American Journal of Law & Medicine

State medical peer review: high cost but no benefit - is it time for a change?

I. INTRODUCTION([double dagger])

The medical community and policy-makers have widely accepted peer review of physicians as essential to encouraging high quality medical practice. Peer review is a process by which members of a hospital's medical staff review the qualifications, medical outcomes and professional conduct of other physician members and medical staff applicants to determine whether the reviewed physicians may practice in the hospital and, if so, to determine the parameters of their practice.(1)

To encourage peer review, almost all states have granted immunity to participants in the peer review process from certain actions(2) and have made the deliberations and records of medical peer review privileged from judicial disclosure.(3) These laws protect peer review participants from liability for their participation in the peer review process(4) and keep medical peer review information privileged even if such information is relevant and probative to a judicial proceeding.(5) In granting these protections, legislatures have determined that limiting the rights of physicians to seek damages for peer review actions and denying malpractice plaintiffs and other litigants information relevant to their lawsuits are justified in order to encourage effective peer review.(6) Remarkably, these laws have flourished at a time when privilege and immunities in other contexts have eroded.(7)

Because peer review protection laws are inconsistent with the general laws on privileges and immunities and these laws deprive individuals full access to the judicial process, they are only justified if they fulfill the stated purpose of encouraging peer review. However, strong evidence suggests that such laws are ineffective in accomplishing their public policy objective and should therefore be eliminated or reformed.(8)

This Article, through analysis of data available from the National Practitioner Data Bank(9) (NPDB), suggests that peer review protection statutes do not encourage peer review. As such, legislatures committed to enhancing the quality of health care through peer review must find additional means of promoting effective peer review. Without such additional mandates, peer review protection statutes risk being little more than special interest laws protecting physicians and hospitals. If legislatures keep their protection statutes in place, lawmakers should tailor such laws to minimize the laws' negative effect on the judicial process. Additionally, legislatures should guarantee that hospitals do not use these laws to protect themselves for failing to engage in effective peer review.

Data from this study also reveal that the NPDB receives more adverse peer review actions in states that impose significant penalties on hospitals failing to report peer review actions to state licensing boards.(10) This indicates that hospitals are failing to report certain peer review actions that, under state law, must be transmitted to the appropriate government agencies, suggesting that stronger peer review statutes are needed.

II. SUMMARY OF STUDY AND FINDINGS

National policy seeks to encourage peer review through protective legislation as opposed to imposing sanctions on hospitals and physicians for failing to perform such review.(11) Although all states offer some type of protection to the peer review process, the type and strength of such protections vary across the states. State laws generally grant protection in one or more of three ways: (1) providing peer review participants immunity from lawsuits for participating in the process;(12) (2) making peer review information privileged from discovery and admission in court;(13) and (3) requiring that the participants in the process keep information regarding the process and its findings confidential.(14) Most states also require hospitals that have made certain peer review decisions restricting a physician's medical practice to report such actions to state authorities(15) and a few states have enacted significant penalties for failure to do so.(16)

The federal government addressed the issue of encouraging peer review through statutory protections when Congress enacted the Health Care Quality Improvement Act of 1986 (HCQIA).(17) This Act has two purposes. The first was to grant immunity to peer review participants.(18) HCQIA provides immunity for peer review participants, but does not grant a federal evidentiary privilege to the records and deliberations of the peer review process.(19) The second purpose of HCQIA was to create the NPDB, a national clearinghouse of information, to prevent physicians who had their clinical privileges at a hospital limited due to quality problems from moving to other hospitals with impunity.(20) Beginning in September 1990,(21) HCQIA required all hospitals to report to the NPDB certain peer review actions resulting in limitations to a physician's medical staff or clinical privileges and to report when physicians voluntarily surrender their medical staff privileges in lieu of facing a peer review investigation.(22)

Because legislatures attempt to encourage peer review by granting protections rather than requiring it through mandates, a strategy that represents the proverbial carrot as opposed to the stick approach, the question should be asked: Do these peer review protection statutes effectively encourage peer review? This question is significant because the protection offered by state legislatures results in a loss of legal recourse by aggrieved parties. If these peer review protection statutes are ineffective, the loss of legal recourse is unwarranted.

