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October 19, 1987

Steven A. Friedman, M.D.
Delaware County Memorial Hospital, et al.; Steven A. Friedman, M.D., P.C. v. Delaware County Memorial Hospital, et al.

The opinion of the court was delivered by: GILES



 This antitrust action arises out of the decision of the Board of Trustees of Delaware County Memorial Hospital ("DCMH") on January 26, 1983 to revoke the staff privileges of Steven Friedman, M.D. for misconduct. Plaintiffs, Dr. Friedman and his professional corporation Steven A. Friedman, M.D., P.C., allege that DCMH and its President and Chief Executive Officer, Richard D. Thomas, conspired with certain physician defendants practicing as Medical Associates of Drexel Hill, Inc. ("MADH" or "Drexel Hill defendants"), Dr. Victor G. Galati and Dr. Donald V. Powers, to terminate Dr. Friedman's staff privileges in violation of federal antitrust laws. Plaintiffs have also asserted pendent state claims for breach of contract and tortious interference with prospective advantage.

 The Drexel Hill defendants and the DCMH defendants have filed separate motions for summary judgment as to all counts of plaintiffs' amended complaint.

 Plaintiffs have made a cross-motion for partial summary judgment on five issues:

(1) that defendants' conspiracy, if proved at trial to the satisfaction of the jury, is a per se group boycott; (2) that defendants have not established and cannot establish their entitlement to the narrow 'rule of reason' exception to per se treatment of their group boycott; (3) that even when judged by the 'rule of reason,' the defendants' conduct is unlawful as a matter of law because Dr. Friedman was denied the fair notice and opportunity for a meaningful hearing which are essential to fundamental due process; (4) that defendants had waived any alleged deficiencies in Dr. Friedman's procedures by their knowing disregard of those matters when his privileges were renewed as of August 20, 1981, and (5) that the Hospital has materially breached its contract with Dr. Friedman.

 An original complaint, No. 83-0398, was filed on January 26, 1983, the same day that the DCMH Board revoked plaintiff's staff privileges. On January 27, 1983, Dr. Friedman filed an amended complaint. On July 9, 1983, the second complaint, No. 83-3278, was filed by plaintiff's professional corporation, of which he is president and sole shareholder. The causes of action alleged in the two suits are identical. On September 30, 1983, they were consolidated.

 Dr. Friedman was a staff physician in the pulmonary disease section of the DCMH Department of Medicine from 1973 until January 26, 1983, when the DCMH Board voted unanimously to revoke his staff privileges following a lengthy internal review of his practice and performance at the hospital.

 In his answers to interrogatories, the plaintiff alleges that William A. Hadfield, Jr., M.D., William Beckwith, M.D., Harold Haft, M.D., and Hal F. Doig, Esquire, are co-conspirators. (DCMH Ex. 1, Plaintiff's Answer and Draft Supplemental Answer to Inter. No. 48). The DCMH Board was dismissed as a defendant on April 4, 1983.

 Dr. Hadfield is the Director of the DCMH Department of Medicine and initiated the charges against Dr. Friedman. These are the charges upon which the DCMH Board concluded that revocation of his staff privileges was appropriate. Dr. Beckwith is chief of the DCMH Cardiology Section. Dr. Haft is chief of the DCMH Neurosurgery Section and was president of the DCMH medical staff while a portion of the proceedings which led to the revocation of the plaintiff's privileges were in progress. Mr. Doig is a member of the law firm which provided legal advice and services to DCMH in connection with the proceedings against Dr. Friedman and continues to represent DCMH in this lawsuit.

 In Count I of the amended complaint, Dr. Friedman alleges that the defendants violated Section 1 et seq. of the Sherman Act, 15 U.S.C. § 1 et seq. He claims that, beginning in 1982, they conspired "to exclude plaintiff from practicing medicine" at DCMH, with the purpose "to destroy and obtain for themselves a large portion of plaintiff's practice." (A. Comp., para. 23). More specifically, it is claimed that defendants conspired to instigate and procure the filing of misconduct charges against him; to cause the DCMH Medical Staff's Medical Executive Committee to vote to revoke his staff privileges; to influence the writing of the decision of a medical staff ad hoc committee which heard the charges in a trial-like setting; to recommend to the DCMH Board that his privileges be revoked; and to prevent him from being afforded due process. (A. Comp., paras. 24, 40). According to the plaintiff, the purpose of the alleged conspiracy was "to increase [the defendants'] patient load and to maximize billings for defendant hospital." (A. Comp., para. 41).

 In Count II, the plaintiff alleges that, in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2, the defendants "conspired . . . in an attempt to monopolize the provision of pulmonary care" (A. Comp., para. 46) and that his exclusion from DCMH "has resulted in . . . monopolization, or attempted monopolization, of pulmonary medical services at defendant hospital." (A. Comp., para. 47).

