Can a Medical Staff sue its own Hospital?


Can a Medical Staff sue its own Hospital? Apparently so. In Medical Staff of Avera Marshall Regional Medical Center v. Avera Marshall Regional Medical Center, the Minnesota Supreme Court determined that the Medical Staff had standing to sue the Hospital and that the Medical Staff Bylaws constituted an “enforceable contract” between the Medical Staff and the Hospital.

In Avera Marshall, the Board of Trustees of the Hospital announced a plan to repeal the Medical Staff Bylaws and replace them with revised Bylaws which had not been approved by the Medical Staff. In the Medical Staff’s view, the new Bylaws were prejudicial to and restricted the rights of the Medical Staff. The Court, relying in part upon a Minnesota statute addressing the right of an unincorporated association to initiate suit, determined that the Medical Staff should be considered a separate entity for purposes of initiating litigation. The Court also determined that the Medical Staff Bylaws constituted a “contract” between the Medical Staff and the Hospital. Accordingly, the unilateral repeal of the Medical Staff Bylaws could be considered a breach of the underlying contract. There is a great deal of authority to suggest that medical staff bylaws constitute a contract between individual members of the medical staff and the hospital but the Avera Marshall Court seemed to conclude that the Bylaws also established a contract between the Medical Staff (as a whole and as a separate entity) and the Hospital.

Let’s place the Avera Marshall decision in context. For many years, healthcare counsel have taken steps to assure that an organized medical staff should not be considered a separate party or entity. That position was taken primarily to avoid antitrust liability in cases in which a physician contended that a hospital and the hospital medical staff “conspired” to somehow harm the physician’s career and livelihood. Since at least two parties are needed to “conspire”, it was beneficial to both the medical staff and the hospital to historically take the position that the medical staff was not a separate entity for legal purposes.

However, there have been real-life situations in which that position has been challenged or questioned. For example, when a hospital seeks to use the medical staff treasury (typically funded by fees generated from the members of the medical staff) for purposes not fully condoned or supported by the medical staff, the organized medical staff has taken the position that it is an aggrieved party with the requisite power to initiate litigation to protect its interest which is separate from the interest of the hospital. Similar instances involve cases like Avera Marshall in which a medical staff is concerned about its autonomy and has challenged the hospital’s ability to interfere with the governance or the operation of the medical staff.

The practical message is simple: “Be careful what you ask for”. While medical staffs may wish to exert a certain level of autonomy, counsel to the medical staff and counsel to the hospital need to be fully cognizant of the “looming” antitrust issues. As counsel to a medical staff, you need to be very careful in choosing your words and asserting a claim on behalf of a medical staff. It may be very difficult to “put the genie back in the bottle” and to argue at a subsequent point in time that the medical staff should not be considered a separate legal entity if the medical staff has taken a formal position in a judicial setting that it wishes to be considered a separate entity with its own legal rights.

To avoid this “dilemma,” these practical tips are helpful:

  • Careful drafting of Medical Staff Bylaws with appropriate dispute resolution provisions.
  • Foster collegial communication between medical staff and hospital leadership.
  • Proper (less formal) assertion of “claims” on behalf of a Medical Staff.
  • Use of a Joint Conference Committee (with both medical staff and governing body representation).
  • Use of other informal and non-public mediation devices.

This blog post has been prepared and published for informational purposes only.  None of its content should be construed as or relied upon as legal advice.  Therefore, no one should act or refrain from acting based on its content.  The content is not a substitute for competent legal advice.  For legal advice or answers to specific questions, please contact one of our attorneys.  Information provided by our attorneys should only be considered legal advice after a formal attorney-client relationship has been established with our law firm and you and confirmed in writing by one of our attorneys.

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