Longa v. Vicory

Peer Review

Longa v. Vicory, No. 83A01-0406-CV-233 (Ind. Ct. App. June 7, 2005)

The families
of six patients who were murdered by an ICU nurse over a two-year period
brought suit against the hospital board, the administrator, and two physicians
on the medical staff. The claim against the physicians was based on the Indiana
hospital licensing statute which they argued created a private cause of action
against the physicians for failing to provide proper peer review. The physicians
were part of the medical staff but did not care for the patients and were not
part of the hospital’s peer review committee.

The issue before the Court of Appeals was whether the Indiana statute imposed
a general duty on all members of the medical staff to assure proper peer review.
The court looked at the language of the statute and determined that it did
not create a duty from a physician to a patient. Rather, the statute made the
medical staff responsible to the board for peer review. The court also found
that the statute made members of peer review committees immune from liability.
Therefore, it would lead to an absurd result if members of peer review committees
were immune but other doctors could be sued. Thus, the Court of Appeals held
that the statute did not provide the families with a private cause of action
and dismissed the case.

 

Louisiana Dep’t of Health and Hosps. v. Center for Medicare and Medicaid Servs.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

__________________________

No. 02-60834
__________________________

United States Court of Appeals
Fifth Circuit
F I L E D
September 22, 2003

Charles R. Fulbruge III
Clerk

LOUISIANA DEPARTMENT OF HEALTH AND HOSPITALS,

Petitioner,

versus

CENTER FOR MEDICARE AND MEDICAID SERVICES; THOMAS A. SCULLY, in his
official capacity as Administrato r o f the Centers for Medicare and Medicaid Services; UNITED
STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; TOMMY G.
THOMPSON, in his official capacity as Secretary of the U.S. Department of Health and Human
Services,

Respondents.

___________________________________________________

Appeal from the Administrato r of the Center for
Medicare and Medicaid Services
___________________________________________________

Before WIENER, CLEMENT , and PRADO, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge:

This appeal arises following the dete rmination, by the Administrato r of the Center for Medicare

and Medicaid Services, that Rural Health Clinics in Lou isiana do not furnish “hospital services”, and

hence are not eligible for certain reimbursements. Because we find that interpretation to be

unreasonable, we REVERSE .

I. FACTS AND PROCEEDINGS

A.

(1)

Statuto ry and regulato ry background

The Medicaid pro gram

Medicaid is designed to enable states to offer medical assistance to certain low-income, elderly,

and disabled individuals whose income and resources ar e inadequate t o pay for necessary medical

services. See 42 U.S.C. § 1396 (2003). Under the Medicaid stat ute, the federal government and the

stat es cooperate and share the cost of providing medical assistance to Medicaid-eligible persons.

The Medicaid statute gives each state flexibility in designing and administering its own Medicaid

program. Under the statute, a st ate that elects to par ticipate in the program submits a “state p lan”

for review and approval by the S ecretary (“Secretary”) of the Department o f Health and Human

Services (“HHS”). See generally 42 U.S.C. § 1396a. A stat e that seeks to change its state plan may

submit a “state plan amendment” to the Center for Medicare and Medicaid Services (“CMS”) for

review and approval. See 42 C.F.R. §§ 430.14 – 430.15 (2002) (recor ding Secretary’s delegation of

authority for appro ving state plan amendments to CMS). CMS, on behalf of the Secretary, is

required to approve a state plan amendment that complies with all app licable statutes and regulations.

42 U.S.C. § 1396a(b). Once CMS approves a state plan amendment, t he Secretary pays the state a

percentage of the “total amount [the state] expended . . . as medical assistance under the State plan.”

42 U.S.C. § 1396b(a)(1). The percentage for Louisiana for the current fiscal year is 71.28%. See 66

Fed. Reg. 59790 (Nov. 30, 2001); see also 67 Fed. Reg. 69223 (Nov. 15, 2002) (raising Lou isiana’s

percentage to 71.63% for t he fiscal year start ing October 1, 2003).

(2)

Provisions for disproportionate share hospitals

In 1981, Congress added a requ irement that stat e plans include higher reimbursement rates for

“public hospitals and teaching hospitals which serve a large Medicaid and low income population [and

2

which] are part icularly dependent on Medicaid reimbursement . . . .” 42 U.S.C. § 1396a(a)(13)(A)

(not ing that a state plan must “provide for a public process for determination of rat es o f payment

under the plan for hospital services” under which “such rates take into acco unt . . . the situat ion of

hospitals which serve a disproportionate number of low-income patients with special needs”). To

meet the so-called disproportionate share (“DSH”) requirement, states must define and list DSH

hospitals that serve a greater percentage of Medicaid and low-income patients. 42 U.S.C. § 1396r-

4(a)(1); see also 42 U.S.C. § 1396r-4(b)(1) (restricting DSH designation to hospitals with low-

income ut ilizat ion rates exceeding 25% or to hospitals whose Medicaid inpatient ut ilizat ion rate is

at least one standard deviat ion above the mean Medicaid inpatient ut ilization rate of all in-stat e

hospitals receiving Medicaid payments). Stat es must provide an “approp riate increase in the rate o r

amount of payment for such services.” Id. Additionally, the statu te co ntemplates that

reimbursements will reflect not only the cost of caring for Medicaid recipients, but also the cost of

charity care given to uninsured patients. Id. § 1 396r -4(b)(3) (basing definition of “low-income

utilizat ion rate” in part on quant ity of charity care provided by the hospital). In 1987 and 1988,

Congress added specific requirements for states to comply with this general mandate through higher

payments to designated hosp itals.

(3)

State-specific and hospital-specific limits on DSH payment adjustments

In 1991, Congress directed the Secretary to determine stat e-specific limits on federal funding for

DSH payments for each fiscal year, using a statutory formula. See 42 U.S.C. § 1396r-4(f) (capp ing

Lou isiana’s DSH allotment for fiscal year 2002 at $631 million and for future fiscal years to the 2002

cap adjusted by the consumer price index). In 1993, Congress respo nded to report s that some

hospitals received DSH payment adjustments that exceeded “the net costs, and in some instances the

3

tot al costs, of operating the facilities,” by requiring hospital-specific limits o n DSH payments. See

H.R. REP. NO. 103-111, at 211-212 (1993), reprinted in 1993 U.S.C.C.A.N. 278, 538-539 (not ing

DSH payment adjustments seeped into state general funds to cover non-health care items including

road construction).

The hospital-specific limitat ions are at the heart of the dispute in this case. The 199 3 amendment

limits the amount of DSH payments to a specific hospital to

the costs incurred during the year of furnishing hospital services (as det ermined by
the Secretary and net of payments under this title, other than under this section, and
by uninsured patients) by the hospital to individuals who either are eligible for medical
assistance under the State plan or have no health insurance (or other source o f third
party coverage) for services provided during the year.

