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Court Broadly Defines When Resignations Can Lead to Data Bank Reporting

A recent decision by the First Circuit Court may make it more difficult for physicians under scrutiny to resign without being reported to the National Practitioner Data Bank.

The Health Care Quality Improvement Act requires that physicians who are subject to disciplinary actions, including a suspension of privileges of more than 30 days, be reported to the data bank. So too are physicians who have had malpractice judgments, fraud convictions, and exclusions from participation in Medicare and Medicaid. Once there, a physician's name is never removed.

The act also requires health care professionals to report “a practitioner's surrender or restriction of clinical privileges while under investigation for possible professional incompetence or improper professional conduct.” A report made for this reason was the basis for the district court case, which turned on a definition of “investigation.”

The identify of the physician and the hospital are confidential, but Neurology Today spoke to the physician's attorney, Michael Duddy, a partner in the Portland, ME, law firm of Kelly, Remmel & Zimmerman.

The case of his client, referred to as “Dr. Doe,” began in 2005, when a nurse at a hospital filed a written complaint that he had threatened her. The medical staff executive committee temporarily suspended the physician, who denied any wrongdoing, and asked an ad hoc group of the committee to conduct an investigation. That ad hoc group reported that “the nurse reasonably perceived Dr. Doe's actions as threatening,” the circuit court ruling stated.

The executive committee “proposed that Dr. Doe be allowed to return to work so long as he agreed to certain contractual modifications, including provisions for regular proctoring and psychological evaluations. Dr. Doe rejected this proposal and voluntarily relinquished his clinical privileges,” the ruling stated. At the time the hospital accepted his resignation, less than a month had passed from the filing of the nurse's complaint.

Shortly after his resignation, Dr. Doe learned that the hospital had reported him as having resigned “while under investigation,” which he disputed. Duddy contends that the investigation had concluded and that Dr. Doe had believed he would not be reported for resigning at the time he did. “There were private negotiations in terms of what the committee was asking the physician to agree to. Those broke down,” he said.

Dr. Doe appealed the report to Department of Health and Human Services (HHS), as provided by law, but HHS Secretary Michael Leavitt found the report to be appropriate. Duddy appealed to the district court, where he lost, and to the circuit court, which, on Jan. 14, also upheld the lower rulings.


MICHAEL GOLDBERG: “I never let my clients resign without getting a letter stating the investigation is over.”

The circuit court upheld Leavitt's position that “an investigation is ongoing for purposes of the HCQIA [Health Care Quality Improvement Act] until the hospital's decision-making process runs its course and the hospital either takes a final action or formally closes the probe.” Even though a fact-finding period is over, technically the investigation is still ongoing, the court said.


While he believes the ruling is in error, Duddy said it provides some clarification. It is the first case of its type to be argued on the federal level.

“In the wake of the case, physicians need to understand that once a corrective action begins and until it is played out, they cannot leave under any circumstances or they will be reported,” Duddy told Neurology Today. “The final opinion, while disappointing from the point of view of physicians, is at least helpful in clarifying the law for physicians, medical staff, and the hospital.”

He said no further appeals are contemplated. The case did not involve a neurologist, Duddy said, although the ruling is applicable to “all physicians who hold any level of hospital privileges.”

Physicians may contemplate resignation when they do not feel they can get a fair hearing, Duddy said. Especially when the medical staff is small, there may be “senior physicians who are incredibly influential and somewhat feared” and who manipulate the outcome of the process to their liking.

“There is just not a good way for physicians who have been improperly accused of things to defend themselves. The very best of physicians can find themselves in a black hole of corrective action with no good way out,” Duddy said.

The data bank is not public but is used by hospitals, insurers, and others who are “authorized” to seek information. The reporting requirement has been in effect since 1986, although the database did not begin to receive reports until 1991. By 2005, it had processed more than 36 million queries and had more than 375,000 reports.

“Every time that a physician applies for a new license, privileges, or employment, the database will be queried,” Duddy said. “It always leads to questions being raised and can lengthen the time it to get a new license, for example.”


Michael Goldberg, a partner with the Goldberg Law Group in Chicago, who represents physicians in hospital peer review and medical staff privileging matters, told Neurology Today the ruling is “not good for practitioners.” He said being in the data bank is akin to “a death sentence.”

Goldberg said that in the past he has been able to argue that an investigation was over and that a physician could resign without being reported. Based on this ruling, he said, “it only ends when the hospital says it is over.”

He recommends that physicians do not resign unless they obtain a letter from the hospital stating the action will not result in a report to the data bank. “I never let my clients resign without getting a letter stating the investigation is over,” Goldberg said.


CLARK STANTON: “I think it is good for a hospital to let someone know if they are getting into an area where your next action is going to result in corrective action by you that will be reportable. It is very important for hospitals to be fair to physicians, and be perceived as being fair.”

If such assurances cannot be obtained, he suggests physicians stick it out through a hearing process and any further appeals, accept the disciplinary action, and perform the requirements — and then resign if they still desire to do so.


Clark Stanton, a partner in the San Francisco office of Davis Wright Tremaine LLP, said the ruling provides some take-away messages for hospitals and medical staffs. “I think it is good for a hospital to let someone know if they are getting into an area where your next action is going to result in corrective action by you that will be reportable,” Stanton said.

“It is very important for hospitals to be fair to physicians, and be perceived as being fair,” he added.

In light of the ruling, Stanton said he will continue emphasizing with his medical staff and hospital clients the need for them to be “clear about when an investigation starts and ends.”

He also will recommend that medical staff bylaws be specific in defining when a corrective action process begins and ends, and who, by title, can begin such an inquiry and how it will end, Stanton said.

Stanton said he advises his clients to develop bylaws that “create as much space as possible for medical staffs to interact with physicians in ways that don't result in a report being generated.”

Duddy agreed that a formal process should be prevented if possible. “There is frequently, although not always, some level of discussion between the medical staff and the physician that lets him or her know that something is cooking,” Duddy said. Should a physician sense this, he suggests “getting two or three colleagues to sit with you” to try working through the issues informally.

Stanton added that there may be advantages to resigning, even if it results in a report to the data bank. “One thing that a resignation avoids, even if it is reportable, is a record of testimony and exhibits that will be created if the practitioner goes to a hearing — and which the state medical board can generally have access to,” which could prompt state action.

“Sometimes it's better to take the report but avoid creating the record,” he said.