Health authorities and hospitals in Canada structure their relationships with physicians in a variety of ways. In some cases, they enter into contracts that may involve an employment relationship or provide that the physician remains an independent contractor. In others, the relationship is defined by fee-for-service billing and there is no contractual relationship between the health authority and physician. There is also a parallel administrative relationship created when hospital boards or the boards of health authorities grant physicians privileges to practice in their facilities.

Case law in this sphere has frequently dealt with issues around alleged wrongful acts by health authorities that are said to affect privileges, contractual rights or both. Characterization of the wrongful act has implications for whether the cause of action arises under administrative law and tort principles (bad faith and breach of natural justice) or contractual law (breach of contract whether for an employee or independent contractor). This in turn impacts the standard against which the conduct of health authorities and hospitals is measured and any resulting damages.

The Nova Scotia Court of Appeal's recent decision in Horne v Queen Elizabeth II Health Sciences Centre (Horne) deals with all these issues. The court reviewed a $1.4 million jury award to a cardiologist who had her privileges varied after tension arose within her department. The decision confirms recent acknowledgments from another appellate court that: (a) health authorities and physicians have the flexibility to arrange their relationship in the manner they choose; and (b) reviewing courts will pay close attention to the characterization of an alleged wrongful act by a health authority. Horne also provides important lessons for health authorities conducting disciplinary investigations into physician performance.

Lessons on structuring relationships with physicians

Horne and another recent appellate decision, Ready v Saskatoon Regional Health Authority, emphasize two important takeaways for physicians and health authorities or hospitals structuring their relationship prior to the physician beginning to practice in the hospital and managing that relationship when issues arise:

  • Courts will respect the parties' decision to structure their relationship using private contract law. Subsisting contractual rights and obligations do not merge with privileges when they are granted. The grant of privileges cannot create a contractual relationship where there is none.
  • When issues arise, courts will hone in on the particular wrongful act. What matters is the precise element of the parties' relationship that the health authority has purported to affect. That wrongful act should channel an aggrieved physician into either an administrative proceeding under the bylaws (where privileges have been modified or revoked) or court or an arbitral tribunal (where a contractual right is at issue).

Lessons on conducting disciplinary investigations

Horne was an extreme case in which there was a finding of bad faith on the part of a health authority administrator. Despite the improbability of similar facts arising in the future, health authorities should take note of the types of checks and balances that should exist in disciplinary investigations that are suggested by the court's reasoning in Horne. These include:

  • ensuring the health authority's conflict of interest policy is up to date, communicated regularly to staff and followed in practice;
  • requiring recusal of individuals who have an actual or perceived conflict of interest from investigating disciplinary matters;
  • ensuring that the individual who investigates complaints related to a physician gives that physician ample opportunity to present his or her side of the story both when the complaint initially arises and as new developments occur; and
  • requiring individuals tasked with providing recommendations to medical advisory committees and the board of directors to set out the objective evidence substantiating the complaint at issue and its impact on patient care.

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