Ryals v. ST. MARY-CORWIN REG. MED. CENTER, No. 99SC137.

• Docket Nº: No. 99SC137.
• Citation: 10 P.3d 654
• Case Date: September 18, 2000
• Court: Supreme Court of Colorado

10 P.3d 654

Jarvis D. RYALS, M.D., Petitioner,
v.
ST. MARY-CORWIN REGIONAL MEDICAL CENTER, a Colorado not-for-profit corporation; Pueblo Radiological Group, P.C., a Colorado professional corporation; Michael E. Ball, M.D., individually and as President of Pueblo Radiological Group, P.C.; Lynn Phelps, M.D.; Mark Forte, M.D.; Marc Johnson, M.D.; Gary Lamonte, M.D.; Mark Mountford, M.D.; Stan W. Jonas, individually and in his capacity as Interim

Page 655

Chief Executive Officer of St. Mary-Corwin Regional Medical Center; Walter Sackett, individually and in his capacity as the Chief Executive Officer of St. Mary-Corwin Regional Medical Center, Respondents

No. 99SC137.

Supreme Court of Colorado, En Banc.

September 18, 2000.

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Caplan and Earnest LLC, Sharon E. Caulfield, Sarah E. Meshak, Boulder, Colorado, Attorneys for Petitioner

Kennedy & Christopher, P.C., John R. Mann, Daniel R. McCune, Dean A. McConnell, Denver, Colorado, Attorneys for Respondents St. Mary-Corwin Regional Medical Center, Stan W. Jonas and Walter Sackett.

Hogan & Hartson L.L.P., Kathryn Webb Bradley, John W. Cook, H. Thomas Coghill, Denver, Colorado, Attorneys for Respondents Pueblo Radiological Group, P.C.; Michael E. Ball, M.D.; Lynn Phelps, M.D.; Mark Forte, M.D.; Marc Johnson, M.D.; Gary LaMonte, M.D. and Mark Mountford, M.D.

Montgomery, Little & McGrew, P.C., Robert N. Spencer, Englewood, Colorado, Amicus Curiae for Colorado Medical Society.

Ken Salazar, Attorney General, Richard H. Forman, First Assistant Attorney General, Business and Licensing Section, Denver, Colorado, Amicus Curiae for Committee on Anticompetitive Conduct.

Justice KOURLIS delivered the Opinion of the Court.

This case deals with the question of whether a physician is required to file a claim against a hospital that has denied him privileges with the Committee on Anticompetitive Conduct (CAC) rather than with the court. We hold that if the denial of privileges does not arise out of professional review committee activity at the hospital, then the physician need not seek review before the CAC. In this case, St. Mary-Corwin Regional Hospital (the Hospital) denied Dr. Jarvis D. Ryals, a neurologist, privileges to read MRIs at the Hospital based on a long-standing exclusive contract between the Hospital and a group of radiologists. Ryals filed suit claiming that the Hospital had engaged in anticompetitive conduct. The trial court dismissed his suit, holding that Ryals was first required to exhaust his administrative remedies with the CAC. The court of appeals affirmed. See Ryals v. St. Mary-Corwin Reg'l Med. Ctr., 987 P.2d 865 (Colo.App.1999).

We reverse. We hold, based on the plain language of the Colorado Professional Review Act (CPRA) and the statutory scheme as a whole, that the CAC has jurisdiction only over those claims of anticompetitive conduct that arise out of professional review committee activity. Professional review committees assess physician qualifications, physician conduct, and the quality and appropriateness of patient care. In this case, the Hospital did not engage in any professional review committee activity in denying Ryals's privileges. Rather, the Hospital made a business decision unrelated to Ryals's qualifications or conduct. If that decision has antitrust implications, then Ryals's claims against the Hospital and other Defendants were anticompetitive conduct claims arising independently of a peer review process. Therefore, Ryals was not required to file his claims with the CAC before seeking a remedy in district court.

I.

The Hospital has employed Dr. Ryals as a licensed neurologist since 1976. Prior to 1995, the Hospital did not own an MRI scanner, and Ryals interpreted MRI scans for the Hospital's patients outside of the Hospital at Southern Colorado MRI, Ltd. (SCMRI). Ryals, the Hospital, and Pueblo Radiological Group (PRG) were joint partners in SCMRI. In December 1995, SCMRI closed. Shortly thereafter, the Hospital obtained its own MRI machines to read MRIs "in-house."

