[664 NE2d 1240, 642 NYS2d 178]

#### Bernard Gelbard, Appellant, v Genesee Hospital, Respondent, et al., Defendant.

Argued February 6,1996;

decided April 4, 1996

*692POINTS OF COUNSEL

*Woods, Oviatt, Gilman, Sturman & Clarke LLP,*Rochester *(Donald W. O’Brien, Jr.,*of counsel), for appellant.

I. Pursuant to the plain wording of the statute, Public Health Law § 2801-b is not applicable to this case because it involves a breach of contract, not a matter within the purview of the Public Health Council. *(Matter of Greenberg [Ryder Truck Rental],*70 NY2d 573; *Gelbard v Genesee Hosp.,*211 AD2d 159; *Guibor v Manhattan Eye, Ear & Throat Hosp.,*46 NY2d 736; *People v Mobil Oil Corp.,*48 NY2d 192; *Matter of Murphy v St. Agnes Hosp.,*107 AD2d 685; *Bassim v Howlett,*191 AD2d 760; *Chalasani v Neuman,*97 AD2d 806, 64 NY2d 879; *Shapiro v Central Gen. Hosp.,*173 AD2d 601; *Farooq v Fillmore Hosp.,*172 AD2d 1063; *Matter of Libby [Long Is. Jewish-Hillside Med. Ctr.],*163 AD2d 388.) II. Plaintiffs first cause of action should not be dismissed based upon his request for injunctive relief.

*Michael R. Wolford & Associates,*Rochester *(Michael R. Wolford*and *Elizabeth A. Wolford*of counsel), for respondent.

I. Plaintiff must first seek relief from the Public Health Council prior to bringing an action for injunctive relief. *(Gelbard v Genesee Hosp.,*211 AD2d 159; *Guibor v Manhattan Eye, Ear & Throat Hosp.,*46 NY2d 736; *Matter of Shapiro v Central Gen. Hosp.,*181 AD2d 896; *Farooq v Fillmore Hosp.,*172 AD2d 1063; *Matter of Capote v Our Lady of Mercy Med. Ctr.,*168 AD2d 238; *Matter of Libby [Long Is. Jewish-Hillside Med. Ctr.],*163 AD2d

*693388; *Mostafa v Aurelia Osborne Fox Mem. Hosp.,*159 AD2d 922, 76 NY2d 888; *Sawah v Rochester St. Mary’s Hosp.,*101 AD2d 694, 64 NY2d 605; *Kolker v St. Francis Hosp.,*145 Mise 2d 966; *Rockland Physician Assocs. v Grodin,*616 F Supp 958.) II. Plaintiff is alleging violations of Public Health Law § 2801-b, and therefore, must exhaust his remedies before the Public Health Council. *(Fried v Straussman,*41 NY2d 376, 1009; *Jackaway v Northern Dutchess Hosp.,*139 AD2d 496; *Gelbard v Genesee Hosp.,*211 AD2d 159; *Saha v Record,*177 AD2d 763; *Matter of Shapiro v Central Gen. Hosp.,*181 AD2d 896; *Matter of Capote v Our Lady of Mercy Med. Ctr.,*168 AD2d 238; *Matter of Libby [Long Is. Jewish-Hillside Med. Ctr.],*163 AD2d 388; *Rovello v Orofino Realty Co.,*40 NY2d 633.)

*Higgins, Roberts, Beyerl & Coan, P. C.,*Schenectady *(Charles J. Assini, Jr.,*of counsel), for New York State Society of Anesthesiologists, Inc., and another, *amici curiae.*

I. A physician may maintain an action against a hospital for breach of hospital bylaws based on the laws of contracts, associations and corporations. *(Giannelli v St. Vincent’s Hosp.,*160 AD2d 227; *Matter of Murphy v St. Agnes Hosp.,*107 AD2d 685; *Tedeschi v Wagner Coll.,*49 NY2d 652; *Matter of Carr v St. John’s Univ.,*17 AD2d 632; *Saha v Record.,*177 AD2d 763; *Shapiro v Central Gen. Hosp.,*173 AD2d 601; *Browne v Hibbets,*290 NY 459; *Polin v Kaplan,*257 NY 277; *Simons v Berry,*240 NY 463.) II. Public Health Council review is inapplicable to a cause of action alleging a breach of contract because a breach of contract action is a common-law remedy which is separate and distinct from an improper practice. *(Matter of Murphy v St. Agnes Hosp.,*107 AD2d 685; *Guibor v Manhattan Eye, Ear & Throat Hosp.,*46 NY2d 736.) III. Review by the Public Health Council should not supersede common-law legal remedies where such review would be futile, prejudicial and cause irreparable injury. *(Watergate II Apts. v Buffalo Sewer Auth.,*46 NY2d 52; *Matter of Cohoes Mem. Hosp. v Department of Health,*48 NY2d 583.)

