STATE OF
MINNESOTA

 

IN SUPREME COURT

 

A05-1698 and
A05-1701

 

 

 

Court of
Appeals                                                                                                      
                                                                                         
 Hanson, J.

Concurring, Anderson,
G. Barry, and

Anderson, Paul H.,
JJ.

Took no part, Page,
J.

 

Mary Larson, et al.,

 

Appellants,

 

vs.       
                                                                                                                                                                                           
Filed: August 16, 2007

Office of Appellate
Courts

 

James Preston Wasemiller, M.D.,

 

Respondent
(A05-1698),

 

Paul Scot Wasemiller, M.D., et al.,

 

                                               
Defendants,

 

St. Francis Medical Center,

 

                                               
Respondent (A05-1701).

 

S
Y L L A B U S

           
The tort of negligent credentialing of a physician by a hospital exists under
the common law and is reinforced, not precluded, by Minnesota?s peer review
statute, Minn. Stat. ?? 145.61-.67 (2006).

           
Reversed and remanded.

           
Heard, considered, and decided by the court en banc.

O
P I N I O N

HANSON, Justice.

Appellants Mary
and Michael Larson commenced this medical malpractice claim against respondent
Dr. James Wasemiller, Dr. Paul Wasemiller and the Dakota Clinic for negligence
in connection with the performance of gastric bypass surgery on Mary
Larson.  The Larsons also joined respondent St. Francis Medical Center as a
defendant, claiming, among other things, that St. Francis was negligent in
granting surgery privileges to Dr. James Wasemiller.  St. Francis then
moved to dismiss for failure to state a claim.  The district court denied
the motion to dismiss, holding that Minnesota does recognize a claim for
negligent credentialing, but certified two questions to the court of appeals.
 The court of appeals reversed the district court?s denial of the motion to
dismiss, holding that Minnesota does not recognize a common-law cause of action
for negligent credentialing.  Larson v. Wasemiller, 718 N.W.2d 461,
467-68 (Minn. App. 2006).  We reverse and remand to the district court for
further proceedings.

In April 2002,
Dr. James Wasemiller, with the assistance of his brother, Dr. Paul Wasemiller,
performed gastric bypass surgery on Mary Larson at St. Francis Medical Center in
Breckenridge, Minnesota.  Larson experienced complications following the
surgery, and Dr. Paul Wasemiller performed a second surgery on April 12, 2002 to
address the complications.  On April 22, 2002, after being moved to a
long-term care facility, Larson was transferred to MeritCare Hospital for
emergency surgery.  Larson remained hospitalized until June 28, 2002. 
 

The Larsons
claim that St. Francis was negligent in credentialing Dr. James P.
Wasemiller.  Credentialing decisions determine which physicians are granted
hospital privileges and what specific procedures they can perform in the
hospital.  See Craig W. Dallon, Understanding Judicial Review of
Hospitals? Physician Credentialing and Peer Review Decisions, 73 Temp. L.
Rev. 597, 598 (2000).  The granting of hospital privileges normally does
not create an employment relationship with the hospital, but it allows
physicians access to the hospital?s facilities and imposes certain professional
standards.  Id. at 605.  The decision to grant hospital
privileges to a physician is made by the hospital?s governing body based on the
recommendations of the credentials committee.  A credentials committee is a
type of peer review committee.  Minnesota, like most other states, has a
peer review statute that provides for the confidentiality of peer review
proceedings and grants some immunity to those involved in the credentialing
process.  Minn. Stat. ?? 145.61-.67 (2006). 
      

The district
court noted that the majority of courts in other jurisdictions have recognized a
duty on the part of hospitals to exercise reasonable care in granting privileges
to physicians to practice medicine at the hospital.  The court also noted
that the existence of such a duty is objectively reasonable and consistent with
public policy.  The court therefore held that Minnesota ?will and does
recognize, at common law, a professional tort against hospitals and review
organizations for negligent credentialing/privileging.?

After denying
St. Francis? motion to dismiss, the district court certified the following two
questions to the court of appeals:

A.      
Does the state of Minnesota recognize a common law cause of action of
privileging of a physician against a hospital or other review
organization? 

 

B.      
Does Minn. Stat. ?? 145.63-145.64 grant immunity from or otherwise limit
liability of a hospital or other review organization for a claim of negligent
credentialing/privileging of a physician? 

 

The court of
appeals held that Minnesota does not recognize a common law cause of action for
negligent credentialing of a physician against a hospital, and noted that the
confidentiality mandate of Minn. Stat. ? 145.64 ?limits the evidence that could
be used to support or defend against such a claim in a manner that appears to
affect the fundamental fairness of recognizing such a claim * * *.? 
Wasemiller, 718 N.W.2d at 470.  The court appropriately
deferred to this court or to the legislature to address the complex policy
concerns involved.  Id. at 468.

In response to
the second certified question, the court of appeals held that the plain language
of Minn. Stat. ?? 145.63-.64 does not grant immunity to a hospital or other
review organization from liability for a claim of negligent credentialing of a
physician, but that the statute does limit the liability of hospitals or other
review organizations ?to actions or recommendations not made in the reasonable
belief that the action or recommendation is warranted by facts known to it after
reasonable efforts to ascertain the facts on which its action or recommendation
is made.?  Wasemiller, 781 N.W.2d at 469-70.  Neither party
challenges the court of appeals? answer to the second certified question. 

