Canada: Court Of Appeal Confirms That Physicians Are Statute-Barred From Claiming For Damages Arising From Hospital Decision To Cease Providing A Service

Last Updated: November 21 2018
Article by Kathryn Frelick, Lisa Spiegel and Lauren Parrish

On Friday, November 2, 2018, the Ontario Court of Appeal, in Beattie v Women's College Hospital, upheld a lower court decision to dismiss a civil claim for damages made by two physicians on the basis that the action was barred by section 44(5) of the Public Hospitals Act (PHA).  This confirms an important protection from liability for public hospitals that are engaged in certain types of restructuring or "integration" activities under the Local Health System Integration Act, 2006 (LHSIA).

Section 44 of the PHA relates to circumstances where a hospital ceases to operate as a public hospital or ceases to provide a service, either on a voluntarily basis or as a result of an integration decision or integration order under LHSIA.  Section 44(5) provides statutory protection from liability in circumstances where the hospital exercises its authority in good faith.  It provides that "[n]o action or other proceeding for damages ... shall be instituted" against the hospital for any act done in good faith in the execution or intended execution by a board of its authority to cease to operate as a hospital or to cease to provide a service or "for any alleged neglect or default in the execution in good faith by a board of such authority."

Background

The plaintiffs were two physicians practicing primarily in the urgent care centre of the Women's College Hospital for upwards of twenty years. The hospital's Board of Directors decided to close the urgent care centre, effective September 10, 2012. By virtue of such action, the physicians' privileges at the hospital were cancelled.

The plaintiffs sued the Hospital for wrongful dismissal and civil fraud. The Ontario Superior Court of Justice dismissed the action in its entirety, stating that the claim was statute barred by section 44(5) of the PHA.

Court of Appeal Decision

In dismissing the physicians' appeal, the Court of Appeal noted that it was not in dispute that the urgent care centre was a "service" as set out in s. 44(1.2)(a) of the PHA, that the Hospital Board decided to cease providing that service and that, as a direct result of ceasing to provide the service, the privileges of the two physicians were cancelled.

The Court of Appeal held that Section 44(5) of the PHA is one component of an "integrated scheme" in the Act that governs a hospital's cessation to operate or to provide a service. If a hospital board decides to cease to provide a "service" then the legislative scheme permits the board to cancel or substantially alter the privileges of any physician involved in the provision of the service. Section 44 of the PHA states that the hospital board is not required to hold a hearing when it makes such a decision and the normal procedural and appeal rights provided for in the Act do not apply.

In this case, the physicians argued that section 44(5) does not bar their claim for two reasons.  First, they argued that the legislative history indicated that at the time s. 44(5) was enacted it was expected to have a limited duration and would be complimented by regulations.  Second, because the trial judge accepted the position that the physicians were "dependant contractors," a legal category that did not exist at the time s. 44(5) was enacted, they claimed that this ought to exempt them from the application of s. 44(5) of the PHA.

The Court of Appeal rejected both arguments. With respect to the legislative history argument, the Court held that "the intention of s. 44(5) is clear" and that the legislature has not repealed or amended the section, despite extensive amendments to the PHA in 2006. Similarly, the Court held that the Minister has never enacted any regulations and "...the power to enact a regulation to provide certain procedural rights...cannot overcome the specific language of s. 44(5)."

The Court similarly rejected the argument that a dependant contractor relationship changes the application and effect of s. 44(5) of the PHA. The Court stated:

Doctors in the situation of the appellants whose privileges are terminated by the good faith decision of a hospital board as a consequence of a hospital board's decision to cease to provide a service have been precluded from suing for damages since 1996, however the legal nature of their relationship to the hospital is characterized. The language of s. 44(5) is all embracing and it would be inappropriate to read-in an exception that the Legislature did not provide.

Implications

This decision confirms the ability of public hospitals to rely on the statutory protections under the PHA in circumstances where it decides, in good faith, to cease to provide a service.  No legal action, including civil lawsuits for damages, can be taken by a physician whose privileges are cancelled or substantially altered as a result of a decision to cease to operate or cease to provide a service.  Further, under section 44 of the PHA, the physician does not have a right of appeal to the Medical Advisory Committee, Hospital Board or Health Professions Appeal and Review Board where their appointment or privileges relate to the provision of the service or operation.

It is important to note that the statutory protections under section 44 of the PHA do not apply to all integration decisions of a public hospital. For example, they would not apply in circumstances where a hospital continues to provide a service, but a hospital decision results in changes to how the service is delivered or to service levels.

Hospitals must both act in good faith and be seen to be acting in good faith by other stakeholders. Ensuring appropriate documentation and communication of such decisions is often the key to avoiding conflict or to defending the decision.

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Authors
Kathryn Frelick
Lisa Spiegel
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