Opinion ID: 1235229
Heading Depth: 1
Heading Rank: 6

Heading: The Medical Staff Bylaws as a Contract.

Text: The plaintiffs argue that Genesis, by entering into an exclusive agreement with A & A and a separate medical director's contract with Dr. Maxwell, has revoked or curtailed the Plaintiffs' medical staff membership rights and clinical privileges to provide patient care.... The plaintiffs claimed damages against Genesis on the theory it had breached the hospital's bylaws. They also alleged that Dr. Maxwell interfered with this relationship. Resolution of both claims turns first on whether the medical staff bylaws constitute a contract on which these plaintiffs may seek money damages. We note, first, that these are medical staff bylaws, not hospital bylaws. Virtually all of the provisions about which the plaintiffs complain regarding staff privileges relate to duties owed to staff doctors by their peers, not by the hospital. These complaints involve alleged denial of due process by the revocation or curtailment of the plaintiffs' medical staff privileges, a matter vested by the bylaws in the medical staff. Article XII, section 2, provides that denial or suspension of medical staff privileges entitles a practitioner to a hearing. Article XII, section 4, provides for a hearing procedure, which shall be accorded by members of the medical staff. Under the bylaws, the hospital becomes involved in these matters only at the conclusion of the staff's hearing process. Article XII, section 4, provides for the board of directors to consider the proposed action by the medical staff unless appellate review is requested. If appellate review by the board is requested, the procedure is outlined in article XII, section 5(A)-(H). All these review processes were to be handled by the medical staff, not the hospital. The district court did not rule on the legal issue of whether the bylaws constituted a contract between Genesis and its medical staff. Rather, it concluded that in any event Genesis had not breached the bylaws. This court has never decided the precise issue of whether the bylaws should be treated as a contract under circumstances similar to those presented here. However, in an early case, we observed without detailed analysis that the types of provisions in question were By-laws of the [medical] staff and not binding on the Governing Board [of the hospital]. Natale v. Sisters of Mercy, 243 Iowa 582, 595, 52 N.W.2d 701, 709 (1952). A federal district court applying Iowa law in a diversity case predicted, without discussing Natale, that we would treat hospital medical staff bylaws as contracts. Islami v. Covenant Med. Ctr., Inc., 822 F.Supp. 1361, 1370-71 (N.D.Iowa 1992) (suit against hospital and medical staff committee for breach of bylaws over suspension of staff privileges). The court in Islami stated that the majority rule is that staff bylaws do constitute a contract. Id. at 1370. Courts in other jurisdictions have considered the issue, reaching various conclusions. See, e.g., id. at 1370-71 (providing overview of case law from foreign jurisdictions); see also John Hulston, et al., Do Hospital Medical Staff Bylaws Create a Contract?, 51 J. Mo. B. 352, 355 n. 4 & 5 (1995) (citing numerous cases on both sides of the issue of whether hospital bylaws create a contract). One treatise demonstrates the abstrusity of any statement of a general rule on this question. On the one hand, it states: A hospital's medical staff bylaws constitute a contract between the hospital and its medical staff, particularly where the hospital and its staff indicate an intent to be bound by their terms, but not otherwise. 41 C.J.S. Hospitals § 16, at 259 (1991) (footnotes omitted). However, the same source explained: Hospital's staff bylaws which stated that they were subject to the ultimate authority of the applicable governing bodies did not give rise to binding contract between staff and hospital, and hospital thus could not be found guilty of breach of contract for failure to follow staff bylaws. Id. at 259 n. 32 (citing Munoz v. Flower Hosp., 30 Ohio App.3d 162, 507 N.E.2d 360 (1985)). (The bylaws in the present case state that they are subject to the ultimate authority of the Board.) A group of commentators has explained the difficulty in interpreting hospital bylaws: Documents such as medical staff bylaws that seem to give parties rights and create obligations but which fall short of having all the criteria for a contract create a dilemma. The question ... could thus be [] are medical staff bylaws judicially enforceable at law or in equity and, if so, what will be the nature of that enforcement? Resolution of the dilemma and the question may depend on how medical staff bylaws are defined or categorized. Are medical staff bylaws an agreement between the hospital and medical staff defining the rights and obligations of each? Or are they an outline of policy set by the governance board? Hulston, 51 J. Mo. B. at 352 (footnote omitted). In analogous cases involving employee handbooks claimed to have created a contract of employment we have said: An implied contract of employment can arise from an employee handbook if: (1) the handbook is sufficiently definite in its terms to create an offer, (2) it is communicated to and accepted by the employee so as to create an acceptance[,] and (3) the employee provides consideration. Jones v. Lake Park Care Ctr., Inc., 569 N.W.2d 369, 375 (Iowa 1997). Some cases have held that a hospital's bylaws cannot constitute contracts because the hospitals give no consideration for the agreement. Hospitals in some cases are required by statute to promulgate bylaws, so their compliance with the law is merely doing what they are required to do. In Iowa hospitals are required to implement rules for the granting of staff privileges; in 1994, when the Genesis staff bylaws were adopted, our law required the department of inspections and appeals to require that a hospital establish and implement written criteria for the granting of clinical privileges. The written criteria shall include but are not limited to consideration of the ability of an applicant for privileges to provide patient care services independently and appropriately in the hospital; the license held by the applicant to practice; training, experience, and competence of the applicant; the relationship between the applicant's request for the granting of privileges and the hospital's current scope of patient care services, as well as the hospital's determination of the necessity to grant privileges to a practitioner authorized to provide comprehensive, appropriate, and cost-effective services. 