United States Court of Appeals,

Fifth Circuit.

No. 91–1552.

UNITED STATES of America, Plaintiff–Appellant Cross–Appellee,

v.

HARRIS METHODIST FORT WORTH, Defendant–Appellee Cross–Appellant.

Sept. 1, 1992.

Appeals from the United States District Court for the Northern District of Texas.

Before WISDOM, JONES, and SMITH, Circuit Judges.

EDITH H. JONES, Circuit Judge:

The Department of Health and Human Services (HHS) appeals from a ruling that a proposed

Title VI compliance review of physician staff privileges at Harris Methodist Hospital–Fort Worth was

a warrantless search that did not comport with Fourth Amendment standards of reasonableness.

Harris Methodist cross-appeals the trial court's ruling that Title VI of the Civil Rights Act of 1964,

42 U.S.C. § 2000d et seq. applies to physician staff privileges. We affirm, albeit on different

reasoning from that of the district court.

BACKGROUND

Harris Methodist in Fort Worth, Texas, is one of 500 to 600 hospitals in Region VI of HHS.

In August 1986, HHS notified Harris Methodist that it was targeted for an investigation of the

hospital's physician staff privileges and peer review processes. HHS asserted that the investigation

was author ized by Title VI. HHS appended an expansive request for information to the original

notifica t io n o f t he investigation, including all documents and the names and ethnic identities of all

persons associated with the granting of physician staff privileges at Harris Methodist. The pertinent

parts of the investigation request are appended to this opinion.

Opposed to the extensive scope of the requested materials, Harris Methodist o fficials soughtmeetings with HHS representatives. When these were unsuccessful, Harris Methodist refused to

permit HHS investigators access to the information. Finally, in May 1989, HHS filed suit seeking

declaratory relief against Harris Methodist. A bench trial was held on March 18, 1991, at which time

the trial court ruled in favor of Harris Methodist, concluding that the proposed compliance review

was an impermissible warrantless search.

The trial court held that Title VI applies to physician staff privileges, prohibiting

discrimination in granting or denying staff privileges at a hospital receiving federal funds. However,

the court also barred execution of the proposed HHS compliance investigation as an unconstitutional

warran t less search. The court found the proposed search to be unreasonable because Harris

Methodist was selected for a compliance investigation on the basis of the unreviewed discretion of

the HHS regional director. The court also found that the director's decision was entirely arbitrary and

was not based on meaningful criteria. The court further ruled that Harris Methodist had no t

consented to the administrative search.

On appeal, HHS argues that Harris Me t ho dist consented to an administrative search by

executing compliance assurance documents tied to federal construction loans under the Hill–Burton

Act and receipt of continuing Medicare/Medicaid funding. HHS asserts that Fourth Amendment

reasonableness req uirements are therefore inapplicable. As cross-appellant, Harris Methodist

challenges the applicability of Title VI to physician staff privileges. As a further ground for affirming

the t rial court's ruling, Harris Methodist urges that peer review materials are protected from

disclosure by an evidentiary privilege.

APPLICABILITY OF TITLE VI

Enacted as part of the Civil Rights Act of 1964, § 601 of Title VI, 42 U.S.C. § 2000d states

a broad prohibition of the use of federal funds to aid discrimination:1 The district court held that Title VI governs discrimination in physician staff privileges

because of the retroactive applicability of the Civil Rights Restoration Act of 1987, Pub.L. No.

100–259, 102 Stat. 28 (1988), 42 U.S.C. § 2000d–4a (Supp.1988). This statute mandates that

Title VI apply "on an institution-wide basis, instead of only in connection with a limited program

activity actually receiving federal funds...." Leake v. Long Island Jew ish Medical Center, 695

F.Supp. 1414, 1416 (E.D.N.Y.1988), aff'd, 869 F.2d 130 (2d Cir.1989) (per curiam). We do not

reach this issue. Harris Methodist has never asserted that Title VI applies on less than a

hospital-wide basis; the dispute between the parties centers on other language in § 601. The

question of statutory retroactivity of the 1987 Act remains open in our circuit. Cf. Ayers v.

Allain, 893 F.2d 732, 754–55 (5th Cir.), vacated, 914 F.2d 676 (5th Cir.1990) ( en banc ), rev'd

No person in the United States shall, on the ground of race, color, or national origin,

be excluded from participation in, be denied the benefits of, or be subjected to discrimination

under any program or activity receiving Federal financial assistance.

The next t wo provisions of Title VI, §§ 2000d–1 and –2, authorize federal agencies to ensure

compliance with the non-discrimination policy and, in the worst cases, to withdraw federal funds from

a violator. The penultimate provision, § 604, 42 U.S.C. § 2000d–3, qualifies the policy:

Nothing contained in this subchapter shall be construed to authorize action under this

subchapter by any department or agency with respect to any employment practi ce of any

employer, employment agency, or labor organization except when a primary objective of the

federal financial assistance is to provide employment.

