Miller v. St. Alphonsus Reg’l Med. Ctr.

IN THE SUPREME COURT OF THE STATE OF IDAHO

Docket No. 28639

STEVEN J. MILLER,

Plaintiff-Appellant,

ST. ALPHONSUS REGIONAL MEDICAL
CENTER, INC., a non-profit corporation
and JOHN DOES 1-20,

Defendants-Respondents.

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Boise, December 2003 Term

2004 Opinion No. 6

Filed: February 6, 2004

Frederick C. Lyon, Clerk

Appeal from the District Court of the Fourth Judicial District of the State of
Idaho, in and for Ada County. Hon. Joel D. Horton, District Judge.

The judgment of the district court is affirmed.

Jim Jones & Associates, Boise, for appellant. Jim Jones argued.

Givens Pursley, LLP, Boise, for respondent. Patrick J. Miller argued.

EISMANN, Justice.
This is an appeal by a physician from a judgment entered by the district court after a
court trial dismissing a complaint seeking to force the defendant hospital to grant the physician
medical staff privileges and from the award of attorney fees to the hospital under Idaho Code §
12-120(3). We affirm the judgment of the district court and award attorney fees on appeal.
I. FACTS AND PROCEDURAL HISTORY
On February 28, 1999, the plaintiff-appellant Stephen J. Miller (Dr. Miller) applied for
medical staff privileges at the defendant-respondent St. Alphonsus Regional Medical Center,
Inc., (Hospital), a private hospital located in Boise, Idaho, and licensed by the state of Idaho.
Staff privileges permit a physician to provide medical or other patient care services in the
Hospital. At the time he applied, Dr. Miller was licensed to practice medicine in the states of
Washington, Alaska, Mississippi, and Idaho; he was board certified by the American Board of

Surgery; he was a fellow with the American College of Surgeons; and he had been previously
granted privileges at hospitals located in all states in which he was licensed to practice medicine.
The Hospital has delegated to its medical staff the authority and responsibility, among
other things, of making recommendations to the Hospital’s Board of Trustees (Board)
concerning an application for medical staff privileges. To provide a framework to govern the
functioning of the medical staff, the Board adopted “Bylaws of the Medical Staff of Saint
Alphonsus Regional Medical Center” (Bylaws). Pursuant to the Bylaws, the Chair of the
Surgery Department conducted an initial investigation and recommended that Dr. Miller should
be granted temporary staff privileges. Effective May 13, 1999, the Hospital granted him
temporary privileges “until processed through appropriate committees and final Board
recommendation or 90 days whichever occurred first consistent with med. staff bylaws.”
The Credentials Committee, chaired by Dr. Adcox, then began its review of Dr. Miller’s
application. Consistent with the Bylaws, Dr. Miller’s name was posted in the doctors’ lounge so
that other members of the Hospital’s medical staff would have an opportunity to submit written
information bearing upon his application for privileges. A number of physicians contacted Dr.
Adcox and advised him to carefully consider Dr. Miller’s application for privileges. As a result
of those contacts, Dr. Adcox made a number of telephone calls between May 18 and 24, 1999, to
physicians who had previously worked with Dr. Miller. Because of negative information
received in these telephone conversations, Dr. Adcox relayed the information to Sandra Bruce,
the Hospital’s President and CEO. She telephoned hospital administrators in Washington and
Mississippi, which confirmed the substance of information obtained by Dr. Adcox. Dr. Miller
was technically competent, but he was unable to work collegially with others, he was critical of
others, and he exhibited serious, repeated behavioral problems in his interactions with support
staff. Based upon that information, the Hospital terminated Dr. Miller’s temporary privileges by
letter dated May 28, 1999, which was signed by Ms. Bruce and Dr. Adcox.
The Credentials Committee met on May 26, 1999, to discuss Dr. Miller’s application for
privileges. As a result of various concerns, the Committee asked Dr. Adcox to conduct further
investigation into the matter. The Committee met again on July 8, 1999, and during that meeting
Ms. Bruce shared the information she had received during her telephone conversations with the
two hospital administrators. On July 15, 1999, the Committee met with Dr. Miller. Prior to that
meeting, Dr. Adcox prepared a written summary of information he had gathered in the telephone

calls he had made in May. That summary omitted favorable information from those telephone
calls, and some of the negative information reported in the summary was inaccurate. Dr. Adcox
testified that because doctors are used to charting by exception, he included in the summary only
the unexpected unfavorable information and omitted the expected favorable information. On
July 21, 1999, the Credentials Committee issued a report to the Hospital’s Medical Executive
Committee recommending that Dr. Miller’s application for privileges be denied.
Under the Bylaws, the Medical Executive Committee was required to make a
recommendation to the Board, after reviewing the report from the Credentials Committee, the
application for privileges, and any other related documentation or relevant information. The
Medical Executive Committee could also conduct a personal interview of the applicant if it so
desired. In this case, the Medical Executive Committee elected not to interview Dr. Miller, and,
after considering the matter, it recommended against granting him staff privileges. Ms. Bruce
gave Dr. Miller written notification of the Committee’s recommendation by letter dated July 26,
1999, to which was attached the Committee’s written report. That report merely adopted the
report and recommendation of the Credentials Committee, which was also attached.
The Bylaws provided that an applicant could then seek review by an Ad Hoc Review
Committee, which would review all prior recommendations and supporting materials and, in its
discretion, could also conduct its own investigation and meet with the applicant or other
individuals. It was then to make a recommendation to the Medical Executive Committee. Dr.
Miller timely requested that his application be reviewed by an Ad Hoc Review Committee. The
Medical Executive Committee appointed an Ad Hoc Committee consisting of four physicians,
none of whom were surgeons, to review Dr. Miller’s application for privileges. Dr. Miller wrote
to the chair of the Ad Hoc Committee requesting that he be permitted to meet with it, but that
request was denied. After reviewing the documents compiled in connection with Dr. Miller’s
application, the Ad Hoc Committee on September 23, 1999, recommended to the Medical
Executive Committee that Dr. Miller’s application for privileges be denied.
On September 27, 1999, the Medical Executive Committee met and voted unanimously,
with two abstentions,1 to adopt the report of the Ad Hoc Committee. By letter dated September
29, 1999, Ms. Bruce gave Dr. Miller written notice of the Medical Executive Committee’s