The Larsons
sought review of the court of appeals holding that Minnesota does not recognize
a claim for negligent credentialing.  This
court reviews de novo the denial of a motion to dismiss for failure to state a
claim.  Hauschildt v. Beckingham, 686 N.W.2d 829, 836 (Minn.
2004).  Certified questions are questions of law that this court also
reviews de novo.  Fedziuk v. Comm?r of Pub. Safety, 696 N.W.2d 340,
344 (Minn. 2005).

We turn to the
first certified question?whether Minnesota recognizes a cause of action for
negligent credentialing.  In determining whether Minnesota recognizes a
particular cause of action this court must look to the common law and any
statutes that might expand or restrict the common law.  This court has the
power to recognize and abolish common law doctrines, Lake v. Wal-Mart Stores,
Inc., 582 N.W.2d 231, 233 (Minn. 1998), as well as to define common law
torts and their defenses, Schumann v. McGinn, 307 Minn. 446, 467, 240
N.W.2d 525, 537 (1976).  It is also the province of the legislature to
modify the common law, Jung v. St. Paul Fire Dep?t Relief Ass?n, 223
Minn. 402, 405, 27 N.W.2d 151, 153 (1947), but statutes are presumed not to
alter or modify the common law unless they expressly so provide, Agassiz
& Odessa Mut. Fire Ins. Co. v. Magnusson, 272 Minn. 156, 166, 136 N.W.2d
861, 868 (1965).

A.     Does
Minnesota?s peer review statute create a cause of action for negligent
credentialing?

 

We consider,
first, whether the language of the peer review statute actually creates a cause
of action for negligent credentialing.  Section 145.63, subd. 1, provides
that

No review organization and
no person shall be liable for damages or other relief in any action by
reason of the performance of the review organization or person of any duty,
function, or activity as a review organization or a member of a review committee
or by reason of any recommendation or action of the review committee when the
person acts in the reasonable belief that the action or recommendation is
warranted by facts known to the person or the review organization after
reasonable efforts to ascertain the facts upon which the review organization?s
action or recommendation is made * * *.

 

(emphasis added.)  The
legislature has the authority to create a cause of action for negligent
credentialing.  The question is whether section 145.63, subdivision 1,
expresses an intent to do so.  

Although stated
in the negative, the language of this statute implies that a review organization
shall be liable for granting privileges where the grant is not reasonably based
on the facts that were known or that could have been known by reasonable
efforts.  This language could be read as evidencing the legislative intent
to establish such a cause of action, whether or not one existed at common
law. 

We agree with
the Larsons that the immunity provision of the peer review statute contemplates
the existence of a cause of action for negligent credentialing?otherwise there
would be no need for the legislature to address the standard of care applicable
to such an action.  But we are reluctant to conclude that the statute
affirmatively creates such a cause of action because the standard of care is
stated in the negative.[1]

Ultimately, we
need not determine whether the statute creates a cause of action because, at the
very least, the statute does not negate or abrogate such a cause of action and
this leaves us free to consider whether the cause of action exists at common
law. 

B.        
Is there a common law cause of action for negligent credentialing?

In deciding
whether to recognize a common law tort, this court looks to (1) whether the tort
is inherent in, or the natural extension of, a well-established common law
right, (2) whether the tort has been recognized in other common law states, (3)
whether recognition of a cause of action will create tension with other
applicable laws, and (4) whether such tension is out-weighed by the importance
of the additional protections that recognition of the claim would provide to
injured persons.  See Wal-Mart Stores, 582 N.W.2d at 234-36
(joining the majority of states that recognize the tort of invasion of privacy
as inherent in property, contract and liberty rights, but declining to recognize
the tort of false light because it would increase the tension between tort law
and constitutional free speech guaranties).

1.         
Is the tort of negligent credentialing inherent in, or the natural extension of,
a well-established common law right?

 

           
Amici curiae, Minnesota Hospital Association, et al. (MHA), argue that a claim
for negligent credentialing is at odds with the common law of vicarious
liability in Minnesota, which makes hospitals liable for the negligence of
employees, but does not regard independent physicians as employees merely
because they are granted hospital privileges.[2] 
But the Larsons argue that the tort of negligent credentialing is not a
vicarious liability claim, but rather is grounded in a hospital?s direct
liability at common law under its duty to exercise reasonable care in the
provision of health services and its duty to protect patients from harm by third
persons.

Amicus curiae,
Minnesota Defense Lawyers Association (MDLA), argues that hospital credentialing
is aimed at protecting the general public and the hospital itself, not a
particular class of persons, and that under Cracraft v. City of St. Louis
Park, 279 N.W.2d 801 (Minn. 1979), breach of a duty owed to the general
public cannot be the basis of liability.  They also argue that this court
has never recognized a special duty between a hospital and a patient outside the
context of direct patient services. 

But we have
recognized that hospitals owe a duty of care directly to patients to protect
them from harm by third persons.  In Sylvester v. Northwestern Hospital
of Minneapolis, we held that a hospital had a duty to protect a patient from
another intoxicated patient.  236 Minn. 384, 389-90, 53 N.W.2d 17, 20-21
(1952).  We quoted from the Restatement of Torts ? 320 (1934) as
follows:

One who * * * voluntarily
takes the custody of another under circumstances such as to deprive the other of
his normal power of self-protection or to subject him to association with
persons likely to harm him, is under a duty of exercising reasonable care so to
control the conduct of third persons as to prevent them from intentionally
harming the other or so conducting themselves as to create an unreasonable risk
of harm to him, if the actor,

 

(a)   knows or has reason to
know that he has the ability to control the conduct of the third persons,
and

 

(b)  knows or should know of the
necessity and opportunity for exercising such control.

