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Double Immunity: Protecting the Corrective Action Process Under State and Federal Law

27 Jan 2016 5:30 PM | Lynette Pitt (Administrator)

by Jay C. Salsman, Harris Creech Ward & Blackerby, P.A.

In North Carolina, a physician seeking to challenge the outcome of a corrective action proceeding taken against the physician’s hospital privileges faces substantial obstacles. The Health Care Quality Improvement Act establishes a presumption of immunity for a professional review body participating in a corrective action, and the physician has the burden of overcoming this immunity. Additionally, North Carolina statute establishes a broad grant of immunity to medical review committee members in corrective action proceedings. Importantly, the North Carolina peer review statute also creates an evidentiary privilege preventing the introduction of evidence of the proceedings of a medical review committee, inclusive of the records and materials it produces. When combined with the presumption of immunity under the HCQIA, the evidentiary privilege creates a powerful shield from liability for defendants.

The Immunity Statutes

N.C.G.S. § 131E-95(a). The North Carolina peer review statute provides a broad grant of immunity to medical review committee participants. A medical review committee member, in the absence of malice or fraud, “shall not be subject to liability for damages in any civil action on account of any act, statement or proceeding undertaken, made, or performed within the scope of the functions of the committee.” N.C.G.S. § 131E-95(a). A medical review committee is defined to include, among other things, a committee of a medical staff of a hospital formed for the purpose of evaluating medical staff credentialing. N.C.G.S. § 131E-76(5).

Note that on the face of the statute the immunity applies to “[a] medical review committee member.” Does the statute provide immunity to the hospital which forms the committee? While no North Carolina case has expressly addressed this issue, there is authority which at least implicitly supports the proposition that a hospital is entitled to immunity under the statute. In McKeel v. Armstrong, 96 N.C. App. 401, 386 S.E.2d 60 B1989), the Court of Appeals affirmed summary judgment in favor of a defendant-hospital on immunity grounds under Section 131E-95(a) without specifically analyzing whether a hospital falls within the scope of the immunity provision. Similarly, in Philips v. Pitt County Mem'l Hosp., Inc., -- N.C. App. --, 731 S.E.2d 462 (2012), the Court of Appeals found the defendant-hospital immune under Section 131E-95(a), again without any analysis of the statute’s application to a hospital. Notwithstanding, a convincing argument can be put forth that to further the clearly defined goals of the statute, the immunity must be afforded to a hospital which forms a medical review committee. Otherwise, the immunity could be easily avoided, and the legislative intent behind enactment of the statute frustrated, merely by suing the hospital instead of the committee members who are acting as agents of the hospital in carrying out their committee responsibilities.

Thus, when a physician files suit seeking damages to challenge the result of a corrective action proceeding (assuming the defendants fall within the purview of the statute), the pertinent issue becomes whether the plaintiff is able to establish malice or fraud to overcome the immunity. In McKeel, 96 N.C. App. at 408, 386 S.E.2d at 64, the Court of Appeals recognized that “in almost any situation [involving a corrective action], opportunities [exist to] compromise the investigation if the persons involved [are] motivated by malicious intent[.]” However, the court refused to infer malice or fraud from such opportunities since the plaintiff “failed to produce any evidence of such intent.” Thus, the plaintiff must produce specific evidence demonstrating the hospital or members of the medical review committees acted fraudulently or with malicious intent. Philips, 731 S.E.2d at 472.

The Health Care Quality Improvement Act (42 U.S.C. § 11111, et seq.). Under the HCQIA, professional review bodies are protected from damages suits for professional review actions taken:

(1) in the reasonable belief that the action was in the furtherance of quality health care,

(2) after a reasonable effort to obtain the facts of the matter,

(3) after adequate notice and hearing procedures are afforded to the physician involved or after such other procedures as are fair to the physician under the circumstances, and

(4) in the reasonable belief that the action was warranted by the facts known after such reasonable effort to obtain facts and after meeting the requirement of paragraph (3).

42 U.S.C. § 11112(a); see also 11111(a)(1). HCQIA immunity is not dependent on a hospital’s compliance with its bylaws, but rather, provides a uniform set of national standards. Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 609 (4th Cir. 2009). There is a presumption that these requirements have been met. 42 U.S.C. § 11112(a). The plaintiff bears the burden of proving that immunity does not attach. Bryan v. James E. Holmes Reg’l Med. Ctr., 33 F.3d 1318, 1333 (11th Cir. 1994).

