California's Fourth District Court of Appeal affirmed a trial court's granting of summary judgment in favor of Corona Regional Medical Center in a defamation lawsuit filed by a physician formerly employed at the facility.

The plaintiff had worked at the organization since 2010. According to his allegations, three workers at the medical center engaged in a coordinated effort to get staff to file dozens of fake incident reports against him, which claimed he was not responsive to pages and calls. The plaintiff claimed these reports were "virtually all fabricated".

In June 2016, one of the plaintiff's patients passed away. The plaintiff alleges that after this, the hospital's chief of staff suspended his privileges without any investigation.

Instead of taking a suspension that could have been reported to the California Medical Board, the plaintiff signed a conditional reinstatement agreement. By doing so, he did not challenge the suspension through peer review.

The conditional reinstatement required the plaintiff to take training courses at his own expense, engage in mentorship with written reports every 90 days, have backup physician requirements, and contained a clause letting the hospital reimpose the suspension if he breached any provision.

The plaintiff allegedly signed the agreement and then left shortly after. He sued the hospital and alleged defamation, interference with economic relations, and conspiracy.

The hospital defended the claims stating the plaintiff did not exhaust his internal remedies.

The trial court agreed with the hospital and the appellate court affirmed the ruling, stating the plaintiff did not receive the maximum relief he could have via internal remedies. His agreement "simply did not represent the maximum relief he might have achieved in a review hearing."

Per hospital bylaws, any employee who sues without exhausting internal remedies must cover legal costs. Therefore, in addition to failing to succeed in his lawsuit, the plaintiff is required to pay $313,830 in legal fees.

Source: https://www.hcamag.com/us/specialization/employment-law/doctor-skips-hospitals-peer-review-loses-lawsuit-and-owes-313k/590691

Commentary

In the case described above, the hospital prevailed because it offered internal grievance procedures that the employee did not use. As a result, he failed to exhaust the available internal remedies before pursuing his claim.

To support a failure-to-exhaust defense, healthcare organizations should maintain fair, timely, and clearly-defined internal grievance procedures. Delays, bias, or confusing requirements may undermine that defense. Whether exhaustion is required depends on the applicable law and the circumstances of the case.

Separately, the Health Care Quality Improvement Act (HCQIA) provides qualified protection from monetary damages for professional review bodies and eligible participants in physician peer review when the review action meets the law's standards. This protection is not blanket immunity from every claim; for example, it does not extend to damages under federal or state civil rights laws.

To qualify for HCQIA protection, a professional review action must meet four standards:

• It must be taken with a reasonable belief that it will further quality healthcare.
• It must follow a reasonable effort to obtain the relevant facts.
• It must provide adequate notice and hearing procedures, or other procedures that are fair under the circumstances.
• It must be taken with a reasonable belief that the action is warranted by the facts obtained through the review.

Healthcare organizations can strengthen their peer review procedures by providing written notice of the proposed action, explaining the reasons for it, and informing the physician of the right to request a hearing. The HCQIA's specified hearing procedures also include using an arbitrator, hearing officer, or panel members who are not in direct economic competition with the physician; allowing the physician to present and challenge evidence; and providing a written final decision that explains its basis.

Organizations should investigate the facts before taking action, while recognizing that the law permits certain immediate restrictions when delaying action could pose an imminent danger to an individual's health, subject to subsequent procedural protections.

The key takeaway is that fair, well-documented peer review procedures can help protect patients and support a hospital's legal defenses. However, failure to exhaust internal remedies and HCQIA immunity are separate defenses, and each must be evaluated under its own requirements.

Sources: https://www.govinfo.gov/content/pkg/USCODE-2024-title42/pdf/USCODE-2024-title42-chap117-subchapI-sec11112.pdf; https://www.law.cornell.edu/uscode/text/42/11112