 

Id. at 387, 53 N.W.2d at
19.  In Erickson v. Curtis Inv. Co., we cited Sylvester and
noted that the duty to protect in the innkeeper/guest and common
carrier/passenger relationship is analogous to that in the hospital/patient
relationship.  447 N.W.2d 165, 168 (Minn. 1989).  We have also noted
that a hospital has a duty to its patients to provide a sufficient number of
attendants as the patients? safety may require.  Mulliner v.
Evangelischer Diakonniessenverein of the Minn. Dist. of the German Evangelical
Synod of N. Am., 144 Minn. 392, 394, 175 N.W. 699, 699-700 (1920).

           
Two other generally recognized common law torts also support recognition of the
tort of negligent credentialing.  The claim of negligent credentialing is
analogous to a claim of negligent hiring of an employee, which has been
recognized in Minnesota.  See Ponticas v. K.M.S. Invs., 331 N.W.2d
907, 909-11 (Minn. 1983) (recognizing a claim for negligent hiring brought by a
tenant against the owner of her apartment complex after the tenant was raped by
the apartment manager who had a criminal record which included burglary and
armed robbery).  See also Restatement (Second) of Agency ? 213
(1958) (?A person conducting an activity through servants or other agents is
subject to liability for harm resulting from his conduct if he is negligent or
reckless * * * in the employment of improper persons or instrumentalities in
work involving risk of harm to others * * *.?).  Some jurisdictions that
recognize the tort of negligent credentialing do so as a natural extension of
the tort of negligent hiring.  See, e.g., Domingo v. Doe, 985
F. Supp. 1241, 1244-45 (D. Haw. 1997); Taylor v. Singing River Hosp.
Sys., 704 So.2d 75, 78 n.3 (Miss. 1997); Rodrigues v. Miriam Hosp.,
623 A.2d 456, 462-63 (R.I. 1993). 

           
The tort of negligent credentialing is perhaps even more directly related to the
tort of negligent selection of an independent contractor, which has been
recognized in the Restatement of Torts to exist under certain
circumstances.  The Restatement (Second) of Torts ? 411 (1965) provides
that

An employer is subject to liability for
physical harm to third persons caused by his failure to exercise reasonable care
to employ a competent and careful contractor

(a) to do work which will involve a risk
of physical harm unless it is skillfully and carefully done, or

(b) to perform any duty which the employer
owes to third persons.

 

Although we have not specifically
adopted this tort, we have frequently relied on the Restatement of Torts to
guide our development of tort law in areas that we have not previously had an
opportunity to address.  See, e.g., Schafer v. JLC Food Sys.,
Inc., 695 N.W.2d 570, 575 (Minn. 2005) (adopting section 7 of the Proposed
Final Draft No. 1,  Restatement (Third) of Torts: Products Liability
(1998), which recognizes reasonable consumer expectations in food products
liability cases); Hubbard v. United Press Int?l, Inc., 330 N.W.2d 428,
438-39 (Minn.1983) (adopting section 46(1) of the Restatement (Second) of Torts,
which defines the elements necessary to prove intentional infliction of
emotional distress).  Some of the courts that have recognized the tort of
negligent credentialing do so as an application of the tort of negligent
selection of an independent contractor.  See, e.g., Albain v.
Flower Hosp., 553 N.E.2d 1038, 1045 (Ohio 1990); Corleto v. Shore Mem?l
Hosp., 350 A.2d 534, 537-38 (N.J. Super. Ct. Law Div. 1975).

Given our
previous recognition of a hospital?s duty of care to protect its patients from
harm by third persons and of the analogous tort of negligent hiring, and given
the general acceptance in the common law of the tort of negligent selection of
an independent contractor, as recognized by the Restatement of Torts, we
conclude that the tort of negligent credentialing is inherent in and the natural
extension of well-established common law rights.

2.         
Is the tort of negligent credentialing recognized as a common law tort by a
majority of other common law states?

 

At least 27
states recognize the tort of negligent credentialing,[3]
and at least three additional states recognize the broader theory of corporate
negligence, even though they have not specifically identified negligent
credentialing.[4] 
In fact, only two courts that have considered the claim of negligent
credentialing have outright rejected it.[5] 
The Larsons argue that this broad recognition of the claim evidences a national
consensus that hospitals owe a common law duty to patients to exercise
reasonable care when making privileging decision.

The decisions
of other states that recognize the tort of negligent credentialing rely on
various rationales, which essentially fall into the following groups.

Direct or
Corporate Negligence

Some courts
have recognized the tort of negligent credentialing as simply the application of
broad common law principles of negligence.  See, e.g., Johnson v.
Misericordia Cmty. Hosp., 301 N.W.2d 156, 163-64 (Wisc. 1981) (noting that
harm to patients is foreseeable if hospitals fail to properly evaluate and
monitor staff physicians); Blanton v. Moses H. Cone Mem?l Hosp., Inc.,
354 S.E.2d 455, 457 (N.C. 1987) (noting that corporate negligence ?is no more
than the application of common law principles of negligence?); Elam v.
College Park Hosp., 183 Cal. Rptr. 156, 160 (Cal. Ct. App. 1982) (?[T]he
primary consideration is the forseeability of the risk.?).