1
Dr. Adcox and another physician abstained from voting because they had served on the Credentials
Committee.

recommendation that his application for medical staff privileges be denied. The reason given for
that recommendation was the Committee’s determination that Dr. Miller had demonstrated
disruptive behavior in his prior hospital affiliations and that his inability to get along with others
or to rely on others for assistance and advice often resulted in poor surgical judgment and
decisions, which the Committee believed had a high potential to disrupt the medical, nursing and
support staff and could lead to difficulty in those individuals effectively performing their
respective jobs.
The Bylaws provided that if the Medical Executive Committee made a recommendation
adverse to an applicant, he or she could request a formal hearing before a panel of at least three
persons appointed by the Hospital CEO. The members of the Hearing Panel had to be members
of the hospital staff who had not actively participated in the consideration of the matter at any
previous level, or physicians or lay people not connected with the Hospital, or any combination
of such persons. Dr. Miller requested a formal hearing, and Ms. Bruce then appointed three
retired physicians to serve as the Hearing Panel.
The formal hearing was conducted on January 6, 7, and 27, 2000. The Bylaws provided
that the Hearing Panel “shall recommend against the person who requested the hearing unless it
finds that said person has proved that the recommendation which prompted the hearing was
unreasonable, not sustained by the evidence, or otherwise unfounded.” On March 2, 2000, the
Hearing Panel issued its report and recommendation that Dr. Miller’s application for staff
privileges be denied. The Panel summarized its recommendation as follows:
In four different locations in approximately seven years, the Applicant has
repeatedly had significant and perhaps serious problems. There appears to be a
consistent inability to evaluate with insight the dynamics of his professional
environment. The Panel recognizes and appreciates the positive endorsements
from a variety of sources, but these endorsements are not so persuasive as to
negate the findings of the Committees. In his relatively short professional life, the
Applicant has demonstrated an inability to work cooperatively with others; and
the Panel believes there is a likelihood that such inability would cause problems
with patient care at St. Alphonsus.
The Hearing Panel’s report and recommendation was then sent to the Medical Executive
Committee. After reviewing that report, the Medical Executive Committee on March 20, 2000,
sent Ms. Bruce a letter stating that it affirmed its initial recommendation that Dr. Miller’s
application for medical staff membership be denied.

(c)

(b)

Dr. Miller then timely requested the final appeal provided in the Bylaws—an appeal to an
Appellate Review Panel composed of at least three persons appointed by the Chair of the Board.
The Bylaws provided that the failure to request such appellate review constituted acceptance of
the adverse recommendation. Under the Bylaws, the grounds for an appeal were:
There was substantial failure on the part of the Medical Executive
(a)
Committee or Hearing Panel to comply with the Hospital or Medical Staff
Bylaws in the conduct of hearings and recommendations based on
hearings so as to deny due process or a fair hearing; or
the recommendation was made arbitrarily, capriciously or with prejudice;
or
the recommendation of the Medical Executive Committee or Hearing
Panel was not supported by the evidence.
The three-person Appellate Review Panel met on April 25, 2000, to consider the appeal. The
next day it issued its report and recommendation denying the appeal.
On May 17, 2000, the Board met to consider the Medical Executive Committee’s
recommendation that Dr. Miller’s application for privileges be denied. After discussing the
matter, the Board voted unanimously to accept the recommendations of the Appellate Review
Panel and the Medical Executive Committee. As a result, Dr. Miller was denied medical staff
privileges at the Hospital.
On May 22, 2000, Dr. Miller filed this action, and two days later he filed an amended
complaint seeking: (a) a declaratory ruling that the credentialing proceeding involving him was
void; (b) an injunction prohibiting the Hospital from reporting the denial of privileges to the state
of Idaho or to a national physician database; and (c) a writ of mandate requiring the Hospital to
provide him with temporary staff privileges during the pendency of the litigation and permanent
privileges thereafter. He also requested an emergency temporary restraining order and
preliminary injunction to prohibit the Hospital from reporting the denial of his request for
privileges. After hearing evidence, the district court denied that request on June 1, 2000.
Dr. Miller then filed a motion for injunctive relief or mandamus to require the Hospital to
grant him privileges. After an evidentiary hearing, the district court denied his motion for a writ
of mandamus on the ground that the Hospital had no clear legal duty to grant the privileges and
that Dr. Miller had an adequate remedy at law. The district court also denied the request for
injunctive relief. It found that the Bylaws constituted a contract between Dr. Miller and the
Hospital, and he was therefore entitled to demand that the Hospital comply with the letter and

