Kwoun v. Southeast Missouri Professional Standards Review Organization Brief for the Federal Respondents in Opposition

    No. 86-1944

3n  tlje Supreme Court of tlje diuteb S ta tes
O ctober  T er m , 1987

Soung  O . K w o u n , et  a l ., petitio n ers

So u thea st  M issouri P rofessional  Standards 
R eview  O r g a n iza tio n , et  a l .

ON PETITION FOR A WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 

FOR THE EIGHTH CIRCUIT

BRIEF FOR THE FEDERAL RESPONDENTS IN OPPOSITION

Charles Fried v 
Solicitor General 

Richard K. Willard 
Assistant Attorney General 

Barbara Herwig 
Robert V. Zener 

Attorneys

Department o f  Justice 
Washington, D.C. 20530 
(202) 633-2217



QUESTION PRESENTED

Whether the HHS employees who initiate and pursue an 
administrative action to exclude a physician from Medi­
care reimbursement based on the recommendation of a 
peer review committee are entitled to absolute immunity 
from damage suits when it is alleged that they committed 
procedural and substantive errors in violation of the physi­
cian’s constitutional rights.



TABLE OF CONTENTS

Page
Opinions below ..................................................    1
Jurisdiction.................... .... ............... .............. ........................ 1
Statement ...............................     2
Argument .......................      10
Conclusion .................................................................................. 16

TABLE OF AUTHORITIES

Cases:
Barr v. Matteo, 360 U.S. 564(1959)................................... 9
Bothke v. Fluor Engineers & Constructors, Inc., 713 F.2d

1405 (9th Cir. 1983).......................................................  10
Butz v. Economou, 438 U.S. 478 (1978) ........................11, 12, 15
Cameron v. IRS, 111 F.2d 126 (7th Cir. 1985).................  10
Cleavingerv. Saxner, No. 84-732 (Dec. 10, 1985) ..............  15
Forsyth v. Kleindienst, 599 F.2d 1203 (3d Cir. 1979), cert.

denied, 453 U.S. 913 (1981)................................    12
Gray v. Bell, 712 F.2d 490 (D.C. Cir. 1983), cert, denied,

465 U.S. 1100 (1984).....................................................  12
Harper v. Jeffries, 808 F.2d 281 (3d Cir. 1986)............... . 10
Henzel v. Gerstein, 608 F.2d 654 (5th Cir. 1979)............. 12
Norton v. Liddel, 620 F.2d 1375 (10th Cir. 1980).............  12
Ray v. Pickett, 734 F.2d 370 (8th Cir. 1984) ...................... 12
Ritter v. Cohen, 797 F.2d 119 (3d Cir. 1986) ...................... 15
Tripoli v. INS, 784 F.2d 345 (10th Cir. 1986)............. 10
Windsor v. The Tennessean, 719 F.2d 155 (6th Cir. 1983), 

cert, denied, 469 U.S. 826 (1984) ...................................  10

Constitution, statutes, and regulations:

U.S. Const. Amend. V .....................   8
Pub. L. No. 97-248, 96 Stat. 324:

§ 143, 96 Stat. 382 ....................... ........................ 3
§ 143, 96 Stat. 388 (codified at 42 U.S.C.

1320c-5(b)(l)) ..................................................   14
42 U.S.C. 405(g)................................................   3
42 U.S.C. (Supp. IV 1974) 1320c et seq.......................... .. 2-3

(HI)



IV

Constitution, statutes, and regulations —Continued: Page
42 U.S.C. 1320c-5(b)(l)......................................................  2,11
42 U.S.C. (Supp. IV 1974) 1320c-6..................................... 3
42 U.S.C. (Supp. I 1977) 1320c-16(b)(1)...........................  10
42 U.S.C. 1395y(d)(l)(C)....................................................  2,11
42 U.S.C. 1395y(d)(3)........................................................  3
42 C.F.R.:

Pt. 405:
Section 405.1502(e) ............................................  3
Section 405.1530 .... ....................    3
Sections 405.1533 et seq........................   3
Section 405.1547 .... .................   3
Section 405.1557 .............    3
Sections 405.1561 et seq........................................ 3

Pt. 420:
Section 420.102(a) (1980) ....................................  3

Pt. 1004 ................................    3

Miscellaneous:
Health Care Financing Administration, Dep’t of HHS,

Peer Review Organization Manual, Transmittal No. 15 
(May 1987) ......................................    14



3 n  tf)e Supreme Court of tfje Untteb ^>tate£
O ctober  T er m , 1987

No. 86-1944
Soung  O . K w o u n , et  a l „ petitio n ers

V.

