An MCO’s ultimate threat to a physician is deselection—being bounced from the plan. Legally, deselection is no different from being denied medical staff privileges at a hospital. The difference is the economic incentive. Traditionally, hospitals benefited from additional staff members. Each physician was a potential source of admissions to the hospital. Most of the cases involving improper termination of medical staff privileges arose from a group of physician competitors who captured the hospital’s medical staff credentialing process. [Patrick.] While hospitals might deselect physicians to maintain the quality of medical care, they had no incentive to reduce their physician staff. [Bryan v. James E. Holmes Reg’l Med. Ctr., 33 F.3d 1318 (11th Cir. 1994).]

In MCOs that employ physicians, each additional physician over the minimum needed to do the work is just more overhead. Even in MCOs that contract with individual physicians and pay only for services provided, additional physicians raise the overhead because they require additional case managers to oversee them.

MCOs are in a stronger bargaining position than physicians because the United States has an excess of physicians. Many specialties have more practitioners than can keep busy doing only specialty practice. Nongovernmental MCOs have only limited due process restrictions on their credentialing. [Liang, BA. Deselection under Harper v. Healthsource: a blow for maintaining patient–physician relationships in the era of managed care, ND Law Rev. 1997;72:799.] They may choose not to renew a physician’s contract for any nondiscriminatory reason, including staff reductions to lower costs. If the MCO terminates the physician’s contract for medical negligence–related conduct, most states will allow or require the MCO to report this to the State Board of Medical Examiners (BOME), who then report to the National Practitioner Data Bank (NPDB). [42 U.S.C. §§ 11131, 11133, & 11134 (1996).] Physicians have a right to review their files, and to request corrections, but no right to force the Data Bank to make corrections. The NPDB allows hospitals and MCOs to query its files when they are hiring or granting staff privileges to a physician. An adverse report in the NPDB can make it impossible for a physician to obtain employment or medical staff privileges anywhere in the United States.

On balance, the NPDB is a good idea, but it poses several problems for physicians in MCOs. An unscrupulous plan can use threats of reports to the NPDB as coercion. This can be very effective if the physician is contesting a noncompete agreement, or does not want to follow the plan’s rules. Arguably, federal law does not mandate reporting to the NPDB by MCOs, but it is difficult to contest the right of an MCO to make a report. Reporting entities have immunity unless it can be shown that the reporting entity knew the information in the report was false. [42 U.S.C. § 1137(c) (1996).] This is a difficult standard to meet. If the physician loses, and the contract with the plan has an indemnification agreement, then the physician may have to pay the plan’s legal expenses.

For employee physicians the risk of deselection may be greater than just being fired. Many MCO employment contracts include noncompete clauses that can force the physician to leave the community. Some states strictly limit the enforcement of these clauses as being against public policy, and a few have outlawed them entirely. [Berg. Judicial enforcement of covenants not to compete between physicians: protecting doctors’ interests at patients’ expense. Rutgers Law Rev. 1992;45:1.] However, in many states, these agreements are enforceable for reasonable limitations of time and distance. In at least one state, Missouri, the courts will enforce restrictions as long as two years, covering a 200-mile radius, and have failed to find any public policy rationale for treating physicians differently from other businesses or professionals. The deselected physician faces having to move, and perhaps getting licensed in another state. If physicians are deselected for not abiding by financial guidelines established by the plan, then it is unlikely that other plans will be interested in hiring them.

Physicians negotiating with an MCO should try to get a contract with very specific criteria for termination. This is increasingly difficult to do. In many communities, MCO contracts have become adhesion contracts because there are too many physicians willing to take positions on any terms. The physician should know at all times where he or she stands with the plan and what is necessary to meet the plan’s objectives. These objectives should be spelled out in sufficient detail that the physician can determine if they can be achieved while preserving adequate quality of medical care. If possible, there should not be a provision for the annual termination of any given percentage of physicians, such as the 10% with the highest costs per capita. Such provisions can force physicians to reduce access to care below what is medically necessary.