spirit of the procedure set forth in the Bylaws. The district court also held that it could review
the Bylaws to ensure that they afford basic notice and fair hearing procedures, including an
impartial tribunal, but it would apply a deferential standard when reviewing the factual basis for
the Hospital’s decision. It would consider whether there is a factual basis for the Hospital’s
decision, but not substitute its opinion as to the weight or effect of the evidence. The district
court found that the Bylaws provided a fair process for evaluating Dr. Miller’s application for
privileges, and that he had failed to show that the Hospital’s conclusion was without a factual
basis or was otherwise arbitrary, capricious, or improperly motivated.
After obtaining leave of the district court, Dr. Miller filed a second amended complaint
on April 25, 2001, by which he sought: (a) a declaratory ruling that the credentialing proceeding
involving him was void; (b) an injunction requiring the Hospital to grant him privileges and
notify the National Practitioner Data Bank of the reversal of its action; and (c) either specific
performance of the contract between him and the Hospital or damages for its breach.
The Hospital moved for summary judgment. The district court denied the motion on the
ground that both the Bylaws and the contract between Dr. Miller and the Hospital required that
the Hospital act in good faith and without malice when considering his application for privileges
and that there was a genuine issue of material fact regarding that issue.
This case was then tried to the district court, and, at the end of Dr. Miller’s case in chief,
the district court orally granted the Hospital’s motion for involuntary dismissal. On May 28,
2002, the district court issued its written findings of fact and conclusions of law in support of the
granting of the motion. It found that Dr. Miller had failed to prove, by a preponderance of the
evidence, that any particular actor at any stage of the proceedings acted in bad faith or that any
decision of any relevant committee was the product of bad faith.
Dr. Miller filed a notice of appeal on June 17, 2002. The Hospital requested court costs
and attorney fees, to which Dr. Miller timely objected. On June 26, 2002, judgment was entered
dismissing this action with prejudice. On August 6, 2002, the district court issued an order
awarding the Hospital $1,469.00 in costs as a matter of right, $2,497.39 in discretionary costs,
and $126,725.17 in attorney fees under Idaho Code § 12-120 on the ground that this was an
action to recover on a commercial transaction. An amended judgment was entered the same day,
and on August 15, 2002, Dr. Miller filed an amended notice of appeal.

B.
C.
D.
E.
F.

II. ISSUES ON APPEAL
Did the district court err by limiting the scope of its review of the hospital’s decision
denying medical staff privileges to Dr. Miller?
Did the procedures set forth in the Bylaws afford Dr. Miller due process?
Did the Hospital fail to substantially follow the Bylaws?
Did the evidence at the formal hearing support the findings of the Hearing Panel?
Did the district court err in refusing to admit evidence?
Did the district court err in awarding the Hospital attorney fees under Idaho Code § 12-
120(3) on the ground that this was an action to recover on a commercial transaction?
Is the Hospital entitled to an award of attorney fees on appeal under Idaho Code § 12-
120(3)?

III. ANALYSIS
A. Did the District Court Err by Limiting the Scope of Its Review of the Hospital’s
Decision Denying Medical Staff Privileges to Dr. Miller?
In its memorandum opinion denying Dr. Miller’s motion for injunctive relief or
mandamus, the district court stated that it “views its authority to determine the parties’ respective
rights and duties as originating in contract.” The district court relied upon the decision of the
West Virginia Supreme Court of Appeals in Mahmoodian v. United Hospital Center, Inc., 404
S.E.2d 750, 755 (W. Va. 1991), wherein it stated:
Utilizing breach of contract principles, most courts explicitly addressing
the issue presented here have held, and we hereby hold, that the decision of a
private hospital to revoke, suspend, restrict or to refuse to renew the staff
appointment or clinical privileges of a medical staff member is subject to limited
judicial review to ensure that there was substantial compliance with the hospital’s
medical staff bylaws governing such a decision, as well as to ensure that the
medical staff bylaws afford basic notice and fair hearing procedures, including an
impartial tribunal.
The district court concluded that the Bylaws constituted the contract between Dr. Miller and the
Hospital. By the time of the hearing on the Hospital’s motion for summary judgment, the parties
both agreed that a contract was formed when Dr. Miller applied for privileges. In its findings of
fact and conclusions of law entered in support of its grant of the Hospital’s motion for
involuntary dismissal, the district court stated, “The Court holds a contract existed which
required Saint Alphonsus to consider Dr. Miller’s application in accordance with the Bylaws.”

The district court held that because every contract contains an implied covenant of good faith, it
would examine the evidence to determine whether Dr. Miller had proven the existence of bad
faith in the consideration of his application for privileges. The district court concluded “that Dr.
Miller has failed to prove, by a preponderance of the evidence, that any particular actor at any
stage of the proceedings acted in bad faith, much less that any decision of any relevant
committee was the product of bad faith.”
Dr. Miller alleges that the district court erred in finding that he had failed to prove bad
faith. A trial court’s findings of fact will not be set aside on appeal unless they are clearly
erroneous. Bramwell v. South Rigby Canal Co., 136 Idaho 648, 39 P.3d 588 (2001); IDAHO R.
CIV. P. 52(a). When deciding whether findings of fact are clearly erroneous, this Court does not
substitute its view of the facts for that of the trial court. Id. It is the province of the trial court to
weigh conflicting evidence and to judge the credibility of witnesses. Rowley v. Fuhrman, 133
Idaho 105, 982 P.2d 940 (1999). On appeal, this Court examines the record to see if challenged
findings of fact are supported by substantial and competent evidence. Id. Evidence is regarded
as substantial if a reasonable trier of fact would accept it and rely upon it in determining whether
a disputed point of fact has been proven. Bramwell v. South Rigby Canal Co., 136 Idaho 648, 39
P.3d 588 (2001). As explained below, we do not agree that the Bylaws constituted a contract
between Dr. Miller and the Hospital. Because the Hospital has not challenged that conclusion on
appeal, however, we have reviewed the record to determine whether the district court’s findings
regarding good faith are supported by substantial and competent evidence. The district court’s
findings in this regard are not clearly erroneous.
Dr. Miller argues that the district court erred in limiting the scope of its review of the
Hospital’s decision denying him medical staff privileges. He argues that the district court should
not have limited its review to whether or not Dr. Miller had proven bad faith, but it should have
treated this as any other action for breach of contract and made findings of fact upon every
critical issue, including whether there was a sufficient basis for denying him privileges. The
Bylaws provide a list of factors to consider when determining whether to grant staff privileges.
They state:

Each recommendation concerning the appointment or reappointment of an
Applicant and the Clinical Privileges to be granted for the Applicant, and the
determinations made with respect thereto, shall be based upon such Applicant’s
current competence and clinical judgment in the treatment of patients; his or her

professional ethics; his or her education, training and experience; his or her
participation in continuing education; his or her meeting of the qualifications for
staff status and his or her anticipated ability in or history with respect to fulfilling
of the responsibilities of staff status; his or her anticipated and/or historical use of
the Hospital facilities; his or her discharge of obligations hereunder; his or her
compliance with the Medical Staff Bylaws, Rules and Regulations and hospital
and Board policies in this hospital and others where he or she has provided
clinical services; his or her cooperation with other members, patients and hospital
employees; his or her disruption, if any, of hospital operations; his or her physical
health, mental health and emotional stability; and other matters bearing on his or
her ability and willingness to contribute to high quality patient care practices in
the Hospital including, without limitation, previously successful or currently
pending challenges to any professional license or registration or any voluntary
relinquishment of such professional license or registration and any voluntary or
involuntary termination of Medical Staff privileges or any voluntary or
involuntary limitation or reduction or loss of Clinical Privileges at this or another
hospital. The basis for privileges determinations to be made in connection with
appointments, reappointment, or otherwise shall be uniformly applied to all
Applicants and shall include observed clinical performance and the documented
results of quality assurance activities conducted at the Hospital or other health
care facilities. Clinical Privileges shall also be based on pertinent information
concerning clinical performance obtained from staff members, peers and other
sources, especially other institutions and health care settings where the Applicant
exercises or has exercised Clinical Privileges. This information shall be added to
and maintained in the Hospital’s file established for a staff member.
According to Dr. Miller, under the contract between him and the Hospital, he was entitled to
have his application for privileges judged according to the above criteria. He contends that in his
breach of contract action, the district court was required to make findings of fact regarding how
Dr. Miller met these criteria.
This Court has never addressed the issue of what is the appropriate standard of judicial
review, if any, applicable to the denial of staff privileges by a private hospital.2 Courts around
the country are divided on this issue. The positions range from no judicial review, Barrows v.
Northwest Mem. Hosp., 525 N.E.2d 50 (Ill. 1988); to judicial review of whether the hospital
followed the applicable procedures, Rosenberg v. Holy Redeemer Hosp., 506 A.2d 408 (Pa.
Super. Ct. 1986); to judicial review of the applicable procedures to ensure that they afford basic
notice and fair hearing procedures, including an impartial tribunal, Mahmoodian v. United Hosp.

2
We are dealing here only with a private hospital’s denial of medical staff privileges. We express no
opinion herein regarding either the appropriate standard for judicial review of a private hospital’s decision to revoke
or refuse to renew hospital privileges or the appropriate standard for judicial review of a public hospital’s decision to
deny, revoke, or refuse to renew staff privileges.

Ctr. Inc., 404 S.E.2d 750 (W. Va. 1991); to judicial review of whether a regulation giving rise to
exclusion is arbitrary, capricious and unrelated to any legitimate aim of the hospital, Reiswig v.
St. Joseph’s Hosp. and Med. Ctr., 634 P.2d 976 (Ariz. Ct. App. 1981); to judicial review of
whether the denial is founded upon reasonable and sensible grounds and is supported by
sufficient reliable evidence to justify the result, Garrow v. Elizabeth Gen. Hosp. and Dispensary,
401 A.2d 533 (N. J. 1979). Courts have used various rationales in order to justify judicial
intervention into the affairs of a private hospital. We believe, however, that the determination of
the appropriate standard of judicial review, if any, must begin with the applicable law.
The district court concluded, and the parties agreed, that the Bylaws constituted a
contract between Dr. Miller and the Hospital. That conclusion was in error. The Hospital’s
Bylaws did not confer any contractual rights. We agree with the reasoning of the Georgia Court
of Appeals in St. Mary’s Hospital of Athens, Inc. v. Radiology Professional Corp., 421 S.E.2d
731, 736 (1992) (citations omitted), wherein the court stated:
Our courts have held that because hospitals have the authority to establish and
revise rules and regulations governing the appointment of physicians to the
hospital staff, medical staff bylaws alone do not create any contractual right to
continuation of staff privileges. Indeed, hospitals are entitled to change the staff
bylaws or the terms of appointment even if that act results in the termination of a
physician’s staff privileges. Given that the bylaws themselves confer no
contractual rights, we conclude that no cause of action lies against a hospital ex
contractu based solely on an alleged breach of bylaw provisions.
The Bylaws merely provided the procedures setting forth how the Hospital would process Dr.
Miller’s application for medical staff privileges. Dr. Miller’s agreement in his application to
abide by the Bylaws, and the Bylaws provision stating that by applying for appointment he
agreed to be bound by them, did not create a contract between Dr. Miller and the Hospital. We
see no need to expand contract law in order to provide a basis for some form of judicial review
of applications for medical staff privileges.
There are two provisions of Idaho law that relate to this issue. Idaho Code § 39-1395
provides, insofar as is relevant, as follows:
Except as otherwise provided in this section, no provision or provisions of
this section shall in any way change or modify the authority or power of the
governing body of any hospital to make such rules, standards or qualifications for
medical staff membership as they, in their discretion, may deem necessary or
advisable, or to grant or refuse membership on a medical staff.

