Hospital told to check bylaws on exclusive deals

A Georgia court found that while hospitals are entitled to offer exclusive contracts to specialty groups, applications for privileges are governed by medical staff bylaws.

By Amy Lynn Sorrel — Posted April 28, 2008

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Georgia hospitals cannot skirt protections afforded in medical staff bylaws to keep out physicians in favor of exclusive arrangements for certain specialty services, a state appeals court recently affirmed.

That applies whether doctors already have staff privileges or seek to apply for them, a unanimous court went on to say.

The Fourth Division of the Court of Appeals of Georgia put a stop to Satilla Regional Medical Center's efforts to prevent three cardiologists from applying for privileges because the hospital purported to have an exclusive relationship with another group for cardiology services.

"That does not mean ... that no exclusive agreement can ever be enforced," Judge J.D. Smith wrote in the March 7 opinion. "Nor does it upset the 'delicate balance' between hospital and physicians. It maintains the current balance between the power of the hospital to manage its 'administrative, operational, and managerial functions' and the physicians' privilege of practicing medicine and providing hospital care for their patients."

Judges emphasized that under Georgia case law, if hospitals want to deny physicians privileges to establish exclusive relationships, such provisions must be spelled out in staff bylaws or in contracts with individual physicians.

Doctors say the ruling is an affirmation of the medical staff's authority and is important, due to the growing popularity of exclusive contracts at hospitals across the country.

Hospitals are entitled to enter into exclusive agreements, which can benefit patients, said Donald Palmisano Jr., general counsel to the Medical Assn. of Georgia. The association filed a friend-of-the-court brief supporting one of the cardiologists.

"But it can't be the hospital unilaterally imposing them without consulting the medical staff, who is responsible for the quality of care for all patients," Palmisano said. More often, doctors are seeing exclusive contracting used "as a way for the hospital to control the physicians, because they allow physicians to be terminated from the medical staff without due process protections," he said.

Despite Georgia's unique legal requirements, most hospitals with exclusive arrangements already follow staff bylaws regarding privileging, said Michael R. Callahan, a health care lawyer and partner at Chicago-based Katten Muchin Rosenman LLP, who works primarily with hospitals.

He said the ruling -- consistent with most courts nationwide -- still upholds hospitals' rights to make exclusive contracts, which can help streamline patient care and improve quality and efficiency.

Callahan noted the decision's limitation: It does not require hospitals to accept physicians on staff, just that they give doctors an opportunity to apply for medical staff membership or appeal any termination of existing privileges. The final say rests with the hospital board, he said.

The ruling stemmed from a dispute initiated by a dozen other staff cardiologists who lost privileges when Satilla struck an exclusive arrangement with Baptist Specialty Physicians Inc. in 2005. The noncontracted doctors won their right to keep their privileges after an appeals court in 2006 found the hospital's policy violated staff bylaws.

Satilla said it believed it was in compliance with that ruling when it failed to process application requests for new privileges by Sonya Lefever, MD, James L. Grigsby, MD, and John D. Madonna Jr., MD. The Waycross, Ga., hospital argued that the 2006 decision provided an exemption only for existing or "grandfathered" staff, according to court documents. The hospital declined to comment further.

Drs. Lefever and Grigsby were new employees at a cardiology group on staff and applied for initial privileges with Satilla, but were rejected based on the Baptist contract, court records show. Dr. Madonna was a member of Baptist, but left the group and sought to reapply for staff privileges separately.

In a court brief the state medical society filed in support of Dr. Madonna, doctors argued that Satilla unfairly conditioned the physician's privileges on his affiliation with Baptist and terminated him without input from medical staff. As a result, Dr. Madonna was unable to treat his Satilla patients, putting their care at risk, the brief states.

The appeals court found that in Drs. Lefever's and Grigsby's cases, staff rules make no distinction between termination and initial grant of privileges. Doctors whose privileges were taken away have the right to reapply under the bylaws, the court said, noting that nothing in Dr. Madonna's contract precluded him from doing so.

John E. Bumgartner, the cardiologists' attorney, said the decision reiterates that hospitals do not have free rein when implementing exclusive arrangements.

The law was meant to ensure that the medical staff has a say, he added. "That's an important safeguard ... because these [agreements] are really subject to being abused."

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Case at a glance

Did a hospital with an exclusive contract illegally forbid doctors from applying for privileges?

The court said the hospital failed to follow privileging protections in medical staff bylaws when it implemented the contract.

Impact: Physicians say the ruling reinforces the medical staff's authority in the face of exclusive agreements. Hospitals say the decision still upholds their right to enter into such contracts, which can help improve patient care.

Madonna v. Satilla Health Services Inc.; Lefever et al. v. Satilla Health Services Inc., Court of Appeals of Georgia, 4th Division

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