Mahan v. Avera St. Luke’s

Mahan v. Avera St. Luke’s,

2001 SD 9 (January 10, 2001)

The governing board of St. Luke’s, a private, nonprofit hospital, closed its medical
staff to physicians requesting privileges to perform procedures concerning spinal
fusions, closed fractures of the spine, and laminectomies. The governing board’s
decision was made in order to facilitate the hospital’s attempt to recruit two
neurosurgeons or orthopedic spine surgeons to replace a neurosurgeon who had
left the staff. The hospital’s previous attempts to recruit neurosurgeons and
orthopedic spine surgeons had been hampered because the surgeons were unwilling
to relocate to Aberdeen, an area with a small population, for fear that there
would not be enough patients to support their practices. Several physicians
at Orthopedic Surgery Specialists (OSS) filed suit against the hospital after
one of their recruited physicians was unable to obtain an application for privileges
at St. Luke’s. The circuit court granted summary judgment for OSS, finding that
the hospital’s bylaws granted the right to make medical staffing decisions to
the medical staff itself and, therefore, the governing board’s decision to close
the medical staff in one area was a breach of the hospital’s contract with the
current medical staff.

The South Dakota Supreme Court overturned the
circuit court. The court found that the hospital had not breached its contract
with the medical staff. The court concluded that the corporate bylaws give the
governing board the power to make business decisions concerning the hospital.
The corporate bylaws delineate the powers granted to the medical staff and, in
this specific case, the bylaws granted the medical staff only the right to
evaluate the competence, training, qualifications and ethics of applicants for
privileges in areas in which the medical staff has particular expertise. The
governing board retained power over all other aspects of medical staffing,
including making business decisions about what staffing measures would be
beneficial to the interests of the hospital and the community.