In Patterson v. Methodist Health Care-Memphis Hospitals, the Tennessee Court of Appeals affirmed an order of summary judgment, allowing a Tennessee hospital to terminate the medical staff membership and clinical privileges of two physicians for a breach of contract. The contract was established by the medical staff bylaws, which required a certain level of continuous uninterrupted professional liability insurance coverage. Upon termination of the membership and privileges, the physicians sued challenging the breach of contract and asserting tortious interference with contractual relationships. 

The court concluded that the bylaws constituted a contract, that there was substantial undisputed evidence to establish that the doctors consented to the terms of the contract by applying for medical staff membership, that they violated the terms of the contract and were not excused from performing the contract.

With respect to intentional interference with contractual relationships, the court concluded that the hospital was entitled to exercise its own business judgment by terminating physicians who do not satisfy the professional liability insurance coverage requirements, and that decisions made for valid business objectives do not satisfy the improper motive requirements for proving the tort of intentional interference. The court stated “we conclude that Methodist acted pursuant to a valid business objective when it enacted and enforced revised bylaws requiring members of its staff to maintain a minimum level of insurance coverage.”