Methodist Health Servs. Corp. v. OSF Healthcare Sys. – March 2015 (Summary)

ANTITRUST

Methodist Health Servs. Corp. v. OSF Healthcare Sys., Case No. 1:13-cv-01054-SLD-JEH (C.D. Ill. Mar. 25, 2015)

The U.S. District Court for the Central District of Illinois ruled that the plaintiff Methodist health services corporation provided services through various operating provisions, including acute care hospitals. Meanwhile, Saint Francis Medical Center, the largest hospital in the region, was the fourth largest medical center in the State of Illinois. According to Methodist, Saint Francis received approximately 53 percent of the market share for inpatient services, and over 50 percent of the market share for outpatient services. In order to retain this percentage, Methodist alleged that Saint Francis threatened insurers that they will withdraw from the insurance provider’s network if the insurer engaged with a competing health care provider, such as Methodist. These exclusionary agreements were alleged to cut off Methodist from 60 percent of the health insurance market in the region. Methodist filed complaints against Saint Francis, stating that Saint Francis engaged in exclusive dealing, monopolization, attempted monopolization, tortious interference with prospective economic advantage, and unfair and deceptive acts and practices. Saint Francis brought a motion for judgment on the pleadings, arguing that Methodist failed to adequately plead plausible relevant product markets or substantial foreclosure in those markets.

The court found that Methodist’s claims were sufficient to survive the motion for judgment on the pleadings. The court found that Methodist properly defined the relative product markets, dismissing the argument that sales to commercial health insurers for inpatient and outpatient surgical services are not interchangeable with the sales of services to government payers. The court also disagreed with Saint Francis’ argument that Methodist had failed to show a substantive foreclosure of competition in the relevant market. The court determined that, with the benefit of discovery, Methodist will likely be able to establish that it was foreclosed from some portion of the health insurance market. The court did, however, grant Saint Francis’ motion to leave to file a reply, and also granted Methodist’s leave to file a surreply.

U.S. ex rel. Hagood v. Riverside Healthcare Ass’n – March 2015 (Summary)

FALSE CLAIMS ACT

U.S. ex rel. Hagood v. Riverside Healthcare Ass’n, Civil Action No. 4:11cv109 (E.D. Va. Mar. 23, 2015)

The United States District Court for the Eastern District of Virginia dismissed multiple False Claims Act (“FCA”) claims brought by a pair of relators against a hospital, holding that the allegations failed to meet the FCA’s heightened pleading requirements. The relators were employed as the emergency room’s administrator and as the Administrator of the defendant hospital. The relators alleged that due to the hospital’s faulty software system, the hospital submitted false claims to the government for services not rendered, pharmaceuticals not administered, services that were “upcoded,” and for services that were provided by unqualified personnel. Additionally, the former administrator relator claimed she was retaliated against after she informed the hospital that certain billing practices were illegal, and was subsequently fired. In their complaint, the relators provided a table of individuals, including the patient’s name, account number, date of service, and service item code, who allegedly were improperly charged by the hospital. The relators assert that twenty to thirty percent of the patients listed in the table were covered by a Government Payor program because Government Payors served at least twenty to thirty percent of the hospital’s patient base. The hospital motioned to dismiss the claims stating that the relators failed to meet the FCA’s heightened pleading requirements, specifically, that the relators failed to allege any particular false claim that was actually presented to the government for payment.

The relators conceded that their claims for retaliation and for billing for services provided by unqualified personnel failed to satisfy the FCA’s heightened pleading requirements, therefore the court dismissed them. Next, the court dismissed the relators’ remaining claims, that the hospital fraudulently billed for services not rendered, pharmaceuticals not administered, and “upcoded” services, because the relators’ allegations failed to identify specific false claims that were actually presented to Government Payors. Furthermore, the relators’ allegations failed to reasonably imply that the hospital submitted false claims to the government for payment. The court explained that the relators failed to connect any overcharging to the submission of bills to Government Payors. Instead, the relators only alleged that because twenty to thirty percent of the hospital’s patients are supported by Government Payors, twenty to thirty percent of the billings must violate the FCA.