An applicant for medical staff membership may not be denied membership
solely on the ground that the applicant holds a license to practice podiatry issued
by the Idaho state board of podiatry. The criteria utilized for granting medical
staff membership shall be reasonable and shall not discriminate against podiatry.
The process for considering applications for medical staff membership and
privileges shall afford each applicant due process.
All applications for medical staff membership shall be acted upon within
one hundred twenty (120) days from the date the required information is
submitted.
The title to the legislation adopting § 39-1395 stated that its purpose was “to provide standards
for determining staff membership for hospitals.” Ch. 134, 1992 Idaho Sess. Laws 421.
The first paragraph of § 39-1395 recognizes the general rule that hospitals have the
authority “to make such rules, standards or qualifications for medical staff membership as they,
in their discretion, may deem necessary or advisable.” The statute limits the hospital’s discretion
in three areas, however, to prevent discrimination against podiatrists, to require that the process
for considering applications afford each applicant due process, and to require that applications be
acted upon within one-hundred-twenty days.
The legislature has also given the Idaho Department of Health and Welfare authority to
adopt rules, regulations, and standards for the licensing of hospitals. IDAHO CODE § 39-1303a
(2002). Pursuant to that authority, the Department has adopted3 IDAPA 16.03.14.200.01.d
which provides:
Medical Staff Appointments and Reappointments:
d.
i.
A formal written procedure shall be established for appointment to
the medical staff;
ii.
Medical staff appointments shall include an application for
privileges, signature of applicant to abide by hospital bylaws, rules, and
regulations, and delineation of privileges recommended by the medical staff. The
same procedure shall apply to nonphysician practitioners who are granted clinical
privileges.
iii.
The procedure for appointment and reappointment to the medical
staff shall involve the administrator, medical staff, and the governing body.
Reappointments shall be made at least biannually.

3
The Department has also adopted IDAPA 16.03.14.250.01.b, which provides, insofar as is relevant, “The
medical staff, with governing body approval, shall develop and implement a written procedure for determining
qualifications for medical staff appointment, and for determining privileges.”

iv.
The governing body bylaws shall approve medical staff authority
to evaluate the professional competence of applicants, appointments and
reappointments, curtailment of privileges, and delineation of privileges;
v.
Applicants for appointment, reappointment or applicants denied to
the medical staff privileges shall be notified in writing;
vi.
There shall be a formal appeal and hearing mechanism adopted by
the governing body for medical staff applicants who are denied privileges, or
whose privileges are reduced.
Thus, Idaho Code § 39-1395 requires hospitals to adopt procedures for considering applications
for medical staff membership and privileges that afford each applicant due process. IDAPA
16.03.14.200.01.d requires that those procedures be in writing; that the applicant must agree to
abide by hospital bylaws, rules, and regulations; that the procedures involve the hospital
administrator, medical staff, and governing body; that the medical staff must have the authority
to evaluate applicants; that applicants who are denied privileges must be notified in writing; and
that there must be a formal appeal and hearing mechanism for applicants who are denied
privileges.
Implicit in those mandates is the requirement that the hospital substantially follow
whatever procedures it adopts for determining qualifications for medical staff appointment. It
would be meaningless to require a hospital to adopt written procedures that afford due process to
applicants for medical staff privileges unless the hospitals were also required to substantially
comply with the procedures they adopt. Thus, the appropriate standard of judicial review in this
case is limited to determining whether the procedures adopted by the Hospital afforded each
applicant due process, whether the procedures included the requirements set forth in IDAPA
16.03.14.200.01.d, and whether the Hospital substantially followed its procedures when
considering Dr. Miller’s application for staff privileges. The district court did not err by failing
to expand the scope of judicial review as asserted by Dr. Miller.

B. Did the Procedures Set Forth in the Bylaws Afford Dr. Miller Due Process?
Idaho Code § 39-1395 mandates that hospitals have a process for considering
applications for medical staff membership and privileges that affords each applicant due process.
Due process is a flexible concept, Bradbury v. Idaho Judicial Council, 136 Idaho 63, 28 P.3d
1006 (2001), and the legislature has not specified what process it considers due in this
circumstance. A common definition of procedural due process is the opportunity upon

