1
CALIFORNIA ASSOCIATION
MEDICAL STAFF SERVICES
43RD ANNUAL EDUCATION FORUM
SHERATON GRAND SACRAMENTO HOTEL
MAY 7-9, 2014
HOT LEGAL TOPICS
FOR MEDICAL STAFF
PROFESSIONALS
Greg Abrams, Esq.
Pacific West Law Group
© 2014 Gregory Abrams, Esq.
Topics for This Presentation
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Possible Changes to the Medical Injury
Compensation Reform Act of 1975 (MICRA),
and Hospital Drug Testing of Doctors
 Changes to the Guidebook of the National
Practitioner Data Bank
 Fahlen MD v. Sutter Medical Center:
Supreme Court Case re Hospital Retaliation
Against Whistleblower Physician on Staff

© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors
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The Medical Injury Compensation Reform Act
(MICRA): California’s medical liability reform
law.
 Born of the mid-1970s malpractice insurance
crisis:

 runaway
jury verdicts for “pain & suffering,”
 skyrocketing malpractice premiums in response;
 Commercial malpractice carriers left California
altogether, canceling all their policies; and ultimately
 the physician-owned carriers were created to fill the
void.
© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
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
What MICRA does:
 Permits
jury verdicts to compensate malpractice plaintiff
for all actual, documentable damages (lost wages,
medical bills not paid by insurance, etc.)
 Prohibits “double recovery” – such as collecting medical
expenses that a health plan already paid for plaintiff
 Sets a statute of limitations shorter than other kinds of
lawsuits;
© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
5

What MICRA does (cont’d):
 Places
a sliding scale percentage limit on the
calculation of plaintiffs’ attorneys fees, so plaintiffs
would share less of an award with their attorney;
 Permits large money jury awards to be paid through an
annuity over time, allowing for deposit of a smaller sum
of money to fully compensate the patient.
 Permits agreement between patient and doctor for any
future malpractice case to go to binding arbitration
rather than the courts (less expenses for arbitration)
© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
6
Probably the most important feature, the MICRA “cap”:
“Pain and Suffering” damages are limited to $250,000.
 Has the biggest effect on limiting “runaway” jury
verdicts
otherwise verdicts can be in the multi-millions depending on
the case with
 There is no consistency between the measure of emotional
distress caused by the malpractice and the measure of the
money damages required to “compensate” for the P&S
 Believed to have the biggest effect on keeping malpractice
premiums lower.
 Also reduces the amount of money by which to calculate the
plaintiff’s attorney’s fees

© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
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


Arguments against MICRA:
The “cap” deprives plaintiffs of their due
compensation for emotional distress
The “cap” harms the patients with the biggest
emotional distress damages
The “cap” makes it difficult for plaintiffs to get an
attorney
© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
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

Arguments in favor of MICRA:
Plaintiffs are not deprived of their true actual
documentable damages for any and all past and
future medical costs
Plaintiffs are not deprived of future lost wages and
lifetime earning potential;
© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
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

Plaintiffs are not deprived of their ability to obtain
punitive damages if the lawsuit involves malicious or
fraudulent acts
Malpractice insurance remains expensive, even after
recovery from the insurance crisis of the 70s and the
institution of MICRA.
© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
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
Arguments in favor of MICRA (cont’d):
We cannot afford to let malpractice premiums be
affected by very high “pain & suffering” jury
awards, which:
 Raises
health care costs due to higher “overhead”
 Reduces the ability of doctors to get malpractice
insurance and cover all other costs of their practice
 Reduces willingness of doctors to go into high risk
specialties that already have high premiums for liability
coverage;
© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
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Trial Lawyers unsuccessfully attempted to
increase the MICRA cap in 1998, 2000, 2012,
and 2013
 Latest effort to increase the cap: The Troy &
Alana Pack Patient Safety Act
 Not qualified for the November Ballot as of
April 11, 2014, but likely has enough
signatures.

© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
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
Initiative states up front:
 Drug
abuse by doctors by doctors must be addressed,
with one in ten MDs having drug impairment, and one
third of all MDs “will experience a condition, including
alcohol or drug abuse” that impairs their ability to
practice safely;
 One third of all hospital admissions involve malpractice,
and a large percentage of those cases are caused by
impaired doctors;
© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
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
Initiative states up front (cont’d):
 No
mandatory drug testing exists for doctors, unlike
airline pilots, bus drivers and others;
 There exists “no effective safeguards . . . to stop
physicians from practicing until a substance abuse
problem is addressed”
 People are harmed by doctors impaired by drugs and
alcohol, and by doctors who overprescribe addictive
narcotics.
© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
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
Therefore, this Initiative would:
 Require
hospitals to conduct random drug and alcohol
testing of doctors
 Require drug testing of physicians after an unexpected
death or serious injury
© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
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


Require all health care practitioners to report
doctors “who appear to be impaired by drugs or
alcohol”
Require all health care practitioners to report
doctors whose patient was harmed because the
doctor “failed to follow the appropriate standard
of care”
Require hospitals to report positive test results,
suspend doctors who test positive or refuse to be
tested.
© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
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

Require doctors to check the CURES database for
any new patient needing a Schedule II or III
prescription;
Adjust MICRA’s cap on pain and suffering
retroactively based on inflation since 1975, and
adjust it annually according to the Consumer Price
Index (estimated to raise the cap to $1,100,000.)
© 2014 Gregory Abrams, Esq.
Voter Initiative on MICRA &
Random Drug Testing of Doctors (cont’d)
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 The
cap “limits the value of children’s lives” to $250K,
as it does the loss due to malpractice of anyone’s
quality of life, “no matter how egregious the
malpractice or serious the injury.”
 “As a result, negligent doctors are not held accountable
and patients’ safety has suffered.”
© 2014 Gregory Abrams, Esq.
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
The drug provisions look like they're in the
initiative to threaten doctors into supporting a
MICRA reform. Its backers deny that, but their
real rationale almost looks worse. The drug
rules are in the initiative because they poll
well, and the backers figure that's the way to
get the public to support the measure. "It's the
ultimate sweetener," says Jamie Court, the
head of Consumer Watchdog.
© 2014 Gregory Abrams, Esq.
Revised National Data Bank Guidebook
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

December, 2013: The National Practitioner Data
Bank (NPDB) announces the release of a draft of
the revised user Guidebook.
“The Guidebook is a policy manual that serves as
an essential reference for Data Bank users to clarify
legislative and regulatory requirements through the
use of reporting and querying examples,
explanations, definitions, and frequently asked
questions (FAQs).”
© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
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


12/27/13 – Draft of “revised user Guidebook”
released for public comment;
Comment period closed January 31, 2014
Unusual –> Guidebook is not law, is not regulation.
 New
regulations from federal or state agencies require
a period of “public notice and comment” before an
agency can finalize a regulation.

Guidebook Final version has not been released as
of April 11, 2014.
© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
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

This is only a guidebook, offering assistance in
understanding duties in re the Data Bank to comply
with law and regulation.
A Guidebook is not required to have a public notice
and comment period, since it is not law or regulation
itself.
© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
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

Draft Guidebook would revise the definition of
“investigation” for purposes of reporting a
physician or dentist to the National Practitioner
Data Bank.
Under Data Bank Rules, a physician or dentist must
be reported when a physician resigns from the
medical staff “while under investigation”
 “relating
to possible incompetence or improper
professional conduct, or in return for not conducting such
an investigation or proceeding.”
© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
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
Therefore:
 [1]
It is important for the physician and the medical
staff to know when an investigation is actually
underway, and
 [2] It is important for the physician or dentist to know
when an investigation is underway to understand the
risks involved in deciding whether to resign
© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
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
Page E-31 of the draft Guidebook defines what
“is” and what “isn’t” an investigation:
What is NOT an investigation:
 “A
routine, formal peer review process under which the
health care entity evaluates, against clearly defined
measures, the privilege-specific competence of all
practitioners . . . .”

