Guerrero v. Burlington County Memorial Hospital

360 A.2d 334, 70 N.J. 344, 1976 N.J. LEXIS 203

• Court: Supreme Court of New Jersey
• Decided: June 10, 1976
• Status: Published

Opinions

The opinion of the Court was delivered by

Mountain, J.

Plaintiffs, Dr. Floro G-. Guerrero and Dr. Amado V. Yives, applied for admission to the medical staff of Burlington County Memorial Hospital for the purpose of practicing general surgery at Southern Ocean County Hospital (SOiCH), a satellite¹ facility operating under the sponsorship of Burlington County Memorial Hospital. The applications of hoth doctors, whose qualifications have never been questioned, were denied by the Board of Trustees of Burlington County Memorial Hospital on December 19, 1972. Motivating the denial of staff privileges was the Trustees’ belief that it would be in the best interest neither of the satellite hospital nor of the community served by SOCH to enlarge its general surgery staff, given its limited bed capacity. After being notified of the denial of their applications, both doctors requested a hearing before the Joint Conference and Credentials Committees. The hearing was conducted on February 12, 1973 and on February 27, 1973 the Board of Trustees again voted to deny plaintiffs’ applications.

Thereafter plaintiffs instituted the present action seeking to compel their admission to the medical staff of Burlington County Memorial Hospital, with full surgical privileges at SOCH. The trial court, concluding that the decision to deny surgical privileges was arbitrary, that it would not foster the well being of the community served by the hospital, and that it did not have a reasonable relationship to the criteria promulgated by the State for satellite hospitals, granted the relief sought by plaintiffs. The Appellate Division affirmed in an unreported per curiam opinion, determining that the evidence presented at trial “more than adequately supports the findings and conclusions of the trial court.” We granted defendants’ petition for certification, 68 N. J. 168 (1975), and now reverse.

It is our conclusion that the decision of the Board of Trustees should not have been disturbed upon judicial review. The determination was supported by substantial credible evidence and was neither arbitrary nor capricious.

A brief review of the events leading .up to the Trustees’ decision is essential to an understanding of the result we reach. In the mid-fifties, the Southern Ocean County Hospital Association was formed to establish a hospital intended to serve Long Beach Island and surrounding communities. The Association was unable to raise sufficient funds to finance a facility of 100 beds, the minimum required by the state for an independent hospital. Accordingly it sought the sponsorship of an existing general hospital for the creation of an affiliated satellite facility. To this end, the Department of Institutions and Agencies² sent a letter on July 19, 1968 to all licensed hospitals describing the Association’s interest in establishing a new hospital and in securing an affiliation with an existing general hospital which would sponsor and administer the subordinate facility. Only one hospital responded to the announcement, and negotiations with that institution were unproductive. In 1969 Burlington County Memorial Hospital was approached for sponsorship. After preliminary negotiations, a Statement of Intent was executed by Burlington County Memorial Hospital and the Southern Ocean Community Hospital Association. Thereafter Southern Ocean County Hospital was incorporated and on June 27, 1972 a formal written agreement was entered into between the two institutions.

Meanwhile criteria for satellite hospitals were developed by the State. These criteria, promulgated by the New Jersey State Department of Health, were incorporated in the Manual of Standards for Hospital Facilities. It is there made clear that the purpose of a satellite facility is distinct from that of a general hospital. The former is neither designed nor intended to provide the full range of services available at a general hospital. Rather, it is designed primarily to provide a particular community or region with a facility for the treatment of urgent and emergency cases.³ As explained both by the Administrator of Burlington County Memorial Hospital and by plaintiffs’ expert, an urgent case is one which, in the judgment of the treating physician, must be admitted to a hospital within 48 hours for treatment. An emergency case is one where, because of the seriousness of the patient’s condition, immediate treatment is required. All other cases are designated as elective.

