Interstate Fire and Cas. Co. v. Dimensions Assurance Ltd — Dec. 2016 (Summary)

INDEPENDENT CONTRACTOR/EMPLOYEE

Interstate Fire and Cas. Co. v. Dimensions Assurance Ltd.
No. 15-1801 (4th Cir. Dec. 6, 2016)

The United States Court of Appeals for the Fourth Circuit reversed a district court’s grant of summary judgment that held that an agency nurse did not qualify as an “employee” of a hospital for the purposes of coverage under the hospital’s professional liability insurance policy.

An employment agency provided health care providers to a hospital under a staffing agreement, which stated that all agency providers would be considered employees of the agency, rather than the hospital.  The agency providers were supervised solely by hospital staff and could also be disciplined or terminated by hospital staff.  Both the agency and the hospital had professional liability insurance for providers.  Following a medical malpractice suit that named one of the agency nurses as a defendant, the hospital’s insurer refused to defend the agency nurse or share in the defense costs.  The agency insurer contended that the agency nurse was a “protected person” under the hospital’s insurance policy and, therefore, was entitled to indemnification from the hospital’s insurer.

The hospital’s insurance policy provided protection to “employees” under a general liability section and under a professional liability section; in the latter, the definition of “employee” did not specifically exclude agency providers, as it did in the former.  The court, applying basic principles of contract construction, interpreted this to mean that the hospital’s professional liability coverage extended to agency employees.  The court justified this interpretation by applying the “right-to-control” test for employees.  This test asks whether the employer had sufficient power to hire and fire the employee, pay the employee’s wages, and generally control the employee’s conduct.

The court rejected the hospital’s insurer’s argument that the court should categorize the agency nurse as an “affiliated provider.”  Under the hospital’s insurance agreement, this would convert all providers, including direct hires, into “affiliated providers.”  The court also rejected the argument that the terms of the staffing agreement, which held that the agency nurse was not a hospital employee, should preclude the applicability of the hospital’s insurance policy to the nurse.  This, the court noted, was a contract between the hospital and the agency and did not involve either the insurance company or the agency nurse.  The terms of this third-party contract could not determine the scope of the hospital’s independent insurance contract.  Thus, the court held, a staffing agreement cannot control the applicability of a separate insurance contract.  The court accordingly dismissed the district court’s summary judgment ruling in favor of the hospital’s insurer and remanded the case.

Newborn v. Christiana Psychiatric Servs., P.A — Nov. 2016 (Summary)

PEER REVIEW PRIVILEGE

Newborn v. Christiana Psychiatric Servs., P.A.
C.A. No. N16C-05-047 VLM (Del. Super. Ct. Nov. 30, 2016)

The Superior Court of Delaware found that the state’s peer review privilege did not apply to the investigative files of a state agency since the agency received the initial complaint regarding a psychiatrist and acted without the involvement of the state medical board.

The psychiatrist began treating a patient, but when he entered into a romantic relationship with her, the physician-patient relationship was ended.  After a few months, the romantic relationship also ended; however, the psychiatrist allegedly continued to prescribe medication to his former patient for over 20 years, and when he provided her with a new medication to replace her Prozac, she suffered emotional side effects and subsequently committed suicide.  The chief medical examiner investigated the circumstances of the patient’s death and filed a report with the state Division of Professional Regulation (“DPR”), which investigated to determine whether there would be further proceedings against the psychiatrist.  After the investigation concluded, the investigative file was sent to the state Department of Justice (“DOJ”), which filed two formal complaints with the state Board of Medical Licensure and Discipline (“Medical Board”).  However, the psychiatrist passed away, and there was no further action.  The patient’s estate filed a medical malpractice action against the psychiatrist, and issued a subpoena to the DPR, as a non-party, among others, requesting the investigative files of the DPR.

The defendants moved to quash the subpoena arguing that since the DPR is a peer review organization, it is protected by the peer review privilege.

The court found that there may be situations when the peer review privilege applies to investigative files of the DPR, such as when the DPR acts as a mandatory investigative arm of the Medical Board.  However, in this case, DPR received the initial complaint from the chief medical examiner, and forwarded the investigative file to the state DOJ, so the matter never went to a peer group or the Medical Board.  Thus, the court found that the investigative file was not subject to the state peer review privilege.  The court ordered part of the investigative file to be disclosed to the patient’s estate, and part withheld on other grounds.

