In re Otero Cnty. Hosp. Ass’n. – March 2015 (Summary)

CREDENTIALING & PEER REVIEW DISASTER

In re Otero Cnty. Hosp. Ass’n., Case No. 11-11-13686 JL (Bankr. D. N.M. Mar. 18, 2015)

NOTE:  The court’s first opinion was issued February 27, 2015.  Then, on March 18, 2015, the court issued this amended opinion, effectively replacing the earlier February 27 opinion.

The United States Bankruptcy Court for the District of New Mexico held that a hospital management company breached a duty of care when its CEO received notification from an external physician regarding the experimental nature of the surgeries being performed by one of the hospital’s physicians, yet failed to request an investigation by the hospital MEC.

This case arose because a number of patients suffered damages as a result of being unwittingly subjected to experimental spinal procedures by an anesthesiologist trained in pain management. Due to the large number of lawsuits, the hospital filed for Chapter 11 bankruptcy. After settling with other defendants, the lawsuit of the 47 united patient plaintiffs remains pending against the hospital management company alone. The hospital management company argued that it should not be held liable because its CEO was not responsible for any medical or credentialing decisions at the hospital, did not have the authority to provide medical services to patients of the hospital, and was not directly involved in any clinical decisions.

The Bankruptcy Court disagreed. In a lengthy opinion that discusses in detail the various roles of hospital board, management and medical staff leadership, the court noted that even though the CEO did not have responsibility for directing the medical judgment of employees, the CEO did have the duty to appropriately involve the medical staff in evaluating medical issues and to inform the board and the medical staff about issues relating to patient safety that were known or should have been known.

The court noted that soon after the anesthesiologist began working at the hospital, his proctor accused him of performing experimental surgeries on unknowing patients. The CEO considered the matter, but merely accepted the opinions of the anesthesiologist himself and another physician who had adopted the anesthesiologist’s experimental methods, rather than referring the matter for further review by the medical staff leadership.

The court concluded that the hospital management company breached its duty on two occasions, first, when the CEO circumvented the process for granting temporary privileges to initial applicants (granting those privileges prior to the application being considered by the Credentials Committee). A second breach of duty occurred when the CEO failed to inform the Medical Executive Committee of the proctor’s accusations regarding the experimental nature of the anesthesiologist’s procedures.

Lampenfeld v. Pyramid Healthcare, Inc. – March 2015 (Summary)

WHISTLEBLOWER

Lampenfeld v. Pyramid Healthcare, Inc., Civil Action No. 3:14-CV-0283 (M.D. Pa. Mar. 4, 2015)

The United States District Court for the Middle District of Pennsylvania dismissed whistleblower protection and wrongful termination claims brought against a drug and alcohol treatment facility by its detoxification program director/nurse manager, holding that the nurse manager was not a covered employee under the Commonwealth’s whistleblower statute and her termination did not violate public policy.

The nurse manager in this case alleged that she reported to the director of nursing that a physician was billing for patient assessments and medical examinations, even though he never actually performed them. Almost a year later, after investigating a patient complaint involving a medication and charting error, the nurse manager reported to the director of nursing that the patient’s complaint was the result of the same physician’s “professional incompetence” and that the “nursing staff are fed up with him.” The director of nursing took the opportunity to share these comments with the physician, at which point he indicated the trust relationship between himself and the nurse manager had been “irrevocably broken.” Four days later, the nurse manager was placed on suspension, for insubordination to a supervisor. A few days later, the nurse manager reiterated her concerns about the physician’s care and billing practices in a letter. Two days after that letter, the nurse manager was terminated for insubordination and for making false or malicious statements about the physician (the medical director) and the director of nursing.

The nurse manager sued, alleging violation of the False Claims Act’s prohibition on retaliation and Pennsylvania’s whistleblower statute, as well as wrongful discharge contrary to public policy (because she was under a duty to report the physician’s incompetence).

