McCollum v. U.S. Dep’t of Health & Human Servs. (Summary)

CONSTITUTIONALITY OF HEALTH REFORM LAW

McCollum v. U.S. Dep’t of Health & Human Servs., No. 3:10-cv-91 RV/EMT (N.D. Fla. Oct. 14, 2010)

The United States District Court for the Northern District of Florida granted in part and denied in part the Department of Health and Human Services (“HHS”) motion to dismiss six claims brought by various state officials and citizens challenging the constitutionality of the Health Care and Education Reconciliation Act of 2010 (the “Act”).

The two counts that the court allowed to go forward are: Count 1, the plaintiffs’ claim that the provision of the Act requiring all citizens, beginning in 2014, to obtain federally approved health insurance or pay a monetary penalty exceeds Congress’ authority under the Commerce Clause; and Count 4, that the Act unconstitutionally coerces and commandeers the states with respect to Medicaid by altering and expanding the program.

The court rejected HHS’ argument that the court did not have jurisdiction to review the individual mandate and penalty provision because the penalty was in fact a tax, and thus subject to the Anti-Injunction Act which prohibits suits “for the purpose of restraining the assessment or collection of any tax.” The court also rejected HHS’ argument that the individual plaintiffs – individuals who do not currently have health insurance and who will be required to purchase it under the individual mandate provision or pay a penalty – do not have standing to bring their claims because they have not suffered an injury in fact. The court found that the individual plaintiffs established “‘a realistic danger of sustaining a direct injury as a result of the statute’s operation or enforcement’ that is reasonably ‘pegged to a sufficiently fixed period of time,’ and which is not ‘merely hypothetical or conjectural.’” The court also ruled that the issue was ripe for review because “[t]he complained of injury … is ‘certainly impending’ as there is no reason whatsoever to doubt that the federal government will enforce an individual mandate and employer mandate against the plaintiffs.” It rejected HHS’ contention that the claims were not ripe for review because no injury can occur before 2014 when the act goes into effect.

Having rejected the defendants’ arguments regarding jurisdiction and standing, the court reviewed the plaintiffs’ claim that Congress exceeded its authority under the Commerce Clause in enacting the individual mandate and penalty. Noting that “the government has never required people to buy any good or service as a condition of lawful residence in the United States,” the court found that the plaintiffs “most definitely stated a plausible claim with respect to this cause of action.”

Turning to the claims of the state plaintiffs, the court said that their coercion theory – they are being coerced by Congress to accept changes in the Medicaid program even though they cannot afford them – “stands on extremely ‘wobbly legs,’” but it allowed the claim to go forward, noting that the Eleventh Circuit, unlike other circuits, has not directly addressed and foreclosed this argument. The court also noted that “the point at which pressure turns into compulsion, and ceases to be inducement, would be a question of degree, at times, perhaps, of fact.”

 

McClellan v. Patel

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
ANA MARIA MCCLELLAN, as Civil No. 06-392-AA
Personal Representative of the
OPINION AND ORDER
Estate of IAN MURILLO MCCLELLAN,
a deceased child,

Plaintiff,

vs.

JAYANT MUKUNDRAY PATEL, M.D.;
NORTHWEST PERMANENTE, P.C., an
Oregon corporation; KAISER
FOUNDATION HOSPITALS, a
California corporation; KAISER
HEALTH PLAN OF THE NORTHWEST;
OREGON HEALTH SCIENCES UNIVERSITY;
and THE OREGON BOARD OF MEDICAL
EXAMINERS, by and through the
STATE OF OREGON,

Defendants.

David K. Miller
Robert Beatty-Walters
Miller & Wagner
2210 N.W. Flanders Street
Portland, Oregon 97210-3408
Attorneys for plaintiff

Page 1 – OPINION AND ORDER

John E. Hart
Troy S. Bundy
Hoffman, Hart & Wagner, LLP
1000 S.W. Broadway, 20th Floor
Portland, Oregon 97205
Attorneys for Kaiser defendants
Donald Bowerman
Bowerman & Boutin, LLP
1001 Molalla Avenue, Suite 208
Oregon City, Oregon 97045
Attorney for defendant Oregon Health
Sciences University
AIKEN, Judge:
Pursuant to 28 U.S.C. § 1447, plaintiff moves to remand this
action to state court on the grounds that this court lacks
subject matter jurisdiction. Plaintiff’s motion is granted.
BACKGROUND
This is a medical malpractice case brought in state court
under state common law theories of negligence against defendants
in connection with the provision of surgical care to a 3 ½ year
old boy in February 1999. The surgery at issue was performed by
defendant Jayant M. Patel.
Defendants Kaiser filed a Notice of Removal on March 20,
2006. The defendant that initially filed the Notice of Removal,
Kaiser Foundation Health Plan of the Northwest (KFHP), has since
been dismissed from this lawsuit. Further, consent to removal
has been obtained from all remaining defendants. Defendants
allege that plaintiff’s claims are preempted under the Employee
Retirement Income Security Act (ERISA), 29 U.S.C. § 1144(a).

