Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Mich. (Summary)

Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Mich. (Summary)

ERISA

Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Mich., Nos. 13-1773, 13-1859 (6th Cir. May 14, 2014)

fulltextThe United States Court of Appeals for the Sixth Circuit affirmed a grant of summary judgment and award in favor of Hi-Lex Controls, Inc. (“Hi-Lex”) in its lawsuit against Blue Cross Blue Shield of Michigan (“Blue Cross”).  The Sixth Circuit held that Blue Cross had breached its fiduciary duty to Hi-Lex under the Employee Retirement Income Security Act of 1974 (“ERISA”) by falsely inflating hospital claims with hidden surcharges, an act constituting “self-dealing.”

This dispute arose out of an arrangement between Blue Cross and Hi-Lex in which Blue Cross served as third-party administrator for Hi-Lex’s self-funded Health and Welfare Benefit Plan.  Under the terms of their contract, Blue Cross agreed to process healthcare claims for Hi-Lex’s employees and to grant those employees access to its provider networks.  Hi-Lex paid monthly “administrative fees” to Blue Cross in exchange for these services.  Two years after entering this agreement, Blue Cross decided to increase its revenue by adding hidden surcharges to the hospital claims paid by clients.  In 2011 (18 years after implementing this billing method), Blue Cross disclosed the existence of the fees to Hi-Lex in a letter, describing them as “administrative compensation.”

Hi-Lex sued Blue Cross, alleging violations of ERISA.  The trial court, in a bench trial, awarded Hi-Lex over $6 million in damages and prejudgment interest.  Blue Cross appealed.  The Sixth Circuit affirmed the lower court’s judgment, concluding, among other things, that Blue Cross was a fiduciary for ERISA purposes because Blue Cross held plan assets of the Hi-Lex Plan and that Hi-Lex’s suit was not barred by the statute of limitations.

U.S. ex rel. Ryan v. Lederman (Summary)

U.S. ex rel. Ryan v. Lederman (Summary)

FALSE CLAIMS ACT

U.S. ex rel. Ryan v. Lederman, No.04-CV-2483 (E.D. N.Y. May 13, 2014)

fulltextThe United States District Court for the Eastern District of New York denied in part and granted in part the federal government’s motion for summary judgment in a False Claims Act (“FCA”) suit brought against a physician.  The government claimed that the physician performed over 300 below-the-neck stereotactic radiosurgeries and billed them to Medicare despite local coverage determinations by the Part B carrier that below-the-neck stereotactic radiosurgeries were not covered.

In ruling on the government’s motion for summary judgment, the court concluded that the physician’s claims were false for two separate reasons.  First, since the Medicare Part B carrier’s local coverage determination was conclusive, the physician’s submission of claims for the below-the-neck stereotactic radiosurgery procedures was false.  Second, the physician’s coding of the procedures made his claims for payment false because the codes used did not cover procedures performed below the neck.  Nonetheless, the court held that whether the doctor had knowledge (for FCA purposes) that he was submitting false claims could not be resolved on summary judgment even though the physician received feedback, and was thus on notice, that below-the-neck procedures were not reimbursable under Part B.

However, the court granted the government’s motion for summary judgment for its payment based on mistake of fact and unjust enrichment claims against the physician.  The court pointed out that these claims were essentially duplicates of the FCA claim, but without the intent requirement.

United Nurses of Children’s Hosp. v. Rady Children’s Hosp. – San Diego (Summary)

United Nurses of Children’s Hosp. v. Rady Children’s Hosp. – San Diego (Summary)

COLLECTIVE BARGAINING/ARBITRATION

United Nurses of Children’s Hosp. v. Rady Children’s Hosp. – San Diego, No. 13-CV-2133-LAB-JMA (S.D. Cal. May 9, 2014)

fulltextThe United States District Court for the Southern District of California denied an employee union’s motion to compel arbitration of certain issues.  A respiratory therapist (“RT”) was issued a final warning by her hospital employer for multiple instances of misconduct, placed on an improvement plan, and transferred from the neonatal emergency transport team to a clinical position with lower pay.  The union filed a grievance and a demand for arbitration on behalf of the RT.  In the grievance, the union challenged the hospital’s actions against the RT.  The arbitration process, however, never materialized because the parties could not agree on a statement of issues.  Specifically, the parties could not agree on whether the RT’s transfer amounted to discipline under the collective bargaining agreement (“CBA”).  The union argued that the hospital’s refusal to agree to its framing of the statement amounted to the hospital refusing to arbitrate whether the RT’s transfer was for disciplinary reasons and, if so, was for just cause.  The court held that the hospital did not refuse arbitration because it agreed to arbitrate whether the transfer was a violation of the CBA. This would allow the arbitrator to also address whether the transfer was for disciplinary reasons.  According to the court, rather than refusing to arbitrate, the hospital refused to give up an argument about the nature of the transfer and, regardless of the argument’s propriety, the hospital could not be forced to relinquish it.

