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Docket Nos. 86952, 87120 cons.-Agenda 11-January 2000.

ABEL GARIBALDI, Appellee, v. ROBERT APPLEBAUM et al., Appellants.

Opinion filed October 26, 2000.

JUSTICE MILLER delivered the opinion of the court:

This appeal considers what procedural rights, if any, aphysician has under hospital bylaws when a hospital enters into anexclusive contract with a competing group of physicians for theperformance of the same work as the physician performs. In twoseparate appeals from judgments entered in the circuit court ofCook County, the appellate court concluded that the plaintiff inthis case was entitled to notice and a hearing before the hospitalentered into an exclusive contract with a competing medical group(Garibaldi v. Applebaum, 273 Ill. App. 3d 536 (1995)), and thatthe plaintiff may recover damages for the period preceding thehearing that he eventually received on the matter (301 Ill. App. 3d849). We allowed the defendants' separate petitions for leave toappeal from the appellate court's second decision (177 Ill. 2d R.315(a)), consolidated the appeals for purposes of oral argumentand disposition, and now reverse the judgment of the appellatecourt.

The plaintiff, Dr. Abel Garibaldi, is a board-certifiedcardiovascular surgeon who has had clinical privileges at St.Francis Hospital and Health Center, in Blue Island, since 1981.From 1981 to 1992, the plaintiff was a member of CardiovascularRenal Consultants (Cardiovascular Renal), a group of physicianswho performed, among other services, open-heart procedures atseveral hospitals in the Chicago area, including St. Francis. Dr.Robert Applebaum, Dr. Tammo Hoeksema, and Dr. DominicAllocco were also members of Cardiovascular Renal. Afterinternal differences arose over matters involving patient selection,operative procedures, and post-operative care, CardiovascularRenal dissolved. A new group, defendant Cardiovascular MedicalConsultants (Cardiovascular Medical), was later formed by Drs.Applebaum, Hoeksema, Allocco, and others, but it did not includethe plaintiff.

Dr. Applebaum later entered into an exclusive contract withSt. Francis that allowed only Dr. Applebaum, employees ofCardiovascular Medical, and those who subcontracted with Dr.Applebaum to perform open heart surgery at St. Francis.According to the plaintiff's subsequent complaint, the effect ofthis exclusive contract was to revoke his right to perform open-heart procedures at St. Francis without affording him the benefitof notice and a hearing, in violation of the hospital's then-currentbylaws.

Article VII, section 3(c), of the hospital bylaws, "CorrectiveAction," states in part:

"Actions which limit, reduce, suspend or revokemembership or clinical privileges of a practitioner on thestaff of the Hospital or revoke staff membership shall bedeemed to be adverse to the practitioner and shall entitlethe practitioner to notice and the hearing and appealprocedures as provided in Article VIII. These actionsinclude:

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(2) Reduction, suspension or revocation of clinicalprivileges and/or admitting privileges;

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(4) Suspension or revocation of specific clinicalprivileges or Staff membership;

(5) Other similar actions.

Such actions constitute a recommendation by theExecutive Committee to the Governing Body."

Additionally, article VIII of the hospital bylaws, "Hearing andAppellate Review Procedure," states in part:

"a. Any practitioner against whom an adverserecommendation has been made and which involvescorrective action set out in Article VII, Section 3(c) shallhave the right to request a hearing on the adverserecommendation under the terms and proceduresdescribed in this Article."

The initial exclusive contract between St. Francis and Dr.Applebaum took effect on January 1, 1993. The plaintiffcommenced the present action on January 26, 1993, by filing athree-count complaint in the circuit court of Cook County. CountI of the complaint was directed against St. Francis, CardiovascularMedical, and Drs. Applebaum, Hoeksema, and Allocco and soughtdeclaratory and injunctive relief. Count I alleged that St. Francis,by entering into an exclusive contract with Dr. Applebaum,effectively revoked the plaintiff's clinical privileges without noticeand a hearing, as required by articles VII and VIII of the hospitalbylaws. Count II of the plaintiff's complaint alleged tortiousinterference with contractual rights and sought damages fromCardiovascular Medical and the defendant doctors. Count III of thecomplaint alleged breach of contract and sought damages from St.Francis.

