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March 22, 1985

ROCKLAND PHYSICIAN ASSOCIATES, P.C., EHSANOLLAH BENARESH, M.D., CARAIDAD M. DY, M.D., MOON YOUNG KIM, M.D., ANTHONY C. K. LAU, M.D., RIZALINA TURLA, M.D., SIDNEY VEITCH, M.D., Plaintiffs, against WARREN GRODIN, M.D., Individually, and as Director, Department of Anesthesiology, Nyack Hospital, NYACK MEDICAL ASSOCIATES, P.C., WARREN GRODIN, M.D., President, DARRELL GOODE, M.D., DAVID MILLER, M.D., MITCHELL COHN, M.D. and STEPHEN CAGLIOSTRO, M.D., Individually and as members of Nyack Medical Associates, P.C., and THE NYACK HOSPITAL, Defendants.

The opinion of the court was delivered by: GAGLIARDI



Plaintiffs, Rockland Physician Associates, P.C. ("RPA"), and individual anesthesiologists associated with RPA, commenced this action seeking damages and injunctive relief claiming breach of contract by defendant Nyack Hospital (the "Hospital"), and violation of the Sherman Act by both the Hospital and defendants Nyack Medical Associates, P.C. ("NMA"), and individual anesthesiologists affiliated with NMA.

 Plaintiffs have moved, pursuant to Rule 65, Fed. R. Civ. P., for a preliminary injunction ordering that anesthesiology cases at the Hospital be assigned such that the seven RPA members provide 7/12 of the "basic value units" *fn1" in anesthesiology and the five NMA members provide 5/12 of the basic value units. All defendants oppose the motion.


 RPA is a professional corporation engaged in the practice of anesthesiology. Individual plaintiffs are shareholders and employees of RPA. Certain of the individual plaintiffs have practiced anesthesiology at the Hospital throughout the last decade. In 1979, RPA and the Hospital signed a contract (the "RPA contract") under which RPA was to be the exclusive provider of anesthesiology services at the Hospital. It was originally contemplated that the RPA contract would run until May 1, 1985, and that it would remain exclusive for the entire period. On December 31, 1983, however, the Hospital notified RPA that because of RPA's failure to provide a suitable member anesthesiologist to serve as director of the Hospital's department of anesthesiology, the contract would be considered non-exclusive for the remainder of the contract period.

 Since February 1, 1984, defendant Warren Grodin, M.D., who has no affiliation with RPA, has been Director of Anesthesiology at the Hospital. As director, Grodin has been responsible for the scheduling of anesthesia services and has assigned a specific anesthesiologist to each regularly scheduled procedure requiring anesthesia. At present, Grodin himself provides anesthesiology services at the Hospital, as do plaintiffs and the four additional individual defendants who with Grodin constitute the defendant group NMA. The Hospital and NMA have signed a contract (the "NMA contract") under which NMA is to be the exclusive provider of anesthesiology services at the Hospital for a five-year period beginning May 1, 1985.

 As the number of non-RPA anesthesiologist with privileges at the Hospital has grown, the plaintiffs as a group have provided less service at the Hospital. According to plaintiffs, as of December 1984, plaintiffs' services total roughly one-third the number of "basic value units" provided by RPA before the appearance of NMA and the individual defendants.

 At some point following the arrival of NMA, plaintiffs apparently solicited and received a number of formal or informal statements from members of the active staff in support of a continued relationship with RPA. *fn2" At least some members of the staff expressed a desire that RPA receive all or a proportionate or "fair share" of the anesthesiology assignments for their cases. The hospital staff apparently has not, however, adopted a practice of referring or assigning each individual case to a specific anesthesiologist. There is no indication on record that any RPA Amember has received any such specific referrals during the period in question, or that such referrals have ever been common. The Hospital has asserted, however, that it has a long-standing policy of honoring such assignments where feasible.

 At this time, all individual plaintiffs retain their clinical privileges at the Hospital, no formal steps have been taken to revoke or cancel those privileges; it appears from the by-laws that the current privileges will expire within several months unless renewed. The governing documents of the medical staff, i.e., the by-laws and the rules and regulations issued pursuant to them, give almost no attention to the status of "contractual practitioners" such as the individual plaintiffs. However, these few points are clear:

 1) privileges are to be granted on the basis of training, experience and competence;

 2) privileges ordinarily can only be revoked or reduced (even at time of renewal) by action of the Board of Trustees after conference with the Medical Executive Committee; and

 3) where privileges are revoked or reduced, the practitioner affected has certain hearing rights.

 Further, it is apparent that the by-laws (and rules and regulations) nowhere expressly determined either (1) whether an anesthesiologist with Hospital privileges is entitled to practice where a specific referral to that anesthesiologist for a particular case is made by an attending physician, or (2) whether an anesthesiologist may practice where such a referral is made but the referral is disapproved as inappropriate by the Director of Anesthesiology.

 The 1979 RPA contract was an exclusive contract, providing that "[n]o one except a qualified member of [RPA] having individual Medical Staff privileges shall be given the responsibility of administering anesthesia at the Hospital." The agreement was to last five years, with automatic five-year extensions absent written notice to the contrary within a specified period. The agreement also provided that the contract would become non-exclusive under certain circumstances and that the Hospital could then "permit qualified anesthesiologists to practice . . . even if they were not members" of RPA, but that such non-exclusivity would not terminate "any individual staff privileges of any anesthesiologist." Under the agreement, RPA was permitted to add anesthesiologists to the group, as long as the new members also were appointed to the Hospital's medical staff.

 The 1983 NMA contract is quite similar. It provides that through April 30, 1985, NMA has the non-exclusive right to administer anesthesia at the Hospital and that begining May 1, 1985, NMA "together with such staff anesthesiologists [i.e., RPA members] who become physician-employees of [NMA] shall have the exclusive right to administer anesthesia at the Hospital." The contract is to remain in effect until May 1, 1990, unless terminated by the Hospital earlier "for cause." There is no provision for automatic renewal of the contract. During its term, NMA members are not permitted to engage in private practice of medicine outside the Hospital without advance written permission.

 With respect to fees and billing, the contract provides that NMA is responsible for billing and collecting its own charges. A fee schedule, however, was apparently attached to and incorporated in the NMA contract. The contract expressly provides that NMA will not change the schedule without the consent of the Hospital, but that consent shall not be unreasonably withheld "provided such fee schedule is consistent with the usual and customary fees for such services in the geographic area of the Hospital." There are no other express limitations on NMA's fees; no minimum or maximum rates. From the face of the contract, it appears that NMA could lower or raise its rates provided the "consistency" requirement were met.

 The NMA contract obliges Warren Grodin to serve as Director of Anesthesiology, to be respnsible for the overall administration of the department, and to schedule the daily use of the operating theaters, including assignment of specific anesthesiologists to specific cases.

 Plaintiffs now request a preliminary injunction requiring that plaintiffs be assigned a proportionate share of the anesthesia cases, measured by "basic value units." According to plaintiffs, a proportionate distribution would be one where RPA members are ...

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