Could a hospital-owned physician network claim South Carolina’s peer-review confidentiality protection?

Plain-English summary

In 1999, a legislator asked whether South Carolina's peer-review confidentiality law extended to a cardiac physician network affiliated with hospitals. The network and hospitals were wholly owned by the same parent, shared administrative officers and governing members, and exchanged some peer-review information. The network nevertheless made its own peer-review decisions. The Attorney General's office concluded that, for this arrangement, a court would treat the network as an extension of the hospital under the peer-review law.

The opinion acknowledged that the network was neither itself a hospital nor an appointed committee of a professional society, and that a subsidiary has its own corporate identity. It emphasized the shared ownership, management, and peer-review purpose in reading the law to protect the network's committee activity. This was a fact-specific statutory interpretation, not a general rule that every corporate affiliate receives confidentiality.

Currency note

This opinion was issued in 1999. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Did the AG consider the physician network itself a hospital? A: No. The opinion said the network was not a hospital under an ordinary definition. It reached confidentiality through the network's close functional relationship with the affiliated hospitals.

Did separate corporate status defeat the protection? A: The AG acknowledged that the network was a separate entity, but concluded that shared ownership, officers, governing members, and peer-review information gave it a unitary interest with the hospital on these facts.

Did the network’s independent peer-review decisions matter? A: The letter noted that independence but still concluded that a court would treat the network as part of the hospital's peer-review structure for confidentiality purposes.

Did the opinion say all documents held by the network were confidential? A: No. It analyzed protection under the peer-review statute. The statute quoted in the letter distinguished protected committee proceedings from records otherwise available from original sources.

Background and statutory framework

The opinion read Sections 40-71-10 and 40-71-20, which addressed committee protection and confidentiality of peer-review proceedings. It relied on the policy of encouraging candid professional review recognized by the South Carolina Supreme Court and compared cases on related entities acting as a single unit for particular legal purposes.

Citations and references

Statutes: Section 40-71-10; § 40-71-20.

The letter cites a South Carolina Supreme Court peer-review decision, but its case name is visibly distorted in the PDF extraction.

Official title

Regarding the interpretation of Section 40-71-10 and 40-71-20 of the Code of Laws of South Carolina 1976, as amended.

Requester

The Honorable Harry B. Limehouse, III

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/june-21-1999-1/
• Original PDF: https://www.scag.gov/wp-content/uploads/2013/11/99june21Limestone.pdf

Original opinion text

The State of South Carolina

OFFICE OF THE ATTORNEY GENERAL
CHARLES M. CONDON
ATIORNEY GENERAL

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June 21. 1999

The Honorable Harry B. Limehouse, III
8 Cumberland Street
Charleston, South Carolina 29401

Re:

Informal Opinion

Dear Representative Limehouse:
You have requested an opinion regarding the interpretation of Section 40-71-10 and 40-71-20 of the Code of Laws of South Carolina 1976, as amended. You state that in Charleston County, there is a N etvvork (the "Network") of cardiac care physicians organized through a South Carolina business operation that is wholly owned by a South Carolina business corporation which wholly owns, manages and operates several licensed South Carolina hospitals (the "Hospital Parent Company"). All of these South Carolina hospitals (the "Hospital" or Hospitals") conduct their own peer review processes related to the members of their medical staffs. Although the Network is wholly owned by the Hospital Parent Company, the Network makes peer review decisions with respect to its member physicians through a process that is independent of the Hospital's peer review process. The Hospital does, however, share certain information with the Network including information related to the Hospital's peer review process. The Network and the Hospital possess common administrative officers and common governing body members. The State of South Carolina has adopted a statute to protect the confidentiality of peer review activities of hospitals and professional societies. See S.C. Code 40-71-20 (the ·'Peer Revie\v Statute"). LAW/ANALYSIS S.C. Code Ann. Sec. 40-71-10 provides as follows: (A) "Professional society'' as used in this chapter includes legal, medical, osteopathic, optometric, chiropractic, psychological. dental, accounting.

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The Honorable Harry B. Limehouse, III
June 21, 1999
Page 2

pharmaceutic, and engineering organizations having as members at least a majority of the eligible licentiates in the area served by the particular society and any foundations composed of members of these societies.

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(B) There is no monetary liability on the part of, and no cause of action for damages arising against, a member of an appointed committee which is formed to maintain professional standards of a state or local professional society as defined in this section or an appointed member of a committee of a medical staff of a licensed hospital. provided the medical staff operates pursuant to written bylaws that have been approved by the governing board of the hospital, or a committee appointed by the Department of Health and Environmental Control to review patient medical and health records in order to study the causes of death and disease for any act or proceeding undertaken or performed within the scope of the functions of the committee if the committee member acts without malice. may make a reasonable effort to obtain the facts relating to the matter under consideration, and acts in the belief that the action taken bv him is warranted bv the facts known to him.

