July 3, 2002Client Alert

Courts Continue to Reject Physician Challenges to Hospitals’ Medical Exclusive Contracts

Courts across the United States continue to reject claims by physicians who are excluded from practicing at a hospital when that hospital enters into an exclusive contract with a physician group. In their legal challenges to exclusive medical contracts, physicians often argue that their "privileges" to practice medicine at a hospital under the medical staff bylaws somehow give them the right to practice their specialty at the hospital indefinitely. Following United States Supreme Court's decision in theJefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 26-30 (1984), courts across the nation continue to reject such claims.

In Van Valkenburg v. Paracelsus Healthcare Corp., 606 N.W.2d 908, 917 (N.D. 2000), the North Dakota Supreme Court granted summary judgment dismissing the claims of emergency room physicians against hospital after it entered into an exclusive contract with a competing emergency room services company. The court recognized the majority rule that the "right to exercise medical privileges is separate from the granting or revoking of those privileges, and a physician with privileges is not guaranteed employment or the free and unfederated right to use a facility to exercise those privileges." Id. at 918 (citing cases). See also Tenet Health, Ltd. V. Zamora, 13 S.W.3d 464, 470 (Tex. App. 2000) (rejecting a physician's claim that a hospital violated the Texas administrative code by excluding him from exercising his privileges because it did "not apply to the situation where a physician's medical staff privileges have been affected by the administrative decision of the hospital to enter into an exclusive provider agreement."); Lipson v. Anesthesia Services, P.A., 790 A. 2d 1261, 1289 (Del. Super. Ct. 2001) ("The Court begins its analysis with the undisputed proposition that a hospital is free to enter into exclusive provider contracts.").

In Mahan v. Avera St. Luke's, 621 N.W.2d 150, 160, 2001 SD 9 (S.D. 2001), the South Dakota Supreme Court recognized that for a hospital to carry out its "defined legal responsibilities and duties," a hospital board "must have the power to close its doors to certain physicians. In fact, this power is nearly beyond refute." As recognized in Mahan, it "would be completely illogical to first impose a duty of reasonable care upon a hospital, and then later strip the hospital of the ability and power to implement the policies and programs required to fulfill that duty."

The growing majority rule recognizes the practical, business reality that a hospital, not its medical staff, must govern hospital affairs and hospital business.

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