Southea st  M issouri P rofessional  Standards 
R eview  O r g a n iza tio n , et  a l .

ON PETITIO N FOR A  W RIT OF CERTIORARI 
TO THE UNITED STATES CO U RT OF APPEALS  

FOR THE EIG H TH  CIRCUIT

BRIEF FOR THE FEDERAL RESPONDENTS IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. la-55a) 
is reported at 811 F.2d 401. The opinions of the district 
court (Pet. App. 76a-123a, 124a-139a) are reported at 622 
F. Supp. 520 and 632 F. Supp. 1091. The decision of the 
district court denying plaintiffs’ motion to alter or amend 
the judgment (Pet. App. 140a-143a) is unreported.

JURISDICTION

The judgment of the court of appeals (Pet. App. 
145a-146a) was entered February 4, 1987. A petition for 
rehearing was denied on March 9, 1987 (Pet. App. 
147a-148a). The petition for a writ of certiorari was filed 
on June 6, 1987. The jurisdiction of this Court is invoked 
under 28 U.S.C. 1254(1).

(1)



2

STATEMENT

Under the Medicare Act, the Secretary of Health and 
Human Services (HHS) is authorized to exclude a physi­
cian from participation in the Medicare program (meaning 
that no Medicare reimbursement may be made with 
respect to services furnished by the physician) upon 
recommendation by a committee of peer review physi­
cians. The physician may then obtain de novo review 
before an administrative law judge. In this case, the ad­
ministrative law judge reversed the initial administrative 
decision to exclude a physician. The physician then 
brought this suit, seeking damages from the peer review 
physicians who recommended exclusion and testified 
before the administrative law judge, as well as against 
the HHS employees who processed the recommendation, 
made the decision to exclude him, and defended that deci­
sion before the administrative law judge. The district court 
dismissed the complaint, and the court of appeals af­
firmed, holding that the defendants were entitled to ab­
solute immunity.

1. The Medicare Act provides that HHS may not reim­
burse a physician who has furnished services which the 
Secretary determines were “substantially in excess of the 
needs of individuals” or “of a quality which fails to meet 
professionally recognized standards of health care.” 42 
U.S. 1395y(d)(l)(C). The Secretary may exclude from 
eligibility for future Medicare reimbursement a physician 
who has failed “in a substantial number of cases[,] sub­
stantially to comply” with his obligation to provide 
medically necessary care meeting professionally recog­
nized standards, or who has “grossly and flagrantly” 
violated this obligation in one or more instances. 42 
U.S.C. 1320c-5(b)(l),

In 1972, Congress established peer review committees of 
private physicians, called professional standards review 
organizations (PSROs), to help the Secretary review physi­
cians’ performance under Medicare and Medicaid. 42



3

U.S.C. (Supp. IV 1974) 1320c et seq. 1 Each PSRO was 
charged with the responsibility of determining whether 
services provided under Medicare or Medicaid were 
“medically necessary” and met “professionally recognized 
standards of health care.” 42 U.S.C. (Supp. IV 1974) 
1320c-4(a)(1). The PSROs were to make recommendations 
to the Secretary as to whether particular physicians should 
be excluded from Medicare eligibility. 42 U.S.C. (Supp. 
IV 1974) 1320C-6.

Under the procedures followed in this case, HHS could 
not exclude a physician without first giving notice of intent 
to exclude, in response to which the physician could sub­
mit documentary evidence and written argument, and re­
quest an informal hearing. 42 C.F.R. 420.102(a) (1980).2 
If HHS decides to exclude, the physician may appeal to an 
administrative law judge, where he has a right to a formal 
hearing with cross-examination and a requirement for a 
decision by the judge based upon the evidence of record. 
42 U.S.C. 1395y(d)(3); 42 C.F.R. 405.1502(e), 405.1530, 
405.1533 et seq., 405.1547, 405.1557. If the decision of the 
administrative law judge is adverse, the physician may ap­
peal to the Secretary’s Appeal Council. 42 C.F.R. 
405.1561 et seq. If this appeal fails, the physician may ob­
tain judicial review in a federal district court. 42 U.S.C. 
405(g), 1395y(d)(3).