Section 604 appears to dovetail with the conte mpo raneously enacted Title VII of the Civil Rights

Act. C onsolidated Rail Corp. v. Darrone, 465 U.S. 624, 632–33, 104 S.Ct. 1248, 1254, 79 L.Ed.2d

568 (1984). In so do ing, it distinguished between remedies available for discriminatory misuse of

federal funds and for discriminatory employment practices. The former problem was to be monitored

by the funding agency, while employment discrimination conferred remedies on the victim employees

through the EEOC-based enforcement process. S ee Consolidated Rail Corp., 465 U.S. at 633 n. 13,

104 S.Ct. at 1253–54 n. 13; Chow dhury v. Reading Hosp. & Med. Center, 677 F.2d 317, 325–26

(3d Cir.1982) (Aldisert, J., dissenting), cert. deni ed, 463 U.S. 1229, 103 S.Ct. 3569, 77 L.Ed.2d

1411 (1983).

Remarkably, in twenty-eight years since the passage of Title VI, only three ca ses have

addressed whether a hospital's discriminatory handling of physician staff privileges may "exclude [a

physician] from participation in" or "subject [him] to discrimination under" federal funding programs. 1sub nom. United States v. Fordice, ––– U.S. ––––, 112 S.Ct. 2727, 120 L.Ed.2d 575 (1992)

(original panel held 1987 CRRA is retroactive). Only the U.S. Supreme Court can rectify the

uncertainty it created on statutory retroactivity.

2 Doe v. St. Joseph's Hospital, 788 F.2d 411 (7th Cir.1986); Bhatt v. Uniontow n Hospital, 50

E.P.D. ¶ 39,207, 1986 WL 30681 (W.D.Pa.1986); Vuciecevic v. MacNeal Memorial Hospital,

572 F.Supp. 1424 (N.D.Ill.1983). Those cases generally held that physician staff privileges are not covered by § 601. 2

We conclude, based on the plainer reading of Tit le VI and our circuit's precedents, that

physician staff privileges are prote ct ed from discriminatory actions by a hospital receiving federal

funds. The co ntrary conclusions of the other cases shed light, however, on the ambit of this

protecti on.

On its face, § 601 arguably covers private physicians on the staff privileges as persons who

"participate in" or may be "subject to discrimination under" a federally-funded program or activity.

That the terms "participate" and "subject to" have this broad meaning was reinforced by the Supreme

Court in North Haven Bd. of Educ. v. Bell, 456 U.S. 512, 102 S.Ct. 1912, 72 L.Ed.2d 299 (1982),

where the Court held that employees who dire ct ly part icipate in federal education programs are

covered by Title IX (which has no counterpart to § 604), not just the students who are the recipients

of the aid. The Court stated:

Employees who directly participate in federal programs or who directly benefit from federal

grants, loans, or contracts clearly fall within the first two protective categories [of § 9012....

In addition, a female employee who works in a federally funded education program is

"subjected to discrimination under' that program if she is paid a lower salary for like work,

given less opportuni ty for promotion, or forced to work under more adverse conditions than

are her male colleagues.

456 U.S. at 520–21, 102 S.Ct. at 1917. The Court also observed that Congress could have narrowed

the coverage of the anti-discrimination provision by limit ing it to "students" or "beneficiaries" rather

than "persons," 456 U.S. at 521, 102 S.Ct. at 1918. If employees are "persons" under Title IX, where

no § 604 exclusion exists, so, it would seem, are non-employee physicians, without whom the hospital3 Indeed, most such vendors or suppliers have only an indirect effect on patient care either

because their products are not medically related or because if so related, their products are not

furnished with the intent or duty to further the federally-funded program. This is another way of

saying that there must be some logical nexus between a person's "participation" and the federally

funded program in order for § 601 to apply. See Association Against Discrimination in

Employment, Inc. v. City of Bridgeport, 647 F.2d 256, 276 (2d Cir.1981), cert. denied, 455 U.S.

988, 102 S.Ct. 1611, 71 L.Ed.2d 847 (1982). would be only a hotel. They "participate in" the federally funded programs, making the facilities

usable as places of treatment, this is not to say that every vendor of supplies or services to a hospital

that receives federal funds is a "participant" in the hospital operations protected by § 601. 3 But by

direct analogy with North Haven, those who directly care for the patients "participate in" the federally

funded programs.

