Bello v. South Shore Hospital

• Decision Date: 22 December 1981
• Citation: 429 N.E.2d 1011,384 Mass. 770
• Parties: Alan S. BELLO et al. v. SOUTH SHORE HOSPITAL (and a companion case 1 ).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1011

429 N.E.2d 1011

384 Mass. 770

Alan S. BELLO et al. v. SOUTH SHORE HOSPITAL (and a companion case ¹).

Supreme Judicial Court of Massachusetts, Norfolk.

Argued Oct. 8, 1981.

Decided Dec. 22, 1981.

Philip M. Cronin, Boston (Peter J. McCue, Boston, with him), for plaintiffs.

Ronald F. Kehoe, Boston (Jeffrey W. Lawrence, Boston, with him), for defendant.

Before HENNESSEY, C.J., and WILKINS, LIACOS, NOLAN and LYNCH, JJ.

NOLAN, Justice.

Four physicians filed a complaint in the Superior Court after the defendant, South Shore Hospital (hospital), denied their applications for staff privileges. They sought a declaratory judgment as to the propriety of the denial of staff privileges, alleging that the hospital's actions were arbitrary, unreasonable, discriminatory, and inconsistent with its own by-laws. They also sought injunctive relief and an order directing the hospital to grant them staff privileges. Subsequently, a second complaint was filed, listing as plaintiffs the same four physicians and three of their patients. The patients sought injunctive relief and a declaration that under G.L. c. 111, § 70E (the Patients' Rights Act), they have a right to be hospitalized at South Shore Hospital and to be attended by one of the physician plaintiffs (physicians). ² The cases were consolidated for trial.

The trial judge ruled that the hospital's involvement with the State was sufficient to constitute State action. Accordingly, the judge ruled that the court had jurisdiction to review the hospital's denial of staff privileges to the physicians. After making such review, the judge ruled that the hospital's action in denying staff privileges to the physicians was not arbitrary, capricious, or unreasonable, and that there was no denial of the physicians' rights of due process as guaranteed by the Fifth and Fourteenth Amendments to the United States Constitution. The judge further ruled that statements signed by the physicians in connection with their applications for staff privileges did not constitute a waiver of their rights to judicial review of the hospital's actions. In regard to the second complaint, the judge ruled that the patients had no claim against the hospital under G. L. c. 111, § 70E. In both cases, the judge entered judgments for the hospital and ordered that the actions be dismissed on the merits. All plaintiffs appealed and the hospital cross-appealed. We allowed the plaintiffs' application for direct appellate review. We affirm the judgments in both cases, although for different reasons than those stated by the judge.

We summarize the pertinent facts as found by the judge. Other relevant facts will be discussed in later portions of this opinion. Four of the plaintiffs, Alan S. Bello, Ibrahim F. Fanous, Bernard Spiegel and Philip G. Sullivan, are licensed physicians specializing in obstetrics and gynecology. They operate a joint practice with offices in Quincy and Marshfield and have staff privileges at Quincy City Hospital. The defendant, South Shore Hospital, is a nonprofit, charitable institution, incorporated under G. L. c. 111. It is located in South Weymouth. The hospital is licensed by the Massachusetts Department of Public Health under G. L. c. 180, § 51, and is accredited by the joint commission on accreditation of hospitals as an acute-care general hospital. It is generally supervised by the Attorney General under G. L. c. 12, §§ 8-8M.

On June 2, 1977, the physicians applied for staff privileges at the hospital. Their applications were considered by the hospital's credentials committee, which approved their qualifications. The obstetrics and gynecology department first accepted and later rejected their applications. The hospital's active medical staff rejected the applications. The physicians appealed the decision of the medical staff to the medical staff review committee. At the review hearing which followed, the doctors were represented by counsel and were permitted to testify and to cross-examine witnesses. The review committee voted unanimously to sustain the decision of the medical staff and denied staff privileges to the physicians. The physicians appealed this decision to a special committee of the hospital's board of trustees. This committee held a hearing at which the physicians again were represented by counsel and again argued against their rejection. The committee voted to reject their applications. Finally, the hospital's board of trustees met on June 26, 1978, and after considering the question of the physicians' applications for staff privileges voted to accept the decision of their special committee and of the active medical staff to reject the physicians' applications. The judge listed nineteen factors that were considered by the trustees in reaching this decision.

