Hoffman v. Garden City Hospital-Osteopathic

• Decision Date: 21 July 1982
• Docket Number: HOSPITAL-OSTEOPATHI,Docket No. 52334,R
• Citation: 115 Mich.App. 773,321 N.W.2d 810
• Parties: , 1982-2 Trade Cases P 64,859 Stephen M. J. HOFFMAN, D.O., and Ronald J. Rasansky, D.O., Plaintiffs-Appellants, v. GARDEN CITYL. Eilenfeldt, D.O., William B. diBlasi, Donald J. Edwards, Jr., Edward C. Reuter, D.O., Charles W. Allen, Jr., Bernard Boland, Eric J. Bradner, Ph.D., Frank H. DuMars, Phyllis A. Merchant, Zachaira Mikros, D.O., Lloyd L. Mrstick, D.O., William G. Williams, collectively known as Board of Trustees, Garden City Hospital-Osteopathic, Forbes R. Houghan, D.O., John H. Morrison, Jr., D.O., John E. Raymond, D.O., and R. L. Eilenfeldt, D.O., jointly and severally, Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

Page 810

321 N.W.2d 810

115 Mich.App. 773, 1982-2 Trade Cases P 64,859

Stephen M. J. HOFFMAN, D.O., and Ronald J. Rasansky, D.O. Plaintiffs-Appellants, v. GARDEN CITY HOSPITAL-OSTEOPATHIC, R. L. Eilenfeldt, D.O William B. diBlasi, Donald J. Edwards, Jr., Edward C Reuter, D.O., Charles W. Allen, Jr., Bernard Boland, Eric J Bradner, Ph.D., Frank H. DuMars, Phyllis A. Merchant, Zachaira Mikros, D.O., Lloyd L. Mrstick, D.O., William G. Williams, collectively known as Board of Trustees, Garden City Hospital-Osteopathic, Forbes R. Houghan, D.O., John H. Morrison, Jr., D.O., John E. Raymond, D.O., and R. L. Eilenfeldt, D.O., jointly and severally, Defendants-Appellees.

Docket No. 52334.

Court of Appeals of Michigan.

Submitted Dec. 1, 1981.

Decided May 4, 1982.

Released for Publication July 21, 1982.

Frimet, Bellamy, Gilchrist & Jehle, P. C. by Alan G. Gilchrist and James R. Lites, Southfield, for plaintiffs-appellants.

Dice, Sweeney, Sullivan & Feikens, P. C. by Jon Feikens and Bruce A. VandeVusse, Detroit, Hyman, Gurwin, Nachman, Friedman & Winkleman by Roger H. Leemis, Southfield, for defendants-appellees.

Before DANHOF, C. J., and J. H. GILLIS and BRONSON, JJ.

J. H. GILLIS, Judge.

Plaintiffs appeal as of right from a judgment of involuntary dismissal entered by the trial court judge pursuant to GCR 1963, 504.2. The action arises out of a decision denying staff privileges to plaintiffs made by the governing board of a private hospital.

Plaintiff Hoffman is an osteopathic physician certified as a subspecialist in gastroenterology. Plaintiff Rasansky is also an osteopathic physician who, at the time of trial, had not yet been board certified in gastroenterology although certification was expected shortly. The individually named defendants are either members of the defendant Garden City Hospital's board of trustees or are staff physicians at the hospital.

The defendant hospital is a nonprofit licensed osteopathic hospital located on the west side of the Detroit metropolitan area. It has received Hill-Burton funds from the federal government on two occasions: $600,000 in 1959-60 and $150,000 in 1962-63. Federal public works accelerated program funds of $750,000 were received in 1965. A community fund drive in 1952 resulted in a $130,000 contribution to the hospital. The hospital is tax exempt as a charitable institution. Medicare and Medicaid patients make up approximately one-third of the total number of patients at the hospital.

Both Hoffman and Rasansky applied for staff privileges at the hospital in September of 1978. Their applications were processed in the usual manner. Dr. Rasansky was interviewed by the hospital's credentials committee in October and by its department of internal medicine in December. The questions asked at these meetings concerned Dr. Rasansky's credentials, his reasons for requesting staff privileges, what services he could provide to the hospital and his intentions with respect to the amount of time he would devote to the hospital.

Dr. Hoffman's application proceeded in the same manner as Rasansky's but with an additional opportunity for an interview before the board of trustees. At this interview Dr. Hoffman was accompanied by his own counsel and made both written and oral presentations.

The board of trustees denied staff privileges to plaintiffs based upon a determination of lack of need. This decision was in accord with the recommendation of both the credentials committee and the department of internal medicine.

Defendant Garden City Hospital-Osteopathic has no physicians who have completed a fellowship program in gastroenterology. However, Dr. Janet Hardie, a staff physician at the hospital and chairperson of the department of internal medicine, held a practice of which 50 to 60 percent focused on gastroenterology. She intended to increase the amount of time she would spend in gastroenterology and by the time of trial 70 percent of her practice was in that area. Dr. Hardie testified that there was an indication, not necessarily a plan, within the hospital for her to focus on gastroenterology and two other physicians to subspecialize in cardiology and pulmonary medicine. Dr. Hardie is not board certified in gastroenterology.

The testimony at trial indicated that there are only 16 or 17 board certified osteopathic gastroenterologists in the United States. Although subspecialties are well established in the allopathic area of the medical profession, subspecialties in the osteopathic field have arisen only in the last ten years.

Upon the denial of staff privileges to them, plaintiffs filed suit claiming the decision was arbitrary, capricious and unreasonable in that it was the fulfillment of a conspiracy to protect the financial interests of the individual staff members. Plaintiffs also claimed that the defendants individually and collectively through explicit and implicit agreements were in violation of the prohibition of trusts, monopolies and combinations embodied in M.C.L. Sec. 445.701 et seq.; M.S.A. Sec. 28.31 et seq. ¹ After presentation of plaintiffs' evidence, a motion for involuntary dismissal pursuant to GCR 1963, 504.2 was brought on behalf of all defendants. The trial judge issued detailed findings of fact and conclusions of law in granting defendants' motion.

Plaintiffs do not argue that the receipt of federal and local public funds by this private hospital transforms the hospital's action into state action. Rather plaintiffs argue that this private hospital is so "affected with a public interest" as to require that its decisions on staff privileges be subject to judicial review in order to protect the public.

There are no reported cases on this issue in Michigan although our courts have dealt with it in terms of public hospitals. In Milford v. People's Community Hospital Authority, 380 Mich. 49, 155 N.W.2d 835 (1968), the Court found a denial of due process when a public hospital restricted the privileges of a staff physician without proper standards. See also Touchton v. River District Community Hospital, 76 Mich.App. 251, 256 N.W.2d 455 (1977). However, the Court in Milford was careful to note the public/private distinction:

"It is to be noted that we deal here with a public hospital authority and not with a private or charitable institution." Milford, supra, 380 Mich. at 57, 155 N.W.2d 835.

The theory that a private hospital holds a fiduciary duty to exercise its staff decisions reasonably and for the public good apparently finds its root in Greisman v. The Newcomb Hospital, 40 N.J. 389, 192 A.2d 817 (1963). In that case a private hospital refused to accept an application for admission to its courtesy staff from an osteopathic physician. The hospital's by-laws required that all applicants be graduates of a medical school approved by the American Medical Association. The AMA did not approve schools of osteopathy. The hospital was the only one in the...