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Quality Improvement Act gets first antitrust test.

Quality Improvement Act Gets First Antitrust Test

The Health Care Quality Improvement Act was enacted in 1986 in order (1) to provide incentives and protection for physicians, including dentists, to engage in effective professional peer review and (2) to restrict incompetent and unprofessional physicians from moving from state to state without disclosure or discovery of lrevious incompetent or unprofessional activity. Under the Act, professional review bodies and persons taking professional review actions that meet the requirements of the Act are immune from private claims for damages under state and federal law, including the anitrust laws (excluding, however, federal civil rights laws). In addition, persons providing information to professional review bodies as defined in the Act are immunized from actions claiming damages under any law as long as the information is not knowingly false. The Act applies to peer reviewers, hospitals, professional societies, and other health care entities licensed by the state or qualified by the federal government, including HMOs and prepaid medical or dental plans, that engage in peer review activities. The Act does not, however, immunize reviewers or health care entities from actions of federal enforcement agencies or claims for injunctive relief.

The Facts

The Cottage Hospital litigation arose out of an alleged conspiracy among physician peer reviewers to suspend Dr. Austin's staff privileges at Cottage Hospital and thereby destroy his neurosurgery practice in Santa Barbara. The facts revealed that, in response to complaints from nurses, technicians, and physicians regarding the quality of care exhibited by Dr. Austin, the chief of staff of Cottage Hospital began a review process that culminated in a summary suspension of Dr. Austin's hospital privileges. Dr. Austin subsequently appealed the decision and, after an extensive hearing, Cottage Hospital reinstated Dr. Austin's privileges with specified conditions. Dr. Austin's suspension lasted approximately seven months. Thereafter, Dr. Austin brought an antitrust action for damages, claiming, among other things, that the defendant neurosurgeons conspired to refuse to cover his patients, although Dr. Austin subsequently admitted that three of the four defendant nuerosurgeons did in fact cover for him but only a few times over a seven-year period. Dr. Austin further claimed that the defendant nuerosurgeons openly demeaned his work to the nursing staff and aggressively attacked his judgment before other neurosurgeons in order to develop animosity against him. Finally, Dr. Austin claimed that the defendants had the power and the ability to exclude him from the practice of neurosurgery because a neurosurgeon was the chief of surgery and another neurosurgeon's wife sat on Cottage Hospital's Board of Directors.

In response to Dr. Austin's claims, Cottage Hospital, joined by the five physician defendants, four of whom were neurosurgeons, filed a summary judgment motion asserting that the defendants were immune from federal antitrust liability under the Act. Significantly, the court did not hold a full trial on the antitrust issues raised by Dr. Austin's claims, which would have cost the defendants huge sums of money. Instead, the court set forth three requirements that must be established in order to qualify for immunity under the Act. First, the professional review action, as defined in the Act, must comply with the due process standards set by the Act; second, the results of the professional review action must be reported to state authorities in compliance with the Act; and, finally, the professional review action must have occurred after the effective date of the Act. According to the Act, a professional review action is any action or recommendation of a professional review body of a health care entity that adversely affects the physician's privileges or membership in the health care entity and that is based on the competence or professional conduct of the physician.

The Court's Analysis

Prior to analyzing the Act's requirements, the court reviewed all of the decisions made in connection with Dr. Austin's privileges and determined that two professional review actions had occurred, each of which had to meet all three of the Act's requirements. According to the court, the first professional review action occurred when the Cottage Hospital Medical executive Committee voted to summarily suspend Dr. Austin's staff privileges (the "MEC decision"), and the second such action occurred when the Cottage Hospital Judicial Review Committee voted to conditionally reinstate Dr. Austin's privileges (the "JRC decision").

In order to satisfy the Act's first requirement--compliance with the Act's due process standard--the court considered four factors that are specified in the Act. Under the first factor, the court must find that the professional review actions were taken in reasonable belief that such actions were in furtherance of quality of care. Under that standard, a subjective good faith effort by the reviewers is insufficient. Rather, the defendants must show from an objective point of view that the reviewers' conclusions were reasonable.

To assess whether both the MEC decision and the JRC decision met the first factor, the court evaluated whether the conclusion of the reviewers was reasonable based on the information available. The court found that the physicians involved in the MEC decision could have reasonably believed that Dr. Austin exhibited incompetence because their decision was consistent with the information available from nearly 10 months of investigation. That investigation included evaluation of two years of Dr. Austin's cases; an internal investigation; and an independent investigation conducted by two neurosurgeons appointed by the state medical association. The court also found that the defendants demonstrated that the physicians involved in the JRC decision acted in the interest of quality of care based on the nature of the conditions placed in the plaintiff's reinstatement, which included periodic monitoring by independent neurosurgeons and consulting with internists, pathologists, and radiologists. In the court's view, the appropriateness of the conditions placed on Dr. Austin's staff privileges demonsrated that the JRC decision was intended to restrict incompetent behavior and protect patients.