Two of this circuit's cases support application of § 601 in this context. In D iggs v. Harris

Methodist Hospital, 847 F.2d 270 (5th Cir.), cert. denied, 488 U.S. 956, 109 S.Ct. 394, 102 L.Ed.2d

383 (1988), a physician re mo ved from appellee's staff contended unsuccessfully that she was an

"employee" of the hospital covered by Title VII. As a consequence of Diggs, staff physicians who

are not "employees" of a hospital are not excluded by § 604 from § 601's blanket nondiscrimination

protecti on. Earlier, this court authorized HHS to audit a hospital's compliance with the handicapped

anti-discrimination law, § 504 of the Rehabilitation Act, based upon the complaint of a patient not

covered by a federally funded program. U nited States v. Baylor Univ. Med. Center, 736 F.2d 1039

(5th Cir.1984), cert. denied, 469 U.S. 1189, 105 S.Ct. 958, 83 L.Ed.2d 964 (1985). Relying upon

Title VI as the model for § 504, this court stated that Title VI prevents

service providers receiving federal funds from discriminating in programs in which individual

beneficiaries of aid participate. Title VI binds t he services provider, or "recipient," thus it

affords a remedy against discrimination by recipients to all participants in a federally funded

program, not merely to the individual beneficiaries of federal aid.

736 F.2d at 1043–44 (emphasis added). This reasoning, if not B aylor 's direct holding, is applicable

in the case before us.4 Where public hospitals are concerned, courts have managed to avoid second-guessing medical

decisions. See, e.g., Leach v. Jefferson Parish Hosp. Dist. No. 2, 870 F.2d 300 (5th Cir.), cert.

denied, 493 U.S. 822, 110 S.Ct. 80, 107 L.Ed.2d 46 (1989); Schuster v. Martin, 861 F.2d 1369

(5th Cir.1988). Also consistent with our reading of § 601 are HHS regulations, which, since shortly after the

passage o f Title VI, have mandated non-discrimination as to physicians' staff privileges by

federally-funded hospitals. 45 C.F.R. § 80.5(e)(1990).

The three cases that have excluded physicians from § 601 are distinguishable from this case

in an important respect: in each of them, an individual physician tried to challenge his termination

from the hospital staff und er an implied cause of action that the courts have recognized as a

counterpart to the statutory provisions barring discrimination in co nnection with federally funded

programs. C

annon v. Univ. of Chicago, 441 U.S. 677, 99 S.Ct. 1946, 60 L.Ed.2d 560 (1979) (Title

IX). Courts are understandably reluctant to second-guess hospitals' administrative and health care

decisions in matters of staff privileges. 4 The courts' visceral aversion to permitting anti-discrimination

legislation to further doctors' individual interests may also arouse sympathy. Such distasteful

consequences are the unforeseen byproducts of engrafting an implied private cause of action upon

statutes, like Title VI, that Congress expressly limited to agency enforcement.

Beyond their motivation, these cases are unpersuasive. Bhatt depends upon the physician's

being an "employee" under § 604 and upon the court's conclusion that Medicare/Medicaid funding

does not have a "primary objective" of securing employment through federal funding. In this context

one must consider the statement, relied upon by Harris Method ist, that "there i s no correl ati on

between a physician's request for staff privileges and the receipt by a hospital of Medicare and

Medicaid funds." B hatt 's reliance upon the § 604 qualification is inappropriate in this circuit because,

after Diggs, a physician is not a Title VII "employee" of a hos pital where he has staff privileges.

Similarly, in Vuciecevic, the court seemed to analogize the doctor's status to that of an employee who

could not avail himself of § 601 dir ect ly unless, pursuant to § 604, it was a purpose of the federalfunding to benefit "the employment of physicians." 572 F.Supp. at 1429–30.

The Seve nt h Circuit's decision in D oe is, on close analysis, not really in conflict with our

reading of § 601. D oe reversed and remanded the doctor's § 601 claim so that she could attempt to

plead that she was an "intended beneficiary" of the Title VI non-discrimination provision. The court

defined "inten ded beneficiary" all-inclusively as the "class of intended beneficiaries, applicants and

participants" under § 601. 788 F.2d at 418 n. 11. Contrary to the government's assertion, D oe is not

founded on a misplaced (in this context) use of a "specific application of the intended beneficiary rule

to employment practices," 788 F.2d at 419 n. 12; Section 604 is incorporated by analogy, not as the

main reason for the court's decision. We can thus agree with this formulation to the extent that D oe

uses "intended beneficiary" as a proxy for placing a logical limit o n the class of persons who can

benefit from § 601 as "participants" in a federally funded program.

The hospital also relies heavily upon provisions in the Medicare and Hill–Burton Acts that

disavow government interference in the practice of medicine or the administration of hospitals. The

Medicare Act provides, in pertinent part:

Nothing in this subchapter shall be construed to authorize any Feder al officer or

employee to exercise any supervision or control over the practice of medicine or the manner

in which medical services are provided, or over the selection, tenure, or compensation of any

o fficer or employee of any institution, agency, or person providing health services; or to exercise any supervision or control over the administration or operation of any such

institution, agency, or person.

42 U.S.C. § 1395. The Hill–Burton Act similarly states:

Except as otherw ise specifically provided, nothing in this subchapter shall be

construed as conferring on any Federal officer or employee the right to exerci se any supervision or control over the administration, personnel, maintenance, or operation of any

facilit y with respect to which any funds have been or may be expended under this subchapter.

