Johnson v. Hospital Corp. of America

• Decision Date: 23 September 1996
• Docket Number: No. 94-11002,94-11002
• Citation: 95 F.3d 383
• Parties: 1996-2 Trade Cases P 71,579 Alfred R. JOHNSON, D.O., et al., Plaintiff-Appellees, Cross-Appellants, v. HOSPITAL CORPORATION OF AMERICA, et al., Defendants, Bedford Northeast Community Hospital, Inc., et al., Defendants-Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 383

95 F.3d 383

1996-2 Trade Cases P 71,579

Alfred R. JOHNSON, D.O., et al., Plaintiff-Appellees, Cross-Appellants, v. HOSPITAL CORPORATION OF AMERICA, et al., Defendants Bedford Northeast Community Hospital, Inc., et al Defendants-Appellants, Cross-Appellees.

No. 94-11002.

United States Court of Appeals Fifth Circuit.

Sept. 23, 1996.

Stephen A. Coke, Richard Wellington Winn, Wesner, Coke and Clymer, Dallas, TX, for plaintiffs-appellees-cross-appellants.

Patton G. Lochridge, Linn Hughes, McGinnis, Lochridge & Kilgore, Austin, TX, for defendants-appellants-cross-appellees.

Appeals from the United States District Court for the Northern District of Texas.

Before JOLLY, DUHE and STEWART, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

William J. Rea, M.D. and Alfred R. Johnson, D.O. sued the hospital where they formerly practiced, Bedford Northeast Community Hospital (the "Hospital"), its parent corporation, HCA Health Services of Texas, Inc. ("Health Services"), the Hospital's administrator, Robert M. Martin, and its chief of staff, Dr. Jim Linton, and three doctors, Drs. Barry Firstenberg, Richard Feingold, and Paul Haberer, who served on an ad hoc Hospital committee to investigate complaints made against Rea and Johnson, which resulted in the suspension of their admitting privileges. Rea and Johnson alleged that the Hospital's suspension of their admitting privileges and its later decision to close the unit to which they admitted patients violated federal antitrust law. They also asserted pendent state law claims of breach of contract, fraud, negligent misrepresentation, slander and business disparagement and tortious interference with contractual relations. After a bench trial, the district court held that the Hospital, Linton, Martin, and Haberer tortiously interfered with Rea and Johnson's contractual relations with their patients. The district court denied all other claims. The district court awarded Rea and Johnson both compensatory and exemplary damages.

We have before us an appeal and cross-appeal. The defendants appeal the award of damages for tortious interference with business relations, arguing that the only damages proved at trial were damages of Rea and Johnson's professional association, for which they lack standing to seek recovery. The defendants also argue that the Hospital's decision to close the unit to which Rea and Johnson admitted patients is protected by the affirmative defense of legal justification, and that the defendants are entitled to immunity in connection with the summary suspension of Rea and Johnson's admitting privileges. Rea and Johnson cross-appeal the denial of their antitrust and business disparagement claims. The overarching question before us, thus, is whether Rea and Johnson have proved that they are entitled to damages under any theory that they assert on appeal and, if so, in what amount. We begin with a review of the relevant facts.

I

Rea and Johnson practice environmental medicine. This practice involves the treatment of patients with chronic pain or disease that is believed to be caused or aggravated by chemicals or other agents found in the patient's environment. Before the suspension of their hospital privileges, Rea and Johnson admitted patients to the Environmental Care Unit ("ECU"), a part of the Hospital's Internal Medicine Department.

The Hospital's relationship with Rea and Johnson had been tumultuous for some time before their suspension, arising from a Medicare inspection in September of 1986. Its importance was heightened because Medicare receipts made up nearly one-half of the Hospital's gross revenue. The inspection uncovered several deficiencies that, unless timely remedied, would result in the loss of the Hospital's Medicare payments. Among the deficiencies noted by Medicare was the use of antigens in the ECU. ¹ Medicare requires that any medication administered in the Hospital, including antigens, be properly labeled, dispensed through the Hospital's pharmacy, and come from an FDA-approved source. Rea and Johnson manufactured the antigens themselves. They were not an FDA-approved source. ² Martin notified Rea and Johnson that they would no longer be able to use the antigens in the Hospital until a suitable alternative source was found. Martin also advised the doctors that their reappointment and privileges could be in jeopardy if their recalcitrance continued. Irrespective of these instructions, Rea and Johnson continued to provide antigens to their patients, but only for self-administration.

