United States v. Millennium Radiology, Inc. (Summary)

FALSE CLAIMS/ANTI-KICKBACK

United States v. Millennium Radiology, Inc., No. 1:11cv825 (S.D. Ohio Sept. 30, 2014)

The United States District Court for the Southern District of Ohio denied the motions to dismiss of two hospitals and their exclusive radiology group in a lawsuit brought by a former physician employee, as a relator on behalf of the government, who alleged that the hospitals and group violated the Anti-Kickback Statute and the False Claims Act.

The relator alleged that the radiology group provided medical director and marketing services to the hospitals free of charge in exchange for the exclusive right to provide radiology services at those hospitals.

In denying the hospitals’ and group’s motions to dismiss, the court rejected their arguments that the relator had not sufficiently alleged that the hospital received remuneration from the hospitals. The court noted that anything of value could constitute “remuneration” and, while the relator had not provided much detail of the remuneration, the fact that the hospital received medical director and marketing services from the group for free means that those services were necessarily provided at below market rates. Further, while the overall arrangement between the hospitals and group should be considered, rather than focusing on the mere fact that no separate compensation was paid to medical directors, the court found that the relator’s allegations were sufficient to survive dismissal. The court also held that the relator sufficiently alleged wrongful intent on the part of the hospitals and group when he claimed that the corporation had been advised by counsel that an exclusive arrangement requiring medical director services to be provided for free could be illegal.

McCullum v. Orlando Reg’l Healthcare Sys. Inc. (Summary)

ADA COMPLIANCE

McCullum v. Orlando Reg’l Healthcare Sys. Inc., No. 13-12118 (11th Cir. Oct. 3, 2014)

The United States Court of Appeals for the Eleventh Circuit affirmed the dismissal/summary judgment of several discrimination claims brought by the parents of a deaf son, individually and on behalf of their son. The parents had claimed that they and their daughter were discriminated against, by association, when the hospital defendants relied on them to provide interpretation services to their son, rather than obtaining a professional interpreter. Further, they claimed their son suffered direct discrimination due to the hospitals’ failure to provide an interpreter. Though health care workers used several communication tactics to help the 14-year-old patient understand his care, including written explanations, pictorial and skill demonstration, books, literature aimed specifically for children, and even an ostomy doll, the parents claimed that their son suffered discrimination and was not able to properly communicate with physicians and other medical staff as a result of the hospitals’ failure to provide an interpreter.

The trial court dismissed the claims of the parents and sister, holding that they had no standing to sue since they had not been directly excluded or denied access to the hospital. The court granted summary judgment to the hospitals on the patient’s claim for an injunction, finding that claim to be too speculative, since there was no evidence that the patient would be likely to need hospital services at any time in the near future or that the hospitals would deny him an interpreter now that they knew he would prefer to have one. The court also granted summary judgment on the patient’s claims for damages, holding that there was not sufficient evidence to show that the hospitals acted with deliberate indifference toward the patient’s disability. Rather, the evidence showed that neither hospital was ever informed that the patient would like to have the services of an interpreter and, further, both hospitals took steps to accommodate the patient’s disability with both believing that they were communicating effectively with the patient. For these same reasons, on appeal, the court affirmed the lower court’s holdings.

Geiger v. Cent. Carolina Surgical Eye Assocs. PA (Summary)

EMPLOYMENT AGREEMENTS/VERBAL MODIFICATION

Geiger v. Cent. Carolina Surgical Eye Assocs. PA, No. COA14-169 (N.C. Ct. App. Oct. 7, 2014)

The Court of Appeals of North Carolina affirmed a trial court’s grant of a directed verdict in favor of an ophthalmologist who sued after her employer failed to pay her the wages she was guaranteed under her written employment contract.