Thomas v. Archer — Dec. 2016 (Summary)

ORAL CONTRACT/PROMISSORY ESTOPPEL

Thomas v. Archer
Supreme Court No. S-15372 (Alaska Dec. 2, 2016)

The Supreme Court of Alaska affirmed in part and reversed in part the superior court’s grant of summary judgment to a physician and a hospital, holding that a patient-physician fiduciary relationship only extends to their medical relationship, an oral contract cannot be established without consideration, and a patient could have reasonably relied on a physician promise under the doctrine of promissory estoppel.

A patient was admitted to a hospital’s emergency department due to pregnancy-related complications.  The physician who examined the patient determined that she was at risk for premature delivery and needed an immediate transfer, by medivac, to another facility that was better equipped to handle her needs.  Before leaving, the patient and her husband notified the physician that they could not leave without preauthorization from their insurance provider.  The physician assured the couple that she would personally contact their insurance provider, and if the services were not covered, the hospital would cover them.  During the process of arranging the transfer, the patient’s husband signed an “Acknowledgement of Financial Responsibility,” agreeing to be personally responsible for any unpaid charges and to “save and hold the hospital harmless therefrom.”

Following the transfer and services, the couple sought payment under their coverage plan, but were denied and ultimately billed over $92,000 for the transfer and services because they failed to request preauthorization within 72 hours of beginning treatment or of admission to the healthcare facility, an in-network facility was available for treatment, and the couple lacked a referral or authorization for the transfer from an in-network physician.  Although the physician did contact the couple’s insurance provider, she did not do so until six months after the incident.  The couple filed suit against both the hospital and the physician alleging breach of fiduciary duty, breach of contract, promissory estoppel, and negligent or intentional infliction of emotional distress.  The Supreme Court of Alaska affirmed the superior court’s decision to grant the hospital and the physician summary judgment in regard to the couple’s breach of fiduciary duty and breach of contract claims, and its decision to dismiss the couple’s negligent or intentional infliction of emotional distress claims.  However, the Alaska Supreme Court disagreed with the lower court’s decision to grant the hospital and the physician summary judgment on the couple’s promissory estoppel claim.

Under the couple’s claim for promissory estoppel, they argued that the physician’s alleged promise to contact their insurance provider induced them to leave the hospital immediately without their insurer’s preauthorization, their reliance on her promise was foreseeable, leaving the hospital without preauthorization caused them to incur substantial medical expenses, and that the interest of justice is served by enforcing the physician’s promise.  The Alaska Supreme Court examined the four elements of promissory estoppel:  the action induced amounts to a substantial change of position; it was either actually foreseen or reasonably foreseeable by the promisor; an actual promise was made and itself induced the action or forbearance in reliance thereon; and enforcement is necessary in the interest of justice.  Upon examination of the elements of promissory estoppel, the Alaska Supreme Court concluded that a reasonable person could conclude that there was a promise on behalf of the physician on which the couple reasonably relied to their detriment, and reversed and remanded for further proceedings.

Herbert J. Thomas Memorial Hosp. Assn v. Nutter — Nov. 2016 (Summary)

RETALIATION CLAIM BY NURSE

Herbert J. Thomas Mem’l Hosp. Ass’n v. Nutter
No. 15-0695 (W. Va. Nov.17, 2016)

The Supreme Court of Appeals of West Virginia reversed a jury verdict of over $1 million in favor of a nurse who claimed she was wrongfully discharged in violation of public policy after she raised concerns about the hospital’s med-psych unit where she was the charge nurse.

