Disputes between hospitals and medical staff

QUESTION: The medical staff at the newly opened hospital is putting together a set of bylaws covering credentialing, peer review, and patient-care quality assurance. The doctors are mostly independent contractors and not hospital employees. The administration, obsessed with financial solvency, wishes to retain veto power over decisions affecting staff privileges. In potential disputes affecting the hospital and its medical staff, which of the following is true?

A. The Joint Commission subscribes to the view that hospital administration rather medical staff has overall authority over clinical privileges decisions.

B. Economic credentialing is universally regarded as unethical and illegal.

C. Medical bylaws are a contractual agreement.

D. A hospital can never make unilateral changes in the medical staff bylaws.

E. The medical staff is an integral part of the hospital’s organizational structure, with its powers wholly independent of the hospital’s governing board.

BEST ANSWER: A. Doctors with hospital privileges typically organize themselves into a formal medical staff, with its powers derived from the hospital’s governing board. Professional organizations such as the American Medical Association believe that the medical staff of a facility should be self governing, with its own enforceable set of bylaws. The general view is that these bylaws do not create a binding contractual agreement.

For example, when Dr. George T. O’Byrne sued Santa Monica–UCLA Medical Center where he held medical staff privileges, the California Court of Appeal ruled that the hospital’s fiduciary duty is to its shareholders and the public – but not to its physicians – and that the medical staff bylaws did not constitute a contract (OByrne v. Santa Monica-UCLA Medical Center, 114 Cal.Rptr.2d 575 [Cal. Ct. App. 2001]).

A similar situation appears to hold in Minnesota, where the medical staff accused Avera Marshall Regional Medical Center of unilateral credentialing and revision of the bylaws, and interference with quality assurance operations (Avera Marshall Medical Staff v. Avera Marshall Regional Medical Center, 836 N.W.2d 549 [Minn. Ct. App. 2013]). Both the trial court and the court of appeals have held that the medical staff lacked the legal capacity to bring a lawsuit and that the bylaws were not a contract (the final decision of the Minnesota Supreme Court is pending).

The Joint Commission’s view is that the hospital administration has the ultimate authority over clinical privileges of its medical staff, in support of the legal doctrine that a hospital can be held liable for the torts of its practitioners. This notion of corporate liability, which includes negligent credentialing, stemmed from the seminal Darling case (Darling v. Charleston Community Hospital, 211 N.E.2d 253 [Ill. 1965]) where the court held the hospital liable for failing to adequately review the qualifications and performance of a negligent medical staff member. Dr. Alexander, the doctor at issue, had applied a plaster cast too tightly, which caused the college football player to eventually lose his leg.

Other cases followed, including the infamous California case of Gonzales v. Nork, 573 P.2d 458 (Cal. 1978), in which a drug-abusing doctor misrepresented himself as being qualified to perform laminectomies. Even in jurisdictions such as Minnesota, which does not specifically recognize negligent credentialing as a legal cause of action, its supreme court has allowed this legal theory to go forward.

Two recurring issues tending to embroil hospital and staff in conflict are unilateral actions by a medical center and the use of economic credentialing.

The usual procedure for amending the bylaws is for the medical staff to initiate and approve changes before subjecting them for final endorsement by the hospital board. Thus, when a Florida hospital unilaterally refused to re-credential two qualified radiation oncologists because of its intention to exclusively contract with the University of Miami School of Medicine for all radiation oncology procedures, the jury found in favor of the aggrieved doctors, awarding them $2.5 million in lost profits and $20.25 million in punitive damages (Columbia/JFK Medical Center v. Spunberg, 784 So.2d 541 (Fla. App. Ct. 2001).

Likewise, a small Georgia hospital tried to close its cardiology department in order to enter into an exclusive contract with a separate group of cardiologists. The Georgia Court of Appeals held that a hospital could not deprive physicians of access to its facilities unless stated in the bylaws or specifically agreed to in an individual contract (Satilla Health Services v. Bell, 633 S.E.2d 575 [Ga. Ct. App. 2006]).

