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Natarajan v. Dignity Health (SC S259364 per curiam 8/12/21) Hospital Peer Review/Hearing Officer’s Financial Interest 

By August 12, 2021August 15th, 2021Business and Professions Code, Peer Review

Under California’s peer review statute, a hospital must afford a  physician a fair hearing before revoking the physician’s staff privileges.  (Bus. & Prof. Code, § 809 et seq.)  A panel of the physician’s peers generally serves as the trier of fact at these proceedings.  Proceedings before a peer review panel may be conducted by a hearing officer who makes evidentiary and procedural rulings, but who may not vote on the merits.  To ensure impartiality, the statute provides that neither panel members nor hearing officers may gain a “direct financial benefit from the outcome.”  (Bus. & Prof. Code, § 809.2, subds. (a) & (b).)

The question in this case is whether a person hired by a hospital to serve as a hearing officer may be disqualified for financial bias under Business and Professions Code section 809.2, subdivision (b), on grounds that the officer has an incentive to favor the hospital in order to increase the chances of receiving future appointments.  The Court of Appeal in this case answered no.  We reach a different conclusion.  While a hearing officer’s interest in future employment is not automatically disqualifying, neither is it categorically beyond the reach of the statute.  In some cases, depending on the circumstances, the hearing officer’s financial interest in currying favor with the hiring entity may create an intolerable risk of bias requiring disqualification under the statute.  But because the record does not establish this is such a case, we affirm the judgment of the Court of Appeal.