Federal District Court Rules That Medical Executive Committee May be Sued

The U.S. District Court for the District of New Jersey has held that a hospital’s Medical Executive Committee can be sued for violations of the Sherman Act (the federal antitrust law), as well as state-law supplementary claims.

The lawsuit which gave rise to this decision is captioned Frederick Nahas, M.D. v. Shore Medical Center et al.  Dr. Nahas filed suit against Shore Medical Center (‘SMC”) and its Medical Executive Committee in 2013, after his privileges to perform endovascular surgery at SMC were adversely affected. SMC had moved for summary judgment, and argued that its Medical Executive Committee did not have the capacity to sue or be sued.  The Court disagreed, concluded that the Medical Executive Committee is an unincorporated association for purposes of New Jersey law, and, as such, could be sued.

A word concerning New Jersey’s law concerning unincorporated associations, in particular, their right to sue and ability to be sued, is in order.  The applicable law states in pertinent part as follows:

“Any unincorporated organization or association, consisting of 7 or more persons and having a recognized name, may sue or be sued in any court of this state by such name in any civil action affecting its common property, rights and liabilities, with the same force and effect as regards such common property, rights and liabilities as if the action were prosecuted by or against all the members thereof… .”

N.J.S.A 2A:64-1.

The court framed the issue thus: “the capacity of an entity to be sued as an unincorporated association turns on whether it is (a) voluntarily organized for a common purpose and (b) separate and distinct from another entity or its own members.”  The parties did not dispute the first component, so the matter turned on whether a Medical Executive Committee is distinct from other entities and/or its own members

The court found that the SMC’s medical staff is indeed distinct from SMC.  It noted that medical staff members pay dues, which is indicative of an association with a “defined membership and defined boundaries.”  The court also pointed to SMC’s Bylaws, which state that they are a contract to which SMC’s Medical Staff is a party with SMC. (The idea here appears to be that if the Medical Staff was not separate or distinct from SMC itself, then it could not have entered into an agreement [the Bylaws] with SMC, because a party cannot contract with itself.)  In making this determination, the court gave short shrift to other jurisdictions which have held that a medical staff is not distinct from the hospital which it serves.

So, the court concluded that a medical staff is an unincorporated association which can be sued.  To get from that determination to its ultimate determination – that SMC’s Medical Executive Committee, a component of the Medical Staff, was also an unincorporated association which could be sued – the court relied on the provisions of the (federal) Health Care Quality Improvement Act (“HCQIA”) of 1986, 42 U.S.C. §§ 11101-11152.  Section 11111 of HCQIA declares that “the professional review body” of a hospital and “any person acting as a member or staff to the body” engaging in protected peer review actions cannot be held liable for damages.  HCQIA defines a “professional review body” to include “any committee of a health care entity which conducts professional review activity,” and “any committee of the medical staff of such an entity when assisting the governing body in a professional review activity.” 42 U.S.C. § 11151. The court reasoned that because Congress decided to immunize professional review bodies like medical executive committees, it contemplated that medical executive committees could be sued, and considered these medical executive committees separate and distinct both from their own committee members, and the hospitals of which they are part.

Thus, the court found that SMC’s medical executive committee could be sued, but concluded by “express[ing] no opinion whatsoever on what claims may be brought against it.” That is an interesting question indeed: what claims may be brought against the medical executive committee?  The way most hospital peer review proceedings are structured, medical executive committees merely “recommend” measures; any actual “action” is typically taken by a hospital’s board.

Suppose the medical executive committee is found liable on a certain claim (or claims), and that its conduct does not qualify for the immunity provided for by the Health Care Quality Improvement Act.  Then what?  A medical executive committee generally has no assets with which to satisfy a judgment.  While the Nahas opinion might lead to more hospital committees being named as defendants in lawsuits stemming from peer review proceedings, it seems that any victory a plaintiff obtains over such committees may be financially meaningless unless the Committee has assets or the plaintiff has a valid way to reach the assets of the individual members of the Committee.