### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE Februar y 19, 2 002 Session CITY OF COOKEVILLE, TENNESS EE, ET AL 

### . v. WILLIAM M. HUMPHREY, M.D., ET AL 

### . Appeal from the Chancery Court for Putnam County No. 99-219 Billy Joe White, Chancellor

No. M2001-00695-COA-R3-CV - Filed Nove mber 20, 2002

This is a declaratory

judgment action wherein a private act hospital authority, established pursuant to Tenness ee Code A

nnotated sections 7-57-601 to 604, see ks a decl aration

that it has the authority to enter in

to an exclu sive cont

ract f or pr ofessional radiology services, thus limiting the use of imaging equipment

and hospital support staff situated in the hospital to such exclusive providers of radio logy service s. Defe

ndants ar e four c ompetent

radiolog ists, pres ently

on the medical staff of the hospital, who have als o establis hed Premi er Diagnostic Imaging Center, LL

C to provide outpatient radio logy service s independent of the hospita l. The exclusive contract sought by the hospital w ould effec tively

“close” use of the

hospital imaging facilities and support staff to all radiologists except the providers named in the exclusive contract. The trial court declare d that the hospital was authorized to enter

into such an exclusive provider contract, and we affirm the judg ment of the trial court. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed

W IL LI AM B. C AIN , J., delive red the o pinion of t

he court , in whic h B EN H. C ANT RELL , P.J., and R OBER T L. J ONES , S P . J., joined.
William H. West, Nashville, Tennessee and John Acuff, Cookeville , Tennes see, for the appe llants, William M. Humphrey, M.D., John P. Limbacher, M.D., Daniel F. Coonce, M.D., George O. Mead, M.D., and

Putnam Rad

iology , P.C.
Andree Sophia Bl

umstein, N ashville, Tenness ee, for the appe llees, City of Cookeville, Tennessee, by and through Cookeville Regional Medical Center, a nd Cookeville Regional Medical Center Au th or it y. William B. Hubbard, Nashville, Tennessee, for amicus curiae , Tennessee Hospital Association. Andrew Yarnell Beatty , Nashville, Tennessee, for amicus curiae, Tennessee Medic al Association. David L. Steed, Nashville, Tennessee, f or amicus curiae, M edical Staf f of Cookeville Regional Medical Center.-2- OPINION
The facts necessary

to a decision in this case were stipulated by the parties, and the case was submitted to the tr ial court on cross motions for summary judg ment. The trial court granted the Motion for

Summary

Judgment f

iled by Plaintiff hospital, and Def

endant r adiolog ists appe al.
Cookeville

Regiona l Medica l Center ( “CRMC”) isa privat e act pub lic hospital operated by the City of Cookeville, by

and through Cookeville Regional Medical Center Authority (“ CRMCA”). This hospital is established under the provisions of Ten nessee Code Annotated sections 7-57-601 to 604. Defendants, Drs. Humphrey , Limbacher, Coonce, and Me ad form a professional corporation known as Putnam Radiology, P.C. and ar e c ompetent and qualified radiologists with staff membersh

ip and clini cal privilegesat CRMC. They practic e at CRMC I

maging Departm ent, which has historically opera

ted as an open staff department without an exclusive provider contra ct.
Defendant

radiolog ists, in ea rly 1999, also

formed a

limited lia

bility comp any, Prem

ier Diagno stic Imag

ing Cent er, L CC, and ap

plied for a Certif icate of Need for an

outpatie nt diagn ostic center in which th

ey intended to provide

outpatie nt imaging servi ces in co mpetit ion w ith CRMC. The Certificate of Need was gr anted to Premier

Diagnostic Imag

ing Center, LCC on April 28, 1999. At a March 25, 1999 meeting, the CRMCA Board of Trustees decided to “close” the medical staff of the Imaging

Department at CRMC by seeking an exclusive provider contract for in hospital imagin g service s. The result of such a contract would be that only radiologists employed by the exclusive provider under thecontract wou ld have access to and use of the imaging facilities and support staff at CRMC.
The medical staff o f CRMC voted to support

the Defe

ndant ra diologis ts and the

ir professional corpora

tion, Putna

m Radiolog

y, PC , in becoming the providers of radiology

services under such an exclusive contract if an agreement could be rea

ched on sucha contract. On April 19, 1999, CRMC issued a request fo r a propo sa l from qualified radiology groups to operate and administer

its Imaging

Department under an exclusive contract. Putnam Radiology, PC

objecte d to several provisions in the proposed exclusive contract including the “reason able n on-compe te provision s” and a provision for termination of med ical staff privileges immediately upon the termination of the radiology services contract. I

n the words of Dr. Humphrey : “It is our position that the medical staff bylaws of CRMC do not giv e the hosp ital the po wer to exc lude rad iologistson its staff from access to the devices and staf f of the hospital.”