This case involved an ophthalmologist employed by the defendant group (the employer) pursuant to a written employment agreement that included terms for a base salary, as well as bonus. While processing her application for participation, Blue Cross Blue Shield learned that the ophthalmologist was the subject of a National Practitioner Data Bank (“NPDB”) report (she had resigned from her prior employment while an investigation was underway regarding her clinical practice), which she had not disclosed on her application. This resulted in a delay in processing her application for participation in BCBS. Once the employer learned of the NPDB report, it met with the physician and told her that the terms of her employment would be changed – that she could work on a commission basis, but would not be provided a base salary. The ophthalmologist eventually began work for the employer and repeatedly complained that she was not being paid appropriately and pursuant to her contract. Ultimately, she stopped working for the employer and sued for breach of contract and violation of the state’s fair wage act. The employer raised the affirmative defense of modification of contract, alleging that it modified the contract during its discussions with the ophthalmologist and when it sent a modified contract to her two months after that conversation.

At trial, the court granted a directed verdict in favor of the ophthalmologist with respect to the affirmative defense of contract modification, noting that the fair wage law did not permit wages to be modified verbally and there was no evidence that the contract had been modified in writing.

Langenberg v. Warren Gen. Hosp. — Nov. 2013 (Summary)

EMPLOYMENT TERMINATION/NPDB REPORTS

Langenberg v. Warren Gen. Hosp., No. 1:12-cv-175-NBF (W.D. Pa. Nov. 22, 2013)

The United States District Court for the Western District of Pennsylvania granted a hospital’s motion to dismiss a vascular surgeon’s claims for abuse of process, breach of bylaws, and breach of the implied covenant of good faith and fair dealing. The surgeon sued after losing his employment and clinical privileges at the hospital.

Under the terms of the employment agreement between the surgeon and the hospital, the hospital promised the surgeon that it would acquire a new cardiac catheterization lab and would endeavor to develop a healthy cardiovascular practice. After several months of practice, the surgeon began to raise concerns about the quality of care offered at the hospital, noting a number of issues with patient safety, lack of supplies, medication errors, and a lack of employee professionalism. In response, the hospital notified the physician that it was terminating his employment, effective immediately, pursuant to its contractual right to terminate him without cause. A short time later, the hospital filed an adverse action report with the National Practitioner Data Bank, stating that the surgeon was terminated because of his lack of civility and demeaning attitude, which had a disruptive and detrimental effect on the hospital’s working environment.

The surgeon sued the hospital for breach of contract, among other things, arguing that the hospital was required by its bylaws to treat its termination of the surgeon as a non-adverse and, therefore, non-reportable event and, further, to offer him the hearing and appeal procedures outlined in its Fair Hearing Plan. The court rejected these claims. First, it noted that the bylaws did not include any promise on the part of the hospital not to report employment-related actions. It refused to look at the HCQIA’s definition of “professional review action,” despite the arguments of the surgeon that the definition was relevant to whether the hospital should have reported his termination. The court noted that since the surgeon was alleging breach of contract, the court only needed to look to the contract (the bylaws) for any contractual obligation on the part of the hospital not to report the surgeon. There was no such obligation in the bylaws.

Further, the court rejected the surgeon’s arguments that he should have been provided fair hearing rights, noting that the bylaws specifically excluded automatic terminations which followed the termination of employment from the list of actions giving rise to hearing rights. Again, it refused the surgeon’s suggestion that it should consult outside sources (state and federal law) regarding the hospital’s duty to provide the surgeon with hearing rights, noting that any such sources were irrelevant to whether the hospital had agreed by contract (in this case, the bylaws) to provide the surgeon with hearing rights.

The court denied the hospital’s motion to dismiss the surgeon’s claims of defamation, invasion of privacy, misrepresentation, and tortious interference. Those claims survive and could potentially go to trial in the future.