42 U.S.C. § 1396r-4(g)(1)(A) (emphasis added).

CMS has not promulgated any regulations specifically addressing the hospital-specific DSH limit

and thus has not addressed the use o f the term “hospital services” as it relates to those limits. In a

letter to State Medicaid directors dated August 17, 1994, the Health Care Financing Administrat ion

(“HCFA”), CMS’s predecessor agency, stat ed:

There are several impor tant considerations that must be made in det ermining the cost
of services under the DSH limit, whether for Medicaid or uninsured individuals. First,
the legislative history of this p ro vision makes it clear that S tat es may include both
inpatient and outpatient costs in the calculat ion o f the limit. Second, in defining
“costs of services” under this provision, HCFA would permit the State to use the
definition of allowable costs in its State plan, or any other definition, as long as the
costs determined under such a definition do not exceed the amounts that would be
allowable under the Medicare principles of cost reimbursement. . . . HCFA believes
this interpretation of the term “costs incurred” is reasonable because it provides
States with a great deal of flexibility up to a maximum standard that is widely known
and used in the determination of hospital costs.

4

Letter from Sally K. Richardso n, Department of Health & Human Services, to State Medicaid

Directors 3 (Aug. 17 , 1994) (emphasis added).

(4)

Rural Health Clinics (“RHCs”)

RHCs generally furnish “those diagnostic and therapeutic services and supp lies that are commonly

furnished in a physician’s office or at the entry point into the health care delivery system.” 42 C.F.R.

§ 491.9(c)(1). RHCs also provide “medical emergency procedures as a first response to common life-

threat ening injuries and acute illness and has available the drugs and biologicals commonly used in

life saving procedures, such as analgesics, anesthetics (local), antibiotics, anticonvulsants, antidotes

and emetics, serums and toxoids.” Id. 491.9(c)(3). Services in RHCs are furnished by a physician

or a mid-level practitioner, such as a nurse p ra ctitioner or physician assistant, acting under the

direct ion of a physician. Id. § 440.20(b)(1)-(3).

B.

Louisiana’s efforts to increase DSH payment adjustments

Lou isiana is largely rural and most of the rural areas are medically under-served. See 67 Fed.

Reg. 21962-67 (May 1, 2002) ( listing urban areas from the 2000 census). Recognizing that small

rural hospitals bear significant costs for the services they provide to low-income uninsured patients

through their “hospital-based” clinics,1 Lou isiana sought guidance from HHS as to how those costs

could be taken into account as part of a rural hospital’s DSH payment adjustment. In a January 19,

1999 letter U.S. Senat or John Breaux asked Donna Shalala, the then Secretary of HHS, to clarify

when RHC costs could be taken into account for DSH purposes. In her response, S ecretary Shalala

wrote:

1 RHCs are eligible to be “hospital-based RHCs” if certain conditions are met. See 42
C.F.R. § 413.65.

5

While I agr ee that a state has discretion to ‘license or formally approve’ a hospital-
based RHC as an outpatient hospital clinic for purpo ses of the Medicaid DSH
program, I [cannot] require that states consider t he co sts o f such a facility in
calculating DSH limits. Under applicable law, a St ate has the flexibility to include a
hospital-based RHC under the license of the hospital, to separately license a hospital-
based RHC, or to issue a license which recognizes the dual nature of the clinic as both
an outpatient hospital clinic and an RHC. Where a state has chosen to license these
clinics as hospital outpatient departm ent s, and they are certified as part of the
hospital, the state would be able to include the uncompensated care costs related to
RHC-provided hospital out pat ient services in the calculation of a hospital’s DSH
payment limit. However, if the state has decided that its hospital-based RHCs are to
be separately licensed, then the clinics’ costs cannot be included in DSH calculations.

. . .

Our underst anding is that Lou isiana law requires separate licensing of RHCs and does
not provide for any other formal approval process to designate outpatient hospital
facilities. Even if an RHC in Louisiana is based at the hospital and owned by the same
overall institution, its uncompensated care costs canno t be recognized for DSH
purposes because the services are not considered hospital services by Medicaid. The
services provided by these entities can only be considered RHC services, and these
clinics would receive cost-based reimbursement for their expenditures. This
distinction is critical because, as stated above, only uncompensated costs associated
with hospital services can be included in the Medicaid hospital specific DSH limit
calculation. However, if Louisiana were to create a process to licence (sic) or
“formally approve” hospital-based RHCs as hospital outpatient departments, then
the clinics’ uncompensated care costs associated with providing hospital outpatient
services could be included in the DSH calculation for their affiliated hospitals.

Letter from Donna E. Shalala, Secretary of Health & Human Services, to Senator John B. Breaux

1-2 (July 30, 1999) (emphasis added).

The Louisiana legislature responded to Secretary Shalala’s letter by immediat ely amending the

stat e stat ute governing RHC licensing requirements. The amendment pro vides:

[A] rural health clinic that meets the definition o f t he Health Care Financing
Administration as hospital-based and is operated by a rural hospital . . . shall not be

6

required to secure a separate license to receive cert ification by the He alth Care
Financing Administrat ion and designated reimbursement under Medicaid and
Medicare as long as the rural hospital meets stat e licensure requirements. Such
hospital shall assure that the clinic meet s all other requirements of [the rural health
clinic licensure sta tut ue], as well as any pursuant rules and regulations . . . .

LA. REV. STAT. ANN. § 40:2197(G) (West 2001).

Having amended state law, the State submitt ed a state plan amendment (“ SPA 01-03”), to CMS

for approval. SPA 01-03 implemented Sec retary Shalala’s guidance by providing t hat : “Any

uncompensated cost s of pro viding health care services in a rural health clinic licensed as part of a

small rural hospital . . . shall be considered outpatient hospital services in the calculation of

uncompensated costs.” Letter from David W. Hood, Secretary, Louisiana Department o f Health &

Hospitals, to Calvin G. Cline, Associate Regional Administrato r, Health Care Financing

Administration Att achment 4 (May 15, 2001) ( emphasis added).

CMS disapproved SPA 01-03 on August 15 , 2001. CMS referred to regulations defining

“outpatient ho sp ital services” in order to conclude that the services at issue did not fall within the

meaning of the term “hospital services”, as used in 42 U.S.C. § 1396r-4(g). See 42 C.F.R. 440.20(a).

Despite the fact that state law no longer required separate licensing of hospital-based RHCs, the

disapproval letter predicated its analysis on the seemingly inappo site observation that “a state may

not include costs or r evenues in the DSH calculation which are attributable to services rendered in

a separately licensed/certified entity, even if that entity is owned by the same institution.” Letter

from Thomas A. Scu lly, Administrato r for Centers for Medicare & Medicaid Services, to David W.

Hood, Secret ary, Louisiana Department of Health & Hospitals (Aug. 15, 2001) (emphasis added).

7

The State requested reconsideration, and a hearing officer convened an administrat ive hearing on

January 30, 2002. See 42 C.F.R. § 430.18 (providing for review of CMS disapprovals). The hearing

officer on June 7, 2002, recommended that the disapproval be upheld. The Administrat or on August

20, 2002, adopted the hearing officer’s recommendation and upheld the disapproval. The

Administrator st ated t hat because hospital services and RHC services are defined separat ely under

the Social Securit y Act and its implementing regulations, RHC services can never be considered

outpatient hospital services. Louisiana Stat e Plan Amendment 01-03, Doc. No. 2002-03 (Centers

of Medicare & Medicaid Services Aug. 19, 2002). The Administrato r reached that conclusion despite

the fact that oftent imes the clinics are licensed by the hospital and provide exactly the same types of

services as the hospital’s outpat ient emergency room, and the costs o f providing these services are

borne by the ho spitals. Louisiana timely appeals.

