Medical staff has no standing to sue hospital, court rules

The Minnesota Medical Assn. and others say the case’s final ruling could put staff rights at risk.

By Alicia Gallegos — Posted Aug. 20, 2012

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A physician medical staff is not an independent, unincorporated body and therefore cannot sue the hospital where it operates, a Minnesota court has ruled. The decision answers one question in a legal dispute between a group of doctors and Avera Marshall Regional Medical Center, but other issues remain.

A judge still must decide if hospital bylaws should be considered a contract between doctors and medical centers, and if hospital administrators can unilaterally repeal those rules.

The Minnesota Medical Assn. “was disappointed with the judge’s ruling,” said Karolyn Stirewalt, MMA policy counsel. “However, [the judge] has yet to address the bigger issue in the case, which is whether or not the medical staff bylaws constitute a contract. That answer will determine” if hospitals can be sued for breaching such agreements.

The MMA was not a party in the case, but the association co-wrote a friend-of-the-court brief, along with the Litigation Center for the American Medical Association and the State Medical Societies, in support of the plaintiff doctors. A judge declined to accept the brief, saying it was not necessary at the time.

The Avera medical staff, its chief of staff and its chief of staff-elect sued the Marshall, Minn.-based critical care hospital in January in the State of Minnesota District Court, 5th Judicial District, County of Lyon. The physicians claimed that the medical center violated current bylaws when it repealed the rules and adopted new bylaws. The hospital failed to follow the process for amending rules outlined by the current bylaws, the doctors said, thus breaching its contract.

The reason for the lawsuit is disputed. Doctors who oppose the new bylaws said Avera is putting patient safety at risk. The new bylaws strip physicians of “nearly all rights and responsibilities” and give Avera absolute power in controlling processes that require medical staff direction, the complaint said.

Avera argues that the lawsuit stems from anti-competitive efforts by some medical staff doctors to usurp control from Avera’s board of directors. Avera’s medical staff primarily consists of doctors who are employed by Avera and physicians who have privileges at Avera but who are aligned with another medical center, Affiliated Community Medical Centers. ACMC is a for-profit health center. Avera, which is nonprofit, maintains that ACMC doctors want to extend ACMC’s market share by controlling Avera’s decisions.

Also in dispute is how many doctors on the medical staff endorse the lawsuit. The Avera-employed physicians do not support the challenge, said Jon Austin, an Avera spokesman. Kathy Kimmel, an attorney for the doctors, said the majority of the medical staff backs the lawsuit, including some Avera-employed physicians.

Avera requested that the medical staff be dropped from the lawsuit because the staff is part of the hospital and has no capacity to sue. The plaintiffs said the medical staff is an independent body with the ability to legally challenge Avera.

In an opinion issued in July, District Judge Michelle Dietrich said the medical staff is not a legal entity that exists separate from the medical center.

“The medical staff would not exist but for the medical center,” she said. “As such & it is not an independent legal entity with the capacity to sue or be sued.”

The judge dismissed the medical staff as a plaintiff. Two physicians remain as independent plaintiffs.

Decision could harm future cases

Avera was pleased with the ruling, saying it protects Avera-employed doctors who want nothing to do with the challenge.

“The decision reflects the underlying reality of this case: The only individuals interested in pursuing this litigation are associated with a for-profit competitor of the hospital and are pursuing an agenda that is economic rather than medical,” Austin said. Avera-employed doctors have made it clear “they did not want to be tarred with this lawsuit’s misstatements of fact and with its unfounded and untrue accusations against the hospital.”

No Minnesota court previously addressed how a medical staff should legally be defined, Kimmel said. The decision probably will be cited by future courts as a reason not to let medical staffs sue medical centers, she added.

Oral arguments on the contract issue were heard in June. A decision is expected by the end of September.

The MMA and others say the ultimate ruling will set a precedent about whether medical staff bylaws can be amended or overturned without input by doctors.

Bylaws “are a meaningful document,” Kimmel said. “It is not something that can be disregarded at the whim of the hospital. Physicians benefit by having rights under those bylaws. & This is about preserving the ability of the medical staff to have a voice in patient care.”

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Case at a glance

Can a medical staff sue the hospital where it operates?

The State of Minnesota District Court, 5th Judicial District, County of Lyon, said no. A medical staff is not an independent, unincorporated body and therefore does not have legal capacity to sue a hospital, the court said.

Impact: The ruling could mean medical staffs in other jurisdictions cannot sue hospitals over complaints in future cases.

Medical Staff of Avera Marshall Regional Medical Center et al. v. Avera Marshall Regional Medical Center, State of Minnesota District Court, 5th Judicial District, County of Lyon

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