The Evolution of Physician Credentialing into Managed Care Selective Contracting

In a field littered with analogies, health care in the mid-nineties is best characterized as an enterprise caught in the violent cross winds of a tropical storm known as managed care. Like a series of hurricanes, managed care has reshaped the landscape of health care delivery in drastic and unpredictable ways. While the forces of managed care have increasingly altered more health care markets, others are only beginning to feel the winds of change. As managed care overtakes fee-for-service (FFS) medicine, profound alterations in health delivery are occurring which affect every aspect of American health care. Particularly noteworthy is the use of capitation as a primary method of reimbursement. The ramifications of capitated health care are broad and warrant exploration from several vantage points. One basic concern in capitated health plans and managed care is the effect of new payment incentives on physician evaluation for purposes of credentialing. This Article focuses on managed care credentialing—the process of appointing, reappointing, and delineating clinical privileges—from a legal perspective. While the Article centers on the link between capitation and credentialing, it has broader applicability in that the same physician evaluation mechanisms in capitated settings are found in discounted FFS arrangements as well. The piece provides a brief overview of capitation and credentialing, and a discussion of trends that have altered hospital medical staff credentialing processes.