Cardiovascular & Thoracic Surgeons, Inc. v. St. Elizabeth Med. Ctr., Inc. (Summary)

BREACH OF CONTRACT

Cardiovascular & Thoracic Surgeons, Inc. v. St. Elizabeth Med. Ctr., Inc., No. 1:10-cv-846 (S.D. Ohio Sept. 11, 2012)

The United States District Court for the Southern District of Ohio found that a cardiology group was entitled to payment for its “willingness” to provide services to a hospital that sought to establish an open heart surgery program, even though the program was ultimately abandoned.  The hospital was required by state law to obtain a certificate of need to develop the open heart surgery program. In the meantime, it entered into a contract with a cardiology group to staff the program. A competitor medical center opposed the hospital’s efforts to obtain the certificate. Ultimately, the program was abandoned when the hospital merged with the competitor medical center, which then refused to pay the cardiology group, claiming that the agreement violated the Stark law since the group never provided any services.

The court found that, under the contract, payment to the group was required regardless of whether the certificate of need was approved and whether services were rendered, since the contract contemplated payment for the mere availability of the staff should the certificate be approved. Next, since the certificate of need was never obtained and the program never began, the court excused the failure of the group to staff the program. Furthermore, the court found that the agreement did not violate the Stark law, since there was evidence that the payment was fair market value, and there was no evidence that payments affected the volume of referrals. (During the relevant time, there was only one patient referred by the group to the hospital.) However, it found that the medical center had properly terminated the agreement by providing written notice, though only after it had ceased making requisite payments. Therefore, it found the group was entitled to all payments made or due prior to the medical center’s termination of the agreement.