Kademian v. Marger (Summary)

GROUP PRACTICE RELATIONS/DISRUPTIVE BEHAVIOR

Kademian v. Marger, No. 25917 (Ohio Ct. App. Oct. 3, 2014)

The Court of Appeals of Ohio affirmed a lower court’s verdict denying a radiation oncologist’s motions for directed verdict and/or a new trial in a lawsuit that he brought against his former business partner alleging breach of fiduciary duty. The oncologist had been involved in a business partnership with the defendant for many years, with the oncologist holding a minority, 49 percent share of the partnership and the partner holding the majority, 51 percent share. Over the years, the two began to have difficulties working together. The oncologist claims this was because he reported quality concerns about a new prospective partner to a state board. The partner, on the other hand, claimed that the oncologist had a history of disruptive behavior which contributed to their deteriorating relationship. Eventually, the partner voted to dissolve the partnership. The partner immediately thereafter formed a new corporation which then contracted on an exclusive basis with several local hospitals, leaving the oncologist unable to exercise privileges at those hospitals. The oncologist claimed this constituted a breach of fiduciary duty on the part of the majority share-holding ex-partner.

At trial, the jury held in favor of the partner. Following the jury verdict, the oncologist asked the court to direct a verdict in his favor on the basis that reasonable minds could only conclude that the partner breached his fiduciary duties based on the undisputed facts entered into evidence. The court denied that motion and refused to grant a new trial, noting that there was evidence supporting both parties’ claims and the jury was free to weigh the evidence and conclude that the partner acted in good faith when deciding to dissolve the corporation. Particularly of interest was the court’s finding that “there was ample evidence to support the conclusion that it was [the oncologist’s] behavior that caused the schism between the shareholders and, still further, that given [the oncologist’s] behavior, [the partner’s] decision to dissolve the corporation was for a legitimate business purpose and was not lacking in good faith.”

On appeal, the Court of Appeals of Ohio affirmed the lower court’s decision. The court recited applicable law, noting that in closely held corporations, the majority shareholder has a duty of good faith and loyalty to the minority shareholder and may not use his or her position to advance personal interests at the expense of corporate interests. But, the court ultimately agreed with the lower court’s conclusion that there was sufficient evidence to support both parties’ assertions and it could not conclude, as a matter of law, that no genuine issue existed for trial.

Torchia v. Cmty. Health Care, Inc. (Summary)

DISCRIMINATION/BREACH OF CONTRACT

Torchia v. Cmty. Health Care, Inc., No. 12-5607 (D. N.J. Sept. 30, 2014)

The United States District Court for the District of New Jersey granted a health network’s motion for summary judgment against claims of employment discrimination and breach of contract filed by the former medical director. The medical director claimed that the CEO harassed her and made discriminatory remarks about her age, gender, national heritage, and religion.

The court concluded that the medical director did not present sufficient proof to infer that discrimination was the cause of her termination. It was unconvinced that her age or gender played a role in her termination, since the person who replaced her was a female over the age of 40. The court also found that her claims of discrimination based on national heritage and religion were implausible, since the local community demographics predominantly matched her Italian heritage and her Christian religion. This was further supported by the fact that the hospital hired most of its employees from the local community.

The court instead reasoned that the CEO harassed and bullied the medical director because he felt threatened that she would succeed him in his position, and explained that this evidenced more of a professional power struggle rather than discrimination based on the medical director’s personal characteristics. Although the court did consider the CEO’s comments to be unprofessional, it disagreed with the medical director’s arguments about any discriminatory motivations. The court relied heavily on the fact that ninety percent of the employees at the hospital were women and that the majority of professional and managerial employees were female.

Regarding the claim of breach of contract, the court explained that while the CEO’s alleged conduct may have felt egregious in the eyes of the medical director, it did not amount to the level of “outrageous, coercive, and unconscionable” behavior necessary to force a reasonable person to resign. As a result, the CEO’s behavior did not force the medical director to resign and therefore did not support a breach of contract claim.

U.S. v. SouthernCare, Inc. (Summary)

FALSE CLAIMS ACT

U.S. v. SouthernCare, Inc., No. CV410-124 (S.D. Ga. Sept. 29, 2014)

The United States District Court for the Southern District of Georgia granted in part and denied in part a motion to dismiss a qui tam action brought against a hospice provider (“Hospice”). The qui tam relator (“Relator”), a former employee at the Hospice, alleged that the Hospice violated the False Claims Act and the Georgia Medicaid False Claims Act by improperly admitting and recertifying patients who did not meet hospice criteria, as well as falsifying documents to support this activity.

