California Court Clarifies Controversial Questions About Medical Staff Peer Review Decisions and the Power of Hospital Boards

Two recent California Court of Appeal opinions decide issues of first impression in the medical staff peer review arena, helping to resolve questions that have long been uncertain and controversial. In the first of the two cases decided by the Fourth Appellate District, Division One, the court clarified that the peer review body’s burden in a peer review hearing is only to prove that its action was reasonable and warranted at the time taken, not that it is the appropriate disposition at the end of the hearing. In the other decision, the court held that a hospital governing board has the power to exercise its independent judgment to overturn the decision of a physician hearing committee. Below we discuss each case in turn, and the issue it resolves.

Issue One: Must a Medical Executive Committee (MEC) prove in a peer review hearing that its action continues to be reasonable and warranted at the conclusion of the hearing, or is it sufficient for the MEC to prove that its action was reasonable and warranted at the time taken?

Answer: The MEC must prove only that its action was reasonable and warranted at the time taken. (M. Mehrdad Sadeghi v. Sharp Memorial Medical Center Chula Vista (Oct. 23, 2013) ___ Cal.Rptr.___, 2013 WL 6069031.) In Sadeghi, the Court of Appeal held that in considering whether the MEC’s actions against Dr. Sadeghi were reasonable and warranted, the JRC had to consider only the propriety of the MEC’s actions at the time they were taken, not whether the actions remained reasonable and warranted at the time of the JRC’s decision. (Click here for the court's decision: http://www.courts.ca.gov/opinions/documents/D060429.PDF.)

The MEC of Sharp Healthcare’s Chula Vista hospital summarily suspended Dr. Sadeghi’s clinical privileges, and the hearing he requested to challenge that action commenced in July 2007. In March 2009, while the hearing was ongoing, the MEC denied Dr. Sadeghi’s request to be reinstated, and his counsel argued the existing JRC should consider that new action also. The hearing officer denied this request, as it involved events that occurred “subsequent to the MEC’s actions in 2007.” (Slip Opinion (Op.) at 17.)

Dr. Sadeghi’s petition for writ of mandate was denied by the trial court, and on appeal Dr. Sadeghi argued that under California Business and Professions (B&P) Code Section 809.3 (b)(3), the JRC was required to consider evidence of his subsequent conduct and determine whether the MEC’s actions in 2007 continued to be reasonable and warranted at the time of its decision in May 2010. Section 809 (b)(3) states: “the peer review body shall bear the burden of persuading the trier of fact by a preponderance of the evidence that the action or recommendation is reasonable and warranted.” The hospital’s medical staff bylaws track the statutory language, except that they use the phrase “was reasonable and warranted” (emphasis added). (Slip Op. at 22.)

The Court of Appeal held Dr. Sadeghi was not denied fair procedure by the hearing officer’s decisions to confine the scope of the hearing to the MEC’s 2007 actions and exclude some evidence of later mitigating conduct by Dr. Sadeghi. The court noted that B&P Code Section 809.1(a) grants the right to request a hearing on a “final proposed action,” and opined that such a hearing is a “safeguard to ensure the prior actions of a peer review body are justified.” (Slip Op. at 23; emphasis added.) The court added that nothing in the statutory scheme contemplates an “open-ended proceeding” where the JRC effectively takes on the role of the MEC by determining, for example, whether the physician “is later fit for reinstatement.” (Id.)

Issue Two: Can a hospital’s governing board, in considering an appeal of a Judicial Review Committee (JRC) decision, overturn the JRC decision using the independent judgment standard of review, if the hospital’s medical staff bylaws specify that standard?

Answer: Yes. (Michael Michalski v. Scripps Mercy Hospital, et al. (Nov. 27, 2013) ___ Cal.Rptr. ___, 2013 WL 6184426.) In Michalski, the Court of Appeal’s decision helped further define the role of hospital governing boards in peer review proceedings. (Click here for the court's decision: http://www.courts.ca.gov/opinions/documents/D062270.PDF.) The court held that where permitted by the hospital’s medical staff bylaws, the governing board may, “using its independent judgment, completely overturn the decision of a medical staff-selected hearing committee.” (Slip Op. at 13.) This is the first reported California decision to hold expressly that a hospital board has such power.

Following the revocation of Dr. Michalski’s privileges at Sharp Healthcare’s Grossmont hospital (Sharp) for sexual harassment, he applied for medical staff membership and clinical privileges at three Scripps Health hospitals. In addition to questions about what had happened at Sharp, there were numerous other problems with his application submissions, which resulted in recommendations at all three Scripps hospitals to deny him membership and privileges. He requested a hearing to challenge those recommendations.

The parties agreed to hold a consolidated hearing with a single JRC consisting of seven physician members, with at least two from each hospital’s medical staff. In its decision, the JRC rejected the recommendations to deny Dr. Michalski’s applications, and the MECs then appealed the JRC decision to the Scripps Health Board of Directors (the Board).

Section 7.5-6 of the Medical Staff Bylaws (the Bylaws) established the Board’s independent judgment standard of review on appeal. (See Ellison v. Sequoia Health Services (2010) 183 Cal.App.4th 1486, 1496-1497; B&P Code Section 809.05(a).) The Bylaws also expressly empowered the Board to “...modify or reverse the decision of the Judicial Review Committee” (Slip Op. at 8; emphasis in opinion). The Board decided that the recommendations to deny Dr. Michalski’s applications were reasonable and warranted.

Dr. Michalski filed a writ of mandate petition, which the trial court denied, and the Court of Appeal affirmed. The appellate court focused first on the Board’s primary duty to the hospital’s patients to “ensure the competence of its medical staff.” (Slip. Op. at 13.) The court then held that, contrary to Dr. Michalski’s arguments, the Board properly exercised its independent judgment—because the Bylaws required the Board to do so, and California law clearly allows application of that standard for governing board appellate review, unless the medical staff bylaws mandate greater deference to the JRC.