A judge in the chancery division granted the defendants'motion for summary judgment on count I and transferred countsII and III to the law division; the judge found no just reason fordelaying enforcement or appeal of the judgment entered on countI (155 Ill. 2d R. 304(a)). The plaintiff appealed from the ruling oncount I, and the appellate court reversed the entry of summaryjudgment and remanded the cause for further proceedings.Garibaldi v. Applebaum, 273 Ill. App. 3d 536 (1995). Theappellate court found that the hospital's decision to enter into theexclusive contract with Cardiovascular Medical effectivelyreduced or revoked the plaintiff's privileges at St. Francis, and thecourt believed that the plaintiff was therefore entitled to the noticeand hearing procedures contained in articles VII and VIII of thehospital bylaws. Garibaldi, 273 Ill. App. 3d at 540. This courtdenied the defendants' petitions for leave to appeal. Garibaldi v.Applebaum, 164 Ill. 2d 562 (1995).

With regard to counts II and III, a circuit judge in the lawdivision granted the defendants' motions for summary judgmenton those counts. The judge found that the hospital bylaws did notcreate a contractual relationship between the hospital and theplaintiff. The judge also concluded that, even if the bylaws wereapplicable, they were not breached when the hospital entered intoan exclusive contract with Cardiovascular Medical without firstproviding the plaintiff with notice and a hearing. The plaintiffappealed from that ruling; the appeal remained lodged in theappellate court until it was later joined by the plaintiff's furtherappeal after the remand of count I.

During the pendency of the plaintiff's appeal from the entryof summary judgment on count I, the legislature amended the Hospital Licensing Act in a manner relevant to this case. See Pub.Act 88-654, eff. January 1, 1995 (amending 210 ILCS 85/10.4(West 1992)). The amendment directed hospitals that contemplateexclusive contracts with professional groups to adopt bylaws thatspecifically provide for notice and hearing procedures forpractitioners whose privileges will be affected by the contracts.210 ILCS 85/10.4 (West 1996). To comply with the new statutoryprovision, St. Francis amended its bylaws; the hospital'sgoverning body approved article IX of the bylaws, "HearingOpportunity Before Implementation of Exclusive HospitalContracts," on July 24, 1995. Article IX states in part:

"Section 1. Notice to Other Practitioners

When the hospital enters into an exclusive contract withone or more practitioners, it shall give written notice ofthe effect of the exclusive contract to all otherpractitioners who hold specific clinical privileges whichwill, thereafter, be provided pursuant to the exclusivecontract. Such notice shall be given not less than sixty(60) days before the exclusive contract takes effect.

Section 2. Who Is an Affected Practitioner

An Affected Practitioner is any Practitioner who, at thedate of the notice:

(a) Holds a clinical privilege which shall becomesubject to the exclusive contract;

(b) Has exercised that clinical privilege at the Hospitalwithin one (1) year prior to the notice;

(c) Has not been offered the opportunity to exercise thatclinical privilege at the Hospital either as a party to theexclusive contract or under an arrangement with theproviders who are themselves parties to the exclusivecontract ***."

Before the issuance of the appellate court's mandate in thefirst appeal, St. Francis notified the plaintiff, on October 12, 1995,that it had entered into a second exclusive contract with Dr.Applebaum, effective December 13, 1995, and that the plaintiffwas an affected practitioner under the new provisions of article IXof the bylaws. The plaintiff timely requested a hearing pursuant toarticle IX.

Following the hearing, a panel of three physicians concludedthat it was "in the best interest of patient care and hospitaladministration" for St. Francis to enter into the exclusive contractwith Cardiovascular Medical. The report also recommended that,whenever an exclusive contract is entered into, the hospital shouldexempt from the consequences of the contract practitioners whohave had clinical privileges for at least one year before theeffective date of the contract. After considering the panel'srecommendations, the hospital's governing board decided to adoptthe exclusive contract without modification and rejected the"grandfather" provision recommended by the hearing panel.

After the article IX hearing, and while the cause was onremand from the appellate court's first decision, involving countI, the trial court allowed the plaintiff to amend his complaint byadding counts IV and V, which sought injunctive relief prohibitingenforcement of the 1995 exclusive contract and a judgmentdeclaring that St. Francis had no right to reject the hearing panel'srecommendation without explanation. St. Francis filed a motionto dismiss as moot count I, which the appellate court hadremanded for further proceedings. Because St. Francis hadconducted a hearing on the 1995 exclusive contract in compliancewith article IX of the bylaws, the trial court dismissed as mootwhat the parties termed "the injunction case." Although the trialjudge commented on several questions concerning the nature ofthe hearing, which was at issue in counts IV and V of the amendedcomplaint, he did not expressly rule on those counts. The plaintiffthen appealed.

