No. 13057 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1975 

NORTH VALLEY HOSPITAL, INC. , 

Plaintiff arid Respondent, 

-vs - 

DAVID V. KAUFFMAN, M.D., 

Defendant and Appellant. 

Appeal from: District Court of the Eleventh Judicial District, 

Honorable Robert S. Keller, Judge presiding. 

Counsel of Record : 

For Appellant : 

Warden, Walterskirchen and Chris tiansen, Kalispell, 

Montana 

Merritt N. Warden argued, Kalispell, Montana 

For Respondent: 

Murphy, Robinson, Heckathorn and Phillips, 

Kalispe1.1, Montana 

I. James Heckathorn argued, Kalispell, Montana 

For Amicus Curiae: 

Smith, Smith and Sewell, Helena, Montana 

Chadwick Smith argued, Helena, Montana 

Submitted : December 12, 1975 

Decided: JAN 1 5 1976 
'Jir. Justice John Conway 'iarrisun 9eLivereJ the apinion of the 

&:ourt. 

This appeal is from the judgment entered in the district 

court, Flathead County, Hon. Robert S. Keller, presiding without 

3 jury. That judgment orders, adjudges and decrees that David V. 

Kauffman, M.D., be enjoined from further utilization of the 

facilities of the North Valley Hospital, Inc. 

The principals involved herein are: 

(1) North Valley Hospital, Inc., plaintiff and respondent, 

hereiriafter referred to as Hospital. 

(2) David V. Icauffman, 11. D. , defendant and appellant, 

hereinaiter referred to as Appellant. 

(3) The Board of Directors of the Hospital, hereinafter 

zalled the Board. 

(4) The private physicians practicing in the surrounding 

area who utilize the Hospital for patient care, hereinafter referred 

to as the Medical Staff. 

The Hospital is a private, nonprofit corporation, con3i;~uc:~ed ln part with Hill-Burton federal funds, that operates in 

Whitefish, Montana. It is governed by the Board, made up of members 

UT the community. Hospital has no paid staff of doctors or 

iriterns. It has a paid administrator, one Burl Hatfield, who 

handles the day to day operations of the facility under the overall 

zupervision of the Board. 

Appellant was licensed to practice medicine in Montana 

in 1338 and has practiced in the Whitefish area since 1959. Ile 

aiilized the facilities of the Hospital during that period and held 

rilo~t of the various office and served on most of the Hospital's 

For a number of years Appellant had problems at the 

Yospiciii which brought about suspensions and disciplinary measures 

irom the Medical Staff. During the 1960fs, for a one year period, 
he was required to have at Least ane ocher surgeon with him 

for all surgery done at the Hospital. During much of the time 

he practiced at the Hospital he had difficulties with the staff 

in not maintaining proper records in regard to his patients. 

Finally, in the late summer 1974, the Medical Staff 

recommended and the Board approved, that the Hospital privileges 

of Appellant not be renewed. Several meetings were held at 

which Appellant was present, at least for part of the meeting, where 

the decision not to renew was discussed in some detail. Appellant requested a hearing, as provided in the by-laws of the 

Yospital, and that hearing was held on November 26, 1974. 

At the hearing a list of some 23 "charges" or "problem 

dieas" was presented to Appellant. He alleges this was the first 

islr~ie he had seen the agenda of "charges" or "problem areas" 

211 which the Medical Staff had acted. Thereafter, the Medical 

><taff voted to recommend nonrenewal of privileges and the Board 

iiccepted the recommendation. Appellant was notified, but he 

cmtinued to use the facility and the Hospital brought an action 

to enjoin him from using the facilities. 

On January 28, 1975, hearing was held in the district 

court, Flathead County, on an order to show cause asking why 

Appellant should not be permanently restrained from utilizing 

the facilities of the Hospital. The hearing lasted for several 

days and both parties presented evidence. 

At the hearing Appellant indicated that he had not been 

;lvea d moper opportunity to defend himself at the November 26 

hearing in that the list of "charges" was presented to him for 

the first time at the hearing. The district judge took the objection 

u~~Jer advisement and at the conclusion of the evidence ordered 

 hat a new hearing be held by the Hospital and that Appellant be 

cully advised in writing, prior to the hearing, of the nature of 
!I ~he charges ' an3 tile basis 31 ~ne recolnrnendatrrionb, in drdei: 

chat Appellant could be prepared to present evidence to the 

*giedical Staff. 

This was done and a full hearing was held on February 

6, 1315. Appellant was present with counsel. The district judge 

atcended solely as an observer. At the close of this hearing, 

ihe entire Medical Staff voted unanimously to recommend Appel- 

[and's privileges not be renewed. Thereafter the district court 

ruled the actions of the Hospital were based on good cause and were 

lio~ discriminatory. The district court issued a comprehensive 

niemorandum, along with findings of fact, conclusions of law and 

iudgment. Appellant appeals. 