*Mark Thomas,*Albany, and *Garfunkel, Wild & Travis, P. C,*Great Neck *(David A. Zarett*and *Roy W. Breitenbach*of counsel), for Healthcare Association of New York State, *amicus curiae.*

The Court below correctly determined that plaintiff-appellant was required to exhaust his Public Health Council administrative remedies. *(Guibor v Manhattan Eye, Ear & Throat Hosp.,*46 NY2d 736; *Farooq v Fillmore Hosp.,*172 AD2d 1063; *Matter of Moss v Albany Med. Ctr. Hosp.,*61 AD2d 545; *694*Matter of Cohoes Mem. Hosp. v Department of Health,*64 AD2d 737, 48 NY2d 583; *Fried v Straussman,*41 NY2d 376; *Gelbfish v Maimonides Med. Ctr.,*184 AD2d 614; *Matter of Nawaz v University Hosp.,*166 AD2d 593; *Jones v Yonkers Gen. Hosp.,*143 AD2d 885; *Maltz v New York Univ. Med. Ctr.,*121 AD2d 323.)

OPINION OF THE COURT

Ciparick, J.

Plaintiff physician commenced this action for breach of contract against defendant hospital seeking an order requiring the hospital to restore his staff privileges. Because we conclude that the Public Health Council must in these circumstances review plaintiff’s complaint before a court can order the restoration of his staff privileges, we affirm the dismissal of plaintiff’s cause of action for breach of contract.

I.

Plaintiff Dr. Bernard Gelbard, a board-certified anesthesiologist, was appointed to membership on the staff of The Genesee Hospital (TGH) in 1989. In March 1993, Dr. A. Kirk Bodary, the Chief of TGH’s Department of Anesthesiology, recommended that plaintiff not be reappointed to the hospital’s medical staff. In support of his recommendation, Dr. Bodary cited various incidents in which plaintiff allegedly engaged in unacceptable medical practices. Dr. Bodary’s recommendation prompted a series of hearings before ad hoc and review committees to determine what action, if any, the hospital should take regarding plaintiff’s staff privileges. These hearings culminated in a resolution of TGH’s Board of Governors terminating plaintiff’s medical staff privileges.

Plaintiff thereafter commenced this action asserting three causes of action. The first cause of action, asserted against TGH, is for breach of contract based on TGH’s alleged violation of specific medical staff bylaws. Plaintiff does not seek monetary damages for the alleged breach of contract but rather seeks a permanent injunction requiring TGH to restore his staff privileges. The second and third causes of action, asserted against Dr. Bodary, seek damages for defamation and tortious interference with contract. Only the dismissal of the first cause of action is at issue here.

By order to show cause, plaintiff sought a preliminary injunction restraining TGH from terminating his staff privileges. *695TGH cross-moved to dismiss the first cause of action on the ground that Supreme Court lacked subject matter jurisdiction because plaintiff had failed to exhaust his administrative remedy before the Public Health Council as required by the Public Health Law *{see,*Public Health Law § 2801-b). Supreme Court denied plaintiff’s motion for a preliminary injunction, finding that plaintiff had failed to demonstrate a likelihood of success on the merits, that the equities weighed, heavily in his favor or that he would suffer irreparable injury if TGH were permitted to terminate his staff privileges. Supreme Court also denied defendant’s cross motion to dismiss, concluding that because plaintiff’s claim was for breach of contract predicated on an alleged violation of specific medical bylaws, and not based on an "improper practice” within the meaning of Public Health Law § 2801-b, the administrative review requirement of section 2801-b did not apply.

On appeal, the Appellate Division reversed Supreme Court’s denial of TGH’s cross motion to dismiss. The Appellate Division concluded that whether administrative review is required by the Public Health Law depends on the relief sought, not necessarily on the nature of the claim. "We believe it is best to establish a 'bright line’ rule that, if a physician seeks reinstatement of hospital privileges, the court is without jurisdiction to consider that issue until the Public Health Council reviews the matter and makes its findings, which constitute prima facie evidence of the facts found therein in any subsequent action” *(Gelbard v Genesee Hosp.,*211 AD2d 159, 165). This Court granted leave to appeal and we now affirm.

II.

At the time of the enactment of section 2801-b of the Public Health Law, a physician had no common-law right to contest the denial or termination of professional privileges and, absent a contractual right to the contrary, served strictly at the hospital’s pleasure *(see, Leider v Beth Israel Hosp. Assn.,*11 NY2d 205, 208-209). To mitigate the perceived harshness of this rule, the Legislature undertook to devise a limited avenue of recourse by which a physician could challenge a hospital’s denial or termination of staff privileges. The product of this effort was section 2801-b of the Public Health Law, which makes it an "improper practice” for a hospital to deny or terminate professional privileges for a reason unrelated to "patient care, patient welfare, the objectives of the institution or the character or competency of the applicant” (Public Health Law § 2801-b [1]).