In dismissing the claim under Pennsylvania’s whistleblower statute, the court held that the statute did not apply to the drug and alcohol treatment facility. Specifically, the court noted that the whistleblower statute covers only employees of a “public body” – which is defined as a body created by, or funded in any amount by or through, the Commonwealth. Although the facility did receive reimbursements from Medicaid and TRICARE for services it provided, the court held that such reimbursement did not constitute funding by the Commonwealth as intended by the whistleblower statute.

Additionally, the court held that the nurse manager was not discharged contrary to public policy. Employment in the Commonwealth is at-will and the only exception to this doctrine is if the employee’s discharge violates clearly mandated public policy. The court explained that nowhere in the nursing statutes or regulations is there an affirmative duty to report alleged instances of medical negligence. Therefore, the nurse manager’s termination was not contrary to clear public policy.

Melez v. Kaiser Found. Hosps., Inc. – March 2015 (Summary)

ARBITRATION

Melez v. Kaiser Found. Hosps., Inc., No. 2:14-cv-08772-CAS (VBKx) (C.D. Cal. Mar. 2, 2015)

The United States District Court for the Central District of California granted a motion to compel arbitration filed by a hospital system in a wrongful termination suit brought by a former physician employee.

The physician began working for the hospital in 1991. After over a decade of working for the hospital, the physician was asked to sign a Dispute Resolution Procedure (DRP) agreement, which stated that any dispute regarding wrongful termination, discrimination, harassment or retaliation would be subject to binding arbitration. Though the physician objected to the terms of the DRP, she eventually signed it.

When the physician was terminated by the hospital, she filed claims including wrongful termination, age discrimination, retaliation, and harassment. The hospital then filed a motion to compel arbitration under the American Arbitration Association (AAA) rules. The physician opposed arbitration, arguing that the DRP agreement was unconscionable and therefore unenforceable.

In response to the argument that the DRP agreement was oppressive (the physician had to sign it if she wanted to continue her employment), the court recognized that the physician was highly educated and could seek employment elsewhere. Thus, the court held that the DRP agreement was “adhesive,” but was not “highly oppressive under the totality of the circumstances.”

The court also looked at whether the hospital’s failure to provide the physician with a copy of the AAA rules referenced in the DRP, and the fact that the AAA rules had been amended after she signed them, rendered the DRP agreement unconscionable. Ultimately, the court concluded that while the agreement was “procedurally unconscionable” it was not “highly so.”

The physician also argued that the DRP agreement was substantively unconscionable, in part because of the limitation on discovery. The court found that the physician had not presented evidence that the limitations on discovery would prevent her from vindicating her statutory rights. Therefore, the agreement was not substantively unconscionable.

The court reached the same conclusion with respect to the carve-out terms in the DRP agreement. Finding that the carve-out provisions were mutual, allowing certain actions by either party, the court ruled that the DRP agreement was not substantively unconscionable. Thus, the court found that the DRP agreement was not sufficiently procedurally or substantively unconscionable to overcome “liberal federal policy favoring arbitration agreements.”

Dysart v. Palms of Pasadena Hosp., LP – March 2015 (Summary)

DISCRIMINATION

Dysart v. Palms of Pasadena Hosp., LP, No. 8:13-cv-2499-T-35EAJ (M.D. Fla. Mar. 2, 2015)

The U.S. District Court for the Middle District of Florida granted a nurse’s motion for partial summary judgment in her discrimination lawsuit against a hospital. The nurse sued the hospital after she was prohibited from treating a particular patient because the patient did not want to receive care from someone with dark skin.

The patient, an elderly Hispanic woman, was admitted to the hospital after being mugged by an African-American male. According to hospital records, the patient displayed a strong aversion to people with dark skin – she would cry, shake, and even lose bladder control at times. The hospital eventually posted a sign on the patient’s door instructing all staff members to report to the nurse’s station before entering the room. The purpose of the sign was to allow the charge nurse to keep dark-skinned staff members from treating the patient.

