Appeal from the Circuit Court for Baltimore County; Raine, J.
Henderson, Hammond, Marbury and Sybert, JJ., and Evans, J., Associate Judge of the Fifth Judicial Circuit, specially assigned. Evans, J., by special assignment, delivered the opinion of the Court.
This is an appeal from an order of the Circuit Court for Baltimore County sustaining the demurrer, without leave to amend, and dismissing the Bill of Complaint in which the complainant is seeking an injunction and monetary damages because of certain actions of the respondent alleged to be in restraint of trade. The case having been decided on demurrer, the facts set forth in the Bill of Complaint are deemed to be true for the purposes of this appeal.
Baltimore County Hospital, Inc., hereinafter referred to as "Hospital", is duly licensed as a non-profit institution equipped and staffed to perform certain services chiefly related to convalescence,
rehabilitation and post operative care. Maryland Hospital Service, Inc., hereinafter referred to as "Blue Cross", is the holder of a franchise for the State of Maryland in the national Blue Cross Plan, and sells hospitalization insurance in Maryland to approximately one third of the entire population of the State.
There are other hospitals in the State, offering the same services as the Hospital, with which Blue Cross has agreements under which it pays for services rendered to its subscribers. The Hospital has offered repeatedly to enter into a similar agreement, but Blue Cross has refused to accept and advises its subscribers that it will not pay for services rendered them by the Hospital. Due to this refusal by Blue Cross, physicians do not refer patients having Blue Cross insurance to the Hospital because of their knowledge that such patients would have to pay their hospital bills from their own funds. As a result, the Hospital is having financial difficulty and may not be able to survive.
As stated above, the Hospital contends that the actions of Blue Cross amount to restraint of trade of a necessary commodity; that, suffering special damages, it is entitled to injunctive relief as well as damages.
Blue Cross contends that, as a private non-profit corporation, it is not required to accept every licensed hospital in the State, but has the right, in its discretion, to select the hospitals with which it enters into contractual relations covering hospital care for its subscribers.
Blue Cross is a private corporation offering a non-profit health service plan to the people of Maryland. As a private corporation has a right to do business in a manner determined by its directors, it has the right to select the hospitals which it accepts as members, and cannot be compelled to accept all hospitals which apply for membership. The powers and duties of the officers of a private corporation are regulated by its charter, constitution and by-laws. This principle was clearly established in the case of Levin v. Sinai Hospital, 186 Md. 174. In this case, Dr. Levin, for many years a member of the visiting staff of Sinai Hospital, was notified that he had been dropped from the visiting staff. He brought action to enjoin the hospital
from interfering with his asserted right to treat patients at the hospital on the ground that the rules of the medical board were arbitrary, discriminatory, and constituted a restraint of trade. This Court discussed the essential difference between a public and a private corporation, stating at page 178, 180:
"The essential difference between a public and a private corporation has long been recognized at common law. A public corporation is an instrumentality of the state, founded and owned by the state in the public interest, supported by public funds, and governed by managers deriving their authority from the state. Public institutions, such as state, county and city hospitals and asylums, are owned by the public and are devoted chiefly to public purposes. On the other hand, a corporation organized by permission of the Legislature, supported largely by voluntary contributions, and managed by officers and directors who are not representatives of the state or any political subdivision, is a private corporation, although engaged in charitable work or performing duties similar to those of public corporations. Trustees of Dartmouth College v. Woodward, 4 Wheat. 518, 4 L. Ed. 629, 667; Regents of University of Maryland v. Williams, 9 Gill & J. 365, 388, 31 Am. Dec. 72; Hughes v. Good Samaritan Hospital, 289 Ky. 123, 158 S. W. 2d 159. So, a hospital, although operated solely for the benefit of the public and not for profit, is nevertheless a private institution if founded and maintained by a private corporation with authority to elect its own officers and directors. Washingtonian Home of Chicago v. City of Chicago, 157 Ill. 414, 41 N. E. 893. * * * A private ...