At this point, the plaintiff had two appeals pending in theappellate court: his appeal from the order entering summaryjudgment on counts II and III of the original complaint, and hisappeal from the ruling of the circuit court, on remand from the firstappeal, dismissing "the injunction case" as moot. The appellatecourt consolidated the two appeals. 301 Ill. App. 3d 849. Theappellate court affirmed the trial court's dismissal of the portionof the amended complaint seeking injunctive relief. The appellatecourt found that the article IX hearing that had been provided tothe plaintiff made moot his original request for a hearing underarticle VIII of the bylaws. 301 Ill. App. 3d at 855. With respect tothe plaintiff's claims for damages in counts II and III of theoriginal complaint, the appellate court reversed the law divisionjudge's grant of summary judgment for the defendants. Theappellate court found that the plaintiff was entitled to pursueclaims for damages stemming from the hospital's failure toprovide him with notice and a hearing before the hospital andCardiovascular Medical entered into the original exclusivecontract. The appellate court reaffirmed its holding in the firstappeal that the hospital bylaws created a contractual relationshipand that the plaintiff's staff privileges had been effectivelyrevoked by the hospital's action in entering into the exclusivecontract with Cardiovascular Medical. The appellate court alsorejected the defendants' various contentions that they could not beliable for damages for the failure to provide the plaintiff withnotice and a hearing. The appellate court therefore remandedcounts II and III of the plaintiff's original complaint to the circuitcourt for further proceedings. The appellate court did not considerthe merits of the remaining counts of the plaintiff's amendedcomplaint, counts IV and V, believing that the circuit court hadfailed to rule on those counts. The appellate court remanded thecause to the trial court with directions to address those counts. 301Ill. App. 3d at 856. We allowed the defendants' separate petitionsfor leave to appeal. 177 Ill. 2d R. 315(a). We later granted leave tothe Illinois State Medical Society and the Illinois Hospital &HealthSystems Association to submit briefs as amici curiae inbehalf of the parties. 155 Ill. 2d R. 345.

We need not consider in this case whether the hospital'sbylaws are a contract, for we find a threshold issue to bedispositive of this appeal. In the first appeal, the appellate courtheld that the plaintiff's right to notice and a hearing under articlesVII and VIII of the bylaws was triggered by the hospital's decisionto enter into an exclusive contract with Cardiovascular Medical.Garibaldi, 273 Ill. App. 3d at 540. The defendants challenge thatconclusion here, arguing that the bylaws, as they then existed, didnot provide the plaintiff with any remedy in these circumstances.The plaintiff responds that the appellate court's first determinationis the law of the case and that our consideration of the issue istherefore barred. We do not agree.

Contrary to the plaintiff's contention, the law of the casedoctrine does not preclude us from reviewing this question, whichwas resolved by the appellate court in the first appeal but whichhas not previously been considered on its merits by this court inthe course of this litigation. See Sjostrom v. Sproule, 33 Ill. 2d 40,41 (1965); Zerulla v. Supreme Lodge Order of Mutual Protection,223 Ill. 518, 520 (1906). This court explained the operation of thelaw of the case doctrine in Relph v. Board of Education of DePueUnit School District No. 103, 84 Ill. 2d 436, 442 (1981):

"Even if the appellate court were bound by the law ofthe case it had announced in the first appeals, thatlimitation would not apply to this court. Although thiscourt denied petitions for leave to appeal in both of theprevious appeals of these cases, such action has noprecedential effect and in no way amounts to aconsideration of the merits of the cases. Nor does itindicate approval of the appellate court's action. (Peoplev. Vance (1979), 76 Ill. 2d 171, 183.) Therefore, this is thefirst time these cases have been before us on the merits.Our review may cover all matters properly raised andpassed on in the course of litigation. (Weiland Tool &Manufacturing Co. v. Whitney (1969), 44 Ill. 2d 105, 113-14.) In Vendo Co. v. Stoner (1974), 58 Ill. 2d 289, 306,this court held that the law of the case is not applicable tothis court in reviewing the judgment of the appellatecourt."

The present appeal marks this court's first opportunity toconsider, on the merits, whether the hospital's decision to enterinto an exclusive contract with Cardiovascular Medical triggeredthe plaintiff's right to notice and a hearing under articles VII andVIII of the hospital bylaws. For the reasons explained in Relph, wedo not believe that the doctrine of law of the case precludes usfrom addressing this issue, even though it was resolved by theappellate court in the plaintiff's first appeal. We now turn to thatquestion.