Looney v. Moore (Summary)

Looney v. Moore (Summary)

PEER REVIEW PRIVILEGE

Looney v. Moore, No. 2:13-CV-00733-KOB (N.D. Ala. May 12, 2014)

fulltextThe United States District Court for the Northern District of Alabama denied a motion filed by class action plaintiffs seeking to compel the University of Alabama Birmingham (“UAB”) to produce records created by its institutional review board (“IRB”) in connection with a clinical research trial performed on premature infants with low birth weights.  The parents of the infants in the clinical research trial sued members of UAB’s IRB, claiming they were negligent and did not obtain informed consent.  In denying the motion, the court held that Alabama’s statutory peer review privilege applied to the IRB and the documents at issue were privileged because they involved quality assurance review.  The court also concluded that the state peer review privilege was not preempted by federal statutes and regulations governing IRBs because these sources made no mention of civil discovery, much less the peer review privilege.

Simpson v. Beaver Dam Cmty. Hosp., Inc. (Summary)

Simpson v. Beaver Dam Cmty. Hosp., Inc. (Summary)

TITLE VII

Simpson v. Beaver Dam Cmty. Hosp., Inc., No. 13-cv-40-bbc (W.D. Wis. May 9, 2014)

fulltextThe U.S. District Court for the Western District of Wisconsin granted a motion for summary judgment filed by a not-for-profit organization of integrated healthcare services (the “hospital”) in a suit brought against it by a physician alleging race discrimination under Title VII.

In 2010, the physician, who was African-American, was offered employment in a clinic affiliated with the hospital.  The physician’s employment was dependent upon his attainment and maintenance of medical staff membership and clinical privileges.  During the credentialing process, several “red flags” arose regarding the physician’s application, including his need to take an oral exam to obtain a medical license in the state of Wisconsin, a negative reference describing his disruptive behavior, two medical malpractice claims which were filed when the physician was not insured, and a probationary period during his residency.  To prevent a report to the National Practitioner Data Bank because of the likelihood that his application would be denied, the physician withdrew his application.

Thereafter, the physician sued the hospital, claiming that he was discriminated against because of his race.  The hospital filed a motion for summary judgment, which the court granted.  In ruling on the hospital’s motion for summary judgment, the court determined that the hospital’s concerns regarding the “red flags” were not unreasonable.  For example, the oral exam was a deviation from the normal licensure process and, as such, without evidence pointing towards a lack of sincerity, the hospital was well within its right to consider it.  Further, it was reasonable for the hospital to rely on the negative reference.  Similarly, the hospital was under no obligation to comply with the physician’s request not to contact a former employer who the physician assumed gave the negative reference.  The court also held that the hospital’s employment offers to three Caucasians after the physician withdrew his application could not support the physician’s claims.  None of the Caucasian physicians’ applications contained problems similar to the physician’s application.  As a result, the physician failed to show that the hired physicians were similarly situated.

Long v. Quorum Health Res., LLC (Summary)

Long v. Quorum Health Res., LLC (Summary)

DATA BANK/LIBEL AND TORTIOUS INTERFERENCE

Long v. Quorum Health Res., LLC, No. 2:13-cv-189 (D. Vt. May 5, 2014)

fulltextThe United States District Court for the District of Vermont granted a hospital’s motion to dismiss and denied a physician’s motion for leave to amend his complaint in a case brought by the physician against the hospital, asserting claims for libel and tortious interference with prospective business relationships.  The suit was rooted in the hospital’s report to the National Practitioner Data Bank (“NPDB”) describing the physician’s voluntary surrender of his privileges during an investigation.

