Satilla Health Services, Inc. v. Bell

• Decision Date: 23 June 2006
• Docket Number: No. A06A0368.,No. A06A0369.,A06A0368.,A06A0369.
• Citation: 633 S.E.2d 575,280 Ga. App. 123
• Parties: SATILLA HEALTH SERVICES, INC. v. BELL et al. Satilla Health Services, Inc. v. Pilcher et al.
• Court: Georgia Court of Appeals

280 Ga. App. 123

633 S.E.2d 575

SATILLA HEALTH SERVICES, INC. v. BELL et al.

Satilla Health Services, Inc. v. Pilcher et al.

No. A06A0368.

No. A06A0369.

Court of Appeals of Georgia.

June 23, 2006.

Terry A. Dillard, Scott C. Crowley, Dillard, Bower & Crowley, Waycross, Roy E. Barnes, Marietta, for appellant.

John E. Bumgartner, Bradley J. Watkins, Whelchel, Brown, Readdick & Bumgartner, Brunswick, Kenneth E. Futch Jr., Blackshear, Michael J. Bowers, Balch & Bingham, T. Joshua R., Atlanta, for appellees.

Parker, Hudson, Rainer & Dobbs, Thomas D. Watry, Alston & Bird, Jack S. Schroder, Jr., Atlanta, Brian W. Looby, amici curiae

BERNES, Judge.

These companion appeals involve a dispute between a hospital and several physicians who held clinical privileges and practiced cardiology there. We must resolve two main issues. The first is whether a hospital that has entered into an exclusive provider contract with a physicians group can lawfully exclude all other physicians not employed by or under contract with that group from having access to the hospital's facilities and resources, irrespective of whether the hospital reserved the right to do so in its bylaws or in a contract with the individual physicians who are denied access. Resolution of this issue turns on whether the rule announced in St. Mary's Hosp. of Athens v. Radiology Professional Corp., 205 Ga.App. 121, 421 S.E.2d 731 (1992) applies under the circumstances here. The second issue is whether, if St. Mary's Hospital applies, the hospital complied with its ruling in this case. For the reasons discussed below, we agree with the trial court that St. Mary's Hosp. applies here. We further conclude that although it is well settled that hospitals may enter into exclusive provider contracts, the hospital's implementation of such a contract in this case was unreasonable because the hospital did not afford the excluded physicians the procedural protections set forth in St. Mary's Hosp. Accordingly, we affirm.

Case No. A06A0368

The record reflects that defendant Satilla Health Services, Inc. d/b/a Satilla Regional Medical Center (the "Hospital") is a private nonprofit corporation that operates a hospital facility located in Ware County. From 1989 to 2001, plaintiff physicians Dr. Willie Bell and Dr. Joel Ferree practiced cardiology at the Hospital as members of Diagnostic Cardiology Associates, P.C. ("DCA").¹ In 2001, the Doctors left DCA and formed South Georgia Cardiology Associates, P.C. ("SGCA") as the sole corporate directors, officers, and shareholders. That same year, SGCA entered into an agreement with the Hospital under which SGCA would be the "exclusive provider of Cardiovascular Services" at the Hospital (the "Agreement").

Under the Agreement, SGCA agreed to provide "quality, continuous and uninterrupted Cardiovascular Services" at the Hospital through two physicians and two physician assistants ("PAs") who were subject to the Hospital's pre-approval. The Agreement recited: "Hospital hereby approves the following two (2) Physicians currently providing services at the Center: Dr. Joel Ferree and Dr. Willie Bell." The Agreement contemplated that SGCA might hire additional physicians in the future "through employment or through contract, subject to the Hospital's right to pre-approve such Physicians."

The Hospital and SGCA agreed that either party could terminate the Agreement at any time without cause by providing written notice to the other party at least 120 days prior to the termination. In turn, Paragraph 3(b)(ii) of the Agreement provided that

upon termination of this Agreement or an individual Physician's or PA's participation under this Agreement, all clinical privileges granted in connection with such Physician's services under this Agreement shall be automatically terminated, and termination of such privileges as a result of termination of this Agreement shall not entitle such Physician or PA so affected to any hearing or appeal process otherwise provided by Hospital's medical staff by-laws.

Agreement Paragraph 3(b)(ii). Moreover, Paragraph 9(a) stated that

SGCA agrees on behalf of itself and each of the Physicians and PAs that, for a period of twelve (12) months following the date of termination of this Agreement or an individual Physician's or PA's participation under this Agreement, unless this Agreement is terminated by Hospital without cause, neither SGCA, the Physicians, nor the PAs will provide Cardiovascular Services in an office or any facility which is located within a twenty (20) mile radius of Hospital.

