For-profit psychiatric hospitals sometimes pay staff physicians large stipends for ostensible medical directorships. This can indicate organizational deviance, a condition where businesses break community norms. Physicians are typically the source of 60 percent of a hospital's admissions. They are free to hospitalize patients at other facilities if they choose. Hospitals thus find it in their interest to create financial incentives. Most states forbid direct kickbacks for referrals, but stipends are justified by the fact that the physicians perform ostensible duties at a hospital. Here, interviews are used to show how these payments operate in the Texas market. A quantitative section then documents the relationship between payment amounts and referrals. Factors prompting high physician payments are also explored. Stipends continue as an important problem that increases health costs and causes psychiatrists to act in their own as opposed to patient interests.
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