A South Dakota hospital, locked in a court struggle with orthopedic surgeons who formed their own specialized surgery center, can legally restrict some staff privileges to remain competitive, the state's Supreme Court ruled last week.
In a ruling with nationwide implications in the ongoing struggle between hospitals and doctors looking for lucrative new business, the justices ruled that 139-bed Avera St. Luke's Hospital in Aberdeen did not violate its bylaws when it refused staff privileges to new orthopedic surgeons.
The high court ruled that the hospital's board had the authority to protect itself against competition from a new surgery center built just two miles from St. Luke's, the only full-service hospital in a 90-mile radius of Aberdeen. The board's decision was crucial to the survival of the not-for-profit hospital, the court said.
"The board must be allowed to make such reasonable, independent decisions if it is to continue to provide comprehensive medical services to the Aberdeen community," Justice David Gilbertson wrote.
Patty Kirkpatrick, spokeswoman for St. Luke's, said, "Obviously, we're very pleased that the court has affirmed the position of our board and its intent to look at the long-range needs of the community. I believe the ruling basically affirms the authority of our decisions about community health, at least in South Dakota."
The case has generated considerable national attention, attracting briefs filed by both the American Medical Association and the American Hospital Association, which took opposite sides in the controversy. The AMA decried the use of what it described as "economic credentialing" to restrict staff privileges; the AHA argued that a hospital board must have the right to make independent decisions to meet the "mission of the hospital."
Richard Wade, the AHA's senior vice president for strategic communications, praised the ruling, saying it underscores the message that hospitals must be able to make tough decisions to protect their ability to serve their communities in all areas.
"Considering the changes in the economics of healthcare, you'll see more and more (cases like this)," Wade said. "The community hospital is there to provide a full range of services to the entire community. That is, in effect, undermined when doctors do what doctors do-which they have every right to do-and that is compete. But the hospital also must have the right to ensure long-term solvency. This is a very important decision."
Richard Braman, the attorney who filed suit on behalf of the surgery center's doctors, criticized the court's decision and said he will file for a rehearing with the state high court. Asked if he'll go as far as the U.S. Supreme Court, he replied, "We're taking it one step at a time."
The restriction imposed by the hospital, Braman said, was "an effort to destroy competition and protect its own turf."
With its decision last week, the high court overturned a state Circuit Court decision last year that supported the surgery center's lawsuit. In its ruling, Braman said, the lower court wrote that the hospital viewed the surgery center "as a competitor that, in the long run, could be destroyed by not allowing any new doctors associated with (the surgery center) to have staff privileges (at the hospital)."
St. Luke's board voted unanimously in June 1997 to refuse staff privileges to any new orthopedic surgeons after a group of six doctors affiliated with Orthopedic Surgery Specialists decided to build Dakota Plains Surgical Center, a 15,000-square-foot facility with three operating rooms and eight inpatient beds. The freestanding surgery center opened in April 1998.
The decision did not affect any of the physicians who broke away to create the surgery center. The specialty group sued St. Luke's after the hospital refused privileges for a new associate, John Mahan, M.D.
"We've very unhappy with the decision," said Chuck Livingston, chief executive officer of the specialty group and surgery center. "I think it has far-reaching effects, not just in our situation but at a state and national level, about how physicians and hospitals are going to work together in the future."
He did, however, suggest that the situation in Aberdeen, a rural community with a population of about 28,000, is a "foreign concept" in most places, especially urban areas with several hospitals and a host of specialized surgery centers.
In a new policy adopted at its interim meeting in December, the AMA opposes "hospitals placing limitations on medical staff privileges or participation at a hospital based in whole or in part on the physician (or a partner, associate or employee of the physician) having a financial relationship with another hospital/health system."
Hospital officials said the doctors who formed Dakota Plains took about 75% of their orthopedic patients to the new surgery center, triggering concerns about the future of a key profit center that traditionally supports other services, including the emergency room. The hospital explained that it was denying privileges to any new orthopedic surgeons to ensure enough business for its own physicians.
In its ruling, the high court decided that the hospital's medical staff "has no authority over any corporate decisions unless specifically granted that power" in corporate bylaws or under state laws.