1 We cite the statute as in effect when the facts of this case occurred 
(in 1979-1981). In 1982, the provisions of the Act regarding peer 
review were extensively amended. Pub. L. No. 97-248, § 143, 96 Stat. 
382. As relevant here, these amendments are discussed at page 14, 
infra. Under the 1982 amendments, the peer review committees are 
now called “peer review organizations” or “PROs.”

2 We cite the regulations in effect when the facts of this case oc­
curred; the present regulations governing exclusion of physicians 
based on peer review findings of substandard practice appear at 42 
C.F.R. Pt. 1004. New Medicare exclusion procedures are discussed at 
pages 14-15 & n.12, infra.



4

2. This case started when the Health Care Financing 
Administration (HCFA), the HHS office which admin­
isters this program, told the Southeast Missouri PSRO 
that its area led the nation in hospital discharge rates per 
1000 Medicare enrollees. Ill App. 365.3 The resulting in­
vestigation focused on the Poplar Bluff Hospital, which 
had the highest patient readmission rate of the 21 hospitals 
in the Southeast Missouri area. Ibid.-, I App. 117. The 
PSRO performed a detailed study of patient records at 
Poplar Bluff, selecting the records of patients with six or 
more admissions plus a random selection of surgical cases. 
I App. 117. Six physicians reviewed the records of 20 pa­
tients, totalling 135 records. Ibid. These patients averaged 
eight admissions for the six-month period covered by the 
study. Ibid.

Following this study, the PSRO sent Poplar Bluff 
Hospital a “Notice of Potential Violation,” summarizing 
its findings and stating that the Hospital and staff physi­
cians could be excluded from Medicare participation. I 
App. 118. A meeting was then held with the Poplar Bluff 
staff (which included Dr. Kwoun); at this meeting a list of 
violations was handed out, and under each violation a list 
of medical records identified by number, date of admis­
sion and doctor’s initials. I App. 136-140; III App. 366. 
The most frequently appearing initials were “SOK,” identi­
fying Dr. Kwoun. I App. 143-148. The hospital adminis­
trator and staff were invited to compare the material 
presented with their records and discuss the matter. Ill 
App. 367.

This meeting took place October 29, 1979. Ill App. 366. 
At the meeting, it was also announced that the hospital 
would be placed on “non-delegated status,” meaning that 
no surgery could be done on federally-funded patients

3 “App.” refers to the appendix in the court of appeals. The hospital 
discharge rate is a way of measuring how frequently Medicare 
enrollees are being hospitalized.



5

unless an outside physician designated by the PSRO ap­
proved it. Ibid. During the succeeding weeks, consider­
able friction developed between Dr. Kwoun and the PSRO 
physicians responsible for approving surgery; Dr. Kwoun 
felt that the PSRO physicians were denying approval for 
surgery that should be done, while the PSRO felt that Dr. 
Kwoun was proposing unnecessary surgery and failing to 
comply with the procedures for PSRO review. Ill App. 
368-371. On January 22, 1980, nearly three months after 
the initial meeting with the Hospital staff, the PSRO voted 
to recommend sanctions against Dr. Kwoun. I App. 166. 
The vote was 16 to 1, with one abstention. I App, 125.

The PSRO report recommending sanctions was sent to 
the Kansas City Regional Office of HCFA. Ill App. 375. 
The Regional Office concurred in the recommendation 
and sent it to the Bureau of Quality Control at HCFA 
Headquarters in Baltimore. Ill App. 376-377. The HCFA 
Bureau of Quality Control then sent Dr. Kwoun a notice 
formally proposing to exclude him from Medicare 
eligibility. I App. 171. Dr. Kwoun, through counsel, 
responded to the proposed exclusion, charging that the 
evidence did not support the PSRO findings and that Dr. 
Kwoun was the subject of discrimination, and requesting a 
hearing. I App. 178-181.

