County of Tuolumne v. Sonora Commun. Hosp.

• Decision Date: 08 January 2001
• Docket Number: No. 98-17424,98-17424
• Parties: (9th Cir. 2001) COUNTY OF TUOLUMNE; ERIC RUNTE, Plaintiffs-Appellants, v. SONORA COMMUNITY HOSPITAL; DONOVAN TEEL; HILLSIDE OBSTETRICS AND GYNECOLOGY; MEDICAL GROUP, INC.; LOUIS ERICH; SONORA MEDICAL GROUP, INC., Defendants-Appellees
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1148

236 F.3d 1148 (9th Cir. 2001)

COUNTY OF TUOLUMNE; ERIC RUNTE, Plaintiffs-Appellants, v. SONORA COMMUNITY HOSPITAL; DONOVAN TEEL; HILLSIDE OBSTETRICS AND GYNECOLOGY; MEDICAL GROUP, INC.; LOUIS ERICH; SONORA MEDICAL GROUP, INC., Defendants-Appellees.

No. 98-17424

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted February 15, 2000

Filed January 8, 2001

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Barbara J. Hensleigh, Los Angeles, California, for the plaintiffs-appellants.

J. Thomas Rosch, San Francisco, California, for defendants appellees Sonora Community Hospital, Lawrence Brunel, M.D., Louis Erich, M.D., and Sonora Medical Group, Inc.

Glenn J. Holder, Fresno, California, for defendant-appellee Donovan Teel, M.D.

Appeal from the United States District Court for the Eastern District of California Robert E. Coyle, District Judge, Presiding. D.C. No.CV 96-5380 REC

Before: Mary M. Schroeder, Chief Judge, and John T. Noonan and A. Wallace Tashima, Circuit Judges.

TASHIMA, Circuit Judge:

Plaintiffs, County of Tuolumne (the "County") and Dr. Eric Runte, a family practitioner, appeal the district court's grant of summary judgment in favor of defendants on their claims of antitrust violations under Section 1 of the Sherman Act, 15 U.S.C. 1, for restraint of trade, conspiracy to boycott, and illegal tying.¹ The alleged restraint is a change in the cesarean-section ("C-section") credentialing, or privileging, criteria for physicians by Sonora Community Hospital ("SCH"). The change essentially forecloses a class of medical service providers -family physicians -from the C-section service market.

For the reasons discussed below, we affirm the district court's grant of summary judgment for defendants.

I. FACTUAL AND PROCEDURAL BACKGROUND

Sonora, California, has two hospitals, defendant SCH and Tuolumne General Hospital ("TGH"). SCH, a non-profit, private hospital, has the second highest C-section rate in the Adventist West Health Care System, of which it is a part. Dr. Christopher Mills and defendant obstetricians, Drs. Teel, Lawrence Brunel, and Louis Erich ("defendant OBs"), have privileges to perform C-sections at SCH.² They are all members of the SCH OB/GYN/PEDS Department (the "OB Department"), but are not employees of SCH. Defendant OBs have cross-coverage arrangements to cover one another's patients.

TGH is operated by the County. It closed its obstetrics facility in 1982 because, according to plaintiffs' expert, it was uneconomical. TGH considered re-opening its inpatient obstetrics facility in the early 1990s, but a feasibility study concluded that it would not be cost-effective, given the anticipated number of deliveries and the other demands on the hospital's resources. TGH, however, operated an Ambulatory Care Clinic (the "Clinic"). The Clinic was staffed by a nurse midwife and primarily provided prenatal services for women entitled to MediCal,³ which provides medical benefits to certain disabled persons in California. TGH contracted with defendant OBs and Dr. Mills to provide supervision for the Clinic.

In 1994, TGH hired Dr. Runte as Medical Director of the Clinic and terminated its contract with the OBs. Dr. Runte is not an employee of SCH, but is a member of SCH's General Family Practice Department ("FP Department"), of which Dr. Charles Waldman is chair. Dr. Runte does deliver babies and charges only $1,255 for vaginal deliveries, while Drs. Brunel, Teel, and Erich charge $1,500. Dr. Runte had performed around 110 C-sections during his family practice residency program. To gain more experience, Dr. Runte took additional night and weekend calls during his residency, which he completed in 1993.

Dr. Runte applied for privileges to perform C-section deliveries at SCH in February, 1994. SCH was in the process of approving new criteria restricting who could obtain C-section privileges. Under the new privileging criteria, C-sections could only be performed by Board-certified or Board-eligible obstetricians or by those doctors who had completed a 36month residency program in obstetrics-gynecology. Dr. Runte did not meet these criteria and was denied C-section privileges.

