Kohn v. FirstHealth of the Carolinas, Inc. – July 2015 (Summary)

CREDENTIALING CRITERIA

Kohn v. FirstHealth of the Carolinas, Inc., No. COA14-1210 (N.C. Ct. App. July 7, 2015)

The North Carolina Court of Appeals affirmed summary judgment for the hospital with respect to a physician’s claim that the hospital had been arbitrary and capricious in denying him appointment and clinical privileges because he failed to satisfy the hospital’s threshold eligibility criteria, which included completion of a residency program accredited by the Accreditation Council for Graduate Medical Education (“ACGME”).

The physician, a native of Canada, completed his internship and residency in Canada. In 1999, he applied for appointment and clinical privileges at the hospital. At that time, he was informed that his application could not be accepted because a pre-application screening revealed that he had not completed a residency program approved by the ACGME as required by the medical staff bylaws.

In 2010, the physician reapplied and his application was denied based on the fact that the residency program he attended was in Canada and was certified by the Royal College of Canada and not the ACGME. The physician tried to argue that his program was compliant with the medical staff bylaws because it was “recognized” by the ACGME. However, the hospital argued that it interpreted the word “approved” in their bylaws as “accredited,” and his request was denied. Both the Credentials Committee and Medical Executive Committee reviewed the physician’s complaints, and both groups determined the physician did not meet the minimum standards as set forth in the medical staff bylaws.

In granting summary judgment to the hospital, the court held: “[i]t is not arbitrary, capricious, and discriminatory to [deny staff privileges to physicians who] have been unable to comply with the standards properly established by the [hospital].” In response to the physician’s argument that many hospitals accept Canadian residencies as functionally equivalent to a residency accredited by the ACGME, the court cited to the broad deference given to hospital boards in making staff privileges determinations. According to the court, hospital staffing decisions will be upheld as long as they are (1) reasonably related to the hospital’s operation; (2) rationally compatible with the hospital’s responsibility; and (3) not based on irrelevant considerations. The court found that the hospital’s requirement – that physicians complete an ACGME-accredited residency training program – met these standards.

The court also affirmed the dismissal of the physician’s attempted monopolization claim, noting the physician’s argument relied upon the “essential facility” doctrine, which the court found inapplicable to the case. Lastly, the court dismissed the physician’s race and ethnic discrimination claim, holding the claim was barred by res judicata because the claim could have properly been litigated in his prior action.

Taylor v. Intuitive Surgical, Inc. – July 2015 (Summary)

DUTY TO WARN

Taylor v. Intuitive Surgical, Inc., No. 45052-6-II (Wash. Ct. App. July 7, 2015)

In a case that made headlines in the New York Times a few years ago, “Salesmen in the Surgical Suite,” the Washington Court of Appeals rejected a patient’s argument that the manufacturer of the da Vinci robot had a duty to warn the hospital, in addition to the surgeon, of the risks associated with the device. The court held that under the state’s Tort Reform and Products Liability Act, applying the “learned intermediary” doctrine, a medical device manufacturer only has a duty to warn a physician of the dangers associated with its product; thereafter, it is the physician’s duty to warn the patient.

In this case, the patient’s prostatectomy was performed by a surgeon who used the da Vinci robot. The patient’s surgery was the first time the surgeon used the da Vinci robot without a proctor being present. The surgeon opted to use the robot even though the patient was morbidly obese and the manufacturer warned against using the device for such patients.

The case took more than 15 hours and the patient suffered multiple complications. The patient never fully recovered from the operative complications he endured and he sued the surgeon, the hospital and the manufacturer of the da Vinci robot. After settling with the surgeon and dropping the hospital as a defendant, the case went forward against the manufacturer. The patient argued that the manufacturer had a duty to warn not only the physician but also the hospital. The court disagreed.

The court held that the manufacturer only had a duty to warn the physician of the dangers of the product. According to the court, the patient places “primary reliance” on the physician’s informed judgment, rather than whatever warnings the manufacturer may have included. Therefore, the physician is in a superior position to warn the patient. The court was unpersuaded that the warning should be provided to the hospital because the hospital purchased the equipment. “The learned intermediary doctrine is not concerned with who pays for the product…. Rather, its rationale is based on the physician’s role as gatekeeper.” Thus, the court refused to overturn the jury verdict in favor of the manufacturer.