The first element for HCQIA immunity is met if “the reviewers, with the information available to them at the time of the professional review action, would reasonably have concluded that their action would restrict incompetent behavior or would protect patients.” Bryan, 33 F.3d at 1334-35. Because the standard is an objective one, assertions of hostility or bad faith are irrelevant to immunity analysis. Poliner v. Texas Health Sys., 537 F.3d 368, 378 (5th Cir. 2008). The Act does not require an actual improvement in health care, nor does it require that the conclusions reached by the reviewers be correct. Poliner, 33 F.3d at 378.

The second element for HCQIA immunity is that the action in question be taken after a reasonable effort to obtain the facts of the matter. 42 U.S.C. § 11112(a)(2). The HCQIA only requires that the totality of the process leading up to the professional review action be evidenced by a reasonable effort to obtain the facts of the matter. Gabaldoni v. Washington Cnty. Hosp. Assoc., 250 F.3d 255, 261 (4th Cir. 2001).

The third requirement for immunity under the HCQIA is that the action be taken “after adequate notice and hearing procedures are afforded to the physician involved or after such other procedures as are fair to the physician under the circumstances.” 42 U.S.C. § 11112(a)(3). There are “safe harbor” provisions established by 42 U.S.C. § 11112(b) which, if satisfied, result in the reviewing body being deemed to have met the adequate notice and hearing requirements as a matter of law. However, failure to satisfy the safe harbor provisions does not mean the reviewing body failed to provide adequate notice and hearing procedures, so long as the procedures were fair under the circumstances.

Finally, the analysis under § 11112(a)(4) closely tracks the analysis under § 11112(a)(1). Poliner, 537 F.3d at 384. To the extent the inquiry differs at all from that under § 11112(a)(1), courts tend to examine whether the specific action taken was tailored to address the health care concerns raised. Id.

The Evidentiary Privilege under N.C.G.S. § 131E-95(b) and its application in actions challenging the corrective action process N.C.G.S. § 131E-95(b) provides:

The proceedings of a medical review committee, the records and materials it produces and the materials it considers shall be confidential . . . and shall not be subject to discovery or introduction into evidence in any civil action against a hospital . . . or a provider of professional health services which results from matters which are the subject of evaluation and review by the committee. No person who was in attendance at a meeting of the committee shall be required to testify in any civil action as to any evidence or other matters produced or presented during the proceedings of the committee or as to any findings, recommendations, evaluations, opinions, or other actions of the committee or its members . . . A member of the committee or a person who testifies before the committee may testify in a civil action but cannot be asked about the person’s testimony before the committee or any opinions formed as a result of the committee hearings.

On the face of the statute, the privilege is broad and absolute. But does the privilege apply when the corrective action itself is being challenged? The answer, it appears, is yes, even though (or perhaps because) application of the privilege severely handicaps a plaintiff-physician’s ability to overcome the immunity provided by state and federal law.

The purpose of the Hospital Licensure Act, under which Section 131E-95 is codified, is “to promote the public health, safety and welfare and to provide for basic standards for care and treatment of hospital patients.” Shelton v. Morehead Mem’l Hosp., 318 N.C. 76, 82, 347 S.E.2d 824, 828 (1986). The privilege was enacted because of fear that access to peer review investigations would stifle candor and inhibit objectivity. Id. “The Act represents a legislative choice between competing public concerns. It embraces the goal of medical staff candor at the cost of impairing plaintiffs’ access to evidence.” Id. There is no exception to this rule when the peer review itself is being challenged as the privilege applies to “any civil action.” Virmani v. Presbyterian Health Svs. Corp., 350 N.C. 449, 515 S.E.2d 675 (1999). Unlike the immunity provision under Section 131E-95(a), there is no “malice or fraud exception” to the evidentiary privilege under Section 131E-95(b).

Similar evidentiary privileges have generally been upheld in other jurisdictions, even when the corrective action is being challenged. For example, in Patton v. St. Francis Hosp., 539 S.E.2d 526 (Ga. Ct. App. 2000), the plaintiff-physician filed suit against the defendant-hospital related to the termination of the plaintiff’s staff privileges. Through discovery, the plaintiff sought information related to the peer review process which resulted in the termination of his privileges, but the court held that such information was immune from discovery under the Georgia peer review statute. Even assuming that the hospital acted with malice, the privilege nonetheless applied. To allow an allegation of malice to destroy the discovery shield would result in full discovery in virtually all peer review cases, contrary to the intent behind enactment of the statute. Id. at 528. Moreover, the failure of a hospital to comply with its bylaws does not destroy the privilege, as allowing such an exception “would virtually destroy the candor sought in the setting of hospital peer review.” The court also rejected the plaintiff’s argument that the privilege should not apply when the peer review process itself is challenged. To allow such an exception would similarly “swallow the rule,” as it is a “rare case in which disciplined physicians do not challenge the peer review process.” Id. at 529-30.

