A couple of recent cases have thrown up a quite puzzling question in a fundamental area of clinical governance and hospital administration: the legal nature of the relationship between a private hospital and its accredited practitioners.

Before we wade into that, a quick word about terminology. When referring to ‘credentialing’, we are referring to the process of verifying the qualifications, experience and professional standing of a practitioner. When referring to ‘accreditation’, we are referring to the status conferred on a practitioner after successful credentialing. Finally, when referring to ‘scope of clinical practice’ we are referring to the scope (or parameters) of an accredited practitioner’s clinical practice defined for a particular hospital. The term ‘clinical privileges’ was used historically, although this term has largely fallen out of favour.

A specialist medical practitioner working in a private hospital in Australia is typically neither an employee (a person working under a contract of service) nor an independent contractor (a person working under a contract for services). Rather, the practitioner is a professional conducting his or her own private practice (an aspect of which can only be undertaken using the facilities and specialised equipment available in the private hospital).

A practitioner seeking to conduct his or her practice in a private hospital will typically apply for accreditation at the hospital. The hospital will, in turn, assess the practitioner’s credentials and grant the practitioner accreditation with a defined scope of clinical practice. In applying for accreditation, a practitioner will typically give an undertaking to abide by the hospital’s ‘by-laws’ (a document which contains the fundamental clinical governance processes and rules for the hospital). It is common that this undertaking is given on the application form which the practitioner signs.

Two recent cases have considered the legal effect of those steps.

In Pisano v Health Solutions (WA) Pty Ltd [2014] WASC 356, the Supreme Court in Western Australia concluded that Dr Pisano signing an application for accreditation and agreeing to abide by the by-laws of Peel Health Campus (on one hand) and Peel Health Campus accepting that application and granting him status as a ‘credentialed’ practitioner (on the other hand) created an agreement between Dr Pisano and Peel Health Campus. Importantly, however – and fatal to Dr Pisano’s particular case – the Court found the terms of that agreement did not confer upon Dr Pisano any right to a particular operating session or list.

Reasonably straight forward so far.

Yet – in Page v Healthscope Operations Pty Ltd [2016] NSWSC 1608 – the Supreme Court of New South Wales came to the opposite conclusion. The legal question considered was fundamentally the same – did Dr Page signing an application for appointment and agreeing to abide by the Healthscope by-laws (on one hand) and the grant of accreditation by Healthscope (on the other hand) give rise to a contract? The Court concluded that it did not. Rather, the Court found ‘the plaintiff’s [Dr Page’s] promise to abide by rules of conduct, the By-Laws, was not given in exchange for any promise of value from the defendant [Healthscope]’.

The Court briefly considered Pisano, finding it neither binding on the Court (Pisano being a WA case) nor particularly helpful. The Court specifically considered whether there was consideration in the form of mutual rights and obligations, but ultimately found Healthscope ‘gave no promise or guarantee of anything of value’ in return for Dr Page’s promise to abide by the by-laws. In the absence of real consideration, the Court said, there cannot be a contract.

It is an odd conclusion. Is the grant of accreditation itself – being a necessary pre-condition for any practitioner wishing to enter a private hospital and use its facilities in order to practice his or her profession – not a valuable thing?

We can certainly understand why a private hospital might be resistant to any conclusion that a contract exists between the hospital and each accredited practitioner (that conclusion is certainly not without implications). But what is the alternative? Should a private hospital read a typical undertaking from a practitioner applying for accreditation at the hospital as ‘I agree to abide by the by-laws of the hospital, but not so as to give rise to any legally binding obligation on my part’?

If the conclusion in Page v Healthscope is the legally correct conclusion, what are the implications? Does it mean – for example – that a hospital can summarily revoke a practitioner’s accreditation at any time irrespective of what the by-laws say? Does it mean that a practitioner seeking to exercise a right of appeal against an accreditation decision in accordance with the hospital’s by-laws can simply be sent away without being heard? If the answer to those questions is ‘yes, because there is no contract’ – in our view – that would seem to be a fairly significant departure from what we expect is an assumed state of affairs in most private hospitals in Australia.

If the conclusion is correct, it seems to leave open a really fundamental question: if a hospital’s by-laws do not take effect as a matter of contract, how do they take effect? Do they have any legal effect at all? By-laws commonly specify substantive obligations and rules of conduct (whether expressly or by reference to other policies and procedures of the hospital). Are those obligations and rules actually enforceable? There is probably a de facto enforceability in the sense that the hospital can presumably sanction non-compliance by revoking accreditation and excluding the practitioner from the hospital. But enforcement by that means illustrates a strange, circular logic implicit in the conclusion in Page v Healthscope – the practitioner is sanctioned for breaching an undertaking to comply with the hospital’s by-laws (an undertaking which is said to be of no legal binding effect) by withdrawing a right or privilege which is said to have so little value that it is actually incapable of giving the practitioner’s undertaking legally binding effect.

It is a curious decision, which we understand has been appealed.

If nothing else, it is perhaps a good prompt for a private hospital seeking to impose substantive obligations on its accredited practitioners as part of the governance and administration of the facility (whether through by-laws or through policy) to carefully consider how such obligations are given effect and how – if at all – those obligations might be enforced.