No. 

### 13057 INTHE 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 Christiansen, 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

## 51976'Jir.Justice John Conway 'iarrisun 9eLivereJ the apinion of 

### the &:ourt. This 

### appeal 

### is from thejudgment entered inthe 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 toasHospital. 

### (2) David V. Icauffman, 11.

### D. 

## , defendant and appellant, hereinaiter referred toasAppellant. 

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

### the Board. 

### (4) The private physicians practicing in the surrounding

area who utilize theHospital forpatient 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 facilityunder the overall zupervision of the Board. Appellant was licensed topractice medicine inMontana 

### in 1338 and has practiced in theWhitefish area since 1959. Ile aiilized the facilities of theHospital during that period and held

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

For a number of years Appellant had problems atthe Yospiciii which brought about suspensions and disciplinary measures irom the Medical Staff. During the 1960fs,for a one year period,hewas required to have at Least ane ocher surgeon with him for allsurgery done atthe Hospital. During much of the time he practiced at the Hospital he had difficultieswith the staff 

### in not maintaining proper records in regard tohis patients. Finally, in the

### latesummer 1974, theMedical Staff recommended and the Board approved, that the Hospital privileges of Appellant not be renewed. Several meetings were held at which Appellant was present, atleast for part of the meeting, where the decision not torenew was discussed in some detail. Appel

### lant requested a hearing, asprovided in the by-laws of the Yospital, and that hearing was held on November 26, 1974. Atthe hearing a 

### list of some 

### 23 "charges" or "problem dieas" was presented toAppellant. 

### He alleges thiswas the first islr~iehe had seen the agenda of "charges" or "problem areas"

211 which the Medical Staff had acted. Thereafter, the Medical ><taff voted torecommend nonrenewal of privileges and the Board iiccepted the recommendation. Appellant 

### was notified, but he cmtinued touse the facilityand 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. Atthe hearing Appellant indicated that he had not been ;lvea d moper opportunity todefend himself atthe November 

### 26 hearing in that the list of "charges" was presented to him for the first time atthe hearing. The districtjudge took the objection u~~Jer advisement and atthe conclusion of the evidence ordered hat a new hearing be held by the Hospital and that Appellant be cully advised inwriting, prior to the hearing, of the nature of!I ~he charges

### ' an3 tile basis 31 ~ne recolnrnendatrrionb, in drdei: chat Appellant could be prepared topresent evidence to the *giedicalStaff. This was done and a fullhearing was held on February 

### 6, 1315. Appellant was present with counsel. The districtjudge atcended solely asan observer. 

### Atthe close of this hearing, ihe entire Medical Staff voted unanimously torecommend 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 forthten 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 toAppellant'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: !~Iontana1947, controls as to the licensing and supervision ,i physicians of this state. Section 66-1022 provides:

IIStatement as to practice permitted. The certificates

issued shall statethe extent and character of the [~ractice that 

### is permitted, and shallbe in the form orescribed by theboard. Neither the privileges norLhe 

### obliga~ions granted to ar in~posed upon iicensees may be altered except by legislative enactment orby action of theboard duly authorized hereunder. t1 ,4ppeLlant rhen cites a recent opinion of this Court, Hull v. ~iorth Valley Hospital, 159Mont. 375, 390, 498 P.2d 136, where !:his Court held:

11

The question of whether ornot a hospital can 

### limita medical licenseunder the statute 

### isnot particularly relevant. This power has been reserved by statute tothe 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- ~laint o the Board of Medical Examiners would satisfy that duty.It Such argument begs the question in the instant case, for here, unlike the facts inHull, the power in question 

### is relevant. The underlying issuehere 

### iswhether 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 aremany 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,164Mont. 168, 170,174, 520 P.2d 99; Hull v. North Valley Hospital, supra. In

# - Ham while we were considering a strictlyprivate huspical, we held a private hospital could prescribe terms on which it offers 

### its services to the public providing it didnot discriminate against some patients in providing those services.

### t11

## &, we 

### also rioted rhe 

### ;tacutoiy Lariguage of 

### section 69-5217,

II 

### 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 tohospital rulesbased on religious ormoral 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 casewith the view that licensed hospitals have the authority, acting on the advice of theirmedical staffs, toadopt 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 hispatient. 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 Hospitalwas the defendant ina casewhere an injured plaintiff sued toestablish that the Hospital was negligent in failing toremove 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 alldoctors toprevent 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 statehad granted him 