AHS Hosp. Corp. v. Town of Morristown – June 2015 (Summary)

HOSPITAL PROPERTY TAX EXEMPTION

AHS Hosp. Corp. v. Town of Morristown, Docket Nos: 010900-2007, 010901-2007, 000406-2008 (N.J. Tax Ct. June 25, 2015)

UPDATED SUMMARY — November 2015

As being reported by national and local media, the Morristown Medical Center, which is part of the Atlantic Health System, has agreed to pay $15.5 million, including fines and interest, to the municipality of Morristown, New Jersey, thereby settling this hospital property tax exemption case.  In addition, the Medical Center will begin paying annual taxes of roughly $1 million. This settlement could have an impact on the tax-exempt status of other not-for-profit hospitals, certainly in New Jersey, but quite possibly nationwide as cities look for ways to plug holes in their budgets.

ORIGINAL SUMMARY — June 2015

In a case of first impression, the Tax Court of New Jersey denied a New Jersey hospital’s property tax exemption for the main hospital campus. To reach this decision, the court applied the New Jersey state law profit test to different aspects of the hospital’s operations including: the “for-profit activity carried out by private physicians,” executive compensation, employed physicians’ contracts, third-party agreements, the gift shop, the auditorium, the day care area, fitness center, and the cafeteria.

Notably, the court found that the hospital failed the profit test because the hospital allowed its property to be used for forbidden for-profit activities, by entangling and comingling its activities with for-profit entities. Perhaps most surprising was the court’s focus on the work performed at the hospital by private “for-profit” physicians. According to the court, the hospital had for-profit doctors using its facilities to generate private medical bills to patients. Since the activities of for-profit physicians could not separately be accounted for (from employed physicians who preform distinctly non-profit activity), the arrangement with the for-profit physicians directly violated the requirement articulated in New Jersey case law.

The court also examined several executive salaries. The court recognized that tax-exempt organizations are permitted to pay salaries to staff that are not excessive and which are comparable to the salaries paid by similar institutions. However, the court found that the hospital had failed to meet its burden of establishing the reasonableness of the compensation paid to its executives. With respect to the compensation paid to a number of employed physicians, the court also found that the hospital had demonstrated a prohibited “profit-making purpose.”

Thus, the court concluded that the property tax exemption could be preserved only in three areas: the parking garage contract, the operation of the auditorium, and the operation of the fitness center.

El Paso Healthcare Sys., Ltd. v. Murphy – June 2015 (Summary)

RETALIATION

El Paso Healthcare Sys., Ltd. v. Murphy, No. 08-13-00285-CV (Tex. App. June 27, 2015)

The Texas Court of Appeals affirmed a jury award for a certified registered nurse anesthetist (“CRNA”) of over $800,000 for lost wages, past and future compensatory damages and attorney’s fees. The CRNA had sued a healthcare system for firing her after she reported an obstetrician who failed to obtain informed consent from a 19-year-old patient who opposed the idea of having a caesarian section. In her complaint, the CRNA alleged that instead of explaining the risk and benefits of the c-section, the obstetrician rebuked the young woman, telling her “[w]ell, if you want a brain-damaged or dead baby, don’t blame me.”

Two to three hours after reporting the obstetrician, the CRNA was informed that she would not be working at either hospital in the health system until her complaint against the physician and his complaint against her were resolved. The CRNA was later contacted by the chairman of the Credentialing and Peer Review Committee to schedule a meeting. When her request to have an attorney present at the meeting was denied, the CRNA filed suit.

On appeal, the court affirmed the jury’s finding of retaliatory discharge, noting that the CRNA’s report was made in good faith because she presented evidence that the obstetrician failed to disclose the risk and hazards associated with a c-section to the patient. The court also affirmed the jury verdict on the CRNA’s tortious interference claim, noting that her retaliatory discharge was sufficient “tortious or unlawful conduct” to show the health system interfered with a business relationship.

The health system tried to argue that it was simply exercising its right, under its contract with the CRNA’s group, to refuse acceptance of a practitioner at its facility. However, the court concluded that the health system would not be permitted to use a legitimate privilege for illegal or tortious means. The health system also opposed the jury’s award of compensatory damages for mental anguish, but the court rejected the argument, holding the CRNA’s testimony regarding her loss of self-esteem, heightened sense of humiliation, feelings of powerlessness, sleeplessness, and loss of enjoyment in her professional life supported a finding of mental anguish damages.