An informal hearing was then held before the Director 
of HCFA’s Bureau of Quality Control. At this hearing, 
and in a subsequent written submission, Dr. Kwoun’s 
counsel presented a detailed, case-by-case critique of the 
PSRO recommendation. II App. 311-315. The HCFA 
Bureau of Quality Control then concluded that “there is 
merit” in Dr. Kwoun’s arguments and returned the file to 
the PSRO with instructions to respond specifically to the 
points Dr. Kwoun had made. Ill App. 383-384. In 
response, the PSRO reviewed the records again, adhered 
to its previous recommendation, and sent the records back 
to HCFA in Baltimore with the comments of the peer



6

reviewers attached. Ill App. 385. HCFA forwarded this 
material to Dr. Kwoun’s counsel, who filed a lengthy and 
vigorous response, including a case-by-case discussion of 
the patient records at issue. II App. 322-330; III App. 
386-387.

HCFA then issued its decision, excluding Dr. Kwoun 
from Medicare eligibility for a period of 10 years. The 
decision made the following finding (II App. 336):

Specifically, the evidence substantiates instances of 
unnecessary or inappropriate use of pacemakers, im­
proper use of laboratory services, inappropriate drug 
usage, unnecessary hospital admissions, scheduling 
unnecessary surgery, excessive use of ancillary serv­
ices based upon diagnosis and treatment rendered, 
and services rendered which were not consistent with 
the diagnosis. * * * * * [X]he evidence submitted by 
Dr. Kwoun in support of his claims of racial discrim­
ination and personal antagonism was uncorroborated 
hearsay only. In light of this and of the compelling 
record evidence of his poor medical performance, we 
find his claims unsubstantiated and without merit.

Dr. Kwoun then exercised his right to a formal hearing 
before an administrative law judge. After the hearing, the 
judge reversed Dr. Kwoun’s exclusion and ordered his 
reinstatement. In a 183-page opinion, the judge held that 
HCFA had committed procedural and substantive errors. 
Ill App. 348 etseq. The ALJ found two procedural errors. 
First, he found that Frank Kram, an employee in the 
HCFA Regional Office (and a defendant in this suit) had 
talked about the case twice with members of the PSRO. 
This, the ALJ held, violated HCFA procedures, which he 
interpreted to require that HCFA’s action on the PSRO 
recommendation be based solely on the PSRO’s written 
report. Ill App. 397, 402, 406-407. Second, the ALJ 
found that Dr. Kwoun and his counsel had not received 
adequate notice of the .charges against him, since the



7

various oral and written notices they received were not suf­
ficiently specific. Ill App. 399-400, 403-406, 407-408, 
410-411.4

The ALJ went on to criticize the presentation of the case 
against Dr. Kwoun, saying that the testimony of one 
witness was a “complete fabrication” (III App. 511), that 
the PSRO and HCFA had engaged in “aberrational 
review” {ibid.), that the government witnesses should have 
acknowledged “the outdated equipment [Dr. Kwoun] had 
at his disposal” as well as “his rural community, the lack of 
cardiologists and other thoracic surgeons * * * at the same 
time criticizing perceived lack of consultation or referrals. 
This is strong evidence of stratagem” (III App. 511-512).5

4 On the substance of the case, the ALJ concluded (III App. 506): 
The Government has not proven by credible evidence that [Dr. 
Kwoun] provided services substantially in excess of the needs of 
the individual in any of the cases * * *. Furthermore, even 
though there may be a few isolated cases where there was some 
evidence that services were of doubtful necessity, the Government 
has not established that there was a pattern of services being con­
sistently rendered which were substantially in excess of the needs 
of individuals. The evidence also fails to prove that the services 
rendered were of a quality which failed to meet professionally 
recognized standards of health care.

5 The judge also criticized the HCFA employees involved in the case 
(III App. 513):

The reviewers disregarded the facts in the patients’ records, the 
practical, and physical situation under which the respondent 
practiced. They disregarded positive proof favorable to the 
respondent and made inferences unfavorable to the respondent in 
all cases where favorable inferences could or should have been 
drawn. The respondent at every opportunity called these failures 
to the attention of the Health Care Financing Administration. 
The prosecution witnesses didn’t back off but changed their 
criticisms still disregarding the facts of the patient’s case. This 
stubbornness on behalf of professional people is despicable and 
certainly not worthy of being condoned by the Health Care 
Financing Administration.



