Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-15-01816/USCOURTS-ca7-15-01816-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 

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In the 

United States Court of Appeals 

For the Seventh Circuit ____________________ 

No. 15-1816 

WILLIAM I. BABCHUK, et al., 

Plaintiffs-Appellants, 

v.

INDIANA UNIVERSITY HEALTH, INC., et al., 

Defendants-Appellees. 

____________________ 

Appeal from the United States District Court for the 

Southern District of Indiana, Indianapolis Division. 

No. 1:13-cv-01376-JMS-DML — Jane E. Magnus-Stinson, Judge. 

____________________ 

ARGUED OCTOBER 2, 2015 — DECIDED JANUARY 11, 2016 

____________________ 

Before POSNER, SYKES, and HAMILTON, Circuit Judges. 

POSNER, Circuit Judge. Dr. William Babchuk, a radiologist, 

brought this suit against Indiana University Health Tipton 

Hospital, Inc. (Tipton Hospital for short), under 42 U.S.C. 

§ 1983, which creates a federal remedy for violations of constitutional rights by what are called “state actors.” See West 

v. Atkins, 487 U.S. 42, 49–50 (1988). In 2003 Tipton awarded 

Babchuk medical staff privileges, and either then or later also gave his professional corporation an exclusive contract to 

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provide radiology services at the hospital. The suit charges 

that the hospital and its administrators deprived him of 

property without due process of law, in violation of the 

Fourteenth Amendment, when in 2012 it cancelled both his 

medical privileges and his corporation’s contract. His professional corporation is an additional plaintiff. The defendants include besides Tipton Hospital the hospital’s owner, 

Indiana University Health, Inc., plus some persons employed by the corporate defendants—but we can ignore 

those persons. 

The district judge granted summary judgment in favor of 

all the defendants. She reasoned that the plaintiffs had failed 

to prove they had a federally protected property interest in 

Dr. Babchuk’s hospital privileges or in the contract between 

his professional corporation and the hospital. An alternative 

ground for affirmance urged by the defendants is that the 

conduct of which Babchuk complains is not state action and 

is therefore not actionable under 42 U.S.C. § 1983. 

The hospital’s medical-staff bylaws provide that a physician’s privileges may be summarily suspended “whenever 

action must be taken immediately in the best interest of patient care or ... the failure to take prompt action may result 

in imminent danger to the life, health, or safety of any such 

person in the Hospital ... and such summary suspension 

shall become effective immediately upon imposition.” In 

June 2012 Dr. Babchuk’s staff privileges, and thus his authority to provide medical services at the hospital, were summarily suspended by a four-member peer review committee 

(although the bylaws required only a three-member committee) on the ground that he had delayed for eight days in dictating a report on the result of an ultrasound performed on a 

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No. 15-1816 3 

patient in the hospital’s emergency room. The hospital defendants claim that the patient had been in the thirtieth week 

of her pregnancy when she arrived in the emergency room 

and that shortly after she had the ultrasound she was transferred by ambulance to another hospital, where she gave 

birth prematurely. During the eight days in which Dr. Babchuk was dithering, he allegedly had instructed members of 

the hospital’s staff to make the ultrasound results “go away” 

or (what amounts to the same thing) delete the record of the 

results of the ultrasound. Dr. Babchuk disputes these allegations. 

The summary suspension of his privileges was quickly 

followed by the cancellation of his professional corporation’s 

contract with the hospital. And the following month (July 

2012) the hospital’s Medical Executive Committee voted to 

continue Babchuk’s suspension. A hearing before an ad hoc 

committee was held in October at Babchuk’s request. The 

committee voted unanimously to make the suspension permanent. Babchuk was told he could appeal the committee’s 

decision to the hospital’s board of directors, but he declined 

to do so, and so the cancellation of his medical privileges 

was made permanent.

His principal argument is that by reporting the suspension of his medical privileges to Indiana’s medical licensing 

board and the National Practitioner Data Bank, as required 

by both federal and Indiana law, see 42 U.S.C. 