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(C) The provisions of this section do not affect the official immunity of an officer or employee of a public corporation. In addition, § 40-71-20 further provides:
[a]ll proceedings of an all dates and information acquired by the committee referred to in Section 40-71-1 O in the exercise of its duties are confidential unless a respondent in the proceeding requests in writing that they be made public. These proceedings and documents are not subject to discovery, subpoena, or introduction into evidence in any civil action except upon appeal from the committee action. Information. documents. or records \Vhich are otherwise available from original sources are not immune from discovery or use in a civil action merely because they were presented during the committee proceedings nor shall any complaint or \vitness before the committee be prevented from testif)'ing in a civil action as to matters of which he has knowledge apart from the committee proceedings or revealing such mattas to third persons. Confidentiality provisions do not prevent committees appointed by the Department of Health and Environmental Control from

The Honorable Harry B. Limehouse, III
June 21, 1999
Page 3

issuing reports containing solely nonidentifying data and information.

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The question at issue here is whether a nehvork of cardiac care physicians, organized through a South Carolina business operation that is wholly owned by a licensed South Carolina hospital, is encompassed within the ambit of§ 40-21-1 O(b). The term "hospital'' is not defined in§ 40-71-10. Clearly, however, the Nehvork \vould not itself be a "hospital'' under any reasonable definition of that term. Neither is the Nehvork an "appointed committee \vhich is formed to maintain professional standards of a state or local professional society as defined .... " Thus, we must focus our attention upon the close relationship ber.veen the Netvvork and the hospital and determine whether, due to the proximity of that relationship, the peer review statute bestO\VS upon the Nehvork the same confidentiality restrictions as the Hospital itself. We start \vi th the proposition that the peer review statute is remedial in nature and. thus, must be broadly construed. In McGee v. Bruce Hospital Svstem, 312 S.C. 58, 439 S.E.2d 257 (1993), our Supreme Court recognized this in the following language:

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[t]he overriding public policy of the confidentiality statute is to encourage health care professionals to monitor the competency and professional conduct of their peers to safeguard and improve the quality of patient care. See State ex rel. Shroades v. Henrv, 187 \V. Va. 723, 421 S.E.2d 264 (1992). The underlying purpose behind the confidentiality statute is not to facilitate the prosecution of civil actions, but to promote complete control and open discussion among participants in the peer review process. Cruger v. Love, 599 So.2d 111 (Fla. 1992). We adopt the Florida Supreme Court's reasoning in Cru£er that:
[t]he policy of encouraging full control in peer review
proceedings is advanced only if all documents considered by the committee ... during the peer review or credentialing process are protected. Committee members and those providing information to the committee must be able to operate \vithout fear of reprisal. Similarly, it is essential that doctors seeking hospital privileges disclose all pertinent information to the committee. Physicians who fear th:.it information provided in an application might someday be used against them by a third party

The Honorable Harry B. Limehouse, III
June 21, 1999
Page 4

will be reluctant to fully detail matters test the committee should consider.

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Indeed, in the words of the Fourth Circuit Court of Appeals, "if there is one instance where society should encourage uninhibited communication, it is in the review of the competency of medical professionals." Siblev v. Lutheran Hosp. of Md., 871F.2d479, 484 (4th Cir. 1989). In addition, a member of other principles of statutory construction are here relevant. First and foremost, is the well-recognized rule that the intent of the General Assembly must be given paramount importance. State v. Martin, 293 S.C. 46, 358 S.E.2d 697 (1987). A statutory provision should be given a reasonable and practical construction vvhich is consistent vvith the purpose and policy expressed in the statute. Hav v. S.C. Tax Commission, 273 S.C. 269, 255 S.E.2d 83 7 (1979). tvforeover, the true guide to statutory construction is not the phraseology of an isolated section or provision, but the language of the statute as a whole considered in light of its manifest purpose. Citv of Cola. v. Nia~rnra Fire Ins. Co., 249 S.C. 388, 154 S.E.2d 674 (1967). Courts may not give to particular words a significance clearly repugnant to the meaning of the statute as a whole or destructive of its obvious intent. Id. Furthermore, a choice of language in an act will not be construed vvith literalitv"' when to do so will defeat the lawmaker's manifest intention, and a court will reject the ordinary meaning of words used in a statute when, to accept ordinary meaning, will lead to a result that could not have been intended bv the Legislature. South Carolina State Board of Dental Examiners v. Breeland, 208 S.C. 469, 38 S.E.2d 644 (1946).
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There is analogous cas~ lavv which supports the principle that a vvholly ovvned subsidiary of a hospital is considered part of the hospital for various purposes. including peer review. For example, in Coppenveld Corp. v. Independence Tube Corp., 467 U.S. 75L 104 S.Ct. 2731, 81L.Ed.2d628 (1984), the Supreme Court of the United States held that the actions of a parent corporation and its wholly O\Vned subsidiary could not conspire with one another under the Sherman Antitrust Act. The Court said that .. [t]he officers of a single firm are not separate economic actors pursuing separate economic interests. so agreements among them do not suddenly bring together economic po\ver that \Vas previously pursuing divergent goals.'' The Court went on to sav. that
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The Honorable Harry B. Limehouse, III
June 21, 1999
Page 5