This sounds a lot like OPPE and routine/periodic
chart reviews.
© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
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What IS an investigation, according to the draft
Guidebook:
 When the “formal peer review process” is used
because
 [1]
issues related to professional competence or conduct
are identified or . . .
© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
26

When the “formal peer review process” is used because


[2] monitoring of a physician’s performance is triggered
“based on a single event or pattern of events related to
professional competence or conduct”
Does this mean a report to the NPDB is required when:


a physician resigns while he is being monitored by the
Physician Well-being Committee, or
when a physician is being proctored for a procedure without
any restrictions of doing the procedure if the proctor doesn't
show up?
© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
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

“An investigation begins as soon as the health care
entity begins an inquiry and does not end until the
health care entity’s decisionmaking authority takes a
final action or formally closes the investigation.”
Therefore, the period in which the mere gathering
of facts is taking place does not determine when the
investigation begins or ends.
© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
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
A report to the NPDB must be based on evidence of:
an investigation ongoing at the time of the surrender,
or
 “evidence of a plea bargain.”


Examples of acceptable evidence of
“investigation”:
 minutes
or excerpts from committee meetings,
 orders from hospital officials directing an investigation,
 notices to practitioners of an investigation.
 BUT, there is no requirement that the practitioner be
notified or even be ©aware
of the investigation.
2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
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
Definition of “investigation” for purposes of an
NPDB report would no longer be “controlled” by
what the medical staff bylaws or policies say!
 The
medical staff bylaws has always defined
“investigation,” so everyone understands when the
investigation is actually underway.

© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
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
Other indicators of “investigation”:
 The investigation must be focused on the practitioner in
question.
 The investigation must concern the professional
competence and/or professional conduct of the
practitioner in question.
 Investigation generally should be the precursor to a
professional review action.
© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
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
Does this mean that an FPPE run by the
department, based on a focused concern
about the physician’s competence or conduct, is
not an “investigation” since it is not typically “a
precursor to a professional review action?
© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
32

Failure to renew privileges while under “investigation”:
The physician’s failure to renew clinical privileges is
considered a surrender while under, or in return for not
conducting, an investigation.
 This action must be reported to the NPDB regardless of
whether the physician knew he was under investigation at
the time he failed to renew his clinical privileges.
 A practitioner’s awareness that an investigation is being
conducted is not a requirement for reporting to the NPDB.


Draft Guidebook, p. E-40.
© 2014 Gregory Abrams, Esq.
Revised National Data Bank
Guidebook (cont'd)
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
(NPDB Website, 2/7/2014) January 31 marked the end of
the extended public comment period for the revised NPDB
Guidebook. The Data Bank received more than 300
suggestions for changes to the draft Guidebook from more
than two dozen individuals and organizations. All comments
are now being reviewed in an effort to refine the draft. Once
suggestions have been incorporated and the internal review
process is complete, the Data Bank will post the new
Guidebook on its website. The posting will be announced on
the website's home page and in the Federal Register. The Data
Bank thanks everyone who took the time to make suggestions
that will lead to a clearer and improved NPDB Guidebook.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
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
Health & Safety Code § 1278.5 – provides
whistleblower protections for patients, healthcare
workers, and “members of the medical staff”
against “discrimination or retaliation” by any “entity
that owns or operates a health facility,” when the
person makes a report to relevant:
 regulatory
agencies,
 accreditation bodies, or
 the hospital itself about

“issues relating to the care, services, and conditions
of a facility”
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
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

Also protects those same persons from
“discrimination or retaliation” when they “initiate,
participate, or cooperate in an investigation or
administrative proceeding” carried out by a
relevant government agency or accrediting body,
“related to, the quality of care, services, or
conditions at the facility”.
The “entity that owns or operates a health facility”
is the one prohibited from “discrimination or
retaliation” under this statute.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
36

Point of this legislation is “to encourage patients,
nurses, members of the medical staff, and other
health care workers to notify government entities
[and accreditation agencies] of suspected unsafe
patient care and conditions.”
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
37

Penalties for engaging in discrimination/retaliation:
 Civil
penalty to the hospital of not more than twentyfive thousand dollars ($25,000).
 Misdemeanor for any person who willfully violates, and
a maximum fine of $20,000.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
38

