Hospitals conduct peer review to determine if a physician may be admitted to or can stay on the medical staff. MCOs conduct peer review, as opposed to deselection, when they hire a physician or terminate a physician because of problems with the quality of care the physician provides. These reviews share many characteristics of hospital privileges reviews. The hospital medical staff model for peer review is the best starting point for understanding the laws governing peer review.

The law grants the professions remarkable latitude in disciplining their own, a practice rooted in a historical context that is very different from current practice. This discretion was often abused. Historically, it was acceptable to discriminate against practitioners for racial, cultural, ethnic, gender, and anticompetitive reasons. The essence of peer review was to ensure that professionals were both technically qualified and socially acceptable, and in many cases social factors outweighed professional ones. Medical professional societies determined where and whether a physician could practice. Hospital medical staffs granted or denied the privilege to practice in a given hospital. In most parts of the United States, medical practice was completely segregated, and this segregation was enforced through the medical societies. Peer review as a method of social and racial segregation ended legally with the passage of the civil rights laws in 1964. (The federal immunity for peer review actions does not apply to claims made under the civil rights acts.) [ LeMasters v. Christ Hosp., 791 F. Supp. 188 (S.D. Ohio 1991).] With the enforcement of the civil rights laws, the stranglehold of local medical societies on medical practice was broken. Rulings that hospital privileges could not be predicated on medical society membership quickly followed.