1. 45Journal of Health Care Compliance — May – June 2014
SETTLEMENTS
JOHN R. FEORE, III
California Supreme Court
Permits Physician Whistleblower
Lawsuit against Hospital Prior
to Exhaustion of Administrative
Remedies
Impact on Hospital/Physician Relations and
Peer Review Unclear
A
t first glance, a February decision by the California
Supreme Court appears to throw a wrench into
hospital discipline, the peer review process, and
employer/employee relations.1
The California Supreme
Court affirmed an appellate court’s ruling that a physi-
cian is not required to exhaust all available administrative
remedies before filing a whistleblower lawsuit against a
hospital that has terminated the physician’s admitting
privileges.2
Medical staff generally are required to exhaust
the hospital’s administrative peer review process or seek
a writ of mandamus prior to filing a lawsuit against a hos-
pital for discrimination or wrongful termination. In this
case, however, the physician sought judicial relief under
California’s whistleblower statute governing health care
facilities, claiming that the hospital’s administrative peer
review process was itself the source of the discrimination.
Does the California Supreme Court’s decision ulti-
mately harm the peer review process and serve as a
detriment to physician participation? Will the relation-
ship between hospital-employers and medical staff-
employees take an even more litigious nature as a result
of the court’s actions? The answer to these questions
may not be as clear cut once the California whistle-
blower statute and the court’s decision are dissected.
BACKGROUND
The California legislature provides whistleblower pro-
tection to members of the medical staff of a health care
John R.Feore, III,is a member of
Dentons’Health Care practice,focus-
ing on assisting clients in navigating
the federal health care regulatory
and legislative arenas.With a par-
ticular expertise in the Affordable
Care Act and the Medicare program,
John advises clients on the impact of
legislative proposals,proposed and
final regulations,agency guidance
and implementation of the Affordable
Care Act.His experience allows him to
serve clients’needs through advocacy
on Capitol Hill,policy development,
and the vital regulatory process that
influences how widespread legislative
changes are implemented.He can be
reached at 202/408-3272 or by email at
john.feore@dentons.com.
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2. Journal of Health Care Compliance — May – June 201446
Settlements
facility who report suspected unsafe patient
care and conditions.3
The whistleblower
law implements the public policy goal of
encouraging clinicians to notify govern-
ment entities of suspected unsafe patient
care and conditions.4
Specifically, the law
provides that no health care facility shall
discriminate or retaliate in any manner
against any patient, employee, member of
the medical staff, or any other health care
worker because that person has presented
a grievance, complaint, or report to the
facility.5
Discrimination includes discharge
or any unfavorable changes in the terms or
conditions of a contract, employment, or
privileges of the member of the medical
staff.6
The statute provides the following
remedies for members of the medical staff
who have been discriminated against in
violation of this law: reinstatement; reim-
bursement for lost income resulting from
any change in the terms or conditions of
his or her privileges; legal costs; and any
other applicable provision of statutory or
common law.7
The plaintiff in this case is a kidney
specialist who was granted nonprovisional
staff privileges at a hospital operated by
the defendant. Over the course of several
years, plaintiff had several clashes with
hospital nurses regarding patient care.
After several of these clashes, plaintiff
reported to the hospital administration
that nurses had been insubordinate and
provided substandard care. An ad hoc
investigative committee recommended to
the hospital’s medical executive commit-
tee (MEC) that plaintiff lose his privileges
at the hospital. A judicial review com-
mittee (JRC) conducted an extensive evi-
dentiary hearing over the course of eight
months and reversed the MEC’s decision;
however, the final decision whether to ter-
minate a physician’s staff privileges rests
with the board of trustees, who reversed
the JRC’s decision and terminated the
plaintiff.
The plaintiff chose to file suit against
the defendant, alleging a violation of the
California whistleblower statute, rather
than seek judicial review of the board’s
decision by means of a writ of mandamus.
The plaintiff alleged that his staff privileges
were terminated because of his complaints
about insubordination by nurses and sub-
standard nursing care, in retaliation for his
reports, a clear violation of the whistle-
blower protections afforded to the plaintiff
by the California legislature.
In August 2012, the California Court of
Appeals, Fifth Appellate District, held that
the plaintiff must not first prevail in an
administrative mandamus proceeding to
set the hospital’s termination decision aside
before filing a civil suit under the California
whistleblower law alleging that the hospi-
tal’s quasi-judicial decision was wrongfully
retaliatory.8
The California Supreme Court
agreed to review this decision.
