Background
Dr. Kermit Muhammad, an orthopedic surgeon and member of the Nation of Islam, had clinical privileges at Riverside Healthcare for 17 years. He held sincere religious beliefs against vaccination. In August 2021, Riverside implemented a COVID-19 vaccination policy, initially allowing religious exemptions. Days later, CEO Philip Kambic circulated a memorandum modifying the policy to deny religious exemptions for patient-facing positions. Muhammad requested a religious exemption in September 2021, which was denied. Riverside notified him his privileges would be terminated effective November 30, 2021, unless he complied with the vaccination mandate.
Muhammad requested a hearing under the medical staff bylaws. The hearing committee, comprised of three physicians, heard the dispute on January 18, 2022. At the hearing, when Muhammad asked why his exemption was denied when the approved policy allowed religious exemptions, Riverside’s counsel stated it was because he was patient-facing and would endanger others. Muhammad also requested the medical literature supporting the denial; Riverside deferred the request. The hearing committee recommended termination, and the board upheld the recommendation. A temporary restraining order prevented official privilege termination. In August 2022, Riverside amended the vaccination policy to allow religious exemptions for patient-facing staff.
Muhammad filed a third amended complaint with four counts: breach of contract, tortious interference with business relations, intentional interference with employment contract, and intentional infliction of emotional distress. The circuit court dismissed all counts, finding defendants immune under section 10.2 of the Hospital Licensing Act (210 ILCS 85/10.2), that count I was moot, and that the remaining counts failed to state claims for relief.
The Court’s Holding
The appellate court reversed the finding that count I (breach of contract) was moot. Although Riverside had later amended its vaccination policy to allow religious exemptions, Muhammad had alleged damages flowing from the adverse action itself—specifically, that he was required to disclose the adverse action to insurance programs during credentialing, resulting in increased premiums and curtailed practice. Because these damages remained cognizable even if the policy was later changed, an actual controversy persisted. The court distinguished Gates v. Holy Cross Hospital, where a suspended physician retained standing to challenge procedural violations even after suspension was lifted.
The court held that section 10.2 of the Hospital Licensing Act—which grants immunity to hospitals and staff for peer review and quality control activities—applies “only if the review was undertaken based on the actual purpose specified by the statute—i.e., to maintain or improve the quality of health care.” Citing Valfer v. Evanston Northwestern Healthcare (2016 IL 119220), the court warned that its interpretation “should not be interpreted as condoning sham peer review.” A plaintiff may survive a motion to dismiss by alleging well-pleaded facts—not mere speculation—that “the purpose of the discipline was not based on the grounds enunciated in the statute but was instead a sham.” Muhammad had alleged that Riverside took adverse action for improper purposes: to usurp his patient volume and cases, to discriminate based on his religious beliefs, and to retaliate against him. These allegations were sufficient to permit inquiry into whether immunity applied.
Key Takeaways
- Hospital immunity under the Hospital Licensing Act for peer review and credential decisions is not absolute; it requires proof that the hospital’s actual purpose was to maintain or improve quality of care, not a sham motivation.
- A physician can survive a motion to dismiss by alleging facts (beyond conclusory assertions) suggesting that disciplinary action was pretextual or motivated by economic interest, discrimination, or retaliation rather than legitimate quality concerns.
- An amended policy does not render moot a breach of contract claim based on violation of the prior policy if the plaintiff has incurred damages (such as credentialing consequences) that survive the policy change.
- Procedural fairness in peer review—including the right to inspect pertinent information and receive specific medical evidence—is important to the court’s analysis.
Why It Matters
This decision significantly narrows the scope of hospital immunity in the peer review context. While section 10.2 provides broad protection for hospitals acting in good faith on quality and safety matters, courts will now scrutinize whether the stated purpose is genuine or a pretext for improper motives. Physicians facing adverse credential actions can challenge immunity by alleging facts suggesting discrimination, retaliation, or economic self-interest, not merely contradicting the hospital’s stated rationale. The ruling protects religious liberty in healthcare employment and reinforces that procedural due process matters: hospitals cannot deny physicians the medical evidence underlying discipline and expect immunity if the physician later alleges sham purpose. The decision also clarifies that policy changes do not retroactively moot claims for damages stemming from prior policy violations, preserving physicians’ remedies for past harm.