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Berman v. Valley Hospital

Decided: June 30, 1986.

LAWRENCE J. BERMAN, M.D., AND SAMUEL A. CASSELL, M.D., PLAINTIFFS-APPELLANTS,
v.
VALLEY HOSPITAL AND BOARD OF TRUSTEES OF THE SOCIETY OF VALLEY HOSPITAL, DEFENDANTS-RESPONDENTS



On certification to the Superior Court, Appellate Division, whose opinion is reported at 196 N.J. Super. 359 (1984).

For reversal -- Chief Justice Wilentz, and Justices Clifford, Handler, Pollock, O'Hern and Stein. For affirmance -- None. The opinion of the Court was delivered by Handler, Justice.

Handler

[103 NJ Page 101] This appeal raises an issue comparable to that considered in a companion case, Desai v. St. Barnabas Medical Center, 103 N.J. 79 (1986), also decided today. The defendant, Valley Hospital, located in Ridgewood, N.J., refused to admit plaintiffs-physicians to its regular medical staff pursuant to a policy denying medical staff privileges to doctors who practiced medicine in the hospital's service area for more than two years. The doctors commenced this action, contending that the hospital's

policy was arbitrary and unlawfully exclusionary and was in violation of anti-trust and tort laws.

The trial court bifurcated the issues and proceeded with the trial of the claims relating to the reasonableness and validity of the restrictive staff-admissions policy of the hospital. The court ruled that the hospital's restrictive admissions policy was invalid both on its face and as applied to plaintiffs in this case. The Appellate Division granted leave to appeal from this judgment and, on the basis that the trial court had used the wrong standard in reviewing the validity of the hospital's policy, unanimously reversed the judgment of the trial court. 196 N.J. Super. 359 (1984). The Appellate Division stayed enforcement of its judgment so that plaintiffs, to whom the hospital had granted provisional staff privileges, could continue to exercise those privileges at Valley Hospital pending proceedings in this Court. We granted plaintiff's petition for certification. 99 N.J. 229 (1985).*fn1

I.

The plaintiffs, Dr. Lawrence J. Berman and Dr. Samuel A. Cassell, are board-certified specialists in internal medicine. Dr. Berman's subspecialty is nephrology, Dr. Cassell's subspecialty is pulmonary medicine. These doctors are part of a group of seven internists with various subspecialties known as the Paterson Clinic, which maintains offices in Paterson and Ridgewood. Prior to their applications for full staff privileges both doctors had courtesy privileges at Valley Hospital, allowing them four hospital admissions and ten consultations per year for patients residing in Valley Hospital's primary service area.

The defendant Valley Hospital has 387 licensed beds of which 273 are medical/surgical. Its primary service area embraces

sixteen municipalities in northwestern Bergen County. The hospital claimed that prior to 1977 it began to experience a problem of overcrowding and overutilization that was attributable to doctors from surrounding areas obtaining staff privileges at the hospital. It asserted that its medical/surgical bed occupancy rate in 1977 reached 89% and that the number of doctors on their medical staff had risen from 172 in 1968 to 260 in 1977.

In October 1977, administrators at Valley Hospital were informed that members of the Paterson Clinic were going to apply for full privileges at Valley Hospital. This information was communicated by administrators of nearby hospitals who were concerned about what they perceived as a pattern of flight from their "inner city" hospitals to Valley Hospital. Upon hearing these "rumors," the Executive Vice President and Director of the hospital called for an emergency meeting of the hospital's medical staff at 7:00 a.m. on October 14, 1977. The director and staff decided to recommend a three-month "freeze" or "moratorium" on applications for staff privileges at the hospital. Members of the executive committee of the hospital's board of trustees were polled by telephone that same day and the "freeze" was adopted. On October 26, 1977, the entire board of trustees ratified the decision of the executive committee.

A special committee, headed by William Saunders, a hospital trustee and lawyer, was appointed to study the bed occupancy problem and to replace the temporary "freeze" with a more permanent solution. On November 20, 1977, the committee reviewed four proposals for dealing with the bed occupancy problem. These were:

(1) admission to the Medical Staff or continued appointment to the Medical Staff would depend on having a fixed percentage of a physician's admissions from within the primary service area; (2) establishment of a table of organization under which the number of physicians needed in each of the departments and in each of the areas of specialty would be fixed and appointment would be available when vacancies occurred in the list; (3) admission to the Medical Staff would be limited to those physicians who have not been in private practice more than two years at Bergen, Passaic, Rockland or Sussex Counties with the

following exceptions: (a) exceptions would be made for those physicians having specialties for which there was limited demand; (b) the two-year requirement would not apply if the physician had not been in private practice (having an office open with regular hours) during the five years preceding his application; (c) a physician who had been a member of The Valley Hospital Medical Staff previously would be eligible for admissions; and (4) a preference in elective admissions would be given to residents of the primary service area.

The committee arrived at the tentative conclusion that both the third and fourth proposals should be adopted. However, after the medical advisers to the committee expressed the opinion that the fourth proposal could not be effectively administered, the committee recommended adoption of the third proposal alone, namely, that medical staff admissions be limited to doctors who had not been in private practice for more than two years in Bergen, Passaic, Rockland, or Sussex Counties, or met a predetermined need. Thereafter, on December 14, 1977, the hospital adopted this proposal by resolution.

Dr. Berman requested an application for full staff privileges on December 6, 1977. He was informed by letter dated December 14, 1977, that Valley Hospital was not releasing any applications until after the board of trustees acted on the proposals they were reviewing, and subsequently on January 6, 1978, that his application was denied pursuant to the December 14, 1977, resolution. When, on August 4, 1980, Dr. Berman again inquired about appointment to the active medical staff at Valley Hospital, he was told he was ineligible under the December 1977 resolution. Dr. Berman nevertheless filed an application for staff privileges on October 10, 1980, as did Dr. Cassell, who applied on March 20, 1981. Because the plaintiffs had been in private practice in the hospital service area for more than two years, their applications were denied under the December 1977 resolution. After hearings before the hospital's boards, both were also denied full staff privileges under the criterion relating to a predetermined need for their subspecialties.

Drs. Berman and Cassell contended that they were being professionally and economically injured by the restrictive staff admissions policy. Further, ...


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