Agreement Paragraph 9(a).

Significantly, however, the Agreement also contained a separate "grandfather" provision. Paragraph 3(e) provided that

any physician currently appointed to the medical staff of Hospital who has been granted clinical privileges in cardiology as of the date [of] this Agreement . . . may continue to exercise those privileges in accordance with the medical staff bylaws and the Board Policy on Appointment, Reappointment, Clinical Privileges and Due Process of Satilla Health Services, Inc.

Agreement Paragraph 3(e).

On June 19, 2001, the Doctors executed the Agreement, listing their respective "titles" as "President" and "Secretary" of SGCA. On February 11, 2002, the Doctors executed another version of the Agreement, listing their "titles" as "cardiologists." The Agreement signed on February 11, 2002 extended the initial three-year contract term from August 31, 2004 to December 31, 2004.

In a September 28, 2004 letter, the Doctors notified the Hospital that SGCA planned to terminate the Agreement. In the letter, the Doctors also stated that they planned to continue practicing cardiology at the Hospital in their personal capacities, pursuant to the clinical privileges that had been granted to them and renewed on an ongoing basis since 1989. The Doctors' position was that the Hospital could not automatically terminate their clinical privileges without violating the medical staff bylaws. The Doctors further contended that the Agreement did not bind them individually, but that even if it did, they could continue to exercise their privileges under the "grandfather" provision, Paragraph 3(e).

In a January 26, 2005 letter, the Hospital notified the Doctors that as a result of the Agreement being terminated, their clinical privileges were being automatically terminated and that they would no longer be permitted to practice cardiology at the Hospital. The Hospital took the position that Paragraph 3(b)(ii) of the Agreement specifically authorized the automatic termination of the Doctors' privileges, and that the non-competition provision, Paragraph 9(a), precluded the Doctors from continuing to practice cardiology at the Hospital.

On January 28, 2005, the Hospital entered into a contract with Baptist Specialty Physicians, Inc. ("Baptist Specialty"). Under the contract, Baptist Specialty would become the new "exclusive provider of Cardiology Services" at the Hospital.

On January 31, 2005, the Doctors filed their verified complaint seeking, among other things, an interlocutory and permanent injunction prohibiting the Hospital from limiting their ability to freely exercise their clinical privileges and practice cardiology in their personal capacities at the Hospital. On February 15, 2005, the trial court granted the requested interlocutory injunction after holding an evidentiary hearing.

Thereafter, the Hospital's board of directors adopted a resolution "to implement the exclusive contract" between the Hospital and Baptist Specialty (the "Resolution"). The Resolution provided that only physicians "employed by or under contract with" Baptist Specialty would be entitled to "use the space, equipment, facilities or personnel of the Hospital" to exercise their cardiology privileges as long as the exclusive provider contract remained in effect. Thus, the Resolution denied all other cardiologists who held privileges at the Hospital from having continued access to the Hospital's cardiology facilities and resources. However, the Resolution stated that "[t]he foregoing shall not constitute a revocation, suspension, limitation or termination of the clinical privileges of the affected physicians, and thus shall not entitle the affected physicians to a hearing or appeal pursuant to the Medical Staff Bylaws, Rules and Regulations, Credentialing Policy Manual or Fair Hearing Plan." The Resolution also carved out a temporary exception for the Doctors, stating that it would not apply to them for "only so long as" the trial court's injunction remained in effect.

Following passage of the Resolution, the Hospital moved for the trial court to dissolve the interlocutory injunction entered in favor of the Doctors. The Hospital also asked the trial court to enter an interlocutory injunction enjoining the Doctors from using the Hospital's cardiology facilities and resources in light of the Resolution.

After holding another evidentiary hearing, the trial court issued its order on March 26, 2005 denying the Hospital's motion. The trial court concluded that the Resolution would effectively terminate the Doctors' clinical privileges and, therefore, had to be analyzed under the framework of St. Mary's Hosp. of Athens, 205 Ga.App. 121, 421 S.E.2d 731. The trial court further ruled that the medical staff bylaws did not authorize the automatic termination of the Doctors' clinical privileges, and that the Hospital did not have individual contracts with the Doctors authorizing such automatic termination. Consequently, the trial court held that the Resolution was unlawful under St. Mary's Hosp. and could not be enforced against the Doctors. ² On appeal, the Hospital contends that the trial court abused its discretion by failing to dissolve the interlocutory injunction previously entered in favor of the Doctors, and in failing to grant an interlocutory injunction in favor of the Hospital. The Hospital contends that regardless of...