 In Count III, the plaintiffs allege various causes of action based on Pennsylvania law, including unreasonable restraint of trade, tortious interference with contractual relations, tortious interference with prospective advantage and breach of contract.

 For these reasons and those which follow, defendants' motions for summary judgment must be granted and plaintiff's motion for partial summary judgment must be denied.


 This court heard plaintiff's motion for a preliminary injunction in January, 1983. On January 31, following two days of hearings, the motion was denied. As of that time, the court concluded that Dr. Friedman had failed to show sufficient competent evidence from which a jury could find that there was an unlawful conspiracy under [Section 1] of the Sherman Act. Specifically, there was:

insufficient evidence showing the existence of an agreement between Drs. Powers, Galati and/or Prestel and the board of directors and/or its agents, which resulted in the increase of the sanction by the board of directors for violations of the hospital rules and regulations which were found by the ad hoc medical committee and, as found or supported by the medical executive committee, both of which recommended probation in some form.

 Transcript of Preliminary Injunction Hearing, Jan. 31, 1983, at 218.

 The court has allowed extensive discovery in the case. The record thus far consists of the depositions of numerous persons. They include the defendants, Mr. Thomas and Drs. Galati and Powers; the alleged nondefendant co-conspirators: Drs. Hadfield and Haft; the five ad hoc committee members: Selma Balaban, M.D., John E. Bevilacqua, M.D., Claude Williams, M.D., Robert G. Trout, M.D., and Henry A. Scheuermann, D.M.D.; eight DCMH Board members: E. Stanley Bowers, Alonzo H. Davis, J. William Erb, Lillian H. Griffin, Rev. George S. Hewitt, William L. Maruchi, John H. Nagel, chairman of the board, and Henry A. VanZanten; Dr. Friedman and his wife; Edwin D. Arsht, M.D.; and Betsy Murren, secretary to the medical staff. It also includes the transcripts of proceedings conducted as part of the internal review process and voluminous documents pertaining to the gravamen of the misconduct charges against Dr. Friedman, the alleged overuse of therapeutic bronchoscopies, absence of documentation of the indications for such use and utilization of the procedure in disregard of the list of criteria indications adopted by DCMH.

 The treatment of pulmonary disease is a subspeciality of internal medicine. The pulmonary disease specialist diagnoses and treats the major disease areas of the subspeciality such as chronic obstructive pulmonary disease, asthma and emphysema and also must have skills in radiology; interprets smears for bacteria, fungi and non-malignant cells; engages in pulmonary function testing, respiratory care, respiratory physical therapy and rehabilitation; interprets pulmonary scintigraphy; performs biopsies, endotracheal and pleural intubation, and bronchoscopies.

 Bronchoscopy is a procedure sometimes used in the diagnosis and treatment of pulmonary disorders. It is an invasive procedure which requires the insertion of a rigid or flexible fiberoptic tube (bronchoscope), either through the nose or the mouth into the patient's lungs. Bronchoscopy is a relatively common procedure, but it is not free of risk of complications and can be unpleasant for the patient.

 Diagnostic bronchoscopies are helpful in providing direct gross examination of suspicious lesions, establishing the location and extent of a pathologic process, and providing a precise diagnosis by examination of biopsied tissue or of collective secretions.

 At DCMH, therapeutic bronchoscopies, on the other hand, are to be used only in the treatment of patients with copious secretions and "continued abnormal gas exchange, abnormal pulmonary function by spirometry, X-ray findings of atelestasis, or copius secretions on auscultation of chest, unresponsive to a previously adequate trial of conservative respiratory therapy." (DCMH Ex. 8, Med. Dept. Rules & Regs. at App. 4) (emphasis in original). In general, the purpose for therapeutic bronchoscopies is to remove excess secretions of mucous from the lungs to improve the patient's ability to breathe, but only after non-invasive therapies have failed to alleviate the problem.


 A. DCMH Background, Organization and Procedures for Terminating Staff Privileges

 DCMH is a nonprofit community hospital that provides short-term, general acute hospital care to residents of Delaware County and adjacent counties in southeastern Pennsylvania. Approximately thirty-five hospitals are within ten miles of DCMH. Dr. Friedman is on the staff of Fitzgerald-Mercy Hospital, which is only 2 1/2 miles from DCMH. (Thomas Aff., para. 3). DCMH has approximately 250 active medical staff members and over 1,200 full-time and part-time employees. (Id. at P 4).