42 U.S.C. § 291m (emphasis added). Insofar as both of those statutes are qualified by the underlined

language, they do not prevent enforcement of §§ 601 or 604 of Title VI. Nevertheless, they representa parallel policy of Congress that must be obeyed. In seeking to enforce §§ 601 and 604, HHS and

the courts must bear in mind that Congress intended by these provisions that federal regulation should

not lose sight of its ult ima t e go al of facilitating the delivery of medical care. Regulation may not

operate in such a way as to "supervise or control" medical practice or hospital a dministration.

Improper interference with the peer review process strikes at the heart of this prohibition.

Title VI covers physician staff privileges under § 601, subject to the proviso in § 604. HHS

should not, however, "supervise or control" medical practice or hospital operations in its oversight

of nondiscrimination. The next questions concern the scope of the agency's proposed investigation

of Harris Methodist.

CONSENT TO THE SEARCH

Although HHS's proposed action here is termed a compliance review, HHS essentially sought

to search the hospital's peer review records, upon which physician staff privilege decisions are, in part,

premised. HHS urges this court to hold, as a matter of law, that Harris Methodist consented to its

administrative search. When Harris Methodist received federal Hill–Burton funds for a construction

project in 1965 it executed an assurance of compliance with Title VI requirements. Those regulations

included a requirement of non-discrimination in granting physician privileges. S ee 45 C.F.R. §

80.5(e); 29 Fed.Reg. 16298 (December 4, 1964). HHS asserts that, by signing the assurance o f

compliance, Harris Methodist has already agreed to any compliance review, including a full inquiry

into physician st aff privileges. HHS extends this argument to assurances of compliance signed in

connection with receipt of Medicaid and Medicare funds, executed in the 1970's and 1980's.

The trial court found that Harris Methodist did not consent to the administrative search. The

issue of consent to a search is normally a question of fact, upon which we will not reverse the trial

co urt 's determination unless it is clearly erroneous. U nited States v. Ibarra, 965 F.2d 1354 (5th

Cir.1992) (en banc); United States v. Coburn, 876 F.2d 372, 374 (5th Cir.1989). HHS, however,characterizes the issue of consent in this case as a question of law. Neither party factually disputes

Harris Methodist's execution of assurances of compliance, leavin g o nly the question whether such

assurances constitute consent to a search.

Harris Methodist asserts that it could not have given a v o luntary and informed consent to

waive the right to challenge the reasonableness of administrative searches, because that right was not

clearly defined at the time it executed the assurances of compliance. The Fourth Amendment interest

now ra ised by Harris Methodist was not recognized until 1978 in M arshall v. Barlow 's, Inc., 436

U.S. 307, 98 S.Ct. 1816, 56 L.Ed.2d 305 (1978), and in this court's decision in the NOPSI trilogy.

See United States v. New Orleans Public Service, Inc., 723 F.2d 422 (5th Cir.1984) ( NOPSI III );

United States v. Mississippi Power & Light, Et Al., 638 F.2d 899 (5th Cir.) ( NOPSI II ), cert. denied,

New Orleans Public Service, Inc. v. United S tates, 454 U.S. 892, 102 S.Ct. 387, 70 L.Ed.2d 206

(1981); and U

nited States v. New

Orleans Public Service, Inc., 553 F.2d 459 (5th Cir.), ( NOPSI I

), rehearing denied, 559 F.2d 30 (1977), vacated, New Orleans Public Service, Inc. v. United States,

436 U.S. 942, 98 S.Ct. 2841, 56 L.Ed.2d 783 (1978). We disagree. That certain constitutional rights

were not more fully refined until later court decisions is of little moment in this case. Additionally,

while conceding that the 1965 assurance of compliance required Harris Meth o dist to comply with

Title VI of the Civil Rights Act and all unambiguous associated requirements imposed in accordance

with Title VI, Harris Met hodist now argues that it could not have been aware that physician staff

privileges could be the subject of compliance reviews. But this assertion cannot be entirely candid,

because from the earliest point, adm inistrative regulations included physician staff privileges as a

subject that the HEW and HHS regarded as within the purview of Title VI.

We agree with Harris Methodist, however, that any consent found in the execution of the

assurances of compliance is consent only to searches that comport with constitutional standards of

reasonableness. See Zap v. United States, 328 U.S. 624, 628, 66 S.Ct. 1277, 1279, 90 L.Ed. 1477

(1946), rev'd on other grounds, 330 U.S. 800, 67 S. Ct. 857, 91 L.Ed. 1259 (1947). In F irst5 Harris Methodist makes a desultory contention that it rescinded and withdrew consent in

1986 when it began protesting the proposed compliance review. The hospital offers no citation to

the record that would support a claim of an unequivocal act or statement withdrawing consent,

nor is there evidence that Harris Methodist notified the government that it was terminating

consent and would refuse to receive further federal funding. See United States v. Alfaro, 935