Similarly, in Holly v. Auld, 450 So.2d 217 (Fla. 1984), the Florida Supreme Court upheld a statutory peer review discovery privilege in a suit alleging defamation against members of a hospital’s credentials committee, after the plaintiff’s application for staff privileges was denied. The court held that the peer review discovery privilege applied, even in the face of a defamation claim. The court reasoned as follows:

Inevitably, such a discovery privilege will impinge upon the rights of some litigants to discovery of information which might be helpful, or even essential to their causes. We must assume that the legislature balanced this potential detriment against the potential for health care cost containment offered by effective self-policing by the medical community and found the latter to be of greater weight. It is precisely this sort of policy judgment which is exclusively the province of the legislature rather than the courts.

Id. at 20.

At least one state, however, has adopted a physician-plaintiff exception. In Hayes v. Mercy Health Corp., 739 A.2d 114 (Pa. 1999), the Pennsylvania Supreme Court held that the confidentiality provisions of its state peer review statute did not apply where a physician challenged his own peer review process. Instead, the court reasoned that the privilege applies only in actions where an outside party seeks to hold a health care provider for negligence.

In North Carolina, the Court of Appeals recently had occasion to apply the privilege in a case in which a plaintiff-physician brought suit against a hospital and several medical review committee members after a series of corrective actions which resulted in the revocation of the physician’s hospital privilege. In Philips v. Pitt County Mem'l Hosp., Inc., -- N.C. App. --, 731 S.E.2d 462 (2012), the trial court entered a protective order pursuant to Section 131E-95(b), finding the documents generated by various medical review committees were privileged. In light of the protective order, the entry of which the plaintiff failed to challenge on appeal, the plaintiff was unable to produce any evidence of malice or fraud sufficient to overcome the immunity afforded by Section 131E-95(a). Further, he was not able to admit evidence of allegedly defamatory testimony of several defendants presented before various medical review committees involved in the corrective action proceedings. Thus, the court applied the evidentiary privilege even though it deprived the plaintiff of crucial evidence. See also Virmani, 350 N.C. at 464, 515 S.E.2d at 686 (rejecting argument that the privilege under Section 131E-95(b) applies only to third party malpractice plaintiffs).

Practical Implications

Philips highlights the challenges a plaintiff faces when attempting to overcome statutory immunity, both under state and federal law, when the plaintiff lacks the ability to introduce evidence of the very proceedings the plaintiff is challenging. This difficulty is compounded by the fact that the HCQIA creates a presumption of immunity, which the plaintiff bears the burden of overcoming.

From a defense perspective, your instinct will likely be to defend the case by establishing that the action taken against the plaintiff-physician’s privileges was the “correct” decision based upon the evidence developed during the corrective action proceeding. However, carefully balance your client’s need for this evidence against the plaintiff’s ability to prosecute his case in the absence of this evidence. It will be very difficult for a plaintiff to produce evidence to overcome the statutory immunities if the evidentiary privilege is applied. This decision will likely need to be made early in the litigation, perhaps before filing an answer to the complaint, so as to avoid inadvertently waiving the privilege.

Additionally, in those situations where removal to federal court is a consideration (whether in a diversity case or in action brought pursuant to 42 U.S.C. § 1983), you will need to determine at the outset of the case whether to enforce or waive the privilege. If you remove to federal court, the evidentiary privilege may not be recognized. See, e.g., Virmani v. Novant Health Inc., 259 F.3d 284 (4th Cir. 2001). Accordingly, you may prefer to remain in state court.

Finally, it is important to keep in mind that the proponent of the privilege has the burden of establishing its existence. Hammond v. Saini, -- N.C. App. --, 748 S.E.2d 585 (2013); Bryson v. Haywood Reg'l Med. Ctr., 204 N.C. App. 532, 536, 694 S.E.2d 416, 420 (2010). Thus, the defendant must establish that the committees in question meet the statutory definition of “medical review committees” and that the documents at issue fall within the purview of Section 131E-95(b). This will likely be done through affidavits, with the privileged documents submitted under seal for in camera review. Make sure you submit enough information to allow the trial court, and ultimately the appellate court, to determine the existence of the privilege.

Conclusion

Application of the evidentiary privilege under N.C.G.S. § 131E-95(b) deprives a plaintiff of crucial evidence which is likely necessary to overcome the immunities afforded to defendants by statute. This is no doubt a harsh result and one which plaintiffs and their counsel will likely see as unjust. However, an examination of the legislative histories of the North Carolina peer view statute and the Health Care Quality Improvement Act suggest that this is the very purpose the statutes were enacted to achieve.

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