This study categorized the amount of protection offered by the states to the peer review process and the strength of the peer review reporting and penalty statutes. If peer review protection laws effectively promote peer review, more peer review activities should occur in hospitals in those states offering greater protection. Consequently, one would expect hospitals in those states to report more adverse peer review actions to the NPDB.(23) Similarly, if reporting and penalty statutes have any positive effect on the amount of adverse peer review actions reported to the NPDB, one would expect more reporting by hospitals in those states with strong reporting and penalty statutes. To test these hypotheses, researchers in this study examined the number of adverse peer review actions reported to the NPDB by a selected group of hospitals.(24)

The study found that of the three types of peer review protection statutes, no positive relationship exists between the strength of state statutes and the number of adverse peer review actions reported. These findings raise serious questions as to whether the! protections given to the medical peer review process are meeting their public policy objectives. To justify the significant restrictions created by peer review protection statutes, these laws must advance their objective of enhancing the quality of health care. Otherwise, peer review protection statutes are reduced to laws that only benefit physicians and hospitals.

There are many reasons why physicians and hospitals are reluctant to engage in peer review. A physician making an adverse peer review decision may face retaliatory litigation and nonlegal retribution, such as loss of referrals from the physician under review.(25) Although peer review protection laws operate against legal retribution, they do not protect physicians from the nonlegal risks of participating in the peer review process.(26) Hospitals also face nonlegal repercussions from the peer review process, such as loss of admissions and referrals from physicians sanctioned under the peer review process.(27) Hence, powerful disincentives to perform peer review exist that counterbalance physicians' and hospitals' desire to improve the quality of health care through effective peer review.(28) Peer review protection statutes, unfortunately, provide inadequate protection from these disincentives.(29) Moreover, hospitals sometimes use peer review protection statutes to protect themselves from liability for failing to perform adequate peer review.(30) In these cases, the statutes protect hospitals that are not engaging in the very activity the statutes seek to encourage.

If peer review is the key to enhanced quality of health care, stronger mandates to perform peer review and sanctions for failure to do so are necessary to cause effective peer review to take place. However, if such statutes remain in effect, they should be crafted to protect physicians and hospitals from liability and scrutiny when participants engage in good faith peer review, but should not protect participants who fail to fulfill their duties to perform peer review.

In addition to evaluating the peer review protection laws, this study also analyzed the effect of state laws requiring hospitals to report adverse peer review actions to state licensing boards and those imposing penalties for failure to do so on the number of adverse peer review actions reported to the NPDB. The results of the study provide no evidence that a statute requiring a hospital to report adverse peer review actions to state authorities increased the amount of adverse actions reported to the NPDB. The study found that significantly more reports were made to the NPDB from hospitals in the three states(31) that had strong penalties for failure to report peer review actions to the appropriate state authorities than from hospitals in the states that required reporting, but that had weak or no penalties for failure to report. At least two possible interpretations explain why a strong penalty for failure to report adverse actions to state authorities would generate more reporting under the federal law. First, hospitals may render adverse peer review decisions but fail to report these decisions to both the NPDB and the state authorities.(32) When hospitals face stiff sanctions for failing to report adverse actions to the state, hospitals may fully comply with both state and federal reporting requirements.(33) Second, because the law concerning the reporting of adverse peer review action is at times ambiguous, hospitals may interpret the law as not requiring such actions to be reported.(34) However, if significant sanctions for nonreporting exist at the state level, hospitals may likely interpret ambiguities in their reporting obligation to favor reporting of adverse peer review action.

The study's finding suggests that sanctions for failing to report are necessary to increase the rate of reporting adverse actions to both state agencies and the NPDB. However, increasing the rate of reporting to the NPDB should be carefully considered. The goal should be to obtain accuracy in and avoid overreporting of peer review actions. This study raises significant concerns that hospitals are failing to report adverse peer review actions. However, additional study is needed, particularly in the few states with high penalties for failure to report, to determine if the higher rates of reporting in these states is due to overreporting or whether such higher reporting rates accurately reflect underreporting by hospitals in other states.

This study suggests that the peer review protection and reporting statutes are ineffective in promoting peer review and in ensuring that peer review reports are properly reported. Legislatures committed to achieving quality health care through peer review should consider additional methods of encouraging effective peer review. Although peer review is the generally accepted method of enhancing quality health care, the reliability of the system has also been criticized.(35) This Article does not seek to answer the question of whether peer review, if occurring with appropriate frequency, can enhance the quality of health care. Legislatures that believe in it and desire to encourage effective peer review, need to consider new ways to promote the process because peer review protection statutes in large part are not working sufficiently by themselves.