reasonable notice for a fair hearing before an impartial tribunal. See Id.; Aberdeen-Springfield
Canal Co. v. Piper, 133 Idaho 82, 982 P.2d 917 (1999); Yellowstone Pipe Line Co. v.
Drummond, 77 Idaho 36, 287 P.2d 288 (1955); Abrams v. Jones, Comm’r of Dept. of Law
Enforcement, 35 Idaho 532, 207 P. 724 (1922). Implicit in the requirement of a fair hearing is an
understandable standard against which the applicant’s qualifications can be judged, Dupont v.
Idaho State Bd. of Land Comm’rs, 134 Idaho 618, 7 P.3d 1095 (2000), although the specificity
required here would not be as great as is required for criminal statutes. Dr. Miller argues that the
Bylaws deprived him of due process4 in several respects.
1. Did the Bylaws provide an understandable standard? Dr. Miller argues that the
Bylaws did not provide a clear, ascertainable standard against which his conduct could be
measured. The two standards that he challenges are “his or her cooperation with other members,
patients and hospital employees” and “his or her disruption, if any, of hospital operations.” He
argues that such standards are too vague unless they are tied to patient care or safety.
These two factors were included in a list ending with the statement, “and other matters
bearing on his or her ability and willingness to contribute to high quality patient care practices in
the Hospital.” This phrase could be read as indicating that the preceding factors were understood
as bearing on the applicant’s ability and willingness to contribute to high quality patient care
practices. The Hospital appears to have so interpreted the two challenged factors.
In its report, the Credentials Committee stated, “The primary concerns are related to
disruptive behavior, possible creation of a hostile work environment and concerns that disruptive
behavior has interfered with clinical decision making/medical care.”
When initially
recommending that Dr. Miller’s application for privileges be denied, the Medical Executive
Committee stated, “The primary concerns relate to disruptive behavior, possible creation of a
hostile work environment and concerns that the disruptive behavior has interfered with clinical
decision making/medical care in the past.” Dr. Miller’s application was then considered by the
Ad Hoc Review Committee, which also linked its negative recommendation to patient care. In
its report, it concluded:
The Committee believes that Dr. Miller has demonstrated disruptive
behavior at all prior locations of practice. This included behavior that was
contentious, threatening, unreachable, insulting and at times litigious. His

4
He bases his due process argument not upon Idaho Code § 39-1395, but upon appellate opinions from other
jurisdictions holding that applicants for medical staff privileges must be afforded due process.

inability to get along with others or to rely on others for assistance and advice
often resulted in poor surgical judgment and decisions. His behavior has high
potential to disrupt the medical, nursing and support staff which could lead to
difficulty in these individuals to perform their respective jobs effectively. We
believe that his behavior holds a significant threat to patient care at Saint
Alphonsus.
Dr. Miller then had a formal hearing before the Hearing Panel. It also linked its adverse
recommendation to patient care. It summarized its recommendation as follows:
In four different locations in approximately seven years, the Applicant has
repeatedly had significant and perhaps serious problems. There appears to be a
consistent inability to evaluate with insight the dynamics of his professional
environment. The Panel recognizes and appreciates the positive endorsements
from a variety of sources, but these endorsements are not so persuasive as to
negate the findings of the Committees. In his relatively short professional life, the
Applicant has demonstrated an inability to work cooperatively with others; and
the Panel believes there is a likelihood that such inability would cause problems
with patient care at St. Alphonsus.
The Appellate Review Panel then considered the application and recommended that the Board
accept the report and recommendation of the Hearing Panel. The Board did so, and made the
specific finding that Dr. Miller “failed to demonstrate his ability to work with others; and that the
ability to work with others is an important qualification that would likely impact patient care.”
Thus, throughout the process, the various recommendations to deny Dr. Miller’s application for
medical staff privileges and the final determination to deny that application were all tied to
patient care. He was on notice from the initial recommendation of the Credentials Committee
through the various levels of review that the primary issue was the concern that his inability to
work cooperatively with others could adversely impact patient care. The challenged factors in
the Bylaws for evaluating applications were not so vague as to deny Dr. Miller due process as
required by Idaho Code § 39-1395.
2. Did Dr. Miller have an impartial tribunal? The Bylaws provide that any member
of the medical staff who is appointed to serve on the Hearing Panel cannot have actively
participated in the consideration of the matter at any previous level. In compliance with this
provision, Ms. Bruce appointed three retired physicians to serve on the Hearing Panel. The
Bylaws do not prohibit, however, a physician who is in direct economic competition with an
applicant from serving on the Hearing Panel. In this case, however, the three members of the
Hearing Panel were all retired, so none of them was an economic competitor of Dr. Miller.

Dr. Miller contends that Dr. Austin Cushman, one of the members of the Credentials
Committee, was a general surgeon who was in direct economic competition with Dr. Miller and
that he had allegedly made negative comments about Dr. Miller’s employer Primary Health, Inc.
Dr. Miller alleges that Dr. Cushman, should therefore not have served on the Credentials
Committee when Dr. Miller’s application for privileges was being considered. The due process
hearing to which Dr. Miller was entitled was, under the Bylaws, the hearing before the Hearing
Panel. The various levels of review prior to that hearing are not required in order to provide
procedural due process. Dr. Miller has not presented any argument or authority supporting the
proposition that such other levels of review, if provided, must comport with due process. Under
the facts of this case, we need not address that issue. The vote of the Credentials Committee was
unanimous, and the district court found that “Dr. Cushman did not express any opinion at any
time to the Credentials Committee as to whether Dr. Miller’s application for privileges should be
granted. Dr. Cushman did not attempt to exert any influence over the Credentials Committee’s
decision.” Thus, even if Dr. Cushman’s service on the Credentials Committee violated the
statutory right to due process provided by Idaho Code § 39-1395, any such violation was
harmless.
Dr. Miller also points out that some members of the Credentials Committee also served
on and participated in the decision of the Medical Executive Committee, that a physician who
served on the Ad Hoc Review Committee also participated in the final action of the Medical
Executive Committee, and that Ms. Bruce provided information to the Credentials Committee
and the Board and participated in the meeting of the Medical Executive Committee where it
voted to recommend against approving Dr. Miller’s request for medical staff privileges. Dr.
Miller does not argue, however, that any of this conduct violated either the procedural due
process required by Idaho Code § 39-1395 or the Bylaws.
Dr. Miller also argues that various members of the medical staff who participated in
reviewing his request for medical staff privileges were motivated by bias against his employer
Primary Health, Inc. The district court found to the contrary, and that finding is supported by
substantial and competent evidence.

