## Facts

- Fresno Community Hospital (FCH), a private nonprofit hospital, operated its anesthesiology department under an “open staff” system in which anesthesiologists with staff privileges independently practiced and rotated coverage.
- FCH’s administration and board identified operational and quality-of-care concerns under the open system, including communication failures, scheduling problems, and patient-safety incidents involving inadequate coordination with nursing staff.
- To address these concerns, FCH’s board decided to convert anesthesiology to a “closed” system and executed an exclusive contract with anesthesiologist William H. Hass to provide anesthesia services through subcontracts with individual anesthesiologists.
- Several anesthesiologists accepted Hass’s subcontract; five anesthesiologists (plaintiffs) declined to sign and asserted the exclusive arrangement effectively terminated or curtailed their ability to practice at FCH based on their medical staff privileges.
- Plaintiffs sued to enjoin implementation of the exclusive arrangement; a preliminary injunction issued but was dissolved after trial, and the trial court denied a permanent injunction and awarded costs to defendants.

## Issues

1. Whether a private nonprofit hospital’s decision to adopt an exclusive contract and close a department is judicially reviewable as a deprivation of physicians’ vested rights based on staff privileges.
2. Whether replacing an open anesthesiology department with an exclusive-contract model unlawfully terminated, modified, or curtailed plaintiffs’ medical staff privileges under applicable law or bylaws.
3. Whether the hospital’s decision was arbitrary, capricious, or not rationally related to legitimate goals concerning patient care and hospital operations.

## Decision

- The Court of Appeal affirmed the judgment denying a permanent injunction and dissolving the preliminary injunction.
- The court held FCH could adopt an exclusive anesthesiology contract as a management decision aimed at improving quality, coordination, and efficiency.
- The board’s decision was not arbitrary or capricious because it was supported by identified problems in the department and legitimate patient-care concerns.
- The exclusive arrangement was treated as a structural reorganization of service delivery rather than an individualized disciplinary action against plaintiffs.
- The court also affirmed the trial court’s cost rulings, rejecting the hospital’s cross-appeal for additional costs.

## Legal Principles

- A private hospital may implement an exclusive contract for departmental clinical services when the decision is rationally related to legitimate objectives in providing medical care and operating the hospital.
- Medical staff privileges at a private hospital do not constitute an absolute entitlement to a particular departmental structure or an “open staff” mode of practice.
- Courts give substantial deference to hospital governing-board policy choices regarding organization and delivery of medical services and will not invalidate such choices absent arbitrariness, caprice, or lack of a rational relationship to legitimate goals.
- Department-wide restructuring and contracting changes do not, without more, constitute a termination or suspension of privileges requiring procedures associated with disciplinary peer-review actions, particularly where physicians are offered a path to continue practice under the new model.

## Conclusion

The court upheld a private nonprofit hospital’s shift from an open anesthesiology department to an exclusive-contract model, concluding the change was a rational, nondisciplinary management decision tied to patient-care and operational concerns and did not unlawfully deprive physicians of vested rights arising from medical staff privileges.


Mateo-Woodburn v. Fresno Cmty. Hosp. & Med. Ctr., 221 Cal. App. 3d 1169 (Ct. App. 1990)