Page 2 – OPINION AND ORDER

DISCUSSION
Pursuant to 28 U.S.C. § 1441, “any civil action brought in a
State court of which the district courts of the United States
have original jurisdiction, may be removed by the defendant or
other defendants, to the district court of the United States[.]”
Removal is proper only where the federal court would have had
subject matter jurisdiction over the matter if the plaintiff had
originally filed the action in federal court. The existence of
federal jurisdiction ordinarily depends on the facts as they
exist when the complaint is filed. Newman-Green, Inc. v.
Alfonzo-Larrain, 490 U.S. 826, 830 (1989)(internal citation
omitted).
Defendants assert that plaintiff’s claims are not limited to
malpractice claims against defendant Patel. Defendants argue
that plaintiff’s claims fall into “two distinct categories: 1)
claims challenging the medical decisions of Dr. Patel, and 2)
claims challenging the administrative decisions of the Kaiser
defendants.” Defendant Kaiser’s Memo in Response, p. 2.
Defendants assert that it is plaintiff’s “administrative
negligence claims” that trigger ERISA preemption and this court’s
resulting jurisdiction. Id.
Specifically, Kaiser defendants allege that plaintiff makes
the following “administrative negligence” claims: Ian McClellan
died following abdominal surgery performed by defendant Jayant

Page 3 – OPINION AND ORDER

Patel, M.D. Complaint, ¶ 1. The Kaiser defendants were “jointly
engaged in the practice of medicine and the delivery of other
healthcare services. Id. at ¶ 5. The collective defendants
granted Dr. Patel surgical privileges and held Dr. Patel out to
the public and plaintiff as a competent physician, specially
skilled in performing abdominal surgery on children. Id.
Defendant Patel was hired by the Kaiser defendants in 1989, and
the Kaiser defendants were aware of at least eight medical
malpractice lawsuits, some of which involved wrongful death cases
and Dr. Patel’s care. Id. at ¶ 11. In 1997, the Kaiser
defendants began conducting an internal review of approximately
80 potential malpractice incidents involving Dr. Patel. As a
result of that internal review, plaintiff alleges the Kaiser
defendants restricted defendant Patel’s surgical privileges in
the summer of 1998, limiting his ability to perform certain
abdominal procedures as well as placing other requirements on
defendant Patel. Id. at ¶ 14.
Plaintiff further alleges that the Kaiser defendants failed
to inform the Oregon Board of Medical Examiners and defendant
Oregon Health Sciences University (OHSU) about defendant Patel
and his “malpractice history.” Further, plaintiff alleges that:
“Despite Dr. Patel’s malpractice history and the restrictions
defendant Kaiser placed on his surgical privileges, Dr. Patel was
nevertheless elevated to a position of leadership in defendant

Page 4 – OPINION AND ORDER

Kaiser’s pediatric surgical service. Id. at ¶ 17.
Finally, plaintiff has alleged against the Kaiser defendants
in particular, that those defendants were negligent “in allowing
Dr. Patel to operate on children in light of the malpractice
incidents that caused defendant Kaiser to restrict his surgical
privileges and put him on a professional improvement plan
approximately six months earlier;” “in failing to report Dr.
Patel’s malpractice incidents between 1991 and 2005 to the Oregon
Board of Medical Examiners as required by ORS 742.400(2);” and
“in failing to have an adequate system in place between 1991 and
1999 to identify physicians and surgeons with surgical
complication rates outside the expected range.”
To determine whether plaintiff’s claims fall within the
scope of § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B), the
court must determine whether those claims are “to recover
benefits due . . . under the terms of [the] plan, to enforce
. . . rights under the terms of the plan, or to clarify . . .
rights to future benefits under the terms of the plan.” Id. I
find nothing in plaintiff’s complaint to indicate that plaintiff
is challenging her ERISA welfare plan’s failure to provide
benefits due under the plan, nor does plaintiff ask the court to
enforce her rights under the terms of her plan or to clarify her
right to future benefits. Instead, plaintiff complains about the
low quality medical treatment her son received and argues that

Page 5 – OPINION AND ORDER

the defendants should be held liable under agency and negligence
principles. As the court stated in Dukes v. U.S. Healthcare,
Inc., 57 F.3d 350 (3rd Cir. 1995), “[w]e are confident that a
claim about the quality of a benefit received is not a claim
under § 502(a)(1)(B) to “recover benefits due . . . under the
terms of [the] plan.” Id. at 356.
It cannot be disputed that anything in the legislative
history, structure, or purpose of ERISA suggests that Congress
viewed § 502(a)(1)(B) as creating a remedy for a participant
injured by medical malpractice. Instead, Congress sought to
assure that promised benefits would be available when plan
participants had need of them and § 502 was intended to provide
each individual participant with a remedy in the event that
promises made by the plan were not kept. The Supreme Court has
noted that while quality standards and work place regulations in
the context of hospital services will indirectly affect the sorts
of benefits an ERISA plan can afford, those have traditionally
been left to the states, and there is no indication in ERISA that
Congress chose to displace general health care regulation by the
states. N.Y. State Conf. of Blue Shield Plans v. Travelers Ins.
Co., 514 U.S. 645, 657-58 (1995).
The inquiry here is whether plaintiff’s claim rests upon the
terms of the plan or requires construction of the plan language;
if so, the claim is preempted by ERISA. Claims challenging the

Page 6 – OPINION AND ORDER

quality of a benefit, as noted above in Dukes, are held not
preempted by ERISA. In order to determine whether ERISA preempts
plaintiff’s medical malpractice claim, the court must determine
whether the alleged negligent medical advice was inextricable
from its actions coordinating benefits and services under the
plan. See Roessert v. Health Net, 929 F.Supp. 343 (N.D. Cal.
1996)(“nothing in [defendant’s] duty to administer benefits to
plaintiff required it to make medical judgments[,]” nor did
plaintiff’s claims require reference to an ERISA plan to resolve
them).
Defendants here assert that plaintiff’s claims allege
“administrative” actions by defendants, therefore ERISA
preemption applies and removal to federal court is proper.
Plaintiff alleges that defendants were negligent for several
actions, including allegations that relate to the oversight and
retention of defendant Dr. Patel. Plaintiff alleges additional
direct negligence claims against these defendants that implicate
the standards of care for providing medical information to
patients, as wells as claims that defendants failed to report Dr.
Patel’s malpractice incidents to the Oregon Board of Medical
Examiners as required by Or. Rev. Stat. 742.400(2), and failed to
thoroughly and adequately investigate Dr. Patel’s prior history
of discipline and fraudulent conduct in the State of New York
prior to granting him surgical privileges. Complaint, ¶ 23.