*696To enforce the statutory prohibition against improper practices, the Legislature created a two-step grievance process by which a physician may obtain injunctive relief requiring the hospital to restore wrongfully terminated staff privileges *(see, Matter of Cohoes Mem. Hosp. v Department of Health, 48*NY2d 583, 587; *Guibor v Manhattan Eye, Ear & Throat Hosp.,*46 NY2d 736, 738). First, the physician must submit a complaint to the Public Health Council (PHC), a committee composed of the State Commissioner of Health and 14 persons appointed by the Governor with the advice and consent of the Senate *(see,*Public Health Law § 220). After investigating the physician’s complaint, the PHC will either direct the hospital to reconsider its decision or inform the parties of its determination that the complaint lacks merit *(see,*Public Health Law § 2801-b [3]). Only upon completion of the PHC review may the physician proceed to the second step, which is to commence an action under section 2801-c to enjoin the hospital from improperly denying or terminating staff privileges *(see, Guibor,*46 NY2d, at 738, *supra).*In a section 2801-c injunction action, the PHC’s determination serves as prima facie evidence of the facts found therein *(see,*Public Health Law § 2801-c).

The requirement of threshold PHC review serves the dual purpose of allowing an expert body to initially review the physician’s complaint and of promoting prelitigation resolution *(see, Cohoes Mem. Hosp.,*48 NY2d, at 589, *supra).*We conclude, in view of the statutory scheme and principles of exhaustion of administrative remedies, that both of these undeniably salutary purposes are advanced by interpreting the statute as mandating threshold PHC review in all cases in which a physician seeks injunctive relief to compel the restoration of staff privileges.

A hospital’s decision to grant or deny staff privileges is based on specialized medical considerations involving notions of patient care, physician competence, and institutional welfare. Unlike the courts, which are generally untrained and inexperienced in these matters, the PHC is a body of medical experts dedicated to the review of complex medical care issues, including issues related to the grant or denial of hospital staff privileges *(see generally,*Public Health Law § 225). The requirement of threshold PHC review thus ensures that before a court orders the restoration of a physician’s staff privileges, the PHC has been afforded an opportunity to apply its special expertise to the issues involved *(cf., Johnson v Nyack Hosp.,*964 F2d 116, 121 [requiring PHC review before physician could assert *697antitrust claim to provide PHC opportunity to assess whether termination of staff privileges was medically justified]). This process assists judicial decision making in a subsequent court action because the PHC’s findings are entitled to prima facie effect (see, Public Health Law § 2801-c).

Citing the potentially preclusive effect of the PHC’s determination, plaintiff contends that he will be prejudiced should the PHC determine that his complaint lacks merit (see, Public Health Law § 2801-b [4]). However, the PHC’s findings are accorded only presumptive, not conclusive, effect in sensible recognition of the PHC’s special competence over medical care issues. Thus, we conclude that the potential prejudice does not overcome the statutory purpose and benefits of allowing this expert body to make presumptive findings regarding alleged improper practices. This is particularly so where plaintiff has the initial opportunity to present his complaint and supporting proof to the PHC *(see,*Public Health Law § 2801-b [2], [3]) and the subsequent opportunity to demonstrate to a court why an adverse determination by the PHC is erroneous *(see,*Public Health Law § 2801-c).

Even though plaintiff in this case asserts a claim for breach of contract, the fact that he seeks injunctive relief to restore his staff privileges places him squarely within the intended scope of the statute. Were plaintiff permitted to bypass threshold PHC review simply by asserting a breach of contract claim, the carefully calibrated statutory progression within section 2801-b, with its insistence on PHC review before a court can order the restoration of staff privileges, would be undermined *(cf., Guibor v Manhattan Eye, Ear & Throat Hosp.,*46 NY2d 736, 738, *supra).*The statutory requirement of threshold PHC review is too important to be circumvented by artful pleading.

In addition, we have recognized the vital mediation role served by the PHC in providing "a professionally competent forum in which to resolve” disputes at an early stage *(Matter of Cohoes Mem. Hosp. v Department of Health,*48 NY2d 583, 589, *supra).*Under the conciliating professional influence of the PHC — an impartial third party with vast experience and unparalleled expertise in these cases — disputes between physician and hospital may be resolved expeditiously, avoiding costly and protracted litigation.

Finally, we reject plaintiff’s argument that requiring threshold PHC review in this case would contravene section *6982801-b (4) of the Public Health Law, which provides that "[t]he provisions of this section shall not be deemed to impair or affect any other right or remedy.” We have held that requiring threshold PHC review does not impair or affect any right or remedy available to the physician, but "merely assures prompt investigation by the administrative body best able to assess the respective interests of the parties involved” *(see, Guibor,*46 NY2d, at 738, *supra).*The requirement of PHC review does not foreclose plaintiff from asserting any claims. Thus, regardless of the results of the PHC review, plaintiff is thereafter free to bring a section 2801-c injunction action or any other valid claim. Moreover, the courts are always open to plaintiff to litigate any claims not subject to the requirement of PHC review.

In view of this analysis and because the issue was not raised in the courts below, we do not address whether a breach of contract action can be predicated on a violation of medical staff bylaws *(compare, Leider v Beth Israel Hosp. Assn.,*11 NY2d 205, *supra, with Chalasani v Neuman,*97 AD2d 806, *revd on other grounds*64 NY2d 879).

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Kaye and Judges Simons, Titone, Bellacosa, Smith and Levine concur.

Order affirmed, with costs.