§§ 11133(a)(1)(A), 11134(c)(2); 45 C.F.R. § 60.12; Ind. Code 

§ 16-21-2-6, the hospital had “blemished” his medical license 

and by doing so had deprived him of property. A medical 

license is deemed property within the meaning of the due 

process clause if state law not only creates an entitlement to 

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the license but also establishes criteria for imposing professional discipline should the license be abused by its holder. 

See Fleury v. Clayton, 847 F.2d 1229, 1232 (7th Cir. 1988); 

Abcarian v. McDonald, 617 F.3d 931, 942 (7th Cir. 2010); cf. 

Board of Regents v. Roth, 408 U.S. 564, 577 (1972); Cain v. Larson, 879 F.2d 1424, 1426–27 (7th Cir. 1989). But a harm to 

reputation caused by a state official’s statements is a denial 

of due process only if the harm is to an interest that the law 

recognizes as an interest in property. See Paul v. Davis, 424 

U.S. 693, 701–12 (1976). 

If possession of a medical license is recognized by state 

law to be a property interest, a “blemish” on such a license 

could be compared to a seizure of a portion of one’s land, 

but this would depend on what exactly the “blemish” consisted of and whether it would seriously harm the licensee’s 

medical practice. And a physician has no due process right 

to be exempt from formal procedures of a hospital that can 

result in his being disciplined. Abcarian v. McDonald, supra, 

617 F.3d at 942. But we needn’t pursue that issue, because 

Indiana’s medical licensing board has not censured Babchuk; 

nor is there evidence that his career has been hindered by 

the hospital’s reporting the suspension of his medical privileges to Indiana’s medical licensing board and the National 

Practitioner Data Bank. 

Babchuk goes way overboard in arguing that the hospital’s action in suspending his privileges has rendered his license “virtually worthless” and as a result has prevented 

him from ever again obtaining staff privileges in a hospital. 

He argues that because before granting such privileges a 

hospital must check the National Practitioner Data Bank for 

adverse peer-review information, 42 U.S.C. § 11135(a)(1), 

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No. 15-1816 5 

and “defendants’ summary suspension of Dr. Babchuk has 

been reported to the NPDB and the Indiana medical licensing board, Dr. Babchuk is ’blackballed’ with respect to future 

employment and his license to practice medicine has been 

rendered virtually worthless.” Not so; for though it’s been 

more than three years since his termination by Tipton Hospital, he has presented no evidence that he’s been “’blackballed’” and his license to practice medicine “rendered virtually worthless.” He is on the physician list of Indiana’s Logansport Memorial Hospital, as his lawyer acknowledged at 

oral argument (see also www.logansportmemorial.

org/pages/Physician-Detail/?Name=Babchuk&physicianID=

3205 (visited January 9, 2016)), and the hospital website that 

we just cited says that he and his professional corporation 

occupy a suite at the hospital and are accepting new patients.

He argues in the alternative that he has a property interest not only in his license but also in his medical privileges at 

Tipton Hospital, because the hospital’s bylaws establish procedures for terminating medical privileges of doctors working at the hospital. But the existence of such procedures creates no entitlement to continued privileges. “Process is not 

an end in itself. Its constitutional purpose is to protect a substantive interest to which the individual has a legitimate 

claim of entitlement.” Olim v. Wakinekona, 461 U.S. 238, 250 

(1983); see also Cain v. Larson, supra, 879 F.2d at 1426. So 

while it’s true that an employee who has tenure—a statutory 

or contractual entitlement to retain his job for a specific period (which can be life) conditioned on good behavior—has 

therefore a property interest in his job, Board of Regents v. 

Roth, supra, 408 U.S. at 576; Cleveland Board of Education v. 

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Loudermill, 470 U.S. 532, 538–39 (1985), Dr. Babchuk did not 

have tenure at Tipton Hospital. 