While Appellant sets forth ten issues for this court's 

.:o~lsideratrion, we find two issues controlling: 

1. Can the Board of Directors of a nonprofit hospital 

-orpoi-ation refuse medical staff privileges to a physician upon 

::he recommendation of the medical staff thereby denying that 

uhysician the use of the hospital's factilties for the treatment 

3f his patients? 

2. Did the procedures followed leading to Appellant's 

lislnls;;al from the Medical Staff of the Hospital violate AppelLant's right to due process of law or his right to freedom from 

discrimination in the treatment of his patients? 

Appellant argues that certain specific statutes of this 

;iace tontrol and the action taken against him is no authorized 

3y ~tatute. 

Appellant first argues that Chapter 10, Title 66, Revised 

:;ode3 J: !~Iontana 1947, controls as to the licensing and supervision 

,i physicians of this state. Section 66-1022 provides: 

I I Statement as to practice permitted. The certificates 

issued shall state the extent and character of the 

[~ractice that is permitted, and shall be in the form 

orescribed by the board. Neither the privileges nor 
Lhe obliga~ions granted to ar in~posed upon 

iicensees may be altered except by legislative 

enactment or by action of the board duly authorized 

hereunder. t 1 

,4ppeLlant rhen cites a recent opinion of this Court, Hull v. 

~iorth Valley Hospital, 159 Mont. 375, 390, 498 P.2d 136, where 

!:his Court held: 

11 The question of whether or not a hospital can 

limit a medical license under the statute is not 

particularly relevant. This power has been reserved 

by statute to the Board of Medical Examiners and 

is remedial only. If a duty to 'act' were found and 

a doctor would not voluntarily comply, a formal com- 

~lainto the Board of Medical Examiners would satisfy 

that duty. It 

Such argument begs the question in the instant case, 

for here, unlike the facts in Hull, the power in question is 

relevant. The underlying issue here is whether or not a hospital, 

private or public, has a right to enact and enforce reasonable 

rules and regulations to govern its internal operations, including 

the activities of its doctors who are granted the privilege of 

treating patients in its facilities? We answer in the affirmative. 

\de need go no further in support of such answer than recent cases 

of this Court, though there are many supportive cases from most 

jurisdictions in this country. 40 Am.Jur.2d, Hospitals and 

Asylums, 5 6, p. 855. 

This Court in three recent decisions held that Montana 

hospieals have the power to enact reasonable rules and regulations 

LO govern their internal operations, including the activities of 

physicians practicing there. Ham v. Holy Rosary Hospital, 165 

(lont. 369, 529 P.2d 361, 31 St-Rep. 948; Hulit v. St. inc cent's 

~iospital, 164 Mont. 168, 170,174, 520 P.2d 99; Hull v. North 

Valley Hospital, supra. 

In - Ham while we were considering a strictly private 

huspical, we held a private hospital could prescribe terms on 

which it offers its services to the public providing it did not 

discriminate against some patients in providing those services. 
t11 &, we also rioted rhe ;tacutoiy Lariguage of section 69-5217, 

I I x.C.M. 1947, which provides Physicians shall continue to have 

It direction over their patients. , means that a physician has exover 

2lusive c~ntrol/~atients, subject to hospital rules based on 

religious or moral tenets. 

In Hulit a case involving a hospital partially constructed 

with i-iiil-Burton funds, where we reviewedthe hospital rule for4idding the Lamaze method of childbirth, this Court said: 

";k ;? however, we approach this case with the view 

that licensed hospitals have the authority, acting 

on the advice of their medical staffs, to adopt rules 

of self regulation governing the hospital's physicians. 

Licensed physicians must live according to the rules 

adopted by their colleagues, even though the physician 

has direction over his patient. 11 

In support of the above cited statement from Hulit, 

chis dourt cited Hull v. North Valley Hospital, supra, the very 

hospital here jmvolved. However in Hull the Hospital was the 

defendant in a case where an injured plaintiff sued to establish 

that the Hospital was negligent in failing to remove Dr. Kauffman 

from its medical staff. While this Court found for the Hospital 

in Hull, we did find that a hospital must enact one set of rules 

to apply to all doctors to prevent discrimination. 

Appellant argues that because the Hospital was partially 

buiit with ill-~urton" funds it is a "public" hospital and the 

Board cannot prevent a physician from practicing in a "public" 

hospital, because the state had granted him a license which could 

unly be suspended or terminated by a legally empowered authority. 