An impasse having thus been reached as to any exclusive services contract between CRMC and Putnam Radiology, PC, the exclusive provider contra ct proposal was put on hold, andthe City of Cookeville, by and throug h CRMC and CRMCA, on July 1, 1999, filedthis action for declaratory judgment seeking a declaration of the right to close the I maging Department at CRMC by means of
an exclusive provider

contract. On July 29, 1999, the Defendants answe red the Complaint and filed
a Counterclaim asserting that the medical staff by laws of CRMC had been violated by the actions of Plaintiff and that t

he decis ion to clos e the CRMCImagi ng Department was done in retribution-3-

agains tDefendants fo r their actions in obtaining a Certificate of Nee d for the establishment of an outpatient diagnostic imaging center in Cookeville.
The case was heard by

Chancellor Billy Joe White on January 17, 2001 on cross motions for summary judgment filed by the parties. The Chancellor granted Plaintiffs’ Motion for Summar y Judgm ent by Ord er of Feb ruary 12, 2 001 ho ldin g:

The Court find s that the Tenness ee Priva te Act Hospital Authority Act of 1996, Tenn. Code Ann. § 7-57-601 et seq. , gives the Plaintiff Cookeville Regional Medical Center Authority (the “ Hospital”) the authority to close a Hospital department

for competitive and economic reasons through an exclusive contracting arrangement

even though doing so will, in this case, incidentally affect the Defend ants’ staff pr

iv ile ges. Th

e Hospita l has the r

ight to c lose the s taff of i ts Imaging Department and to seek an exclusive provider of radiology services, and the Defend ants’ loss of their s taff privileges necessarily follows. The Court finds that there is no issue concerning the compe tence of the Defe ndant ra diologis ts and tha

t, theref ore, it w ould be meaningless to require the Hospital to provide a hea ring regarding any adverse effec t on priv ileges. The Court finds tha

t the Plaint

iffs’ decision to close the Hospital’s Imaging Department is a business decision.
The Court fur

ther find s that: th e Hospita l’s Medical Staff By

laws, and specific ally

Section 14.1.D of the Medical Staff By laws, do not give the Med ical Staff the right to veto a

decisi on by the Hos pital to close a previously open d epa rtment; Section 14.1.D gives the Medical Staff only the right to make recommendations to the Hospital Board; there is no breach of the Medical Staff Bylaws; and there are no due process prob lems in co nnection with the Hospital’s actions. Thus, the Hospital may close its Imaging De

partment without violating the Defend ants’ co ntractu al or due processrights.
The case was decided by

the trial court with the Motion for Summary

Judgment o f Plaintif

fs’ being granted and the M otion for Summary

Judgment o f Defendants’ be ing den ied. The Defend ants filed a timely

appeal.

An appeal f

rom a grant o f summary

judgmen t bringsthe case

before the appe llate courts on questions of

la w o nl y, subject to de novo review accompanied by no presumption of correctness of the disposition made by the trial c ourt. Gonzales v. Alman Constr. Co. , 857 S.W.2d 42 (Tenn. Ct

. App. 1993). The burden rests upon the party see

king summary judg

ment to persuade the court that
no genuine and mat

erial fa ctual issu es exist and

that the mo vant is en

titled tojudgmen

t as a matter of law. Byrd v. H

all , 847 S.W.2d 208 (Tenn. 1993). In ruling on a motion

for summa

ry judgmen t, boththe trial

c ourt an d the Cour

t of Appe als must loo

k to all of t

he evide nce, tak e the stro ngest legitima te view of the eviden ce in favor of the opponent of the

motion and

allow all reasona ble inferences in his favor, discarding all countervailing evidence. After having done so, if the re is any dispute as to any mater

ial determin ative evidence o r any doubt as to

the conclusion to be drawn from-4-

the whole evidence, the motion must be denied. Dooley v. Evere tt , 805 S.W.2d 380 (Tenn. Ct. App. 1990); Evco Corp . v. Ross , 528 S.W.2d 20 (Tenn. 1975). In this case, the facts ar e es sentially stipulated such that