The nurse-plaintiff, an African-American woman, overlooked this sign and entered the patient’s room. Although the patient did not object to her presence, two other members of the hospital staff followed the nurse into the room and asked her to leave. When the nurse learned that the hospital was not allowing dark-skinned staff members to care for this patient, she became upset and immediately left the unit. The hospital offered her paid vacation as compensation for the incident, but the nurse instead filed a discrimination lawsuit.

In its analysis of the case, the court acknowledged that this was a difficult situation. However, the court was not persuaded by the hospital’s attempts to defend its behavior. The court emphasized that the law expressly prohibits unwritten discrimination policies, and that there is no such thing as a legitimate reason for this sort of intentional race discrimination.

The court concluded that the lawsuit would need to go to a jury trial to determine whether the nurse had provided enough evidence to receive compensation for her harm. In addition, it granted the nurse’s request to exclude evidence of the patient’s age and ethnicity from the jury. The court stated that the patient’s age was no more relevant than her race for determining whether the hospital discriminated against the nurse.

The judge granted the nurse’s request to present evidence to the jury of how much money the hospital made from treating the patient. The nurse will also be allowed to show that the hospital had certified compliance with Title VII. In its defense, the hospital will be allowed to present evidence to the jury of its justification for excluding the nurse from the patient’s care.

Larsen v. Provena Hosps. – Feb. 2015 (Summary)

PEER REVIEW, WHISTLEBLOWER

Larsen v. Provena Hosps., Nos. 4-14-0255, 4-14-0261 (Ill. App. Ct. Feb. 26, 2015)

The Appellate Court of Illinois affirmed a lower court’s dismissal of claims for breach of contract and violation of the state’s Whistleblower Act, brought by a physician, against a hospital. In upholding the dismissal, the appellate court found that the hospital was immune from liability under the peer review provision of the hospital licensing statute because the physician had not alleged physical harm. The court also found that the hospital was not subject to the provisions of the Whistleblower Act because it was not funded by the state as required by the Act.

The physician had clinical privileges to practice at the hospital for over 30 years. The physician alleged that the hospital denied his application to renew his medical staff appointment and clinical privileges, without a hearing, in violation of the bylaws and in retaliation for reports he had made to governmental agencies about the hospital. The lower court dismissed the claims, holding that the physician had only pled that the hospital had harmed his reputation, not his person, as is required for an exception to the peer review immunity provisions in the licensing statute. The lower court also found that the hospital did not fall within the purview of the Whistleblower Act because it did not receive state funding. Both parties appealed.

Citing the hospital licensing act, the appellate court found that the hospital is entitled to immunity for credentialing decisions except for decisions involving willful or wanton conduct. The terms “willful or wanton” are defined by the act to mean “a course of action that shows actual or deliberate intention to harm or that…shows an utter indifference to, or conscious disregard for, a person’s own safety….” In an earlier case, the court had interpreted “willful or wanton” to mean “physical harm” or a conscious disregard for the aggrieved physician’s safety. Thus, in light of the peer review protection in the hospital licensing act, a physician cannot recover from a hospital for a credentialing decision resulting in reputational harm. Finding that there was no allegation of physical harm, the appellate court concluded that the hospital was entitled to immunity for the breach of contract claim.

In addressing the claim under the Whistleblower Act, the appellate court found that this act supersedes the peer review immunity in the hospital licensing act. However, the court also found that the Whistleblower Act was not applicable because, as required by that act, the hospital was not funded by the state. Specifically, the court found that receiving payments from Medicaid is not the same thing as being funded by the state.