F.2d 64, 67 (5th Cir.1991). Alabama Bank of Montgomery v. Donovan, 692 F.2d 714, 719 (11th Cir.1982), the Department of

Labor sought to conduct a compliance review under an Executive Order prohibiting discrimination

by government contractors. The bank refused to submit to the compliance review and argued that

signing contracts with the government containing assurances of non-discrimination did not include

consent to unreasonable or unconstitutional searches. The court agreed, noting that the government

did not dispute, as it does in the case before us, that such consent does not extend to unreasonable

or o t herwise unconstitutional searches. 692 F.2d at 719. Finding F irst Alabama Bank of

Montgomery to be persuasive authority, we expressly limit our holding t hat Harris Methodist

consented to HHS compliance reviews only to those reviews which employ reasonable searches as

that term is defined under the Fourth Amendment. S ee First Alabama Bank of Mont gomery, 692

F.2d at 720. We reject the government's assertion that Fourth Amendment reasonableness standards

do not apply when an administrative search is conducted pursuant to consent. 5 S ee also Florida v.

Jimeno, ––– U.S.

––––, ––––, 111 S.Ct. 1801, 1803, 114 L.Ed.2d 297 (1991) (consensual search

deemed reasonable only as long as scope confined to reasonable bounds).

REASONABLENESS OF THE PROPOSED SEARCH

The district court found t hat Harris Methodist was selected to be the subject of the

complian ce review arbitrarily and without any meaningful guidelines. The court further found the

decision was made in the unreviewed discretion of an HHS field officer. The court also found that

the decision was made without legislative or administrative standards, and without any administrative

plan containing specific neutral criteria. Relying on its position that, except for questions as to the

mode of inquiry, reasonableness standards are not relevant because of HHS's consent, the government

affirmatively declines to challenge these findings.Our determination of the reasonableness of the proposed search must begin with a balancing

of two important competing public interests. U nited States v. Martinez–Fuerte, 428 U.S. 543, 555,

96 S.Ct. 3074, 3081, 49 L.Ed.2d 1116 (1976). HHS seeks to achieve the purposes of Title

V I—preventing discrimination against minority health care professionals and affording mino rity

citizens the opportuni ty to seek health care at a non-discriminatory facilit y. Harris Methodist wishes

to vindicate the confidentiality of peer review, a process critical to the advancement of quality health

care. S ee 42 U.S.C. § 11101(5) (Congressional finding of overriding national need for confidentiality

for physicians engaging in effective professional peer review). Congress again endorsed medical

self-governance by its admonition that regulation should not "supervise or control" medical practice

or hospital operations. Medicare Act, 42 U.S.C. § 1395; Hill–Burton Act, 42 U.S.C. § 291m. The

peer review process provides a system in which a hospital's medical staff reviews, c ritiques, and

suggests impro vement in the skills and performance of their fellow physicians. We recognize "an

overwhelming public interest in promoting improvement in health care t hro ugh the mechanism of

[physician] peer revie w ." L aws v. Georgetown University Hospital, 656 F.Supp. 824, 826

(D.D.C.1987).

We have previously enunciated standards of reasonableness for searches associated with

compliance reviews in NOPSI III and NOPSI II. In N OPSI II we held that at least three elements are

necessary to establish the reasonableness of a proposed administrative search: 1) whether the

proposed search is authorized by statute; 2) whether the proposed search is properly limited in scope;

and, 3) how the a dministrative agency designated the target of the search. N OPSI II, 638 F.2d at

907. We reaffirmed t

hat test in N

OPSI III, 723 F.2d at 425. We review the first two elements as

matters of law, and the final element as a matter of fact, affording clearly erroneous review. N OPSI

III, 723 F.2d at 425. With regard to factual evaluation of the third element we have stated:

The search will be reasonable if based either on (1) specific evidence of an existing violation,

(2) a showing that "reas o nable legislative or administrative standards for conducting an ...

inspection are satisfied with respect to a particular [establishment]," [ Marshall v. Barlow 's,

Inc., 436 U.S. 307, 320–21, 98 S.Ct. 1816, 1824, 56 L.Ed.2d 305 (1978) (quoting Camara6 The record reveals no "specific evidence of an existing violation", nor even any complaint,

that preceded the selection of the hospital for "compliance review." v. Municipal Court of City and County of San Francisco, 387 U.S. 523, 538, 87 S.Ct. 1727,

1736, 18 L.Ed.2d 930 (1967)) ], or (3) a showing that the search is "pursuant to an

administrative plan containing specific neutral criteria." 436 U.S. at 323, 98 S.Ct. at 1826.

NOPSI III, 723 F.2d at 425 (quoting NOPSI II, 638 F.2d at 907).

