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The Minnesota Supreme Court has ruled that a medical staff has standing to sue its hospital board and that the medical staff bylaws constitute "an enforceable contract between members of a medical staff and a hospital."

How that ruling will be played out in hospitals nationwide will be an interesting chapter in the hospital medical staff story.

The 3-year case pitted Avera Marshall Regional Medical Center, a 25-bed hospital in southwestern Minnesota, against its own medical staff. A district court and court of appeals had ruled in favor of the hospital, but with assistance from various national and state medical associations, the plaintiff doctors went to the Supreme Court, which overturned the earlier decisions by a vote of 5-2.

"This is an important victory for all physicians and one that we should celebrate," said , president of the Minnesota Medical Association. "An independent, autonomous medical staff serves a critical role in facilitating and maintaining quality patient care in a hospital setting and should have a strong voice in the decision-making process regarding that care."

Supreme Court decisions can't be appealed, but when the case goes back to the district court the judge may yet give the hospital board the ultimate decision-making authority over medical staff bylaws. "Our position has always been that a hospital must be allowed to govern itself, particularly in the critical areas of patient safety and care," Avera Marshall said in a statement after the decision. "We believe that maintaining such a clear line of authority is consistent with the law."

Or, as the hospital's attorney, David Crosby, put it: "We've basically been hijacked by this group that has sued us."

Case Background

Conflicts between hospital administrators and medical staff are not uncommon but they rarely rise to the level of a lawsuit, much less adjudication by a state supreme court. In some states, the medical staff is considered an unincorporated association and can sue a hospital; in other states it is not, and may not sue.

The Avera case pertains only to Minnesota and is unlikely to establish a national precedent. Yet as hospitals everywhere continue to buy up physician practices, doctors may rightly wonder whether their independence and autonomy as members of a credentialed medical staff may be compromised by the decisions of hospital administrators.

"Some employed physicians might feel uneasy because the hospital is writing the physicians' paycheck. That's a big issue," said Kathy Kimmel, the attorney who won the Supreme Court case. Physicians, both employed and independent, need to be able "to get together and discuss issues freely and openly, and present them to the hospital for consideration, without outside influence or pressure from an employer."

Hospital administrators are "wise to want to hear the input of the medical staff on matters affecting patient care," and they are always going to be in a position to say, "I hear you, and we're going to make this decision," she added.

All the same, "They don't have to control the medical staff by saying who is going to lead the medical staff and what the medical staff is going to discuss." That is the crux of the argument, she said.

In the Avera Marshall case, the medical staff was charged with physician credentialing, peer review, and quality assurance. A two-thirds majority vote was required to change the bylaws. When the hospital administration unilaterally changed the bylaws in early 2012, two physicians -- , and -- became lead plaintiffs in a lawsuit, along with the medical staff itself.

They alleged that the hospital:

• Unilaterally appointed and reappointed physicians to the medical staff without medical staff input
• Interfered with the internal operations of the medical staff and the medical staff executive committee
• Interfered with the composition and function of the medical staff quality improvement committee
• Disciplined a physician without following the peer review procedures set forth in the medical staff bylaws
• Unilaterally adopted revised medical staff bylaws

The American Medical Association, American Osteopathic Association, American Academy of Family Physicians, Minnesota Academy of Family Physicians, and Minnesota Chapter of the American Academy of Pediatrics also supported the physicians' case.

In addition to its 25-bed critical-access hospital, Avera Marshall includes a 76-bed skilled nursing long-term-care facility, an emergency care center, specialty physician clinics, an imaging center, and an outpatient services center. It is part of Avera Health, a Catholic system based in Sioux Falls, S.D., that has six hospitals and that offers services at 300 locations in South Dakota and surrounding states. Other entities in Avera Health were not involved in the Marshall lawsuit. The hospital was supported by amicus briefs from the American Hospital Association and the Minnesota Hospital Association.

Docs Choose Sides

While the Supreme Court decision issued Dec. 31, 2014, discusses the legal issues around hospital and medical staff governance in depth, the real source of the dispute lies elsewhere: namely, in a conflict between two large physician groups over patient referrals, income, and privileges in a rural community of 13,680 people.

According to Crosby, the medical staff at Avera Marshall was split in two factions: One faction was doctors employed by the hospital's medical group; the other was ACMC, Affiliated Community Medical Center, which has clinics in southwestern Minnesota. The medical staff was balanced 50-50 between the two groups, and likewise the various committees. One group could not dominate the other.

In 2010 ACMC sued the hospital, alleging antitrust violations. The ACMC doctors alleged that the hospital was steering emergency room patients toward its own employed doctors. In the discovery process, ACMC requested 18,000 patient records, which the hospital declined to hand over, citing patient confidentiality restrictions. The lawsuit was dismissed.

But relations between ACMC doctors and their Avera-employed colleagues continued to deteriorate, Crosby said. Around the same time, the ACMC group gained a clear majority of seats on the medical committees, and they attempted to inject issues from the litigation into the committee meetings. The hospital took exception to that.

Then the physicians running the meetings decided to hold them off site. The hospital refused to recognize those meetings, with the result that the medical staff fell into chronic dysfunction. Credentialing wasn't taking place.

Other doctors asked the hospital board to rewrite the bylaws to break the log jam and get back on track. When the new bylaws were presented to the medical committee, those physicians argued that they were invalid because they had not been approved by a two-thirds vote of the existing medical staff.

"The hospital said, 'Yes, we can,' " Crosby said. "The bylaws say nothing can abrogate the rights of the board of directors. If we say, 'We have to modify the bylaws,' and a faction of the medical staff can say, 'No, no, no,' to whatever we try to do," then the board is effectively not running the hospital any more. And under Minnesota law, the board cannot cede its obligation to operate the hospital.

What's Next

What this lawsuit is really about, Crosby said, is whether or not the hospital has the right and ability to modify the bylaws even without a two-thirds majority vote of the medical staff. "That question, even though it was taken up on review by the Supreme Court, was not answered." Unless the parties reach a resolution, that is what the district court will have to rule on.

"It was frankly a little disappointing," Crosby said. "We've waited all this time, yet the big question wasn't answered."

Kimmel said the medical staff plaintiffs hope that the hospital administration will work with them to implement the Supreme Court's ruling.

"The question now is, what are the current bylaws?" she said. "Is it the old bylaws, or some different bylaws? We contend it's the old bylaws, the last bylaws that both sides agreed to."

That judgment will be rendered by the district court at some point in the future.

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