Howard v. Ark. Children’s Hosp. – July 2015 (Summary)

WHISTLEBLOWER FALSE CLAIMS ACT AND WHISTLEBLOWER HIPAA

Howard v. Ark. Children’s Hosp., No. 4:13CV00310 JLH (E.D. Ark. July 1, 2015)

The United States District Court for the Eastern District of Arkansas denied a hospital’s motion for summary judgment in which the hospital had claimed that its former employees were not entitled to whistleblower status under the False Claims Act or the Health Insurance Portability and Accountability Act (“HIPAA”). The employees were terminated from their positions after raising questions concerning the manner in which the hospital billed the federal government. The court stated that due to ongoing discovery, summary judgment in favor of the hospital was premature on the issue of whether the employees were whistleblowers under the False Claims Act. The court also determined that the employees met their burden of showing that they qualified as whistleblowers under HIPAA.

Robinson v. CareAlliance Health Servs. – June 2015 (Summary)

ADA AND HCQIA

Robinson v. CareAlliance Health Servs., No. 2:13-cv-1916-RMG (D. S.C. June 24, 2015)

A hospital that refused to allow an OB/GYN to provide obstetric services while sitting on a stool was denied summary judgment with regard to the OB/GYN’s ADA claim because material issues of fact existed as to whether the OB/GYN had a disability, whether the OB/GYN had ever requested an accommodation, and the appropriateness of the requested accommodation. The court granted summary judgment for the hospital with respect to the OB/GYN’s state law claims of civil conspiracy, abuse of process, and tortious interference with contract, holding that the hospital was entitled to immunity under the Health Care Quality Improvement Act (“HCQIA”) for the peer review action taken.

The OB/GYN, who has Type II diabetes and is insulin dependent, was, as a result of his condition, substantially limited in his ability to walk and stand and sometimes used a stool during surgery. Following several complaints, including a complaint that the OB/GYN had stumbled while sitting on the stool and touched the surgical drape, the chief medical officer asked two physicians to investigate.   The investigation report supported that the OB/GYN was fit for duty. An orthopedic surgeon also reported that the OB/GYN was able to function without limitations.

The chief medical officer then told the OB/GYN that he could use the stool so long as it did not become a patient safety issue. An occupational medicine physician also weighed in and confirmed that the OB/GYN was able to meet or exceed the physical requirements to safely provide care to his patients.

Two months later, the OB/GYN performed a difficult caesarian section on an obese patient while sitting on a rolling chair. A physician who assisted with the case complained that the OB/GYN was a danger to his patients. The anesthesiologist and two nurses also registered concerns about the OB/GYN’s care of the patient, including that he appeared unable to stand for any part of the procedure.

An investigating committee was appointed and subsequently determined that the OB/GYN performed in a “substandard” way during the delivery because he was unable to stand during the most important parts of the procedure. The investigating committee recommended that the OB/GYN not be permitted to sit during a caesarian section for “any period of time.” The MEC reviewed the report and asked the OB/GYN to provide additional information concerning his condition and any treatment he had requested for his condition. He was also required to undergo a comprehensive physical examination. Additionally, the MEC requested that the OB/GYN request a medical leave of absence within 10 days or face an immediate precautionary suspension.

The OB/GYN requested a 30-day medical leave, but was informed by the MEC that he was being placed on medical leave for at least six weeks. The MEC also notified the OB/GYN that he had to register for a Competency Advancement Program to assess his functional capacity.

Shortly thereafter, the OB/GYN’s legal counsel sent a letter to the hospital alleging that the hospital was keeping the OB/GYN away in violation of the ADA. The OB/GYN also gave notice that he was terminating his “voluntary” leave, agreed to undergo observation and simulation, and requested that the hospital accommodate his disability by letting him use a stool for procedures.

The chief medical officer informed the OB/GYN that he could not return until he was cleared by the MEC. The physician’s legal counsel provided another letter accompanied by physician reports and a demand to fully reinstate the OB/GYN. The MEC deferred a decision on the matter because it had yet to receive the information requested from the OB/GYN with regard to the functional capacity program. The OB/GYN then filed suit.

Citing to the OB/GYN’s testimony regarding the impact of his diabetic condition on his ability to walk and stand and the wide variety of assistive footwear he had to wear, the court found that the OB/GYN had presented sufficient evidence that he was disabled. The court also found that there was sufficient evidence to support that the OB/GYN was “regarded” as disabled.

The court also held that there was sufficient evidence to establish an issue of fact as to whether the hospital had notice of the OB/GYN’s disability and that he needed an accommodation to continue to perform his job and denied his request for an accommodation. The court pointed out that the evidence supported that the hospital knew the OB/GYN needed a stool for surgery, that it had determined that using the stool in the OR did not jeopardize patient safety, and that using a stool was even common practice. However, according to the court, there was evidence to support that the MEC did not reject the ad hoc committee’s recommendation that the OB/GYN only be permitted to practice if he could stand on his own for a minimum of two hours and not be allowed to sit during caesarean sections “for any period of time.” This was sufficient to establish a question of fact that the requested accommodation was denied.