II. STANDARD OF REVIEW

This Court reviews the Administrato r’s decision disappro ving a state plan amendment under the

Administr at ive Procedure Act, 5 U.S.C. §§ 701 -706 (2003), to ensure that the decision was not

arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. See 5 U.S.C.

§ 706; Harris County Hosp. Dist. v. Shalala, 64 F.3d 220, 221 (5th Cir. 1995). In addition, t his

Court must defer to the Secretary’s interpretation o f Medicare legislation and its att endant

regulations—the Secretary’s interpre tat ion of Medicare regulations is given “contro lling weight unless

it is plainly erroneous or inconsistent with the regulation.” Id. If a statu te is involved and its meaning

is unambiguous, this Court must give effect to the intent o f Congress. See Chevron U.S.A., Inc. v.

Natural Res. Def. Council, Inc., 467 U.S. 837, 842 (1984). This Cou rt “shall have jurisdiction to

8

affirm the action of the Secretary or to set it as ide, in whole or in part.” 42 U.S.C. § 1316(a)(5)

(West 1991).

III. DISCUSSION

The dispositive issue in this case is whether the Administrator ’s disapproval of Louisiana’s

proposed st ate plan amendment was arbitrary or cap ricious, where the Administrato r determined

that t he term “hospital services” as used in 42 U.S.C. § 1396r-4(g) do es not include services

provided by RHCs.

A. Analysis

Louisiana and its amicus list three reasons why the Administra to r’s disapproval of SPA 01-03

was arbitrary and capricious: (1) the services provided by hospital-based RHCs that are not

separat ely licensed fall within the regulato ry definition of “outpat ient hospital services”; (2) the

Congressional purpose behind the DSH prog ram support s reimbursing hospital-based RHCs for

the cost o f caring for uninsured patients; and (3) CMS’s own regulations recognize hospital-based

RHCs are integral to their parent hospitals. CMS responds that the Administrator correctly found

that “outpat ient hospital services” and “rural health clinic services” are separate and distinct

catego ries of services.

(1) Whether services provided by hospital-based RHCs that are not separately licensed

fall within the regulatory definition of “outpatient hospita l services.”

The hosp ital-specific DSH limit allows reimbursement only of “the costs incurred during the

year o f furnishing hospital services . . . .” 42 U.S.C. § 1396r-4(g)(1)(A) (emphasis added).

Not ing that the agency has not defined “hospital services” for purpo ses of § 1396r-4(g), Louisiana

asserts that Congress intended the phrase to include both inpatient and outpatient hospital

9

services. In describing the 1993 DSH amendment, Congress wro te t hat the bill limits the amount

of DSH payment adjustments to the co sts “these facilities incur in furnishing inpatient or

outpatient services to Medicaid-eligible pat ients and uninsured patients, less payments from

Medicaid other than DSH payment adjustments” and uninsured pat ients. H.R. CONF. REP. NO.

103-213, at 835 (1993), reprinted in 1993 U.S.C.C.A.N. 1088, 1524 (emphasis added). CMS

concedes that the phrase “hospital services” in § 1396r-4(g)(1) (A) refers to both inpatient and

out patient hospital services.

HHS regulations define both “inpatient hospital services” and “outpat ient hospital services.”

“Outpat ient hospital services” is defined as “preventat ive, diagnostic, therapeut ic, rehabilitative,

or palliative services” that, among other things, are furnished by an institution that is “licensed or

formally approved as a hospital by an officially designated author ity for State standard-set ting . . .

.” 42 C.F.R. § 440.20. Louisiana asserts that services provided by hospital-based RHCs

indisputably satisfy the first part of the definition, being “preventat ive, diagnostic, therapeut ic,

rehabilitat ive, or palliative.” RHCs satisfy the “licensed o r formally approved” r equirement,

Louisiana maintains, because the clinics are not licensed independent ly from the parent hospitals.

Rather t han rebuffing Louisiana’s textual argument, with which it ag rees in part, CMS

analyzes the term “hospital services” with the premise that “outpat ient hospital services” and

“rural health clinic services” are mutually exclusive. CMS no tes: (1) federal statu tes and

regulations distinguish the terms in at least two places, see 42 U.S.C. §§ 1396d(a)(2)

(enumerating categories of medical assistance services, including outpat ient hospital services and

rura l health clinic services); 42 C.F.R. § 440.20 (defining each term); (2) unt il recently, RHC

services and outpat ient hospital services were subject t o two ent irely distinct payment reg imes,

10

see, e.g., 42 C.F.R. § 447.371 (designating reimbursement rules for ru ral health clinics); and (3)

Lou isiana itself recognizes in its state plan that RHC services and outpatient hospital services are

distinct categories of services. CMS assumes, without explanation, that any service that a RHC

render s may never be considered an outpatient hospital service even if the service fits w ithin the

regulato ry definition of “hospital out patient service”.

We agree with Lou isiana that a hospital-based RHC functions as a part of the hospital with which

it is affiliated. The hospital employs clinic personnel, pays the clinic’s bills, perfo rms quality

assurance, credent ials the physicians and physician assistants employed by the clinic, owns or leases

the building in which the clinic is located, handles payroll functions for the clinic, and provides

medical supplies to the clinic.

(2) Whether reimbursing hospital-based ru ral health clinics for the cost of caring for uninsured

pat ients fulfills the Congressional purpose of DSH payment ad justments.

Lou isiana argues that the Administrato r’s interpretation of § 1396r-4(g) conflicts with the broad

goal of the DSH program—to support hospitals that serve low-income patients. Louisiana claims

that Congress has, on multiple occasions, demonstrat ed an intention of broadly defining the DSH

program. See, e.g., H.R. Rep. No. 100-391, at 524-27 (1987) (demonstrating: (1) Congress’s

solicitude for the needs of rural hospitals by exempting them from certain requirements ot herwise

applicable to DSH ho spitals, and (2) Congress’s awareness of state plans that offer extra pa yments

to some hospitals because they provide “outpat ient services and outpatient pharmacy to Medicaid and

non-Med icaid eligible low-income pat ients”); H.R. REP. NO. 101-964, at 868, 871 (1990) (exp laining

new provision in § 1396r-4(c)(3) that allows additional DSH payments to designated hospitals to

finance services for Medicaid and low-income patients).

11

Lou isiana recognizes that when Congress amended the statute in 1993, it introduced a hospital-

specific DSH limit. But Louisiana emphasizes that the 1993 amendment’s use of the phrase “hospital

services” expanded the range of services covered by DSH by explicitly rejecting HCFA’s former

position that only inpatient services were covered. See, e.g., State of New York by Perales v. Bowen,

811 F.2d 776, 777-78 (2d Cir. 1987) (considering a co ntent ion by HCFA that DSH adjustment

payments could not include the costs of outpatient hospital service s). Lo uisiana contends that the

Administrato r’s interpretat ion—which precludes reimbursement to hospitals for uncompensated care

provided in their RHCs even though the same care provided to the same patients in a less clinically

appropriate and more cost ly emergency room would be covered—is antithetical to the intention of

Congress. Here to o it seems that Louisiana presents the stronger argument.

(3) Whether CMS’s ow n regulations recognize hospital based rural health clinics are

integral to their parent hospitals.