Page 7 – OPINION AND ORDER

Similar to the court’s analysis in Dukes, however, I find that
plaintiff’s allegations allege common law negligence directly
related to the quality of care ultimately provided to plaintiff’s
son. These claims do not implicate the administration of, or
necessitate the interpretation of, the benefits plan.
Further, defendants fail to point this court to a plan-
created right implicated by plaintiff’s state law medical
malpractice claims. I find no allegation by plaintiff that the
defendants have withheld plan benefits due, and nothing in the
complaint resembles a request that the court clarify a right to a
future benefit. In fact, plaintiff’s complaint centers on past
events.
The Ninth Circuit’s analysis and holding in Bui v. American
Telephone and Telegraph, 310 F.3d 1143 (9th Cir. 2002), relied on
by both parties, is instructive. There, plaintiff Bui sued his
own employer and it was those claims that the court found
preempted by ERISA finding that plaintiff was claiming a denial
of benefits under the ERISA plan. Plaintiff’s malpractice claims
against healthcare providers were not preempted by the court.
The court did, however, preempt plaintiff’s negligence claim in
the plan’s retention of a service provider, holding that the
selection of service providers under the benefits plan is a
necessary part of the administration of an ERISA plan. Here,
plaintiff is not alleging that defendant Kaiser Foundation Health

Page 8 – OPINION AND ORDER

Plan was negligent in contracting with defendants Northwest
Permanente, Kaiser Foundation Hospitals, or OHSU. Instead,
plaintiff’s claim is against the hospital and Dr. Patel’s
employer for negligence in credentialing Dr. Patel and allowing
him to provide surgical services to plaintiff’s decedent. I find
plaintiff’s claims to be similar to those in Dukes which were not
preempted, than plaintiff’s claims in Bui. Plaintiff’s claims
relate to duties outside the proper administration of the benefit
plan. As plaintiff notes, any patient treated at any hospital in
the state of Oregon, regardless of whether their benefits were
provided under an ERISA plan, could bring a claim against their
hospital and the employer of their surgeon for negligence in
allowing that surgeon to practice.
In sum, since the actions alleged by plaintiff do not
require interpretation of the plan, I find no reason to believe
that state resolution of the disputed medical decisions would
affect the important uniformity of federal ERISA law. Rather,
plaintiff’s complaint falls within the familiar purview of state
tort law. Therefore, the causes of action pled against
defendants do not come within the ambit of § 502(a)(1)(B) and
this court lacks jurisdiction to hear them.
CONCLUSION
Plaintiff’s motion to remand this action to state court
(doc. 12) is granted. Further, plaintiff’s request for oral

Page 9 – OPINION AND ORDER

argument is denied as unnecessary.
IT IS SO ORDERED.
Dated this 16 day of July 2006.

/s/ Ann Aiken
Ann Aiken
United States District Judge

Page 10 – OPINION AND ORDER

McDonnell v. Cardiothoracic & Vascular Surgical Assoc.

PHYSICIAN RECRUITMENT

McDonnell v. Cardiothoracic & Vascular Surgical Assoc.,
No. 04-4151, 04-4509 (6th Cir. Jan. 31, 2006)

The United States Court of Appeals for the Sixth Circuit
affirmed summary judgment in favor of a hospital and physician group that were
sued for fraud, breach of an employment agreement and intentional interference
with contractual relationships by a physician who had been recruited by the
physician group. The recruit claimed that the defendants had fraudulently induced
him to sign the employment agreement by failing to inform him that he would
also be required to sign a physician recruitment agreement and promissory note.
The court rejected the physician’s claim that the physician recruitment agreement
violated the Stark Law and the Antikickback Statute, agreeing with the federal
district court that it would have been illegal for the hospital to provide
recruitment assistance to the group without such a recruitment agreement and
promissory note.

 

McCall v. Pacificare of California, Inc

McCall v. Pacificare of California, Inc.,

No. S082236 (Cal. May 3, 2001)

An enrollee sued his Medicare HMO after one of its physicians repeatedly refused
to provide him with referrals and services incidental to his lung disease. The
HMO argued that all of the enrollee’s claims were subject to the Medicare Act’s
requirement that complainants exhaust their administrative remedies prior to
filing suit in court. The California Supreme Court declared that state tort
claims brought against a Medicare provider are not preempted by the Medicare
Act and are not subject to the administrative exhaustion requirement.

McCloud v. The Bd. of Dirs. of Geary Cmty. Hosp., et al.

Case 6:06-cv-01002-MLB-DWB Document 41 Filed 08/16/2006 Page 1 of 13(cid:10)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

Plaintiffs,

v.

Case No. 06-1002-MLB

DEANNA McCLOUD and
TIMOTHY McCLOUD,

)
)
)
)
)
)
)
)
)
)
)
)
Defendants.
___________________________________ )

THE BOARD OF DIRECTORS OF
GEARY COMMUNITY HOSPITAL,
et al.,

MEMORANDUM AND ORDER

Before the Court is the Joint Motion of Defendants for an Order to Gather

Personal Health Information and for Ex Parte Communications (Doc. 29), filed on

June 30, 2006. Plaintiffs filed a Response in Opposition (Doc. 36) on July 19,

2006, which was followed by Defendants’ reply (Doc. 39) on July 31, 2006. After

careful consideration of the briefing of the parties, the authorities stated therein,

and the numerous exhibits submitted, the Court is prepared to rule on Defendants’

motion.