8

3. This suit followed. Four HCFA officials were 
named: respondents Frank Kram, Katherine Rosenfeld, 
Don Nicholson, and Ralph Howard. Kram and Rosenfeld 
were employees in the Kansas City Regional Office. Kram 
initially received the PSRO report and discussed it with 
members of the PSRO; Rosenfeld, his supervisor, signed 
the letter to HCFA in Baltimore concurring in the PSRO 
recommendation. Ill App. 375-376. Nicholson is a HCFA 
employee in Baltimore; he signed the notice of proposed 
exclusion sent to Dr. Kwoun. Ill App. 377-378. Howard is 
a HCFA official in Baltimore; he signed the final decision 
excluding Dr. Kwoun from Medicare eligibility. Ill App. 
387-388.

Three counts of the complaint named the HCFA 
employees. Count IV alleged that these defendants denied 
Dr. Kwoun fair access to the HCFA procedures, as well as 
his right to practice medicine and to participate in the 
Medicare program with his reputation intact. This con­
duct, the complaint alleged, violated the Fifth Amend­
ment. VII App. 894. Count V charged that the federal 
respondents “commenced a prosecution against plaintiff 
Kwoun and caused that prosecution to be continued 
without probable cause” {ibid.). Count VI charged that 
“defendants’ conduct in commencing a prosecution 
against plaintiff Kwoun and causing that prosecution to be 
continued under the present circumstances and without 
probable cause for same, constitutes extreme and 
outrageous conduct” {ibid.). The factual allegations of the 
complaint charged that the HCFA officials were aware 
that the peer review committee gave Dr. Kwoun inade­
quate notice and issued an inaccurate report. The com­
plaint also charged that the HCFA officials processed the 
peer review recommendation without following agency 
policies, published a newspaper notice of the proceeding, 
and in presenting HCFA’s case before the administrative



9

law judge misstated the facts, overlooked evidence 
favorable to Dr. Kwoun, and fabricated evidence. VII 
App. 891.

4. The district court declined to dismiss the case 
against the federal respondents on the basis of absolute 
immunity, on the ground that “reasonable minds could 
differ as to whether [the officials’] activity is within [their] 
scope of authority” (Pet. App. 100a). All federal 
respondents (but one) immediately appealed that 
decision.6 While that appeal was pending, the district 
court dismissed the complaint as to all defendants, on the 
ground that they were entitled to qualified immunity (Pet. 
App. 124a-139a). Petitioners’ appeal from that decision 
was consolidated with the prior appeal.

5. The court of appeals, by a divided vote, affirmed 
the district court’s order dismissing the complaint, on the 
ground that respondents were entitled to absolute immuni­
ty (Pet. App. la-42a). The court of appeals held that the 
HCFA employees had absolute immunity from peti­
tioners’ common-law tort claims under Barr v. Matteo, 
360 U.S. 564 (1959), because their actions, even if 
mistaken, were within the scope of their authority (Pet. 
App. 8a-14a). The court also held that these employees 
were entitled to absolute immunity against the claims for 
constitutional violations, on the ground that their conduct 
occurred “in the context of essentially advocatory pro­
secutorial duties —‘deciding whether a proceeding should 
be brought and what sanctions should be sought,’ Butz [v. 
Economou, 438 U.S. 478, 515 (1978)], against ‘a specific 
target,’ Gray v. Bell, 712 F.2d 490, 501 (D.C. Cir. 1983), 
cert, denied, 465 U.S. 1100 (1984)” (Pet. App. 19a). The 
court of appeals also extended absolute immunity to the 
peer review physicians. The court concluded that peer 
review groups are analogous to the professional organiza­

6 One HCFA defendant, Katherine Rosenfeld, did not appeal.



10

tions to whom absolute immunity from constitutional 
claims has been granted when disciplinary actions have 
resulted in a lawsuit by the person disciplined. Pet. App. 
27a-28a.

The dissent argued that the record did not contain suffi­
cient evidence to support the conclusion that the HCFA 
defendants were performing prosecutorial or adjudicatory 
functions and were therefore entitled to absolute immuni­
ty. The dissent believed that the case should have been 
remanded for additional findings on this issue. Pet. App. 
43a-47a, 54a-55a. The dissent also concluded that the 
Medicare statute required that the physicians acting as the 
peer review group receive only qualified immunity. Id. at 
47a-54a (citing 42 U.S.C. (Supp. I 1977) 1320c-16(b)(1)) 
(correct citation).