However, under some narrow circumstances, a hospital can act unilaterally, without medical staff agreement, especially where the bylaws are silent on the point. Illinois recently ruled that a medical center could, without physician assent, increase physician malpractice premium limits to $1,000,000 per occurrence and $3,000,000 aggregate for multiple occurrences (from $200,000 and $600,000, respectively). Its appellate court allowed the change, holding that physician enforcement of its bylaws were restricted only to matters of clinical competence (Fabrizio v. Provena United Samaritans, 857 N.E.2d 670 [Ill. S.Ct. 2006]).

And in Lo v. Provena Covenant Hospital, 796 N.E.2d 607 (Ill. App. Ct. 2003), a hospital unilaterally and summarily suspended a cardiovascular surgeon who allegedly had twice the national mortality rate. The medical staff leadership had not been responsive to the hospital’s concern of imminent danger to patients. The Illinois Appellate Court made the finding that in this "anomalous" case, the hospital’s actions were neither arbitrary, capricious, nor in violation of the bylaws.

A second area of conflict between doctors and hospitals is hospitals’ use of economic factors in credentialing, where financial factors are used to profile – and determine – a physician’s application for privileges.

For example, a staff gynecologist risked losing her 19-year membership at Baptist Health Medical Center in Little Rock, Ark., because her physician-husband owned an interest in a competing hospital specializing in spinal surgery. The case settled when the husband divested his competing ownership. In Arkansas, the courts have ruled that Baptist Health’s policy wherein a physician who holds a financial interest in a competing hospital is ineligible for privileges at any Baptist Health hospital is both unconscionable and illegal, and the hospital economic credentialing policy tortiously interfered with the physicians’ existing and prospective business relationships (Murphy v. Baptist Health, 373 S.W.3d 269 [Ark. 2010]).

But other jurisdictions have not adopted this view. The South Dakota Supreme Court has ruled that a hospital administration may refuse applicants to the medical staff based on economic criteria (

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Mahan v. Avera St. Lukes, 621 N.W.2d 150 [S.D. S.Ct. 2001]). The court questioned the legal right of certain members of the medical staff to open a competing ambulatory surgery center. In a subsequent case, the same court held that in the absence of specific prohibitions in the bylaws, a hospital could use economic credentialing in its staffing determinations.

Even for physicians with only an occasional hospital practice, the following pointers from the book "The Biggest Legal Mistakes Physicians Make and How to Avoid Them," edited by Steven Babitsky and James J. Mangraviti Jr., may prove useful:

1) Failing to practice in a collegial manner.

2) Impugning the quality of care of the hospital, nurses, and other physicians.

3) Not knowing the hospital’s policies and procedures.

4) Not involving consultants when the issue is out of one’s specialty.

5) Not accepting constructive criticism and suggestions.

6) Failing to seek approval before prescribing unorthodox drugs or treatment.

7) Failing to respond promptly to inquiries about care or behavior.

8) Failing to follow up on an agreement resolving an issue.

9) Acting as though the hospital is lucky to have such a physician.

10) Not calling a lawyer when necessary.

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk," and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

QUESTION: The medical staff at the newly opened hospital is putting together a set of bylaws covering credentialing, peer review, and patient-care quality assurance. The doctors are mostly independent contractors and not hospital employees. The administration, obsessed with financial solvency, wishes to retain veto power over decisions affecting staff privileges. In potential disputes affecting the hospital and its medical staff, which of the following is true?

A. The Joint Commission subscribes to the view that hospital administration rather medical staff has overall authority over clinical privileges decisions.

B. Economic credentialing is universally regarded as unethical and illegal.

C. Medical bylaws are a contractual agreement.

D. A hospital can never make unilateral changes in the medical staff bylaws.

E. The medical staff is an integral part of the hospital’s organizational structure, with its powers wholly independent of the hospital’s governing board.

BEST ANSWER: A. Doctors with hospital privileges typically organize themselves into a formal medical staff, with its powers derived from the hospital’s governing board. Professional organizations such as the American Medical Association believe that the medical staff of a facility should be self governing, with its own enforceable set of bylaws. The general view is that these bylaws do not create a binding contractual agreement.

For example, when Dr. George T. O’Byrne sued Santa Monica–UCLA Medical Center where he held medical staff privileges, the California Court of Appeal ruled that the hospital’s fiduciary duty is to its shareholders and the public – but not to its physicians – and that the medical staff bylaws did not constitute a contract (OByrne v. Santa Monica-UCLA Medical Center, 114 Cal.Rptr.2d 575 [Cal. Ct. App. 2001]).