only questionsof law ar

e befor e the Cour

t, and the se questi ons were correctly determinedon summary judgme nt motion. Allstate Ins. Co. v. Jordan , 16 S.W.3d 77 7 (Tenn. Ct. App. 1999).
Two issue s control

the case on appea l: 1. Do Pl aintiffs

/Appelle es have t

he righ t to “close ” the I

maging Departm ent at CRMC by mean s of an exclusi ve provid er contr act and t hereby preclud e Defe ndants/Ap

pellants’ use of CRMC imaging facilities and support staff? 2. If such closing is authorized, does the resulting non-access to CRMC imaging fa cilities and
su pport staff violate the medical staff by laws of CRMC and constitute breach of c ontract wit h Appellan ts?
As to the first issue, CRMC is a public hospital, as opposed to a private h o spital, and Appellan ts rely upon the

lon g standing rule in Tennessee that a lice nsed physician who c omplies withhospital rules and regulations has a right to practice medicine in the public hospitals of the State. See Henders on v. City o f Knoxvill

e , 9 S.W.2d 697, 698 (Tenn. 1928). The decisive question
on this issue is whether or not the rule in Henderson and its pr ogeny survived the enactment o f Chapter 778 of the Public Acts of 1996, now codified as Tennessee Code Annotated sections 7-57- 601 to 604. On November 25, 1998, the Attorney General provided the following opinion: QUESTION: Does Tennessee Code Annotated § 7-57-601, et seq. , authori ze a public hospital to cl ose its me dical staff to licensed Tennessee phy sicians in good standing, thus overruling by

legislation previous case law?
OPINI ON: Yes. Tenn. Code Ann. § 7-57-603 extends the powers and rights of pr ivate act metropolitan hospitals to private act hospital autho

rities, otherwis e known a s public h ospitals. Tenn. Cod

e Ann. § 7- 57-502 pr

ovides me

tropolita n hospital s with th e authority to contra ct exclusiv ely

with phy sicians. Previous case law restricting the public hospitals’ right to close a medical staff, therefor e, ha s be en nullifi ed by

this statutory extension of authority

. OPINI ON BY: JOHN KNOX WAL

KUP, Attorney Gene

ral and Reporter; MICHAEL E. MOORE, Solicitor G

eneral ; VICK

IE P. H ALL , Assistan

t Attorne y General

. OPIN ION ANAL YSIS: The Private Act

Hospital Authority Act (the “A ct”), Tenn. Code Ann. § 7-57-601, et seq. , was adopted in 1996 to extend the powers of the met ropo litan hospital-5-

au thorities to the private act hospitals. Tenn. Code Ann. § 7-57-603 states in pa r t that:

“A private

act hospital autho

rity , . . . has a s supple mental and additional rights and powers, all powers gra nted to private act metropolitan hospital authorities in title 7, chapter 57, part 5. . . .”

Tenn. Code Ann. § 7-57-50 2(c) sta tes in part tha t a hospita l authorit y, in the exerc ise of it s p ow er s, ma y:
“. . . contract for

or otherwise participate solely or with others in the ownersh ip or operation of a hospital, medi cal or health program properties and f

acilitie s and prop erties, f acilitie s, and pro grams supporting or relating thereto of any kind and nature whatsoever and in any form of owne rship whe never th e board o f trustee s in its discretion shall determine it is consistent with the purposes and policies of this par t o r any priva te act applicable to it, and may exercise such powers regardless of the c ompetitive conseq u ences thereof.”
Based on the language of that statute, a public hos pital may

contract with othe

rs in furtherance

of the hospital’s operation regardless of the c ompetitive consequences of th at co nt ra ct . C er ta in ly p hys icians and surgeons are an integ ral part of the operation of any hospital. I t, therefore, follows that ho spitals may contract with a particular phy sician or

phy sician g

roup exclu sively

even if it is to the di sadva ntage of other similarly qualifie d phy sicians o

r group s.
The purpo se and policy for the enactment of Tenn. Code Ann. § 7-57-501, et seq. , is stated in part asfollows:
“The general assembly

hereby f inds t hat the de

mand for hospital, medical and health care services is rapidly chang ing as is the way and
manner in which such services are purchased and delivered; that the market for hospital a

nd health care se rvices isbecoming

increa singly competitive; and that t

he hospital and o ther health care providers needfle x ibility to be able to respond to chang ing conditions by having the power to developefficient and cost-effective methods to provide for hospital , medical and health care needs. The g eneral assembly finds that public hospitals in metropolitan a reas are present ly at a comp etitive di s advant age, and that significant investmen