1993 Iowa Acts ch. 108 (now found as Iowa Code § 135B.7 (1997)). The department complied with this mandate by adopting an administrative rule, Iowa Admin. Code r. 481-51.5(4). Because the board of directors of Genesis was required to establish criteria for the granting of clinical privileges, it might well be argued that the board's compliance could not be adequate consideration to form a contract. The responsibility for establishing criteria for staff privileges, as already noted, is placed on the board of directors. For various reasons connected with Genesis, its prior method of delivering anesthesiology services before it entered into the exclusive contract with A & A was unsatisfactory. Consultants hired by Genesis recommended the change for a variety of reasons, all ultimately affecting the quality of care given at Genesis. The problems noted by the consultant included defects in the preadmission testing and evaluation practices, the scheduling of anesthesia coverage, and interpersonal relationships on the part of the anesthesiologists that create an uncomfortable environment in the operating room. Lack of adequate coverage of anesthesiology services was noted, and the consultant stated that under the preexisting system there was considerable bickering in the department. In fact, the department was characterized as dysfunctional and disorganized according to the report. In addition, the consultant noted a lack of accountability in the department that made problem resolution difficult. Based on the consultant's study, several solutions were recommended. One of them was for the hospital to grant an exclusive contract to a group of anesthesiologists to the exclusion of any anesthesiologists not a member of the group. This was the model adopted by the hospital. Analogizing to the test that we apply in employee handbook cases, we hold that, in order for bylaws such as these to be considered an agreement for continued employment, the plaintiffs must establish with sufficient definiteness that an offer of continued employment was a part of the agreement. See, e.g., Jones, 569 N.W.2d at 375. The right to continued staff privileges is not expressed in the bylaws, and for that reason this case must be distinguished from Islami, a case in which the plaintiff complained that he had the express right under the bylaws to receive notice and a hearing before suspension. 822 F.Supp. at 1372. In this case there is also a vast difference between a doctor's loss of staff privileges through some form of disciplinary sanction, such as in Islami, and the doctor's loss of staff privileges through his refusal to comply with the terms of the staff reorganization agreement. A California case involved a very similar question involving a doctor who had failed to become a part of a departmental reorganization. The court held that he did not have a right to continued employment. In the process, the court stated that where a doctor loses or does not attain staff privileges because of professional inadequacy or misconduct, the professional reputation of that doctor is at stake. In that circumstance, his or her ability to become a member of the staff at other hospitals is severely impaired. On the other hand, a doctor's elimination by reason of a departmental reorganization and his failure to sign a contract does not reflect upon the doctor's professional qualifications and should not affect his opportunities to obtain other employment. The trial court correctly found the decision to close the department of anesthesiology and contract with [an independent provider] did not reflect upon the character, competency or qualifications of any particular anesthesiologists. Mateo-Woodburn v. Fresno Community Hosp., 221 Cal.App.3d 1169, 1185, 270 Cal. Rptr. 894, 903 (1990). The plaintiffs in Mateo-Woodburn, like the plaintiffs here, were anesthesiologists on staff at the defendant hospital. The hospital was experiencing problems with the anesthesiology department and elected to hire a single anesthesiologist who would subcontract with others. As in the present case, the plaintiffs in Mateo-Woodburn refused to sign the subcontracts, contending they had the right under the hospital bylaws to continue providing services as before on an open staff basis. Id. at 1176, 270 Cal.Rptr. at 897. The open staff, however, had problems. Id. The result was that the hospital closed its anesthesiology department and contracted with an independent doctor. Id. at 1179-80, 270 Cal. Rptr. at 899. The plaintiffs had an opportunity to sign a subcontract but refused. Id. at 1181, 270 Cal.Rptr. at 900. The California court held that the hospital had the authority to change the method of delivery of services without violating the plaintiffs' rights. The court dissolved a temporary injunction that had been ordered and denied a permanent injunction. Id. at 1188-89, 270 Cal.Rptr. at 905. Although the Mateo-Woodburn case did not involve a contract theory of recovery against the hospital, that case confirms our view that there is a difference between a staff doctor's right to due process in a disciplinary action to which he is entitled under the express language of the bylaws and a claim for continued employment on an open staff basis, a matter which is not even mentioned in the bylaws. Under our statutory scheme, the board simply must be allowed to make key decisions on the method of delivery of anesthesiology services that best suit the needs of its patients and most completely satisfies the requirements of the law. If the view of these plaintiffs prevailed, the hospital could not scale down or close a department, regardless of the advisability of doing so, without incurring liability to doctors who incidentally are affected. In keeping with this responsibility, Genesis had previously entered into exclusive contracts for the delivery of various services including emergency services, renal dialysis services, radiology, and pathology. We will not imply an agreement for continued employment or staff privileges in these bylaws because we believe it would improperly impinge on the statutory mandate to the board of directors to establish criteria for staff privileges, perpetuate the problems that had led to the establishment of the independent contractor system, and ultimately affect the successful operation of the hospital. Such a contract, impacting as it would on the statutory responsibilities of the hospital on matters affecting staff qualifications, might well be argued to be against public policy. In any event, we conclude that continued staff privileges are not implied by the bylaws, and we will not give the bylaws the effect of a contract. Accordingly, we hold that the district court did not err in dismissing the plaintiffs' claim based on the hospital bylaws.