Peer Review or Employment? A Framework for Addressing Physician Performance Issues in Hospitals

COVID-19 accelerated the trend of physician employment with hospitals, with recent data showing that nearly 70 percent of physicians are employed by hospitals or hospital-affiliated foundations or groups. While physician integration improves quality of care and clinical efficiency, it also blurs the separation of responsibilities between the medical staff and the employer. This can create headaches for stakeholders who want to address physician performance issues.

The New Normal of Hospital-Affiliated Physicians

Traditionally, hospitals addressed clinical concerns through self-governed medical staffs, while independent practices, as the employer, retained authority over administrative and behavioral matters. This clean division of responsibility has been muddied by the new normal of hospital-based employment, which overlays the employment relationship onto medical staff membership. Now hospitals and affiliated entities often must decide whether to address physician performance through peer review and medical staff bylaws or through human resources and employment contracts. That decision can have significant consequences for both the hospital and physician.

Take, for example, a physician employed by a hospital-affiliated group. Suppose that shortly after the physician joins the hospital, nurses complain to hospital administration that the physician is abrasive and condescending to staff. Imagine that colleagues also question the new hire’s clinical judgment in specific cases. Both the medical staff and employer have good reasons for wanting to handle these issues through their own internal processes. The hospital too wants to address these issues appropriately taking into account patient safety, workplace morale, the physician’s career, legal risk, and the hospital’s reporting obligations. 

The Need for a Triage Process with Medical Staffs and Medical Groups

This hypothetical demonstrates the need for a triage process with the employer and medical staff to decide whether to address physician issues through medical staff peer review or through the employment process. Without a consistent framework through which medical staffs and employers can discuss which process is best suited to handle any given physician issue, hospitals and affiliated entities run the risk of duplicating efforts and producing inconsistent results.

To avoid such complications (and the attendant legal risks), hospitals should develop a framework for deciding how to address physician practice issues. Relevant considerations include:

• who gets to decide whether the issue is addressed through peer review or the employment process;
• what factors are taken into account when making that decision;
• will the medical staff and employer proceed on parallel or distinct paths;
• will there be collaboration between the medical staff and employer; and
• how will all stakeholders be kept informed throughout the process.

Picking which route to take can be a difficult choice, with different stakeholders vying for control and a number of competing interests complicating the analysis. Even after a framework is established, many factors—legal and otherwise—can impact specific decisions. 

For example, medical staffs are qualified to handle clinical issues while administrators with hospital-based employers often have training to address workplace behavioral issues. And running issues through medical staffs affords a number of immunities and privileges that don’t apply in employment disputes. On the other hand, medical staff proceedings can be costly and time consuming compared to employment decisions. Another important factor is reporting obligations to state medical boards or the National Practitioner Data Bank, which can raise the stakes for physicians and hospitals. These considerations should be assessed in each situation when deciding whether to address physician issues through peer review or the employment process.

A Workable Framework Benefits All Stakeholders

In the end, ad hoc approaches for physician performance issues won’t work. For hospital-affiliated physicians, medical staffs and medical groups should work closely with each other—and legal counsel—to adopt a workable framework for handling physician performance issues. Doing so will ultimately support physicians, protect patients, maximize legal protections, and avoid duplicative or inconsistent processes.