ts in the publ

ic assetsof priva

te act me tropolita n hospital authorities could

be jeopa rdized by inability to compet

e with pri vate hospitals because of legal con s traints up on the sco pe of the

ir-6- operations and limitations upon the power g ranted t o publichospitals under existing law.”
If there is any que stion as to the specific language in Tenn. Code Ann. § 7-57-502(c), cl ea rl y, the leg islative i ntent for the enactment of

the statute, and the subsequent
en actment

of the Act, is to enable public hospitals to compete in the health c ar e market. “It is gener

ally held that

private hospitals have the right to exclude licensed physicians and surgeons from the use of the hospital for any cause deemed sufficient by its managing au th orities.” Nashville Memorial Hospital, Inc., et al. v. Binkley , 534 S.W.2d 318 (Tenn. 1976). It follows then tha t the p ower to “contact for or otherwis e particip ate solely o r with othe

rs in the . . . opera

tion of a h ospital . . .” is intended to give public hospitals the same right to exclusive ly c ontract

with physicians or surgeons , re gardless of the affect on the e xcluded physicians. Tenn. Code Ann. § 7-57-502.
The result

of the Act, therefore, is to nullify court decisions under prior law which held that a licensed physician w

ho complies with hospital rules and regulations has
a right to practic e medicin

e inthe stat e’s public hospitals. Henderson v. City of Knoxville , et al. , 9 S.W.2d 697 (Tenn. 1928).
Alth ough the statute in question does not proh ibit the spe cific action by a public hospital set out in this opinion request, this Opinion does not address, and should not be construed to address, other provisions of federal and state law governing competitive activity. Specifically , this Office has not reviewed and takes no position
on the activ

ity in question u

nder app licable

provision s of the She

rman Act , 15 U.S.C. § 1 et seq. , the Clayton Act, 15 U.S.C. § 12 et seq. , or any other federal la w. Fi na ll y, this opinion is not intended to analyze any other actions by priva te act or metropolitan hospital authorities that might conflict with Article I, Section 22 of the Tennessee Constitution or with Tenn. Code Ann. § 47-25-101, et seq. Op. Att’y Gen. 98- 223 (1998).
After careful consideration, we find that we cannot improve on the reasoning of the Attorney Genera l, and we , theref

ore, ado pt the opin

ion of the Attorney Genera l as the op inion of the Court. The Plaintiff

s are em powere d to close the Imag ing Department of CRMC by means of an exclusive pro vider contract and Henderson v. City of Knoxville and its pr ogeny have be en legi slati vel y overruled by

sections 7-57-601 to 604 of the Code. Turning now to the second issue, Appellants assert that “closing” the I

maging Department of CRMC to qualified radiologists who are members of the medica l staff of the hospital constitutes
a breach of the contract between the hospital and the affected radiologists. Rely ing on the near universal rule in Lewisburg Co mmunity Hospital v. Alfredson , 805 S.W.2d 756 (Tenn. 1991), that-7-

hospital bylaws and medica l staff bylaws a

re an integral part of the contra ct between the hospital and its medica

l staff me mbers, Ap

pellants p oint to ce

rtain pro visions of

these by laws.

ARTI CLE I

II : ST AFF MEM BER SH IP
3.1 NAT URE OF S TAF F ME MBE RS HIP
Members hip on the medical staff of Cookeville

General Hospital is a privilege which shallbe extended only to profe ssionall y competent phy sicians, dentists and podiatris ts who conti nuously meet the q

ualifica tions, standards and requirements set forth in these b yla

ws. Appoin

tment to and member ship on the sta ff shall confer on the staff member

only such clinical privileg es and prerogatives as have been granted by the board in ac cordance with these by laws, andsh al l i nc lu de st af f c at eg or y, and departm ent assig nments.

. . . . 3.2-3 Nondiscrimination Staff membership or particular clinical privileges shall not be denied
on the basis of any

criteri on unrela

te d to the e fficient delivery of patient c are at th

e gene rally recog nized prof

essional level of quality in the hospit

al, inclu ding, but not limited to, sex, race, creed, religious beliefs and natio nal origin or to an otherwise qualified handicapped practitioner.