Armstrong v. Exceptional Child Ctr., Inc. – March 2015 (Summary)

MEDICAID

Armstrong v. Exceptional Child Ctr., Inc., No. 14-15 (U.S. Mar. 31, 2015)

The Supreme Court reversed a ruling by the Ninth Circuit that allowed the providers of residential habilitation services (“providers”) to sue the director of Idaho’s Department of Health and Welfare (“Department”). The providers alleged that the Department reimbursed them at rates lower than those permitted by the federal Medicaid Act.

A crucial dispute in the case centered on whether or not the Supremacy Clause of the Constitution granted the providers the power to sue the Department for its violation of the Medicaid Act. At the trial level, the district court had entered summary judgment in favor of the providers. The Ninth Circuit affirmed this decision, concluding that the Supremacy Clause implied a private right of action that allowed the providers to sue under these circumstances.

Reversing the Ninth Circuit, the Supreme Court held that the Supremacy Clause does not confer a private right of action because it is not the source of any federal rights. Instead, the Supreme Court held that the Supremacy Clause only instructs the courts on how to resolve clashes between federal and state law – it does not specify who may enforce laws in court. To support this conclusion, the Supreme Court pointed to the context of the Constitution as a whole, noting that Article I vests Congress with broad discretion over how to implement its enumerated powers. It interpreted this to mean that Congress wields the discretion to decide who is permitted to enforce federal laws, and can limit enforcement of federal law to federal actors.

Under the Medicaid Act, the sole remedy provided for a state’s failure to comply with Medicaid requirements is the withholding of Medicaid funds by the Secretary of Health and Human Services. The Supreme Court concluded that the express provision of this remedy suggested that Congress intended to preclude other remedies, and added that the Medicaid Act did not contain the kind of rights-creating language needed for the providers to sue the Department. It reversed the judgment of the Ninth Circuit.

Kim v. Humboldt Cnty. Hosp. Dist. – March 2015 (Summary)

EMPLOYMENT

Kim v. Humboldt Cnty. Hosp. Dist., No. 3:12-cv-00430-MMD-WGC (D. Nev. Mar. 25, 2015)

The United States District Court for the District of Nevada denied a county hospital’s motion to dismiss a surgeon’s First Amendment claim against it, holding that a jury was required to determine if the surgeon’s complaints were the motivating factor in her termination. Plaintiff was the lone general surgeon employed at the defendant, a county-owned hospital. The surgeon also was a member of the hospital’s Board of Trustees. Throughout the surgeon’s tenure, she and other physicians brought complaints to the hospital’s administrator regarding the hospital’s internal operations. After four years of the surgeon being a Board member, the Board amended its corporate compliance policy to prohibit hospital employees from serving on the Board. Nevertheless, the surgeon filed for reelection, and the Board terminated the surgeon’s employment citing its desire to contract with a third-party surgical service.

The surgeon brought suit challenging the termination of her employment, which she claimed violated her First Amendment rights by limiting her ability to seek reelection and for lodging complaints. The hospital argued that the surgeon’s contract was terminated pursuant to its without cause termination clause, due to a business decision and not her speech.

The court held that the surgeon’s complaints to the hospital administrator constituted protected speech on matters of public concern. These complaints included nursing training, personnel needs, patient education, slowness in lab results, and issues with the operating room. Next, the court stated that an issue of material fact existed as to the hospital’s motivation behind the surgeon’s termination. The court explained that the Board’s simultaneous vote to terminate the surgeon and interview outside surgical services suggested pretext. Lastly, the court decided that further discovery was needed in order to rule on the surgeon’s claim that the hospital violated her First Amendment rights by restricting her ability to seek reelection.

Deborah Heart and Lung Ctr. v. Virtua Health Inc. – March 2015 (Summary)

ANTITRUST

Deborah Heart and Lung Ctr. v. Virtua Health Inc., Civil No. 11-1290 (RMB/KMW) (D. N.J. Mar. 24, 2015)

The United States District Court for the District of New Jersey granted two motions for summary judgment that were filed by a hospital and cardiology group (the “Defendants”). The competitor, a charity specialty hospital, alleged that the Defendants had conspired to exclude it from the market.