Yedidag v. Roswell Clinic Corp. – Feb. 2015 (Summary)

EMPLOYED PHYSICIANS – PEER REVIEW PROCESS

Yedidag v. Roswell Clinic Corp., No. 34,286 (N.M. Feb. 19, 2015)

The New Mexico Supreme Court upheld a lower court’s judgment on a jury verdict finding that a hospital violated the New Mexico Review Organization Immunity Act (“ROIA”) and “breached an implied promise in [a] surgeon’s employment agreement that he would not face adverse employment consequences” for participating in the medical staff’s peer review process when the hospital terminated the surgeon’s employment because of reports that he acted unprofessionally in a peer review meeting.

The hospital terminated the surgeon’s employment after it received a report that the surgeon, in his role on a peer review committee, had “verbally attacked” another surgeon whose work was under review. The hospital terminated the surgeon’s employment because of this report even though there were reports from other physicians on the peer review committee that the surgeon’s conduct “was not rude in any way” and “was not unusually contentious.”

The surgeon sued the hospital, claiming that the hospital violated ROIA by breaching an implied promise not to take adverse action against him for his participation in the peer review process. A jury found for the surgeon and awarded punitive damages, and the lower court entered a judgment on the jury’s findings. The state appeals court affirmed the lower court’s judgment, as did the state supreme court. The state supreme court held that the surgeon is able to bring a private cause of action against the hospital under ROIA. According to the court, “the acquisition and use of confidential peer review information for purposes of employee discipline is not a statutorily permissible use of peer review information.” Thus, the surgeon’s claim under ROIA was sustainable. The court also concluded that ROIA creates an implied promise that doctors participating in the peer review process will not suffer adverse employment consequences for that participation. Since the hospital terminated his employment for, according to the court, participating in the peer review process, it violated this implied promise. Lastly, the court upheld the jury’s reward of punitive damages. The court stated that it was reasonable for the jury to find that the hospital was indifferent to whether it would be violating the surgeon’s rights when it terminated him based on peer review information.

U.S. ex rel. Oughatiyan v. IPC the Hospitalist Co. – Feb. 2015 (Summary)

FALSE CLAIMS ACT – “UPCODING”

U.S. ex rel. Oughatiyan v. IPC the Hospitalist Co., No. 09C5418 (N.D. Ill. Feb. 17, 2015)

The United States District Court for the Northern District of Illinois granted in part and denied in part a physician group’s motion to dismiss a False Claims Act lawsuit brought by a physician who had formerly worked for the group as a hospitalist. The government intervened in the lawsuit,   which alleged that the physician group, along with its subsidiaries and affiliates, submitted false claims to the government by “upcoding” or billing Medicare and Medicaid for higher and more expensive levels of medical service than were actually performed. For example, the government alleged that one member of the physician group billed for 43 hours’ worth of services in a single day of work.

The physician group filed a motion to dismiss, arguing that the government’s complaint did not provide an adequate level of detail about the alleged fraud. The court agreed in part with the physician group. Analyzing this claim, the court explained that a lawsuit is generally expected to describe alleged fraud with a level of particularity roughly equivalent to that in the first paragraph of a newspaper story. In this case, the court concluded that the complaint had failed to explain what sort of role the group’s subsidiaries and affiliates played in the alleged false claims. Based upon this, it granted the physician group’s motion to dismiss, but only insofar as the lawsuit implicated its subsidiaries and affiliates. The rest of the government’s case was allowed to go forward.

Baney v. Fick – Feb. 2015 (Summary)

EMTALA

Baney v. Fick, No. 4:14-CV-2393 (M.D. Pa. Feb. 23, 2015)

The United States District Court for the Middle District of Pennsylvania dismissed an Emergency Medical Treatment and Active Labor Act (“EMTALA”) claim brought against a hospital by a former patient and his wife and declined to exercise jurisdiction over their remaining state law claims. The patient underwent a scheduled elective cervical spine neurosurgical procedure at the hospital. During the procedure, the patient’s esophagus was allegedly perforated. According to the complaint, the patient suffered “devastating permanent injuries” because the hospital did not properly manage the perforation and did not transfer him immediately to a tertiary care facility where cardiothoracic surgeons were available to address the perforation.