After the physician made allegations that someone at the hospital was deliberately contaminating several of his surgeries with bacteria and, consequently, infecting his patients, the hospital initiated an investigation to, in part, look into the physician’s allegations.  As a result of the investigation, the hospital prohibited the physician from performing surgeries pending completion of a psychiatric evaluation.  The physician resigned the next day.  The hospital submitted a report to the NPDB indicating the physician resigned while under investigation.  The physician sued the hospital and others in 2005.  The suit ultimately resulted in a $4 million settlement in favor of the physician.  However, the settlement did not require removal of the NPDB report. In 2011, the physician challenged the report, seeking review by the Secretary of the Department of Health and Human Services (“HHS”).  HHS requested additional information from the hospital, which was provided and included a chronology of events and internal correspondence.  Based on the information, HHS declined to remove the NPDB report and added a notation that the report was properly filed.  The physician filed a second suit alleging that the information provided by the hospital in response to HHS’s request was libelous.  The physician also asserted a claim for tortious interference.

In granting the hospital’s motion to dismiss in the second suit, the court, among other things, concluded that the physician’s claims were barred by the legal doctrine of res judicata because the claims were based on events that arose out of the same core of facts as the physician’s 2005 suit.  The court also denied the physician’s request for leave to amend his complaint to add additional causes of actions, including one under Vermont’s consumer fraud statute.  According to the court, the underlying facts did not fall within the purview of the state’s consumer fraud statute because the physician was not a consumer as defined by the statute.

Crow v. City of Colo. Springs Mem’l Health Sys. (Summary)

Crow v. City of Colo. Springs Mem’l Health Sys. (Summary)

ADA/DUE PROCESS

Crow v. City of Colo. Springs Mem’l Health Sys., No. 13-cv-02842-RBJ (D. Colo. May 5, 2014)fulltext

In July 2011, the plaintiff physician was hired for a term of one year by Memorial Health System (“MHS,” described as an “enterprise of the City of Colorado Springs”) after it acquired his former group practice, to perform General Surgery and Trauma services.  Shortly thereafter, he was injured, unable to work and subsequently granted leave.  In April 2012, he sought a limited return to work and accommodations.  However, his request for accommodation was never forwarded to the Accommodation Evaluation Committee (“AEC”) due to “inconsistencies.” Despite numerous attempts to remedy his application, it never was given to AEC for review.  He was not permitted to return to work and his employment was not reinstated, resulting in termination.  He also sought employment as a breast surgeon from June 2012 until his termination.  He alleged that despite the fact that he was qualified for the position, MHS filled one or more positions with female physicians. The lawsuit alleged procedural and substantive due process and equal protection claims against individual representatives of MHS.

The U.S. District Court for the District of Colorado granted defendants’ motion to dismiss the constitutional claims.  The court held that the procedural due process claim was inappropriate because the crux of his complaint (failure to consider accommodation) was a claim more properly brought against MHS under the ADA rather than the defendants under the due process clause. The court also found that the substantive due process claims were not sufficiently egregious to substantiate a cause of action under the due process clause because the alleged arbitrary behavior did not shock the conscience and was at best motivated by indifference or ill-will.  Finally, the court held that plaintiff failed to plead specific allegations linking defendants to plaintiff’s denial of employment as a breast surgeon and as a result his equal protection claim against the defendants was improper.

Clark v. Evergreen Sw. Behavioral Health Servs., LLC (Summary)

Clark v. Evergreen Sw. Behavioral Health Servs., LLC (Summary)

SEXUAL HARASSMENT

Clark v. Evergreen Sw. Behavioral Health Servs., LLC, No. 1:12-cv-00218 (S.D. Ohio May 2, 2014)