Under the second factor, the defendants must show that before professional review actions were taken, there was a reasonable effort to obtain the underlying facts. Here, the court sought to evaluate the length and breadth of the peer review process. The court found that prior to the MEC decision, the physician reviewers had engaged in nearly 10 months of internal and external evaluations and monitoring and that such efforts demonstrated diligence sufficient to satisfy the reasonable effort requirement. Of particular significance to the court was the investigation by the two neurosurgeons who were appointed by the state medical association and who had no prior connection with Cottage Hospital.

The court also concluded that the length and breadth of the JRC decision was adequate to satisfy the Act's reasonable effort requirement. In evaluating the reviewers' efforts, the court found that the plaintiff admitted that he was granted adequate time to prepare for the hearing and that the hearing entailed more than 70 hours of testimony at which the plaintiff was allowed to present all of the evidence and witnesses he desired. The Judicial Review Committee's effort was found to be diligent and reasonable to gather the relevant facts.

Under the third factor, the defendants must show that adequate notice and hearing procedures were afforded the plaintiff. Under that standard, the defendant must demonstrate that their procedure is adequate to provide a fair and unbiased review. The court found that the MEC decision, by which Dr. Austin was summarily suspended, met the notice and hearing requirements under a special provision of the Act that allows immediate suspensions or restrictions of hospital privileges where failure to take such action may result in imminet danger to a patient and where a subsequent notice and hearing are provided. Under the Act, summary actions are permitted when a reasonable finding has been made that a patient's health may suffer. Significantly, the court determined that the MEC decision met the Act's requirement even though the JRC found the summary revocation to be extensive and reinstated Dr. Austin's privileges, albeit conditionally. According to the court the MEC decision was reasonable, based on the information available, and was supported by the ultimate conclusions of the JRC decision, which not only stated that Dr. Austin's treatment of certain patients was substandard but also placed significant restrictions on Dr. Austin's Cottage Hospital privileges.

The court also determined that the JRC decision met the Act's notice and hearing requirements. The court found that a letter, which notified Dr. Austin of the hearing date and outlined the reasons for the summary revocation, provided adequate notice of the hearing date. The court then determined that Dr. Austin received an adequate hearing that met all the requirements of the Act and included a hearing before six impartial physicians, none of whom were neurosurgeons, i.e., direct competitors; recorded proceedings; an opportunity to call witnesses, present all the evidence desired, and provided a written statement at the close of the hearing; and a final written report with recommendations from the Judicial Review Committee.

Last, the court must find that the professional review action was taken in the reasonable belief that the facts warranted the action after a reasonable effort was made to obtain the facts and to meet the due process requirements. Having satisfied the initial three factors, the court concluded that both the MEC decision and the JRC decision were warranted. Having met the standards for professional review actions, the court found that the defendants successfully demonsrated that they warranted immunity under the Act.

The court next addressed the Act's second requirement--compliance with the Act's reporting requirements--which provides that immunity may be forfeited if the health care entity fails to report to the state board of medical examiners any professional review action that adversely affects the clinical privileges of a physician for more than 30 days. In the current case, the defendants had appropriately reported both actions.

The court then addressed the final requirement of the ACt--that the professional review action occurred after November 14, 1986, the effective date of the Act--and found the actions taken by Cottage Hospital met this requirement as well. Because all requirements of the Act had been met, the participants in both professional review actions, including the five physician defendants, Cottage Hospital, and its various committees, were entitled to immunity under the Act.


The Cottage Hospital case provdes guidance to health care entities as to how courts evaluate peer review proceedings. The case also highlights how health care entities can conduct and document an objective peer review process, even though physician competitors are intimately involved in peer review. For example, with regard to the MEC decision, the investigation and written report of the independent neurosurgeons were important to validate the findings of the competitor neurosurgeons and also supplied valuable additional information to justify the suspension ecision. Likewise, both the written recommendation, including the conditions placed on Dr. Austin's privileges and the extensive recorded adversarial hearing held in connection with the JRC decision, provided comfort to the court that the professional review actions were designed to protect patients and not merely to exclude competition.

Health care entities should carefully review their credentialing procedures to ensure that their peer review process complies with the Act. Procedures complying with the Act will help health care entities avoid high cost and time-consuming antitrust litigation as a consequence of a challenge to a decision adversely affecting a physician's membership or staff privileges. Such procedures will also protect peer reviewers and may encourage physician participation in the peer review process.

Clifford E. Barnes is a partner with Esptein Becker & Green, P.C., in its Washington, D.C., offices. He is currently representing an HMO in an antitrust challenge by a radiology group claiming that the HMO's decision not to include the group in its provider panel violated antitrust law.
COPYRIGHT 1990 American College of Physician Executives
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Health Care Quality Improvement Act of 1986
Author:Barnes, Clifford E.
Publication:Physician Executive
Date:Jul 1, 1990
Previous Article:Pros and cons of clinical practice.
Next Article:Approval processes different for devices and drugs.

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