Court finds employees can sue hospital board for breach-of-contract

The Minnesota Supreme Court has ruled that medical staff bylaws constitute a contract between physicians and hospitals, which prohibits hospitals from changing bylaws without physicians' consent.

In January 2012, a group of physicians from Avera Marshall Regional Medical Center sued the Minnesota hospital over allegations that it had breached its "contract" by repealing and adopting new bylaws without following the process outlined in the existing bylaws, which said a two-thirds majority of medical staff must approve the change.

According to the physicians, the new bylaws removed "nearly all rights and responsibilities" from physicians, giving the hospitals absolute authority over processes that require medical staff direction. However, Avera attorney David Crosby asserted that the hospital bylaws state that "nothing can abrogate the rights of the board of directors," even disagreements with medical staff.

District Judge Michelle Dietrich in September 2012 ruled that that the bylaws should not be defined as contracts because they are missing the necessary components of legally binding contracts.

A court of appeals also ruled in favor of the hospital, but with the help of various national medical groups—such as the American Medical Association and the American Academy of Family Physicians—the case made it to the Supreme Court, where the decision was reversed in the physicians' favor.

Although the Supreme Court decision cannot be overturned, the case returns to the district court and, the judge could still allow the board to be the final decision-maker over medical staff bylaws.

While this court's decision pertains only to the state of Minnesota, physicians in all states may wonder whether their independence as licensed medical staff could be affected by decisions made by a hospital board.

According to Kathy Kimmel, the lawyer who won the Supreme Court case in Minnesota, hospital administrators are "wise to want to hear the input of the medical staff on matters affecting patient care" and they are free to say, "I hear you, and we're going to make this decision." But, she adds, "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."

Donald Jacobs, president of the Minnesota Medical Association, called the decision "an important victory for all physicians." He adds, "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."

Meanwhile, Crosby says the hospital is disappointed in the lack of clarity surrounding the bylaws under which the hospital will now operate. According to MedPage Today, that question will be taken up by the district court at some point in the future (Moore, MedPage Today, 1/19).