QUESTION:          Our hospital wants to enter into an exclusive contract and we were told that it should include an “incident to and coterminous” provision.  What is it and why should we include it?

ANSWER:             The provision basically states that the appointment and clinical privileges of the physicians who provide services under the exclusive contract are “incident to and coterminous” with the contract.  What this means is that if the contract is terminated or not renewed, the appointment and clinical privileges of the physicians in the physician group that was awarded the contract automatically expire.  The same holds true if a physician leaves the group that was awarded the contract – the appointment and clinical privileges of that particular physician automatically expire.  Also, this provision states that the physicians have no right to the hearing procedures in the medical staff bylaws or credentials policy.

The rationale for this provision is that in order for an exclusive contract to be legally valid under the antitrust laws (as well as the laws pertaining to tax-exempt hospitals, if hospital facilities have been financed through tax-exempt bonds), the hospital needs to be able to demonstrate that the contract is pro-competitive.  In order for a contract to be considered pro-competitive, the hospital must have the ability to replace the group under contract with a new group if referring physicians and hospital management become dissatisfied with the quality of services, timeliness of reports, etc.

As for having no right to hearing procedures, the due process provisions in the bylaws or credentials policy are intended to handle situations that are different from those involving business questions or a situation when a physician leaves a group that was awarded an exclusive contract.  The due process provisions handle situations where the physician’s professional conduct or professional competence is the basis for an adverse action that is reportable to the National Practitioner Data Bank – not when a hospital decides to terminate or not renew an exclusive contract, or when a physician leaves the physician group that was awarded the contract.