Other sources of friction arose between the Hospital and Rea and Johnson. After learning that Rea and Johnson violated hospital policy by rendering medical services to patients in the "ECU Hotel," which consisted of several rooms adjacent to the ECU used by the families of ECU patients "almost as a hotel," the Hospital decided to close it. Coinciding with its closure of the ECU Hotel, the Hospital also instituted a cash-only policy for ECU patients. The Hospital took this action after experiencing problems in bill collection when insurance coverage was denied to several ECU patients.

The immediate impetus for the Hospital's suspension of Rea and Johnson's admitting privileges--one of two factual bases for the present suit--occurred in January of 1987, less than six months after Medicare inspected the Hospital. The dispute began when the Hospital's Director of Pharmacy, Mike Warmington, notified Martin, the hospital administrator, of concerns he had about the drug regimen of two ECU patients under the care of Rea and Johnson.

On January 22, 1987, the Hospital's Medical Executive Committee ("MEC") met. The MEC was composed of the elected heads of the Hospital's various departments. During that meeting, Martin relayed Warmington's concerns. Martin also raised the Hospital's earlier problems with Rea and Johnson surrounding the use of antigens and transfer factor in the ECU. Linton, the Hospital's chief of staff, and Firstenberg, the chairman of internal medicine, both expressed some concern that the Hospital's previous inquiry into antigen use was being brought up again now. Feingold recommended that the MEC bring in an outside consultant to investigate the charges against Rea and Johnson. Disregarding Feingold's suggestion, Linton appointed an ad hoc committee (the "Committee") to review the charts of certain ECU patients. ³ The Committee consisted of defendants Drs. Feingold and Firstenberg, defendant Dr. Paul Haberer, a former chief of staff at the Hospital, and a fourth member not named as a defendant, Dr. Jeffrey Mills.

Twenty-two days after its appointment, on February 13, 1987, three members of the Committee, Mills, Haberer, and Feingold, met for the first time to review the charts of four ECU patients. Firstenberg, who was out of town, did not attend the meeting. The Committee spent two hours reviewing the charts, but prepared no written findings or recommendations after its review. The charts showed that Johnson gave one patient four times the daily recommended dose of Halcion, a level described as toxic in the 1986 Physician's Desk Reference. A second patient received six times the daily recommended dosage of Halcion, while simultaneously receiving a second drug that "potentiates" or make stronger the effect of Halcion. At least one patient appeared from the charts to be addicted to narcotic pain killers. Other patients demonstrated depression and suicidal ideations for which no psychiatric evaluation was performed or treatment provided. Haberer reported the Committee's findings to Linton by telephone after the meeting, describing the situation as a "shooting gallery."

On the morning of February 16, 1987, Martin and Linton met to discuss the Committee's findings as orally reported to them by Haberer. Feingold and Mills confirmed Haberer's report. Joined by Firstenberg, who had been absent from the Committee's meeting on February 13, Martin and Linton summoned Johnson. Johnson was informed that the Hospital was suspending his and Rea's admitting privileges immediately, but that the doctors' treating privileges were being suspended effective February 18, 1987, at noon. Both actions were taken pending further investigation of the doctors' medical practices through the Hospital's Fair Hearing Process, set forth in its Bylaws. The Hospital argues on appeal that it did not immediately suspend the doctors' treatment privileges in order to allow them "to make arrangements for new doctors to take over the care of the patients." Despite the promise Johnson made during the meeting to arrange substitute care, he did not. Martin and Linton arranged substitute physicians for the ECU patients.

The Hospital confirmed its suspension of Rea and Johnson by letter the same day, stating that suspensions were based upon § 8.1-4(a)-(f) of the Hospital's Bylaws, which governs summary suspensions. The letter gave no specific reason for the suspension. Sometime after the meeting concluded, Firstenberg and Linton each reviewed for the first time the ECU charts that triggered the Hospital's suspension of Rea and Johnson.

On February 19, 1987, the MEC met to review the suspension and voiced considerable concern for the ECU patients' safety. The MEC voted unanimously to continue Rea and Johnson's suspension. On February 26, the MEC met a second time to consider the suspension. At this meeting, Rea and Johnson each spent an hour answering questions from the MEC regarding their treatment of patients. Following the doctors' appearance, the MEC voted unanimously a second time to affirm the summary suspension pending a full hearing before the Fair Hearing Committee.

On March 26, 1987, the day before the Fair Hearing Committee met to consider the suspension, Martin closed the ECU. At the time, the ECU had no patients and it was doubtful there would be any new patients in the immediate future.

On March 27, 1987, the Fair Hearing Committee met for over...