The court reasoned that the nurse failed to offer any evidence from which a jury could actually conclude that the hospital violated any public policy principles.  With regard to the nurse’s claim of intentional infliction of emotional distress, the court rejected the nurse’s assertion that the hospital exceeded the bounds of decency when it wrongfully discharged her with the goal of undermining public policy. The hospital claimed that it terminated the nurse because she intentionally and falsely completed documentation in patient files, and at best the record established that the nurse completed the documentation carelessly and improperly. As such, the court concluded that the hospital’s actions were not so extreme and outrageous as to support a cause of action for intentional infliction of emotional distress and dismissed the nurse’s intentional infliction of emotional distress claim. With respect to the nurse’s defamation claim, the court concluded that her claim was barred by a one-year statute of limitation.  It noted, however, that the hospital’s chief nursing officer was compelled by ethics rules to report the nurse’s termination to the West Virginia Board of Examiners for Registered Professional Nurses.

Lastly, the court found that there existed sufficient evidence on the record such that a jury could rule in favor of the nurse on her unpaid wage claim. However, after reviewing the lower court’s abuse of discretion in the admission and refusal to admit evidence favorable to the hospital and asking over 300 questions of witnesses over the objections of the hospital, the court found the jury’s entire verdict inherently unreliable and remanded the nurse’s unpaid wages claim for further proceedings.

Armin v. Riverside Cmty. Hosp. — Nov. 2016 (Summary)

WHISTLEBLOWER

Armin v. Riverside Cmty. Hosp.
G052125 (Cal. Ct. App. Nov. 16, 2016)

In an unpublished opinion, a California superior court found that a hospital’s peer review process did not need to reach completion before a physician could bring a whistleblower claim under a state statute.  The case derived from a lawsuit brought by a physician after his privileges had been summarily suspended, but prior to the initiation of a hearing.  The physician claimed he was being retaliated against for bringing forward complaints about two other physicians in his specialty. While a lower court ruled that the physician must exhaust his administrative remedies before bringing his whistleblower lawsuit, the superior court found the standard of review allowed for the physician to bring forth his claim that the peer review process had been instigated in retaliation for his complaints.

Stafford v. Burns — Nov. 2016 (Summary)

EMTALA/MALPRACTICE CLAIM

Stafford v. Burns
No. 1 CA-CV 15-0476 (Ariz. Ct. App. Nov. 29, 2016)

The Court of Appeal of Arizona affirmed that a heightened burden of proof applied to a patient’s claims for medical malpractice and wrongful death, since services were provided in compliance with the Emergency Medical Treatment and Active Labor Act (“EMTALA”).

The patient arrived at a hospital’s emergency department after ingesting an unknown quantity of methadone. The patient was tested, evaluated, and monitored for possible methadone overdose by a physician. A second physician took over the patient’s care until he was discharged 12 hours later. The following day, the patient was found dead. The patient’s parents brought an action against the second physician, alleging that she negligently caused the patient’s death by discharging him prematurely. The parents’ burden of proof was rooted in a state statute that provides protections for emergency medical providers.

The parents denied the applicability of EMTALA because their complaint did not include an EMTALA claim and that their son was not diagnosed with an emergency medical condition.  However, the court found EMTALA applicable in this case because its mandates apply to all patients presented in emergency departments seeking treatment for what may be an emergency medical condition. The court noted that the fact that the patient was not ultimately diagnosed with an emergency medical condition is not dispositive. Nor was the fact that a different physician had already determined the patient did not have an emergency medical condition. The court found that if the patient was misdiagnosed or discharged prematurely, as the patient’s parents contend, those actions occurred in the course of providing EMTALA-mandated services. Therefore, the heightened burden of proof applied.

Parkview Adventist Med. Ctr. v. United States — Nov. 2016 (Summary)

A HOSPITAL IN BANKRUTPCY

Parkview Adventist Med. Ctr. v. United States
No. 16-1731 (1st Cir. Nov. 29, 2016)

The United States Court of Appeals for the First Circuit affirmed a district court’s ruling that a termination of a provider agreement between the Centers for Medicare & Medicaid Services (“CMS”) and a hospital in bankruptcy did not constitute impermissible discrimination against a debtor in bankruptcy under federal law.

The hospital had a provider agreement with CMS to receive reimbursements for services provided under Medicare Parts A and B.  The hospital informed CMS that it would be discontinuing its participation in Medicare Part A because it was closing its inpatient services and filing chapter 11 bankruptcy.  CMS sent a response confirming receipt of the hospital’s letter and advising the hospital that it would terminate the provider agreement and payments on the day the hospital ceased to provide inpatient services.  In the interim, however, the hospital obtained a conditional license from the Maine Department of Health and Human Services and continued to provide outpatient services.  The hospital informed CMS that it would continue to provide outpatient services, that it no longer wished to terminate the provider agreement, and that CMS’s rescission of the provider agreement would “adversely affect [the hospital’s] bankruptcy transition plan.”