BACKGROUND

This case arises out of medical care and treatment provided to Plaintiff

Deanna McCloud, who was 31 weeks pregnant at the time of the medical care at

Case 6:06-cv-01002-MLB-DWB Document 41 Filed 08/16/2006 Page 2 of 13(cid:10)

issue, and Kiana McCloud, her unborn child. The medical care was necessitated

by a motor vehicle accident in which Deanna McCloud was involved. Plaintiffs

filed their Complaint (Doc. 1) on January 6, 2006, alleging violations of the

Emergency Medical Treatment and Active Labor Act (hereinafter “EMTALA”), 42

U.S.C. § 1395dd (Counts I and II),1 and state law claims for the wrongful death of

Kiana McCloud (Count III), for the personal injuries of Deanna McCloud due to

defendant’s alleged negligence (Count IV) and for punitive damages due to

defendants’ alleged gross negligence (Count V). Defendants generally denied

Plaintiffs’ allegations of negligence. (Docs. 15, 17, and 18.)

Defendants filed the present motion requesting that the Court enter

appropriate orders directing “the physician-patient privilege has been waived, that

Defendants are entitled to Deanna and Kiana McCloud’s medical records as

outlined in the orders and that Defendants are entitled to interview Deanna and

Kiana McCloud’s treating physicians, without the presence of plaintiffs or their

counsel, if the physicians consent.” (Doc. 29 at 10.) Plaintiffs responded that

Defendants have “fail[ed] follow legal procedures as required by HIPAA . . .”

1 On June 29, 2006, Defendants jointly moved to dismiss Count II of Plaintiffs’
Complaint, which seeks damages under EMTALA against Defendant doctors Felts and
Khoury individually. (Doc. 28.) This motion is currently pending before the District
Court.

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(Doc. 36 at 14.) Plaintiffs requested that Defendants be required to follow

HIPAA’s protocols. Plaintiffs further requested that the Court enter an Order

requiring Plaintiffs’ counsel to be present at any meeting with a treating physician

or, in the alternative, notify Plaintiffs’ counsel three days in advance of any such

scheduled meeting. (Id.) Defendants replied (Doc. 39) that Plaintiffs’ objections

have no foundation in fact and law.

DISCUSSION

1.

Ex Parte Contact With Treating Physicians.

In making claims for wrongful death and personal injury, Plaintiffs have

clearly placed the medical condition of Deanna and Kiana McCloud at issue.

Therefore, Plaintiffs cannot claim that their treating physicians are prevented from

disclosing information concerning their medical condition by the physician-patient

privilege which is codified in K.S.A. 60-427.2 Subsection (d) of that statute

specifically states:

There is no privilege under this section in an
action in which the condition of the patient is an
element or factor of the claim or defense of the
patient or of any party claiming through or under

2 Fed.R.Evid. 501 provides that in civil proceedings, where state law provides the
rule of decision concerning a claim or defense, the privilege of a witness or person is to
be determined in accordance with state law. Here the parties agree that Kansas law is the
basis for the wrongful death and personal injury claims by Plaintiffs.

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the patient or claiming as a beneficiary of the
patient through a contract to which the patient is or
was a party. (Emphasis added).

Thus, there is no issue of waiver of the privilege in the present case; the privilege

simply does not exist. See Bryant v. Hilst, 136 F.R.D. 487, 491 (D. Kan. 1991)

(holding “[t]he issue is not waiver or partial waiver, there is simply no privilege

available to the plaintiff.”). Judges in this District consistently have held that ex

parte communications with treating physicians are permissible in cases, such as the

present one, in which the medical condition of the plaintiff is an issue. See G.A.S.

v. Pratt Regional Medical Center, Inc., et al., No. 05-1267-JTM, June 8, 2006,

Memorandum and Order (Magistrate Judge Karen Humphreys), at 2-3 (attached as

Ex. 3 to Defendants’ Joint Motion, Doc. 29) (collecting decisions from this

District). See also Lake v. Steeves, 161 F.R.D. 441 (D.Kan. 1994) (District Judge

Sam A. Crow); McGee v. Stonebridge Life Insurance Co., No. 05-4002-JAR,

June 28, 2005, Memorandum and Order (Magistrate Judge K. Gary Sebelius). The

Court finds no reason to part with the well-reasoned line of decisions from this

District,3 and an extended discussion of those prior decisions would not add

3 The Court is also mindful of the decisions cited by Defendants from other
jurisdictions also holding that such ex parte communications with treating physicians are
to be allowed when a plaintiff has placed his or her medical condition at issue. (Doc. 39
at 14-19.)

4

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anything meaningful to the legal scholarship on this topic.

2.

Provisions of HIPAA.

Plaintiffs argue that HIPAA, the Health Insurance Portability and

Accountability Act, has changed the landscape for production of medical

information and that HIPAA preempts any state provisions on this topic unless the

state law provisions are “more stringent” than the rules and regulations under

HIPAA. (Doc. 36 at 6.) The Court, however, does not need to delve into the

intricacies of this argument because it finds that Defendants, by filing the present

motion seeking a court order allowing the production of medical information and

an ex parte contact with the treating physicians, has complied with the HIPAA

regulations.4

The Court is satisfied that Defendants have followed all the relevant

procedural requirements and safeguards imposed by HIPAA. Those requirements

are set out in 45 C.F.R. § 164.512(e)(1), and that section allows disclosure of

protected health information

“in the course of any judicial or administrative
proceeding: (i) In response to an order of a court or
administrative tribunal, provided that the covered entity
discloses only the protected health information expressly

4 To the extent the Court may have concerns about the provisions of the proposed
orders as to information covered by 42 C.F.R., Part 2, those are addressed later in this
Memorandum and Order.

5

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authorized by such order . . . .”
That is precisely what Defendants have done in this case by filing the instant

motion and seeking a Court order allowing disclosure of Plaintiffs’ medical

information. The proposed Orders clearly state what medical information is

covered by the Orders thus allowing any medical providers to assure themselves

that they are in compliance with the HIPAA requirements.

Plaintiffs argue that other subsections of section 164.512(e)(1) also govern

in this case and that Defendants have not complied with those requirements. (Doc.