. . . . ARTI CLE XI

V: GENERAL PROVI SIONS

14.1 MEDICAL

STAFF RULES & REGUL ATIONS

. . . . D. Medic al S taff Role in Exclusive Contracting : The Medical Staff, through the Medical Execu ti ve Committe e, with medical staff approval, shall re view and mak e recommendations to the Board regarding issues relate d to the exclusive arra ng ements for physicia n and/or professional service s, prior to anydecision being made, in the following situations : 1. the decision to execute an e xclusive contract in a previously open depa

rtment or service;-8- 2. the decision to renew or modify an exclusive contract in a particular department or ser vice; 3. the decision t o terminat e an exclu sive cont

ract in a particular department or service.

. . . . ARTI CLE XVI: FAIR HEARI NG PLAN

. . . . 16.1-1 INI

TIATION OF HEARING
16.1-1 Recommendations or Actions
The following

recomme ndations o

r action s shall, if

deemed a

dverse pursuant to Section 16.1-2, e

ntitle the practitioner a

ffecte d thereb y to a heari ng: A. Denial of

initial sta ff appointment, B. Denial of

reappointment, C. Suspension

of staff appointme

nt, D. Revocat

ion of sta ff appointment, E. De ni al of

re qu es te d m od if

ic at io n o f s ta ff

ca te go ry, F. Re du ct io n i n s ta ff ca te go ry, G. Limita

tion of ad mitting pr eroga tives, H. Denial of

request ed depa rtment as signmen

t, I. Denial of

request ed clinic al privile ges, J. Reduction

in clinica l privileg es, K. Suspension

of clinic al privile ges, L. Revocat

ion of clin

ical priv ileges , M. Terms of probation, N. Requirement of consultation, AND/OR O. Letter of admonition or letter of re primand.
The pivotal and decisive question involves the holding of the Supreme Court in Alfredson

. While it is not ope

n to legitimate dis putethat the medica l staff bylaws a re an integral part of the contract betweenAppellan

ts and App ellees, as Alfredson correctly holds, it is the effect of closure of the hospit

al Imaging

Departm ent on the contractual rig

hts of App ellants th at puts Alfredson at odds with every other

jurisdiction that has addressed the issue. In Alfreds on , the Sup reme Court held:-9-

After the foregoing analy sis, the Court of App eal s ob ser ved , an d we agr ee, It is fair to conclude that the hospital granted Dr. Alfredson specif ic, delineated clinical privileges enabling

him to practice radiology

at the hospital. His contract required them. The bylaws themselve s required that he seek them and likewise required the hospital to grant

them. With such hospital-based specialties such as radiology , the inability to use the hospi tal faci lities and staff would have rendered the clinical privileges meaning less. Thus , necess arily included withDr. Alfredson’s privileges was the right to use hospital facilities and staff.

. . . . We, ther ef

ore, hold that the H ospital’srefusa l to give Dr. Alfr edson ac cess to its radiol ogical

equipmen

t and staf f after January 2, 1986, si gnific antly

reduce d his privileg es. It follows that Dr. Alfredson was entitled to a

hearing under the medical staff bylaws, a

nd that the Hospital breached its contract by failing to provide him a hearin g. As a

result, we affirm the Court of Appeals’ holding that the Hospital was notentitled to a summary dismissal of Dr. Alfreds on’s cla ims arising from the Hospital’s failure to follow its bylaws, and a ffirm its action vacating the Hospital’s summary judgment in part. We reverse the Court of Appeals’ decision that genuine fa ctual issues exist concerning whether the Hospital significantly curtailedDr

. Alfredson’s clinical privileges by denying him acce ss to its radiological equipment and staf f, and its resulting

remand t o the tria l court. Having determinedthat

Dr. Alfredson’s clinical privileges are sufficiently set outin the record

for this purpose, we hold, as a matter of law, that his privileges were significantly r

educed when the Hospital denied him access to its equipment and its staff. It fo llows that

the medic al sta

ff bylaws r

equ ired the

Hospital t

o gran t him a hearing when his clinical privileg es were signific antly

reduced, and that by

not doing so, the Ho spital bre ached it s contra ct. Alfredson , 805 S.W.2d at 761-62.
Without menti onin g Alfredson , the tria l court he

ld : “Thus , the Hosp ital may close its Imaging Departm ent withou

t violatin g the Defend ant’s co ntractu al or due processrights. ” In

so holding, the trial court followed the apparently universal rule applied in other jurisdictions, which ruleis contra to Alfredson

