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Desai v. St. Barnabas Medical Center

Decided: June 30, 1986.

MAHESH R. DESAI, M.D., PLAINTIFF-APPELLANT,
v.
ST. BARNABAS MEDICAL CENTER, DEFENDANT-RESPONDENT



On certification to the Superior Court, Appellate Division.

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, J.

Handler

[103 NJ Page 83] The main issue posed by this appeal is whether the plaintiff, Mahesh Desai, a medical doctor, was unlawfully denied hospital staff privileges by the defendant, St. Barnabas Medical Center in Livingston (St. Barnabas or hospital). Dr. Desai instituted an action against the defendant hospital seeking to compel the hospital to admit him to its regular medical staff. The law suit was filed after St. Barnabas had thrice rejected Dr. Desai's application for staff privileges. Dr. Desai alleged that the exclusionary application of the hospital's closed-staff admissions policy was arbitrary and capricious. The hospital filed an answer denying the allegations of the complaint and contending generally that its closed-staff policy and actions taken under it were proper. In an unreported opinion, the trial court denied Dr. Desai's requested relief. Following Dr. Desai's appeal, the Appellate Division affirmed the judgment of the trial court in a two sentence per curiam opinion. We granted certification. 99 N.J. 216 (1984).

I.

Plaintiff is a qualified medical doctor, having been licensed to practice medicine in New Jersey in June of 1978. Further, he is board certified in internal medicine and gastroenterology, which is a specialty covering enterology and the diagnosis and treatment of diseases of the digestive tract. Defendant is a non-profit, non-sectarian hospital, located in Livingston, New Jersey. The hospital has 705 licensed beds, with approximately 675 attending physicians and a house staff of 120. The hospital services an area that includes Essex, Morris, Sussex and Union Counties.

In 1969, in response to perceived bed overcrowding and over-utilization of the hospital's resources, the hospital adopted a so-called "closed-staff" policy governing the admission of medical doctors to its staff. The staff-admissions policy was, according to the hospital, intended to limit, but not completely close, the hospital staff. Under this policy, a doctor applying for admission to the hospital's medical staff would be given favorable consideration only if he was professionally qualified and if he satisfied one or more of six criteria.*fn1 The trial court concluded that the single most important factor in determining whether a doctor would be admitted to the staff of St. Barnabas was the final criterion, namely, "whether the physician is associating himself with an existing member of the medical staff."

In August 1978 Dr. Desai purchased the medical practice of a retiring physician in Irvington, New Jersey. On July 3, 1978, in anticipation of establishing his practice, Dr. Desai applied simultaneously for hospital privileges at Beth Israel Hospital in

Newark and St. Barnabas Medical Center in Livingston. A few weeks later he also applied for hospital privileges at Irvington General Hospital. Dr. Desai was granted privileges at both Beth Israel and Irvington General Hospitals, and later, at East Orange General Hospital and the Hospital Center at Orange.

On October 20, 1978, the Department of Medicine at St. Barnabas voted to deny plaintiff's application and formally notified him of the rejection in a letter dated May 1, 1979. The reasons stated were "insufficient medical and surgical beds" and the absence on the part of Dr. Desai of "specialized skills which cannot presently be supplied by members of the Staff."

Following successive reapplications, Dr. Desai received identical rejection letters, on May 5, 1980, and June 26, 1981. In addition, on November 6, 1981, following a hearing on Dr. Desai's application before the hospital's Joint Conference and Credential Committee, plaintiff was notified, without explanation, that the decision to reject his application had been affirmed. The hospital claimed, however, that the reasons for the denials of Dr. Desai's application were those set forth in its May 1, 1979, letter of rejection.

The trial court, addressing the question of the original need to adopt the closed-staff policy, determined that the closed-staff policy served to inhibit or reduce a more intensive use of hospital beds. Without making a specific finding of fact regarding the bed occupancy and utilization rate, the trial court implied that the hospital was not completely filled at the present time, but only because of its implementation of the closed-staff policy in 1969. It concluded that there was a "good, sound reason" and a "need for the hospital doing what it did [in adopting a closed-staff admissions policy]."

There was also testimony regarding overcrowding and over-utilization of the endoscopy rooms.*fn2 The endoscopy rooms at the hospital are normally available from 7:30 a.m. to 3:00 p.m., Monday through Friday, although they can potentially be used starting at 7:00 a.m., after 3:00 p.m., or on weekends, for emergencies or prolonged cases. Dr. Siegel, the former chief of the gastroenterology section of the department of medicine, testified that over the past several years the endoscopy rooms at St. Barnabas "have been over used so far as facility is concerned and under supplied so far as space and ability to work comfortably and well." The trial court apparently concluded that although there was physically time and room left to use the endoscopy rooms at the hospital, the work environment would suffer if additional procedures were performed. Based on these findings, the trial court concluded that the hospital's closed-staff admissions policy, including its exceptions, was reasonable and enforceable.

II.

Since the seminal case of Falcone v. Middlesex County Medical Soc'y, 34 N.J. 582 (1961), the strong societal concern in matters affecting public health has been recognized as a significant criterion by which to measure the reasonableness of institutional health-care decisions. The Court in Falcone considered the interests of a medical doctor seeking staff privileges at a local hospital. Membership in the county medical society was a prerequisite for securing hospital staff privileges. Because of the society's determinative role in relation to the hospital's medical staff, the Court observed that the society "engages in activities vitally affecting the health and welfare of the people," id. at 596-97. Accordingly, the Court considered the society as one "with which the public is highly concerned" and its power "as a fiduciary power to be exercised in a reasonable and lawful

manner for the advancement of the interests of the medical profession and the public generally." Ibid.

Two years later, in Greisman v. Newcomb Hosp., 40 N.J. 389 (1963), the Court dealt with a direct challenge to a hospital for denying staff privileges to an osteopathic doctor on the grounds that the doctor had not been graduated from an A.M.A.-approved medical school nor obtained membership in the county medical society. The Court ruled the hospital's actions were unlawful. The decision stressed that powers exercised in the selection of the hospital medical staff "are deeply imbedded in public aspects, and are rightly viewed, for policy reasons entirely comparable to those expressed in Falcone, as fiduciary powers to be exercised reasonably and for the public good." Id. at 402.

The Court further observed:

Hospital officials . . . must never lose sight of the fact that the hospitals are operated not for private ends but for the benefit of the public, and that their existence is for the purpose of faithfully furnishing facilities to the members of the medical profession in aid of their service to the public. They must recognize that their powers, particularly those relating to the selection of staff members, are powers in trust which are always to be dealt with as such. While reasonable and constructive exercises of judgment should be honored, courts would indeed be remiss if they declined to intervene where, as here, the powers were invoked at the threshold to preclude an application for ...


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