The procedure for staffing a satellite facility is also set forth among the criteria. It is there stated that:

a. There shall be but one medical staff for both facilities. The physicians serving the “satellite” shall be given staff appointments in accordance with the procedures and requirements of the sponsoring institution as described in its constitution, by-laws, rules and regulations. [New Jersey State Department of Health, Manual of Standards for Hospital Facilities, supra, at D-2]

In accordance with this regulation, and pursuant to the agreement between the sponsoring and satellite hospitals, the task of staffing SO'CH was entrusted to Burlington County Memorial Hospital. Specific department heads were given the responsibility of securing adequate and competent personnel for their respective departments. It thus became incumbent upon Dr. William R. Muir, as chief of the department of surgery at Burlington, to staff the surgical department at SOCH. Mindful of the limited primary function of a satellite hospital — namely, to treat urgent and emergency cases — Dr. Muir initially confined his efforts to finding — as he put it — a “dynamic” individual to become the nucleus of the surgical department at SOCH. It was contemplated that this individual would work full-time at the satellite and that he would be capable of functioning without the aid of supporting surgical personnel. “Back-up” would be provided by the surgical staff practicing at Burlington.

When the plaintiffs’ applications for staff privileges were received on July 5, 1972, SOCH was still under construction and the surgical requirements of the facility, beyond its obvious need for a primary surgeon, had not been definitely determined. At that time both plaintiffs were employed as emergency room physicians, Dr. Wives in Paul Kimball Hospital in Lakewood and Dr. Guerrero in Point Pleasant Hospital. Neither had previously practiced as a private surgeon. Anticipating such a practice and mindful of the construction of SOCH as well as the lack of surgeons in the area, they had jointly opened an office in June of 1972 in Forked River. They also applied to Community Memorial Hospital in Toms River for staff privileges.

Plaintiffs were jointly interviewed by Dr. Muir on August 1, 1972. Neither was considered for the position of primary surgeon because Dr. Muir at once concluded that they were not sufficiently dynamic, self-assured or experienced to fill this role. Ultimately, one Dr. Begley was secured to fill the post.

On September 11, 1972, the Joint Conference Committee, acting upon the recommendation of the Medical Executive Committee, deferred final consideration of plaintiffs’ privileges for three months, until the staffing needs of SO CEE could be more precisely assessed. The satellite, licensed for 60 beds, had opened in August of 1972 with 52 beds and contained an x-ray department, a laboratory, two operating rooms, an emergency room and a small out-patient area. While the hospital beds were not designated as being either medical or surgical, the occupancy figures for the early months of its operation established an almost 3 to 1 ratio of medical to surgical beds. Additionally, the occupancy figures indicated that the facility was running at a very high capacity, contrary to the expectation that only a 60% occupancy rate would be reached during the winter months. Because of these factors — the relationship of medical-surgical cases and the high percentage of occupancy — it became evident to Dr. Muir that an increase in the number of surgeons practicing at SOCEE would be disadvantageous. He perceived that an enlargement of the surgical staff at SOCH — at least at that time — was likely to effect an immediate increase in the surgery performed at the- institution and thereby overtax the facility and diminish the quality of patient care. Rearing this result, it was determined not to expand the surgical staff at that time.⁴

On December 14, 1972 the Medical Executive Committee met to reconsider plaintiffs’ applications which had been deferred; it voted to recommend denial of the' appointments. The Board of Trustees, on December 19, 1972, concurred in this recommendation. By letter dated January 5, 1973, it notified the plaintiffs of its decision but gave no reasons for the action taken. Plaintiffs were, nevertheless, informed of a right to have the decision reviewed before it became final, such review to be in the form of a hearing before the Joint Conference and Credentials Committees. The hearing in fact took place. As a result thereof it was again recommended that plaintiffs’ applications be denied for the following reason:

Because of the limited bed capacity existing at this satellite hospital, it would not be in the best interest of the general public of the community serviced by Southern Ocean County Hospital to enlarge the surgery staff.

The Board of Trustees, after reviewing plaintiffs’ application in detail, voted again to deny the applications. In arriving at this determination, the Board considered the following specific factors: (1) the size of the satellite facility; (2) that the hospital was operating at near capacity during the winter months in contrast to the anticipated occupancy rate of 60%; (3) that the surgical coverage at the facility was presently adequate; (4) that an enlargement of the surgical staff would lead to an increase in the surgery performed at the institution; and (5) that the needs of the community — which were largely medical — would not be served by such additional surgery. The Board did decide, however, that it would reconsider the plaintiffs’ applications if SO CEE were to expand its facilities. At approximately the same time that plaintiffs were denied appointments to the staff of Burlington County Memorial Hospital, they received full privileges at Community Memorial Hospital in Toms River.