The Statute was amended in 2005 to add
protections for “members of the medical staff.”
 Previously
was only for employees of the hospital, and
did not include government agencies or accreditation
bodies as possible recipients of the report.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
39

Remedies for the medical staff member
discriminated or retaliated against by the hospital:
 reinstatement,
 reimbursement
for lost income resulting from any
change in the terms or conditions of his or her privileges
 “legal costs” associated with pursuing the case, or
 any remedy deemed warranted by the court.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
40



Employees (e.g., nurses): reinstatement, lost wages,
and any work benefits, legal costs associated with
pursuing the case
“Other healthcare worker”: reimbursement for lost
income and the legal costs associated with pursuing
the case
And/or any remedy deemed warranted by the
court.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
41

“Discrimination and Retaliation” means:
 discharge,
demotion, suspension, or
 any unfavorable changes in, or breach of, the terms or
conditions of a
 contract,
employment, or privileges of the employee,
member of the medical staff, or any other health care
worker of the health care facility,
 or
the threat of any of these actions.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
42
What if the peer review
process is the method used to
retaliate against a physician?

© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
43



February 20, 2014, California Supreme Court
Case Fahlen, MD v. Sutter Central Valley Hospitals
Major interpretation of the anti-retaliation statute
Dr. Mark Fahlen a “kidney specialist”
 Employed
by Gould Medical Group, Modesto
 Practicing at Memorial Medical Center, operated by
Sutter Central Valley Hospital.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
44




2004 – two episodes of arguing with hospital
nurses allegedly failing to follow his patient
treatment instructions
2006 – two more such arguments
2007-08 – six more “clashes" with certain nurses
about patient care.
Dr. Fahlen reported nurses’ insubordination and
substandard care “on several of these occasions”
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
45

May 2008 – Hospital COO asks group medical
director to talk with Fahlen.
 Goal
was for Dr. Fahlen to “blow up” at medical
director so he would be fired from group, and that
Fahlen would “leave town.”
 COO would then not have to have peer review
proceedings to get rid of Dr. Fahlen.

Gould did terminate Fahlen, though apparently
there was no “blow up.”
 But
Dr. Fahlen’s malpractice insurance was canceled,
“leaving him immediately unable to treat patients at
© 2014 Gregory Abrams, Esq.
the hospital.”
California Whistleblower Protections
in the Hospital
46



Dr. Fahlen asks to meet with the COO, because he
wants to open his own private practice and remain
at the hospital.
Before the meeting, COO sends an email to the
CEO that Dr. Fahlen “does not get it” – i.e., Dr.
Fahlen should have understood he was going to lose
his privileges at the hospital.
CEO responds: “Looks like we need to have the
Medical Staff take some action on his Med Quals!!
Soon!!”
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
47


At their meeting, COO tells Dr. Fahlen “he should
resign from the hospital and leave town, or the
Hospital would begin an investigation and peer
review proceedings that would result in a report to
the Medical Board of California.”
Dr. Fahlen does not resign, an ad hoc committee is
formed and makes a report to the MEC, and the
MEC recommends against renewal of Dr. Fahlen’s
privileges.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
48



Dr. Fahlen is charged with 17 counts of disruptive or
abusive behavior.
Peer review hearing consists of 13 sessions between
October 2009 and May 2010.
Six JRC physicians unanimously reverse the MEC’s decision:
 The evidence failed to show Dr. Fahlen was
professionally incompetent or had engaged in behavior
endangering the delivery of patient care.
 To the extent anyone’s behavior was detrimental to such
care, the nursing staff was more to blame than Dr.
Fahlen.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
49

Peer Review Ruling (cont’d):
 Several
interactions with nurses were “inappropriate
and unacceptable,” but the hospital “should have
intervened sooner and failed in its responsibility to do
so.”
 Therefore, hospital “omitted to consider intermediate
steps short of loss of privileges, such as anger
management counseling.”
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
50



After MEC recommended terminating his privileges, Dr.
Fahlen got psychological counseling, and completed
anger management training – his behavior appreciably
improved.
Therefore, MEC “failed to sustain its burden” that
termination was warranted.
But JRC only recommends an outcome – hospital board is
the final “decider”. . . .
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
51