ARGUMENT

The decision below is correct as to the federal 
respondents,7 and it does not conflict with any decision of 
this Court or of any other court of appeals. Accordingly, 
review by this Court is not warranted.

1. The decision below is correct as to the respondent 
HCFA officials.8 Those officials performed the tradi­

7 This brief is filed on behalf of the HCFA officials only; we do not 
address the issues relating to the peer review physicians, other than to 
note certain changes in the peer review procedures that have occurred 
since the case arose. See pages 14-15, infra.

8 That decision does not conflict with any decision of this Court or 
of any other court of appeals. None of the decisions cited by petitioner 
is similar to this case. See Harper v. Jeffries, 808 F.2d 281 (3d Cir. 
1986) (probation officers); Tripati v. INS, 784 F.2d 345 (10th Cir. 
1986) (United States Attorney, immigration officer, and probation of­
ficers all found to have absolute or qualified immunity); Cameron v. 
IRS, 773 F.2d 126 (7th Cir. 1985) (tax protestor suit challenging IRS 
agents’ processing of protestor’s files); Windsor v. The Tennessean, 
719 F.2d 155 (6th Cir. 1983) (wrongful discharge suit brought by pros­
ecutor against United States Attorney), cert, denied, 469 U.S. 826 
(1984); Bothkev. Fluor Engineers & Constructors, Inc., 713 F.2d 1405 
(9th Cir. 1983) (wrongful levy action against IRS official).



11

tional prosecutorial function of deciding, under highly 
discretionary statutory criteria, whether to adopt a recom­
mendation to impose sanctions on a physician, and if so, 
whether to defend that decision before an administrative 
law judge. In view of those functions, they were entitled to 
absolute immunity.

In Butz v. Economou, 438 U.S. 478 (1978), this Court 
ruled that administrative officials performing functions 
analogous to those of prosecutors are entitled to absolute 
immunity from damages based on charges of constitu­
tional violations when the officials act within the scope of 
their authority. The Court explained that “[t]he decision to 
initiate administrative proceedings against an individual or 
corporation is very much like the prosecutor’s decision to 
initiate or move forward with a criminal prosecution.” Id. 
at 515. In particular, the Court emphasized that “[a]n 
agency official, like a prosecutor, may have broad discre­
tion in deciding whether a proceeding should be brought 
and what sanctions should be sought.” Ibid.

The “broad discretion” which this Court saw as 
characteristic of the prosecutor’s role is also evident here. 
HCFA’s decision to proceed aganist Dr. Kwoun was 
governed by broad statutory criteria: whether Dr. Kwoun 
had furnished medical services that were “substantially in 
excess of the needs of individuals” or of a “quality which 
fails to meet professionally recognized standards of health 
care,” and whether Dr. Kwoun failed “in a substantial 
number of cases[,] substantially” to comply with his obliga­
tions or had “grossly and flagrantly” violated his obliga­
tions in one or more cases. 42 U.S.C. 1395y(d)(l)(C); 42 
U.S.C. 1320c-5(b)(l). Decisions under this type of broad 
standard are peculiarly susceptible to second-guessing 
and, in the context of discipline directed against a profes­
sional person, are almost guaranteed to elicit a damages 
action in the absence of absolute immunity.



12

The conclusion that HCFA officials making these deter­
minations have absolute immunity is consistent with the 
court of ap p ea l decisions following Butz that have dis­
tinguished between prosecutorial and investigative deci­
sions, holding that the latter are subject to only a qualified 
immunity. Norton v. Liddel, 620 F.2d 1375, 1379 (10th 
Cir. 1980) (prosecutor absolutely immune for filing 
charges); Henzel v. Gerstein, 608 F.2d 654, 657 (5th Cir. 
1979) (same); see Ray v. Pickett, 734 F.2d 370 (8th Cir. 
1984); Gray v. Bell. 712 F.2d 490 (D.C. Cir. 1983), cert, 
denied, 465 U.S. 1100 (1984); Forsyth v. Kleindienst, 599 
F.2d 1203, 1213-1215 (3d Cir. 1979), cert, denied, 453 
U.S. 913 (1981). Here, the respondent HCFA officials 
became involved in the case only after the peer review 
committee had focused on Dr. Kwoun.9 At that point, the 
HCFA officials’ only role was to determine whether the 
facts developed by the peer review committee warranted 
initiation of a proceeding against Dr. Kwoun. That was a 
quintessentially prosecutorial determination.10

