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Court of Appeals Reaffirms a Hospital

Court of Appeals Reaffirms a Hospital's Right to Control Who is on its Medical Staff

Health Care Law Note
(July 29, 2015)

Brief Overview

On July 7, 2015, the Court of Appeals upheld the right of a hospital's medical staff and its governing board to determine the qualifications required for entry onto its medical staff. In Kohn v. FirstHealth of the Carolinas, Inc. (COA14-1210) ("Kohn II"), the Court of Appeals considered, for the second time, claims by a physician that he was entitled to medical staff membership and clinical privileges even though he did not meet the requirements set forth in the hospital's medical staff bylaws.

The Court of Appeals reaffirmed the broad authority of hospitals to determine who will be on their medical staff and hold clinical privileges. The case dealt with a hospital requirement that physicians have completed a residency program accredited by the ACGME (Accreditation Council for Graduate Medical Education). The Court found that the case was similar to its 1982 decision in Cameron v. New Hanover Memorial Hospital, in which the Court upheld a denial of privileges to podiatrists based upon similar criteria. In short, the Court held that the accreditation requirement was objective, related to the factors set forth in N.C. Gen. Stat. § 131E-85, and reasonable. The foundation underlying the decision reaches beyond accreditation requirements, however, and supports the principle that a hospital may make privileging decisions based upon any "reasonable" standards that are rationally related to quality, patient safety, and efficient hospital operations.

The Court of Appeals also rejected Plaintiff's contention that new claims based upon the same alleged wrong could be asserted in his second suit following voluntary dismissal. In the original case, the trial court dismissed certain claims and Plaintiff dismissed the remainder for an immediate appeal. After that appeal was unsuccessful, Plaintiff re-filed. In this setting, res judicata prevents "claim splitting" and bars any claim that could have been brought in the original action. In other words, a party cannot bring claims A, B, and C, voluntarily dismiss the action for the purpose of appealing an adverse judicial ruling, then file a second suit asserting claim D based upon the same underlying conduct. This rule applies even when a party files a voluntary dismissal without prejudice for the express purpose of re-filing a new action. This stands as a warning to litigants that all claims based upon the same alleged wrong should be brought in the initial action or may be lost.

More Details of the Case and Decision

FirstHealth's medical staff bylaws mandated that staff members complete a residency approved by the ACGME. Plaintiff's residency was accredited by the Royal College in Canada, not the ACGME. After his application was denied in 1999 and again in 2010 because he did not meet this standard, Dr. Kohn filed suit, along with two of his patients. He contended that he was entitled to be on the medical staff for several reasons, including that the hospital allegedly: (1) functioned as a monopoly or an attempted monopoly; (2) was a public utility, which must be open to all applicants; (3) violated the North American Free Trade Agreement (NAFTA); (4) misinterpreted its own bylaws; and (5) acted arbitrarily and capriciously in denying his application. The trial court dismissed the two patients for lack of standing and dismissed several substantive claims.

Thereafter, Plaintiff voluntarily dismissed his remaining claims without prejudice and appealed. In Kohn I, 747 S.E.2d 395 (2013), the Court of Appeals held that a hospital is not a public utility. The Court of Appeals declined to disturb the trial court's ruling that patients lacked standing to sue the hospital for denial of a physician's application for medical staff privileges.

As permitted by civil procedure rules, Dr. Kohn filed a second suit within a year of his voluntary dismissal, re-alleging the claims he voluntarily dismissed in the first action and adding a new claim for national origin discrimination. The trial court dismissed several of his claims and granted summary judgment on his remaining claim for arbitrary and capricious conduct. Plaintiff then appealed these rulings.

The Court of Appeals affirmed all of the trial court's rulings and rejected several creative arguments by Plaintiff in an unpublished decision. The Court was willing to overlook a small number of physicians who were accidentally admitted to the medical staff without the required residency. Likewise, the Court was not troubled that the chair of one of the committees involved in the credentialing process was an alleged competitor of the applicant. Plaintiff's monopoly and antitrust claims failed because they were similar to his public utility claim, previously rejected by the Court in Kohn I. The Court also rejected Dr. Kohn's argument that "approved" should mean "recognized" instead of "accredited" (although the evidence that the ACGME even "recognized" Plaintiff's residency program was questionable). Finally, the Court rejected the argument that the accrediting body's name change from "LCGME" to "ACGME," which occurred after Dr. Kohn completed his residency, mandated a different result.

In short, the Court of Appeals reaffirmed that hospitals may control who is on their medical staff, provided that the basis for their decision is rational and related to the safe and efficient operation of the hospital.

The opinion is available at:

*Smith Moore Leatherwood represented FirstHealth before the trial and appellate courts in both Kohn I and Kohn II.

** Past success does not indicate the likelihood of success in any future legal representation.

Matthew Nis Leerberg
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