Mahan v. Avera St. Luke’s

Avera St. Luke’s (ASL) (defendant) was the only private, nonprofit hospital within a 90-mile radius of the small community of Aberdeen, South Dakota. In response to ASL’s only neurosurgeon leaving the hospital, the Board of Directors of ASL (Board) passed a resolution to recruit two neurosurgeons or two “spine-trained” orthopedic surgeons to fill the void. The Board had learned through the recruitment process that having more than one spine-trained surgeon in the small Aberdeen community would pose a significant difficulty on the surgeon’s ability to grow a medical practice. The ASL learned that a local physicians group, Orthopedic Surgery Specialists (OSS) (plaintiff), had decided to build a day surgery center that would directly compete with the ASL. As a result of the new center, the ASL suffered a significant loss of income and hospital operating room usage. In response, the Board passed two motions that precluded any new physician-surgeons from applying for hospital privileges to practice spinal-related procedures. The Board’s decision did not affect those physicians, including OSS surgeons, who already had staff privileges. In making its decision, the Board specifically determined that the staff closures were in the best interests of the Aberdeen community and surrounding area. Dr. Mahan (plaintiff), a spine-trained orthopedic surgeon for the OSS, twice sought medical staff privileges at ASL to perform spine-related procedures. Mahan’s application was denied on both occasions. Mahan, the OSS, and its other physicians brought suit against the ASL challenging the Board’s decision to close the staff and argued that the decision was a breach of medical staff bylaws. Mahan and the OSS requested a permanent injunction requiring the ASL to consider Mahan’s application for privileges. The trial court granted the injunction, finding that the Board had breached the staff bylaws in closing the staff. The ASL appealed.