Baptist Mem’l Hosp.-Miss. Cnty., Inc. v. Kalyan (Summary)

CONTRACT DISPUTES

Baptist Mem’l Hosp.-Miss. Cnty., Inc. v. Kalyan, No. CV-14-450 (Ark. Ct. App. Dec. 10, 2014)

An appellate court in Arkansas reversed and remanded a trial jury’s award of damages, finding insufficient evidence to support the amount of damages that had been awarded in a case in which a pulmonologist breached his physician agreement with a hospital.

The pulmonologist was recruited to work full time for a hospital. The pulmonologist and the hospital signed a physician agreement stipulating that the hospital would pay the pulmonologist guaranteed draws for income assistance and practice expenses. Under the terms of the physician agreement, the pulmonologist was supposed to repay the amount of the advancement, unless he worked at the hospital long enough for his debt to be forgiven. During his practice at the hospital, the pulmonologist received $228,350.74. The pulmonologist left before the terms of his contract were up and did not repay the amount he received from the hospital. A jury trial determined that the pulmonologist had breached his contract, but had awarded the hospital only $46,478.38 in damages. The hospital appealed this amount.

The appellate court found that the pulmonologist presented no evidence at trial to suggest that the pulmonologist’s amount owed should be set off. Additionally, though the pulmonologist argued that he was entitled to damages for the hospital’s negligent recruitment, claiming that the hospital knew there was not enough need to support a full-time pulmonologist, he had failed to present any damages at trial. Because he received $228,350.74 and was found to have breached his contract with the hospital, the court found no substantial evidence to support the jury’s award of $46,478.38.

Wheeless v. Maria Parham Med. Ctr. (Summary)

MEDICAL STAFF PRIVILEGE ACTIONS

Wheeless v. Maria Parham Med. Ctr., No. COA14-612 (N.C. Ct. App. Dec. 2, 2014)

The Court of Appeals of North Carolina affirmed a trial court’s decision to grant a hospital’s motion to dismiss claims filed by an orthopedic surgeon alleging, among other things, unfair and deceptive trade practices and medical malpractice. The hospital and surgeon had been embroiled in a long-standing dispute about the physician’s conduct and potential violations of the hospital’s “disruptive physician policy.”

Although there were several different episodes of conflict between this physician and the hospital, the most salient one for purposes of this court opinion involved an anonymous complaint submitted to the North Carolina Medical Board. This anonymous complaint alleged that the physician engaged in inappropriate and disruptive behavior. According to the physician, the anonymous complaint referenced instances that were subject to a strict confidentiality agreement. Consequently, the physician believed that the anonymous complaint was an attempt by certain individuals to discredit him before the North Carolina Medical Board.

In this appeal, the physician challenged three adverse rulings by the trial court. First, the physician argued that the trial court erred by dismissing his claim for unfair and deceptive trade practices. The appellate court disagreed, finding that health care professionals who make complaints to a medical board are not subject to suit for unfair and deceptive trade practices, because they are performing an integral part of their role in ensuring the provision of adequate medical services. Second, the physician argued that the trial court erred by dismissing his claims for medical malpractice and negligence. The appellate court again disagreed, holding that a physician-patient relationship is necessary in order to bring a medical malpractice claim, and cannot simply be brought by a physician against his colleagues. The court also found that the trial court had acted properly in dismissing the physician’s negligence claims under the doctrine of abatement, finding that if a plaintiff files multiple lawsuits that present significant overlap between the parties, subject matter, issues, and relief requested, then the duplicate claims may be “abated” by the initial lawsuit. Because the negligence claims dealt with many of the same issues as the physician’s first complaint, the appellate court held that the trial court acted properly in dismissing these duplicate negligence claims under the doctrine of abatement.

U.S. ex rel. Schaengold v. Mem’l Health, Inc. (Summary)

FRAUD AND ABUSE – QUI TAM ACTIONS

U.S. ex rel. Schaengold v. Mem’l Health, Inc., No. 4:11-cv-58 (S.D. Ga. Dec. 18, 2014)

The U.S. District Court for the Southern District of Georgia granted in part and denied in part a hospital’s motion to dismiss a qui tam lawsuit filed by its former CEO and President. The lawsuit alleged claims for breach of contract, retaliatory discharge, and violation of the False Claims Act.

According to the CEO, his problems with the hospital began when he advised the Board that the hospital was paying excessive amounts of compensation to certain physicians. Although the Board initially cooperated with his attempts to implement a new compensation model, it ultimately continued to pay certain physicians at levels above fair market value. The CEO claimed that the Board had terminated his employment in direct retaliation for his efforts to report these compliance issues to the Department of Health and Human Services. The hospital had also withheld his severance pay unless he agreed to sign a release of his legal claims.