In Pedroza v. Bryant, the Washington Supreme
Court explained the policy reasons for adopting the theory of corporate
negligence.

The doctrine of corporate
negligence reflects the public?s perception of the modern hospital as a
multifaceted health care facility responsible for the quality of medical care
and treatment rendered.  The community hospital has evolved into a
corporate institution, assuming ?the role of a comprehensive health center
ultimately responsible for arranging and co-ordinating total health care.?

 

677 P.2d 166, 169 (Wash. 1984)
(quoting Arthur F. Southwick, The Hospital as an Institution?Expanding
Responsibilities Change Its Relationship with the Staff Physician, 9 Cal.
W.L. Rev. 429, 429 (1973)).  The Pedroza court went on to say:

 

To implement this duty of
providing competent medical care to the patients, it is the responsibility of
the institution to create a workable system whereby the medical staff of the
hospital continually reviews and evaluates the quality of care being rendered
within the institution?* * *.  The hospital?s role is no longer limited to
the furnishing of physical facilities and equipment where a physician treats his
private patients and practices his profession in his own individualized
manner.

 

677 P.2d at 169 (quoting Moore v. Bd. of Trustees of
Carson ? Tahoe Hosp., 495 P.2d 605, 608 (Nev. 1972)).

 

Duty of Care
for Patient Safety

Some courts
have considered the tort of negligent credentialing to be an extension of
previous decisions that hospitals have a duty to exercise ordinary care and
attention for the safety of their patients.  See, e.g., Strubhart
v. Perry Mem?l Hosp. Trust Auth., 903 P.2d 263, 276 (Okla. 1995) (holding
that a hospital?s duty to ensure that only competent physicians are granted
staff privileges is merely a reasonable expansion of the general duty of
hospitals to exercise ordinary care for the safety of their patients);
Garland, 156 S.W.3d at 545-46 (holding that a hospital?s credentialing
activities are ?an inseparable part of the medical services received by
patients?); Elam, 183 Cal. Rptr. at 161 (noting that case precedent
establishes that a hospital has a duty to protect patients from harm and that a
hospital?s failure to insure the competence of its medical staff creates an
unreasonable risk of harm to patients).

Negligent
Hiring

Some courts
view the tort of negligent credentialing as the natural extension of the tort of
negligent hiring.  See, e.g., Rodrigues v. Miriam Hosp., 623
A.2d 456, 463 (R.I. 1993) (noting that the liability of a hospital for negligent
credentialing is analogous to the liability of an employer for negligent hiring,
which is premised on the ?failure to exercise reasonable care in selecting a
person who the employer knew or should have known was unfit or incompetent for
the employment, thereby exposing third parties to an unreasonable risk of
harm?); Domingo v. Doe, 985 F. Supp. 1241, 1245 (D. Haw. 1997) (noting
that hospitals are in a superior position to monitor and control physician
performance and that the rationale underlying a cause of action for negligent
hiring is the same as the rationale underlying a cause of action for negligent
credentialing).

Negligent
Selection of Independent Contractors

Some courts
have relied on the ?well-established principle? that an employer must exercise
reasonable care in the selection of a competent independent contractor, as
outlined in Restatement (Second) of Torts ? 411.  See, e.g,
Corleto, 350 A.2d at 537; Albain, 553 N.E.2d at 1045.  In
Albain, the court concluded that in a hospital setting, this rule
?translates into a duty by the hospital only to grant and to continue staff
privileges of the hospital to competent physicians.?  553 N.E.2d at
1045.  The court also noted that a physician?s negligence does not
automatically mean that the hospital is liable, rather, a plaintiff must
demonstrate that but for the hospital?s failure to exercise due care in granting
staff privileges, the plaintiff would not have been injured.  Id. at
1045.

Courts that have allowed claims for negligent
credentialing have, either implicitly or explicitly, held that such claims are
unrelated to the concept of derivative or vicarious liability.  See,
e.g., Corleto, 350 A.2d at 537 (?Liability does not attach
vicariously but because of the wrongful act in placing an incompetent in a
position to do harm?); Browning v. Burt, 613 N.E.2d 993, 1003 (Ohio 1993)
(stating that negligent-credentialing claims ?have nothing to do with any issue
concerning derivative liability of the hospital for the acts of its agent or
employee-physician?); Albain, 553 N.E.2d at 1046 (?[A] physician?s
negligence does not automatically mean that the hospital is liable * * *.?);
Pedroza, 677 P.2d at 168-71 (corporate negligence imposes on the hospital
a nondelegable duty owed directly to the patient, regardless of the details of
the doctor-hospital relationship).

We conclude that the tort of negligent
credentialing is recognized as a common law tort by a substantial majority of
the other common law states.

3.
         Would the tort of negligent
credentialing conflict with Minnesota?s peer review statute?

 

St. Francis
argues that the fact that a majority of other jurisdictions have recognized a
negligent-credentialing claim is not dispositive because such a claim would
conflict with Minnesota?s peer review statute.  Minnesota?s peer review statute
contains both confidentiality and limited liability provisions.  Minn. Stat. ?? 145.61- .67
(2006).