### a licensewhich could unly be suspended or terminated by a legally empowered authority. We 

### find this argument irrelevant. We 

### arenot 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 specificallydisclaimed any reliance upon the 'private' nature of the corporation, and rsked tobe treated asif it 

### were public; that in !ight of the receipt and use of Hill-Burton funds, it 

### llustbe treated as if it 

### is public, in so faras 

### liscriminatoryrules and regulations areconcerned.II

### Undoubtedly, the Hospital agreed toa garden variety of rules and regulations related toboth itsoperation and to the use of Hill-Burton funds inconnectionwith itsacceptance of benefits under theAct. Here, we arenot 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 arenot the facts in the instant case and we find

no basis for concluding thatby acceptingHill-Burton funds the Hospital unwittingly surrendered any rights it 

### otherwise possessed todetermine the quality of medical practice in 

### itshospital. Montana isbut one of a number of stateswhere therule making power has been considered favorable tohospital authorities. Moore v. Board of Trustees of Carson-Tahoe Hospital, 

### 88 Nev. 207, 495 P.2d 605; Silverv. CastleMemorial Hospital, (Hawaii-1972), 497 P.2d 564; v. Auburn General Hospital, 10Wash.App. 361, 517 P.2d 240. The rationale of these cases 

### is thatboth public and private hospitals have the discretionary right toexclude, suspend or take away staff privileges upon grounds setby the medical staff. The fact that Appellant 

### is a licensed practicing physician 

### isnot, asAppellant argues, a controlling factor. The generalrule throughout the country, asnoted in theAnno. 

### 37 ALR3d, Physician, Surgeon---Hospital Exclusion, pp. 645, 666, is:

11It 

### iswell settled that a 

### licensed physician or sur

### geon does not have an unqualified right, constitutional motherwise, topracticehis 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 licensingby the stateisa prerequisite to

### admission to staff membership inany hospital, private or public.

### Granting the privilege of staff membership toa hospital 

### is an entirely separate matter and that power rests ina board acting in accordancewith fairrules and regulations. Such board 

### is vested with regulative discretion in 

### itspowers of appointment and reappointment of medical personnel to 

### its staff. This power includes theright of refusal of membership toa physician who fails to abideby the rules of the hospital. Dayan v. Wood River Township Hospital, 18 Ill.App.2d 263, 152N.E.2d 205. Here, the real question 

### iswhether or not the operating rules of the Hospital

arereasonable and whether ornot the procedures provided by the by-laws fornotice and hearing were followed. Appellant's second issue is 

### as tothe procedure followed, and whether Appellant's right todue process was violated. While theright topractice a profession 

### is a liberty interestprotected 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 theby-laws of the Hospital. He need only have complied with those requirements tohave continued his membership on the staff. This consideration 

### is sufficient to dispose of hispossible property interest aswell. 'We find the hearings conducted afforded due process. Appellant does not deny he received proper noticebut contends he was denied due process of law because theMedical Staff hearing his casewas prejudiced against him. 

### Aspreviously set forth, the trial court afterhearing the case for several days, referred the matterbcktotheMedical Staff foranother hearing and tobe certain

## ellant ant's rightswere protected the court attended the hearing as a spectator to see that the hearingwas fully and fairlyconducted. Following that hearing every member of theMedical Staff of the Hospital voted todeny Appellant staff privileges.

### This Court inHulit, considering the court's function in this area, referred toa 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 arereasonably related to the operation of the hospital and fairlyadministered. 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 totake on the escutcheon of Caduceus."' Our function 

### is twofold. First todetermine whether due processwas accorded. From our discussion heretofore, it 

### is clear that it

### was. Second, todetermine whether therewas an arbitrary and capricious decision made by the Medical Staff. That a conscientiousjudgment was made isclear--just the opposite of an arbitraryand capricious one. The competent Medical Staff opinions are sufficient touphold the findings and decision of the Staff, the Board and the trialcourt. Accordingly, the decision of the trialcourt 

### isaffirmed.