August 2013 Volume 9 Number 12

Louisiana Supreme Court Denies HCQIA and State Law Immunity for Peer Review Action Against Physician

By Gilbert F. Ganucheau, Jr., Kathleen L. DeBruhl & Associates, L.L.C., New Orleans, LA

AuthorThe Louisiana Supreme Court, in an opinion issued on June 28, 2013, interpreted both federal and state law to find that a hospital was not immune from liability for failure of the hospital to provide due process and to follow its Medical Staff Bylaws (“Bylaws”). The case, Granger v. CHRISTUS Health Central Louisiana d/b/a CHRISTUS St. Francis Cabrini1 (“Cabrini” or “Hospital”), was brought by Tommie Granger, M.D., against Cabrini, its medical staff and the local governing board of the Hospital for actions including a temporary suspension, an investigation of behavioral issues and a recommendation and decision to terminate the medical staff membership of Dr. Granger if he refused to obtain an anger management evaluation. The Louisiana Supreme Court, in a case of first impression, upheld lower court determinations that the Hospital was not entitled to immunity under the Health Care Quality Improvement Act2 (“HCQIA”) and Louisiana’s peer review statute.3 The Court also ruled for the first time that an approved application for medical staff membership and the Bylaws created a contractual relationship between Dr. Granger and the Hospital.

The dispute began with an allegation that Dr. Granger, a cardiovascular surgeon, failed to properly care for a patient who experienced complications from a Carotid Endarterectomy. While caring for the patient, Dr. Granger allegedly had a heated exchange with members of the Cabrini staff, including aspersions concerning the care rendered by the Cabrini nursing staff. After performing an in-room procedure and ordering the patient be transferred to intensive care, Dr. Granger left the Hospital to perform surgery at another facility at which another patient was prepared for surgery and under anesthesia. The Cabrini patient’s condition deteriorated and emergency surgery had to be performed by another surgeon.

A report of the incident was made by the Hospital’s chief medical officer to the Medical Executive Committee (“MEC”) the next day which resulted in a summary suspension of Dr. Granger’s privileges for 21 days while the matter was investigated. Dr. Granger’s privileges were fully restored after 21 days, but a letter of reprimand was placed in his record. Dr. Granger requested that the letter of reprimand be removed and for a hearing on his suspension, which requests were denied. The MEC, finding that Dr. Granger’s unprofessional behavior was a contributing cause that affected patient care, recommended that Dr. Granger be placed on supervised probation for six months and be required to report to the Louisiana Physician’s Health Program for an anger management evaluation. The MEC also recommended that, if Dr. Granger failed to have the evaluation, his medical staff membership be automatically revoked. The executive committee of the Hospital Board accepted the MEC’s recommendation. The Hospital Board ratified the Board’s executive committee’s revocation of Dr. Granger’s membership and privileges for failure to obtain the evaluation. Dr. Granger did not apply for a renewal of his membership and privileges, which expired for non-renewal the day after the Board’s vote to immediately revoke his membership and privileges.

Dr. Granger originally brought a declaratory judgment and injunction proceeding in state court, which was later amended to assert breach of contract and other state law claims for damages. A jury in the case determined that the Hospital’s peer review action: 1) was not taken without malice, 2) was not taken in reasonable belief that the action was warranted by the known facts, 3) was not taken in furtherance of quality healthcare; 4) was not in substantial compliance with the hospital’s bylaws; and 5) caused the revocation of Dr. Granger’s privileges. The jury also found that the Hospital engaged in an unfair trade practice and made negligent misrepresentation to and about Dr. Granger, which caused harm to Dr. Granger. The jury awarded general damages of $1 million and lost income of $2.9 million to Dr. Granger. The Court of Appeals found that the jury’s conclusions regarding the peer review process, and the jury’s determination that the hospital was not entitled to immunity, were not in error. The Court of Appeals did reverse the jury’s finding that the Hospital’s actions constituted an unfair trade practice under Louisiana law and lowered the general damages award to $100,000.4

Summary Suspension

The Hospital argued to the Supreme Court that it was entitled to HCQIA immunity with regard to the summary suspension under 42 U.S.C. 11112(c)(1)5 and that the notice and hearing requirements of HCQIA did not apply to “professional review activities” but only to “professional review actions.” The Supreme Court disagreed with the Hospital’s arguments, finding that where an immediate summary suspension is imposed, the suspension is subject to subsequent notice and a hearing or other adequate procedures. The Court found that a meeting between Dr. Granger and the MEC, without counsel, and the refusal of the MEC to have a hearing as requested by Dr. Granger, were insufficient to grant immunity to the Hospital under HCQIA.

The Court addressed at length the differences between a “professional review action” and “professional review activities” and held that only a professional review action is immune under HCQIA. The court held that a professional review activity that is concerned with the competence or professional conduct of a physician that may adversely affect a physician’s privileges is a professional review action. The Court found that the 21 day summary suspension was a professional review action which required right to counsel and a post-suspension hearing. The Court further held that where a professional review activity results in no adverse action being taken, to be entitled to immunity a hospital must still meet all of the requirements of 42 U.S.C. 11112(a) even though no hearing would be necessary.