Evidence adduced at trial made clear that the defendant Board of Trustees considered that any enlargement of the surgical staff at SOCH would have a corresponding adverse effect on the quality of patient care dispensed at the satellite. This would come about because an increase in surgeons would inevitably increase the amount of surgery, which would in turn overload the limited bed facilities and thereby very possibly prevent emergency cases from being treated. Moreover, it was not considered to be in the interest of the community served by SOCH, which had proven to have a far greater need for medical than for surgical treatment, to disturb the rather delicate relationship that had been achieved between medical and surgical beds.

A number of explanations were offered at trial to show why an increase in the surgical staff would effect an increase in surgery. It was, for instance, pointed out that surgeons would be likely to channel patients who might otherwise be treated at other hospitals to SOCH when convenient. Even plaintiffs’ expert admitted that there was a reasonable likelihood that surgeons might categorize elective eases as urgent in order to secure admission to the satellite facility.

Plaintiff’s expert, however, did not consider a limited surgical staff as a reasonable solution to the problem of limited bed space. Rather, he proposed that the problem should be solved by an admissions officer or “gatekeeper” who could see that the public good was being served by controlling the admissions to the hospital. The feasibility of this solution was disputed by Dr. Muir, who envisioned difficulty in having such a person turn away emergency patients.

We believe that the evidence adduced at trial amply demonstrated that the Board of Trustees properly exercised its discretion in denying staff privileges to the plaintiffs. At the outset, we readily acknowledge that the exercise of discretion by a hospital Board of Trustees is a very delicate process, particularly when the Board is called upon to determine whether staff privileges should be granted to an applying physician or surgeon. It is readily apparent that staff privileges for a member of the medical profession are essential to a viable medical practice. This is especially true as to surgeons. Unlike other types of physicians, surgeons must have access to a hospital operating room or they are precluded from practicing the specialty for which they have been trained.

Counterbalancing the needs of the physician, however, are those of the hospital. It has a primary interest in maintaining the quality of patient care it affords to those in need. It is sometimes the difficult task of those who administer hospitals to weigh the relative merits of these two vital and sometimes competing considerations. At times the wisdom of the determination, may be challenged. On such occasions a reviewing court should confine its effort to determining whether the .decision made by the hospital is supported by substantial credible evidence and is neither arbitrary nor capricious. When a decision fulfills these requirements, a reviewing court should refrain from substituting its own judgment for that of the hospital authorities.

It is well settled that this is the proper standard of review by which to measure the propriety of determinations of administrative agencies. See, e. g., Close v. Kordulak Brothers, 44 N. J. 589, 598-99 (1965); Flanagan v. Department of Civil Service, 29 N, J. 1, 12 (1959); First Savings & Loan Association v. Howell, 87 N. J. Super. 318, 321-22 (App. Div. 1965), certif. den. 49 N. J. 368 (1967); Quinlan v. Board of Education, 73 N. J. Super. 40, 46-47 (App. Div. 1962); Tullo v. Township of Millburn, 54 N. J. Super. 483, 498 (App. Div. 1959). We consider the same standard of review appropriate with respect to decisions of governing boards of hospitals, such as the determination here being examined. See Duffield v. Memorial Hospital Association of Charleston, 361 F. Supp. 398, 404 (S. D. W. Va. 1973); Davidson v. Youngstown Hospital Association, 19 Ohio App. 2d 246, 250 N. E. 2d 892, 896 (1969); Benell v. City of Virginia, 258 Minn. 559, 104 N. W. 2d 633, 636 (1960); Grodjesk v. Jersey City Medical Center, 135 N. J. Super. 393, 410 (Ch. Div. 1975). Such a standard defers to the expertise of hospital authorities concerning the operations of the hospital, while at the same time affording full opportunity for judicial intervention when there is no rational basis for the decision being reviewed, or it appears to be unreasonable, arbitrary or capricious.