           
The Confidentiality Provision

The
confidentiality provision of the peer review statute provides in part that

[D]ata and information
acquired by a review organization, in the exercise of its duties and functions,
or by an individual or other entity acting at the direction of a review
organization, shall be held in confidence, shall not be disclosed to anyone
except to the extent necessary to carry out one or more of the purposes of the
review organization, and shall not be subject to subpoena or discovery.  No
person described in section 145.63 shall disclose what transpired at a meeting
of a review organization except to the extent necessary to carry out one or more
of the purposes of a review organization.  The proceedings and records of a
review organization shall not be subject to discovery or introduction into
evidence in any civil action against a professional arising out of the matter or
matters which are the subject of consideration by the review
organization.  

 

Minn. Stat. ? 145.64, subd. 1
(2006).  Credentialing committees are ?review organizations? under the
statutory definition.  Minn. Stat. ? 145.61, subd. 5(i) (2006).  Any
unauthorized disclosure of the above information is a misdemeanor.  Minn.
Stat. ? 145.66 (2006).

St. Francis
argues that the prohibition on disclosing what information a credentialing
committee relied upon precludes a claim of negligent credentialing because the
precise fact question to be tried in a negligent-credentialing case is whether
the hospital was negligent in making the decision on the basis of what it
actually knew at the time of the credentialing decision.  It argues
that the confidentiality provision therefore makes it impossible for a hospital
to defend against such a claim.

St. Francis?
interpretation of the common law claim is too narrow because negligence could be
shown on the basis of what was actually known or what should have been
known at the time of the credentialing decision.  See Diaz, 881
P.2d at 750 (should have known); Corleto, 350 A.2d at 538 (had reason to
know); Albain, 553 N.E.2d at 1046 (had reason to know).  And
Minnesota?s confidentiality provision recognizes this broader concept, and
addresses the problems of proof, by providing that

[i]nformation, documents or
records otherwise available from original sources shall not be immune from
discovery or use in any civil action merely because they were presented during
proceedings of a review organization, nor shall any person who testified before
a review organization or who is a member of it be prevented from testifying as
to matters within the person?s knowledge, but a witness cannot be asked about
the witness? testimony before a review organization or opinions formed by the
witness as a result of its hearings.

 

Minn. Stat. ? 145.64, subd.
1.

 

 
          Thus, although section
145.64, subdivision 1 would prevent hospitals from disclosing the fact that
certain information was considered by the credentials committee, it would not
prevent hospitals from introducing the same information, as long as it could be
obtained from original sources.  In this respect, the confidentiality
provision may provide a greater advantage to hospitals than to patients because
a hospital knows what information it actually considered and why it granted
privileges and it may emphasize the information that most strongly supports its
decision.  The difficulty of proof may fall most heavily on the patients
because the effect of the statute is to preclude the discovery of what evidence
was actually obtained by the hospital in the credentialing process, and the
patients bear the burden of proof on negligence.

Both Ohio and
Wyoming have rejected the argument that the confidentiality provisions of their
peer review statutes preclude a claim of negligent credentialing.  Relying
on the ?original source? and ?matters within a person?s knowledge? exceptions to
the confidentiality requirement, the Supreme Court of Ohio rejected the argument
that the confidentiality provision of Ohio?s peer review statute would prevent a
hospital from defending itself against a claim of negligent credentialing. 
Browning v. Burt, 613 N.E.2d 993, 1007 (Ohio 1993).  In holding that
similar confidentiality provisions do not preclude a claim for negligent
credentialing, the Supreme Court of Wyoming reasoned that ?[i]f the legislature
had wanted to prohibit actions against hospitals for breaching their duties to
properly supervise the qualifications and privileges of their medical staffs, it
would have done so expressly.  We will not construe the privilege statute
to impliedly prohibit this category of negligence actions.? 
Greenwood v. Wierdsma, 741 P.2d 1079, 1088 (Wyo. 1987) (citations
omitted).

Although the
confidentiality provision of Minnesota?s peer review statute may make the proof
of a common law negligent-credentialing claim more complicated, we conclude that
it does not preclude such a claim.

The Limited
Liability Provision

Minn. Stat. ?
145.63, subd. 1 (2006) provides some immunity from liability, both for
individual credentials committee members and hospitals, for claims brought by
either a physician or a patient.  Section 145.63, subdivision 1 provides
that

No review organization and no
person who is a member or employee, director, or officer of, who acts in an
advisory capacity to, or who furnishes counsel or services to, a review
organization shall be liable for damages or other relief in any action brought
by a person or persons whose activities have been or are being scrutinized or
reviewed by a review organization, by reason of the performance by the person of
any duty, function, or activity of such review organization, unless the
performance of such duty, function or activity was motivated by malice toward
the person affected thereby.  No review organization and no person shall be
liable for damages or other relief in any action by reason of the performance of
the review organization or person of any duty, function, or activity as a review
organization or a member of a review committee or by reason of any
recommendation or action of the review committee when the person acts in the
reasonable belief that the action or recommendation is warranted by facts known
to the person or the review organization after reasonable efforts to ascertain
the facts upon which the review organization?s action or recommendation is
made.