In its motion to dismiss, the hospital countered by arguing that the CEO’s complaint did not state an actionable legal claim and was not detailed enough in its allegations of fraud. Also, the hospital challenged the CEO’s ability to assert a breach of contract claim on behalf of the government, and argued that any retaliatory discharge claim would have to be pursued in an arbitration hearing.

The court granted certain parts of the hospital’s motion to dismiss. It dismissed some of the Stark violations that were tied to so-called “Bonus Pool” payments made to specific physicians, since the CEO’s complaint had failed to set an adequate benchmark for fair market value. Without any evidence of fair market value, the court explained that it was unable to determine whether the bonus payments were genuinely excessive.

It also granted the hospital’s motion to dismiss the False Claims Act violations. It reasoned that the CEO had not given enough evidence to show that the government actually made payments for services derived from illegal referrals. Without this evidence, the court held that the CEO had failed to plead a sufficient cause of action under the False Claims Act.

However, the court denied the hospital’s attempt to compel arbitration for the retaliatory discharge claim. It discovered that the CEO had attempted to pursue his retaliatory discharge claim in an earlier arbitration proceeding, but that the hospital had challenged the arbitrator’s jurisdiction over the claim. The court concluded that the hospital’s inconsistent courses of action were prejudicial to the CEO and that the hospital therefore had waived its right to compel arbitration at this point in the litigation.

It also denied the hospital’s attempt to dismiss other Stark claims relating to physician compensation, as the CEO had provided evidence of fair market value for these claims. Further, it denied the hospital’s attempt to dismiss the Anti-Kickback Statute violations, finding that the CEO had given “sufficient indicia” that the hospital intended its compensation arrangements to induce referrals from certain physicians. Lastly, the court granted the relator’s request to amend certain counts of his complaint.

Holmes Reg’l Med. Ctr. v. Dumigan (Summary)

PRODUCTS LIABILITY – NEGLIGENCE STANDARDS

Holmes Reg’l Med. Ctr. v. Dumigan, No. 5D14-505 (Fla. Dist. Ct. App. Dec. 12, 2014)

The Fifth District Court of Appeal of Florida denied a petition for writ of certiorari filed by a hospital seeking review of an adverse decision in a negligence lawsuit. At issue on appeal was whether a patient’s negligence lawsuit should be characterized as a medical malpractice claim or as a products liability claim.

The lawsuit was filed by a patient who had been admitted to the hospital for cardiac bypass surgery. During the course of the surgery, he had received contaminated heparin, which caused him to develop a severe bacterial infection. This infection was so extensive that it eventually led to the amputation of his left leg and his right foot. In his complaint, the patient explained that the heparin supplier had issued a notice of recall prior to the surgery, but that the hospital had failed to implement adequate procedures to respond to the recall.

At trial, the hospital argued that this was a medical malpractice case subject to the Florida Medical Malpractice Act (“FMMA”). The FMMA requires plaintiffs to address a higher, medical negligence standard of care in their lawsuits. Because the patient had not done this, the hospital argued that his claim should be dismissed. The trial court disagreed with the hospital’s argument, concluding that the patient was actually alleging a product liability suit, rather than medical malpractice, which carried a lesser, ordinary negligence standard.

The appellate court agreed, holding that the allegedly wrongful act was the hospital’s failure to remove contaminated heparin from its supplies, not the medical decision to administer a blood thinner. Because this involved an administrative policy rather than a medical judgment, it was properly classified as a products liability case and was not subject to the heightened medical negligence standard. Consequently, the trial court had acted properly in denying the hospital’s motion to dismiss.

Prairie Rheumatology Assocs. v. Francis (Summary)

RESTRICTIVE COVENANTS

Prairie Rheumatology Assocs. v. Francis, No. 3-14-0338 (Ill. App. Ct. Dec. 11, 2014)

The Third District Appellate Court of Illinois affirmed in part and reversed in part a trial court’s orders regarding a physician group’s request for a preliminary injunction. The physician group sought the injunction after one of its former employees, a rheumatologist, failed to abide by a restrictive covenant in her employment agreement. This restrictive covenant prevented the rheumatologist from entering into a competitive practice within a 14-mile radius of the physician group’s offices.

In the trial court, the physician group succeeded in obtaining a limited preliminary injunction that prevented the rheumatologist from treating the current patients of the physician group. However, the trial court refused to enforce the non-competition agreement with respect to the general public. The physician group appealed this decision, arguing that the trial court had abused its discretion by declining to enforce the restrictive covenant in full. The rheumatologist countered by arguing that the restrictive covenant was unenforceable altogether, as it lacked adequate consideration.

