SB 700: California Legislature Makes Changes to Peer Review and Reporting Requirements

On Sept. 29, 2010, California Gov. Arnold Schwarzenegger signed Senate Bill 700 (SB 700) into state law. SB 700 amends Sections 800, 803.1, 805, 805.1, 805.5, 2027, and 2220 of the California Business and Professions (B&P) Code and adds a new Section 805.01 to the law.

Among other things, the bill increases the reporting requirements for hospitals; adds further requirements for notifications to licensees (defined to include a physician and surgeon, podiatrist, clinical psychologist, marriage and family therapist, clinical social worker, or dentist); and grants licensees the right to include, in the licensing board’s database, statements pertaining to findings of bad faith in certain peer review proceedings. SB 700 also emphasizes maintaining—and submitting—information electronically. The amendments and new provisions will go into effect on Jan. 1, 2011.

The California Medical Association (CMA), the Medical Board of California (MBC), and the Center for Public Interest Law, a long-time MBC critic, supported SB 700. According to a Senate analysis of SB 700, the bill was needed to address various criticisms of the peer review process. These included a perceived reluctance among physicians to serve on peer review committees due to the risk of involvement in related future litigation, and a rising concern about “sham peer review” (defined as the use of the peer review system to discredit, harass, discipline, or otherwise negatively affect a physician's ability to practice medicine or exercise professional judgment for a nonmedical or patient safety related reason).

Other criticisms of the peer review system noted in the Senate analysis include “over legalization of the process, lack of transparency in the system, and [the] burdensome human and financial toll” on both the hospital and the physician. Unfortunately, SB 700's additional requirements appear more likely to increase the over-legalization and burdensome nature of peer review than to alleviate its perceived problems.

Peer review defined

In SB 700, the California Legislature formally defines “peer review” for the first time. Peer review is now defined under B&P Code Section 805 (a)(1)(A) as:

Findings of bad faith now included electronically in the 805 Report segment of the Central File

Currently, under B&P Code Section 800, the MBC maintains a confidential “Central File” for each physician (as well as each dentist and some other licensed practitioners), which is created and maintained to provide an individual historical record for each licensee with respect to:

1. Any conviction of a crime constituting unprofessional conduct;
2. Any judgment or settlement in excess of $3,000;
3. Any public complaint against the practitioner; and
4. Any report made pursuant to B&P Code Section 805(b) (805 Report).

B&P Code Sections 800 and 805(f) also allow a physician to supplement the 805 Report segment of the physician’s Central File with “additional exculpatory or explanatory statements” and add any finding of bad faith by a court regarding a peer review proceeding that resulted in an 805 Report. The licensee has the burden of notifying his or her licensing board about such a bad-faith finding.

SB 700 now provides in B&P Section 805.5(b) for licensees to submit their “additional exculpatory or explanatory statements” and bad-faith findings electronically. Where a licensee has done so, hospitals that query to obtain 805 Reports will receive the licensee's electronic statements in addition to copies of any 805 reports. However, the licensing board will not send a copy of an 805 Report if, among other things, the licensee has notified the licensing board of a court finding that the peer review leading up to the 805 Report was conducted in bad faith.

The new 805.01 Report

Currently an 805 Report must be submitted after any of the following events occurs for a medical disciplinary cause or reason:

1. Denial or rejection of an application for membership or privileges;
2. Summary suspension of a licensee’s membership, privileges, or employment that remains in effect for more than 14 days;
3. Termination or revocation of a licensee’s membership, privileges, or employment;
4. Restrictions on a licensee’s membership, privileges, or employment for a cumulative total of 30 days or more within a 12-month period;
5. Resignation or leave of absence from membership, privileges, or employment after notice of an impending investigation or denial or rejection of an application for medical disciplinary cause or reason;
6. Withdrawal or abandonment of a licensee’s application for membership or privileges after notice of an impending investigation or denial of an application for medical disciplinary cause or reason;
7. Withdrawal or abandonment of a request for renewal of privileges after notice of an impending investigation or denial of an application.

SB 700 provides, in newly enacted B&P Code Section 805.01, for an additional report, distinct from the 805 Report (the 805.01 Report), which must be made within 15 days after a peer review body—e.g., the Medical Executive Committee (MEC)—makes a final decision or recommendation—not 15 days after a licensee is informed of the proposed action, or after the decision becomes effective—regarding a disciplinary action (as specified in Section 805(b)) against a licensee based upon a formal investigation. In this context, the term “formal investigation” is defined to mean “an investigation performed by a peer review body based on an allegation that any of the acts listed in [Section 805.01] have occurred.” Those acts are:

1. Incompetence, or gross or repeated deviation from the standard of care involving death or serious bodily injury to one or more patients, to the extent or in such a manner as to be dangerous or injurious to any person or to the public;
2. The use of, or prescribing for or administering to himself or herself of any controlled substance, any dangerous drug (as specified), or alcoholic beverages, to the extent or in such a manner as to be dangerous or injurious to the licentiate, any other person, or the public, or to the extent that the licentiate’s ability to practice safely is impaired by that use;
3. Repeated acts of clearly excessive prescribing, furnishing, or administering of controlled substances or repeated acts of prescribing, dispensing, or furnishing of controlled substances without a good faith effort prior examination of the patient and the medical reason therefore (note that in no event shall a physician or surgeon who is lawfully treating intractable pain be reported for excessive prescribing, and if a report is made, the licensing board must promptly review any such report to ensure these standards are properly applied); and 
4. Sexual misconduct with one or more patients during a course of treatment or an examination.

