We’re in the process of reviewing our Medical Staff Bylaws, so we need to get the Bylaws Committee up and running. The Bylaws state that the Bylaws Committee will be chaired by the Vice President of the Medical Staff, but the Vice President resigned a few months ago. Should the President of the Medical Staff just appoint another Bylaws Committee chair? Or should it be the MEC that appoints the chair? Or should the Bylaws Committee just vote on a new chair?
OUR ANSWER FROM HORTYSPRINGER ATTORNEY NICHOLAS CALABRESE:
The Medical Staff Bylaws should have the answer. In the article in the Bylaws that deals with officers, their eligibility criteria, duties and election, there should be a section regarding what happens when there are vacancies. Vacancies can be filled based on what works best for a particular hospital. Usually, if there is a vacancy in the office of President of the Medical Staff, the Vice President is elevated to that role. If there is a vacancy in the office of Vice President, Secretary or Treasurer, the Medical Executive Committee will usually appoint an individual to fill the office for the remainder of the term or until a special election can be held, whichever is decided by the Medical Executive Committee. In this case, let’s assume that the MEC appoints the individual, in which case, the VP can take the reins of the Bylaws Committee.
QUESTION: Our Bylaws Committee would like to know more about exclusive contracts. Specifically, we want to know where the hospital board gets the authority to enter into an exclusive contract. Does this come from the medical staff bylaws or from somewhere else?
ANSWER: Under the general principles of corporate law, hospital boards are afforded broad discretion in how they manage the hospital’s business affairs, including the ability to enter into exclusive contracts. These general principles are reflected in laws at the federal and state levels, as well as in the standards of various health care accreditation bodies. Consequently, the board’s authority to enter into an exclusive contract is bestowed by law, not by the medical staff bylaws.
Courts often view exclusive contract decisions as “quasi-legislative” actions, in contrast to an “adjudicatory” action aimed at a particular physician (which might give rise to a hearing). So long as the hospital board acts rationally when it undertakes these quasi-legislative actions, courts are likely to defer to the board’s business judgment.
Although the medical staff bylaws are not the source of this authority, they may affect the process and consequences of entering into an exclusive contract. For example, the bylaws (or credentials policy) may outline a process for the Medical Executive Committee to review and comment on the clinical performance and service implications of the proposed exclusive contract. This review-and-comment process is limited solely to the clinical performance aspects of the contract; the actual terms of the arrangement (especially financial terms relating to remuneration) would not be disclosed to the Medical Executive Committee.
It is also important to see how the medical staff bylaws frame the issue of medical staff privileges. The definition of medical staff privileges is relevant when assessing whether the exclusive contract arrangement will entitle the affected practitioners to any kind of hearing. When you are drafting bylaws, we do not recommend that you give hearings to physicians affected by the exclusive contract. Entering into this kind of contract is a managerial business decision – it is not a judgment about a particular practitioner’s competence or professionalism.
Most state laws (and most courts) recognize these core principles, but there are some exceptions. Be sure to check the laws of your state before proceeding with an exclusive arrangement.
If you’d like more information on these issues, you should join us for our November 30 audio conference on Exclusive Contracts: New Challenges, New Opportunities. Henry Casale and Josh Hodges will share best practices for entering into an exclusive contract, including recommendations on drafting the agreement and tips on avoiding common pitfalls. More information will be available on our website in the near future.