The plaintiff contends that the hospital's exclusive contractwith Cardiovascular Medical effectively revoked his privileges toperform open heart surgery at St. Francis and that the hospital'sactions are subject to judicial review to determine whether he wasafforded the necessary notice and hearing procedures incompliance with the hospital's bylaws. The plaintiff contendsfurther that he may recover damages for the hospital's failure toprovide him with notice and a hearing.

In this case, we do not believe that the plaintiff suffered arevocation, suspension, or reduction of his clinical privilegeswithin the meaning of the hospital bylaws. By the terms of thebylaws, clinical privileges are defined as "the permission toprovide medical or other patient care services in the Hospitalwithin well-defined limits, based on the individual's professionallicense, experience, competence, ability and judgment." Thegranting of privileges, therefore, signifies that a doctor is qualifiedto practice at the hospital. There is no doubt, in this case, that St.Francis has determined that the plaintiff is qualified, and thatdetermination is embodied in the privileges the plaintiff has beengranted. The right to exercise those privileges, however, is aseparate matter that may be affected by a host of hospitaladministrative decisions that are wholly unrelated to the doctor'sprofessional competence or ethics. For example, a hospital maydecide, for economic reasons, that it will no longer offer aparticular medical specialty. Although the practical effect of thatdecision may be to curtail or even eliminate a practitioner's abilityto exercise his or her privileges at the particular facility, thehospital's decision does not also signify that it has reduced orterminated the practitioner's privileges under its bylaws. Indeed,the hospital's decision would have nothing to do with thepractitioner's competence to practice, which forms the centralinquiry when privileges are reduced or terminated. See Engelstadv. Virginia Municipal Hospital, 718 F.2d 262, 267 (8th Cir. 1983).

In this case, the plaintiff fails to distinguish between hisprivileges and his ability to exercise those privileges in a "closed"environment. This distinction was illustrated by the court ofappeals in Collins v. Associated Pathologists, Ltd., 844 F.2d 473,481 (7th Cir. 1988), which stated:

"Dr. Collins also asserts that St. John's [Hospital]wrongfully removed or reduced his staff privileges inviolation of the by-laws of the hospital. However, therecord reflects that St. John's has neither removed norreduced Dr. Collins' staff privileges. *** Staff privilegesreflect the hospital's decision that a physician is qualifiedto practice in the facility, but do not in and of themselvesconfer employment. Employment as a pathologist at St.John's was determined by the legal contract between St.John's and APL [the exclusive contractor]. [Citation.] Although without concurrent employment by St. John's asa pathologist these staff privileges may be of little or novalue to Dr. Collins, the fact remains that the privilegeswere neither removed nor reduced."

Articles VII and VIII of the St. Francis bylaws do not pertainto or control administrative decisions, such as the formation ofexclusive contracts, but concern instead matters of professionalcompetence and ethical conduct. More specifically, the remediesafforded by articles VII and VIII are available to a doctor who isfacing "corrective action." Article VII, section 3(c), entitles apractitioner to notice and to the hearing and appeal procedures ofarticle VIII when an action limits, reduces, suspends, or revokesmembership or clinical privileges of that practitioner on themedical staff. Article VII, by its terms, applies only to "correctiveactions." Moreover, article VIII specifically states that "[a]nypractitioner against whom an adverse recommendation has beenmade and which involves corrective action set out in Article VII,Section 3(c) shall have the right to request a hearing on theadverse recommendation under the terms and proceduresdescribed in this Article." Thus, in order for a practitioner torequest a hearing under article VIII, both an adverserecommendation and corrective action must be present. In thiscase, however, the record fails to disclose any "corrective action"initiated by St. Francis against the plaintiff. The hospital's decisionto enter into an exclusive contract cannot be deemed correctiveaction; rather, that decision affected not only the plaintiff, but alsoany other physician who had privileges at St. Francis and who wasnot a member of Cardiovascular Medical or working undersubcontract with Dr. Applebaum. For these reasons, we do notbelieve that the plaintiff was entitled to the notice and hearingprocedures provided by articles VII and VIII of the hospitalbylaws.

Further support for this conclusion may be found in thesubsequent addition of the notice and hearing requirements ofarticle IX of the bylaws for actions like the one involved here. Aswe have found, prior to the legislature's amendment of section10.4 of the Hospital Licensing Act (210 ILCS 85/10.4 (West1994)) and the hospital's ensuing adoption of article IX, thehospital bylaws did not explicitly grant the plaintiff the right tonotice and a hearing in these circumstances. It was only after thelegislature amended section 10.4 of the Hospital Licensing Actand the hospital amended its bylaws that notice and a hearingbecame expressly necessary whenever the hospital entered into anexclusive contract. An amendment to a statute gives rise to apresumption that the amendment was intended to change the law.Illinois v. Mikusch, 138 Ill. 2d 242, 252 (1990). The legislature'senactment of this particular requirement suggests to us that thelegislation effected a change in the law. Because the hospitalfound it necessary to amend its bylaws in response to the newlegislation, one may also infer that the hospital bylaws, prior tothat time, did not already contain a similar requirement.