In an earlier, separate lawsuit, the Hospice had entered into a settlement agreement with the government regarding false claims it had submitted. As part of the settlement agreement, the Hospice was required to establish a compliance program under its Corporate Integrity Agreement (“CIA”).

In this case, the Relator alleged that the Hospice did not comply with the CIA and instead continued to submit false claims to the government. The Relator cited to patients who received hospice care despite ineligibility, as well as others whose diagnoses were fraudulently altered. The Relator even claimed that the Hospice had improperly drugged a patient in order to make the patient decline in health and thus become eligible for hospice care.

The Hospice raised a number of arguments in its defense. It first asserted that the Relator was merely relying upon publicly available information, from the earlier suit. The court disagreed, finding that the Relator pled sufficient facts to establish himself as an original source of the information.

The Hospice also claimed that the Relator was bringing up claims that had previously been the subject of an earlier settlement agreement. The court explained that while the Relator was not permitted to re-litigate claims that had already been addressed in the settlement agreement, the Relator was permitted to sue over similar types of claims so long as the specific claim arose after the settlement agreement.

Furthermore, the Hospice argued that the Relator failed to meet certain pleading standards for fraud claims. While the court found that the Relator’s complaint was sufficient to put the Hospice on notice of the particular acts of fraud at issue, the court agreed that the Relator had failed to allege the necessary link between the alleged fraud and the submission of those claims to the government. The court granted the Relator leave to amend the complaint to cure the pleading deficiencies.

In the same opinion, the court granted the Relator’s motion to dismiss the Hospice’s claim for breach of duty of loyalty. This claim arose after the Relator left his employment at the Hospice and went to work for a competitor. The court concluded that the Hospice had offered only speculative allegations of any harm caused by the Relator’s actions. It described the claim as “baseless” and granted the Relator’s motion to dismiss.

Nahas v. Shore Med. Ctr. (Summary)

ANTITRUST/CIVIL RIGHTS

Nahas v. Shore Med. Ctr., No. 13-6537 (D. N.J. Sept. 29, 2014)

The United States District Court for the District of New Jersey granted a hospital’s motion to dismiss numerous legal claims filed by a surgeon. The surgeon alleged antitrust violations, civil rights violations, and unfair competition stemming from the hospital’s short-term suspension of his clinical privileges and various actions surrounding the suspension.

In 2003, the surgeon had pled guilty to criminal charges related to Medicare billing and his medical license was suspended for six months. Following this event, the hospital suspended the surgeon’s medical staff appointment and clinical privileges for three years.

According to the surgeon, when he reapplied for appointment and privileges in 2006, the hospital treated him with hostility. The surgeon alleged that the hostility was partially due to his Middle Eastern heritage.

After the dispute escalated, the surgeon succeeded in obtaining a court order from the New Jersey Superior Court which required the hospital to reinstate his privileges in general and vascular surgery. Furthermore, the superior court also instructed the hospital to assist the surgeon in the process of reinstating his endovascular surgery privileges. While the surgeon was permitted to exercise general and vascular surgery privileges, he alleged that the hospital stymied his efforts to obtain endovascular surgery privileges.

Between 2009 and 2012, there were a number of professional review activities and actions, including the following: (1) a 14-day suspension for performing endovascular procedures without appropriate privileges; (2) a referral to the Physician’s Assistance Program; (3) an investigation into concerns about his conduct; (4) a referral of cases to an external peer review organization; and (5) a focused professional practice evaluation.

The surgeon filed this lawsuit. The district court dismissed all of the surgeon’s claims. First, it addressed his antitrust claims, noting that the surgeon had not pled any facts suggesting that the hospital or its physicians had an agreement to restrain competition in a way that would violate Section 1 or Section 2 of the Sherman Act.

The court also held that the surgeon failed to offer sufficient facts to support a claim of racial discrimination. According to the court: “Alleging wrongdoing, and alleging that the victim of the wrong is a racial minority, without more, is insufficient to plead discrimination.” The court also dismissed the surgeon’s unfair competition claim, explaining that the surgeon failed to meet the minimum requirements necessary to plead a claim under the Lanham Act.

