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Baptist Health v. Murphy

Baptist Health v. Murphy was an extended legal battle culminating in a 2010 ruling by the Arkansas Supreme Court. Addressing the issue of economic credentialing, and resolving a dispute that had first entered the judicial system in February 2004, the court eventually ruled in favor of a group of doctors whose part ownership in competing hospitals had been deemed a violation of the contracting hospital’s conflict of interest policy, which had resulted in the severance of their association and employment. In its ruling, the court upheld a previously issued permanent injunction, and Baptist Health was permanently prevented from implementing the policy.

The genesis of the case was the adoption in May 2003 of the Economic Conflict of Interest Policy by the Board of Trustees of Baptist Health, a private nonprofit corporation that runs a number of full-service hospitals serving communities around Arkansas. The policy prohibited the hiring (including the renewal of those with existing contracts) of any practitioners who acquired or held ownership or investment interests in a competing hospital. The named individual in the case, Bruce Murphy, as well as the other individuals on the suit, all had appointments with Baptist Health. However, as a result of their ownership interests in other hospitals, when their appointments came up for renewal in 2004 (with the newly adopted Economic Conflict of Interest Policy operational), Baptist Health refused to extend the appointments.

In response, on February 10, 2004, Murphy and his fellow litigants sued Baptist Health in federal district court, charging that the corporation’s failure to renew their appointments was a violation of a federal anti-kickback statute as well as the Arkansas Medicaid Fraud Act, the Arkansas False Claims Act, and the Arkansas Deceptive Trade Practices Act. The doctors also alleged that the policy was a tortious, or wrongful, interference with their relationships with their patients as well as their relationships with referring doctors. Baptist Health moved to dismiss the case for lack of federal jurisdiction, and on February 24, 2004, district court judge James Moody granted the motion. The next day, Murphy and company filed essentially the same suit in the Pulaski County Circuit Court, and the physicians sought a preliminary injunction as well as permanent injunctive relief to prevent Baptist Health from enforcing its policy. After a hearing on February 26, as well as the submission of additional legal briefs, the preliminary injunction was granted after the circuit court determined that the doctors would likely prevail at trial. That ruling was then appealed to the Arkansas Supreme Court.

Amidst a raft of charges and countercharges, the Arkansas Supreme Court ruled that the circuit court had not abused its discretion in issuing the injunction while litigation concerning the other points of contention was addressed. It upheld the injunction. Over the next few years, the litigation dragged on as a federal anti-trust dimension was added and then dismissed, and efforts to revisit the original injunction were also undertaken.

Finally, in 2010, the Arkansas Supreme Court did a comprehensive review of the case and its history. It considered a full range of issues, including the alleged interference with the doctor-patient relationship, possible violations of the Arkansas Deceptive Trade Practices Act, and the question of who should cover attorney’s fees. In the end, the Arkansas Supreme Court ruled that the economic conflict of interest policy, part of a practice known as “economic credentialing,” was a tortious interference with the relationship that existed between the doctors and their patients at Baptist Health. Indeed, the relationship was at the center of the ruling, as the court noted that the relationship was not only a critical source of both referrals and income for the doctors, but it was also central to the continuity of treatment that was essential to improved medical outcomes. Looking at it from a public policy perspective, the court said that the hospital would have to demonstrate a valid reason to interfere with that relationship. Ultimately, the court ruled to prohibit Baptist Health from using the policy to deny appointment and clinic privileges to the members of the Little Rock Cardiology Clinic who had brought the suit.

The ruling caused a stir in medical and legal circles. While it has been recognized that the ruling technically has limited application since it was based upon Arkansas law and thus had no direct application to other jurisdictions, it has been seen as reflecting a receptivity, in at least one court, to the idea that economic credentialing can be seen as interfering with the doctor-patient relationship. Too, some fear that the one singular success could spur other efforts to challenge economic credentialing policies, especially since the court’s focus on the doctor-patient relationship added a humanitarian dimension to what had previously been seen as an essentially economic issue.

For additional information:
Baptist Health v. Bruce Murphy, et al. 2010 Ark. 358 (2010). http://opinions.aoc.arkansas.gov/WebLink8/ElectronicFile.aspx?docid=49054&&dbid=0 (accessed September 20, 2016).

Eller, John J. “Arkansas Court Enjoins Hospital’s Use of Economic Credentialing Policy.” Ober Kaler. http://www.ober.com/publications/544-arkansas-court-enjoins-hospitals-use-economic-credentialing-policy (accessed September 20, 2016).

Ford, Matthew Michael. “Health Law—Economic Credentialing of Physicians—The Supreme Court of Arkansas’s Decision in Baptist Health v. Murphy and Its Impact on a Hospital’s Ability to Make Credentialing Decisions: What Truly Is Best for Patients?” UALR Law Review 2012. http://ualr.edu/lawreview/files/2013/04/Ford-Final-NORMAL.pdf (accessed September 20, 2016).

William H. Pruden III
Ravenscroft School

Last Updated 5/11/2017

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