California Decision Allows Physician to Challenge Sham Peer Review as Whistleblower Retaliation

Tucker Arensberg, P.C.

In Fahlen v. Sutter Central Valley Hospitals, the California Supreme Court found:

  1. A physician is not required to first exhaust his administrative remedies through the medical staff appeals process in order to challenge sham peer review as whistleblower retaliation; and
  2. Dr. Fahlen qualified as a whistleblower for purposes of the California Whistleblower Act.

The California Medical Association and attorneys for physicians have hailed this decision as a landmark victory, allowing physicians to seek whistleblower protection against sham peer review, before exhausting their administrative remedies. Requiring the physician to prevail at a medical staff proceeding not only significantly delayed the opportunity to seek protection and risked irreversible damages to a physicians career, requiring the physician to actually prevail also stacked the deck against the physicians because medical staff hearings are not the most neutral venues for physicians. Of course, this decision is limited to California law at this point, and particularly the California Whistleblower Protection Act.

On the other hand, hospitals and their counsel are contending that this makes peer review that much more difficult for hospitals, because other physicians will be even less willing to participate in peer review proceedings if they feel they are at risk for whistleblower retaliation, and the cost of these proceedings to the hospital will be significantly increased because of the prospect of additional litigation.

Frankly, I believe the chilling effect on peer review is exaggerated, for a number of reasons.

First, the peer review process starts well before there are hearings involving supposedly neutral physicians. It begins when complaints are made against the physician’s conduct, and hospital executives and medical staff officers need to decide how to address those concerns.

Second, successful challenges to hospital peer review processes have been few and far between since the advent of the Health Care Quality Improvement Act in 1986. I doubt that adding an additional level of protection for those physicians who are actually the subject of sham peer review is likely to dramatically alter that balance.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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Tucker Arensberg, P.C.

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