The hospital filed a motion to dismiss the EMTALA claim, which the court granted. The court noted that EMTALA’s medical screening and stabilization requirements only apply to individuals seeking emergency treatment. Per the court’s opinion, “EMTALA’s requirements are triggered when an ‘individual comes to the emergency department’ and an individual only does so if that person is not already a ‘patient.’“ Here, the patient had a scheduled appointment and was already a patient of the hospital when the emergency condition presented during his procedure. Accordingly, EMTALA did not apply, the court granted the hospital’s motion to dismiss, and declined to exercise supplemental jurisdiction over the plaintiffs’ state law claims.

Arapahoe Surgery Ctr., LLC v. Cigna Healthcare, Inc. (Summary)

ANTITRUST

Arapahoe Surgery Ctr., LLC v. Cigna Healthcare, Inc., No. 13-cv-3422-WJM-CBS (D. Colo. Feb. 20, 2015)

The United States District Court for the District of Colorado denied a motion to dismiss filed by several health insurers in an antitrust suit brought against them by a number of surgery centers. The surgery centers’ suit alleged that the insurers conspired with hospitals and others to restrain trade in violation of the Sherman Act and Colorado’s Antitrust Act. According to the complaint, the insurers joined a conspiracy with two hospitals to compel physicians not to refer patients to the surgery centers by threatening, and acting on these threats, to terminate the referring physicians’ contracts with the insurers.

The insurers filed a motion to dismiss the surgery centers’ Sherman Act and state law antitrust claims.      The court denied the motion, finding that the surgery centers adequately pled an agreement between the insurers and the hospitals, as well as conduct in furtherance of such agreement to demonstrate unlawful conspiracy under federal and state antitrust law. Further, the court concluded that the allegations in the surgery centers’ complaint were sufficient to show that the insurers’ agreement with the hospitals constituted a group boycott that may be considered per se illegal under Section 1 of the Sherman Act.

N.C. State Bd. of Dental Exam’rs v. F.T.C. (Summary)

ANTITRUST – STATE-ACTION IMMUNITY DOCTRINE

N.C. State Bd. of Dental Exam’rs v. F.T.C., No. 13-534 (U.S. Feb. 25, 2015)

The United States Supreme Court affirmed a decision by the United States Court of Appeals for the Fourth Circuit, holding that the North Carolina Board of Dental Examiners (“Board”) was not entitled to immunity from federal antitrust laws under the state-action immunity doctrine for the Board’s attempts to prevent non-dentists from offering teeth whitening services in the state.

Specifically, the Board had issued at least 47 cease-and-desist letters to various non-dentist teeth whitening service providers and product manufacturers. It justified this by arguing that teeth whitening is equivalent to “the practice of dentistry” for legal purposes, and that the unlicensed practice of dentistry is a crime.

The Federal Trade Commission (“FTC”) challenged these actions by filing an administrative complaint against the Board. The FTC claimed that the Board’s activities violated the federal antitrust laws. The Board asserted the state-action immunity doctrine, which permits state actors to engage in anticompetitive conduct under certain limited circumstances.

After a long series of appeals, the dispute between the Board and the FTC eventually reached the Supreme Court. The Court sided with the FTC, explaining that limits on state-action immunity are most important in circumstances where the Board has delegated regulatory power to active market participants. The Court illustrated its point by noting that eight of the ten members of the Board had themselves offered teeth whitening services at some time in the past. Because of this, the Court warned that market participants might be susceptible to hidden dual allegiances that affect their judgment.

Because a controlling number of Board members were active market participants with this kind of dual allegiance, the Court explained that the Board would only receive immunity if it acted under the active supervision of the state. The Board could not show that this active supervision requirement had been met. Therefore, it was not immune to the FTC’s antitrust challenge.