Exclusive contracts part of bottom-line orientation

In the Courts. By Miles J. Zaremski and Ila S. Rothschild, amednews contributors. April 9, 2001.

IN THE COURTS

Analyzing the impact of recent court decisions on physicians

SEE ARCHIVES

The Illinois Supreme Court recently addressed, in Garibaldi v. Applebaum, the issue of whether a hospital's decision to enter into an exclusive contract with a physician group triggered another physician's right to notice and hearing under the hospital bylaws.

More specifically, the appeal considered "what procedural rights, if any, a physician has under hospital bylaws when a hospital enters into an exclusive contract with a group of competing physicians for the performance of the same work as the physician performs."

Abel Garibaldi, MD, a board-certified cardiovascular surgeon, had clinical privileges at St. Francis Hospital and Health Center in Blue Island, Ill. Dr. Garibaldi had been a member of a cardiovascular group that, due to differences among its members, dissolved. A new group was formed that did not include him. Thereafter, a member of the newly formed group, Robert Applebaum, MD, entered into an exclusive contract with the hospital that allowed only himself, employees of the new group and those who subcontracted with him to perform open heart surgery at the hospital.

Dr. Garibaldi claimed that the effect of the exclusive contract was to revoke his right to perform open heart procedures at the hospital without affording him the benefit of notice and a hearing, in violation of the hospital's then current bylaws. He filed suit against St. Francis, Dr. Applebaum and two other physicians seeking declaratory and injunctive relief.

After a trial court dismissed the action, it was reinstated by an Illinois appellate court. That court held that the hospital's decision to enter into the exclusive contract with the new cardiovascular group effectively revoked Dr. Garibaldi's hospital privileges; accordingly, he should have had notice and a hearing before the contract with Dr. Applebaum ever became effective.

While this case was moving through the courts, the Illinois' Hospital Licensing Act was amended. As relevant to this case, the act was amended to direct hospitals that contemplate exclusive contracts with professional groups to adopt bylaws that provide for notice and hearing procedures for practitioners affected by the contract. St. Francis so amended its bylaws.

Grandfather clause rejected

After the hospital amended its bylaws, it entered into a second exclusive contract with Dr. Applebaum, effective December 13, 1995. Dr. Garibaldi received notification of this two months earlier. He requested a hearing, which proceeded before a panel of three physicians. The panel approved the exclusive contract, but recommended that the hospital should exempt from the consequences of the contract practitioners who had had clinical privileges for at least one year before the contract's effective date.

The hospital's governing board allowed the exclusive contract but rejected the "grandfather" provision. Thereafter, Dr. Garibaldi was allowed to amend his court complaint and he sought injunctive relief to prohibit the enforcement of this second exclusive contract.

At this juncture, Dr. Garibaldi had two appeals pending, one based upon the dismissal of one of the claims for injunctive relief and the other from the original dismissal. The appellate court consolidated both appeals. The court affirmed the trial court's dismissal of claims for injunctive relief because Dr. Garibaldi did ultimately receive a hearing before the adoption of the second exclusive contract in 1995, but reversed the trial court on the original complaint. They held that Dr. Garibaldi was entitled to a hearing before the original exclusive contract entered into between the hospital and the cardiovascular group.

Further, the appellate court reaffirmed that the hospital bylaws created a contractual relationship and that the plaintiff's staff privileges had been effectively revoked by the hospital entering into exclusive contract.

The Illinois Supreme Court held that Dr. Garibaldi's privileges were not removed, suspended or reduced based on the first exclusive contract.

The court distinguished between privileges, which are awarded based on qualifications, and the right to exercise those privileges in treating patients for which the privileges were given in the first place.

The Illinois high court also found that the plaintiff failed to distinguish between his privileges and his ability to exercise those privileges in a "closed" environment. Additionally, they held that the hospital bylaws at issue pertained to physicians facing corrective action -- they did not address the ability to practice. And Dr. Garibaldi's lawsuit was not based on any corrective action to be taken against him.

The Garibaldi decision is but a microcosm of a growing number of court decisions whose underpinnings are physicians being "disenfranchised" from their ability to gainfully practice in the hospital from which their privileges were awarded due to exclusive contracts. However, such situations are only symptomatic of health care delivery becoming more and more "bottom line" oriented.

The pendulum, though, will have to swing back in order to provide physicians with more parity and with a more level playing field on which to compete with the business of health care delivery.

Zaremski is a health care attorney at the Chicago law firm Kovitz Shifrin and Waitzman. Ila Rothschild, who co-writes some columns, is with the same firm.