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New Jersey Court Supports Peer Review Immunity for Hospital

Written by:  Nili S. Yolin

On November 24, 2014, the New Jersey Appellate Division affirmed a lower court’s decision to dismiss a physician’s lawsuit against a hospital based on federal and state statutory immunity provisions that shield hospitals and their peer review participants from monetary damages.

The case involved a surgeon who had his privileges revoked by the hospital’s board of trustees due to questions regarding his clinical judgment and record keeping practices, even though, following an extensive internal review process, a hearing committee comprised of medical staff members had recommended only to suspend him.  The physician asserted several legal theories for the recovery of damages, including breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of his due process rights.

Federal peer review immunity is a component of the Healthcare Quality Improvement Act of 1986 (HCQIA), which shields a “professional review body” and any person participating on such body from damages with respect to the action taken if it was made in the furtherance of quality health care, after a reasonable investigation, affording the physician with notice and a fair hearing, and warranted by the facts.   HCQIA imposes a rebuttable presumption of reasonableness that the physician must overcome.

Similarly, New Jersey’s peer review statute provides broad immunity from damages to “any person” involved in the review of a physician “for any action taken or recommendation made” by that person within the scope of the peer review function.  The state immunity will apply as long as “such action or recommendation was taken or made without malice and in the reasonable belief after reasonable investigation that such action or recommendation was warranted upon the basis of facts disclosed.”

Having reviewed the record on appeal, the court held that there was no evidence to support the contention that the hospital and its participants failed to proceed in a fair and reasonable manner, or without the reasonable belief that the actions taken were in furtherance of quality health care.  Although the board of trustee’s decision to revoke the physician’s privileges was more stringent than the initial recommendation of suspension, the court stated that “the ultimate authority to make privilege decisions within the hospital rests with the Board of Trustees under the hospital's bylaws, and the board's selection of a harsher penalty in this case does not mean that it acted maliciously or unreasonably.”

What is interesting about this case is not so much the ultimate decision, which is consistent with the public policy of not substituting a court’s “judgment for that of the hospital's governing board or to reweigh the evidence regarding the renewal or termination of medical staff privileges,” but rather the underlying facts, in which a hospital’s board of trustees took a harsher position than the hearing committee.  Although often times a hospital’s board and a hearing committee will reach the same conclusion regarding a physician’s clinical skills (as was the case here), it is not uncommon for the two bodies to disagree regarding the penalty, arguably because the hearing committee is, in fact, made up of the physician’s “peers.”  Members of a medical staff hearing committee may be more sympathetic to the physician because he or she is either a friend, or because they are capable of putting themselves in the physician’s shoes.  On the other hand, a hospital’s board of trustees may review a case with a slightly more objective eye.  It may not be uncommon to see harsher penalties doled out by a hospital’s board of trustees than by the peers charged with reviewing the case in the first instance.

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Theresa advises clients on all aspects of the pharmaceutical supply chain, including counseling industry stakeholders on a range of business, legal, transactional, and compliance matters. She provides clients with strategic counseling and creative business modeling that considers legal restrictions and regulatory risk in light of innovation and business goals.