Here, the legal issues are readily resolved. We have concluded that HHS was authorized by

statute to conduct some kind of search. As the appendix demonstrates, especially in the absence of

information suggesting that the hospital routinely violated Title VI with respect to staff privileges,

the scope of the proposed search is entirely too broad. It could not be conducted without chilling the

peer review process, breaching confidentiality, and intrusively second-guessing medical judgments

embodied in staff privilege and peer review decisions.

The district court relied upon the NOPSI II and III factual criteria to find that the compliance

review was initiated arbitrarily and without proper administrative standards or plan. 6 Although not

discounting the genuine governmental interest in compliance with Title VI, the critical public interest

in effective peer re view requires that the compliance review process be carefully limited by the

standards cited in the NOPSI cases.

The decision to select Harris Methodist as the target of the compliance review was made by

Davis Sanders, HHS Region VI director. Sanders testified that the investigation was intended to be

extensive in scope, unlike any that had ever been conducted in Region VI. Sanders conceded that

there was no administrative plan promulgating selection criteria. He testified that he had six or seven

unwritten criteria in mind when he selected Harris Methodist, although he was unable to recall the

full list of criteria at trial. Relying on the memory of one of Sanders' assistants, the government now

states that Sanders employed nine criteria in making his selection decision. No written record was

made of the decision process. C f. NOPSI III, 723 F.2d at 428 ("Instead of trusting their memories,officials should keep a written record of the criteria they use in each particular case.").

Although Sanders was able to articulate certain criteria, in response to probing by the trial

court Sanders could not explain which factor or factors militated in favor of selecting Ha r ris

Methodist. One asserted criterion, avoidance of repetitive investigation of the same hospital, worked

against selection of Harris Methodist. Harris Methodist had been the subject of an investigation

concerning physician staff privileges in 1984, an investigat io n which Sanders termed satisfactory.

That investigation concluded that Harris Methodist had not violated Title VI in regard to physician

staff privileges. No hospital in the adjoining community of Dallas, site of HHS Region VI

headquarters, had been the subject of physician staff privilege review since at least 1980.

Similarly, the asserted criterion of community/physician demog raphi cs supported the selection

of a hospital other than Harris Methodist. Sanders testified that he considered the total number and

percentage of minority physicians and patients in the surrounding community. However, evidence

adduced at trial demonstrated that there were numerous metropolitan hospitals in counties in Region

VI with greater percentages of minorities and greater total numbers of minorit ies than Tarrant

County, the county in which Harris Methodist is situated. More significantly, there were numerous

other metropolitan hospitals in counties with greater percentages of minority physicians, and a greater

number o f minority physicians. Sanders conceded that he was aware that Harris Methodist's

percentage of minority staff positions was at least as great as t he percentage of minorities in the

surrounding community. Sanders admitted that this ratio, coupled with the fact that Harris Methodist

had a higher percent age o f minority physicians on staff than other Region VI hospitals, mitigated

against the selection of Harris Methodist for the compliance review.

Several of Sanders' other stated criteria further suggested that his decision was arbitrary. For

example, Sanders cited budgetary woes restricting travel expenses as the reason for selection of a

Fort Worth Hospital. However, an HHS investigator assigned to Region VI testified that he routinelytraveled to all five states in Region VI to conduct compliance reviews. Moreover, there were several

hospitals located in much closer proximity to HHS regional headquarters in Dallas, Texas. Sanders

also stated that he wished to establish an HHS "presence" in Fort Worth. This is a curious claim since

HHS had conducted an investigation in Fort Worth in 1984, and yet had conducted no investigations

in Dallas since 1980. Finally, Sanders asserted that he considered compliance data in his selection

decision. Although the government now asserts that there were informal complaints of discrimination

in denying physician staff privileges at Harris Methodist, t his claim is wholly unsupported by the

record, and stands in direct contradiction to HHS's responses to interrogatories. Again, Sanders

conceded that this factor should have been resolved in favor of selecting a hospital other than Harris

Methodist for compliance review.

In NOPSI II, the court stressed the importance of limit ing the discretion of field enforcement

officers through administrative oversight of compliance review decisions. 638 F.2d at 907–08. HHS

established a Annual Operating Plan which included a section requiring notification to senior HHS

o fficials and justification for each compliance review decision. The Plan mandated advance written

approval or disappro v al for each compliance review. Those procedures were not followed with

regard to Harris Methodist. Sanders made one telephone call to notify a mid-level HHS official of

his selection. Considering the slipshod manner in which the selection criteria were developed and

followed—if indeed followed—we ag ree with the trial court's conclusion that Sanders acted

arbitrarily and without an administrative plan containing neutral criteria.

It would be inappropriate for us to specify criteria that would have substantiated a reasonable

search of this hospital's peer review records. The N OPSI cases provide general guidance that should

be augmented by partic ular agency deference to matters of medical judgment and to the need for

confidentiality. HHS's propo sed compliance review of Harris Methodist satisfied none of these

concerns.PRIVILEGE

Harris Methodist asserts that the physician peer review materials sought in the compliance

review are subject to privilege and therefore protected from the sco pe o f the HHS investigation.