Subsequent Review of Physician’s Behavior

The Court then focused on the subsequent activities and recommendation of the MEC and the Hospital Board in investigating the “unprofessional conduct and behavior” of Dr. Granger with the Hospital staff. The Court found that those activities were related to professional conduct that could affect a patient and had the potential to adversely affect Dr. Granger’s privileges, and thus constituted a professional review action by the Hospital. The decision by the MEC and the Board to revoke Dr. Granger’s privileges and medical staff membership was a professional review action that required that Dr. Granger be given notice and a fair hearing. The Court held that the Hospital failed to provide adequate notice and hearing and therefore was not immune under HCQIA.

State Law Immunity

The Supreme Court next addressed immunity for peer review action granted under Louisiana law. LSA-R.S. 13:3715.3(c) provides that a committee or person conducting peer review is not liable “if such committee member acts without malice and in the reasonable belief that such action or recommendation is warranted by the facts known to him.” The statute provides an affirmative defense to liability for an action that is taken in good faith and without malice, which the Court stated required the committee to have had a reasonable basis for its actions or recommendations. Since the jury had found that the Hospital’s actions were taken with malice, not in the reasonable belief that the action was in furtherance of quality healthcare, and not in the reasonable belief that the action was warranted by the facts, the Court held that the Hospital was not immune under Louisiana law.

Cause of Action for Damages

The Court recognized that while there was no immunity under HCQIA or Louisiana law, neither statute granted a private cause of action for damages. The Court then looked to state law under contract and tort. The Court joined twelve other jurisdictions6 that have held that the application for medical staff membership and the Medical Staff Bylaws create a contractual relationship between the physician and the Hospital.7 The Court found that the Hospital’s failure to follow its Bylaws in the conducting of the investigation was a breach of contract entitling Dr. Granger to damages. The Court also affirmed the jury’s award of damages for negligent misrepresentation due to the failure of the Hospital to fully inform Dr. Granger of the nature of the actions being taken against him.

Damages

The jury had awarded Dr. Granger damages for loss of income of $2.9 million and general damages of $1 million, which was reduced to $100,000 by the Court of Appeals. The Supreme Court reversed the damage award for loss of income finding that Dr. Granger, who allowed his membership and privileges to expire without reapplication during the course of the peer review actions against him, suffered no loss of income from the Hospital’s revocation of his membership and privileges the day before the expiration of his membership and privileges for nonrenewal. The court found that any loss of income was due to his failure to reapply and not the actions of the Hospital in revoking his membership and privileges. Thus, Dr. Granger was entitled only to the $100,000 general damages award.

Impact of Granger

Granger could have significant national implications if other courts follow its rulings regarding HCQIA immunity, and will be closely looked at by physicians seeking redress for adverse credentialing actions. This case is a strong warning to hospitals and their medical staffs that they must follow their bylaws and provide due process, including notice and a fair hearing, in circumstances where the possibility of an adverse action is present, including the imposition of summary suspension. Professional review activities concerning the professional conduct of a physician which may affect the physician’s privileges must be conducted in accordance with all HCQIA requirements or the hospital may lose immunity under HCQIA. Hospitals in Louisiana, and other hospitals in states where a contractual relationship is created by the medical staff bylaws, face significant damages for breach of contract where the hospital does not follow its bylaws and is not immune under HCQIA.


Mr. Ganucheau is an attorney with Kathleen L. DeBruhl & Associates, L.L.C., a healthcare firm located in New Orleans, Louisiana. His practice focuses on corporate and regulatory healthcare issues and related litigation. Mr. Ganucheau also serves as chairman of the Health Law Section of the Louisiana State Bar Association. He can be reached at gganucheau@md-law.com.


1

2012-1892 (La. 6/28/2013); 2013 La. Lexis 1539.

2

42 U.S.C. 11101 et seq.

3

LSA-R.S. 13:3715.3.

4

Granger v. CHRISTUS Health Central Louisiana, 2011-0085 (La. App. 3 Cir. 7/20/12), 97 So.3d 604.

5

42 U.S.C. 11112. Standards for professional review actions.

(a) In general. For purposes of the protection set forth in section 411(a) [42 USCS § 11111(a)], a professional review action must be 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). A professional review action shall be presumed to have met the preceding standards necessary for the protection set out in section 411(a) [42 USCS § 11111(a)] unless the presumption is rebutted by a preponderance of the evidence.

* * *

(c) Adequate procedures in investigations or health emergencies. For purposes of section 411(a) [42 USCS § 11111(a)], nothing in this section shall be construed as--

(1) requiring the procedures referred to in subsection (a)(3)--

(A) where there is no adverse professional review action taken, or

(B) in the case of a suspension or restriction of clinical privileges, for a period of not longer than 14 days, during which an investigation is being conducted to determine the need for a professional review action; or

(2) precluding an immediate suspension or restriction of clinical privileges, subject to subsequent notice and hearing or other adequate procedures, where the failure to take such an action may result in an imminent danger to the health of any individual.

6

These jurisdictions include courts in the, District of Columbia, Florida, Kentucky, Maryland, Ohio, North Carolina, Pennsylvania, South Dakota, Tennessee, Texas and Utah.

7

The Court refused to follow other jurisdictions that have held that medical staff bylaws do not create a contract, which include courts in Connecticut, Georgia, Missouri and West Virginia.


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