August 16, 2021

Natarajan v. Dignity Health (Aug. 12, 2021, S259364)

A hospital medical staff revoked the privileges of a physician. The physician petitioned the superior court for a writ of administrative mandate, arguing he was denied due process because the hearing officer appointed by the hospital to hear the physician’s case was potentially biased by his past and likely future appointment by the hospital. The trial court denied the petition because there was no evidence of actual bias. The Court of Appeal affirmed, disagreeing with Yaqub v. Salinas Valley Mem. Healthcare Sys. (2004) 122 Cal.App.4th 474 regarding the “potential for bias” disqualification standard.

The Supreme Court affirmed. Disapproving Yaqub, the Court explained that a peer review hearing officer may be disqualified based on a direct financial benefit that creates an intolerable risk of actual bias under the circumstances—a context-sensitive inquiry. But such a risk does not arise simply because a hearing officer has been hired by a hospital on an ad hoc basis and may be hired again by the same hospital at some point in the future. The Court held that in determining whether a hearing officer is disqualified, courts must consider two factors: (1) which entity exercises control over the hearing officer selection process, and (2) the extent and likelihood of future financial opportunities the hearing officer may receive from the same entity.