We find this argument irrelevant. We are not here involved in the 

revocation of a license. The trial court found in its conclusion 

>i law No. 1: 

 hat the plaintiff is a private, nonprofit corporation, but specifically disclaimed any reliance 

upon the 'private' nature of the corporation, and 

rsked to be treated as if it were public; that in 

!ight of the receipt and use of Hill-Burton funds, it 

llust be treated as if it is public, in so far as 

liscriminatory rules and regulations are concerned. I I 
Undoubtedly, the Hospital agreed to a garden variety 

of rules and regulations related to both its operation and to 

the use of Hill-Burton funds in connection with its acceptance 

of benefits under the Act. Here, we are not faced with the type 

of discrimination that arose in G.C. Simpkins v. Moses H. Cone 

Memorial Hospital, 323 F.2d 959, where negro physicians, dentists 

and patients brought an action for declaratory and injunctive 

relief against hospitals receiving Hill-Burton funds which discriminated against Negro citizens. 

Such are not the facts in the instant case and we find 

no basis for concluding that by accepting Hill-Burton funds the 

Hospital unwittingly surrendered any rights it otherwise possessed 

to determine the quality of medical practice in its hospital. 

Montana is but one of a number of states where the rule 

making power has been considered favorable to hospital authorities. 

Moore v. Board of Trustees of Carson-Tahoe Hospital, 88 Nev. 207, 

495 P.2d 605; Silver v. Castle Memorial Hospital, (Hawaii-1972), 

497 P.2d 564; v. Auburn General Hospital, 10 Wash.App. 361, 

517 P.2d 240. The rationale of these cases is that both public 

and private hospitals have the discretionary right to exclude, 

suspend or take away staff privileges upon grounds set by the 

medical staff. 

The fact that Appellant is a licensed practicing physician 

is not, as Appellant argues, a controlling factor. The general rule 

throughout the country, as noted in the Anno. 37 ALR3d, Physician, 

Surgeon---Hospital Exclusion, pp. 645, 666, is: 

11 It is well settled that a licensed physician or surgeon does not have an unqualified right, constitutional 

motherwise, to practice his profession in a public 

hospital. Therefore, the cases involving charges of 

improper exclusion or discrimination against such institutions have been decided upon other grounds. 11 

We concur. The licensing by the state is a prerequisite 

to admission to staff membership in any hospital, private or public. 
Granting the privilege of staff membership to a hospital is an 

entirely separate matter and that power rests in a board acting 

in accordance with fair rules and regulations. Such board is 

vested with regulative discretion in its powers of appointment 

and reappointment of medical personnel to its staff. This power 

includes the right of refusal of membership to a physician who 

fails to abide by the rules of the hospital. Dayan v. Wood River 

Township Hospital, 18 Ill.App.2d 263, 152 N.E.2d 205. Here, the 

real question is whether or not the operating rules of the Hospital 

are reasonable and whether or not the procedures provided by the 

by-laws for notice and hearing were followed. 

Appellant's second issue is as to the procedure followed, 

and whether Appellant's right to due process was violated. While 

the right to practice a profession is a liberty interest protected 

by the Fourteenth Amendment, Shaw v. Hospital Authority of Cobb 

County, 507 F.2d 625, here Appellant was not precluded from 

exercising that right by the by-laws of the Hospital. He need 

only have complied with those requirements to have continued his 

membership on the staff. This consideration is sufficient to 

dispose of his possible property interest as well. 'We find the 

hearings conducted afforded due process. 

Appellant does not deny he received proper notice but 

contends he was denied due process of law because the Medical Staff 

hearing his case was prejudiced against him. As previously set 

forth, the trial court after hearing the case for several days, 

referred the matterbckto the Medical Staff for another hearing 

and to be certain ellant ant's rights were protected the court 

attended the hearing as a spectator to see that the hearing was 

fully and fairly conducted. Following that hearing every member 

of the Medical Staff of the Hospital voted to deny Appellant 

staff privileges. 
This Court in Hulit, considering the court's function in 

this area, referred to a statement in Sosa v. Board of Managers 

of Val Verde Memorial Hospital (5th Cir. 1971), 437 F.2d 173, 

 he court is charged with the narrow responsibility 

of assuring that the qualifications imposed by the 

Board are reasonably related to the operation of the 

hospital and fairly administered. In short, so long 

as [hospital actions] are administered with fairness, 

geared by a rationale compatible with hospital responsibility, and unencumbered with irrelevant considerations, a court should not interfere. Courts must not 

attempt to take on the escutcheon of Caduceus."' 

Our function is twofold. First to determine whether 

due process was accorded. From our discussion heretofore, it is 

clear that it was. Second, to determine whether there was an 

arbitrary and capricious decision made by the Medical Staff. 

That a conscientious judgment was made is clear--just the opposite 

of an arbitrary and capricious one. The competent Medical Staff 

opinions are sufficient to uphold the findings and decision of 

the Staff, the Board and the trial court. 

Accordingly, the decision of the trial court is affirmed.