A divided Supreme Court, acting in the case of a Los Angeles eye surgeon, ruled Tuesday that hospitals can be sued under federal antitrust laws for wrongly denying operating-room privileges to a physician.
Lawyers predicted that the 5-4 ruling will increase the number of damage suits against hospitals whose doctors have moved to exclude a fellow doctor.
Most states, including California, have urged hospitals to maintain quality care by using teams of doctors to review the work of their colleagues. But others have said this power can be misused to keep out competitors and, in effect, inflate prices.
The Los Angeles case arose in 1987 when doctors at the Midway Hospital Medical Center in West Los Angeles revoked the privileges of Dr. Simon J. Pinhas, who specialized in cornea transplants and cataract removals.
Hospitals officials said they acted because Pinhas had operated hastily on some patients without thoroughly checking their records. Pinhas contended that he was removed because he refused to employ a second surgeon, a requirement that he said is costly and unnecessary. He sued Midway and its parent company, Summit Health Ltd., for violating the federal antitrust laws. He said he had been removed because he posed a competitive threat.
Federal antitrust laws--designed to prevent huge business trusts--provide a powerful weapon against any "conspiracy" to restrict competition. Under the laws, losers must pay triple damages as well as the attorneys' fees of the prevailing party.
But lower courts have been divided on the reach of these antitrust laws. Because the Sherman Act applies only to "commerce among the several states," many judges have concluded that the law does not apply to a single hospital being sued by a doctor.
Indeed, Pinhas' suit was dismissed by a federal judge without a hearing.
But on Tuesday, the high court said his suit can proceed to trial. A restriction on competition for surgical services at even a single hospital can have "a potential harm" with a wide impact on patients, some of whom come from outside of California, wrote Justice John Paul Stevens for the court.
"I think the message is that the federal courts are open to doctors who have been denied medical staff privileges," said Lawrence Silver, a Los Angeles lawyer who represented Pinhas.
Silver said he will seek damages from the hospital, although the amount has not been determined.
In 1986, Congress passed the Health Care Quality Improvement Act to encourage peer review in hospitals and to protect them from damage suits. The law gives doctors and their hospitals a shield from liability if they use fair procedures in evaluating colleagues and act "in the furtherance of quality health care."
But the lawyer who represented the hospital in the Midway case said the 1986 law will not block all such lawsuits.
"It has a lot of holes in it," Los Angeles lawyer J. Mark Waxman said of the law. The Supreme Court decision "will lead to a significant increase in attacks on peer review decisions. You will have to spend an enormous amount of money" to prepare a defense for such lawsuits, Waxman added.
Christopher Wright, an antitrust expert with the Los Angeles law firm of Latham & Watkins, said the high court ruling could have an impact far beyond hospitals. "It would apply to any local conspiracy, whether in trash hauling, dairy-price rigging or anything of that sort," he said.
In dissent, Justice Antonin Scalia took the same view, contending that the ruling will open the door to a variety of business lawsuits that belong in state courts.
"Federal courts are an attractive forum, and the treble damages . . . an attractive remedy. We have today made them available for routine business torts . . contributing to the trivialization of the federal courts," he wrote.
His dissent in the case (Summit Health vs. Pinhas, 89-1679), was joined by Justices Sandra Day O'Connor, Anthony M. Kennedy and David Souter.