36 at 10-11.) The Court does not agree. Section 164.512(e)(1) sets out two

separate and alternative ways to obtain protected health information: one is by

court order under subsection (i), and the other is by subpoena, discovery request, or

other lawful process “that is not accompanied by an order of a court . . . .”

(emphasis added) under subsection (ii). Plaintiffs discuss several things that are

required if a party proceeds under subsection (ii) by subpoena or discovery request,

including the requirement that the party whose records are being sought is given

notice under subsection (ii)(A), or that the party seeking the information secure a

“qualified protective order” as described in subsections (ii)(B) and (v). Any such

“qualified protective order” is to include provisions that prohibit use of the

information for any purpose other than the litigation and require the return of the

information to the covered entity at the end of the litigation. See

6

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164.512(e)(1)(v)(A) and (B). However, the provisions of subsections

164.512(e)(1)(ii), (iii), (iv) and (v), all apply only where the information is sought

by subpoena or document request under subsection (ii), and not where the

documents are to be provided in response to a court order for disclosure under

subsection (i).5

Plaintiffs finally argue that if the Court enters an order granting Defendants’

motion, it should either include the requirement that Plaintiffs’ counsel be present

during any interview with treating physicians or that Plaintiffs be given three day’s

notice prior to any ex parte contact with their physicians or other health care

provider. (Doc. 36 at 14.) The Court will not adopt these suggestions. None of

the cases in this District which allow ex parte contact with treating physicians or

other health care providers have included the requirement that opposing counsel be

present during the interview. In fact, the term “ex parte” is specifically defined as

“On one side only; by or for one party; done for, in behalf of, or on the application

of one party only.” BLACK’S LAW DICTIONARY, (Fifth Ed.). The Court will not

modify the procedure to allow or require Plaintiffs’ counsel to be present during

any such interviews. The Court also will not impose any notice requirement or

5 Even if the Court were to apply the requirements of section
164.512(e)(1)(v)(A) and (B) in this case, the Orders proposed by Defendants
specifically state that the Court is entering a “qualified protective order” and the
proposed Orders also contains the requirements of these subsections.

7

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timetable before the interviews can be conducted. Under HIPAA, notice to the

party whose records are to be obtained is only required when those records are

sought by subpoena or document request. See section 164.512(e)(1)(ii)(A) and

(iii). In this case, Plaintiffs already have notice by the filing of the instant motion

that interviews will be requested. There is no need for any further notice to

Plaintiffs.

Finally, the proposed Order clearly informs any treating physician of their

right to decline any request for ex parte communication. The language of the

proposed order adequately notifies the treating physician that he or she has a right

to decline an attorney’s request to speak or meet with the physician informally. As

such, the Court finds Defendants’ proposed Order to be consistent with the practice

in this District.

3.

42 C.F.R., Part 2.

The proposed Orders submitted by Defendants also include the statement

that “This Order further allows the disclosure of . . . (2) information regarding

diagnosis and treatment of mental, alcoholic, drug dependency and emotion

condition pursuant to 42 C.F.R. part 2.” (Doc. 29, attached Orders.) The

regulations found in 42 C.F.R. part 2 are not HIPAA regulations, but were enacted

pursuant to the provisions of the Drug Abuse Prevention, Treatment, and

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Rehabilitation Act, 21, U.S.C. § 1175, and were later transferred into the Public

Health Service Act, 42 U.S.C. § 290dd-2. See 42 C.F.R. § 2.1 and 2.2.6

Under 42 U.S.C. § 290dd-2, records of the identity, diagnosis, prognosis or

treatment of any patient which are maintained in connection with any program

relating to substance abuse education, prevention, training, treatment, rehabilitation

or research, which are conducted, regulated, or directly or indirectly assisted by

any department or agency of the United States, shall be confidential, and shall be

disclosed only as provided in the statute and implementing regulations. One

method for obtaining such records is to obtain authorization by an appropriate

order of a court of competent jurisdiction, upon a showing of good cause. 42

U.S.C. § 290dd-2(b)(2)(C). The statute further directs that

In assessing good cause the court shall weigh the public
interest and the need for disclosure against the injury to
the patient, to the physician-patient relationship, and to
the treatment services. Upon the granting of such order,
the court, in determining the extent to which any
disclosure of all or any part of any record is necessary,
shall impose appropriate safeguards against unauthorized
disclosure.

42 U.S.C. § 290dd-2(b)(2)(C). See also Mosier v. American Home Patient, 170

6 Initially there were separate statutory sections pertaining to disclosure of records
for drug abuse and another for alcoholism. In 1992, these sections were combined into
one section – 42 U.S.C. § 290dd-2. See Pub.L. 102-321, Title I, § 131, 106 Stat. 366
(1992).

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F.Supp. 2d 1211, 1213-15 (N.D.Fla. 2001) (discussing what may constitute a finding of

“good cause” under the regulations).

Subpart E of the regulations enacted pursuant to this statute set out the

requirements and procedures for entry of an order authorizing disclosure of patient

substance abuse records in a pending civil action where it appears that the records

are need to provide evidence. See 42 C.F.R. § 2.63 and 2.64. These orders are “a

unique kind of court order.” See 42 C.F.R. § 2.61. Courts applying these statutes

and regulations have noted that there is a strong presumption against disclosing

records of the kind covered by the statute and regulations, and the privilege

afforded to them should not be abrogated lightly. Fannon v. Johnson, 88

F.Supp.2d 753, 758 (E.D.Mich. 2000); Guste v. The Pep Boys-Manny, Moe &

Jack, Inc., 2003 WL 22384947 at * 3 (E.D.La. 2003).