Lou isiana finally argues that t he regulations governing whether a RHC is hospital based2

demonstrate that qualifying clinics operate as any other hospital outpatient department. For instance,

the regulations require that, in order to be considered hospital based, a clinic must: have common

licensure with the parent facility; provide services that are fully integrated with the hospital’s services;

share income and expenses with the hospital; hold out to the public that it is part of the hospital; and

demonstrate it is under the contro l and ownership of the hospital. See 42 C.F.R. § 413.65(d)(3).

Louisiana also not es that the regulations have treat ed RHCs as hospital outpat ient departments

for Medicare reimbursement limitations. Unt il recent ly, Medicare reimbursed outpatient services on

2 The governing regulations refer to “provider based” RHCs. See, e.g., 42 C.F.R. §
413.65. Hospital based RHCs are a subset of provider based RHCs.

12

a reasonable-cost basis, except that certain reductions in t he calculation of reasonable cost s were

mandated. Under 42 C.F.R. § 413.124, “the reasonable costs of outpat ient hospital services (other

than capital-related costs of such services) are reduced by 5.8 percent.” Similarly, under 42 C.F.R.

§ 413.130, capital-related costs o f these hospitals are reduced by 10 percent. In the past, HCFA

required hospitals to treat their hospital-based RHCs as outpatient departments for reimbursement

purposes.

It seems clear that, without justification, the Administrato r’s decision made an assumption about

out patient hospital services and RHC services—that they are subst antially different—that HCFA’s

previous regulations showed to be unfounded.

B. The Administrato r’s decision was arbitrary and capricious

Lou isiana changed its law in response to, and it s underst anding is in accordance with, former

Secretary Shalala’s guidance . Lo uisiana eliminated Secretary Shalala’s primary objection to the

plan—separate licensing requirements for RHCs—and instead adopted a common licensure reg ime.

Not only were these changes substantial and made in good faith by the Louisiana legislature, but ,

when questioned directly at oral argument, counsel for CMS was unable to offer any other language

that Louisiana should have used to comply with Secretary Shalala’s letter.

CMS does not seriously dispute that RHCs provide medical services t raditionally provided in

hospitals. We agree with Louisiana that commonly-licensed RHCs, like traditional hospitals, provide

medical service that is “preventat ive, diagnostic, therapeutic, rehabilitative, or palliative,” 42 C.F.R.

§ 440.20, t hereby satisfying the first part of the definition o f “hospital services”.

The second part of the definition requires services to be furnished by an institu tion that is

“licensed or formally approved as a hospital by an officially designated authority for State standard-

13

setting . . . .” Id. The Administrato r adopt ed the recommendation of a hearing officer who ignored

the critical fact that Lou isiana, with an eye to this definition, enacted a system of common licensure

for hospital based RHCs. Whether medical care falls within the second part of the definition heavily

depends on the licensing scheme of the inst itu t ion furnishing the service. The Administrat or’s

assumpt ion— that the nature o f a service, and not the circumstances under which the service is

delivered, determines its categorization—ignores the common licensure scheme, the clea r textual

analysis offered by Lo uisiana, and the previous Medicare regulations that analyzed hospitals and

RHCs in a similar manner. Given t he Administrator’s decision was made without proper

consideration of the appropriate facts and contravenes prior regulations promulgated by the HCFA

itself, we hold that the Administrato r’s decision was arbitrary and capricious, and cannot stand.

IV. CONCLUSION

For the above stated reasons, we REVERSE the judgment of the Administrator.

14

Longmore v. Kingston Hospital,

Longmore v. Kingston Hospital,
N.Y. App. Div.,
June 5, 2003

A state appellate court in New York affirmed the dismissal of a physician’s
action
seeking a hearing and money damages after his work at a hospital was discontinued.
The hospital contracted with the physician’s employer to provide ER services
at the hospital. When the hospital did not renew the contract, the physician
(with courtesy staff privileges) requested a hearing regarding the termination
of his employment. The hospital denied the request, claiming it did not terminate
his employment because it did not employ the physician. The court agreed
with the hospital and further held the physician’s work was not terminated
because
his privileges were revoked, but because the employer ceased working at the
hospital. In addition, the court held that because the physician failed to
show that a
contract existed, no money damages could be awarded.

 

 

Louisiana Dep’t of Health and Hosps. v. Center for Medicare and Medicaid Servs.

Louisiana Dep’t of Health and Hosps. v. Center for Medicare
and Medicaid Servs.,
No. 02-60834 (5th Cir. Sept. 22, 2003)

CMS
determined that Rural Health Clinics (RHCs) in Louisiana do not furnish "hospital
services" and thus are not entitled to a higher disproportionate share
reimbursement rate. The United States Court of Appeals for the Fifth Circuit
held that that determination was unreasonable.

The court found that hospital-based RHCs function as part
of the hospital because the hospital employs the clinic’s personnel, pays the
clinic’s bills, performs quality assurance and credentialing for the clinic,
owns or leases the clinic location, handles payroll functions and provides medical
supplies.

Longnecker v. Loyola Univ. Med. Ctr.

FIRST DIVISION
June 25, 2008

No. 1-06-1536

CONNIE LONGNECKER, Individually and as
Special Administrator of the Estate of
CARL LONGNECKER, Deceased,
Plaintiff-Appellant,

v.
LOYOLA UNIVERSITY MEDICAL CENTER, and
SIRISH PARVATHANENI, M.D.,
Defendants-Appellees.

Appeal from the
Circuit Court of
Cook County.

)
)
)
)
)
)
)
)
)
The Honorable
)
) Irwin J. Solganick,
Judge Presiding.
)

No. 02 L 007989

JUSTICE GARCIA delivered the opinion of the court.
Connie Longnecker, individually and as special administrator
of the estate of her husband Carl Longnecker, filed suit against
Dr. Sirish Parvathaneni and Loyola Medical Center, after Mr.
Longnecker died following an unsuccessful heart transplant.
During the procedure, Mr. Longnecker received a diseased
“hypertrophic heart.” He died four days later, never regaining
consciousness.
Dr. Parvathaneni acted as the “procuring” or “harvesting”
surgeon during the transplant. At trial, the plaintiff presented
two theories of liability: (1) Dr. Parvathaneni, as an agent of

No. 1-06-1536

Loyola, committed professional negligence where he failed to
properly test and visually inspect the donor heart, and failed to
diagnose it as having significant left ventricular hypertrophy
and coronary artery disease; and, (2) Loyola committed
institutional negligence by failing to ensure that Dr.
Parvathaneni understood his role as a procuring surgeon. The
jury found in favor of Dr. Parvathaneni and Loyola on the
professional negligence claim. The jury found against Loyola on
the institutional negligence claim and awarded the plaintiff $2.7
million.
Loyola filed a posttrial motion in which it argued it was
entitled to judgment notwithstanding the verdict (judgment
n.o.v.), or, in the alternative, a new trial, because (1) the
plaintiff failed to plead institutional negligence, (2) the
plaintiff failed to produce expert testimony to support
institutional negligence, (3) the plaintiff failed to establish
breach, (4) the plaintiff failed to establish causation, and (5)
the verdicts were inconsistent. The circuit court found the
verdict in favor of Dr. Parvathaneni to be irreconcilable with
the verdict against Loyola, reasoning if Dr. Parvathaneni had not
been negligent, Loyola’s failure to ensure he understood his role
could not have been the proximate cause of Mr. Longnecker’s
death. Therefore, the court decided the verdicts were
2