. See Adler v. Montefiore Hosp. Ass’n of W.Pa. , 311 A.2d 634 (Pa. 1973); Anne Arundel Gen. Hosp. v. O’Brien , 432 A.2d 483 (Md. 1981); Engelstad v. Virginia Mun. Hosp. , 718 F.2d 262 (8 th Cir. 1983) ; Collins v. Assoc iated Path ologists, Ltd , 844 F.2d 473 (7 th Cir. 1988); Holt v. Good Samar itan Hosp. & Health Ctr. , 590 N.E. 2d 1318 (Ohio 1990); Bartley v. Eastern Maine Med. Ctr. , 617 A.2d 1020 (Me. 1992); Dutta v. St. Francis Reg. Med. C tr. , 867 P.2d 1057 (Kan. 1994); Gonzalez v. San Jacinto Methodist Hosp. , 880 S.W.2d 4 36 (Tex. 19 94); Bryant v. Glen Oaks Med. Ctr. , 650 N.E.2d 62 2 (Ill. App. Ct. 1 995); Garibaldi v. Applebaum , 742 N.E.2d 279 (I ll. 2000); Van Valkenburg v. Paracelsus Healthcare Corp. , 606 N.W.2d 908 (N.D. 2000).-10-

In addressing the effect on the constitutional and contra ctual rights of medical staff physicians effected

by exc lusive con tract cl osure of the hospit

al emerg ency

departm ent, the Su

preme Court of North Dakota held:

Relying on Lewis burg Community Hosp. v. Alfredson , 805 S.W.2d 756 (Tenn. 1991), the plaintiff s argue the defe ndants breached the medical staff by laws by not adhering to thedue proc ess and hearing provisions. I n Alfredson , 805 S.W.2d at 761, the court held a hospital’s term ination of a radiologist’s exclusive contract and denia l of acc ess to hospi tal eq uipm ent an d staf f “sign ificantl y reduced” the radiologist’s privileges. The court held the hospital breached its contract by failing to provide the radiologist a hearing under the medical staff by

laws. Id. The majority of courts, howe ver, have rejected

the rational of Alfredson and have held hearing and due process provisions in similar medical staff bylaws are

not implicated unless there are allegations ag ainst a physici an b earing on professional competency

and conduct. We agree with the major i ty of courts, and we

hold the hearing and due process provisions of the Hospital’s medical staff by laws are not implicated unless there are allegations bear ing on professional co mp et en cy, conduct, or character. Here, the plaintiffs’ medical privileges were not re voked or suspended, and there were no allegations bearing on professional competency , conduct, or character. Rather, the plaintiffs were not assigned staff coverage in the Hospital’s eme rgency departm ent. The right

to exercise medical privileges is separate f rom the granting or
rev ok ing of those privileges, and a phy sician with privileges is not guaranteed employment

or the free an d unfe ttere d righ t to use a facility to exercis e those privileg es. We conclude, as a matter of law, the hear ing and due process provisions of the Hospital’s medical staff by laws were not implicated in this case.
Van Valkenburg , 606 N.W.2d at 917-18 (citations omitted). Addressing the contractual and due process rig hts of a ra diologist excluded by exclusive contract closure of a hospital radiology department, the Supreme Court of Kansas held:

We believe the byla

ws, when considered

as a whole, support the conclusion of the Court of Appeals that Dutta was not entitled to a hearing because the hospital’s managerial

decision was based on business considerations. The Court of Appe a ls distinguished a case relied on by Dutta, Lewisburg

Community Hosp. v. Alfredson , 805 S.W.2d 756 ( Tenn. 199 1), on the basis tha

t St. Fran

cis’ by laws lim it a physician’s right t o a hear ing to thos e matt ers bea ring on pro fessional competency and conduct. 18 Kan.App.2dat 253. We agree. The threshold issue in Lewisburg
was whether the bylaws formed a contract with the plaintiff radiologist as a member of the medic al staff

. 805 S.W.2d a

t 759. St. F

rancis, in the ca se at bar, has admitted the contractual relationship. We find no referenc e in Lewisburg to a bylaws provision limiting hearings to matters of professional competency . Th e hospita l-11-

bylaws in Lewi sburg w ere construed to require the hospital to permit the use of certain facil itie s by physici ans gran ted cl inica l priv ilege s i n a pa rt ic ul ar sp ec ia lt y. 805 S.W.2d at 761. No such requirement appears in the St. Francis by laws. The weight of authority supports the conc lusion of the C ourt of Appeals. Lewisburg appears to be th e o nly

contrar y a uthority . We are u

npersua ded by the rea soning in Lewisburg

. A parallel medical employ ment issue was recently

reviewed in Bartley
v. Eastern Maine Medical Center , 617 A.2d 1020 (Me. 1992). Bartley held that because the staff privileges of the