C. Did the Hospital Fail to Substantially Follow the Bylaws?

1. Did the Hospital properly consider the various factors listed in the Bylaws as a
basis for determining whether or not to grant medical staff privileges? One of the factors
listed in the Bylaws as a basis for determining whether to grant medical staff privileges is the
applicant’s “current competence and clinical judgment in the treatment of his patients.” Another
is “pertinent information concerning clinical performance obtained from staff members, peers
and other sources.” Dr. Miller argues that the Hospital failed to give sufficient weight to these
two factors. He also contends that he was not treated equally because he is the first physician to
be denied medical staff privileges by the Hospital based upon his inability to work cooperatively
with others. The weight to be given the various factors is entirely within the discretion of the
Hospital and is not subject to judicial review.
2. Did the Hospital fail to substantially comply with the Bylaws by not providing
Dr. Adcox’s notes prior to the hearing? The Bylaws provided that an applicant can request a
formal hearing before a Hearing Panel when the Medical Executive Committee recommends
against granting him or her medical staff privileges. The Bylaws further provided:
If pertinent, all patient records or information supporting the recommendation
shall be identified. This statement may be amended or added to at any time, even
during the hearing so long as material is relevant to the continued appointment or
Clinical Privileges of the person requesting the hearing, who shall have sufficient
time to study this additional information and rebut it.
By letter dated December 1, 1999, Dr. Miller’s counsel requested from the Hospital’s counsel,
“If any of the hospital’s witnesses are going to be giving testimony based on notes of
conversations, I think we are entitled to see those notes, as are the hearing panel members.” The
Hospital’s counsel responded by letter dated December 3, 1999, stating:
In response to your December 1, 1999 letter, I do not have any objection
to notes of members of the hospital staff being admitted into evidence at the
hearing provided that such individual is called to testify and testifies from his or
her notes. I do not have copies of such individual’s notes nor does the medical
staff office. Any such notes (and assuming such notes exist) would be maintained
by the individual staff members who took notes. As a result, I would propose to
deal with this at the time of the hearing and not try to provide the notes to the
hearing panel in advance.
By letter dated December 17, 1999, Dr. Miller’s counsel again requested such notes, particularly
any made by Dr. Adcox, in order to prepare a response. He stated that Dr. Miller needed to
know the source of several allegations in order to respond. By letter dated December 28, 1999,
the Hospital’s counsel responded, “The notes of individual physicians who participated in

telephone interviews are not intended by me to be an exhibit at the hearing. Obviously, to the
extent I call a witness who will testify from notes, you will be entitled to review those notes.”
Dr. Adcox was the first witness called to testify when the formal hearing before the
Hearing Panel commenced on January 6, 2000. As chair of the Credentials Committee, he had
between May 18 and 24, 1999, telephoned various physicians who had previously worked with
Dr. Miller and had made notes of those telephone calls. When he was asked to testify regarding
those conversations, he requested permission to review his personal notes. At that point, a copy
of the notes was given to Dr. Miller’s counsel. After Dr. Adcox testified to his telephone
conversation with one physician, Dr. Miller’s counsel objected to anything from the notes
because they had not been provided to him prior to the hearing. The hearing officer ruled that
Dr. Adcox could use the notes to refresh his memory, but he could not read from them or quote
them. That was a discretionary ruling of the hearing officer that is not subject to judicial review.
Dr. Miller also alleges that he could not adequately prepare for the hearing without the
notes. He was notified before the hearing of the reason for the denial of his application for
privileges and provided with the names of those persons from whom information had been
obtained. The Bylaws did not require that the expected testimony of the various witnesses be
disclosed prior to the hearing. They only require the exchange of a list of the names and
addresses of witnesses that a party intends to call and a list of exhibits that the party intends to
introduce at the hearing. The Hospital did not offer Dr. Adcox’s notes as an exhibit. The
Hospital did not fail to substantially comply with the procedures set forth in the Bylaws.

D. Did the Evidence at the Formal Hearing Support the Findings of the Hearing Panel?
The Bylaws provided:
The hearing shall not be conducted according to rules of law relating to the
examination of witnesses or presentation of evidence. Any relevant evidence
shall be admitted by the Presiding Officer if it is the sort of evidence on which
responsible persons are accustomed to rely in the conduct of serious affairs,
regardless of the admissibility of such evidence in a court of law.
Dr. Miller contends that Dr. Adcox’s notes contained many inaccuracies, that they did not
include the positive comments made by those Dr. Adcox contacted, and Dr. Adcox accepted
without further investigation various negative comments made by two physicians that he
contacted. As a result, Dr. Miller contends that no responsible person should have relied upon

Dr. Adcox’s testimony. He also argues that some of the findings of the Hearing Panel were not
supported by the evidence.
Dr. Miller has not pointed to any provision in the law that permits judicial review of the
findings of the Hearing Panel. The admission of evidence is within the sole discretion of the
hearing officer, and the Panel’s findings are not reviewable by a court.