Finally, the court concluded that the surgeon failed to allege a due process claim.   Specifically, the court held that the surgeon did not specify whether the hospital had violated a federal or state constitution. The surgeon also failed to properly allege action on behalf of a government entity.

Terry v. Cmty. Health Network, Inc. (Summary)

MALPRACTICE/INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS

Terry v. Cmty. Health Network, Inc., No. 49A04-1312-PL-630 (Ind. Ct. App. Sept. 26, 2014)

The Court of Appeals of Indiana affirmed in part and reversed in part a trial court’s decision regarding whether a patient’s claims for breach of duty and intentional infliction of emotional distress could go forward.

An unconscious patient was admitted to the hospital after having been slipped a date rape drug. While examining the patient, the ED physician noted signs of possible vaginal trauma, but did not notify the patient, did not report it to authorities, and did not use a rape kit to preserve potential evidence. During her hospital stay, hospital staff made derogatory remarks to the patient referring to her as an addict and writing “Happy Birthday” next to the physician’s notation that she had possible vaginal trauma.

The patient sued the hospital for breach of duty. Specifically, the patient alleged that the hospital breached its duty to her by (1) failing to notify law enforcement of a possible rape; (2) failing to preserve evidence of a possible rape; and (3) failing to notify her of the possible rape. The court concluded that these allegations stem from medical malpractice claims and, consistent with the Medical Malpractice Act, were required to be presented to a medical review panel before a complaint could be filed in court. Since the patient had not brought these claims to a medical review panel, the court concluded that it lacked subject matter jurisdiction and upheld the dismissal of the claims.

However, the court found that the claims for intentional infliction of emotional distress stemming from the disparaging remarks made about the patient by hospital staff were not made while staff were acting in a professional capacity as medical care providers. Thus, these claims were not covered by the Medical Malpractice Act and were not required to be filed with a medical review panel. The court reversed the dismissal of these claims.

Digiosia v. Aurora Health Care, Inc. (Summary)

DISCRIMINATION

Digiosia v. Aurora Health Care, Inc., No. 12-C-1292 (E.D. Wis. Sept. 24, 2014)

The United States District Court for the Eastern District of Wisconsin granted a health system’s motion for summary judgment with respect to discrimination claims brought by an employed obstetrician. In her complaint, the obstetrician alleged that the health system, through its clinic, placed her on leave and terminated her employment in violation of the Americans with Disabilities Act (“ADA”) and the Americans with Disabilities Act Amendments Act (“ADAAA”).

According to the health system, the problems with the obstetrician arose following two infant deaths that occurred within a month of each other. The peer review process was triggered and the obstetrician was informed by the clinic that she could take a leave voluntarily or she would be placed on a leave. The obstetrician requested a medical leave.

While she was on leave, the other obstetricians in the clinic decided they did not want her to return to practice with them. Shortly thereafter, the clinic’s management committee voted unanimously to terminate the obstetrician’s employment.

The obstetrician argued that the forced leave was a violation of the ADA because her employer regarded her as disabled. In particular, she claimed that her colleagues knew she suffered from bipolar disorder and believed this condition impaired her ability to work.

In granting the motion for summary judgment, the court concluded that the obstetrician failed to show that the clinic was motivated by a desire to discriminate against her because of a real or perceived disability. Even though the obstetrician presented evidence that some of her colleagues made flippant comments about her bipolar disorder, the court concluded that this evidence was only “barely suggestive” that her colleagues viewed her condition as impacting her work.

Additionally, the court found that the decision to terminate the obstetrician’s employment was made by the management committee of the clinic and that only two of the ten members on the committee even knew that she suffered from bipolar disorder.   Thus, the court concluded, there was no evidence that the obstetrician’s condition was a cause of the decision to terminate her employment much less that it was “the” cause for the termination. In dismissing the obstetrician’s lawsuit, the court concluded that the obstetrician was unable to show that her employer was motivated by a desire to discriminate against her due to a real or perceived disability.