Minnesota Supreme Courts Rules That Medical Staff Bylaws Are Enforceable Contracts
On Dec. 31, 2014, the Minnesota Supreme Court ruled that a hospital’s medical staff has standing to sue its hospital and that the medical staff bylaws are an enforceable contract between the hospital and its medical staff physicians.
In 2012, the governing board of Avera Marshall Regional Medical Center unilaterally repealed and replaced the hospital’s medical staff bylaws, without input from the medical staff as a body. In Medical Staff of Avera Marshall Regional Medical Center v. Avera Marshall, A12-2117, 2014 LEXIS 693 (Minn. Dec. 31, 2014), the Minnesota Supreme Court ruled that the medical staff had standing to sue the hospital under a statutory provision granting unincorporated associations the right to sue and be sued.
The court held that although the hospital and the medical staff’s physicians were all under pre-existing duties under Minnesota law to agree to the terms of the medical staff bylaws, that in this case, consideration existed, because “with the appointment of each member of the medical staff, that member and Avera Marshall both voluntarily assumed an obligation on the condition of an act by the other party – that is, each member of the medical staff agreed to be bound by the medical staff bylaws and Avera Marshall agreed to let each member of the medical staff practice at its hospital.” The court reasoned that Avera Marshall was not “under a preexisting legal duty to allow that particular physician to practice at its hospital.” Nor was each physician “under a pre-existing legal duty to follow Avera Marshall’s medical staff bylaws.” Thus, the Minnesota Supreme Court held that Avera Marshall formed a contractual relationship with each member of the medical staff upon appointment.
As highlighted by the Avera Marshall case, a medical staff’s ability to sue a hospital regarding medical staff bylaws depends both on whether the state recognizes the medical staff as an unincorporated association with authority to sue, and whether under state law the medical staff bylaws meet the legal requirements of an enforceable contract.
While Avera Marshall is only binding in Minnesota, the decision is the latest in a nationwide trend. Courts in approximately half of the states have expressly found medical staff bylaws to be enforceable contracts between hospitals and their medical staff physicians. The law is not universally settled; a handful of state courts have held that medical staff bylaws are not enforceable contracts. The issue has not been expressly addressed in all states.
The issue of whether a hospital can amend medical staff bylaws without medical staff approval only applies to hospitals that are not accredited by the Joint Commission. Joint Commission standards prohibit such unilateral activity.