plaintiff emergency

department physicia

ns had not been revoked or reduced, the phy sicians w ere not e ntitled to notice and hearing under the ho sp it al byl aws. The physicians in Bartley were notified that they could no longer work in the emergency room unless they neg otiated new employment contracts with the hos pital. Th e physicians’ staf f privileges were not terminated when the hospital made different arrang ements for staffing the emergency departm ent. The Bartley court not ed that there is a

dist inction betw een a grant of privileges and the right to exercise privileges. Bartley found that the hospital bylaws didnotapply to the

emergency

room physicians’ terminations bec ause there had been
no allegation of unprofessional conduc t or privilege reduction. 617 A.2d at 1021. See Collins v. Associated Pathologists, Ltd. , 844 F.2d 473, 481 (7 th Cir.), cert. denied 488 U .S. 852, 109 S.Ct. 137 , 102 L .Ed.2d 110 (1988); Engelstad v. Virginia Mun. Hosp. , 718 F.2d 262, 268 (8 th Cir. 1983) ; Lewin v. St. Joseph Hospital of Orange , 82 Cal.App.3d 3 68, 391, 1 46 Cal.Rptr . 892 (197 8); Anne Arundel Gen. Hosp. v. O’Brien , 49 Md.App. 362, 371-73, 432 A.2d 48 3 ( 1981); Holt v. Good Samaritan Hosp. & He alth C tr. , 69 Ohio App.3d 439, 445-46, 590 N.E.2d 1318 (1990); and Adler v. Montefiore Hosp. of

W.Pa. , 453 Pa. 60, 80-81, 311 A.2d 634 (1973), cert. denied 414 U.S. 1131, 94 S.Ct. 870, 38 L.Ed.2d 755 (1974).

Dutta , 867 P.2d at 1062-63.
As an in te rm ed ia te ap pe ll at e c ou rt , w e a re bo un d b y Alfredson , and unless the case has been legisla tively overrul ed by

Chapter 7 78 of the Pu

blic Acts of 1996 (sections 7-57-601 to 604 of the Code), we are

bound to fo llow it. Thu s, this ca se wou ld have to be reversed and remande d as Appellee s must gr

ant a hea ring to t he Appellants pur suant to the medica l staff by laws.
However, Alfredson was decided by the Tennessee Supre me Court on March 4, 1991. Chapter 119 of the Public Acts of 1995 (codified as Tennessee Code Annotated sections 7-57-501 to 504) was effective April 19 , 1995 , and chapter 778 of the Public Acts of 1996 (codified as Te nnessee Code Annotated sections 7-57-601 to 604) was effective Apr il 17, 1996. The contrac t betweenCRMC and Dr. Mead was renewed for a two y ear ter

m in Febr uary of 1998. T

he contr acts betweenCRMC and Drs. Humphrey, L imbacher and Coonce were rene wed in 1999 for a period of two years. Thus, both Te nnessee Code Annotated sections 7-57-501 to 504 and Tenn essee Code Annotatedsections 7-57-601 to 604 post-dated the Alfredson decision and pre-dated each of the four contracts in issue in t

his case. A s the cont

racts in issue post-date the legislative enactments involved,-12-

there can be no impairment of the obligation of contract. Munday v. Wisconsin Trust Co. , 252 U.S. 499 (1920).
Certain settle d rules mu st be cons idered i n determ ining the effec t of leg islative a

cts intervening between the decision in Alfredson and the contracts between CRMC and the Appellan

ts.
1. The Genera

l Assembly

is presumed to know the existing state of the law on the subject under consideration when it enacts legislation. Holder v. Tennessee Judicial Se lection Com m’n , 937 S.W.2d 877 (Tenn. 1996); SunTrust Bank of Nashville v. Johnson , 46 S.W.3d 216 (Tenn. Ct. App. 2000).
2. A statute is to be construedwith reference to pre-existing law and doe s not change such law further than it expr

essly declar es or nec essarily

implies. In re: Deskins’ Estates , 381 S.W.2d 921 (Tenn. 1 964); Winte r v. Smith , 914 S.W.2d 527 (Tenn. Ct. App. 1995).
3. The court should consider the existing state of the law, the circumstances contemporaneous to the enactment of a new law, the facts which induced the new law, and the evils sought to be remedied. First National Bank v. Howard

, 253 S.W.2d 9 61 (Tenn . 1923); Still v. First Tenn. Bank , N.A. , 900 S.W.2d 282 ( Tenn. 199 5); Wachovia Bank of N. C. v. Johnson , 26 S.W.3d 62 1 (Tenn. Ct. App. 2000).
4. When the court

can gather the paramount intention of the legislative action, such intention must be give n effec t alt hough there may exist some apparent obstacle s. Rawlins v. Braswell , 231 S.W.2d 1021 (Tenn. 195 0); Still , 900 S.W.2d 282. Applying such rules we must now determine the legislative intent in the enactment of sections 7-57- 501 to 504 and sections 7-57-601 to 604 of the Code.