The licensee must receive a notice of the proposed action and the licensee's right to submit additional explanatory or exculpatory statements to the licensing board electronically or otherwise.

B&P Code Section 805.01(f) notes that a peer review body need not make an 805.01 Report if the peer review body did not make a final decision or recommendation regarding the disciplinary action to be taken against a licentiate based on a determination that any of the acts listed in paragraphs 1 through 4, above, may have occurred (i.e., if the final decision or recommendation was based on some other factor).

Access to the 805.01 Report record

Under new B&P Code Section 805.01, licensing boards are entitled to inspect and copy the following documents relating to an 805.01 Report:

1. Any statement of charges;
2. Any document, medical chart, or exhibit;
3. Any opinions, findings, or conclusions;
4. Any certified copy of medical records, as permitted by other applicable law.

All information relating to an 805.01 Report submitted to a licensing board becomes part of the subject licensee’s Central File, and all the confidentiality provisions applicable to the Central File likewise apply to that information as well.

Licensee statements regarding the new 805.01 Report included in the Central File

SB 700 also permits licensees to submit explanatory or exculpatory statements relating to their 805.01 Reports. (Hospitals sought unsuccessfully to have the Legislature include in SB 700 a provision allowing hospitals to submit statements or information in rebuttal to statements and information submitted by licensees.) Under the new B&P Code Section 800(a)(5), information submitted to the licensing board about the 805.01 Report, including any explanatory or exculpatory statements made by the licensee, must be maintained in the licensee’s Central File.

Increased access for the licensing board; additional administrative burdens for hospitals and medical staffs

The licensing board is subject to the same investigative requirements with respect to the 805.01 Report as it is with respect to the 805 Report (i.e., investigations within 30 days of receipt). Until now, the MBC, the Osteopathic Medical Board of California, and the Dental Board of California were entitled to inspect and copy certain documents in the record of any disciplinary proceeding that warranted an 805 Report. Under SB 700, the licensing boards now also have the authority to inspect and copy any certified copy of medical records included in the disciplinary proceeding record, as permitted by other applicable law.

Public disclosure

Previously, the only information relating to 805 Reports that could be disclosed to the public was a hospital's termination or revocation of a licensee’s privileges for a medical disciplinary cause or reason. However, under SB 700 the public can now access electronically any explanatory or exculpatory statement relating to publicly available 805 Reports that a licensee submitted electronically, via a link on the licensing board's website.

Moving peer review reporting into the electronic age

As noted above, the licensing board’s electronic records on licensees are expanding. Before SB 700, the licensing board was simply required to maintain 805 Reports for three years, without any reference to form, but now each board is specifically required to maintain the records electronically for three years, and also to educate the public about 805 Reports by posting online a “factsheet” explaining the 805 reporting requirements.

Additional requirements for notification to licensees

Prior to SB 700, when a peer review body made an 805 Report, it had to do two things under B&P Code Section 800: (1) send a copy to the licensee; and (2) notify the licensee of his or her right to submit “additional statements or other information” to be included in the Central File.

Post-SB 700, a peer review body must issue two additional notifications to a licensee: (1) that his or her additional statements or other information may be submitted electronically to the licensing board; and (2) that the electronically submitted information will be publicly disclosed to those who request it.

Conclusion

The existing reporting requirements under Section 805 always have presented challenges, including those based on the absence of any definition of “investigation” in that context, and the absence of any provisions in the prescribed reporting form for certain types of reportable events.

Section 805.01 will present new challenges. For example, many events may have to be reported twice, under both Section 805 and Section 805.01, using different reporting instruments—because the statute expressly states that the report required under Section 805.01 shall be in addition to any report required under Section 805. It remains to be seen whether the MBC will prescribe a special reporting form for Section 805.01, and if so, when.

One of the most basic questions, which inevitably will spark lively debate, is when a "final decision or recommendation of a peer review body" has occurred to trigger the new 805.01 reporting requirement. For example, if the MEC adopts a recommendation to terminate a practitioner's privileges, is that a reportable event, or does it not become a "final recommendation ... of the peer review body" (which is defined by Section 805 as "the medical or professional staff") until it is ripe for consideration and action by the governing body? That might be after the physician has either waived his hearing rights or pursued them unsuccessfully.

Section 809.1 defines “final proposed action” as “the final decision or recommendation of the peer review body after informal investigatory activity or prehearing meetings, if any.” If that definition is applied in interpreting Section 805.01, it would suggest that reports should be made prior to the waiver or exhaustion of hearing rights, but the Section 809.1 definition is not incorporated by reference in Section 805.01, nor is it entirely clear in any event.

These and other vexing issues are certain to arise under the new law.