9 On December 17, 1979, the chairman of the peer review commit­
tee advised Dr. Kwoun in writing that his current actions “are being 
added item by item to your file on sanctions which is developing and 
will in due time be reviewed by the PSRO Board and other appropriate 
agencies for action.” I App. 118; III App. 370-371. The allegedly im­
proper meetings between a HCFA official and the peer review physi­
cians—which were the earliest acts by HCFA officials alleged to 
violate Dr. Kwoun’s rights — occurred in January and March, 1980. Ill 
App. 377, 406. In Gray v. Bell, supra, the court listed “important 
clues” for determining whether pre-indictment conduct is entitled to 
absolute immunity, one of which is the extent to which an official has 
focused on a specific target. 712 F.2d at 501. The December 17 letter 
focused on Dr. Kwoun. At that point, further proceedings became 
prosecutive rather than investigative.

10 There is no merit to the contention made in the dissent that the 
case should have been remanded for further factual development con­
cerning the roles played by the HCFA defendants. Pet. App. 45a-46a, 
54a-55a. The case was decided on the basis of an extensive record, in­
cluding a voluminous opinion by the administrative law judge which



13

Petitioners’ claim that the members of the peer review 
committee were motivated by racial animus, even if cor­
rect, would not affect the immunity of the HCFA of­
ficials. The three counts in petitioners’ complaint alleging 
racial discrimination do not name the HCFA defendants. 
VII App. 893-894 (Counts I-III). In addition, the only 
evidence of racial animus is a remark made at a social oc­
casion by one of the 18 members of the peer review com­
mittee who voted on the recommendation. II App. 
305-306. There was no allegation, and no evidence, that 
this racial animus was shared by any of the federal of­
ficials who were involved in this case.11 Petitioners have 
cited no case, and we know of none, that would support 
the contention that a prosecutor’s immunity from damages 
liability is overcome by evidence that an individual who 
recommended in favor of prosecution may have been 
racially motivated.

describes in great detail the actions performed by the defendant 
HCFA officials. Ill App. 376-388. This description shows that 
respondent Frank Kram made the initial recommendation for HCFA 
to proceed; respondent Katherine Rosenfeld wrote a letter recom­
mending this course to her superiors; respondent Don Nicholson 
Issued the notice of proposed exclusion, participated in the informal 
hearing that ensued and in the remand of the case to the peer review 
committee; and respondent Ralph Howard issued the final notice of 
exclusion which was appealed to the administrative law judge. Ibid. In 
addition, respondent Kram appeared at the hearing before the ad­
ministrative law judge and was one of HCFA’s witnesses. Ill App. 
348. Petitioners never contested these facts, or contended that addi­
tional facts existed to show that the HCFA defendants performed ad­
ditional functions beyond those described. The court of appeals’ con­
clusion that these functions were prosecutorial in nature is therefore 
amply supported by the record.

11 The record does not support the statement made by the dissent 
below that Dr. Kwoun may have been singled out because he was “ap­
parently the only minority doctor in the hospital” (Pet. App. 47a n. 1). 
The record lists six staff doctors who attended the initial meeting with 
the peer review committee; the names listed suggest that at least four



14

2. In any event, recent modifications in the Medicare 
program substantially lessen the prospective importance 
of the issues petitioners seek to raise. In this case, the peer 
reviewers followed an informal, consultative procedure. 
Dr. Kwoun was not represented by counsel at the peer 
review stage, and he had no opportunity to meet with the 
committee as a body, to present witnesses before the com­
mittee or to question its members. In 1982, however, Con­
gress amended the Medicare statute to provide that the 
peer review committee’s recommendation will auto­
matically go into effect unless the recommendation is 
altered or reversed by the Secretary within 120 days. Pub. 
L. No. 97-248, § 143, 96 Stat. 388 (codified at 42 U.S.C. 
1320c-5(b)(l)). Moreover, in May 1987, HCFA amended 
its Peer Review Organization (PRO) Manual to require a 
PRO, before recommending sanctions, to meet with a 
physician, and also to require that the meeting comply 
with various safeguards designed to provide additional 
procedural protections for physicians.* 12 Thus, under the 
procedures now in effect, PROs will render a legally bind­
ing decision, rather than merely offer a recommendation, 
and they must follow a prescribed process affording con­
siderable procedural protections.