It is sections 7-57-601 to 604, entitled “Private Act Hospi

tal Author ity of 1996,” that governs the issues in th

is case, but we ar

e legis latively

commanded by Te

nnessee Code Annotated section 7 -57-603 (1998) that “[a] private act hospital authority, a s defined in this part, in a ddition to th e rights and powers granted to such authority by any private act of the genera

l assembly or its charter of incorporation, has as supplemental and addit ional rig hts and pow ers, all p owers g ranted t o private act metropolitan hospital authorities in title 7, chapter 57, part 5.” Turningthen to Title 7, Chapter 57, part 5 of Tennessee Code Annotated, the declared intent of

the legislature is expressed in section 7-57-501.
The general assembly hereby f inds thatthe demand for hospital, medical and health care services is rapidly

changing as is the way

and manner in which such services are purchased and delivered; that the mar ket for hospital and health care services is becoming incre asingly competiti ve; and th at the hos pital and other he alth
care providers need flexibility to be able to re spond to changing conditions by having the power to develop efficient and cost-eff ective methods to provide for hospit al,-13-

medical a nd health care needs. The

gener al assemb ly

also finds that the increasing competition and changingconditions force hospitals and other health care provider s to develop market strategies and strateg ic plans to effe ctively

compete. The general assembly further finds that

public hospitals in metropo litan are as are p resently at a competitive disa dvan tage, and that significant investments in the public assets of private act metropolitan hospital authorities could be jeopar dized by inability to compete with priva

te hospita ls becau se of leg al constr aints upon

the scope

of their operations and limitations upon the power granted to public hospitals under existing law. Tenn. Code Ann. §7-57-501(b)(1998).

In furtherance of the ge

neral purposes set forth in section 7-57-501(b ) of the Code , the General Assembly gr

anted specific powers that are set for th in section 7-57-502 and concluded such design ation o f specific powers with a declaration of leg islative intent that is too clear to leave substantia l doubt. (c) In the exercise of i ts powers , including , without li mitation, t he power s in this section, any other pr

ovision of this part and of any other law a private act metropolitan hospital a

uthority may acquire , manage, lease, purchase , sell, contract for or other wise par ticipate solely or with oth

ers in t he ownership or operation of hospital, medical or

health program properties and fa cilities and propert

ies, fac ilities, and programs supportingor relating thereto of any kind and nature

whatsoever and in any form of ownership whenever the boar d of truste es in its dis cretion shall determine it

is consistentwith the purposes and policies of this part or any private act applica ble to it, and may exercise such powers regardless of the competitive consequences thereof

. Tenn. Code Ann. § 7-57-50 2(c) (1 998) (em phasis ad ded). Am ong the “compet itive con sequenc es”
necessa rily envisioned by such ena

ctment are the significant reductions in clinical privileges of competing staff ph

ysi cians dis placed b y a

n administr

ative bus iness decision to “close” a department of a hospi tal by means of an exclusi ve contr

act.
There being no impairment in the obligation of existing c ontract s in this ca se, it would appear that CRMC acted within the scope of its powers under Tennessee Code Annotated sections 7-57-601 to 604 when it made the business decision to “close” its radiol ogy departm ent by exclusive contract. The “competitive consequences” to sta ff radiologists not employed by the exclusive provider ar e legislatively manda

ted.
CONCLUSIO N Lewisburg

Community Hospital v. Alfredson is a pronouncement by the Supreme Court of Tennessee that this in

termedia te appellatecourt is mandated to follow in the absence of legislative-14-

action so clear

as to lea ve no roo m for doub t. Such, in o ur judgm ent, is the effect of Code sections 7-57-601 to 604. The judgment of the trial court is in all respects affirmed. However , the last word still rests with the Supreme Court of Tennessee.
The case is remanded

to the trial court for such further proceeding s as may be necessary and proper. Costs of the cause are assessed ag ainst the Appellants.

___________________________________ WILL IAM B. CAI

N, JUDGE