Our courts, as well as others, have consistently evinced a sensitivity to the need of hospital administrators to be able reasonably to exercise their discretion without judicial interference, at the same time remaining alert to strike down action that is discriminatory or unfair. As put by Justice Jacobs in Greisman v. Newcomb Hospital, 40 N. J. 389, 403-04 (1963) :

Hospital officials are properly vested -with large measures of managing discretion and to the extent that they exert their efforts toward the elevation of hospital standards and higher medical care, they will receive broad judicial support. But they must never lose sight of the fact that the hospitals are operated not for private ends but for the benefit of the public, and that their existence is' for the purpose of faithfully furnishing facilities to the members of the medical profession in aid of their service to the public. They must recognize that their powers, particularly those relating to the selection of staff members, are powers in trust which are always to he dealt with as such. While reasonable and constructive exercises of judgment should be honored, courts would indeed be remiss if they declined to intervene where, as here, the powers were invoked at the threshold to preclude an application for staff membership, not because of any lack of individual merit, but for a reason unrelated to sound hospital standards and not in furtherance of the common good.

In short, judicial intervention will be restricted to situations in which the hospital action constitutes an unreasonable exercise of discretion.

In Davis v. Morristown Memorial Hospital, 106 N. J. Super. 33 (Ch. Div. 1969) the court had to determine the reasonableness of denying staff privileges to two qualified obstetricians. The denial resulted from a specific written hospital policy deferring all such privileges until an adequate number of beds could be provided in the obstetrics department. The court recognized that, on the one hand, the hospital had an occupancy problem in the obstetrics ward, but that on the other hand, plaintiffs might suffer a loss of patients were they denied privileges. The court refused to adopt plaintiffs’ contention that it would have been less arbitrary for the hospital to provide multiple staff appointments and geographically limit admissions. Eather, the court noted that the focus of its attention should be on the reasonableness of the action "as it relates to ‘sound hospital standards’ in ‘faithfully furnishing facilities to the members of the medical profession in aid of their service to the public.’ ” Id. at 43. Assessing the action from this perspective, the court upheld the hospital’s policy decision. See also Blank v. Palo Alto-Stanford Hospital Center, 234 Cal. App. 2d 377, 44 Cal. Rptr. 572 (1965).

We have thoroughly reviewed the record in the case at bar and cannot conclude, as did the trial court and Appellate Division, that the Trustees’ decision to deny staff privileges to plaintiffs was arbitrary and not reasonably in furtherance of the goals of a satellite hospital. To the contrary, the decision was motivated by the Trustees’ unwillingness to permit the quality of patient care at SOCH to deteriorate — an occurrence they deemed inevitable if the facility were overtaxed by additional surgical cases.

Nothing we have said should be in any way construed as suggesting that hospitals may routinely deny staff privileges to doctors moving into an area. Any denial of such privileges, if motivated by a desire to exclude newcomers in order to maintain the status quo of the staff, would not be judicially tolerated. Implicit in our opinion in Falcone v. Middlesex County Medical Society, 34 N. J. 582, 597 (1961) is the belief that the power to exclude must be reasonably and lawfully exercised in furtherance of the interests of both the public and the medical profession. A denial predicated upon exclusionary policies fostering only the well-being of those staff members who are already admitted would clearly be in derogation of the spirit of Falcone. Where, however, as here, a facility is designed to accommodate a very limited number of patients and is intended primarily to afford treatment of urgent and emergent cases, a showing that an augmented surgical staff will engender additional surgery to the detriment of the facility provides a thoroughly rational basis for the Trustees’ exercise of discretion in denying surgical privileges.

Plaintiffs also contend that the Board of Trustees of Burlington County Memorial Hospital is estopped to deny staff privileges to the plaintiffs. They suggest they were led to believe they would be granted staff privileges and that they relied on this assumption to their detriment. From our reading of the record, however, we are unable to discern any conduct on the part of the defendants which would reasonably mislead a physician in these circumstances. See Dambro v. Union County Park Commission, 130 N. J. Super. 450, 457 (Law Div. 1974). Furthermore, it appears that the only harm plaintiffs may have suffered was a failure to pursue more vigorously than they did their applications at Community Memorial Hospital in Toms River. Thus we remain unpersuaded that estoppel should find any place in this decision.