A similar situation appears to hold in Minnesota, where the medical staff accused Avera Marshall Regional Medical Center of unilateral credentialing and revision of the bylaws, and interference with quality assurance operations (Avera Marshall Medical Staff v. Avera Marshall Regional Medical Center, 836 N.W.2d 549 [Minn. Ct. App. 2013]). Both the trial court and the court of appeals have held that the medical staff lacked the legal capacity to bring a lawsuit and that the bylaws were not a contract (the final decision of the Minnesota Supreme Court is pending).

The Joint Commission’s view is that the hospital administration has the ultimate authority over clinical privileges of its medical staff, in support of the legal doctrine that a hospital can be held liable for the torts of its practitioners. This notion of corporate liability, which includes negligent credentialing, stemmed from the seminal Darling case (Darling v. Charleston Community Hospital, 211 N.E.2d 253 [Ill. 1965]) where the court held the hospital liable for failing to adequately review the qualifications and performance of a negligent medical staff member. Dr. Alexander, the doctor at issue, had applied a plaster cast too tightly, which caused the college football player to eventually lose his leg.

Other cases followed, including the infamous California case of Gonzales v. Nork, 573 P.2d 458 (Cal. 1978), in which a drug-abusing doctor misrepresented himself as being qualified to perform laminectomies. Even in jurisdictions such as Minnesota, which does not specifically recognize negligent credentialing as a legal cause of action, its supreme court has allowed this legal theory to go forward.

Two recurring issues tending to embroil hospital and staff in conflict are unilateral actions by a medical center and the use of economic credentialing.

The usual procedure for amending the bylaws is for the medical staff to initiate and approve changes before subjecting them for final endorsement by the hospital board. Thus, when a Florida hospital unilaterally refused to re-credential two qualified radiation oncologists because of its intention to exclusively contract with the University of Miami School of Medicine for all radiation oncology procedures, the jury found in favor of the aggrieved doctors, awarding them $2.5 million in lost profits and $20.25 million in punitive damages (Columbia/JFK Medical Center v. Spunberg, 784 So.2d 541 (Fla. App. Ct. 2001).

Likewise, a small Georgia hospital tried to close its cardiology department in order to enter into an exclusive contract with a separate group of cardiologists. The Georgia Court of Appeals held that a hospital could not deprive physicians of access to its facilities unless stated in the bylaws or specifically agreed to in an individual contract (Satilla Health Services v. Bell, 633 S.E.2d 575 [Ga. Ct. App. 2006]).

However, under some narrow circumstances, a hospital can act unilaterally, without medical staff agreement, especially where the bylaws are silent on the point. Illinois recently ruled that a medical center could, without physician assent, increase physician malpractice premium limits to $1,000,000 per occurrence and $3,000,000 aggregate for multiple occurrences (from $200,000 and $600,000, respectively). Its appellate court allowed the change, holding that physician enforcement of its bylaws were restricted only to matters of clinical competence (Fabrizio v. Provena United Samaritans, 857 N.E.2d 670 [Ill. S.Ct. 2006]).

And in Lo v. Provena Covenant Hospital, 796 N.E.2d 607 (Ill. App. Ct. 2003), a hospital unilaterally and summarily suspended a cardiovascular surgeon who allegedly had twice the national mortality rate. The medical staff leadership had not been responsive to the hospital’s concern of imminent danger to patients. The Illinois Appellate Court made the finding that in this "anomalous" case, the hospital’s actions were neither arbitrary, capricious, nor in violation of the bylaws.

A second area of conflict between doctors and hospitals is hospitals’ use of economic factors in credentialing, where financial factors are used to profile – and determine – a physician’s application for privileges.

For example, a staff gynecologist risked losing her 19-year membership at Baptist Health Medical Center in Little Rock, Ark., because her physician-husband owned an interest in a competing hospital specializing in spinal surgery. The case settled when the husband divested his competing ownership. In Arkansas, the courts have ruled that Baptist Health’s policy wherein a physician who holds a financial interest in a competing hospital is ineligible for privileges at any Baptist Health hospital is both unconscionable and illegal, and the hospital economic credentialing policy tortiously interfered with the physicians’ existing and prospective business relationships (Murphy v. Baptist Health, 373 S.W.3d 269 [Ark. 2010]).