Harris Methodist relies on three district court cases involving alleged medical malpractice in which

the court granted a privilege against discovery of peer review documents. S ee Laws v. Georgetown

University Hospital, supra; Mew born v. Heckler, 101 F.R.D. 691 (D.D.C.1984); B redice v. Doctors

Hospital, Inc., 50 F.R.D. 249 (D.D.C.), aff'd, 479 F.2d 920 (D.C.Cir.1973). In contrast, HHS relies

on the Supreme Court's recent pronouncement in University of Pennsylvania v. EEOC, 493 U.S. 182,

110 S.Ct. 577, 107 L.Ed.2d 571 (1990), in which the Court held that a university was not able t o

protect from disclosure, by means of any evidentiary privilege, peer review materials utilized in the

tenure decision-making process. 493 U.S. at 194, 110 S.Ct. at 585.

As Congress has recognized, peer review materials are sensitive and inherently confidential,

and protecting t hat co nfidentiality serves an important public interest. 42 U.S.C. §§ 11101(5),

11137(b). HHS cannot administratively override the goal of this statute. Unlike the privilege claim

fo r faculty tenure decisions rejected in U niversity of Pennsylvania v. EEOC, as well as potential

analogous claims by "writers, publishers, musicians, [and] lawyers," 493 U.S. at 194, 110 S.Ct. at

585, the medical peer review pro cess "is a sine qua non of adequate hospital care." B redice, 50

F.R.D. at 250. However, because we affirm the district court's det erminat ion that the proposed

search exceeded bounds of reasonableness, we need not define the scope of any applicable privilege.

We note that HHS o ffered its commitment that peer review materials would be kept

confidential and that Harris Methodist need supply only redacted records, thus minimizing disclosure

concerns. HHS is bound by its own regulations to protect the confidentiality of peer review materials

obtained in the course of compliance reviews. 45 C.F.R. § 80.6(c) (1990). HHS has also agreed that

the district court could issue an appropriate order tailoring the scope of any compliance review and

establishing particular requirements to protect sensitive documents. If HHS continues to pursue thistype of compliance review, its targets are always free to se ek the assistance of the courts when

necessary to protect restricted access materials.

CONCLUSION

The scope of Section 601, the anti-discr i mination provision of Title VI, extends to

non-employee physician staff privileges at a hospital receiving federal funds. To that end, HHS may

c o nduct appropriate compliance reviews. In this case, Harris Methodist consented to reasonable

searches in the form of compliance reviews by executing assurances of compliance with Title VI and

by accepting federal funding associated with Title VI. However, we hold that consent to extend only

to reasonable searches. We affirm the trial court's finding that t he proposed search did not meet

Fourth Amendment standards of reasonableness. Because the search was not properly initiated, the

compliance review shall proceed no further.

AFFIRMED.

APPENDIX

HHS Investigative Plan for Harris Methodist–Fort Worth Hospital

V. COMPLIANCE STANDARD

The Office for Civil Rights will examine Harris Hospital–Methodist's policies, procedu r es, and

practices relating to physician staff privileges to determine whether they subject minority physicians

to disparate treatment or whether they have the effect of discriminating against the physicians on the

basis of race, color, or national origin. In order to make this determination, OCR first will seek to

determine whether the hospital's policies, procedures or practices have a disproportionate a dverse

effect on minority physicians. If OCR determines that the policies, practices, or procedures do not

result in a disproportionate adverse effect, OCR will make a no violation determination.

If OCR determines that Harris Hospital–Methodist's policies, procedures, or practices havea disproportionate adverse effect on minority physicians, OCR must determine whether the policies,

procedures or practices are necessary to achieve a legiti mat e program objective identified by the

recipient. If OCR determines that Harris Hospital–Methodist's policies, procedures or practices have

disproportionate adverse effect on minority physicians, but are not necessary to achieve a legitimate

program objective, OCR will find a violation.

If OCR determines that Harris Hospital–Methodist's policies, procedures or practices have

a disproportionate adverse effect on minority phy sicians, but are necessary to achieve a legitimate

program objective, OCR must determine whe t her t he hospital has available alternative means of

achieving the program objective(s) that would result in a less disproportionate adverse effect. If OCR

determines that Harris Hospital–Methodist has no such alternative(s) available, OCR will make a no

violation determination. If alternatives are available, use of the policies, procedures or practices in

question would be a violation.

To determine if minority physicians are subjected to disparate treatment, OCR will examine

whether there are differences in policy or in practice in the application of eligibility criteria for staff

privileges, whether for purposes of retaining staff privileges minority physicia ns in po licy or in

practice are required to meet different terms and conditions, and whether minority physicians are

subjected to disparate treatment during the exercise of their staff privileges or as a part of the

application process.