 

St. Francis argues that this
limitation on liability raises the threshold for permitted claims against review
organizations, precluding recovery for simple negligence.  The Larsons
argue that the second sentence of section 145.63 is merely a codification of the
common law standard of care for hospitals, and that the language of the
provision actually contemplates a credentialing claim based on simple
negligence.

Under the rules
of statutory construction generally recognized by this court, a statute will not
be construed to abrogate a common law right unless it does so expressly. 
See Wirig v. Kinney Shoe Corp., 461 N.W.2d 374, 377-78 (Minn.
1990).  Although the plain language of the second sentence of
section 145.63 does limit the liability of hospitals and credentials committees,
it in no way indicates intent to immunize hospitals, or to abrogate a common law
claim for negligent credentialing.  In fact, read in conjunction with the
evidentiary and discovery restrictions of section 145.64, the statutory scheme
suggests that civil actions for credentialing decisions are indeed
contemplated.  If the legislature had intended to foreclose the possibility
of a cause of action for negligent credentialing, it would not have addressed
the standard of care applicable to such an action.

St. Francis
argues that the second sentence of section 145.63 creates a standard of care
different from the standard of care applicable to a simple negligence claim,
effectively elevating the burden of proof necessary to succeed in a claim
against a hospital for credentialing decisions.  That sentence precludes
liability ?when the person acts in the reasonable belief that the action or
recommendation is warranted by facts known to the person or the review
organization after reasonable efforts to ascertain the facts upon which the
review organization?s action or recommendation is made * * *.?  In other
words, a hospital cannot be liable if it acted reasonably based on information
that the hospital actually knew or had reason to know.  In our view, that
provision is a codification of the common law ordinary negligence standard.[6] 

We conclude
that the liability provisions of section 145.63 do not materially alter
the common law standard of care and that, although the confidentiality
provisions of section 145.64 present some obstacles in both proving and
defending a claim of negligent credentialing, they do not preclude such a claim.

4.         
Do the policy considerations in favor of the tort of negligent credentialing
outweigh any tension caused by conflict with the peer review statute?

 

The function of
peer review is to provide critical analysis of the competence and performance of
physicians and other health care providers in order to decrease incidents of
malpractice and to improve quality of patient care.  Richard L. Griffith
& Jordan M. Parker, With Malice Toward None: The Metamorphosis of
Statutory and Common Law Protections for Physicians and Hospitals in Negligent
Credentialing Litigation, 22 Tex. Tech. L. Rev. 157, 159 (1991); Kenneth R.
Kohlberg, The Medical Peer Review Privilege: A Linchpin for Patient Safety
Measures, 86 Mass. L. Rev. 157, 157 (2002).  This court has held that
the purpose of Minnesota?s peer review statute is to promote the strong public
interest in improving health care by granting certain protections to medical
review organizations, Amaral v. Saint Cloud Hosp., 598 N.W.2d 379, 387
(Minn. 1999), and to encourage the medical profession to police its own
activities with minimal judicial interference, Campbell v. St. Mary?s
Hosp., 312 Minn. 379, 389, 252 N.W.2d 581, 587 (Minn. 1977).  This
court has also recognized that ?the quality of patient care could be compromised
if fellow professionals are reluctant to participate fully in peer review
activities.?  Amaral, 598 N.W.2d at 388.

The Larsons
argue that policy considerations weigh in favor of the tort because allowing
patients to hold hospitals liable for negligent credentialing will lead to more
reasonable and responsible credentialing decisions, thereby improving the
quality of health care.  St. Francis and the amici argue that recognition
of a negligent-credentialing claim will harm the quality of health care in
Minnesota because, if physicians may be subject to liability for negligent
credentialing, they will be reluctant to participate in peer review. 

St. Francis
also argues that recognition of a negligent-credentialing tort is not necessary
because patients who prove that a physician?s negligence caused them harm are
entitled to full compensation from the physician and his or her employer. 
See Schneider v. Buckman, 433 N.W.2d 98, 101-02 (Minn.
1988)).  The Larsons counter that malpractice claims against problem
physicians are not likely to compensate patients because those physicians are
the least likely to have adequate malpractice insurance.  The Larsons
reason that if a hospital grants privileges to a problem physician, public
policy goals are well served by holding the hospital liable for injuries not
compensated for by the physician?s insurance.

St. Francis
also argues that the trial of a negligent-credentialing claim will present
serious procedural issues in addition to the effects of the limitations of the
peer review statute.  It argues that physicians who are faced with
defending a medical malpractice claim within the same trial as a
negligent-credentialing claim will be unfairly prejudiced by the admission of
negative information that is relevant to the credentialing process, but is
irrelevant to the determination of the malpractice claim.  St. Francis
argues that, to avoid this type of prejudice, courts will have to allow
bifurcated proceedings, thereby increasing the time and expense of
litigation.       

We recognize
that a claim of negligent credentialing raises questions about the necessity of
a bifurcated trial and the scope of the confidentiality and immunity provisions
of the peer review statute.  We likewise recognize that there is an issue
about whether a patient must first prove negligence on the part of a physician
before a hospital can be liable for negligently credentialing the
physician.  But, in part, these are questions of trial management that are
best left to the trial judge.  See Conwed Corp. v. Union Carbide Chems.
and Plastics Co., Inc., 634 N.W.2d 401, 413 n.11 (Minn. 2001). 
Further, they cannot be effectively addressed in the context of this Rule 12
motion. 

