California Medical Association (CMA) member and Modesto nephrologist Mark Fahlen, M.D., has won reinstatement of his hospital privileges four years after they were terminated when he complained about nursing practices at Sutter Memorial Hospital. The victory is part of a settlement with the hospital to resolve Dr. Fahlen’s lawsuits of whistleblower retaliation and unlawful peer review in Stanislaus County Superior Court.

Dr. Fahlen’s lawsuits were made possible after the California Supreme Court issued a landmark ruling in 2014 that affirmed the right of physicians to sue hospitals for retaliatory, sham peer review under a CMA-sponsored bill that extended hospital whistleblower protection to physicians on medical staffs.

Adverse peer review proceedings were initiated shortly after Dr. Fahlen had reported nursing errors and insubordination, and after he had refused the hospital CEO’s pressure to leave. The hospital alleged that Dr. Fahlen’s privileges should be terminated due to disruptive conduct, but a peer review panel of physicians found there was no evidence to such claims and concluded that Dr. Fahlen should keep his privileges. The medical staff did not challenge these findings. The hospital governing board, however, rejected the peer review panel's findings and terminated Dr. Fahlen’s privileges nonetheless.

In Fahlen v. Sutter Central Valley Hospitals, the California Supreme Court held that physicians who suffer whistleblower retaliation in the form of adverse peer review action have the right simultaneously to sue the hospital for retaliation while seeking judicial reversal of the peer review decision. The court rejected the hospital industry’s claims that physicians must first complete the expensive and protracted process of overturning the peer review decision before they can access the courts to seek damages for whistleblower retaliation. CMA participated in the case as an amicus party, arguing that the Legislature provided all health care workers in a hospital, including physicians, the same level of broad and immediate whistleblower protection in order to encourage reporting of patient safety issues in hospitals.

Following his victory in the California Supreme Court, Dr. Fahlen secured a court order finding that Sutter had improperly rejected the peer review panel’s findings and, accordingly, that the hospital must reinstate his privileges. This ruling paved the way for trial on Dr. Fahlen’s claims that the hospital’s wrongdoing amounted to retaliation, entitling him to monetary damages and other judicial relief. Before trial commenced, the parties reached a settlement.