 DCMH is accredited by the Joint Commission on Accreditation of Hospitals (JCAH), a private accreditation agency for hospitals. (Thomas Aff., at para. 4). JCAH conducts surveys of hospitals to measure and encourage their compliance with the JCAH standards, and, in recognition of substantial compliance, awards accreditation. (DCMH Ex. 3, Joint Comm. on Accreditation of Hosps., Accreditation Manual for Hospitals, ix (1983) (JCAH Manual)). To maintain its JCAH accreditation, the hospital must be operated in accordance with the principles and standards established by that group. DCMH also must meet the regulatory standards of the Pennsylvania Department of Health and comply with its rules and regulations, as well as with its own corporate bylaws.

 1. The DCMH Governing Body

 The governing body of DCMH is its Board of Trustees. It has overall responsibility for insuring that the hospital functions in a manner consistent with an objective of high quality care to the community. The DCMH Board has 27 members, each of whom (except the hospital's president) serves without compensation for an elected term of three years.

 DCMH Board members serve on standing and special board committees established by the corporate bylaws to facilitate operation of the hospital. Two of the Board's committees were involved in the events leading to the termination of Dr. Friedman's staff privileges: the Board Executive Committee, which transacts all regular business of the hospital during the interim between full Board meetings; and the Joint Conference Committee, comprised of the members of the Board's standing medical committee and a like number from the medical staff, which works to effect better patient care and communications between the Board and the medical staff. The Joint Conference Committee also reviews medical staff recommendations relating to a staff member's privileges whenever the Board does not agree with the medical staff's recommendation. However, the final decision is with the Board of Trustees.

 2. THE DCMH Administration

 a. The Chief Executive Officer

 The Board has delegated responsibility for the daily operations of DCMH to Mr. Thomas, who has been president and chief executive officer since 1977. He is in charge of the overall administration of the hospital. His duties include implementing all policies established by the Board, working with the medical staff to ensure that the best care will be given to all patients, assuring the hospital's compliance with the law, attendance at all meetings of the Board and its committees, and insuring that all departments are staffed adequately to provide professional services to DCMH patients. He performs all other duties necessary for the efficient operation of the hospital.

 b. The DCMH Medical Departments

 The DCMH medical department director and section chiefs also are part of the hospital's administration. The largest of the departments at DCMH is its Department of Medicine which has adopted rules and regulations relating to proper standards of medical care. The director of the Department of Medicine, William A. Hadfield, Jr., M.D., was appointed to that position by the DCMH Board in July, 1979 upon the recommendation of the medical staff's Medical Executive Committee (MEC).

 The Pulmonary Disease Section is a section of the Department of Medicine. Dr. Galati, the chief of the Pulmonary Disease Section is board certified in pulmonary medicine. As Chief of the Pulmonary Disease Section, Dr. Galati is responsible for his section and reports to Dr. Hadfield, alerting him to all problems and activities within the section. Additionally, Dr. Galati is responsible for the Pulmonary Function Laboratory and for overseeing respiratory therapy and respiratory therapists.

 3. The DCMH Medical Staff

 The medical staff is a third part of the hospital's organization. Its members are appointed by the DCMH Board for one-year periods. While the medical staff is responsible for making recommendations to the Board, the Board makes the final decision regarding "medical staff appointments and reappointments, as well as the granting, curtailment, suspension or revocation of clinical privileges."

 The DCMH medical staff has administrative responsibility for the quality of medical care provided to DCMH patients and for the ethical conduct and professional practices of its members. However, it is accountable to the Board. Pursuant to the direction and approval of the Board, the medical staff has adopted bylaws and rules and regulations regarding its relationship with the hospital. See, 28 Pa. Admin. Code §§ 103.3(7), 103.4(8), 107.11.

 The president of the medical staff is elected by its members and serves as chief administrative officer. He must coordinate and cooperate with the president of DCMH in all matters of mutual concern within the hospital. When charges were brought against Dr. Friedman, Dr. Haft, a neurosurgeon and alleged co-conspirator, was president of the medical staff. As a neurosurgeon, Dr. Haft did not compete with Dr. Friedman. (Haft Aff., para. 14).

 The DCMH medical staff has administrative committees, several of which were involved in events leading to charges being brought against Dr. Friedman and the subsequent proceedings. The Medical Executive Committee (MEC) is comprised of the directors of the medical departments at DCMH and other medical staff representatives. The MEC represents the entire medical staff and acts on its behalf. 28 Pa. Admin. Code § 107.25. It reviews all matters relating to clinical privileges and is specifically responsible for the initiation of and/or participation in medical staff corrective or review measures when warranted. The Pennsylvania Department of Health Rules and Regulations require the MEC to "take reasonable steps to ensure ethical professional conduct on the part of all members of the medical staff, and initiate such prescribed disciplinary measures as are indicated." 28 Pa. Admin. Code § 107.25(b)(5).