At SCH, privileging criteria, including the C-section privileges at issue in this case, are generally drafted by the relevant department. The criteria must be approved by the Medical Executive Committee (the "MEC") and SCH's Governing Board (the "Board"). The MEC is comprised of the department chairs, several committee chairs, the Chief of Staff (who is also a Board member), and the administrator, Lary A. Davis, who does not vote. Two of the three defendant OBs, Drs. Erich and Brunel, were members of the MEC when it recommended the C-section privileging criteria to the Board; FP Department Chair Dr. Waldman was also on the MEC.

The Board is the final decision-maker on hospital privileging criteria. None of defendant OBs was a member of the Board. Many Board members were non-physician community representatives or had backgrounds in health-care administration.

In 1993, Kathleen Mutchler, SCH Medical Staff Coordinator, had recommended that all departments adopt "bundled" privileges lists, which would group privileges into categories depending on the training and skill required. Dr. Brunel, who became OB Department Chair in 1994, drafted the department's privileging list and placed C-sections in the category of procedures involving high risk and/or requiring special training. The OB Department voted to recomment the draft privilege criteria to the MEC. Dr. Brunel presented the draft privileging criteria to the MEC in July 1995. Dr. Runte gave a presentation to the MEC, opposing the proposed privileging criteria. At Dr. Runte's urging, the MEC formed a task force to advise it on the privileging criteria. The task force was comprised of members of the California Academy of Family Practitioners and the American College of Obstetrics and Gynecology. The MEC made it clear that neither it nor the Board would be bound by the task force's recommendation. In the following months, Mutchler also conducted a telephone survey of seven regional hospitals and found that none granted C-section privileges to family practitioners. In addition, Drs. Brunel, Erich, and Karen Wright wrote letters to SCH, stating that Board certification in obstetrics was a proper standard for eligibility.

When the MEC met to vote in early November 1995, the task force report had not yet been completed. The task force did, however, furnish the MEC with a summary of its findings. It advised that privileges should be based on competence, training, and expertise, rather than specialty. The task force recommended that Dr. Runte be eligible for C-section privileges.

At the November meeting, Dr. Runte opposed the OB Department's proposed privileging criteria. Dr. Teel also addressed the MEC and read a letter to it that he had written. In it, he stated that Dr. Runte did not have enough surgical experience to perform C-sections and asserted that"[i]f the committee proceeds with granting these privileges [to Dr. Runte], each of us [in the OB Department] will then have to individually re-evaluate our present relationship with Sonora Community Hospital." The district court found that the "MEC devoted more time to this privileging issue than to any other issue in recent memory." By a 6-1 vote, the MEC recommended that the Board approve the privilege list. In their declarations, the MEC members gave various reasons for their respective votes, including a belief that the standards would provide an optimal level of care for patients.

In late November 1995, the Board met to address the MEC's recommendation. Administrator Davis reminded the Board members of their responsibility to study carefully all issues that the MEC recommendation raised and to make their final decisions in the best interest of patient care at the hospital. The Board members were provided with 160 pages of documents. They tabled the matter until January 1996, to allow members more time to carefully study the material. The Board also had further information gathered. Mutchler expanded her survey to nine additional regional hospitals and expanded her questions. She found that 13 of the 16 hospitals surveyed did not grant C-section privileges to family practitioners.

The Board met to vote in January 1996. Dr. Runte had sent a letter, and both Dr. Runte and FP Department Chair Dr. Waldman addressed the Board to oppose the proposed privileging criteria. Dr. Runte acknowledged that certain C-section complications could arise that would require him to request assistance from an obstetrician. Dr. Teel made a presentation in favor of the proposed criteria. The district court found that "Board spent more time on this privileging issue than on any other in recent memory." By an 8-2, secret-ballot vote, the Board approved the privileging criteria as submitted by the MEC. The Board has never voted in a manner inconsistent with a recommendation of the MEC with regard to privileges.

The Board members' decisions, as stated in their declarations, were affected by the fact that adequate, superior care already existed and thus there was no need to lower the standard and potentially compromise patient care. They were also concerned that the hospital itself could be subject to liability if it acted in a manner that was not in the best interest of its patients by lowering the standard for C-section privileges.

Plaintiffs filed this action alleging violations of Section 1 of the Sherman Act, 15 U.S.C. 1, for restraint of trade, conspiracy to boycott, and illegal tying. Plaintiffs also claimed violations of Section 2 of the Sherman Act, 15 U.S.C. 2, for attempted monopolization and conspiracy to monopolize. Plaintiffs further alleged state-law antitrust violations under the Cartwright Act, Cal. Bus. & Prof. Code 16700 et seq., unfair competition, tortious interference with...