The other plaintiffs, Diane Connell, Sandra Kresser, and Deborah Panora, are all residents of communities served by the hospital and were patients of the physicians when the latter applied for staff privileges.

1. Judicial Review of the Hospital's Actions.

Initially, we must decide whether the judge's ruling that the hospital's actions constituted State action is correct as a matter of law. The issue whether the actions of a private hospital receiving State and Federal funding may be properly viewed as "State" action within the purview of the Fourteenth Amendment is one of first impression for this court. In Duby v. Baron, 369 Mass. 614, 622, 341 N.E.2d 870 (1976), we acknowledged that there were divergent views among the jurisdictions on this issue, but we did not reach or answer the question. We now decide that, at least in the circumstances of this case, the hospital's actions cannot properly be considered State action and are therefore not subject to judicial review under the Fourteenth Amendment.

The distinction between public and private hospitals has long been recognized by the courts. This distinction has been defined in widely quoted language from Levin v. Sinai Hosp. of Baltimore City, Inc., 186 Md. 174, 178, 46 A.2d 298 (1946): "The essential difference between a public and a private corporation has long been recognized at common law. A public corporation is an instrumentality of the state, founded and owned by the state in the public interest, supported by public funds, and governed by managers deriving their authority from the state. Public institutions, such as state, county and city hospitals and asylums, are owned by the public and are devoted chiefly to public purposes. On the other hand, a corporation organized by permission of the Legislature, supported largely by voluntary contributions, and managed by officers and directors who are not representatives of the state or any political subdivision, is a private corporation, although engaged in charitable work or performing duties similar to those of public corporations.... So, a hospital, although operated solely for the benefit of the public and not for profit, is nevertheless a private institution if founded and maintained by a private corporation with authority to elect its own officers and directors." The plaintiffs do not contend that the hospital is a public corporation but nevertheless urge that its contacts with the State and Federal governments are such as to warrant a finding that its actions are subject to judicial review under the Fourteenth Amendment.

In Burton v. Wilmington Parking Auth., 365 U.S. 715, 725, 81 S.Ct. 856, 862, 6 L.Ed.2d 45 (1961), the United States Supreme Court held that a private institution's conduct is subject to the Fourteenth Amendment if the relationship between the State and the institution is symbiotic in character and if "(t)he State has so far insinuated itself into a position of inter-dependence ... that it must be recognized as a joint participant in the challenged activity." In Jackson v. Metropolitan Edison Co., 419 U.S. 345, 351, 95 S.Ct. 449, 453, 42 L.Ed.2d 477 (1974), the Court defined the inquiry as "whether there is a sufficiently close nexus between the State and the challenged action of the regulated entity so that the action of the latter may be fairly treated as that of the State itself." In answering that question the Court considered whether the State had directly encouraged or approved the particular practice under challenge and found that it had not. Id. at 354, 95 S.Ct. at 455.

In the present case, the judge found that the hospital had the following connections with the State and Federal governments. In 1967, the hospital received $400,000 under the Hill-Burton Act, 42 U.S.C. §§ 291 et seq. (1976), representing approximately ten percent of the total construction cost of a new wing. In addition, the hospital's first mortgage of $12,160,000 is insured by the Federal Housing Authority. The hospital's second mortgage of $6,914,179 is federally guaranteed under the Hill-Burton Act, and the hospital receives an annual interest subsidy of three percent on the second mortgage under the same Act. As a condition of receiving the Federal funds, the hospital must provide medical care to indigents. 42 U.S.C. § 291c(e) (1976). The hospital also provides services to certain United States military personnel stationed at the naval air station in Weymouth and receives Federal reimbursement for these services. The hospital is licensed and regulated by the Commonwealth and is tax exempt. In 1974, the hospital received a certificate of need from the State Public Health Council for the construction of an addition to one wing of the hospital.

We have carefully considered the facts of this case and we are persuaded that they do not justify a ruling that the challenged action occurred under color of State law. The judge apparently placed heavy weight on the fact that the hospital receives Hill-Burton funds and other State and Federal aid. However, eight Federal circuit courts which have addressed the question have held that a private hospital's actions are not State action for the...