No. 1-06-1536

inconsistent. The court vacated the verdict against Loyola and
entered judgment for Loyola.
The plaintiff contends on appeal that the jury’s verdicts
are not inconsistent. She alternatively argues that if the
verdicts are inconsistent, the proper remedy is to order a new
trial on both causes of action.
Dr. Parvathaneni agrees the verdicts are not inconsistent.
In his brief, he points to the “wholly separate theories of
liability against Loyola as principal of Dr. Parvathaneni and
[liability against] Loyola for institutional negligence,” to
which two separate standards of care apply.
Loyola’s brief intimates that we need not determine whether
the verdicts are inconsistent if the circuit court’s grant of
judgment n.o.v. is proper for other reasons. Loyola focuses on
the circuit court’s finding that proximate cause was precluded
based on the verdict in favor of Dr. Parvathaneni to contend the
judgment n.o.v. was proper. Loyola also argues the judgment
n.o.v. was proper because the plaintiff failed to establish the
element of breach, and because the institutional negligence claim
was barred by the statute of limitations. In the alternative,
Loyola argues the circuit court correctly found the verdicts to
be inconsistent. Loyola concedes that if the verdicts are
inconsistent, the proper remedy is to order a new trial on both
3

No. 1-06-1536

claims.
For the reasons that follow, we hold the verdicts in this
case are not inconsistent, and that no other basis supports the
grant of judgment n.o.v. We therefore reverse the decision of
the circuit court of Cook County, and remand for further
proceedings.

BACKGROUND
Carl Longnecker suffered from numerous coronary ailments,
and, by age 58, had suffered three heart attacks.
In 2000, Mr. Longnecker became a patient of Dr. George
Mullen, a cardiologist at Loyola. Dr. Mullen told Mr. Longnecker
he needed a heart transplant, and placed his name on a donation
waiting list.
By 2001, Mr. Longnecker’s condition worsened. His “status”
on the donation waiting list went from “2 class” to “1B class,”
moving his name up the list. His chance of surviving one year
without a transplant was 30%.
On June 11, 2001, Mr. Longnecker was informed a potential
donor heart had been located. He went to Loyola and was prepared
for surgery.
A. Loyola Heart Transplantation Procedures
Loyola uses a team approach to heart transplantations. The
Loyola transplant team consists of a nurse coordinator and three
4

No. 1-06-1536

doctors: the transplant cardiologist, the procuring surgeon, and
the transplant surgeon.
The Regional Organ Bank of Illinois (ROBI) also plays a role
in Loyola’s heart transplantations. When a potential donor is
declared brain dead, ROBI gathers information about the donor,
including gender, age, and weight, the cause of death, and
whether the donor smoked, drank alcohol, or used narcotics. ROBI
may also order diagnostic tests of the donor’s heart. ROBI then
passes any relevant information to Loyola’s nurse coordinator,
who briefs the transplant cardiologist.
The transplant cardiologist first makes an evaluation, based
on the donor’s history and the results of any tests, to
preliminarily accept or decline the heart. If the heart is
preliminarily accepted, the procuring surgeon goes to the donor
hospital, where he or she opens the donor’s sternum and visually
inspects the heart and feels it for defects. Next, the procuring
surgeon makes the “final phone call” where he or she reports the
findings to the transplant surgeon, who decides whether to accept
or reject the heart. If the heart is accepted, the procuring
surgeon “cross-clamps” the donor heart, cutting off the blood
supply, and flushes it with a preservative solution. The heart
is transported to Loyola, where the transplant surgeon, who has
removed the patient’s “native” heart, transplants the donor
5

No. 1-06-1536

heart.
Time is of the essence in heart transplantations. A
preserved heart can remain viable for approximately four hours
after being removed from the donor’s body. Thus, the removal of
the donor heart and its transport to the recipient hospital must
be carefully coordinated with the removal of the recipient’s
native heart.
B. The Heart Transplantation in this Case
In this case, the nurse coordinator was Penny Pearson. Dr.
Mullen was the transplant cardiologist. The defendant, Dr.
Parvathaneni, was the procuring surgeon, and Dr. Foy, the
surgical director of the Loyola transplant team, was the
transplant surgeon.
The donor was a 46-year-old male who was declared brain dead
at Good Samaritan Hospital. The donor’s family informed ROBI he
smoked cigarettes and marijuana and drank alcohol regularly, and
that he may have used cocaine. The family also revealed the
donor was diagnosed with hypertension (high blood pressure) in
September 2000. He was “noncompliant” with treatment, meaning he
did not take medication regularly.
Based on the donor’s history, ROBI ordered diagnostic tests,
including an echocardiogram, the “gold standard” test for left
ventricle hypertrophy (the enlargement of the heart wall), and an
6

No. 1-06-1536

angiogram, the “gold standard” test for coronary artery disease
(plaque in the arteries). The donor’s level of troponin, a
substance that may be indicative of damaged heart muscle, was
also measured.
The echocardiogram revealed the donor’s left ventricle
measured 1.2 centimeters, meaning he suffered from “mild” left
ventricle hypertrophy. The angiogram revealed “mild” coronary
artery disease. The donor’s troponin level was elevated.
ROBI contacted Pearson with the above information. Pearson
then contacted Dr. Mullen, who, after evaluating the
echocardiogram and angiogram, and after discussing the matter
with Dr. Foy, preliminarily accepted the heart. Dr. Parvathaneni
then went to Good Samaritan in order to “visualize” the heart,
that is, to inspect it for congenital abnormalities and to
confirm the findings of the echocardiogram and angiogram. Dr.
Parvathaneni did not have any concerns about plaque or
hypertrophy in the heart. Dr. Parvathaneni called Dr. Foy and
told him the heart “look[ed] good” and was “suitable for
transplantation” from a surgical aspect. Dr. Foy accepted the
heart.
At 7:10 a.m., Dr. Parvathaneni cross-clamped the donor’s
heart, and removed it at 7:30 a.m. By 7:40 a.m., the heart was
in route to Loyola, where it arrived at 8:10 a.m.
7

No. 1-06-1536

At 7:48 a.m., while the donor heart was on its way to
Loyola, Dr. Foy placed Mr. Longnecker on a bypass machine. At
8:28 a.m., Mr. Longnecker’s native heart was cross-clamped and
removed. When Dr. Foy removed the donor heart from its
container, he immediately saw and determined by touch that it
suffered from left ventricular hypertrophy and coronary artery
disease. Dr. Foy wrote “Hypertrophic heart!” in his operative
note because the amount of hypertrophy was more than he expected
based on the results of the echocardiogram. Nevertheless, Dr.
Foy determined the heart was suitable for transplant, and
transplanted it. The heart, however, never functioned, and, on
June 15, 2001, Mr. Longnecker died. Had Mr. Longnecker survived,
his name would have been placed back on the heart donation
waiting list.
An autopsy revealed the donor heart weighed 492 grams,
whereas a normal heart weighs 300 grams. The heart’s left
ventricle measured two centimeters in thickness, indicating
“severe” hypertrophy. The heart also exhibited “moderate to
severe” coronary artery disease. The cause of death was
determined to be acute myocardial infarction, with left ventricle
hypertrophy being an indirect contributing cause.
C. Litigation
On June 24, 2002, the plaintiff filed a three-count
8