The U.S. District Court for the Southern District of Ohio denied a hospital’s motion for summary judgment against a former fulltextemployee’s claims of sex discrimination and retaliatory discharge.  Mr. Clark, a registered nurse, was allegedly forced to resign after breaking off a consensual sexual relationship with Dr. Cantor, the Acting Medical Director/Administrator of the hospital. According to the allegations in the case, Dr. Cantor pressured the Director of Nursing to fire Clark shortly after their break-up.  Ms. Charlier, the Director of Nursing, offered instead to move Clark to a separate shift so that he would no longer be working alongside Dr. Cantor.  When Clark asked Charlier about why he was being moved to another shift, she told him that it was because Dr. Cantor wanted him fired.  Clark informed her about his past affair with Dr. Cantor, which Charlier passed on to her supervisor and to a Managing Member of the Board.  A member of the hospital’s management team told Charlier that “Someone is going to have to fall on the sword.”  Clark volunteered to resign so that no one else would be punished. Clark’s lawsuit alleges that he was discriminated against on the basis of his sex and retaliated against for engaging in protected activity in violation of Ohio law.  The hospital counters that Clark was terminated for sexually harassing other employees and for creating a “disruptive and racially charged atmosphere” at the hospital.  The court denied the hospital’s claim for summary judgment, noting the suspicious timing of Clark’s termination (just one week after he broke off the affair).  The court found that Clark had established prima facie claims of discrimination and retaliation.

Babchuk v. Ind. Univ. Health, Inc. (Summary)

Babchuk v. Ind. Univ. Health, Inc. (Summary)

STATE ACTION/DUE PROCESS

Babchuk v. Ind. Univ. Health, Inc., No. 1:13-cv-01376-JMS-DML (S.D. Ind. Apr. 30, 2014)fulltext

The Southern District of Indiana denied defendants’ motion to dismiss plaintiff’s civil rights claim. Plaintiff, a doctor and former employee of defendants, alleged that defendants are state actors and that he was wrongfully terminated by them without due process. Defendants argued that they are not state actors and this claim should be dismissed because this is not a matter under federal court jurisdiction. The court held that the issue of whether they were state actors is an element of plaintiff’s civil rights claim over which the court has jurisdiction. Moreover, the defendants attempt to argue that plaintiff failed to state a claim, but because they did not assert it in their original motion to dismiss, they waived their right to this argument.

King v. Garfield County Pub. Hosp. (Summary)

King v. Garfield County Pub. Hosp. (Summary)

DRUG TESTING OF EMPLOYEES

King v. Garfield County Pub. Hosp., No. 12-CV-0622-TOR (E.D. Wash. May 1, 2014)

The U.S. District Court for the Eastern District of Washington granted in part and denied in part a hospital’s motion for summary judgment after a nurse’s employment was terminated for alleged drug diversion.fulltext

The plaintiff, a registered nurse, was employed by the defendant hospital. After a painful dental procedure, the nurse was prescribed painkillers with codeine. In the days that followed, another nurse suspected that the hospital’s supply of morphine had been diverted and diluted by an employee, as a morphine sulfate bottle that was intended to contain only 15 milliliters actually contained 34 milliliters. The hospital subsequently administered a drug test to its employees. The nurse, who had been taking the prescribed painkillers with codeine, which metabolizes into morphine, was found to have high levels of morphine in his system, and was subsequently put on leave. Experts later opined that while there was a presence of the drug in the nurse’s system, the results were not consistent with the use of the morphine from the hospital. The nurse then sued the hospital, along with the company involved in administering the drug test, and the doctor responsible for interpreting the test’s results.

The court held that the doctor interpreting the drug test’s results may have been negligent in telling the hospital that the nurse had near-fatal levels of morphine in his system. The doctor was unable to evaluate the dosage levels from the simple urine analysis conducted, and he should have taken into account the fact that the nurse was on prescribed painkillers with codeine. Additionally, it was determined that an expert witness was not required to explain the causal relationship between the negligence and the resulting injury to the nurse.

The court ruled that the administration of the drug test was not an unreasonable search in violation of the Fourth Amendment, because a government hospital has so high an interest in protecting patients from employees under the influence of drugs. The court found potential merit in the nurse’s claims that his termination without a hearing was in violation of his right to due process. Even though the nurse was later able to find a job elsewhere, a name-clearing hearing was still deemed appropriate because the accuracy of the charges was contested, the charges had been made subject to public disclosure, and the accusations were connected to his termination.

Hospital officials were not entitled to qualified immunity because they placed stigmatizing information in the nurse’s personnel file without a name-clearing hearing. The court did grant the defendants’ summary judgment against claims of a breach of promises of specific treatment, finding that there was no evidence presented to establish the hospital’s pattern of practice that would contradict the language of the hospital’s employee handbook.

The hospital was not vicariously liable for the actions of the doctor interpreting the drug test’s results, as the nurse was unable to explain how this doctor presented himself as an agent for the hospital. The request for summary judgment to dismiss this claim was therefore granted.