CALIFORNIA SUPREME COURT’S DECISION
In an earlier decision, Westlake Community
Hosp. v. Superior Court, the California
Supreme Court held that before a physi-
cian may bring a common law tort action
directed against a hospital’s allegedly mali-
cious and wrongful quasi-judicial adminis-
trative decision to terminate the physician’s
staff privileges, he or she must first exhaust
all internal hospital procedures to reverse
the decision and then prevail in court in
a mandamus proceeding to have the deci-
sion set aside.9
In the case at hand, the California
Supreme Court had to determine whether
a different rule applied to a statutory cause
of action for whistleblower retaliation
under the California Health and Safety
Code. The court notes that “we have on
several occasions found a clear legisla-
tive intent, whether express or implicit,
to permit a statutory whistleblower action
without prior exhaustion of administrative
and judicial remedies. We have done so
even where the quasi-judicial administra-
tive procedural issue was not, as here, an
alleged instrument of retaliation, but was
instead itself a forum specifically provided
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3. Journal of Health Care Compliance — May – June 2014 47
Settlements
to address claims of retaliation accom-
plished by other means.”10
The California Supreme Court states
that section 1278.5 does not include an
express or implied proviso that a protected
individual who alleges retaliatory discrimi-
nation cannot sue unless the claim is first
presented to an administrative body.11
The failure of the whistleblower statute
to mention resorting to such an admin-
istrative forum as a condition to suit is a
significant indicator that the California
legislature did not contemplate such a
precondition in this instance.12
In this
particular case, the hospital’s peer review
proceeding was not a potential admin-
istrative remedy for the alleged retalia-
tory treatment. In fact, it was the alleged
instrument of the hospital’s discriminatory
treatment.13
The court holds that the legislative his-
tory supports the clear implications of the
statutory language. Namely, a physician
who claims a peer review committee’s final
disciplinary decision was an act in retali-
ation for whistleblowing activity is not
required to succeed in setting the decision
aside by mandamus before bringing an
action under section 1278.5.14
KEY THEMES AND TAKEAWAYS —
THE “MIDDLE GROUND”
The California Supreme Court was keenly
aware of the potential implications of
its decision. Opponents of the plaintiff’s
stance argued that the peer review pro-
cess would be less effective. Would peer
review decisions simply be challenged in
the courts as a retaliatory action against a
physician whistleblower? How would this
impact the effectiveness of peer review or
the relationship between hospital employ-
ers and physician employees?
Ultimately, the California Supreme
Court discussed the ramifications of this
case and the specific whistleblower statute,
holding that the public policy implications
of section 1278.5 outweighed the poten-
tial negative consequences of the court’s
holding. It is important to serve the com-
mon aim of both the statutory medical
peer review process and the whistleblower
protections provided by section 1278.5,
that is, the safe and competent care of hos-
pital patients.15
In this regard, the court’s
decision is narrowly focused on whether a
“physician who claims a hospital decision
to restrict or terminate his staff privileges
was an act in retaliation for his whistle-
blowing in furtherance of patient care and
safety need not seek and obtain a man-
damus petition to overturn the decision
before filing a civil action under section
1278.5.”16
In reality, there always exists a deli-
cate balance between the care and safety
of a health care facility’s patients versus
employer/employee relations and the
statutory provisions governing such rela-
tionship. The California Supreme Court
noted that “the balance of competing inter-
ests is altered when the wrongful motive
at issue is one specifically prohibited by
statute, in the public interest, under a
legislative policy that also seeks to safe-
guard the health and safety of hospital
patients.”17
The California whistleblower
statute simply protects whistleblowers
as a public policy goal espoused by the
California legislature. The necessity and
thoroughness of the peer review and
quasi-judicial processes is not damaged.
In fact, the California legislature acknowl-
edged this concern, stating that the whis-
tleblower protections “are not intended to
conflict with existing provisions in state
and federal law relating to employee and
employer relations.”18
Endnotes:
1. Fahlen v.Sutter Central Valley Hospitals,--- P.3d --- (Cal.
2014) (NO.S205568).
2. Id.
3. Cal.Health & Safety Code § 1278.5.
4. Id. § 1278.5(a).
5. Id. § 1278.5(b)(1).
6. Id. § 1278.5(d)(2).
7. Id. § 1278.5(g).
8. Fahlen v.Sutter Cent.Valley Hospitals,145 Cal.Rptr.3d
491 (Cal.App.5 Dist.2012) (NO.S205568).
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4. Journal of Health Care Compliance — May – June 201448
Settlements
9. Westlake Community Hosp.v.Superior Court,17
Cal.3d 465 (1976).
10. Sutter Central Valley Hospitals,--- P.3d ---.See Runyon
v.Board of Trustees of California State University,
48 Cal.4th 760 (2010) and State Bd.Of Chiropractic
Examiners v.Superior Court 45 Cal.4th 963 (2009).
11. Sutter Central Valley Hospitals,--- P.3d ---.
12. Id.
13. Id.
14. Id.
15. Id.
16. Id.
17. Id.
18. Cal.Health & Safety Code § 1278.5(a).
Reprinted from Journal of Health Care Compliance, Volume 16, Number 3, May-June 2014,
pages 45–48, with permission from CCH and Aspen Publishers, Wolters Kluwer businesses.
For permission to reprint, e-mail permissions@cch.com.