No. 1-06-1536

complaint against Loyola and Dr. Parvathaneni, alleging medical
negligence and wrongful death, and seeking recovery under the
Family Expense Act (750 ILCS 65/15 (West 2002)). The plaintiff
alleged that Loyola, by and through its agent, Dr. Parvathaneni:
“a. Failed to perform appropriate
testing of the donor heart;
b. Failed to perform appropriate visual
inspections of the donor heart;
c. Fail[ed] to diagnose significant
left ventricle hypertrophy in the donor heart
prior to transplantation;
d. Fail[ed] to diagnose significant
coronary artery disease in the donor heart
prior to transplantation; [and]
e. Otherwise deviated from the standard
of care.”
On June 10, 2003, the plaintiff filed an amended complaint
in which she named as additional defendants others involved in
the transplantation. Prior to trial, the additional defendants
were either granted summary judgment or voluntarily dismissed
from the case. The allegations against Loyola and Dr.
Parvathaneni were the same in both complaints. Neither complaint
expressly based Loyola’s liability on institutional negligence.
9

No. 1-06-1536

On November 29, 2005, one day prior to trial, Loyola filed a
motion in limine seeking to bar the plaintiff from presenting
evidence of Loyola’s institutional negligence because (1) the
plaintiff’s complaint did not allege institutional negligence,
(2) any institutional negligence claim would be time barred, and
(3) the plaintiff’s expert, Dr. James Avery, lacked the
appropriate foundation for his testimony regarding institutional
negligence. The circuit court denied the motion.
On November 30, 2005, the trial commenced. Dr. Foy
testified that he trained Dr. Parvathaneni, who had been a
cardiac fellow at Loyola, to procure hearts for transplantation.
Dr. Foy was “quite satisfied” that Dr. Parvathaneni both knew and
understood his responsibilities in terms of procuring hearts.
Thus, Dr. Parvathaneni remained on Loyola’s staff after his
fellowship completed.
Because Loyola used a team approach to organ procurement,
each team member was required to know his or her role and perform
that role. According to Dr. Foy, in Loyola’s system, the
procuring surgeon evaluates the donor heart and is involved in
making decisions regarding its suitability for transplant; the
procuring surgeon does more than simply remove the heart from the
donor’s body. The procuring surgeon is responsible for (1)
gathering and reviewing all of the available information about
10

No. 1-06-1536

the donor, (2) reviewing any echocardiograms and angiograms, (3)
visually inspecting the heart for trauma or abnormalities and
confirming or denying any abnormalities noted on the
echocardiogram or angiogram, and (4) feeling the heart. Dr. Foy
did not specify whether the procuring surgeon is required to feel
the heart prior to cross-clamp, or whether the examination need
be performed after removal. Dr. Foy’s “final decision” to accept
or reject the heart is based in large part on the procuring
surgeon’s findings.
In this case, by the time Dr. Foy removed the donor heart
from its container, he had already removed Mr. Longnecker’s
native heart. From the moment Dr. Foy held the donor heart, he
knew it had “significant” hypertrophy. Dr. Foy, however, decided
to proceed with the transplant. Although Dr. Foy’s deposition
testimony indicated that “at the time *** the donor heart[] is
brought on to the operative field the die is cast, you have no
choice but to implant that heart,” he testified at trial that he
had the option of using “a Jarvick type, total artificial heart.”
Dr. Parvathaneni, who is triple board certified in general
surgery, critical care, and cardiothoracic surgery, testified
that when he arrived at Good Samaritan to procure the heart, he
knew Drs. Foy and Mullen had already reviewed the results of the
echocardiogram and angiogram, and that Dr. Mullen had “evaluated
11

No. 1-06-1536

[the] heart and cleared it for transplant.” Dr. Parvathaneni
testified he also reviewed the echocardiogram and angiogram as
part of his duties.
Dr. Parvathaneni distinguished between two potential roles
of a Loyola transplantation team member: evaluating a heart for
transplant and examining a heart to be transplanted. He
testified it was his duty as the procuring surgeon to examine a
heart to be transplanted, not to evaluate a heart for transplant.
He did not consider himself capable of evaluating a heart for
transplant.
According to Dr. Parvathaneni, Loyola’s standard practice
required procuring surgeons to visually examine the heart and
manually assess it for hypertrophy and coronary artery disease
before removing the organ. Pursuant to this practice, Dr.
Parvathaneni visually inspected the heart while it remained in
the donor’s chest and felt it for plaque and hypertrophy. He
could not recall whether he could feel more hypertrophy or plaque
in the heart then indicated in the echocardiogram or angiogram
when he placed it in its container.
Dr. Parvathaneni acknowledged that hypertrophy can most
easily be felt after the heart is removed. However, Dr.
Parvathaneni testified he was not trained to manually inspect the
heart after removal. Rather, he was trained “to bring the organ
12

No. 1-06-1536

as fast as [he] could.” Dr. Parvathaneni explained, “Once we are
told to take the heart, we take the heart, bag it up and send it.
Time is of the essence, and they’re expecting the organ [at
Loyola].”
Dr. Mullen, the transplant cardiologist, testified he was
aware the donor was 46 years old and had a history of
uncontrolled hypertension. He was also aware the donor suffered
from “mild” hypertrophy and “mild” coronary artery disease. In
his opinion, it was proper to accept a heart with these
conditions. Dr. Mullen took “full responsibility” for accepting
the donor heart in this case.
Dr. Avery, a cardiovascular surgeon from the California
Pacific Medical Center, gave expert testimony on behalf of the
plaintiff. Prior to testifying, Dr. Avery reviewed depositions
from Drs. Foy, Mullen, and Parvathaneni, which served as the
bases for his opinions.
In Dr. Avery’s opinion, the standard of care required Dr.
Parvathaneni to review the patient’s medical and social history,
the echocardiogram and angiogram, to see and feel how the heart
worked in the donor’s chest, and to come to a conclusion
regarding whether to accept the heart. Dr. Parvathaneni’s
deposition testimony, however, indicated he did not believe he
was required to evaluate the heart at all; rather, he was sent to
13

No. 1-06-1536

Good Samaritan “to get the heart and bring it back.” Dr.
Parvathaneni’s deposition testimony was in conflict with
deposition testimony given by Drs. Foy and Mullen that described
Dr. Parvathaneni’s role as “enormous” in the evaluation of the
heart.
According to Dr. Avery, Dr. Parvathaneni deviated from the
standard of care by being unaware of “significant historical
items” related to the donor, including his history of
uncontrolled hypertension, history of cigarette smoking, and
potential cocaine use. Dr. Parvathaneni also deviated from the
standard of care by failing to perform a physical examination of
the donor heart after the heart was removed. If Dr. Parvathaneni
had done so, he would have found what Dr. Foy later found: “a
thick heart of significant hypertrophy and considerable plaque in
the coronaries.”
Dr. Avery additionally testified the standard of care
required Dr. Parvathaneni to understand his role in the
transplant as viewed by the other team members. However, Dr.
Parvathaneni’s deposition testimony indicated he failed to
understand his role, in deviation of the standard of care.
Regarding Loyola, Dr. Avery testified:
“Q. And in regards to the Loyola
transplant team did the standard of care
14

