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Ruling in Physician Whistle-Blower Case Could Have Far-Reaching Consequences

A California Supreme Court ruling last month in a case involving a Modesto physician who filed a lawsuit challenging the termination of his hospital privileges could have significant long-lasting ramifications, according to some observers.

In Fahlen v. Sutter Central Valley Hospitals, the court upheld a physician’s right to file a whistle-blower lawsuit before exhausting the peer-review process. Some experts contend the case could fundamentally alter hospital-physician relationships in California.

Mark Fahlen, a nephrologist, filed suit in March 2011 after Sutter Health rescinded his privileges to care for patients at Memorial Medical Center in Modesto. The suit included a whistle-blower claim under the state Health & Safety Code, alleging the hospital’s actions against Fahlen were in retaliation for his complaints about insubordination and substandard care by hospital nurses.

The hospital sought to have the suit dismissed because Fahlen had not first exhausted the peer-review process of challenging the action.

In a unanimous decision, the state Supreme Court ruled a physician claiming that his or her hospital privileges are restricted or terminated as an act of retaliation for whistle-blowing may file a civil suit without first exhausting the professional-review process.

The case was closely watched by hospital officials and physicians, many of whom believe the decision will have an impact on the peer-review process in California hospitals.

The California Hospital Association and California Medical Association filed briefs on opposite sides of the case.

Milestone Case? Depends Who You Ask

Fahlen is definitely a milestone case,” said Steve Schear, Fahlen’s lead attorney.

“It is the first case since the California Supreme Court’s 1976 decision in Westlake v. Superior Court to allow a California physician to go directly to court to sue for bad faith peer review. Because the courts in California and throughout the nation have been extremely deferential to hospital peer review decisions, hospital peer review has become the preferred mechanism of silencing physician whistleblowers. The Fahlen case will give physicians in California strong protection from sham peer review following whistleblower reports,” Schear said in an email response to questions from California Healthline.

Jana DuBois, CHA’s vice president and legal counsel, disagrees.

“I don’t consider the ruling a milestone in hospital-physician relations,” DuBois said.

“I think of it as an unfortunate development that I believe will further complicate what is currently a very complex process. The ruling in this case now opens up the prospect of dual proceedings that will likely cross over and intersect in ways that will tangle and perhaps chill the rights and responsibilities of physicians to raise a grievance, and hospitals/medical staffs’ ability to effectively address physician quality of care and disruption issues,” Dubois wrote in an email.

Changes in Peer Process

Those in the Fahlen camp believe the ruling will bring physicians a new sense of confidence and freedom to point out problems in patient care.

“As physicians learn about their whistleblower protection, they will have more confidence and feel more free to speak up about hospital conditions that jeopardize or endanger patient care. Before Fahlen, many or most physicians were afraid to identify hospital deficiencies because of fear of hospital retaliation,” Schear said.   

In the other camp, hospital officials believe the ruling will make an already complex process even more labrynthian and difficult to manage.

“Certainly, I think it is appropriate for anyone to raise a quality concern without fear of retaliation and that goes for physicians on the hospital’s medical staff,” DuBois said. But, she added, having peer review of a physician’s performance happening at the same time as a civil suit will muddy the waters.

“I believe it will be much more difficult to operationalize and manage concurrent proceedings given the uncertainty of peer review protections in light of civil litigation that may likely try to obtain confidential peer review information or subject physician peer reviewers to civil litigation,” DuBois said. 

“For example, if a physician lodged a complaint at about the same time the medical staff determined that an investigation of a physician on its medical staff was warranted, knowing that a retaliation lawsuit may follow, potential peer reviewers would be required to clearly identify any connection between the investigation for quality of care concerns and the allegation of retaliation, and distinguish whether or not those distinctions are appropriately under the auspices of peer review and quality oversight or retaliatory. If one and not the other, how does the medical staff maintain that distinction given confidentiality protections for peer review and the need for evidence in civil litigation?”

Impact on Patient Care

Schear believes the court ruling will ultimately improve patient care in California.

“Because the remedies in California’s whistleblower law are very strong and provide excellent legal protection to doctors, physicians will be less afraid and less intimidated by hospitals,” Schear said. The decision will make it more likely that hospitals will “solve patient care problems rather than sweeping them under the rug and terminating the physicians who dare to point them out,” Schear said.

“As time goes by, Fahlen should have a very positive impact on the quality of patient care in California hospitals,” Schear concluded.

DuBois said the court decision leaves many questions unanswered.

“What happens if a matter is dropped once a retaliation lawsuit is filed but then subsequent quality concerns with the physician occur? What are the potential repercussions of dropping or not taking a peer review action given the prospect of a retaliation claim?”

“These are the questions that remain unanswered and will need to be addressed to rebut a presumption of retaliation,” DuBois said.

“Ultimately, it will come down to peer review bodies’ response to complaints of retaliation and demonstrating that any subsequent peer review action is warranted,” DuBois said.

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