 Other medical staff committees that addressed problems with Dr. Friedman included the Quality Assurance, Admissions and Utilization Review, Medical Records, Endoscopy, Operating Room, and Grievance Committees. The Quality Assurance Committee (which is sometimes referred to in hospital documents as the "Quality Care" or "Audit" Committee) is responsible for "reviewing the professional activities as they pertain to the quality care of patients" according to a plan that satisfies applicable regulations. (Med. Staff Bylaws, Art. XII, § 1.G.(2).) This committee's major function is to audit medical procedures performed at the hospital and determine if they were justified and performed competently. The Endoscopy Committee, a special committee formed in late 1978 comprised of members of the DCMH Gastro-enterology and Pulmonary Disease Sections (including Dr. Friedman), formulated guidelines (sometimes referred to as "criteria" or "indications") in January 1980 for therapeutic bronchoscopies to be used by the quality assurance committee in its review of bronchoscopies. (Hadfield Aff., para. 10).

 The Admissions and Utilization Review Committee conducts studies designed to evaluate "the appropriateness of admissions to the hospital, lengths of stay, discharge practices, use of medical and hospital service and all related factors which may contribute to the effective utilization of hospital and physician services." It also analyzes how overutilization of hospital or medical services affects the quality of patient care. (DCMH Ex. 6, Med. Staff Bylaws, Art. XII, § 1.F.(2)). The Medical Records Committee makes recommendations regarding the institution of practices to improve the hospital's medical records function. (Id., Art. XII, § 1.J.(2).) The Grievance Committee investigates and evaluates incidents and unprofessional behavior by staff members referred to it by the MEC.

 4. Administrative Procedures for Revocation of Staff Privileges

 The DCMH Medical Staff Bylaws provide the framework by which corrective action, including the termination of privileges, can be taken against a staff physician. Article VII, Section 2 provides that the director of any clinical department, the president of the medical staff, the chairman of any medical staff standing committee or the president of the hospital may request corrective action "whenever the activities or professional conduct of any staff member are considered to be lower than the standards of the Hospital or to be in violation of the Bylaws, Policies, Directives, Orders, Rules and Regulations of the Board of Trustees and Medical Staff in force at the time, or to be disruptive to the operations of the Hospital."

 The process commences with a letter of charges, including a request for corrective action, to the MEC. The letter is supported by reference to improper conduct by the physician in question who is notified of the charges. The charges are then considered by the MEC which, after an appearance by the physician in question, may "reject or modify the request, . . . impose terms of probation, . . . or recommend that the individual staff membership be revoked." (Med. Staff Bylaws, Art. VII, § 2.C.)

 If the MEC recommendation is adverse to the physician, he may invoke the "Hearing and Appellate Review Procedure" found in Article VIII of the DCMH Medical Staff Bylaws. The first step is a hearing before an ad hoc committee of the medical staff, whose duty is to formulate a recommendation. The MEC then reviews that recommendation and sends its final recommendation to the Board. (Med. Staff Bylaws, Art. VII). The physician may appeal that recommendation. If, as in Dr. Friedman's case, he does not appeal, the matter is ripe for the Board's decision. If the Board disagrees with the MEC recommendation, the matter is reviewed by the Board's Joint Conference Committee, which formulates a recommendation to the Board. The matter then goes back to the Board for its final decision. (See Med. Staff Bylaws, Art. VIII).

 B. The Charge Against Dr. Friedman

 On March 23, 1982, pursuant to the Medical Staff Bylaws, Dr. Hadfield wrote Harold Haft, M.D., the medical staff president and chairman of the Medical Executive Committee, and initiated charges against Dr. Friedman. He cited seven different grounds for the charges:

(1) overutilization of bronchoscopies -- Dr. Friedman violated the DCMH bronchoscopy criteria, failed to order indicated laboratory studies, and failed to document objectively any change in the pulmonary status of his patients following therapeutic bronchoscopy;
(2) inappropriate intravenous hyperalimentation -- Dr. Friedman had inappropriately ordered salt poor albumin, intralipids, and hyperalimentation as nutritional supplements for his patients' weight gain;
(3) delinquent medical records -- Dr. Friedman's medical records had not been sufficiently detailed or organized to provide evidence of effective continuing patient care, and his admitting privileges had been suspended 19 times in the past two years for delinquent record keeping;
(4) staff attendance requirements -- Dr. Friedman had not satisfied the minimum attendance requirements for departmental meetings;
(5) evasion of Utilization Review Committee recommendations -- Dr. Friedman had repeatedly circumvented the Utilization Review Committee's recommendations that his patients ...

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