The appellate court agreed, explaining that under state law, two years or more of continued employment constitutes adequate consideration for a restrictive covenant. This rule is maintained even if the employee resigns on her own instead of being terminated. In this instance, because the rheumatologist resigned after 19 months, her employment with the physician group had not constituted sufficient consideration to support the restrictive covenant.

In addition, the court noted that the rheumatologist received “little or no additional benefit” from the physician group in exchange for her agreement not to compete, noting that the physician group had not assisted her with obtaining hospital privileges nor had the group introduced her to any referral sources. Consequently, it concluded that the restrictive covenant was not enforceable altogether. It reversed the trial court’s decision to enforce the restrictive covenant for the group’s current patients and remanded the case for further proceedings.

Gaskill v. VHS San Antonio Partners (Summary)

MEDICAL STAFF PRIVILEGE ACTIONS

Gaskill v. VHS San Antonio Partners, No. 04-14-00153-CV (Tex. App. Dec. 17, 2014)

The Court of Appeals of Texas reversed a trial court’s dismissal of a physician’s lawsuit challenging the suspension of his privileges. The physician sued the hospital after the hospital issued a formal “Notice of Involuntary Reduction of Medical Staff Privileges” against him, which left him unable to work at any hospital. The physician requested a hearing, but the parties ultimately decided to mediate the dispute by sending several of the physician’s cases to external review. After the external review concluded that there had been no deviation from the standard of care, the physician’s privileges were fully restored; however, he then sued the hospital for breach of contract, defamation, business disparagement, and intentional infliction of emotional distress, alleging that the suspension had damaged his business and his reputation.

In the trial court, the hospital system filed a motion to dismiss, arguing that the physician’s claims had no basis in law. The trial court agreed, granting the motion and awarding the hospital $8,320.50 in attorney’s fees. The physician appealed, arguing that this dismissal had been improper because he was not given adequate notice of the upcoming motion to dismiss.

The appellate court agreed. It explained that under the Texas Rules of Civil Procedure, the physician was entitled to at least 14 days’ notice of the hearing on the motion to dismiss. In this instance, the hearing was held without giving any formal prior notice of the date and time of the hearing to the physician. Consequently, the physician was deprived of his due process rights to respond to the motion to dismiss. The appellate court reversed the trial court’s dismissal and remanded for further proceedings.

Abrahamson v. Ill. Dep’t of Fin. and Prof’l Regulation — Dec. 2014 (Summary)

DUE PROCESS – MEDICAL LICENSURE ACTIONS

Abrahamson v. Ill. Dep’t of Fin. and Prof’l Regulation
No. 13-1921 (7th Cir. Dec. 11, 2014)

The U.S. Court of Appeals for the Seventh Circuit affirmed a trial court’s decision to dismiss a due process claim against the Illinois Department of Financial and Professional Regulation (“department”) filed by a physician after the department rejected his application for a medical license for the second time in nearly 20 years.

The physician had first applied for a medical license in 1986 after graduating from medical school, completing three years of surgical residency, and passing his boards. The department denied this initial application after discovering that he had fabricated his medical school transcript and had lied about his academic credentials and his applications for other state licenses. When the physician applied again in 1998, the department denied his application and explained that, at that time, he had insufficient current professional experience upon which it could grant the license. The physician sued and, after protracted litigation, obtained an order from a circuit court instructing the department to assess his capacity to practice medicine and to determine what sort of additional training he would need to obtain a license. Following that review, the department informed the physician that he needed to pass the current medical boards and complete another two years of residency. After unsuccessfully appealing this in the state court system, the physician then filed a due process claim in federal court. The trial court dismissed the claim, reasoning that the physician was really just conducting a “collateral attack” on the state court judicial decisions, concluding that only the Supreme Court of the United States could overturn the state court rulings.

The Seventh Circuit affirmed the trial court holding on appeal. It explained that the physician was asking for relief that it could not give, because he was essentially trying to use the federal courts to upset a judgment by the state courts. Consequently, it refused to overturn the lower court’s decision.

Knapik v. Mary Hitchcock Mem’l Hosp. (Summary)

PEER REVIEW PRIVILEGE

Knapik v. Mary Hitchcock Mem’l Hosp., No. 5:12-CV-175 (D. Vt. Dec. 12, 2014)

The United States District Court for the District of Vermont denied a former resident’s motion for contempt and sanctions against a hospital for withholding documents. Plaintiff, who had been in a residency program at defendant hospital, alleged that she was wrongfully terminated by the hospital for whistleblowing activity which involved her sending a letter the hospital had sent to a different resident that was critical about that resident’s performance to the fellowship program that the resident had applied to as the plaintiff resident was aware that the information had not been disclosed to the fellowship program. During discovery, the former resident requested, and a court ordered, the hospital to disclose internal e-mails regarding certain medical residents’ employment records and feedback about their performances. The hospital provided some, but not all, requested documentation, arguing and that the information that was not provided was privileged under the state’s quality assurance and peer review privileges. The former resident then sought sanctions against the hospital for failing to produce the documents. Ultimately, the missing documentation was submitted to the court for in camera review to determine whether they were privileged.

