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June 28, 1985

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 moved for a temporary restraining order and preliminary injunction restraining defendants from honoring an exclusive contract for anesthesiology services at Nyack Hospital ("the hospital"). Plaintiffs, who have rendered anesthesiology services at the hospital on both an exclusive and, more recently, a nonexclusive basis, argued that they retain clinical privileges at the hospital and that as long as they retain such privileges they cannot be ousted by an exclusive contract. Defendants opposed the motion on a number of grounds. Plaintiffs' motion was denied by oral order at a conference on April 29, 1985. At that time, the court indicated that before the court could consider injunctive relief, plaintiffs would first need to exhaust their administrative remedy before the New York Public Health Council, thereby complying with the procedures set forth in N.Y. Pub. Health L. § 2801-b (1-4) and § 2801-c, as interpreted in Guibor v. Manhattan Eye, Ear and Throat Hospital, 46 N.Y.2d 736, 413 N.Y.S.2d 638, 386 N.E.2d 247 (1978). This order sets forth in greater detail the basis of the April 29 decision.


 Most of the critical facts concerning this action are set forth in the order of this court dated March 19, 1985, and will not be repeated here. Following issuance of the March 19 order, plaintiffs continued to provide some anesthesiology services at the hospital. Specific referrals to individual anesthesiologists to serve on particular cases apparently were honored. In April, 1985, however, plaintiffs were informed by the hospital administration that such individual referrals to plaintiffs would no longer be honored after May 1, 1985, the date the hospital's contract with Nyack Medical Associates, P.C., ("NMA") by its own terms becomes exclusive. Individual plaintiffs' position is that they are entitled to have specific referrals honored, on the basis of renewal of their clinical privileges last year for the two year period beginning June 1, 1984 and ending May 31, 1986. *fn1" To rebut defendants' argument that plaintiffs' privileges have been terminated by the exclusive contract, plaintiffs argue that (1) provisions of the hospital by-laws set forth specific procedures to be followed in the event the hospital wishes to terminate an individual's privileges and that (2) the by-laws have the force of contract, so that (3) unless those procedures are followed, plaintiffs' privileges remain intact.

 In earlier submissions to the court, defendants have argued that questions concerning curtailment or termination of anesthesiology privileges do not present situations of irreparable harm and, further, that such questions in any event must be presented to the Public Health Council before they can be addressed by this court. The court has considered these arguments, as well as the more recent argument that plaintiffs' privileges automatically lapse on May 1, 1985, when the contract with NMA becomes exclusive.


 I. Section 2801

 At common law, a grant of hospital privileges to a physician meant little. Absent contractual provisions to the contrary, privileges were revocable by the hospital at will, for any or no reason. See Cohoes Mem. Hosp. v. Dept. of Health, 48 N.Y.2d 583, 424 N.Y.S.2d 110, 399 N.E.2d 1132 (1979); Guibor v. Manhattan Eye, Ear & Throat Hospital, 46 N.Y.2d 736, 413 N.Y.S.2d 638, 386 N.E.2d 247 (1978), aff'g, 56 A.D.2d 359, 392 N.Y.S.2d 628 (App. Div. 1977) ("Guibor"). In passing the provisions of N.Y. Pub. Health L. § 2801, the legislature granted the holders of hospital privileges an enforceable but limited right not to have privileges terminated except "for reasons limited to patient welfare, institutional objectives, and character or competency of the physician." See Fried v. Straussman, 41 N.Y.2d 376, 393 N.Y.S.2d 334, 335, 361 N.E.2d 984 (1977). One limitation placed on this right is that claims that a hospital improperly has excluded or expelled a physician from membership, or curtailed, terminated or diminished "in any way" a physician's professional privileges must be presented to and determined by the Public Health Council before being brought before a court. This requirement applies to all claims, including those seeking injunctive relief. See Guibor, supra; Cohoes Mem. Hosp. v. Dept. of Health, supra (injunctive relief must await determination of Public Health Council; requirement of exhaustion of administrative remedies does not violate or conflict with N.Y. Pub. Health L. § 2801-b(4),(c)).

 A second significant limitation stems from the standard of review. Under section 2801, courts are not to determine the "ultimate truth" of the claims which form the basis of a hospital's actions. Rather, a court is to uphold a hospital's action if it appears that the action was taken in "good faith" on the basis of the "apparent facts as reasonably perceived by the [hospital] administrators," and that the "purported grounds were reasonably related to the institutional concerns set forth in the statute. . . ." Fried v. Straussman, supra, 393 N.Y.S.2d at 338; see Moss v. Albany Medical Center, 61 A.D.2d 545, 403 N.Y.S.2d 568 (App. Div. 1978).

 II. Irreparable Harm

 Plaintiffs argue that they will be irreparably harmed if they are not permitted to practice at the hospital after May 1, 1985. In interpreting section 2801, however, New York courts have not been swayed by the sympathetic circumstances of physicians seeking injunctive relief to restore long-standing grants of clinical privileges. In Guibor, the New York Court of Appeals affirmed an appellate division opinion refusing to grant injunctive relief on the ground of failure to exhaust the administrative remedy. This was done even though the physician in question had held privileges from 1971 until 1976, and, as the result of the denial of reappointment, had not been permitted to practice in the hospital for more than two and a half years. See Guibor, supra, (issued December 6, 1978). Thus, even if a risk of irreparable harm were proven, it might not justify issuance of an injunction before recourse to the Public Health Council.

 Further, on the facts of this case, plaintiffs have not met the burden of establishing irreparable harm. *fn2" See the order of this court dated March 19, 1985 at 7-10. See also Dos Santos v. Columbus-Cuneo-Cabrini Med. Ctr., 684 F.2d 1346 (7th Cir. 1982) (district court abused its discretion in granting preliminary injunction against enforcement of exclusive contract for anesthesiology, even though plaintiff retained privileges and ...

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