But other jurisdictions have not adopted this view. The South Dakota Supreme Court has ruled that a hospital administration may refuse applicants to the medical staff based on economic criteria (

<cf number="\"2\"">’</cf>

Mahan v. Avera St. Lukes, 621 N.W.2d 150 [S.D. S.Ct. 2001]). The court questioned the legal right of certain members of the medical staff to open a competing ambulatory surgery center. In a subsequent case, the same court held that in the absence of specific prohibitions in the bylaws, a hospital could use economic credentialing in its staffing determinations.

Even for physicians with only an occasional hospital practice, the following pointers from the book "The Biggest Legal Mistakes Physicians Make and How to Avoid Them," edited by Steven Babitsky and James J. Mangraviti Jr., may prove useful:

1) Failing to practice in a collegial manner.

2) Impugning the quality of care of the hospital, nurses, and other physicians.

3) Not knowing the hospital’s policies and procedures.

4) Not involving consultants when the issue is out of one’s specialty.

5) Not accepting constructive criticism and suggestions.

6) Failing to seek approval before prescribing unorthodox drugs or treatment.

7) Failing to respond promptly to inquiries about care or behavior.

8) Failing to follow up on an agreement resolving an issue.

9) Acting as though the hospital is lucky to have such a physician.

10) Not calling a lawyer when necessary.

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk," and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

QUESTION: The medical staff at the newly opened hospital is putting together a set of bylaws covering credentialing, peer review, and patient-care quality assurance. The doctors are mostly independent contractors and not hospital employees. The administration, obsessed with financial solvency, wishes to retain veto power over decisions affecting staff privileges. In potential disputes affecting the hospital and its medical staff, which of the following is true?

A. The Joint Commission subscribes to the view that hospital administration rather medical staff has overall authority over clinical privileges decisions.

B. Economic credentialing is universally regarded as unethical and illegal.

C. Medical bylaws are a contractual agreement.

D. A hospital can never make unilateral changes in the medical staff bylaws.

E. The medical staff is an integral part of the hospital’s organizational structure, with its powers wholly independent of the hospital’s governing board.

BEST ANSWER: A. Doctors with hospital privileges typically organize themselves into a formal medical staff, with its powers derived from the hospital’s governing board. Professional organizations such as the American Medical Association believe that the medical staff of a facility should be self governing, with its own enforceable set of bylaws. The general view is that these bylaws do not create a binding contractual agreement.

For example, when Dr. George T. O’Byrne sued Santa Monica–UCLA Medical Center where he held medical staff privileges, the California Court of Appeal ruled that the hospital’s fiduciary duty is to its shareholders and the public – but not to its physicians – and that the medical staff bylaws did not constitute a contract (OByrne v. Santa Monica-UCLA Medical Center, 114 Cal.Rptr.2d 575 [Cal. Ct. App. 2001]).

A similar situation appears to hold in Minnesota, where the medical staff accused Avera Marshall Regional Medical Center of unilateral credentialing and revision of the bylaws, and interference with quality assurance operations (Avera Marshall Medical Staff v. Avera Marshall Regional Medical Center, 836 N.W.2d 549 [Minn. Ct. App. 2013]). Both the trial court and the court of appeals have held that the medical staff lacked the legal capacity to bring a lawsuit and that the bylaws were not a contract (the final decision of the Minnesota Supreme Court is pending).

The Joint Commission’s view is that the hospital administration has the ultimate authority over clinical privileges of its medical staff, in support of the legal doctrine that a hospital can be held liable for the torts of its practitioners. This notion of corporate liability, which includes negligent credentialing, stemmed from the seminal Darling case (Darling v. Charleston Community Hospital, 211 N.E.2d 253 [Ill. 1965]) where the court held the hospital liable for failing to adequately review the qualifications and performance of a negligent medical staff member. Dr. Alexander, the doctor at issue, had applied a plaster cast too tightly, which caused the college football player to eventually lose his leg.

Other cases followed, including the infamous California case of Gonzales v. Nork, 573 P.2d 458 (Cal. 1978), in which a drug-abusing doctor misrepresented himself as being qualified to perform laminectomies. Even in jurisdictions such as Minnesota, which does not specifically recognize negligent credentialing as a legal cause of action, its supreme court has allowed this legal theory to go forward.