Finally, we note that our result in this case is consistent withthe results reached by a number of other courts that have addressedsimilar issues involving a medical staff member's proceduralrights prior to a hospital's entry into an exclusive contract with acompetitor. See Engelstad v. Virginia Municipal Hospital, 718F.2d 262 (8th Cir. 1983); Dutta v. St. Francis Regional MedicalCenter, Inc., 254 Kan. 690, 867 P.2d 1057 (1994); Bartley v.Eastern Maine Medical Center, 617 A.2d 1020 (Me. 1992); Holtv. Good Samaritan Hospital & Health Center, 69 Ohio App. 3d439, 590 N.E.2d 1318 (1990).

As a rule, courts exercise only a limited form of review incases involving medical staffing decisions. Barrows v.Northwestern Memorial Hospital, 123 Ill. 2d 49 (1988); Knapp v.Palos Community Hospital, 176 Ill. App. 3d 1012 (1988). InAdkins v. Sarah Bush Lincoln Health Center, 129 Ill. 2d 497, 506-07 (1989), this court explained:

"[T]here is, in cases involving private hospital staffprivileges, a 'rule of non-review' under which, as a matterof public policy, internal staffing decisions of privatehospitals are not subject *** to judicial review.[Citations.] An exception exists when the decisioninvolves a revocation, suspension or reduction of existingstaff privileges. In such cases, the hospital's action issubject to a limited judicial review to determine whetherthe decision made was in compliance with the hospital'sbylaws. [Citations.] The judicial reluctance to reviewthese internal staff decisions reflects the unwillingness ofcourts to substitute their judgment for the professionaljudgment of hospital officials with superior qualificationsto consider and decide such issues. [Citations.]"

Because we conclude that the plaintiff, in this case, has notsuffered a revocation, suspension, or reduction of his privileges,we decline to review the internal staffing decision of St. Francis.See Adkins, 129 Ill. 2d at 506-07. Applying the rule of limitedjudicial review, we conclude the St. Francis substantially followedits medical staff bylaws in existence when the hospital first enteredinto the exclusive contract. In sum, because plaintiff's privilegeswere not revoked, reduced, or suspended by St. Francis enteringinto the contract, under the rule of nonreview, we decline toconsider further St. Francis' decision to enter into that exclusivecontract. We make no determination regarding counts IV and V ofthe plaintiff's amended complaint challenging the fairness of thearticle IX hearing and the hospital's refusal to follow the hearingpanel recommendation that plaintiff should be exempted from theeffects of the exclusive contract.

For the reasons stated, the judgment of the appellate court,affirming the trial court's dismissal of count I, is affirmed. Thejudgment of the appellate court, reversing the grant of summaryjudgment on counts II and III, is reversed. The cause is remandedto the circuit court of Cook County for further proceedings toaddress counts IV and V of the plaintiff's amended complaint.

Appellate court judgment

affirmed in part and reversed in part;

cause remanded.

JUSTICE HEIPLE, specially concurring:

I agree with the court's disposition of this case. However, Ifurther believe that its underlying analysis may need clarification.

Plaintiff argued to this court, inter alia, that St. FrancisHospital's exclusive contract with his former partners effectivelyrevoked his privileges to practice at that hospital, giving rise to aright of notice and hearing on that revocation under St. Francis'bylaws. The majority rejects this assertion, likening the exclusivecontract to a hospital's decision to discontinue an entire field ofmedical practice. Slip op. at 8-10.

My concern is that this analysis, as written, might be read togive carte blanche authority to a hospital to avoid obligationsassumed under its bylaws to provide notice and a hearing beforerevoking a physician's privileges, simply by entering intoexclusive contracts. It is conceivable that, under a different set offacts, a plaintiff doctor might show that an exclusive contract wasentered into by the hospital simply to revoke a physician'sprivileges, as an end run around the notice and hearing obligationsof its bylaws in order to get rid of him.

Except for this caveat, I fully join the majority's opinion.Because the facts in this particular case do not support animpropriety on the hospital's part, I agree that plaintiff was notentitled to the notice and hearing procedures provided by thehospital bylaws.