NASHVILLE, Tenn.-Ending nearly two years of legal wrangling, Tennessee Gov. Don Sundquist signed legislation on June 12 that for the first time permits hospitals in the state to employ physicians.
Until now, hospitals have been able to buy the assets of physician practices but not employ the doctors directly. They have had to enter into contractual relationships with the physicians.
The law was pushed by the Tennessee Hospital Association, which felt that the state's decades-old prohibition against the corporate practice of medicine inhibited hospitals from developing fully integrated healthcare delivery systems, said Lamar Jackson, THA's vice president for communications.
However, the legislation contains significant limitations on physician employment designed to quell the fears of organized medicine in the state that physicians will lose the ability to practice medicine as they see fit.
The legislation, in effect, overrules several legal opinions since January 1994 by the Tennessee attorney general's office. Hospitals wanted the attorney general's office to clarify existing state statutes and case law as they pertain to corporations practicing medicine.
Specifically, hospitals wanted to know whether the statutes and case law stopped them from employing physicians.
In the first opinion, issued on Jan. 28, 1994, the attorney general's office said no specific statute addressed the issue, but the office concluded that a 1949 decision by the state Supreme Court barred corporations from employing physicians to treat employees.
In a follow-up opinion issued on April 12, 1994, the attorney general's office said the same court decision barred even not-for-profit hospitals from providing medical services through employed doctors.
The legislation signed by Sundquist permits any licensed hospital in the state or an affiliate of a licensed hospital to employ most physicians.
But to satisfy the concerns of the Tennessee Medical Association, the law contains a number of safeguards to protect physician autonomy. The law, for example, says hospitals can't restrict or interfere with an employed physician's medical judgment (See chart).
Howard Wall, an attorney with Waller Lansden Dortch & Davis in Nashville, said the limitations in the law illustrate the important political compromises that hospitals had to make in order to get the bill passed.
Lobbyists representing radiologists, anesthesiologists, pathologists and full-time emergency physicians exempted those physicians from the law. They enjoy contractual relationships with hospitals that they wanted insulated from employment arrangements, THA's Jackson said.
Tennessee's limitations on physician employment
Hospitals may not interfere with a physician's independent
Hospitals may not employ radiologists, pathologists, anesthesiologists or full-time emergency physicians
Noncompete clauses in employment contracts are limited
to two years
Hospitals must treat employed physicians and nonemployed physicians equally under their medical staff bylaws
Source: Tennessee House Bill 712