We conclude
that the policy considerations underlying the tort of negligent credentialing
outweigh the policy considerations reflected in the peer review statute because
the latter policy considerations are adequately addressed by the preclusion of
access to the confidential peer review materials.  We therefore hold that a
claim of negligent credentialing does exist in Minnesota, and is not precluded
by Minnesota?s peer review statute.  We reverse the answer of the court of
appeals to the first certified question, answer that question in the
affirmative, and remand to the district court for further proceedings consistent
with this opinion.

The Larsons
also challenge dicta in the court of appeals opinion, noting that the
confidentiality provisions of the peer review statute may present due process
issues in the trial of a negligent-credentialing claim.  But because we
have concluded that the confidentiality provisions of the peer review statute do
not preclude the presentation of evidence in defense of a
negligent-credentialing claim, we conclude that the confidentiality provision is
not facially unconstitutional.  We leave for another day the question of
whether circumstances might arise that would render the provision
unconstitutional as applied.

Reversed and
remanded.

CONCURRENCE

ANDERSON, G. Barry, Justice (concurring).

           
I reluctantly concur in the result reached by the majority.  Minnesota
Statutes ? 145.63 (2006) clearly contemplates a cause of action against a
review organization for negligent credentialing when the organization fails to
make a reasonable effort to inform itself of the facts or fails to act
reasonably on those facts.  That said, I am skeptical of the efficacy of
negligent credentialing litigation as a method of improving health care.  I
write separately, however, to express my concern that our peer review statute
may not be fulfilling the intended purpose and to encourage the legislature to
revisit this important issue.

           
The main administrative body or governing board that is responsible for
overseeing the activities of a hospital is often comprised primarily or entirely
of non-physicians.  Ronald G. Spaeth et al., Quality Assurance and
Hospital Structure: How the Physician-Hospital Relationship Affects Quality
Measures, 12 Annals Health L. 235, 236 (2003) (citing Paul L. Scibetta,
Restructuring Hospital-Physician Relations: Patient Care Quality Depends on
the Health of Hospital Peer Review, 51 U. Pitt. L. Rev. 1025, 1031-32
(1990)).  The board thus must rely on the hospital?s staff physicians to
evaluate peer performance, and ?the level of quality provided to patients
depends upon how well the processes of credentialing and peer review are carried
out by their physicians.?  Id. at 237.

           
Despite the central role of peer review in ensuring quality care, physicians are
often reluctant to participate in the peer review process and have little
motivation to participate aggressively and meaningfully.  Peer review
participants receive no compensation for their time.  Id. at
238.  They face the social tension that comes with evaluating and
criticizing peers along with the possibility of reprisal in the form of lost
patient referrals.  Id.  They may also face legal repercussions
from their decisions.  Id. at 237-38.  The threat of lawsuits,
and burdensome discovery, stifles the ?[f]ree, uninhibited communication of
information to and within the peer review committee [that] is imperative to the
professed goal of critical analysis of professional conduct.?  Richard L.
Griffith & Jordan M. Parker, With Malice Toward None: The Metamorphosis
of Statutory and Common Law Protections for Physicians and Hospitals in
Negligent Credentialing Litigation, 22 Tex. Tech. L. Rev. 157, 159
(1991).  When Congress enacted the Health Care Quality Improvement Act, it
found that ?[t]he threat of private money damage liability under [state and]
Federal laws, including treble damage liability under Federal antitrust law,
unreasonably discourages physicians from participating in effective professional
peer review.?  42 U.S.C. ? 11101(4) (2000).

Review by one?s peers within a
hospital is not only time-consuming, unpaid work, it is also likely to generate
bad feelings and result in unpopularity.  If lawsuits by unhappy reviewees
can easily follow any decision * * * then the peer review demanded by [the law]
will become an empty formality, if undertaken at all. 

 

Scappatura v. Baptist Hosp., 584 P.2d 1195, 1201 (Ariz. Ct. App.
1978).

           
To encourage robust peer review, all states and the federal government have
enacted statutes that protect peer review participants through immunity,
privilege, confidentiality, or some combination of the three.  Susan O.
Scheutzow, State Medical Peer Review: High Cost but No Benefit?Is It Time for
a Change?, 25 Am. J.L. & Med. 7, 9 (1999).  These statutes run
counter to the general trend in the law, which has been to abrogate privileges
and immunities.  Id. at 17. 

           
It is open for debate, however, whether these measures actually promote
effective peer review.  A 1999 article in the American Journal of Law
and Medicine analyzed data available from the National Practitioner Data
Bank (NPDB)[7]
and concluded that they do not.  See Scheutzow, supra, at
8.  The article suggests that peer review protection statutes are
insufficient because they do not address ?the loss of referrals and general
ill-will that may be generated by sanctioning a colleague.?  Id. at
19. 

           
Minnesota law contemplates a cause of action by a patient against a peer review
organization (Minn. Stat. ? 145.63), but protects the work product of the
organization with privilege and confidentiality (Minn. Stat. ? 145.64
(2006)).  A plaintiff who alleges negligent credentialing must show that
the peer review organization failed to act reasonably, but is prohibited by
section 145.64 from discovering the basis for the peer review organization?s
decision?the most obvious source of evidence of the reasonableness of that
decision.  See B. Abbott Goldberg, The Peer Review Privilege: A
Law in Search of a Valid Policy, 10 Am. J.L. & Med. 151, 162
(1984).  ?[A]s a matter of public policy it makes little sense to create a
cause of action and then, by creating a privilege, destroy the means of
establishing it.?  Id. at 159.

