October 2004 Volume 68	Number 10

Falling Short and Going Too Far: A Tale of Two Hospitals

Karin Bierstein, J.D.
Assistant Director of Governmental Affairs (Regulatory)


wo California hospitals have had recent legal woes that illustrate some of the limits on hospitals’ freedom to use — and abuse — the medical and nurse anesthetist staff.

Supervision of Properly Credentialed Nurse Anesthetists
In one of these situations, a threat of immediate proceedings to terminate the facility’s participation in the Medicare program caused Sutter Solano Medical Center in northern California to revamp swiftly and drastically its anesthesiology service. The most critical problem was the delivery of anesthesia care by nurse anesthetists for whom the surgeons refused to accept supervisory responsibility. California has not opted out of the Medicare supervision requirement. As the deficiency notice stated, “medical staff members had refused to verify their request and approval of the CRNA-administered anesthesia. As a result, the hospital had continued to allow unsupervised CRNAs to administer anesthesia.”

Among the other violations of either the Medicare Conditions of Participation or the anesthesia standards of the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) were the following:

• No documentation in the surgical record that the surgeon had requested nurse-provided anesthesia and approved the anesthesia plan.

• Lack of policies delineating preanesthesia and postanesthesia responsibilities.

• Incomplete credential files for the nurse anesthetists.

• No policies to ensure a preanesthesia evaluation by an individual qualified to administer anesthesia within 48 hours prior to surgery.

The Centers for Medicare & Medicaid Services (CMS) notice of deficiency listed specific findings. In each of the five surgeries for which the surveyors pulled records in which a nurse anesthetist had administered the anesthesia, there were violations of either medical staff bylaws or hospital policies and/or federal regulations. It is important to note that adherence to a hospital’s own rules enters into a government review of compliance with the Conditions of Participation. Here hospital policy required a medical history conducted within seven days prior to surgery as well as an interval history and physical examination conducted within 24 hours presurgery. Most of the records did not contain history and physical examinations or the interval history. Although the hospital had alerted the medical staff in March 2004 that unsupervised nurse anesthetists were not to administer anesthesia, there was no documentation that the nurse-provided anesthesia had been requested, approved or supervised by the anesthesiologist or operating practitioner.

Other findings showed a “significant lack of documentation of [nurse anesthetist] qualifications.” None of the 10 credential files contained any record of reappraisal of competency upon renewal of privileges. Also missing from some of the files was documentation of certification of letters of reference and of continuing education. The language of the notice of deficiency parallels the new rules on credentialing “licensed independent practitioners” (who include physicians but not, in California, nurse anesthetists since these require physician supervision) in the “Medical Staff” section of the Comprehensive Accreditation Manual for Hospitals. It appears that the hospital exercised its option to credential nurse anesthetists through the medical staff or equivalent process. Anesthesiology department leaders should familiarize themselves with the new credentialing rules in general.

The Sutter case also is useful in understanding the relationship between JCAHO and CMS surveys. Hospitals accredited by JCAHO are deemed to meet the Medicare Conditions of Participation; CMS has essentially delegated its authority to JCAHO. CMS continues to survey a small sample of hospitals as a means of validating its reliance on JCAHO. CMS uses state health agencies — in this instance, the California Department of Health Services — to conduct the surveys on site.

The Sutter survey was concluded on June 28. The state agency surveyors’ conclusions that the violations posed “an immediate and serious threat to the health and safety of patients” resulted in an urgent letter from the CMS Western Consortium Division of Survey and Certification giving Sutter until July 13 to submit evidence that the deficiencies had been corrected. If such submissions were not received and verified through an immediate re-survey, CMS intended to terminate Sutter’s provider agreement effective July 21, three weeks after the survey. The hospital did file a timely plan of correction and has not lost its provider status.

The lesson to hospitals and to anesthesiology professionals is clear: Compliance with the Conditions of Participation regarding the delivery of anesthesia services is a serious matter.

The Wrong Way to Try to Control the Medical Staff
After more than a year of litigation, the medical staff at Community Memorial Hospital in Ventura, California has entered into a favorable settlement agreement with the hospital. The battle over the medical staff’s autonomy reflects the increasing economic pressure on both hospitals and physicians in many parts of the country.

Community Memorial Hospital had imposed an offensive code of conduct and conflict of interest policy on the physicians, as reported in the article by Judith J. Semo, Esq., titled “Hospital-Medical Staff Relations: Strengthening Fragile Relationships” in the December 2003 NEWSLETTER. The code of conduct empowered the hospital itself, as distinct from the medical staff, to set standards, to credential, investigate and discipline physicians and to handle quality assurance. The conflicts policy prevented physicians with an investment interest in any competing facility from serving as officers or committee members or voting on medical staff matters. Applying this policy, the hospital had refused to recognize the chief elected by the medical staff.

Physicians’ financial interests in their own ambulatory surgical centers and other facilities that compete for their hospitals’ patients are a big problem for hospitals. The hospital lobby worked hard last year to obtain a provision in the Medicare Prescription Drug, Improvement and Modernization Act that prohibits physicians from billing Medicare for services provided in specialty hospitals in which they are invested for 18 months while Congress studies the issue. (The pressure on anesthesiologists to follow the surgeons to their competing surgical centers is an independent but related problem that also is growing.)

The Community Memorial Hospital medical staff filed its lawsuit in April 2003 after mediation efforts failed. Longstanding conflict between the parties had come to a head when the administration brought in an out-of-state radiologist to provide cryotherapy services in a proposed new prostate center. The incumbent radiology group objected, and the hospital gave notice that it would not renew their exclusive contract. The lawsuit included specific allegations that the hospital had unilaterally granted exclusive contracts to physicians who had not been credentialed by the medical staff, seized $250,000 in medical staff funds, attempted to rig medical staff elections and unilaterally changed the medical staff bylaws.

On August 18, 2004, the parties announced that they had agreed to a settlement proposal containing commitments that the physicians hope can be used as a model for physician-hospital relations elsewhere. Several key provisions appear in the box below.