Hospital board sent case back to JRC with a series
of detailed questions about each alleged incident
of misconduct, what the JRC’s findings were on each
one, and “what evidence provided at the hearing
was considered” in making the findings.
JRC had 30 days to respond.
JRC tells board its requests were unreasonable and
that it should work off the record that it has.
Hospital board votes to terminate Dr. Fahlen, saying
JRC had no factual support at the hearing for its
decision.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
52


Hospital files an 805 Report.
Dr. Fahlen does not go to court to overturn the
Hospital board’s ruling terminating him, i.e., he does
not “exhaust his remedies”
 Failure
to exhaust remedies means the physician has
accepted the peer review outcome
 But what if the peer review outcome is itself the
retaliation prohibited under Health & Safety Code §
1278.5?

Dr. Fahlen files suit under the anti-retaliation statute.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
53

His lawsuit alleges Hospital:
 Caused
his medical group to fire him
 Tried to run him out of Modesto
 Terminated his privileges because he complained about
“substandard, insubordinate and unprofessional nursing
care . . . which endangered patient care and patient
safety.”

He seeks reinstatement to the medical staff, lost
wages, pain & suffering, attorneys fees, and
punitive damages.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
54




Hospital asserts that Dr. Fahlen cannot sue anyone
or anything unless he first successfully challenges the
peer review action’s result itself in court.
Therefore hospital argues the civil complaint under
Health & Safety Code § 1278.5 must be
dismissed.
Trial judge disagrees, permits the complaint to
stand
Appellate court agrees with Trial Court, that Dr.
Fahlen does not have to exhaust his remedies first to
© 2014 Gregory Abrams, Esq.
bring the anti-retaliation lawsuit.
California Whistleblower Protections
in the Hospital
55

Supreme Court agrees that Dr. Fahlen can continue
his lawsuit for retaliation under the statute:
 Nothing
in the statute indicates the Legislature intended
the exhaustion of remedies requirement to delay the
ability of the physician to seek protection under the
anti-retaliation statute;
 Wording of the statute itself shows the Legislature
understood a physician could go forward with such a
lawsuit while a peer review process was underway
 statute
says the court may issue an injunction to protect an
ongoing peer review process while an anti-retaliation
lawsuit is underway
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
56

Peer review proceedings are not structured in their subject
matter to consider whether retaliation is the basis for the
proceeding
They are structured to deal with competence and conduct
only
 The standard of review on challenging a peer review
outcome in court makes it very difficult for a physician to win
on such a challenge

© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
57


Therefore, requiring a physician to overturn the peer
review proceeding itself before he could file an AR
lawsuit means the physician is very unlikely to be able
to exercise his right to ever challenge a retaliatory peer
review
This would defeat the purpose of the AR statute,
which is to encourage workers in a health facility to
report unsafe patient care.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
58


This case dealt with a physician’s claim that a peer review
decision to terminate his privileges was itself the act of
retaliation for his whistleblowing activities.
Supreme Court recognized this was not a case where:
 A peer review hearing was still in progress, or where
 A peer review decision was born of “two things true at
the same time,” i.e.:
 Personal
enmity/forbidden retaliatory motive was involved
in a decision to terminate privileges, while also
 The peer review record nonetheless shows significant
quality-of-care grounds for the adverse decision.
© 2014 Gregory Abrams, Esq.
California Whistleblower Protections
in the Hospital
59

Under those circumstances:
 “Future
litigants may argue that proper attention to
these various concerns should affect the trial timing, the
issues, and the available remedies in an individual
physician’s whistleblower suit under section 1278.5.
Such matters, however, are beyond the the scope of the
narrow question before us here. We pass no final
judgment upon them, but await their appropriate future
development.”
© 2014 Gregory Abrams, Esq.
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GREG ABRAMS
PACIFIC WEST LAW GROUP, LLP
abrams@pacificwestlaw.com
(510) 482-2845
© 2014 Gregory Abrams, Esq.