It is important to note, however, that not every substance abuse treatment

program’s records will be covered by the statute and regulation. The statute and

regulations apply only to records of programs which are federally conducted,

regulated or supported in a manner which constitutes Federal assistance under the

regulations. See 42 C.F.R. § 2.12(a)(2); Beard v. City of Chicago, 2005 WL

66074 at * 4 (N.D. Ill. 2005) (Section 290dd-2 does not create a privilege that

covers any and all records of substance abuse treatment but only those records of

10

Case 6:06-cv-01002-MLB-DWB Document 41 Filed 08/16/2006 Page 11 of 13(cid:10)

programs which are conducted, regulated or directly or indirectly assisted by an

agency of the United States). See also, Center for Legal Advocacy v. Earnest, 320

F.3d 1107 (10th Cir. 2003) (holding as a matter of law that a specific hospital’s

emergency department does not qualify as an alcohol or drug abuse “program”

under the Part 2 regulations and therefore the hospital could not refuse production

of the records in reliance on the statute and regulations).

After reviewing 42 U.S.C. 290dd-2, the regulations in 42 C.F.R. § 2.1, et.

seq., and the cases cited above, the Court cannot conclude based on the present

record that the motion and proposed Orders in this case would satisfy the statutory

and regulatory requirements for production of information regarding diagnosis and

treatment of alcoholism or drug dependency pursuant to 42 C.F.R. Part 2. See 42

C.F.R. §§ 2.63 and 2.64. See e.g., U.S. ex.rel. Chandler v. Cook County, Ill., 277

F.3d 969, 982-83 (7th Cir. 2002) (finding that the district court’s discovery order

violated the provisions of the regulations). In fact, the Court is not in a position to

determine whether any such records actually exist, or if they do exist, whether they

are records of a “program” that is federally directed or assisted in the manner

required by 42 C.F.R. part 2. Therefore, the Court is not in a position to include in

the present Orders any authorization to produce records that are governed by 42

U.S.C. § 290dd-2 and 42 C.F.R., Part 2.

11

Case 6:06-cv-01002-MLB-DWB Document 41 Filed 08/16/2006 Page 12 of 13(cid:10)

The Court therefore directs that Defendants remove the language in the two

proposed Orders which states that the Orders allow disclosure of “(2) information

regarding diagnosis and treatment of mental, alcoholic, drug dependency and

emotional condition pursuant to 42 C.F.R. part 2.” Furthermore, the paragraph of

the proposed Orders which describes in detail those documents that are covered by

the Order should be amended to include the following proviso:

“Provided however, that this Order does not provide
for the production of any medical records maintained
in connection with any program relating to substance
abuse education, prevention, training, treatment,
rehabilitation or research, which are conducted,
regulated, or directly or indirectly assisted by any
department or agency of the United States, and which
are covered by the provisions of 42 U.S.C. § 290dd-2
and 42 C.F.R., Part 2.

The Court should emphasize, however, that the proposed Orders, as revised,

would authorize the production of any medical records or information about any

treatment of Plaintiffs for substance abuse issues if the provider who did the

treatment and maintained the records was not a federally assisted or directed

program as defined by 42 U.S.C. § 290dd-2 and 42 C.F.R., Part 2. Furthermore,

nothing in this Memorandum and Order should be construed to prohibit

Defendants from seeking an order in the future concerning production of substance

abuse records which would be covered by 42 U.S.C. § 290dd-2 and 42 C.F.R., Part

12

Case 6:06-cv-01002-MLB-DWB Document 41 Filed 08/16/2006 Page 13 of 13(cid:10)

2 if such records exist and if Defendants can satisfy the requirements of the statute

and regulations.

CONCLUSION

Defendants’ Motion (Doc. 29) is hereby GRANTED as outlined in this

Memorandum and Order. Defense counsel shall revise the two proposed Orders as

directed above, and shall forward the revised Orders by e-mail to the undersigned

magistrate judge for approval and filing. Because the Court has ruled on the

objections raised by Plaintiffs, the revised Orders do not need to contain the

approval lines and electronic signatures of counsel for the parties.

IT IS SO ORDERED.

Dated at Wichita, Kansas on this 16th day of August, 2006.

s/ Donald W. Bostwick
DONALD W. BOSTWICK
United States Magistrate Judge

13

McElwain v. Physicians Ins. Co. of Wis.

McElwain v. Physicians Ins. Co. of Wis.,
No. 99-CV-656 (Wis. Ct. App. Feb. 5, 2002)

A patient and his wife appealed a summary judgment dismissing their medical
malpractice action against a cardiac surgeon and a hospital. The patient suffered
complications after surgery in 1994 but did not file suit until 1999. The cardiac
surgeon and hospital argued that the plaintiffs knew, or should have known,
about any alleged malpractice after reading a July 1998 article in a local newspaper
about the surgeon. Therefore, they argued, the claim was barred by the statute
of limitations.

Under Wisconsin law, a patient has one year to commence an action from the
time an injury is discovered or, in the exercise of reasonable due diligence,
should have been discovered. The appeals court noted that the question of whether
a plaintiff knew or should have known of an injury is usually left to the jury.
In this case, the court found the July 1998 article to be so ambiguous that
a jury should determine whether, after reading it, the plaintiffs should have
known they had a malpractice claim. Therefore, the court ruled that summary
judgment was inappropriate.

McCall v. Scott

McCall v. Scott,

Nos. 99-6370/6387 (6th Cir. Feb. 13, 2001)

Insisting that a large, national health care corporation’s Board of Directors intentionally
ignored indications of widespread and systematic health care fraud, the corporation’s
shareholders brought this consolidated stockholder derivative suit against the
current and former directors of the corporation. Claiming that the corporation
had engaged in various forms of Medicare fraud and interference with physician
relationships in pursuit of its acquisition goals, the stockholders’ complaint
specifically alleged intentional and negligent breach of the fiduciary duty
of care and intentional breach of the fiduciary duty of care by illegal insider
trading. The district court, granting the directors’ motion to dismiss the consolidated
claim under Federal Rule of Civil Procedure 12(b)(6), held that the stockholders
failed to sufficiently allege the demand futility necessary to excuse the stockholders’
failure to make a pre-suit demand on the corporation’s Board of Directors.