Furthermore, some comment seems appropriate as to the Trustees’ failure to apprise plaintiffs prior to their hearing of the reasons for the denial of their staff privileges. In Sussman v. Overlook Hospital Ass’n, 92 N. J. Super. 163, 179, 183 (Ch. Div. 1966), aff'd, 95 N. J. Super. 418 (App. Div. 1967), the court determined that a physician who had been denied staff privileges for personal reasons was entitled to notice of the specific reasons for denial prior to any hearing. See also Birnbaum v. Trussell, 371 F. 2d 672, 679, n. 15 (2d Cir. 1966); Silver v. Castle Memorial Hospital, 53 Haw. 475, 497 P. 2d 564, 571, cert. den. 409 U. S. 1048, 93 S. Ct. 517, 34 L. Ed. 2d 500 (1972); Note, Denial of Hospital Staff Privileges: Hearing and Judicial Review, 56 Iowa L. Rev. 1351, 1362-63 (1971). We note that reasons were in fact given at the time of plaintiffs’ final denial following the full hearing. While lack of notice prior to the hearing will certainly not mandate reversal here, we believe that the more judicious practice would be for hospitals to notify all applicants who are denied staff privileges of the specific grounds, be they personal or policy reasons, for the denial. This will afford applicants a fuller opportunity to respond more effectively to the precise reasons that have led to their initial rejections.

In summary, the record is utterly barren of the kind of discriminatory conduct that moved us to act in Falcone, supra. No surgeons other than Drs. Begley and Konylian have been added to defendant’s staff, except for an orthopedic surgeon who presumably was added because of a need for his specialized skills. As we mentioned before, defendant has promised to give full consideration to any renewal of plaintiffs’ applications should the satellite’s facilities be later enlarged.

The judgment of the Appellate Division is reversed and judgment is entered in favor of defendants. No costs.

1 “A ‘satellite’ is defined as an organized unit of an existing hospital (200 beds or larger) operated under the direction and control of one board of trustees, one medical staff, the same by-laws and license, and providing facilities and services in those geographical areas where it is either inconvenient or uneconomical for the community to provide the broad range of services normally found in an acute general hospital.” [New Jersey State Department of Health, Manual of Standards for Hospital Facilities, 1972, Appendix D]

2 Administrative supervision of hospitals was transferred from the Department of Institutions and Agencies to the State Department of Health in 1971. N. J. S. A. 26:2H-1 et seq.

3 The criteria provide:

2. Professional Medical Services

a. Professional medical services shall be the responsibility of the sponsoring institution and should be regulated by its constitution, by-laws, rules and regulations.

b. Professional medical services should include, but not be limited to, the following:

(1) Emergency room service: Staffed on a 24-hour basis, by licensed physicians or house staff supplemented .by local physicians on an “on-call” basis as the need requires. The emergency room shall include adequate facilities and equipment for such emergencies as cardio-pulmonary resuscitation, etc.

(2) Hospitalization for urgent and emergency cases: If the required medical service is of a limited nature, hospitalization may be provided in the “satellite.” If medical service requires comprehensive or specialized medical care, the patient may he transferred to the sponsoring institution or the specialty service brought to the “satellite.”

(3) Specialized medical care should be available to the “satellite” at all times.

(4) Facilities for emergencies requiring limited surgical procedures, primarily those associated with accidental injuries, should be provided. If provided, such facilities shall be staffed with qualified personnel.

(5) Emergency delivery room service should be provided. As soon as possible after emergency delivery, the mother and newborn shall he transported to the sponsoring institution. If provided, such facilities shall be staffed with qualified personnel.

(6) Kadiologic services as required to provide emergency care shall be staffed with qualified technical personnel.

(7) Clinical laboratory services as required to provide emergency care shall be staffed with qualified technical personnel. This should include electrocardiographic service.

4 It had previously been concluded that uninterrupted surgical coverage by a team would be desirable. For this purpose, Dr. Begley selected as his partner a Dr. Konylian, who formally applied on December 19, 1972 and was approved by the Board of Trustees on February 27, 1973.