Two recurring issues tending to embroil hospital and staff in conflict are unilateral actions by a medical center and the use of economic credentialing.

The usual procedure for amending the bylaws is for the medical staff to initiate and approve changes before subjecting them for final endorsement by the hospital board. Thus, when a Florida hospital unilaterally refused to re-credential two qualified radiation oncologists because of its intention to exclusively contract with the University of Miami School of Medicine for all radiation oncology procedures, the jury found in favor of the aggrieved doctors, awarding them $2.5 million in lost profits and $20.25 million in punitive damages (Columbia/JFK Medical Center v. Spunberg, 784 So.2d 541 (Fla. App. Ct. 2001).

Likewise, a small Georgia hospital tried to close its cardiology department in order to enter into an exclusive contract with a separate group of cardiologists. The Georgia Court of Appeals held that a hospital could not deprive physicians of access to its facilities unless stated in the bylaws or specifically agreed to in an individual contract (Satilla Health Services v. Bell, 633 S.E.2d 575 [Ga. Ct. App. 2006]).

However, under some narrow circumstances, a hospital can act unilaterally, without medical staff agreement, especially where the bylaws are silent on the point. Illinois recently ruled that a medical center could, without physician assent, increase physician malpractice premium limits to $1,000,000 per occurrence and $3,000,000 aggregate for multiple occurrences (from $200,000 and $600,000, respectively). Its appellate court allowed the change, holding that physician enforcement of its bylaws were restricted only to matters of clinical competence (Fabrizio v. Provena United Samaritans, 857 N.E.2d 670 [Ill. S.Ct. 2006]).

And in Lo v. Provena Covenant Hospital, 796 N.E.2d 607 (Ill. App. Ct. 2003), a hospital unilaterally and summarily suspended a cardiovascular surgeon who allegedly had twice the national mortality rate. The medical staff leadership had not been responsive to the hospital’s concern of imminent danger to patients. The Illinois Appellate Court made the finding that in this "anomalous" case, the hospital’s actions were neither arbitrary, capricious, nor in violation of the bylaws.

A second area of conflict between doctors and hospitals is hospitals’ use of economic factors in credentialing, where financial factors are used to profile – and determine – a physician’s application for privileges.

For example, a staff gynecologist risked losing her 19-year membership at Baptist Health Medical Center in Little Rock, Ark., because her physician-husband owned an interest in a competing hospital specializing in spinal surgery. The case settled when the husband divested his competing ownership. In Arkansas, the courts have ruled that Baptist Health’s policy wherein a physician who holds a financial interest in a competing hospital is ineligible for privileges at any Baptist Health hospital is both unconscionable and illegal, and the hospital economic credentialing policy tortiously interfered with the physicians’ existing and prospective business relationships (Murphy v. Baptist Health, 373 S.W.3d 269 [Ark. 2010]).

But other jurisdictions have not adopted this view. The South Dakota Supreme Court has ruled that a hospital administration may refuse applicants to the medical staff based on economic criteria (

<cf number="\"2\"">’</cf>

Mahan v. Avera St. Lukes, 621 N.W.2d 150 [S.D. S.Ct. 2001]). The court questioned the legal right of certain members of the medical staff to open a competing ambulatory surgery center. In a subsequent case, the same court held that in the absence of specific prohibitions in the bylaws, a hospital could use economic credentialing in its staffing determinations.

Even for physicians with only an occasional hospital practice, the following pointers from the book "The Biggest Legal Mistakes Physicians Make and How to Avoid Them," edited by Steven Babitsky and James J. Mangraviti Jr., may prove useful:

1) Failing to practice in a collegial manner.

2) Impugning the quality of care of the hospital, nurses, and other physicians.

3) Not knowing the hospital’s policies and procedures.

4) Not involving consultants when the issue is out of one’s specialty.

5) Not accepting constructive criticism and suggestions.

6) Failing to seek approval before prescribing unorthodox drugs or treatment.

7) Failing to respond promptly to inquiries about care or behavior.

8) Failing to follow up on an agreement resolving an issue.

9) Acting as though the hospital is lucky to have such a physician.

10) Not calling a lawyer when necessary.

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk," and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].