The court held that the hospital had no property interest in participating in Medicare and that, even if it did, CMS could still terminate the provider agreement because it was exercising its “police and regulatory power,” which is an exception to the general prohibition against filing an action against a debtor in bankruptcy.  To qualify for the exception, a government entity must demonstrate that its action is intended to “protect the public safety and welfare” and is not for any “pecuniary purpose[.]”  The court ruled that CMS had a strong public policy interest in ensuring that public monies were spent on appropriately qualified hospitals to protect patients.  The hospital’s request for exemption from CMS conditions of participation was akin to an attempt to “evad[e] CMS’s efforts to secure compliance with the Medicare statute – exactly the kind of action the police and regulatory power exception is meant to prevent.”  The court further held that CMS’s termination of the provider agreement was in direct response to the hospital’s voluntary decision to withdraw from the Medicare program, not in reference to its bankruptcy proceedings.  Therefore, the termination also did not violate the nondiscrimination provision under the federal bankruptcy statute.  As a result, the court denied the hospital’s request to enforce a stay on CMS’s termination proceedings.

Brandner v. Providence Health & Servs. – Wash. — Nov. 2016 (Summary)

DUE PROCESS/AUTOMATIC TERMINATION/HCQIA

Brandner v. Providence Health & Servs. – Wash.
Supreme Court No. S-15933 (Alaska Nov. 25, 2016)

The Supreme Court of Alaska held that a physician whose privileges had been terminated pursuant to an “automatic termination” provision in a hospital policy was entitled to a pre-termination notice and a hearing.

The physician had come under scrutiny during 2010, when the Alaska State Medical Board received a report that he had threatened an employee in the governor’s office. The Medical Board ordered the physician to submit to psychiatric and medical evaluations in order to assess his ability to practice medicine. These evaluations confirmed that the physician was fit to practice and the investigation was resolved.

Then, in early 2011, the physician allegedly made a series of strange, “disjointed” statements at an executive committee meeting, raising concerns at the hospital over his ability to practice. When the executive committee ordered him to undergo psychiatric evaluation, he explained that he had recently had one and had been found fit to practice. The hospital reviewed the records of this evaluation and discovered the involvement of the Medical Board.

Under hospital policy, the physician was required to report any condition the Medical Board placed on his ability to practice. Failure to do so resulted in an “automatic termination” of privileges.  Accordingly, after determining that the Board’s order to submit to a psychiatric evaluation placed a condition on his ability to practice medicine, the hospital’s medical staff executive committee voted to terminate the physician’s hospital privileges because of his failure to report. The hospital’s board affirmed the termination prior to any hearing taking place. The physician was ultimately given a hearing after the termination took effect, but he was unsuccessful in his appeal. He then sued.

Reversing the course of a lower superior court, the supreme court determined that, contrary to the hospital’s contentions, the physician did not waive his due process rights by the mere fact that he agreed to abide by all hospital policies, including the policy providing for automatic termination.  Furthermore, the hospital failed to present any evidence that its actions were in response to an immediate threat to patient health or safety.  As such, the court held that the physician was entitled to a pre-termination notice and a hearing.

The court also held that the hospital did not qualify for immunity under the Health Care Quality Improvement Act (“HCQIA”) because, even if the physician had waived his right to notice and a pre-termination hearing by agreeing to be bound by the hospital bylaws, “waivers [alone] cannot release a hospital from HCQIA requirements to achieve immunity [under the statute].” The court, therefore, remanded the case to the superior court.

U.S. ex rel. Doghramji v. Cmty. Health Sys., Inc. — Nov. 2016 (Summary)

ATTORNEY’S FEES IN FALSE CLAIMS ACT SETTLEMENT

U.S. ex rel. Doghramji v. Cmty. Health Sys., Inc.
No. 15-6280 (6th Cir. Nov. 22, 2016)

The United States Court of Appeals for the Sixth Circuit reversed and remanded the district court’s order concluding that a settlement agreement in a qui tam lawsuit unambiguously restricted a health system’s challenges to entitlement of attorneys’ fees.