E. Did the District Court Err in Refusing to Admit Evidence?
Dr. Miller contends that the district court erred in refusing to admit the transcript of the
testimony before the Hearing Panel into evidence for all purposes. He argues that it was
relevant, and therefore admissible, even though it was hearsay. The district court was not
conducting an appellate review of the decision of the Hearing Panel. It therefore did not err in
refusing to admit the transcript into evidence.
Dr. Miller also contends that the district court erred by refusing to permit him to take the
depositions of out-of-state physicians who were familiar with his professional behavior. He
argues that because the Hospital relied upon unfavorable comments by two out-of-state
physicians contacted by Dr. Adcox, he should be permitted to depose other physicians where Dr.
Miller practiced in order to show that those two physicians were influenced by bias or prejudice.
The district court correctly recognized that it could not substitute its judgment for that of the
Hospital regarding whether or not Dr. Miller should be granted medical staff privileges. The
deposition testimony of these other physicians was not relevant to any matters to be decided by
the district court. It therefore did not err in refusing to permit Dr. Miller to take those
depositions.

E. Did the District Court Err in Awarding the Hospital Attorney Fees Under Idaho Code §
12-120(3) on the Ground that This Was an Action to Recover on a Commercial
Transaction?
The district court found that this was an action to recover on a commercial transaction
and awarded the Hospital attorney fees pursuant to Idaho Code § 12-120(3) in the sum of
$126,725.17. That statute provides:
(3) In any civil action to recover on an open account, account stated, note,
bill, negotiable instrument, guaranty, or contract relating to the purchase or sale of
goods, wares, merchandise, or services and in any commercial transaction unless

otherwise provided by law, the prevailing party shall be allowed a reasonable
attorney’s fee to be set by the court, to be taxed and collected as costs.
The term “commercial transaction” is defined to mean all transactions
except transactions for personal or household purposes. The term “party” is
defined to mean any person, partnership, corporation, association, private
organization, the state of Idaho or political subdivision thereof.
In his second amended complaint, Dr. Miller alleged as one count that his application for
medical staff privileges created a contract between him and the Hospital and that the Hospital
breached that contract. The focus of the trial was whether the Hospital acted in good faith in the
performance of its alleged contractual obligations. Although we have held that there was no
contract, that does not end the inquiry regarding the Hospital’s claim for attorney fees.
We have previously held that if a party alleges the existence of a contractual relationship
of the type embraced by Idaho Code § 12-120(3), that claim triggers the application of the
statute, and the prevailing party is entitled to an award of attorney fees even though no liability
under a contract was ultimately established. Property Mgmt. West, Inc. v. Hunt, 126 Idaho 897,
894 P.2d 130 (1995); Magic Lantern Prods., Inc. v. Dolsot, 126 Idaho 805, 892 P.2d 480 (1995).
Likewise, if a party asserts a claim that is based upon the existence of an alleged commercial
transaction, attorney fees are awardable to a prevailing party who defends against such claim
even if the alleged commercial transaction is found not to have existed. In that circumstance,
attorney fees are awardable under Idaho Code § 12-120(3) even if there were other theories also
asserted in support of the claim that would not have triggered the application of the statute.
Great Plains Equip., Inc. v. Northwest Pipeline Corp., 136 Idaho 466, 36 P.3d 218 (2001),
Therefore, if the contractual relationship asserted by Dr. Miller in his second amended complaint
constituted the allegation of a claim based upon a commercial transaction between him and the
Hospital, then the Hospital was entitled to an award of attorney fees under Idaho Code § 12-
120(3).

Idaho Code § 12-120(3) defines a commercial transaction as “all transactions except
transactions for personal or household purposes.” Dr. Miller’s application for medical staff
privileges was not for personal or household purposes. Thus, if the contract alleged in his second
amended complaint constituted a transaction, then it would be a commercial transaction under
the statute. We have previously held that a transaction cannot exist under the statute unless the
parties dealt with each other directly. Ag Servs. of Am., Inc. v. Kechter, 137 Idaho 62, 44 P.3d
1117 (2002); Great Plains Equip., Inc. v. Northwest Pipeline Corp., 136 Idaho 466, 36 P.3d 218

(2001); Brower v. E.I. DuPont De Nemours and Co., 117 Idaho 780, 792 P.2d 345 (1990). We
have also held that a commercial transaction can exist in the absence of a contract. Great Plains
Equip., Inc. v. Northwest Pipeline Corp., 136 Idaho 466, 36 P.3d 218 (2001). In this case, Dr.
Miller’s allegation of a contract between him and the Hospital that was for other than personal or
household purposes constituted the allegation of a commercial transaction. Even though we have
held that no such contract existed, the Hospital was entitled to an award of attorney fees under
Idaho Code § 12-120(3).

G. Is the Hospital Entitled to an Award of Attorney Fees on Appeal under Idaho Code §
12-120(3)?
The Hospital has requested an award of attorney fees on appeal under Idaho Code § 12-
120(3). Since we have upheld the award below under that statute, the Hospital is also entitled to
an award of attorney fees on appeal. Eagle Water Co., Inc. v. Roundy Pole Fence Co., Inc., 134
Idaho 626, 7 P.3d 1103 (2000).

IV. CONCLUSION
We affirm the judgment of the district court dismissing this action with prejudice and
awarding attorney fees to the Hospital under Idaho Code § 12-120(3). We award the Hospital
costs and attorney fees on appeal.

Chief Justice TROUT, and Justices SCHROEDER, KIDWELL and BURDICK
CONCUR.