Medical Staff Credentialing Case Heads to New Jersey Supreme Court

Derick Alison
Derick Alison
9 Min Read

The Supreme Court of New Jersey is expected to hear oral arguments Wednesday in a case concerning medical staff credentialing that could have major implications for physicians around the country.

Comprehensive Neurosurgical P.C. v. The Valley Hospital examines the relationship between a neurosurgical practice, also called New Jersey Brain and Spine Center (NJBSC), and the nonprofit Valley Hospital in Ridgewood, New Jersey. In short, the neurosurgeons allege that the hospital (Valley) unfairly entered into an exclusive agreement with a competing practice, and essentially shut NJBSC out of its emergency department (ED) and neurosurgery suite.

“This is all about the autonomy of the physician to do what’s best for their patient,” said Larry Downs, JD, CEO of the Medical Society of New Jersey, which filed a joint amicus brief with the American Medical Association (AMA) in favor of the plaintiffs, Comprehensive Neurosurgical/NJBSC.

Downs added that the case was about physicians being able to “order or not order [a test], to be able to perform surgery, or not perform surgery, and select the site where the patient will do best.”

As the AMA pointed out in a recent blog post, the case also centers around the concept of “economic credentialing,” where hospitals allegedly make decisions regarding which physicians or practices can provide care at their facilities based on the hospital’s “bottom line” rather than the quality of care they provide.

In December 2015, Valley terminated NJBSC medical staff privileges so that the hospital could enter into an exclusive arrangement with Neurosurgical Associates of New Jersey P.C. (“Columbia Group”). As a result, Columbia Group was granted privileges to use certain specialized equipment — including a Gamma Knife and biplane angiography suite — to treat patients with stroke or other circulatory disorders of the brain, and to attend to such patients in Valley’s ED.

NJBSC sued about a month later, naming as defendants Valley; Audrey Meyers, president and CEO of the Valley Health System; the Valley board of trustees; and Columbia Group. When the case was ultimately heard at trial, Valley remained as the sole defendant.

History of the Case

Two decades ago, NJBSC physicians were invited to become medical staff at Valley. Over the years, NJBSC physicians helped Valley acquire some of its specialized equipment, and helped it gain designation as a Comprehensive Stroke Center, according to the opinion of the Appellate Division of the Superior Court of New Jersey. But NJBSC’s relationship with Valley grew sour, around the time Hackensack North (formerly Pascack Valley Hospital) reopened in May 2013.

Several NJBSC physicians held privileges at Valley and Hackensack North. Roy Vingan, MD, co-founder of NJBSC and one of the plaintiffs, was appointed chair of surgery at Hackensack North.

NJBSC argued that Valley believed NJBSC was “bleeding” the hospital, or unnecessarily referring ED admissions to Hackensack, with whom Valley had a longstanding rivalry, as the opinion noted.

Valley then published what NJBSC alleged was a “sham” white paper by an entity called the “Valley Staff Development Committee” that detailed “cost and quality in the neurosurgery department.” The analysis, as outlined in a court opinion, suggested that NJBSC “had higher rates for lengths of stay and higher direct costs than Columbia Group” and noted that NJBSC’s “‘primary hospital is Hackensack’ based on a review of Hackensack’s inpatient service lines showing that NJBSC attended 940 patients, versus 57 cases at Valley Hospital for the same service lines.”

However, based on email communications obtained by NJBSC counsel during expedited discovery, the white paper — which Valley attempted and failed to “claw back” — was nothing more than “a premeditated scheme by Valley [Hospital] senior administrators to manufacture a pretextual healthcare basis to support [its] ouster,” according to the plaintiffs, as noted in the opinion of the Appellate Division.

The ‘Fair Dealing’ Argument

NJBSC’s complaint included multiple contract and tort claims such as breach of contract and breach of an “implied covenant of good faith and fair dealing.”

Downs explained that the case hinges on the latter concept, and whether a physician practice can lay claim to such a covenant. An implied covenant is a “common law construct” that essentially reflects “an implied promise that you’ll be fair and act in good faith towards your business partners,” he told MedPage Today.

A jury found in favor of NJBSC on the implied covenant of good faith claim, awarding damages of $24.3 million to the plaintiffs. Valley appealed the jury’s decision, but an appellate court upheld the award. The hospital then appealed to the state Supreme Court.

Neither Valley nor the New Jersey Hospital Association (NJHA) responded to a MedPage Today request for comment. However, in an amicus brief supporting Valley that was quoted in the appellate court’s opinion, NJHA argued that “the verdict in this case represents an ‘impermissible expansion of the rights of medical staff members to challenge managerial actions undertaken by a hospital’s board.'”

The American Hospital Association (AHA) also filed an amicus brief with the Supreme Court of New Jersey in support of Valley, which stated that hospitals face “challenging times,” owing to a global pandemic, inflation — which has driven up costs — and workforce shortages.

“Hospital boards need the freedom to be able to make difficult decisions based on their best judgment and unimpaired by a concern that members of the medical staff will be able to employ the medical staff bylaws in a manner never intended and seek substantial damage awards from juries due to the impact of the hospital’s decisions on their practices.”

Given that every accredited hospital in the U.S. is required to establish medical staff bylaws, the ruling in New Jersey “portends civil lawsuits and threats of litigation brought by physicians elsewhere whose medical practices will be adversely affected by institutional reforms being implemented by hospital boards,” AHA wrote.

Medical Staff Bylaws

Christopher Gribbin, MD, an interventional radiologist and member of the Medical Society of New Jersey, noted that one important aspect of the case is medical staff bylaws. He explained that “medical staff bylaws are a set of guidelines for hospitals and medical staff to deal with each other, not simply a set of guidelines for doctors to police themselves,” as Gribbin argued the NJHA has suggested.

Under a hospital’s bylaws, there is a “whole hierarchical process” for terminating privileges that involves allowing the person to respond to the claims being made against him or her, Gribbin said. “Ultimately, if there was a complaint that was going to lead to suspension of privileges, and there was no other resolution, it would require a fair hearing,” he said, and NJBSC physicians were not afforded that right by Valley.

That process generally involves looking at each physician’s practice one-by-one, he said, so “you can’t just axe the whole group.”

Gribbin predicted that if a decision by the New Jersey Supreme Court is rendered that agrees with Valley, and says “‘Yes, a hospital can just run roughshod over bylaws, and they have the right to do that’ — especially on such flimsy clinical grounds as is the situation in this case — that’s definitely bad for health, [for] medicine, and for patients.”

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    Shannon Firth has been reporting on health policy as MedPage Today’s Washington correspondent since 2014. She is also a member of the site’s Enterprise & Investigative Reporting team. Follow

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