Much of the alleged conspiracy revolved around the actions of a key cardiologist who had been employed by the charity hospital. This cardiologist had resigned from the charity hospital in 2006 and joined a competing hospital that intended to build a cardiac institute at a new location. According to the record, patient referrals from the cardiology group to the charity hospital began to decline precipitously in the following years, from 627 patients in 2006 to 60 patients in 2010. The charity hospital introduced evidence of correspondence between the cardiologist and the administrators of the competing hospital, in which they discussed using a “white knight” strategy to obtain the charity hospital’s cardiac surgery services (presumably by forcing it into a merger).

Although the court acknowledged that the charity hospital had been adversely affected by the Defendants’ actions, it ruled that there was a fatal defect in the alleged antitrust claim. Specifically, the charity hospital failed to show that the conspiracy had caused an anticompetitive effect on the market as a whole. At best, the charity hospital only established harm to itself and a relatively small population of patients, which the court ruled was insufficient to prevail in federal court on a Sherman Antitrust Act claim. The court granted the Defendants’ motions for summary judgment, but did state that the charity hospital potentially had a legal remedy in the state court.

Conn. Gen. Life Ins. Co. v. Humble Surgical Hosp., LLC – March 2015 (Summary)

FINANCIAL CONFLICT OF INTEREST AND ERISA

Conn. Gen. Life Ins. Co. v. Humble Surgical Hosp., LLC, Civil Action No. 4:13-CV-3291 (S.D. Tex. Mar. 24, 2015)

The United States District Court for the Southern District of Texas dismissed Cigna’s Employment Retirement Income Security Act (“ERISA”) claim brought against a five-bed surgical hospital, holding that Cigna had failed to establish that it has standing to sue under ERISA. Cigna alleged that defendant, a surgical hospital, engaged in fraudulent billing practices by only charging Cigna’s policyholders in-network rates, while billing the remainder of the total amount to Cigna at its higher, out-of-network rates. Cigna also alleged that the surgical hospital paid referral fees to physicians, some of whom were owners of the surgical hospital.

Cigna asserted state law claims for common law fraud, negligent misrepresentation and unjust enrichment. Cigna also sought injunctive relief that would require the surgical hospital to disclose its referral arrangements with physicians and declarative judgment that the surgical hospital’s billing practices violated Texas law. Cigna also alleged that it was a fiduciary under ERISA and requested the court to order the hospital to return the overpayments.

The court ruled that ERISA pre-empted all state claims arising from Cigna’s self-funded and employee benefit plans. The court then ruled that Cigna failed to allege sufficient facts to show that it had standing to sue under ERISA, ruling that Cigna’s assertion that it was a fiduciary under ERISA was unsubstantiated and conclusory.

Babchuk v. Ind. Univ. Health, Inc. – March 2015 (Summary)

SECTION 1983

Babchuk v. Ind. Univ. Health, Inc., No. 1:13-cv-01376-JMS-DML (S.D. Ind. Mar. 20, 2015)

The United States District Court for the Southern District of Indiana granted a hospital’s motion for summary judgment against a radiologist’s due process claim. The radiologist and his professional corporation had sued the hospital following the suspension of his medical staff privileges and the subsequent termination of an exclusive contract.

In order to establish a procedural due process claim, the radiologist and his professional corporation had to show that they were deprived of a legally protected property interest in a way that did not afford them adequate due process. Furthermore, they had to show that the hospital was considered a “state actor” under the law.

The radiologist marshaled several reasons to support his claim that the hospital was a state actor, including an argument that the hospital was a state actor because it received immunity for its peer review activities. Specifically, the radiologist asserted that this immunity was a role delegated by the state to the hospital, and therefore made the hospital into a state actor for purposes of the due process claim.

The court disagreed with the radiologist’s argument about immunity, noting that the Seventh Circuit had rejected a similar argument earlier this month. However, the court ultimately decided that neither side had presented enough evidence to conclude determinatively that the hospital was not a state actor. Accordingly, it declined to grant summary judgment on this element.

