California Supreme Court rules in peer review case

June 14, 2013

The California Supreme Court recently issued a long awaited ruling in a case involving peer review and medical staff self-governance, El-Attar v. Hollywood Presbyterian Medical Center (no. S196830).

In this case, the hospital board at Hollywood Presbyterian Medical Center ignored and overrode the medical staff executive committee's (MEC) recommendation to reappoint a physician on staff. The physician then invoked his right to a joint review committee hearing to challenge the hospital’s termination of his privileges.

Frustrated that the hospital overrode its decision that the physician should remain on staff, the MEC decided that since it was the hospital that wanted to terminate him, then it should be the hospital to prosecute the peer review action. Subsequently the hospital's lay governing board appointed the hearing officer and members of the review committee, which ultimately terminated the physician's privileges.

Under the medical staff bylaws, however, only the MEC has authority to determine the joint review process, including the appointment of the hearing officer and joint review committee members. At issue in this case was whether state law allows the MEC to delegate this responsibility, or if by doing so the physician's rights were violated.

On June 6, the California Supreme Court ruled that the mere fact that the hospital appointed the joint review committee and hearing officer did not violate fair procedure.

CMA had filed a joint amicus brief with the American Medical Association (AMA) to explain the carefully balanced statutory relationship between a hospital governing body and its medical staff. A broad coalition of two dozen current or former chiefs of staff throughout California also had filed a separate amicus brief focusing on the practical aspects of maintaining self-governance and working with hospital administration. Together, the amicus briefs argue that the hospital in El-Attar failed to respect the medical staff self-governance rights when it unilaterally appointed the review panel and hearing officer in a peer review action.

Notwithstanding the fact that the court ruled against the individual physician in this case, CMA believes the court’s El-Attar decision can be cited to affirm some important principles concerning peer review. To be sure, the specific result in this case is limited to a unique set of facts that makes it less likely to apply broadly, namely, that the MEC delegated its powers to the hospital and thereby facilitated, if not was complicit in, the violation of the medical staff bylaws. The court acknowledged:

The situation would be different if the Governing Board had exercised this power [to appoint the JRC panel and hearing officer] in the face of active resistance by the MEC. If the Board had appointed the hearing participants despite the medical staff's own efforts to do so, the Board would have violated the provisions of the peer review statute providing that it is the peer review body or its designees that determine the manner in which a judicial review hearing is held. Although we need not decide the issue, such a usurpation of the medical staff's power of appointment may provide grounds to presume that the hearing participants were biased, for in such a case there would be greater reason to think that the Board sought to stack the review panel with participants who would rule in its favor.

Furthermore, despite finding that the physician was not deprived of fair procedure under the specific circumstances, the El-Attar opinion makes some keen observations about the peer review system and potential for abuse by hospitals:

There is certainly the potential for a hospital's governing body to abuse the power of appointment in a way that would deprive a physician of a fair hearing. A hospital's governing body could undoubtedly seek to select hearing officers and panel members biased against the physician. It might even do so because it wishes to remove a physician from a hospital staff for reasons having no bearing on quality of care. But where, as here, the medical staff has left to the hospital's governing body the task of selecting the participants in the judicial review hearing, we are not persuaded that we must presume any hearing officer or panel member appointed by the governing body is likely to be biased.

Finally, the court added a “cautionary note” about misreading its decision. It explained:

Although we hold that the assumed violation of Hospital's bylaws in this case was not material, we do not suggest that such bylaws are meaningless or that a violation of a bylaws provision that implements procedural protections above and beyond those specifically mandated by the Legislature could never be found material. Moreover, we emphasize that even when a violation of the bylaws is immaterial, that does not mean it is irrelevant. The violating entity's decision to depart from procedures delineated in the bylaws may constitute evidence of that entity's bad intent, and it may bolster a claim that the entity has taken other action that deprived a physician of his or her right to a fair proceeding. (Opn. at 22.)

These statements reflect the court’s understanding that in reality hospitals can abuse the peer review process. Although CMA is disappointed that the court ruled against the physician, in the long term we believe that this opinion can be used in a positive way to further bolster the importance of fair hearing rights.

The California Supreme Court is also set to hear Fahlen v. Sutter Central Valley Hospitals (no. S205568) this year, another case involving peer review and medical staff self-governance. The Fahlen case came to the court last fall, when it agreed to review a decision from an intermediate state appellate court in Fresno. The lower court’s decision addressed the availability of remedies to physicians who claim retaliation for whistleblowing in the hospital setting.

Under a 2007 amendment to Health & Safety Code section 1278.5 that CMA sponsored, physicians who suffer retaliation in the form of adverse action on their medical staff privileges for having advocated for patient safety can sue the hospital for reinstatement and damages. The hospital defendant in Fahlen argued that the physician must first go through the protracted process of challenging the adverse peer review action in a writ proceeding before going to court to sue under section 1278.5.

CMA submitted an amicus brief in the Fahlen case to argue, and the lower appellate court agreed, that if the adverse peer review action arises out of whistleblower retaliation, section 1278.5’s separate remedy of an immediate court action should apply without exception. The lower court explained that whistleblower protections for physicians would be rendered illusory if physicians were prohibited from immediately challenging in court a sham peer review decision that serves as retaliation for whistleblowing. This important question will now be decided in the California Supreme Court. CMA intends to submit an amicus brief jointly with the AMA.

The California Supreme Court is the final arbiter in the state court system, and its decisions serve as statewide legal precedent.

MORE INFORMATION: For more information, see CMA On-Call documents #5206, “Peer Review – Fair Hearing Requirements," and #7007, "Retaliation by Managed Care Plans and Others."


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