Following in camera inspection of the e-mails, the court held that the e-mails were covered by the quality assurance privilege because they related to performance feedback and evaluations of medical residents by peers and advisors. The court stated that the privilege protects both formal and informal feedback and evaluations, such as e-mails, from disclosure. The former resident argued that one particular e-mail should be disclosed because a physician discussed it with her and thereby waived the privilege. The court rejected this argument because the privilege is held by the hospital, not its employees, hence only the hospital is able to waive it. In addition, due to the privileged nature of the documents, the court also declined to impose sanctions against the hospital.

Picard v. Am. Bd. of Family Med. (Summary)

PRODUCTION OF DOCUMENTS

Picard v. Am. Bd. of Family Med., No. 13-CV-14552 (E.D. Mich. Dec. 5, 2014)

The United States District Court for the Eastern District of Michigan denied a physician’s motion to compel against a certification board holding that review of the certification board’s actions is limited to the physician’s specific claim. Plaintiff, a physician who was a recovering alcoholic, erroneously lost his license to practice medicine by the Michigan Board of Medicine after he self-reported a relapse. The state medical board reversed its decision and restored the physician’s license to a full and unrestricted status. The physician additionally signed a monitoring agreement with the state Health Professionals Recovery Program. The certification board revoked the physician’s board certification status after his license was suspended by the state medical board as one of its prerequisites for certification is that physicians have unrestricted medical licenses. The physician appealed the certification board’s decision on the basis that the suspension by the state medical board had been determined to be in error and that his license had been fully restored. The certification board then informed the physician that his certification would not be reinstated until he completed his monitoring agreement with the Health Professionals Recovery Program, as the monitoring agreement was viewed as a restriction on his license. As a result, the physician was then terminated by his employer due to the fact that he was no longer board certified, which was mandated by his employment contract. The physician sued the certification board arguing that the board had violated his due process rights, and in this portion of the lawsuit, the physician was seeking to compel the board to provide documentation concerning all physicians who had been granted or denied certification by the board due to the fact that they were subject to monitoring agreements. The court denied the motion, holding that the physician’s claim should be limited to the record regarding the certification board’s decision as to the physician alone and that any information regarding other physicians would be irrelevant to the physician’s due process claim.

Birnbaum v. Tarzana Anesthesia Med. Grp. Inc. (Summary)

DISABILITY DISCRIMINATION

Birnbaum v. Tarzana Anesthesia Med. Grp. Inc., B253705 (Cal. Ct. App. Dec. 16, 2014)

The California Court of Appeal upheld a lower court’s dismissal of an anesthesiologist’s disability discrimination claim holding that the anesthesiologist failed to allege that he was an employee of a medical group, rather than an independent contractor. The anesthesiologist was under contract with defendant, a medical group. The contract stated that the anesthesiologist was an independent contractor for the first two years, after which, the medical group would vote to admit the anesthesiologist into the medical group’s partnership. After the two years, the partnership vote was scheduled, but the anesthesiologist was diagnosed with cancer and unable to work for a few months and the vote never took place. The anesthesiologist returned to the medical group and requested a scheduling accommodation in which he would not be assigned to surgeries that lasted more than two hours. Several months later, the medical group asked that he sign an addendum to his contract regarding the scheduling of shorter cases, which he did not execute. Nearly 18 months after he returned to work at a reduction of hours, the medical group voted not to make the anesthesiologist a partner or renew his contract. The anesthesiologist sued, claiming disability discrimination and failure to accommodate under a state antidiscrimination statute. The medical group argued that the anesthesiologist was not an employee, thus he was not protected by the antidiscrimination statute. The lower court agreed with the medical group and dismissed the complaint; the anesthesiologist appealed.

On appeal, the court held that the anesthesiologist was not protected by the antidiscrimination statute because he was in fact an independent contractor and not an employee of the medical group. The court explained that the medical group did not exercise control over the anesthesiologist when he performed his professional services. The anesthesiologist did not receive employment benefits from the medical group, the mutually agreed upon contract explicitly stated that the anesthesiologist was an independent contractor, and the medical group did not mandate performance of certain procedures, or direct his practice of anesthesia services other than his scheduling.