III. THE PEER REVIEW PROCESS

A. MEDICAL PEER REVIEW

Physicians from a hospital's medical staff compose peer review boards.(36) These physicians review the qualifications and practice patterns of physicians on the hospital's medical staff as well as new applicants.(37) Peer review determines whether such physicians should be providing certain health care services in that institution and, if so, which procedures and treatments they are qualified to perform.(38)

In the first half of the twentieth century, the medical profession developed peer review as a way to review the quality of the care rendered by physicians and surgeons.(39) The purpose of peer review is to analyze critically the medical services rendered by physicians, and if deficiencies exist, either to prevent a physician with quality problems from continuing to provide such services or to cause the physician to improve the quality of services rendered.(40) In 1952 the Joint Commission on Accreditation of Hospitals,(41) now the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), began to require hospitals to perform peer review to qualify for accreditation.(42) Over the second half of the twentieth century, medical peer review developed into the primary method of evaluating the quality of physician services at the hospital level.(43) Today, peer review is performed in a variety of settings, such as part of the quality assurance program of a hospital or other health care institution,(44) a medical society or a third-party payer of health care expenses.(45) The analysis herein focuses on peer review in a hospital setting.

Although a hospital's governing body ultimately decides whether a physician should be permitted on the hospital's medical staff, the peer review process provides the basis for the medical staff's recommendation to the hospital board.(46) Members of the hospital's medical staff review the qualifications, training and experience of both medical staff applicants and existing medical staff members to recommend to the governing body whether the individuals should be on the medical staff and which clinical privileges they may enjoy.(47) The decision to offer a physician medical staff privileges is a yes or no decision.(48) The decision as to which clinical privileges a person may enjoy if accepted onto the medical staff is a detailed process through which physicians are granted privileges to perform specific procedures.(49) For example, a general surgeon may be granted the right to attend vaginal deliveries in the hospital, but may be denied the right to perform cesarean sections. Similarly, a general surgeon may be granted the privilege to perform an open cholecystotomy,(50) but not a laparoscopic cholecystotomy,(51) a procedure generally reserved for a physician with specialized training. Even if a physician has the training to perform a specific procedure or treatment, the physician may be denied the privilege to provide the service if quality concerns have been raised regarding the physician's past provision of other services.(52)

For initial applicants, the process involves the review of the applicant's training and previous clinical experience.(53) This part of the process is often referred to as credentialing because it is based in large part on physicians' credentials, such as training, certifications and demonstrated competence.(54) For existing medical staff members, the peer reviewers are also able to review quality assurance data, diagnostic and laboratory utilization reports, and other information regarding each staff member's actual practice at the hospital.(55) Periodically, such information, along with any changes in the physician's training or other qualifications, is reviewed to determine if the physician may continue to practice at the hospital and, if so, what clinical privileges may be exercised.(56) Although existing hospital medical staff members are generally required to submit to review every two years whether or not quality concerns have been raised.(57) medical staffs and hospitals generally are empowered to review a physician's clinical privileges whenever there is a reason to believe that quality concerns warrant action prior to the next review.(58) Inherent in peer review is the premise that information obtained in such review, if indicative of quality concerns regarding a physician's practice, may be used to determine whether the physician's privileges should be limited in some manner or be eliminated.(59)

Peer review is only one mechanism to monitor and improve the quality of physicians. State licensing board disciplinary actions and the medical malpractice system are two other methods of preventing physicians from practicing substandard medicine.(60) State licensing boards are empowered to address a physician's practice in an office setting while the hospital peer review process focuses on the physician's hospital practice.(61) The malpractice system, in theory, improves the quality of health care by forcing physicians whose conduct falls below the standard of care to take remedial steps to improve the services they provide through the threat of civil liability.(62) Despite the existence of these alternatives, peer review has become widely accepted as the primary means to weed out low quality physicians and to identify and offer assistance to physicians whose skills need to be enhanced in certain areas.(63)

Comparisons of the level of adverse peer review actions reported to the NPDB with the other methods of evaluating physician quality raise questions as to whether peer review is taking place with sufficient frequency to affect significantly quality of care. In a 1995 report, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) found that in the first three-and-one-half years of the NPDB's existence, hospitals reported only 3,154 adverse actions, and over 75% of the all hospitals, some with over 300 beds, never reported a single disciplinary action.(64) This means only 901 adverse peer review actions were reported on average in the entire United States each year.