[a] parent and its wholly owned subsidiary have a complete unity of interest. There objections are common, not disparate; their general corporate actions are guided or determined not by two separate corporate consciousness. but one. . . . With or without a formal "agreement," the subsidiarv acts for the benefit of the parent, its sole shareholder. If a parent and a wholly owned subsidiary do ••agree" to a course of action, there is no sudden joining of economic resources that had previously served different economic interests, and there is no justification for§ 1 scrutiny. In the view of the United States Supreme Court, a parent and a subsidiary " ... share a common purpose whether or not the parent keeps a tight rein over the subsidiary; the parent may assert full control at any moment if the subsidiary fails to act in the parent's best interests." 467 U.S. at 770.
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The Fourth Circuit has applied the Coppenveld reasoning to peer review procedures. In Oksanen v. Page Memorial Hospital, 945 F.2d 696 (4th Cir. 1991). the Court concluded that
[w]e think a similar unity of interest is present in the relationship between the hospital and its staff, both of which seek to upgrade the quality of patient care. Oksanen contends, however, that intracorporate immunity should not shield the participants in the peer review process for the simple reason that the medical staff and the hospital, unlike a corporation and its officers, are legally separate entities. . . . This argument, however, ignores the functional approach to the question of intracorporate characterization which we believe is mandated by the Copperweld decision. Copperweld in fact criticized the notion that a corporation can conspire with itself because this "looks to the form ofan enterprise's structure and ignores the reality." 467 U.S. at 772, 104 S.Ct. At 24 72. Consistent with Copperweld, we must examine the substance, rather than the form, of the relationship benveen the hospital and the medical staff during the peer review process. 945 F.2d at 703. In the view of the Oksanen court. ··[i]n effect. the medical staff was vvorking as the Board's agent. .. to implement a single unitary firm's policies of evaluating the conduct and competence of those to whom the hospital extended privileges.'' Id. (quoting Copperweld, 467, U.S. at 769) (internal quotations emitted.)

The Honorable Harry B. Limehouse, III
June 21, 1999
Page 6

Likewise, in Boulware v. State ofNevada. Dept. of Human Resources, 960 F.2d 793 (9th Cir. 1992), the Court said that "[b ]ecause NCSC is a wholly owned subsidiary of Humana. these two entities cannot form a 'combination or conspiracy' for purposes of section 1 [of the Sherman Act.] See also, Op. Attv. Gen., Dec. 3, 1996 [private corporation may be alter~ of hospital depending upon the facts]. l

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And, in Hotel Dieu v. Williams, 410 So.2d 1111 (1982), the Supreme Court of
Louisiana concluded that a private corporation controlled in membership by a hospital vvas
the hospital's alter e20 and thus entitled to the same exception from ad valorem taxation as
the hospital itself. Similarly, in Ex Parte Charter Retreat Hospital. Inc. v. Charter Retreat
Hospital. Inc., 538 So.2d 787 (1989), the Supreme Court of Alabama held that a wholly
owned subsidiary of a parent hospital acted as the agent of the parent for purposes of venue.
See also, Crosbv v. Hospital Authoritv, 93 F .2d 1515 (11th Cir. 1996) [even if hospital and
staff group are separate legal entities. staff group may be acting as agent of hospital for
purposes of peer revievv and thus entitled to state action immunity in context of antitrust];
Evrin2 v. Ft. Sanders Park West Med. Center. Inc., 1997 \VL 29445 7 (1997) [intent of peer
review· law is to include both committee making the recommendation as vvell as the
hospital].
There is no doubt that a wholly owned subsidiary is a distinct and separate corporate
unit from its parent. See, Gordon v. Hollvwood-Beaufort Packa2e Corp., 213 S.C. 438, 49
S.E.2d 718 (1948). In this instance, moreover, we are advised that the Network makes peer
review decisions with respect to its member physicians through a process that is independent
of the Hospital's peer review process. However, the Hospital shares certain information
with the Network including information related to the Hospitals' peer review process. In
essence. the Network, which similar to the Hospital, is wholly owned by the Hospital Parent
Company, is acting in conjunction with the Hospital.
In our judgment the foregoing cases and rules of construction dictate that the
Network and the Hospital share a single unitary interest in the peer review process.
Accordingly, based upon the overriding public policy underlying the peer revievv statute. it
is our opinion that the relationship betvveen the Hospital and the Net\vork is such to assure
that the Network is also encompassed by the peer review statute. Since the Netvvork and
Hospital are wholly owned by the Hospital Parent Company and has common administrative
officers and governing body members \Vith the Hospital. in my judgment. a court would
conclude that the Network would be deemed as part and parcel of the Hospital for purposes

The Honorable Harry B. Limehouse, III
June 21, 1999
Page 7

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of the protection of confidentiality provided by the peer review statue. In other words, the
Network would for purposes of peer review statute be simply an extension of or the
"hospital." V/hile the Network may be a separate and independent corporation, for purposes
of the peer review statute, the Network would be encompassed within the language "an
appointed member of a committee of a medical staff of a licensed hospital" and thus subject
to the confidentiality protections provided therein. Such conclusion fully effectuates the
policy considerations of confidentiality recognized by our Supreme Court in the McGee
case.
With kind regards, I am

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Verv trulv
. vours,

Assistant Deputy Attorney General
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