VI. INVESTIGATIVE ACTIVITIES

OCR will pursue the investigation of Harris Hospital–Methodist's compliance with Title VI

with respect to staff privileges by engaging in the following activities:

1. Determine the number of physicians by race, color, or national origin by specialty in the service

area.

2. Determine the number of all physicians with Harris Hospital–Methodist staff privileges accordingto the race, color, or national origin of the physicians, their respective specialties, and their

type of staff privileges.

3. Analyze Harris Hospital–Methodist's written policies that have a direct or indirect relationship to the granting, retention, evaluation, and withdrawal of staff privileges.

4. Analyze all r elevant records maintained by Harris Hospital–Methodist that demonstrate the

hospital's practices with respect to membership staff privileges.

5. Inter view Harris Hospital–Methodist staff and decision makers who directly or indirectly affect

staff privilege decisions.

6 . Int erview physicians whose staff privileges have been granted, denied, modified or withdrawn

based on decisions or actions by the hospital.

7. Interview community representatives who have relevant information about the hospital's actions

and activities related to physician staff privileges.

VII. DATA NEEDS

OCR will obtain

dat a, info rmation, and evidence based on direct requests to the recipient,

information provided by witnesses and persons generally knowledgeable about hospital staff privilege

procedures and requirements, informa t io n available through DHHS OPDIVs and the region, and

investigation related research.

*1. Identify physicians by race, color, or national origin, and specialty in the hospital service area.

2. Hospital's organizational chart, including expla nat io ns of relationship between various

o rganizational units and sub-units, and the identification of organization officers and

administrators directly or indirectly responsible for evaluating, approving, withdr awing,

and/or denying staff privileges, by name, and title.

3. Descriptions of hospital's services and programs, including ancillary services and programs.

4. Hospital's nondiscrimination policy.

5. Description of hospital's geographic service area.

*6. The population of the service area by race, color, or national origin.

7. Hospital's referral and recruitment sources for staff physicians and the applicabl e po licies and

procedures. Breakdown by referral source of number referred, number of applicants and

number approved.

8. Hospital's committees responsible for evaluating staff privilege applications, recommending and/or

approving the granting, retention or withdrawal of staff privileges, including the identification

of committee members by race, color, or national origin type of privilege, specialty,

committee responsibility, and any policies and procedures that govern the commit tee(s)'

operations and activities.9. Hospital's staff privilege and applications, including all necessary application forms, credentials

request documents, reference request documents, staff privilege contracts, standards of

conduct for staff physicians, and the applicable policies and procedures governing the staff

privilege application process.

10. Description of the types of staff privileges available at the hospital, in cluding the eligibility

criteria, rights, limitations and responsibility(ies) associated with each, by specialty.

11. The identification of all persons at the hospital responsible for monitoring and e valuating

physicians' compliance with hospital staff privilege requirements. Include persons who are

responsible for collecting/analyzing data and information used in the evaluation/monitoring

process, by name, status, specialty (if applicable) and race, color, or national origin, [p]olicies

and procedures that govern the monitoring and evaluation process.

12. Hospital policies and procedures for terminating or modify ing staff privileges and instituting

disciplinary act io ns fo r staff privilege violations, including a description of violations that

warrant discipline and the applicable disciplinary actions, and a detaile d description of

available due process procedures.

13. Listing of all physicians currently and over the past 3 years with staff privileges at the hospital,

by type of privilege, specialty, and race, color, or national origin organized according to the

date in which the privileges were granted.

14. Listing of all physicians who have requested hospital staff privileges over the past 3 years, by type

of privilege requested, and each applicant's specialty and race, color, or national origin and

the disposition of each application, including the basis for the disposition, organized by date

of application and date of disposition.

15. Listing of all physicians who have resigned the hosp it al st aff privileges, had their privileges

involuntarily withdrawn or modified, or otherwise been subjected to discip l inary sanctions due

to staff privilege violations within the past 3 years, organized by year, by t ype privilege,

specialty, race, color , o r national origin and reason(s) for the resignation, involuntary

withdrawal or modification, and/or disciplinary action, to include the type and extent of the

disciplinary action imposed.

Responses to requests concerning information by race, color, and national origin should be organized

according to the following U.S. Census Bureau designations.

16. Listing of all physicians whose staff privileges have bee n mo dified for other than disciplinary

reason s wit h the past 3 years, organized by year, the type and reason for the modification,

original privilege or status, and type of privilege after modification, by race, color, or national

origin and specialty.

17. Minutes and records of specific actions of various committees and boards affecting the granting,

amending and terminating, of staff privilege of individuals for the past 3 years.

18. Executed contractual agreements the hospital has with physician groups.

19. Reports, surveys, etc., that discuss issues and problems relating to physi cian staff privileges at

hospital.

* Data item will not be requested from recipient.

....Interviews:

1. Hospital personnel that will be interviewed during the onsite review may include but will not be

restricted to the following:

Complete

2. Community contacts will be interviewed during the onsite:

Complete