Because Ryals did not have privileges to read MRIs at the Hospital, Ryals began to make inquires regarding obtaining privileges. After several informal inquiries with the Hospital staff, Ryals submitted a request for privileges to the Hospital's Medical Qualifications Committee on February 1, 1996. PRG had a long-standing exclusive contract with the Hospital to perform radiology services at the Hospital. The Medical Qualifications Committee decided that this exclusive contract prevented other doctors from reading MRIs. Ryals wrote PRG on February 6, 1996 requesting PRG to renegotiate their exclusive contract with the Hospital so as to permit him to read MRIs. PRG declined.

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Ryals submitted a second request to the Medical Qualifications Committee, which the Committee again denied at its meeting on March 1, 1996. The Committee found that although Ryals was qualified to read MRIs, he was not eligible to do so because of PRG's exclusive contract. The Hospital's acting chief executive officer, Stan Jonas, wrote Ryals on March 4, 1996 to inform him of the Committee's decision to deny his request. On March 12, 1996, the Hospital Governing Board then passed a resolution affirming its exclusive contract with PRG. The resolution did not specifically address Ryals's requests for privileges. Ryals did not receive a copy of the resolution until May 29, 1996 when he requested a copy of the exclusive contract from the Hospital

Ryals then filed suit against St. Mary-Corwin Hospital, Hospital officers, and PRG in district court claiming three antitrust violations, breach of contract, promissory estoppel, tortious interference with contractual and prospective contractual relations, and outrageous conduct. The defendants moved to dismiss the complaint alleging that Ryals failed to exhaust his administrative remedies by first filing his complaint with the Colorado Committee on Anticompetitive Conduct (CAC). The trial court agreed and granted the motion without an evidentiary hearing.

The court of appeals affirmed the trial court's decision, holding that Ryals must first present his claims to the CAC. See Ryals, 987 at 869. The court of appeals held that the CAC had jurisdiction because the Hospital's denial constituted a professional review activity within the parameters of the CAC's enabling legislation. See id. The court reached this conclusion by reasoning that the Hospital's Medical Qualifications Committee and the governing board operated pursuant to valid written bylaws, and therefore, they constituted professional review committees for the purpose of the CPRA. See id. The court further held that the Hospital's actions, taken as a whole, could constitute final action and appropriate notice of the denial of privileges to Ryals in these circumstances. See id. at 868. The court also held that the CAC's jurisdiction extended to Ryals's common law claims. See id. at 870. We granted certiorari.¹

II.

Maintaining standards of patient care is of preeminent importance in a hospital. In service of that goal, hospitals rely upon peer review processes to oversee physician conduct and promote appropriate patient care. During the peer review process, a peer review committee may be critical of the physician, and may issue a corrective action or sanction. See Fredrick Yu, The Committee on Anticompetitive Conduct: New Agency on the Block, 21 Colo. Lawyer 31, 31 (1992). However, a peer review committee is necessarily composed of peers who may be competitors of the physician being reviewed. Accordingly, when a peer review committee issues an adverse decision, it is possible that the committee's decision was based not on a deficiency in the physician's performance, but rather on a desire to remove the physician from competition. See id. This possibility raises antitrust liability concerns.

In 1988, the Supreme Court ruled that a hospital's peer review committee was not immune from federal antitrust liability because the state did not actively supervise the committee. See Patrick v. Burget, 486 U.S. 94, 100, 108 S.Ct. 1658, 100 L.Ed.2d 83 (1988). Because the committee did not qualify for immunity, the individual members of the peer review committee could be subject to

10 P.3d 658

suit for violating federal antitrust laws. See id. at 102, 108 S.Ct. 1658. In order to qualify for state action immunity,² the Supreme Court held that a state must actively supervise the private peer review committee's activities so that the state exercises "ultimate control over the challenged anticompetitive conduct." Id. at 101, 108 S.Ct. 1658

In order to assure the continuation of the peer review process, many states, including Colorado, reacted to Patrick by enacting legislation to establish the requisite level of state supervision. The Colorado Professional Review Act (CPRA), was Colorado's answer to the dilemma. See §§ 12-36.5-101 to -106, 4 C.R.S. (1999). It allows private entities to establish professional review committees that operate as an arm of Colorado's Board of Medical Examiners. See § 12-36.5-103(3)(a), 4 C.R.S. (1999). In the enabling legislation, the General Assembly observed that the Board of Medical Examiners could not feasibly assume responsibility over every single allegation that a physician's conduct deviated from a professional standard of care. See § 12-36.5-103(1). The legislature, therefore, intended to employ professional review committees to assist the Board in reviewing "in good faith the professional conduct of physicians, including the quality and appropriateness of patient care." § 12-36.5-103(2).

A hospital may establish a professional review committee as long as the committee operates pursuant to written bylaws, which are approved by the hospital's governing board. See § 12-36.5-104(4), 4 C.R.S. (1999). Professional review committees are charged with investigating the qualifications of a licensed physician or "the quality or appropriateness of...