Corporate bylaws were not a contract between medical staff and hospital

In the case of Medical Staff of Avera Marshall Regional Medical Center v. Avera Marshall, 836 N.W.2d 549 (Minn. Ct. App. 2013) the Court of Appeals of Minnesota decided that the hospital's corporate bylaws were not a contract between the hospital and its medical staff.

Background and procedural history

In 2012, the nonprofit, charitable hospital repealed their medical staff bylaws and issued new ones, adopting changes relating to eligibility to serve on the medical staff, clarifying work requirements, amending procedures for electing medical staff officers and making other changes to clinical rules and regulations.

The medical staff, the medical staff's executive committee, and two doctors filed suit requesting that the court declare that the medical staff bylaws were an enforceable contract between the medical staff and the hospital and also that the medical staff had the legal capacity to file the suit. The suit also requested an injunction barring the hospital from repealing the old bylaws and adopting new bylaws. The district court ruled without a trial that the medical staff was not an independent legal entity that could sue the hospital and also determined that the medical staff bylaws were not a contract. The medical staff appealed the decision to the Court of Appeals.

The decision by the Court of Appeals

The Court of Appeals agreed with both of the district court's rulings. The medical staff lacked capacity to sue as a separate entity on behalf of the individual staff members. An unincorporated group like the medical staff is not a legal entity recognized by statute in Minnesota. The medical staff is a subordinate administrative unit serving under the hospital's authority.

The appeals court also decided that the district court was correct in concluding that the hospital's bylaws did not constitute a contract between the medical staff and the hospital. The hospital's bylaws required the board of directors to organize the medical staff under bylaws approved by the hospital's board of directors. The bylaws also expressly reserved the hospital's authority to modify the bylaws unilaterally.

In addition, agency rules from the state's Department of Health regulating hospitals provided that a hospital's governing body is responsible for the management, control and operation of the hospital. These rules state that the duties of a hospital's governing body's include appointment of a medical staff and creation of hospital policies. The health department rules further stated that the medical staff was responsible to the hospital's governing body for the work performed at the hospital and should be consulted by the hospital's governing body for advice on professional problems and policies. The rules also required the medical staff to adopt bylaws, rules, regulations and policies with the approval of the hospital's governing body.

Under contract law, a valid contract requires an offer by one party, acceptance by the other party, and exchanged promises must be supported by "consideration," something of value given in exchange for the promise or service of the other party. The Court of Appeals stated that a party's promise to do something that the party is already under a legal obligation to do does not qualify as "consideration" under contract law. Both the medical staff and the hospital already had a duty to adopt medical staff bylaws. Neither party conferred a benefit on the other beyond that which the law already required.

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