It is true that an Indiana statute provides procedural protections, similar to those in Tipton Hospital’s bylaws, for 

disciplinary charges that if sustained by the hospital’s governing board would have to be reported to the state licensing 

board. Ind. Code § 34-30-15-5. But that is a procedural provision. It no more creates a property interest than the requirement of proof beyond a reasonable doubt in a criminal case 

gives a criminal defendant a liberty interest. The reasonabledoubt standard is procedural, conferring a degree of protection of a liberty that a criminal conviction would impair. In 

contrast, hospital privileges terminable at will are not a constitutionally protected entitlement. See Lim v. Central DuPage 

Hospital, 871 F.2d 644, 647 (7th Cir. 1989); Illinois Psychological 

Association v. Falk, 818 F.2d 1337, 1344 (7th Cir. 1987). To hold 

otherwise would turn every at-will contract into a tenure 

contract.

Tipton Hospital’s bylaws declare that the grant of medical privileges is “not a contract” and that appointment to the 

medical staff is “a privilege which may be extended by the 

Board [of Directors] only to professionally competent, fully 

licensed physicians ... who continuously meet the qualifications, standards, and requirements set forth in these bylaws 

and as established by the Board” (emphasis added). The bylaws don’t define specific criteria for the removal or retention of privileges but instead provide a list of general qualifications and skills that a physician must demonstrate to 

maintain privileges, including “demonstrated competence,” 

“good reputation[],” “ability to work with others” and “ability and willingness to make efficient use of Hospital faciliCase: 15-1816 Document: 29 Filed: 01/11/2016 Pages: 8
No. 15-1816 7 

ties.” A physician must “continuously maintain and demonstrate the appropriate level of competence, skill, training, 

and aptitude which would justify the continuance of those 

clinical privileges.” And finally and critically, the bylaws 

provide that nothing in them “shall in any way limit the ultimate authority of the Board to take action with respect 

to ... the status [of] clinical privileges.” 

As if this were not enough, the defendants have a compelling alternative ground for affirmance: that they are not 

state actors—that the actions of the hospital which Dr. Babchuk claims harmed him and his professional corporation 

cannot be attributed to the State of Indiana and thus were 

not committed under color of state law and so cannot be a 

basis for a constitutional suit. About this defense the district 

judge said that “a reasonable jury could conclude either that 

Defendants were acting under color of state law or that they 

were not.” That was incorrect; clearly they were not acting 

under color of law. 

The defendant that comes closest to being an arm of the 

state is Indiana University Health, Inc. (IU Health, the parties call it), the owner of Tipton Hospital. Actually IU Health 

is at least formally private, as the “Inc.” at the end of its 

name implies, but some members of its governing board are 

elected by the trustees of Indiana University, a state university. And the operating expenses of the university’s medical 

school are paid from IU Health’s revenues, which in turn derive in part from Tipton Hospital. So there are connections 

between the hospital and the state university. But those connections do not make the hospital’s termination of Dr. Babchuk’s privileges state action. Tipton Hospital is private and 

everyone involved in the termination of his privileges was a 

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physician on the hospital’s medical staff except the hospital’s 

CEO, who is an employee of IU Health but whose vote on 

the summary suspension was unnecessary because three 

qualified members of the medical staff had already agreed 

on suspension. Although Babchuk had a right to appeal to 

the hospital’s board of directors, some of whom had been 

appointed by IU Health, he did not appeal. 

So this is not a case in which “it can be said that the State 

is responsible for the specific conduct of which the plaintiff 

complains.” Blum v. Yaretsky, 457 U.S. 991, 1004 (1982) (emphasis in original). The fact that some of Tipton Hospital’s 

revenues are siphoned off to the state university no more 

makes the hospital a state actor than the fact that tax laws 

siphon income from private companies and individuals to 

state and federal treasuries. The university may well exert 

pressure direct and indirect on Tipton Hospital, just as federal and state governments in manifold ways exert pressure 

on private institutions. Government is omnipresent; that 

doesn’t make all employees of private entities state actors. 

The judgment in favor of the defendants is 

AFFIRMED. 

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