physicians or medical groups for the purpose of providing a specific service to the organization. Exclusive contracts generally occur within the organizations ancillary service departments (e.g., radiology, anesthesiology, and pathology). 19
  19. 19. Restraint of Trade• Department of Justice: primary responsibility for enforcing federal antitrust laws• Federal Trade Commission• Sherman Antitrust Act• Cases – Conspiracy to Terminate Physician’s Privileges – Claim of Group Boycott Denied – Physician Agreement for Professional Services/ Too Restrictive – Contract Violates Antitrust laws 20
  20. 20. Hospital Staff Privileges• Restricting Privileges – Moratoriums & closed medical staffs, as used in the healthcare field, describe an organization’s policy of prohibiting further appointments to its medical staff – Generally, a moratorium is for a specified period of time • It is lifted at such time as the purpose for which it was instituted no longer exists 21
  21. 21. Moratorium Effect - I• Effect on the organization’s census• Organization and community needs for additional physicians in certain medical and surgical specialties and subspecialties• Strain that additional staff will put on the organization’s supporting departments (e.g., radiology and laboratory services) 22
  22. 22. Moratorium Effect - II• Effect of denying medical staff privileges to applicants who presently are located within the geographic area of the organization and serving community residents• Effect on any contracts the organization may have with other healthcare delivery systems, such as health maintenance organizations• Effect a moratorium will have on physician groups that may desire to add a partner 23
  23. 23. Moratorium Effect - III• Effect additional staff may have on the quality of care rendered in the organization• Whether closing the staff will confine control of the organization’s beds to the existing medical staff, allowing them to enhance their economic interests at the expense of their patients and other qualified physicians• Effect of a limited moratorium by specialty as opposed to a comprehensive one involving all specialties (Indiscriminately closing a staff in all departments and sections without a review could be 24 considered an action in restraint of trade.)
  24. 24. Moratorium Effect - IV• Existence of a mechanism for periodic review of the need to continue a moratorium• Effect that medical staff resignations during the moratorium may have on the organization’s census• Existence of a mechanism for notifying potential medical staff candidates at such time that the organization determines that there is a need for an expanded medical staff 25
  25. 25. Moratorium Effect - V• Characteristics of the medical staff (Is the staff aging and in need of new membership?)• Potential for restraint of trade legal action under anti-trust laws• Effect on physicians without staff privileges whose patients are admitted to the hospital 26
  26. 26. Moratorium Effect - VI• Formation of a committee composed of representatives from the governing body, medical staff, administration, & legal counsel to develop an appropriate moratorium policy 27
  27. 27. Moratorium Effect - VIISelection of a consultant – study demographics marketplace – physician referral patterns – literature & organization use – conduct a medical staff opinion poll – develop patient–physician population ratios 28
  28. 28. Moratorium Effect - VIIISelection of a consultant cont. – determine population shifts – develop a formula to determine optimal staffing levels by department & section – provide this information to the governing body for use in determining appropriateness of closing staff in selected medical departments and/or sections
  29. 29. Patient Transfer Agreement• Transfer Agreements• Basic Elements of a Transfer Agreement 30
  30. 30. Transfer Agreement - I• Identification of parties to agreement• Purpose of agreement• Policies & procedures for transfer• Organizational responsibilities for transfer• Exchanging/Sharing information 31
  31. 31. Transfer Agreement - II• Retention of autonomy• Procedure for settling disputes• Procedure for modification or termination• Sharing of Services• Publicity• Exclusive v. Non-exclusive agreement 32
  32. 32. Insurance Contract• Insurance Denials• Pre-existing Condition – Truett v. Community Mut. Ins. Co. – Coverage Denied 33
  33. 33. Review Questions - I1. What is a contract?2. Describe the differences between an expressand an implied contract.3. What are the elements of a contract? 34
  34. 34. Review Questions - II4. Discuss the remedies available fornonperformance of a contract.5. Discuss the importance of disclaimers inemployee handbooks.6. Discuss why the courts often considermedical staff bylaws a contract. 35
  35. 35. Review Questions - III7. Explain why exclusive contracts are socontroversial.8. Describe the advantages and disadvantagesof closing a medical staff to new physicians.9. What is an insurance contract? 36