Furthermore, there appear to be no reliable studies of
how, exactly, privilege and confidentiality statutes affect negligent
credentialing lawsuits and whether plaintiffs, peer review participants, or both
suffer in the end.  The conventional wisdom is that the bar to discovery of
peer review documents will burden the plaintiff, because the plaintiff bears the
burden of proof.  See, e.g., Christina A. Graham, Comment,
Hide and Seek: Discovery in the Context of the State and Federal Peer Review
Privileges, 30 Cumb. L. Rev. 111, 114-15 (2000).  This is probably true
in most circumstances, but in certain cases the confidentiality requirement may
hamper defendants by preventing a hospital from demonstrating that the hospital
did not and could not obtain information that called a physician?s competence
into question. 

Whatever the theoretical merits of Minn. Stat.
? 145.64?s confidentiality and privilege protections, they may ultimately
be of little consequence because the statute allows disclosure and discovery of
any information?such as incident reports, patient charts, records, billing
information, and general medical error and safety information?available from an
original source.  Minn. Stat. ? 145.64, subd. 1 (?Information,
documents or records otherwise available from original sources shall not be
immune from discovery or use in any civil action merely because they were
presented during proceedings of a review organization * * * .?).  Thus, it
is only documents originally created by the peer review organization that are
truly off-limits.  ?[D]espite current immunity and confidentiality
legislation, it is not uncommon for a large portion of the peer review documents
to be considered discoverable in a medical malpractice action.?  Spaeth et
al., supra, at 243 (citing Jason M. Healy et al., Confidentiality of
Health Care Provider Quality of Care Information, 40 Brandeis L.J. 595, 597
(2002)).  Therefore, ?denial of the privileged documents should have little
impact on any patient?s ability to maintain a cause of action for medical
malpractice.?  Doe v. Ill. Masonic Med. Ctr., 696 N.E.2d 707, 711
(Ill. App. Ct. 1998).  Of course, limiting the privilege in this manner
prevents hospitals faced with a malpractice suit from hiding incriminating
information by funneling it through the peer review committee.  See
May v. Wood River Twp. Hosp., 629 N.E.2d 170, 174 (Ill. App. Ct.
1994).  But the discoverability of incident reports and similar quality
assurance measures ?constitutes a significant impediment to the peer review
process.  Physicians will be reluctant to create such records if parties to
lawsuits can subsequently discover them.?  Kenneth R. Kohlberg, The
Medical Peer Review Privilege: A Linchpin for Patient Safety Measures, 86
Mass. L. Rev. 157, 160 (2002).   

Peer review participants also enjoy qualified immunity
under Minn. Stat. ? 145.63.  Like Minnesota, ?[t]he majority of states
have qualified the immunity, imposing as statutory hurdles the threshold
requirement that the peer review actions be taken without malice, in good faith
or reasonably in order to invoke the immunity.?  Smith v. Our Lady of
the Lake Hosp., Inc., 639 So. 2d 730, 742 (La. 1994).

           
 But the qualified immunity afforded by section 145.63 is likely to be of
little comfort to a peer review participant.  Under the statute, a
negligent-credentialing plaintiff must demonstrate that the peer review
organization did not act based on a reasonable belief or make reasonable efforts
to ascertain the facts–but failure to exercise reasonable care is always the
basis of a negligence action.  See, e.g., Funchess v. Cecil
Newman Corp., 632 N.W.2d 666, 674 (Minn. 2001) (citing Restatement (Second)
of Torts ? 323 (1965)).  In order to recover, therefore, a negligent
credentialing plaintiff would need to prove that the peer review organization?s
decision was unreasonable even in the absence of Minn. Stat.
? 145.63.  With or without the statute, a negligent-credentialing case
will most likely proceed at least to the summary judgment stage, as the
reasonableness of a peer review organization?s decision will not generally be
disposed of on the pleadings but will require discovery and expert
testimony.  It is therefore not clear to me what section 145.63
accomplishes, other than preventing negligent-credentialing and privileging from
turning into strict liability torts.

           
An obvious response would be to strengthen the immunity provision and immunize
peer review participants from liability to patients unless the peer review
organization performed its duties recklessly or with malice.  But for those
who argue, as the appellant does here, that the prospect of a
negligent-credentialing claim forces hospitals to shore up defective
credentialing procedures, a stronger immunity provision may discourage adverse
peer review decisions.  The argument advanced by appellants is essentially
that ?institutions and individuals held responsible to injured patients for
failing to perform effective peer review will be more diligent in policing the
profession and taking corrective actions.?  Scheutzow, supra, at
56.

           
It may be that a partial solution is found in changes to these confidentiality
and immunity provisions.  Or perhaps part of the solution may lie in
revisiting the credentialing machinery.  It is also worth noting that
negligent-credentialing actions are a very small piece in a much larger puzzle,
medical malpractice litigation, and it is possible that the best route to reform
runs through the larger issues present in the medical malpractice debate. 
But whatever suggested improvements might surface, the place to address these
issues is in the executive and legislative branches of our government, an
exercise I would encourage forthwith.

 

ANDERSON, Paul H. (concurring).

           
I join in the concurrence of Justice Barry Anderson.