Next, the court focused on whether the physician and his professional corporation had a legally protected property interest. The hospital argued that even if it was considered a state actor, the radiologist’s due process claim could not proceed because there was no federally protected property interest at stake. The court agreed with the hospital. First, it explained that the professional corporation did not have any kind of constitutionally protected property interest merely because of its contract with the hospital. Second, it concluded that the radiologist had failed to show that he was entitled to any kind of constitutionally protected property interest in the procedures afforded by the hospital’s bylaws. It noted that the hospital had not directly caused any harm to the physician’s license, and rejected the physician’s claim that Indiana state law gave him a federally protected property interest in certain procedures.

The court granted the hospital’s motion for summary judgment. It denied the radiologist’s and professional corporation’s competing motion for partial summary judgment and entered final judgment.

Bass v. Cook Cnty. Hosp. – March 2015 (Summary)

EMERGENCY SERVICES

Bass v. Cook Cnty. Hosp., No. 1-14-2665 (Ill. App. Ct. Mar. 20, 2015)

The Appellate Court of Illinois, First District, held that emergency room physicians involved in inter-hospital transports, including physicians who prepare patients for ambulance transfer and accompany patients on ambulance trips, are immune from malpractice liability pursuant to a state statute establishing a statewide EMS system. The court found that a physician who accompanied an 11-year-old patient on an emergency transfer to a pediatric intensive care unit was immune from liability as a good-faith provider of emergency services. Because the physician was not liable, the hospital was immune from vicarious liability.

Rumble v. Fairview Health Servs. – March 2015 (Summary)

DISCRIMINATION

Rumble v. Fairview Health Servs., No. 14-cv-2037 (SRN/FLN) (D. Minn. Mar. 16, 2015)

The United States District Court for the District of Minnesota denied a hospital’s motion to dismiss a patient’s discrimination claim under the Affordable Care Act (“ACA”). Plaintiff, a transgender patient, alleged discriminatory mistreatment when he presented to the emergency room of the defendant hospital. The hospital moved to dismiss the case, arguing that the ACA does not provide a cause of action for transgender patients, and furthermore any alleged discriminatory treatment was performed by an independent contractor physician.

The court held that the ACA provides a cause of action for transgender discrimination. The ACA incorporates four civil rights statutes, one of which prohibits discrimination on the basis of sex. The court explained that this specific statute’s prohibition extends to gender stereotyping, and that the patient had sufficiently alleged that his disparate treatment was based on his gender identity.

Additionally, the court held that a hospital may be liable under the ACA for an independent contractor physician’s actions if the actions effectively barred the patient’s access to reasonable medical care, an appropriate person at the hospital knew of the physician’s actions and was deliberately indifferent, and, lastly, if the hospital had substantial control over the physician and the emergency room. The court explained that two hospital employees knew of the physician’s actions and did nothing to prevent them, and the hospital had sufficient control over the emergency room and the physician. Therefore, the patient’s claim survived the hospital’s motion to dismiss.

Golden v. Sound Inpatient Physicians Med. Grp. – March 2015 (Summary)

INTERFERENCE WITH CONTRACTUAL RELATIONS

Golden v. Sound Inpatient Physicians Med. Grp., No. 2:14-cv-00497-TLN-EFB (E.D. Cal. Mar. 17, 2015)

The United States District Court for the Eastern District of California dismissed a hospitalist’s suit alleging that a hospitalist group interfered with her prospective economic advantage and violated the state professional code forbidding unfair competition.

The hospitalist had previously held a contract to provide a medical center with her services. After the contract expired, the medical center replaced her with another group. The hospitalist then entered into agreements with several doctors to provide hospitalist services for their patients. The hospitalist provided the medical center with a list of these doctors and requested the medical center to admit their patients under her care. The new group allegedly instructed medical center staff to ignore the list and admit these patients under the care of the new group. The hospitalist brought suit claiming that the new group interfered with her prospective economic advantage and participated in unfair competition.

The court dismissed both claims, holding that the hospitalist did not allege sufficient facts to state a claim that the new group’s conduct rose to the required levels of wrongfulness. The court explained that to interfere with another’s economic relationship, the alleged interfering act must be wrongful by some legal measure. However, the court allowed the hospitalist to amend the complaint to allege the necessary facts.