A health system, the government, and several qui tam relators reached a settlement agreement after claims for fraudulent Medicare billing were brought against the health system. The relators agreed to dismiss their claims in exchange for a specified amount to be paid by the health system. Following the settlement agreement, the health system appealed on the issue of whether it failed to preserve its right to challenge the entitlement of the relators to attorneys’ fees.

The health system argued that a term in the agreement preserved its right to make first-to-file and public disclosure challenges or object to the relators’ claims for attorneys’ fees. The relators argued that the provision on which the health system relied limited its scope of protection to that specific section, and first-to-file and public disclosure challenges were located in another section. The district court agreed with the relators, reasoning that it is unlikely that the first-to-file provision favoring the health system would have been left out of the agreement unintentionally and, given that the government intervened in all of the relators’ claims, their conduct would entitle relators to attorneys’ fees.

The health system’s appeal hinged on whether both its interpretation of a specific term in the settlement agreement and the relators’ interpretation were reasonable. If both interpretations of the contract term were reasonable, then the provision would be considered ambiguous, requiring the introduction of extrinsic evidence to ascertain the parties’ understanding of the contract at the time of its inception. The health system interpreted the contract term as limiting its ability to challenge first-to-file and public disclosures on the basis of attorneys’ fees. The relators interpreted the contract term as limiting the health system’s ability to challenge within the scope of the cited section. The relators further argued that the term did not explicitly state that the health system could challenge claims for attorneys’ fees; therefore, the health system had to and failed to explicitly reserve those rights. Lastly, the relators argued that they have a reasonable expectation of attorneys’ fees granted by statute which requires the payment of reasonable attorneys’ fees whenever the government proceeds with a qui tam action.

The court determined that both the health system and the relators advanced reasonable interpretations of the settlement agreement, rendering it ambiguous. Because the settlement agreement is ambiguous, extrinsic evidence may be used to ascertain the parties’ original understanding of its terms. The court, therefore, reversed and remanded the district court’s order for further inquiry.

Bastidas v. Good Samaritan Hosp. LP — Nov. 2016 (Summary)

CIVIL RIGHTS

Bastidas v. Good Samaritan Hosp. LP
Case No. 13-cv-04388-SI (N.D. Cal. Nov. 21, 2016)

The United States District Court for the Northern District of California denied a hospital’s motion for summary judgment of a retaliation claim made by a surgeon, while granting a motion for summary judgment as to individual defendants.

This litigation arose following a complicated surgery at a hospital that resulted in the death of a patient and the suspension of the surgeon’s privileges.  After peer review proceedings, the Board of Trustees issued a final report on the matter, recommending that the surgeon be proctored for a number of surgeries prior to regaining his surgical privileges.

The surgeon was elected to the Chair of Surgery while his proctorship was pending.  The Medical Executive Committee (“MEC”) at the hospital, under the staff bylaws, disallowed his chair appointment on the basis that a majority of MEC members voted against him.  The MEC also removed the surgeon from the Cancer Care Committee.

The court found that the surgeon was engaged in “protected activity” when he filed a discrimination lawsuit and was, shortly afterwards, subjected to an “adverse employment action” by virtue of the defendant’s delay in implementing the proctoring program.  The delay prevented the surgeon from “perform[ing] certain types of surgeries at [the hospital]” which formed a large portion of his practice.  The court also held that a jury could reasonably find that the defendant’s failure to timely update the National Practitioner Data Bank also could have affected the surgeon’s employment privileges in an adverse way.

Although the defendants produced evidence that there were legitimate, nondiscriminatory reasons for the “adverse employment action,” the MEC’s failure to ratify the Chair of Surgery election results and the removal of the surgeon from the Cancer Care Committee raised an issue of fact as to whether those nondiscriminatory reasons were actually a pretext.  Ultimately, the close relationship between the “protected activity” and the “adverse employment action” was a sufficient basis on which to deny the defendant’s motion for summary judgment.