Reversing the district court with respect to the
stockholders’ claim for intentional and reckless breach of the duty of care,
the court of appeals held that the shareholders presented the particularized
factual statements essential to their claim. The court, stressing that its
decision addressed only the sufficiency of the pleadings, recognized that
director liability under the shareholders’ claim of intentional or reckless
breach of the duty of care may stem from “an unconsidered failure of the
board to act in circumstances in which due attention would, arguably, have
prevented the loss.” In light of directors’ prior business experience,
coupled with media reports of illegal activities, federal criminal
investigations into the corporation’s business practices, and a qui tam action
against the corporation, the court held that the shareholders presented
sufficient evidence to establish their claim that the directors could not
exercise “independent and disinterested business judgment in responding to
a demand” from the shareholders.

McCloud v. The Bd. of Dirs. of Geary Cmty. Hosp., et al.

MALPRACTICE & HIPAA

McCloud v. The Bd. of Dirs. of Geary Cmty. Hosp., et
al., No. 06-1002-MLB (D. Kan. Aug. 16, 2006)

The United States District Court for the District of Kansas
found that a hospital and other defendants (hospital) in a wrongful death
and personal injury action could meet with the plaintiff’s treating physicians
without the plaintiff or her attorney being present, if the treating physicians
consented. The plaintiff and her unborn child were involved in a motor vehicle
accident and filed a claim against the hospital for the medical care and treatment
provided. The hospital sought an order that the physician-patient privilege
had been waived, and that the hospital was entitled to interview the plaintiff’s
treating physicians without her presence or the presence of her attorney. The
court, in ruling for the hospital, found that the physician-patient privilege
does not exist when a plaintiff places her medical condition at issue. The
court also found that the Health Insurance Portability and Accountability Act
regulations were met when the hospital filed the motion seeking a court order.

 

McFall v. PEACE, INC.

RENDERED: FEBRUARY 24,200O
TO BE PUBLISHED

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1998-SC-0628-DG ;– —.
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SCOTT McFALL, INDIVIDUALLY AND
AS ADMINISTRATOR OF THE ESTATE
OF JUDITH ANN McFALL

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APPELLANTS

V .

ON REVIEW FROM COURT OF APPEALS
96-CA-1259-MR
JEFFERSON CIRCUIT COURT NO. 92-Cl-5780

PEACE, INC., D/B/A OUR LADY OF
PEACE HOSPITAL, AND MOHAMMAD
A. MIAN, M.D.

APPELLEES

OPINION OF THE COURT BY JUSTICE JOHNSTONE

AFFIRMING IN PART,
REVERSING IN PART,
AND REMANDING WITH DIRECTIONS

Pursuant to a jury verdict, the trial court entered judgment in favor of Appellees,

Our Lady of Peace Hospital (“OLOP”) and Dr. Mohammad Mian, in an action brought

by the estate of a decedent who committed suicide while a patient at OLOP. The Court

of Appeals affirmed and we granted discretionary review. We affirm in part, reverse in

part, and remand with directions.

On September 14, 1991, Judith McFall committed suicide in a room on a locked

ward at OLOP, where she had been admitted as a patient some twelve hours earlier.

McFall was on moderate suicide precautions at the time of her death. Dr. Mian was

McFall’s designated treating physician after she was admitted. However, he did not

personally examine her prior to the suicide.

On September 11, 1992, Appellant, Scott McFall, individually and as

administrator of Judith McFall’s estate, brought a wrongful death action against OLOP

and Dr. Mian alleging hospital negligence and medical malpractice. A ten-day jury trial

commenced on March 12, 1996, which produced a voluminous record. McFall

presented twenty-two witnesses, including one expert, and sixty-six exhibits. OLOP

offered no witnesses, but introduced eleven exhibits. Dr. Mian presented four

witnesses, including one expert, and introduced eleven exhibits. The jury returned

verdicts in favor of OLOP and Dr. Mian.

The sole issue presented in this appeal is whether the trial court erred by

entering a protective order preventing McFall from discovering a Quality Assurance

Review (“QAR”) form.

According to OLOP, the QAR form at issue was a routine form filled out by

OLOP’s nursing coordinator who reviewed and critiqued OLOP’s response to the Code

300 reported in Judith McFall’s case. These forms are then reviewed by the nursing

coordinator manager and, when appropriate, later reviewed by OLOP’s safety

committee as part of a comprehensive peer review program to monitor and improve the

quality of patient care.

McFall filed a discovery motion requesting that OLOP produce “[a]ny and all

originals and/or copies of documents regarding Judith McFall’s admission, evaluation,

stay, and/or discharge from Our Lady of Peace Hospital . . . .” OLOP neither produced

-2-

the QAR form nor objected to its production in its first two responses to this discovery

request.

McFall first learned of the existence of the QAR form during a pretrial evidentiary

hearing. Subsequently, he filed a motion to compel production of the QAR form. In

response, OLOP stated that the QAR form did not fall within the scope of McFall’s

original request for production of documents. Further, OLOP stated that if the QAR

form had fallen within the scope of the original production request, it would have

objected to its production on grounds that it was protected by the peer review privilege

set forth in KRS 311.377. Some months later, OLOP filed a motion for a protective

order to prevent production of the QAR form on grounds that it was protected by the

peer review privilege. After holding an in camera hearing regarding the discovery of the

QAR form and other hospital documents, the trial court entered a protective order which

found that the QAR form was protected by the peer review privilege.