of these physicians could have been members of minority groups (Drs. 
Kwoun, Varma, Tuma, and Kim). I App. 143. Nine problem cases 
were discussed at this meeting; Dr. Kwoun was the physician in five of 
these cases. I App. 144. It might be noted that the 18 peer review 
physicians who attended the meeting at which sanctions against Dr. 
Kwoun were recommended (all of whom are defendants in this suit) 
included Dr. Jose Gonzales, Dr. Pin Pu, Dr. Vinai Raksakulthai, and 
Dr. A.T. Tuma. I App. 165; VII App. 887-888. Sixteen doctors at the 
meeting voted for the recommendation. I App. 169.

12 The meeting must satisfy the following requirements (Health 
Care Financing Administration, Dep’t of HHS, Peer Review 
Organization ManualjTransmittal No. 15, at 6-12 to 6-12.3 (May 
1987) (amending Section 6025):

1. Notice prior to the meeting, “including a clear statement of 
the factual bases for [the PRO’S initial] findings, the purpose



15

These revisions show that the decision below is largely 
of historical, and not current, significance. The current 
procedures clearly provide the type of safeguards that the 
Court has held justify absolute immunity for actions taken 
within the scope of an official’s duties. See Cleavinger v. 
Saxner, No. 84-732 (Dec. 10, 1985), slip op. 9; Butz v. 
Economou, supra. 13 In this case, unlike Cleavinger, some

of the proposed meeting, the potential sanctions which may 
be imposed * * *, and the procedures applicable to the 
meeting.”

2. The right to present expert testimony in either oral or written 
form.

3. Representation by an attorney at the meeting, who may assist 
the physician in the presentation of witnesses, ask questions 
of the peer reviewers designed to clarify their conclusions, 
ask for clarification of the peer reviewers’ questions to 
witnesses and the physician, and present opening and closing 
statements.

4. Preparation of a verbatim transcript of the meeting, for the 
use of the physician and his counsel in their submission to 
HCFA in connection with its review of the peer review 
recommendation.

5. Disqualification from the final PRO vote of the peer review
.v physician primarily responsible for developing the record and

the PRO’S initial findings.
We have provided a copy of this transmittal to petitioners’ counsel and 
have also lodged a copy of it with the Clerk.

13 In determining not to grant absolute immunity to members of a 
prison disciplinary committee, Cleavinger cited (slip op. 13) the 
absence of four procedural protections at disciplinary hearings: the 
right to counsel, the right to question witnesses, the right to receive a 
transcript of the hearing, and the right to have independent committee 
members make the final decision. These elements may be less impor­
tant in the context of a proceeding like the one involved in this case, 
which will typically hinge on medical subjects that are best resolved by 
a dialogue among physicians, rather than on issues of credibility that 
require cross-examination. See Ritter v. Cohen, 797 F.2d 119 (3d Cir. 
1986). Ritter held that due process does not require the state to con­
duct an evidentiary hearing before terminating a physician’s eligibility



16

of these elements were available at the pre-suspension in­
formal hearing held by HCFA, and all of them were avail­
able at the post-suspension hearing before the administra­
tive law judge. The new procedures, which will be avail­
able in the first instance, not only strengthen the case for 
absolute immunity for PRO officials, but also make clear 
that a decision in this case will not govern cases arising in 
the future.

CONCLUSION

The petition for a writ of certiorari should be denied. 
Respectfully submitted.

Charles Fried 
Solicitor General

Richard K. Willard 
Assistant Attorney General

Barbara Herwig 
Robert V. Zener 

A ttorneys

August 1987

for Medicaid where the doctor was able to meet informally with the 
peer reviewers. As the Third Circuit explained, “[i]ssues such as the 
medical necessity of particular treatments, or the adequacy of a physi­
cian’s records, are not determined to any great extent on credibility 
grounds. * * * Ritter had an opportunity to meet with the peer review 
team, and, most important, to submit written reasons why he should 
not be terminated from the program. Presentation of his case would 
not be significantly abetted by an evidentiary hearing.” Id. at 123. In 
any event, the current procedures offer additional safeguards.

*  U.S. GOVERNMENT PRINTING OFFICE: 1987-181-483/43010