With regard to the state law claims, the court rejected the physician’s argument that the hospital failed to qualify for immunity under the HCQIA. Even if the MEC deviated from the standard procedure set forth in the medical staff bylaws, the OB/GYN was provided with notice of the concerns and met with the investigating committee. The court concluded that the process that was followed was fair under the circumstances. The court also found that the OB/GYN was not able to overcome the presumption that the MEC’s actions were taken in a reasonable effort to obtain the facts in light of very serious concerns raised about the OB/GYN’s clinical practice. The court also rebuked the OB/GYN for “quickly assum[ing] the posture of an impending litigant.”

Reyes v. Glendale Mem’l Hosp. – June 2015 (Summary)

AGENCY

Reyes v. Glendale Mem’l Hosp., B255302 (Cal. Ct. App. June 26, 2015)

Following complications experienced by a patient after receiving care in the hospital’s ED, the patient sued the hospital on the grounds that the ED physician involved was the hospital’s agent. The trial court ruled in favor of the hospital’s summary judgment motion. On appeal, the California Court of Appeals reversed the trial court’s decision. The Appeals Court ruled that the hospital failed to refute the state law inference that the ED physician was the hospital’s agent, and that the hospital failed to show the patient knew of the ED physician’s independent status. The hospital had argued that it was not liable for the ED doctor’s care because the patient signed a form in her admission paperwork stating that “doctors caring for patients in the hospital are independent providers of medical care and are not employees or agents of the hospital.” In addition to making significant procedural mistakes in its summary judgment motion, the court found that the form was not enough to support the hospital’s motion because its mere existence was not sufficient to conclusively indicate that the patient should have known the physician was not the hospital’s agent.

Sumeru Health Care Grp. v. Hutchins – June 2015 (Summary)

BREACH OF CONTRACT

Sumeru Health Care Grp. v. Hutchins, No. 3:02-cv-447 (E.D. Tenn. June 24, 2015)

A Tennessee health care group employed a number of overseas physicians to serve medically underserved rural communities through the group’s clinics. Under a state program, the physicians were required to enter into employment agreements to obtain visas that would lift certain residency restrictions on their temporary visas. The group also placed physicians to work in a nearby hospital’s Emergency Department. The health care group alleged that the hospital improperly enticed physicians to breach their employment contracts and work solely at the hospital’s ED, leading to the financial collapse of the clinics and the group. The court held that the group was unable to show that its injuries were caused by the hospital or that the group suffered any damages other than those it self-inflicted.

Luedecke v. Tenet Healthcare Corp. – June 2015 (Summary)

AMERICANS WITH DISABILITIES ACT

Luedecke v. Tenet Healthcare Corp., Civil Action No. 3:14-CV-1582-B (N.D. Tex. June 23, 2015)

A Texas anesthesiologist filed a discrimination lawsuit against several hospitals that employed him. While the physician claimed that he was able to act as an anesthesiologist during his regularly scheduled shifts, he claimed that his employer’s refused to grant his request to be removed from the emergency on-call list due to impairments in his neck, violated the Americans with Disabilities Act. The physician further alleged that his employer refused to offer the accommodation and retaliated against him by increasing his on-call responsibilities. The District Court ruled that the physician’s amended complaint included sufficient additional facts including the specific daily tasks that were affected by his neck injuries, to allow the case to go forward.

Tate v. Univ. Med. Ctr. of S. Nev. — June 2015 (Summary)

MEDICAL STAFF HEARING

Tate v. Univ. Med. Ctr. of S. Nev.
No. 13-15736 (9th Cir. June 22, 2015)

The United States Court of Appeals for the Ninth Circuit affirmed in part and reversed in part a ruling by a district court dismissing a negligence claim made by a physician and granting a medical center summary judgment on a breach of contract claim. The litigation arose after the termination of the physician’s medical staff membership and clinical privileges. The court determined that the district court correctly dismissed the physician’s negligence claim because the Nevada statutes used as a basis for the claim were not violated. However, the court determined that the breach of contract claims were improperly dismissed because there was a material issue of fact as to whether the physician voluntarily resigned or whether his medical staff appointment was terminated in which case he was entitled to a hearing under the medical staff bylaws.