The OIG compared the number of reported adverse peer review actions with statistics on other measures that address problems with the quality of medical care. Although hospitals reported 3,154 adverse actions, over twice that many disciplinary actions were taken by state licensing boards and reported to the NPDB over the same time period.(65) State licensing boards take disciplinary actions based on different criteria than hospitals. This includes consideration of physicians' actions in their own private practice and conduct unrelated to their practice.(66) The peer review system, however, should address problems of physicians before they impact a physician's license to practice medicine. Notwithstanding the differences between what the hospital peer review system is designed to accomplish and the state physician licensing system, the significantly higher rate of state actions raises the question of whether hospital peer review activity is taking place at an, adequate level.(67)

The OIG report also cited a 1991 Harvard Medical Practice Study that found that one percent of all hospitalizations in New York State in one year involved adverse events caused by professional negligence.(68) Projecting this estimate to hospitals nationwide suggests that approximately 80,000 patients are killed each year in the United States by physician negligence.(69) Although an individual case of physician negligence would not necessarily result in an adverse peer review action by a hospital (because the peer review process is designed primarily to address patterns and trends as opposed to individual acts of malpractice),(70) the magnitude of physician negligence indicated by the Harvard Study raises the question of whether peer review is occurring at a sufficient rate.

Whether or not peer review is occurring with adequate frequency, it remains the primary means of assessing physician quality within an institutional setting.(71) Whether or not peer review, when performed, is reliable in measuring quality of health care has been questioned at times.(72) A 1992 survey of all published studies from 1966 to 1990 that evaluated the effectiveness of peer review concluded that:

 
   Overall, physician agreement regarding quality of care is only slightly 
   better than the level expected by chance. This finding casts considerable 
   doubt on the standard practice of peer assessment; thus, it poses a major 
   challenge for those involved in quality assurance efforts given the central 
   role of peer review in currently used methods.(73) 

If peer review is unreliable, then should peer review be the preferred method for enhancing the quality of health care services rendered in hospitals? Furthermore, if peer review is unreliable, it weakens the rationale underlying peer review privilege and immunities laws. These questions about the system's reliability in measuring physician quality may be particularly problematic for state legislatures. If peer review is not as effective as it could be in enhancing quality health care solely because it is not being used with sufficient frequency, peer review protection statutes, coupled with mandates sufficient to compel appropriate peer review, may be an answer. If, however, the peer review system is inherently ineffective in identifying poor quality physicians, then offering peer review protections that adversely affect individual litigants is unjustified.

This Article suggests that if legislatures want to encourage effective peer review, they must require it because protective legislation has been ineffective. If mandates are adopted, keeping the peer review protection statutes in place may be appropriate in the spirit of fairness to the physicians and hospitals required to perform peer review. Without such mandates, however, the existing protection statutes do not appear to benefit the public and instead burden the judicial process.

B. POLICY RATIONALE FOR THE PEER REVIEW PROTECTION STATUTES

Despite a general acceptance by the medical community that peer review is necessary to achieve high quality patient care, physicians often hesitate to participate in peer review for a variety of reasons, including their reluctance to criticize their peers and fear of reprisal in the form of loss of patient referrals and lawsuits by the physicians they review.(74) To encourage physicians to participate in peer review, many state legislatures have enacted laws that grant protections to the participants in the peer review process and to the institutions in which the peer review occurs.(75) These laws are generally of three types: (1) laws granting immunity from lawsuit to participants in the peer review process, and in some cases to the hospital entity sponsoring the peer review; (2) laws providing that peer review information is privileged and inadmissible in court; and (3) laws providing that information in the peer review process remains confidential.(76) Confidentiality laws differ from privilege laws in that the privilege protections apply to discoverability and admissibility of evidence as part of a judicial proceeding; confidentiality generally applies to the release of peer review information to third parties outside of the judicial context.(77) In addition to the state protections, HCQIA grants immunity to peer review participants and entities engaging in good faith peer review.(78)

Within the broader context of privileges and immunities, the existence of peer review protections is remarkable. Although privileges and immunities in general are being significantly abrogated and restricted,(79) peer review privileges and immunities have flourished and states have generally broadened their peer review protection statutes rather than restricted them.(80) The policy reasons behind enactment of the peer review protections are consistent: there is widespread belief among physicians and policy-makers that those who testify against colleagues in a peer review setting may find themselves under attack for defamation and other actions,(81) and that absent such laws, physicians will be reluctant to sit on peer review committees.(82)

Although interrelated, the rationale behind the immunity, privilege and confidentiality laws are slightly different and deserve noting. Immunity laws grant protection from lawsuits that might be brought against participants and institutions performing peer review.(83) By enacting HCQIA, Congress specifically acknowledged that the practice of medicine by incompetent physicians was a significant problem, that peer review was a way to remedy this problem and that there should be federal protection of the peer review process.(84) Congress explicitly stated its intent in passing this legislation:

 
   (1) The increasing occurrence of medical malpractice and the need to 
   improve the quality of medical care have become nationwide problems that 
   warrant greater efforts than those that can be undertaken by any individual 
   State. 
 
   (2) There is a national need to restrict the ability of incompetent 
   physicians to move from State to State without disclosure or discovery of 
   the physician's previous damaging or incompetent performance. 
 
