DON'T OVERLOOK FEDERAL PROTECTIONS WHEN DEFENDING HOSPITALS AND PEER REVIEWERS IN PHYSICIANS' RETALIATION LAWSUITS

Physicians often sue hospitals and medical staffs under a California whistleblower statute, Health and Safety Code section 1278.5, which enables physicians to claim that peer review disciplinary action is mere pretext for retaliation for their complaints about the quality of patient care at hospitals. In some cases, physicians preemptively lodge complaints administratively and file retaliation lawsuits knowing that their peer physicians are about to suspend, restrict, or terminate their practice privileges.

Experienced hospital lawyers are well aware of California law that frequently results in dismissal or narrowing of such suits, such as the anti-SLAPP statute that courts have applied to protect peer review communications, as well as various absolute and qualified privileges that protect peer reviewers. The California Supreme Court has explained that such protections are necessary to encourage participation in physician peer review, which is essential to policing incompetent and unprofessional physicians. Kibler v. Northern Inyo Cty. Local Hosp. Dist., 39 Cal.4th 192, 201 (2006).

But in many cases, defendants overlook substantial protections for peer reviewers – total immunity from damages – provided by the federal peer review law: the Health Care Quality Improvement Act (HCQIA), 42 U.S.C. § 11101 et seq. This may simply be because litigants are unaware of the law. It could also be due to a broad misconception that California opted out of HCQIA. However, HCQIA has always applied to peer review in California.

HCQIA incentivizes and protects participation in peer review. It states “[t]he threat of private money damage liability under Federal law … unreasonably discourages physicians from participating in effective professional peer review” and “[t]here is an overriding national need to provide incentive and protection for physicians engaging in effective professional peer review.” 42 U.S.C. § 11101. Thus, HCQIA creates broad and presumptive immunity for hospitals, medical staffs, and individual peer reviewers from damages claims by physicians. HCQIA does not protect against claims for injunctive relief.

Under HCQIA, a physician cannot recover damages for objectively reasonable peer review actions in which the doctor received a fair hearing, and peer review hearings are rebuttably presumed to have been fair if certain basic prerequisites were met. 42 U.S.C. § 11112(a).

Whether a physician has rebutted the presumption of immunity is evaluated under an objective standard. A physician cannot rebut the presumption by alleging that those conducting the peer review had improper motives, including an intent to retaliate against the physician based on his/her complaints. Austin v. McNamara, 979 F.2d 728, 734 (9th Cir. 1992). Such intent is an essential element of a suit under California’s physician whistleblower statute, section 1278.5.

A separate provision of HCQIA provides immunity to a person or entity that files a report with the National Practitioner Data Bank, which is required when a physician takes certain acts (such as resigning his/her medical staff membership while under investigation), or when a physician is subject to certain discipline. 42 U.S.C. § 11137(c). “[I]mmunity for reporting exists as a matter of law unless there is sufficient evidence for a jury to conclude the report was false and the reporting party knew it was false.” Wisner v. Dignity Health, 85 Cal.App.5th 35, 45–46 (2022) (citation omitted). Wisner is a first-impression appellate ruling in California applying HCQIA immunity.

HCQIA’s broad damages immunity likely preempts parts of California’s whistleblower statute. For one thing, HCQIA expressly allows state peer review laws to co-exist with HCQIA only to the extent they supplement or increase, rather than lessen, the damages immunity for hospitals and other peer reviewers. 42 U.S.C. § 11115(a). In addition, under standard conflict preemption analysis, HCQIA should preempt the application of section 1278.5’s subjective intent standard, because HCQIA immunizes objectively reasonable action regardless of motive. HCQIA also should preempt the application of section 1278.5’s presumption that peer review action taken within 120 days of the physician’s complaint about safety concerns is retaliatory, because under HCQIA, it is presumed that peer reviewers acted reasonably and the process was fair. These conflicts are built into the respective statutes and cannot be reconciled.

Finally, the notion that California opted out of HCQIA is a myth. When initially enacted, HCQIA included a provision allowing states to opt out if they enacted their own statutory framework for physician peer review. California attempted to do so in enacting the state peer review scheme, Business and Professions Code section 809 et seq. To this day, section 809(a)(9)(A) states “California exercises its right to opt out of specified provisions of the federal Health Care Quality Improvement Act relating to professional review actions.”

But before section 809 became effective, Congress amended HCQIA to delete the opt-out provision, as well as to confirm the federal legislation’s broad preemptive scope by clarifying that HCQIA did not preempt state laws that provide additional protections, immunities, or incentives for peer reviewers. Section 809’s legislative history reflects a vigorous back-and-forth between California Congressman Henry Waxman (a principal author of HCQIA) and the California Medical Association (the sponsor of California’s peer review statute). CMA was concerned that HCQIA would preempt California laws that were more protective of peer reviewers, and refused Rep. Waxman’s assurances that only less protective state laws would be preempted. Ultimately, in December 1989, before the Jan. 1, 1990 effective date of the California peer review statute, Congress amended HCQIA to foreclose opting out. Rep. Waxman explained: “To end this confusion and assure a uniform national minimum level of protection for peer review, the opt-out has been eliminated.” California’s Supreme Court tacitly acknowledged this, when it modified its opinion in Mileikowsky v. West Hills Hospital & Medical Center, 45 Cal.4th 1259 (2009), at the rehearing request of the California Hospital Association, to delete a reference to California’s opt-out of HCQIA. See 2009 Cal.LEXIS 5415; see also Smith v. Selma Cmty. Hosp., 188 Cal.App.4th 1, 27 n.22 (2010) (“Congress amended the federal statute to repeal the so-called opt out provision”); Fox v. Good Samaritan L.P., 801 F.Supp.2d 883, 892 (N.D. Cal. 2010) (“Congress … revoked that option [to opt out of HCQIA]. … Whatever force [California peer review law] may continue to have in other settings, it does not serve to override HCQIA immunity now”), aff’d, 467 F.App’x 731 (9th Cir. 2012).

HCQIA is a powerful tool that protects and incentivizes physician peer review. It should be a standard part of hospitals’ and medical staffs’ defenses to physician litigation challenging peer review disciplinary action.

Barry S. Landsberg and Joanna S. McCallum are partners at Manatt, Phelps & Phillips, LLP.