After the trial court entered a judgment in favor of OLOP and Dr. Mian, McFall

appealed to the Court of Appeals raising a number of issues. On November 17, 1997,

the Court of Appeals sua soonte entered an order to supplement the record in this

case, which states in pertinent part:

In reviewing the issue of the discoverability of the
QAR form and the record, it has become apparent that the
QAR form, which was reviewed by the circuit judge ti
camera, was returned to the appellee’s attorney after the
circuit judge made a ruling thereon . . . . In order to
determine if the document at issue was discoverable, said
document must be included in the record for appellate
review. Therefore,

IT IS HEREBY ORDERED that the circuit court
retrieve the above-described document [the QAR form] and
send it to this Court, under seal, to be included in the sealed
portion of the record.

-3-

The certified supplemental record received by the Court of Appeals consisted of

two forms: a Code 300 Monitoring Form and a Critical Incident Review Report. In

reviewing these forms, the Court of Appeals concluded, “[we believe the trial court

properly found that [the two documents] fell within the peer review privilege of KRS

311.377.” McFall v. Peace. Inc., Ky. App., 96-CA-1259-MR at 7 (May 22, 1998).

On appeal to this Court, McFall attacks both the procedure under which the

motion for the protective order was made and granted and the correctness of the order

itself. We need not address the procedural issues because we hold that -both the trial

court and the Court of Appeals erred in determining that the QAR form was protected

peer review material. The peer review privilege of KRS 311.377 has no application to

medical malpractice suits like the case at bar. Sisters of Charitv Health Svstems. Inc. v.

Raikes, KY., 984 S.W.2d 464, 470 (1999). Erroneous rulings on discovery matters are

subject to the harmless error rule of CR 61 .Ol. See Reaalbuto v. Grant, Ky., 473

S.W.2d 833, 838 (1971). However, for the reasons set forth below, we decline to

answer the question of whether the error was harmless and remand the case to the trial

court to hold an evidentiary hearing on the matter.

Because the documents comprising the QAR form remained sealed throughout

this appeal, McFall only could hypothesize on the resulting prejudice to his case. It

seems patently unfair and contrary to the principles of due process to hold in McFall’s

’

favor on the central issue raised in this case, yet ultimately decide the case against him

on an issue he did not and could not argue but for the errors of the trial court and the

Court of Appeals. Thus, we believe that McFall should be given the opportunity to view

the documents, make his own independent determination of prejudice, and argue his

-4-

case to the trial court. However, under the circumstances, it seems equally unfair to

allow McFall to argue his case against both OLOP and Dr. Mian.

The discovery request for the QAR form was made to OLOP alone, and OLOP

alone made the motion for the protective order. Moreover, everything in the forms

concerning Dr. Mian was otherwise provided through discovery. Further, apparently Dr.

Mian has not been able to view the documents in question either. Thus, Dr. Mian

neither contributed to the error, nor did the error create any conceivable prejudice to

McFall’s case against Dr. Mian.

Finally, we deny McFall’s motion for an order directing transmittal of a proper and

complete supplemental record.

Therefore, we reverse the opinion of the Court of Appeals as to OLOP, affirm as

to Dr. Mian, and remand this case to Jefferson Circuit Court with directions to unseal

that part of the record containing the documents comprising the QAR forms and to hold

an evidentiary hearing to determine whether the erroneous entry of the protective order

is grounds for granting a new trial against Appellee, Peace Inc., d/b/a, Our Lady of

Peace Hospital.

If the trial court finds that there are not sufficient grounds for granting a

new trial, it shall reinstate its original judgment.

If the trial court finds that there are

sufficient grounds, a new trial shall be granted. Regardless of how the trial court rules,

the order shall be final and appealable the same as a trial court’s ruling on a motion for

a new trial pursuant to CR 60.02.

All concur. Lambert, C.J., not sitting.

-5-

COUNSEL FOR APPELLANTS:

Guy Jantzen Hibbs
Chris Meinhart
150 South Third Street
Louisville, KY 40202

Harry B. O’Donnell, IV
2100 Gardiner Lane, Suite 321
Louisville. KY 402052949

COUNSEL FOR APPELLEE,
PEACE, INC., D/B/A OUR LADY
OF PEACE HOSPITAL:

B. Todd Thompson
Millicent A. Tanner
THOMPSON & MILLER, PLC
220 W. Main Street, Suite 1700
Louisville, KY 40202

Sherry R. Deatrick
DINSMORE & SHOHL, LLP
2000 Meidinger Tower
Louisville, KY 40202

COUNSEL FOR APPELLEE,
MOHAMMAD A. MIAN, M.D.:

Byron Miller
THOMPSON & MILLER, PLC
220 W. Main Street, Suite 1700
Louisville, KY 40202

Martha J. Hasselbacher
STITES & HARBISON
1800 Providian Center
400 West Market Street
Louisville, KY 40202-3352

-6-

McClellan v. Patel

ERISA PREEMPTION

McClellan v. Patel, No. 06-392-AA (D. Or. July 25, 2006)

A three-year-old boy
died after abdominal surgery, and his parents sued the performing physician
for medical negligence and the hospital for “administrative negligence” in
state court. The lawsuit was later removed to federal district court. The parents’
claims against the hospital were based on the decision to grant the physician
privileges despite a history of malpractice and the hospital’s failure to report
the physician’s malpractice incidents to the state board of medicine, as required
by statute. The district court rejected the hospital’s argument that the “administrative
negligence” claims were preempted by ERISA, because the parents were not
seeking to recover benefits due under an ERISA welfare plan or to clarify rights
to future benefits under the plan. Claims challenging the quality of a benefit
are not preempted by ERISA. The purpose of ERISA was to assure that promised
benefits would be available to participants, not to create a remedy for a participant
injured by malpractice. Because there was no indication that ERISA was intended
to displace general heath care regulation by the states, the district court remanded
the case back to state court.