A California Court of Appeal has provided additional guidance on how hospital decision making and contracting with medical groups for services influence or affect medical staff operations and fair hearing rights. The court has more effectively opened the door for medical staffs and hospitals to consider eligibility requirements related to a provider’s past disciplinary record.

Kime v. Dignity Health, Inc., held the terms of an Emergency Department Services Agreement between the hospital and a medical group related to representations and warranties about prior disciplinary action of the group’s physicians constitute eligibility criteria for medical staff membership and privileges. As such, the court found the decision by the hospital and medical staff to cease the processing of Dr. Kime’s application for medical staff membership and privileges for failure to meet minimum eligibility requirements was an administrative or quasi-legislative process. The decision was not grounded in an assessment of Dr. Kime’s clinical and professional competencies or made for medical disciplinary cause or reason.

Of note is that the court distinguished the facts of this case from the Economy v. Sutter East Bay Hospitals case that at first glance appeared to broaden the scope of hearing rights. The scope of the application of the Economy case has since been further narrowed by Asiryan v. Medical Staff of Glendale Adventist Medical Center and now by the court in Kime v. Dignity Health, Inc.

Dr. Kime was subject to corrective action, specifically a summary suspension, by the Clearlake Hospital medical staff. A Business and Professions Code § 805 report was submitted to the Medical Board of California for resignation of “privileges while under investigation for having been summarily suspended.” Valley Emergency Physicians medical group offered Dr. Kime a position as an emergency room physician at Mercy Hospital and Mercy Southwest Hospital (collectively “Mercy Hospital”), both of which are Dignity Health owned hospitals. As a condition of the offer, Dr. Kime had to successful apply for and receive privileges at Mercy Hospital. Dr. Kime applied for medical staff membership and privileges at Mercy Hospital.

Dignity Health had a closed contract with Valley Emergency Physicians medical group to provide emergency department services to Mercy Hospital. The contract contained a provision that represents and warrants, “‘(b) [no] Group Provider has ever been reprimanded, sanctioned or disciplined by any licensing board, certifying authority or medical specialty board; … (e) no Group Provider’s medical staff membership or clinical privileges at any hospital or health care facility have ever been suspended, limited or revoked for a medical disciplinary cause or reason.’” Dignity Health characterized this section as serving as eligibility requirements for physicians applying for emergency department privileges.

When the hospital learned of the corrective action taken at Clearlake Hospital, the Chief Medical Officer of Mercy Hospital instructed the medical staff to stop processing Dr. Kime’s application. The medical staff ceased its processing and did not send the application to the credentials committee for review. Dr. Kime later sued Dignity Health claiming he was entitled to fair hearing rights. Dignity Health responded to the claim by arguing this was an administrative or quasi-legislative decision and not a decision related to Dr. Kime’s competency (i.e., does not involve a decision made for medical disciplinary cause or reason). Dignity Health argued the terms of the service agreement with Valley Emergency Physicians medical group constituted eligibility requirements or criteria for medical staff membership and privileges. Dr. Kime did not meet the eligibility requirements as a result of the prior summary suspension and, therefore, his application could not be processed. As an administrative decision, the medical staff was not required to provide fair hearing rights. The court agreed with Dignity Health.

The court notably also distinguished the facts of this case from the facts of the Economy case noting that in Economy the “anesthesiologist’s suspension and termination were based on a “medical disciplinary cause or reason” under Section 805 where plaintiff’s documentation of pharmaceutical use at hospital was “ ‘completely unacceptable for this doctor’ ” after extensive training and “hospital was ‘not comfortable with the quality of care provided by [plaintiff] and cannot approve anesthesia coverage schedules containing’ him”.” Whereas, in the Kime case, neither Mercy Hospital nor the medical staff undertook a consideration of Dr. Kime’s clinical and professional competencies. Rather, he was administratively determined to not meet minimum qualifications and criteria for medical staff membership and privileges.

The court further reasoned this conclusion did not violate public policy reasons for Section 805 reporting as the Medical Board of California was already informed of the underlying incident(s) giving rise to the concern with the Dr. Kime’s practice. In other words, the prior conduct giving rise the summary suspension, which the Medical Board of California would desire notice of for the safety of the public and which disqualified Dr. Kime from medical staff membership and privileges at Mercy Hospital, had already been reported to the Medical Board of California. In other words, the public safety component had already been satisfied by the Section 805 report submitted by the Clearlake Hospital medical staff.

Thus, the court found, “[w]e fail to see what purpose would be served by requiring Dignity, and all the other hospitals that may have refused privileges to Kime because of the Clearlake Hospital suspension, to file reports informing the Medical Board that Kime had been denied privileges because of that suspension (which was the subject of the 805 Report) and the Medical Board’s subsequent reprimand. In short, Kime has not persuaded us that public policy is violated by an eligibility requirement that bars a physician from staff privileges because of the physician’s disciplinary history.”

While the court’s findings relate to emergency department closed contract terms, the analysis and reasoning of the court provides for broader application to the processing of applications for medical staff membership and privileges. Indeed, by such opinion, the court has effectively opened the door for medical staffs and hospitals to consider how they may establish eligibility requirements related to prior reported incidents of reported corrective action and disciplinary conduct.