No. 1-06-1536

require that they–did they have any
responsibility under the standard of care to
make sure that Dr. Parvathaneni understood
his role if they were going to send him to
get a heart?
A. Yes.
Q. And did Loyola deviate from the
standard of care in that regard?
MR. PATTERSON [Counsel for Loyola]:
Objection your Honor, motion in limine.
THE COURT: Overruled.
A. [Dr. Avery]: In this regard I
believe they did.
Q. In what manner?
A. Well, basically everybody needs to
be on the same page in terms of what each
team member’s role is in the team.”
In Dr. Avery’s opinion, had Dr. Parvathaneni fulfilled his
responsibilities pursuant to the standard of care, and had Loyola
fulfilled its responsibilities in ensuring Dr. Parvathaneni knew
his role, the heart would not have been transplanted.
Dr. Robert Higgins, the chairman of cardiovascular and
thoracic surgery and the director of the Heart Transplant and
15

No. 1-06-1536

Mechanical Assist Device Program at Rush University Medical
Center, testified as an expert on behalf of Loyola. Dr.
Higgins’s opinion, to a reasonable degree of scientific
certainty, was that the donor heart was suitable for
transplantation. The echocardiogram showed only mild
hypertrophy, the angiogram showed only mild coronary artery
disease, and the donor’s possible cocaine use was not a factor in
the donor’s death. The heart was also visually suitable for
transplantation. Dr. Higgins, however, testified he would not
transplant a heart with two-centimeter hypertrophy and severe
coronary artery disease.
Dr. Alfred Carl Nicolosi testified as an expert on behalf of
Dr. Parvathaneni. According to Dr. Nicolosi, Dr. Parvathaneni
complied with the standard of care in his role as a procuring
surgeon because he reviewed the echocardiogram and the angiogram,
and conducted a visual inspection and physical examination of the
heart. According to Dr. Nicolosi, the donor heart was acceptable
for transplant, and none of Dr. Parvathaneni’s actions caused Mr.
Longnecker’s death. According to Dr. Nicolosi, the left
ventricle of the donor heart measured two centimeters at the
autopsy because of swelling, not because of hypertrophy.
At the jury instruction conference, Loyola unsuccessfully
objected to instructions on Loyola’s institutional negligence.
16

No. 1-06-1536

The jury was instructed, in part:
“The plaintiff claims that Carl
Longnecker died and that defendants Dr.
Parvathaneni and Loyola *** were negligent in
one or more of the following respects: Failed
to properly evaluate the donor heart; failed
to perform an appropriate physical
examination of the donor heart; failed to
communicate significant problems with the
donor heart after physical examination; and
failed to reject the donor heart for
transplantation.
The plaintiff further claims that
defendant Loyola *** was negligent in one or
more of the following respects: Failed to
ensure that Dr. Parvathaneni understood his
role as a procuring surgeon.
Negligence by a hospital is the failure
to do something that a reasonably careful
hospital would do or the doing of something
that reasonably careful hospital would not do
under the circumstances similar to those
shown by the evidence.
17

No. 1-06-1536

The law does not say how a reasonably
careful hospital would act under the
circumstances, that is for you to decide.”
The jury was not instructed that it could return a verdict
in favor of Dr. Parvathaneni only if it also found in favor of
Loyola. In fact, the jury instructions allowed the jury to find
the way it did.
After initially indicating it could not reach a verdict, the
jury found for Dr. Parvathaneni and Loyola on the professional
negligence claim, and against Loyola on the institutional
negligence claim. The jury assessed $2.7 million in damages.
On Loyola’s motion for judgment n.o.v., the circuit court
found the verdicts inconsistent, and vacated the verdict against
Loyola. The circuit court stated:
“If the institutional negligence in this
case is based specifically on the conduct of
Dr. Parvathaneni in that he did not
understand what his role was and was not–and
that Loyola did not make sure he understood
his role, well, if the jury found that he
wasn’t negligent, then, you know, there was
nothing wrong with what he did and whether he
personally did not understand his role or
18

No. 1-06-1536

whether Loyola didn’t see that he understood
his role doesn’t matter. He didn’t do
anything that caused harm to [Mr.
Longnecker].
If his actions were not a proximate
cause of injury to Mr. Longnecker, even if he
was negligent, then if anything that he did
didn’t cause Mr. Longnecker’s death, then,
you know, the failure by Loyola to see that
he understood what he was doing or knew what
he was doing doesn’t really matter. Nothing
he did was the cause of the injury to Mr.
Longnecker. So they really are
inconsistent.”
The court entered judgment in favor of both defendants.
This timely appeal followed.
ANALYSIS
In medical negligence cases, a hospital may face liability
under two separate and distinct theories: (1) vicarious liability
for the medical negligence of its agents or employees; and (2)
liability for its own institutional negligence. Darling v.
Charleston Community Memorial Hospital, 33 Ill. 2d 326, 211
N.E.2d 253 (1965), cert. denied, 383 U.S. 946, 16 L. Ed. 2d 209,
19

No. 1-06-1536

86 S. Ct. 1204 (1966).
In a professional negligence case, the standard of care
requires the defendant to act with “the same degree of knowledge,
skill and ability as an ordinarily careful professional would
exercise under similar circumstances.” Advincula v. United Blood
Services, 176 Ill. 2d 1, 23, 678 N.E.2d 1009 (1996). Generally,
“expert testimony is necessary in professional negligence cases
to establish the standard of care.” Snelson v. Kamm, 204 Ill. 2d
1, 43-44, 787 N.E.2d 796 (2003). “[E]xpert testimony is needed
*** because jurors are not skilled in the practice of medicine
and would find it difficult without the help of medical evidence
to determine any lack of necessary scientific skill on the part
of the physician.” Walski v. Tiesenga, 72 Ill. 2d 249, 256, 381
N.E.2d 279 (1978).
Institutional negligence involves an analogous standard of
care; a defendant hospital is judged against what a reasonably
careful hospital would do under the same circumstances. Illinois
Pattern Jury Instructions, Civil, No. 105.03.01 (1995). See
generally Jones v. Chicago HMO Ltd. of Illinois, 191 Ill. 2d 278,
294-99, 730 N.E.2d 1119 (2000). Under this theory of liability,
however, “the standard of care *** may be shown by a wide variety
of evidence, including, but not limited to, expert testimony,
hospital bylaws, statutes, accreditation standards, custom and
20

No. 1-06-1536

community practice.” Jones, 191 Ill. 2d at 298. “[T]he
institutional negligence of hospitals can also be determined
without expert testimony in some cases.” Jones, 191 2d at 296.
The concept of proximate cause is the same under
professional and institutional negligence. However, consistent
with the help lay jurors need “to determine any lack of necessary
scientific skill on the part of the physician” (Walski, 72 Ill.
2d at 56), “[t]he proximate cause element of a medical
malpractice case must be established by expert testimony to a
reasonable degree of medical certainty.” (Emphasis added.)
Krivanec v. Abramowitz, 366 Ill. App. 3d 350, 356-57, 851 N.E.2d
849 (2006). We are aware of no authority that imposes a similar
rule that proximate cause be established to a reasonable degree
of medical certainty in an institutional negligence case.
However, an institutional negligence case may present where
professional and institutional standards of care are so
intertwined that proximate cause is required to be shown to a
reasonable degree of medical certainty. The case before us is
not such a case. Nor does Loyola contend otherwise.
In this case, the jury rejected the plaintiff’s contention
that Dr. Parvathaneni (and, vicariously, Loyola) was
professionally negligent. The plaintiff does not challenge this
finding on appeal. The jury accepted the plaintiff’s contention
21