   (3) This nationwide problem can be remedied through effective professional 
   peer review. 
 
   (4) The threat of private money damage liability under Federal laws, 
   including treble damage liability under Federal antitrust law, unreasonably 
   discourages physicians from participating in effective professional peer 
   review. 
 
   (5) There is an overriding national need to provide incentive and 
   protection for physicians engaging in effective professional peer 
   review.(85) 

Even with immunity for participating in peer review proceedings, health care professionals may still be reluctant to participate in the peer review process because they do not want their appraisals of a physician's competence to be disclosed later in court against the physician under review.(86) A physician may work with a colleague who is under review, may consider that physician a friend, and may be willing to testify as part of a confidential peer review process discussing that colleague's shortcomings only if the testimony will not be revealed during a malpractice or other action later brought against the reviewed physician.(87) It is easy to see why physicians would be reluctant to participate in peer review if they believe their statements might later be released and used against their colleague or used in a collateral matter. In the absence of law to the contrary, however, parties to a lawsuit may discover any information that is relevant to the case.(88) To create an environment that encourages physicians to participate in peer review, states have adopted privileges for peer review proceedings.(89) In discussing the peer review testimonial privilege, for example, the Supreme Court of Nebraska explained:

 
   Confidentiality is essential to effective functioning of these staff 
   meetings; and these meetings are essential to the continued improvement in 
   the care and treatment of patients. Candid and conscientious evaluation of 
   clinical practices is a sine qua non of adequate hospital care. To subject 
   these discussions and deliberations to the discovery process, without a 
   showing of exceptional necessity, would result in terminating such 
   deliberations. Constructive professional criticism cannot occur in an 
   atmosphere of apprehension that one doctor's suggestion will be used as a 
   denunciation of a colleague's conduct in a malpractice suit. The purpose of 
   these staff meetings is the improvement, through self-analysis, of the 
   efficiency of medical procedures and techniques. They are not a part of the 
   current patient care but are in the nature of a retrospective review of the 
   effectiveness of certain medical procedures.(90) 

It is this belief, that physicians will be unwilling to serve on quality assurance and other peer review committees and will not openly discuss the performance of other doctors without the assurance that their discussions will be confidential and privileged, that underlies the evidentiary privilege granted by the states.(91) Confidentiality laws are generally not mentioned apart from privilege laws, and are based on the same policy as the privilege laws: that peer review participants will be willing to participate in peer review only if they have assurances that their comments will not be disclosed to those outside the process.(92)

However, even though peer review protection laws address some disincentives of physicians to perform peer review, the loss of referrals and general ill-will that may be generated by sanctioning a colleague is not addressed by these laws.(93) In a study conducted of physicians regarding peer review, twenty-one percent indicated that they had lost referrals or had antagonized colleagues as a result of their participation.(94) Consequently, the existence of these protective statutes may not necessarily remove physicians' reluctance to participate in peer review activities.

As suggested above, the articulated public policy for peer review protections has been based exclusively on the policy considerations of promoting peer review and thereby enhancing quality of health care.(95) However, this policy might not be the full explanation for enactment of the peer review protection laws. Such laws can also be considered as special interest legislation developed by effective lobbying efforts of medical and hospital lobby groups to protect their members.(96) There is also evidence that the immunity provisions of HCQIA were the quid pro quo for garnering physician support for the NPDB reporting provisions of the law.(97) It is at least questionable whether Congress would have passed the NPDB provisions of HCQIA without the immunity provisions.(98) Physicians based their need for the immunity provision of HCQIA on the fear of lawsuits, particularly antitrust actions.(99) However, such fears may be unfounded because the federal judiciary has not often entertained lawsuits over staff privileges,(100) Moreover, antitrust laws have rarely been used successfully to overturn peer review decisions.(101) Last, a recent trend indicates that peer review protection laws are used to protect hospitals from liability for failing to perform adequate peer review.(102) This has led courts and commentators to suggest that the real reason behind peer review statutes is to protect its participants and hospitals that should be performing the peer review, and not to advance the public interest.(103)

C. MANDATORY PEER REVIEW AND SANCTIONS FOR NONCOMPLIANCE

Although hospitals are required by a variety of authorities to perform peer review, the sanctions for not performing effective peer review are limited. The actual requirement imposed on hospitals is that a peer review process is in place and that it is used as part of the initial medical staff appointment and biannual reappointment processes. However, the process's efficacy is difficult to measure and seldom evaluated.(104)

As part of a hospital's overall quality assurance program, peer review is a prerequisite for accreditation by JCAHO and the American Osteopathic Association (AOA). …

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