Mid-Atlantic Health Law TOPICS

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Heads, the Hospital Wins...Tails, the Physician Loses

A recent decision by Maryland's intermediate appellate court sheds some light on a physician's hearing rights when a hospital terminates the doctor's medical staff privileges as the result of a "business decision." In Volcjak v. Washington County Hospital, the hospital made a "business decision" to enter into an exclusive contract for anesthesiology services, and as a result terminated the privileges of the anesthesiologists then on its medical staff without giving each doctor a hearing.

The court determined, however, that (1) under the hospital's Medical Staff Bylaws, the hospital's decision to terminate clinical privileges entitled each physician to a hearing, and (2) such bylaws constituted a contract between the physicians and the hospital.

A. The Facts

The controversy arose when the Health Care Financing Administration (HCFA) issued a report severely critical of the hospital's anesthesiology department. In response, the hospital's Board made a "business decision" to outsource anesthesiology on an exclusive basis. The hospital subsequently advised the anesthesiologists, including Dr. Volcjak, that their privileges would be terminated without a hearing. At that time, Dr. Volcjak was the hospital's chief anesthesiologist. Dr. Volcjak sued the hospital and the new exclusive provider for breach of contract, as well as for tortious interference with economic relations.

B. The Decision

The court held that the hospital, under its Medical Staff and corporate bylaws, had the right to make a business decision to enter into an exclusive contract for anesthesiology services. Nonetheless, the Medical Staff Bylaws set forth explicit provisions for granting hearings in the event of an adverse action, including termination of clinical privileges. (The court distinguished this case from other similar cases because Dr. Volcjak did not have a written agreement with the hospital waiving his rights to a hearing in the event an exclusive contract was awarded.)

Moreover, the court believed that this case involved more than a "business decision" because it involved allegations impacting the professional qualifications of the physician at issue. Thus, the court was skeptical of the hospital's characterization of its decision to enter into an exclusive contract as solely a business decision. Instead, the court found that HCFA's quality of care allegations were the primary, if not the exclusive, reason for the hospital's decision to enter into the new arrangement.

C. The Rub

Dr. Volcjak may have won the battle, but lost the war. Although the hospital will now be required to give Dr. Volcjak a hearing at least in part related to the quality of care issues raised by HCFA, losing that hearing will now have worse consequences for Dr. Volcjak.

His initial termination of privileges was not a reportable event to the National Practitioner Data Bank because it was based on a business decision. However, the court looked behind the hospital's business decision, and determined that there was an underlying quality of care issue. Now, if Dr. Volcjak does not prevail at the hearing, he will not only lose his privileges and his right to collect damages under his breach of contract claim, but his loss of privileges will also constitute a reportable event.


March 21, 1999




Rosen, Barry F.


Health Care