No. 1-06-1536

that Loyola was institutionally negligent. The circuit court,
however, concluded the jury’s findings were inconsistent, granted
Loyola’s motion for judgment n.o.v., and vacated the verdict.
The plaintiff challenges this ruling.
A motion for judgment n.o.v. should be entered “only in
those cases in which all of the evidence, when viewed in its
aspect most favorable to the opponent, so overwhelmingly favors
movant that no contrary verdict based on that evidence could ever
stand.” Pedrick v. Peoria & Eastern R.R. Co., 37 Ill. 2d 494,
510, 229 N.E.2d 504 (1967). Our standard of review is de novo.
York v. Rush-Presbyterian-St. Luke’s Medical Center, 222 Ill. 2d
147, 178, 854 N.E.2d 635 (2006).
I. Institutional Negligence
In support of affirming the trial court’s decision, Loyola
puts forth three arguments: (1) the jury should not have
considered the institutional negligence claim because the claim
was time barred; (2) judgment n.o.v. was proper because the
plaintiff failed to establish breach; and, (3) judgment n.o.v.
was proper because the plaintiff failed to establish proximate
cause.
Before addressing the merits of Loyola’s contentions, we
address the plaintiff’s assertion that Loyola has waived the
first two contentions, if not also the third, because it failed
22

No. 1-06-1536

to obtain a conditional ruling in the circuit court in violation
of section 2-1202(f) of the Code of Civil Procedure, which
requires the circuit court to “rule conditionally on the other
relief sought [in a posttrial motion].” 735 ILCS 5/2-1202(f)
(West 2006). Loyola’s posttrial motion, which raised the issues
of timeliness, breach, and proximate cause, did not seek other
forms of relief. Rather, Loyola’s posttrial motion set forth
alternative bases for the same relief–judgment n.o.v.
Consequently, Loyola’s alternative bases for upholding the
judgment n.o.v. are not waived. Varady v. Guardian Co., 153 Ill.
App. 3d 1062, 1070, 506 N.E.2d 708 (1987); Ralston v. Plogger,
132 Ill. App. 3d 90, 97, 476 N.E.2d 1378 (1985). We address each
in turn.

A. Time Barred
Loyola points out the plaintiff’s original and amended
complaints did not specifically allege Loyola breached any
independent duty of care and, in its view, only alleged Loyola
was vicariously liable for Dr. Parvathaneni’s alleged
malpractice. Loyola argues, “Even assuming that Plaintiff
attempted to amend her complaint at [a later date], any claim of
institutional negligence against Loyola would be time barred.”
Loyola points out the statute of limitations for a medical
malpractice claim is two years (735 ILCS 5/13-212(a) (West
23

No. 1-06-1536

2004)), and argues any institutional negligence claim would not
“relate back” to the original complaint under section 2-616(b) of
the Code of Civil Procedure (735 ILCS 5/2-616(b) (West 2004)).
Section 2-616(b) provides:
“The cause of action, cross claim or
defense set up in any amended pleading shall
not be barred by lapse of time under any
statute *** prescribing or limiting the time
within which an action may be brought or
right asserted, if the time prescribed or
limited had not expired when the original
pleading was filed, and if it shall appear
from the original and amended pleadings that
the cause of action asserted, or the defense
or cross claim interposed in the amended
pleading grew out of the same transaction or
occurrence set up in the original pleading
***.” 735 ILCS 5/2-616(b) (West 2004).
Loyola mistakenly relies on section 2-616(b) and
institutional negligence cases addressing the relation-back
doctrine. See, e.g., Frigo v. Silver Cross Hospital & Medical
Center, 377 Ill. App. 3d 43, 62, 876 N.E.2d 697 (2007)
(plaintiff’s negligent credentialing claim related back to her
24

No. 1-06-1536

original pleading specifically alleging the hospital committed
negligence); Weidner v. Carle Foundation Hospital, 159 Ill. App.
3d 710, 713, 512 N.E.2d 824 (1987) (plaintiff’s allegation that
the hospital breached its institutional duty of care did not
relate back to her original complaint alleging the hospital was
vicariously liable for the doctor’s malpractice). The relation-
back provision of section 2-616(b), by its very terms, applies
only in cases where “cause[s] of action, cross claim[s] or
defense[s]” are raised beyond the limitations period in “any
amended pleading.” 735 ILCS 5/2-616(b) (West 2004); Porter v.
Decatur Memorial Hospital, 227 Ill. 2d 343, 882 N.E.2d 583
(2008). In this case, the plaintiff did not raise any new claim
against Loyola in an amended pleading. Rather, the plaintiff’s
original and amended complaints, both filed within the two-year
limitations period, contained the same allegations against
Loyola, and no other amended pleadings were filed. Simply
stated, the relation-back doctrine has no application in this
case.
What is relevant, however, is whether the plaintiff’s timely
filed amended complaint contained sufficient facts to put Loyola
on notice that the plaintiff sought to hold it liable for
institutional negligence. The plaintiff’s amended complaint
alleged Loyola and Dr. Parvathaneni failed to properly test,
25

No. 1-06-1536
inspect, and diagnose the donor heart, and that both defendants
“[o]therwise deviated from the standard of care.” Although the
amended complaint did not expressly assert an institutional
negligence claim against Loyola, Loyola was on notice of this
theory of liability long before the commencement of trial. In
her Supreme Court Rule 213 (210 Ill. 2d R. 213) response, the
plaintiff disclosed Dr. Avery’s opinion on this very point.
“9. Defendant Loyola University Medical
Center, as an institution and through the
physicians practicing within the heart
transplant unit, had a duty to ensure that
each physician and participant in the heart
transplant team understood his or her role
and what was expected of him or her in the
assessment of the donor heart for transplant.
This was a deviation from the standard of
care on the part of Defendant Loyola
University Medical Center.”
Loyola’s motion in limine to bar Dr. Avery from testifying
about institutional negligence confirms that Loyola understood
that the plaintiff was proceeding under this separate theory of
liability.
We reject Loyola’s contention that the plaintiff’s

26

No. 1-06-1536
institutional negligence claim was time barred.
B. Breach of Duty
In an institutional negligence case, “[a] hospital owes a
duty to its patients to exercise reasonable care in light of
apparent risk.” Andrews v. Northwestern Memorial Hospital, 184
Ill. App. 3d 486, 493, 540 N.E.2d 447 (1989), citing
Ohligschlager v. Proctor Community Hospital, 55 Ill. 2d 411, 303
N.E.2d 392 (1973). Here, the “apparent risk” was that a donor
heart with significant hypertrophy would be accepted for
transplantation. In order to avoid this risk, the plaintiff
asserts Loyola had a duty to ensure that each member of the heart
transplant team was fully aware of his role in evaluating the
donor heart for transplantation.1
According to the plaintiff, Dr. Parvathaneni should have
been informed that his role, as part of the transplant team,
included evaluating the heart for transplantation after
harvesting, not simply examining the heart while in the donor.
Had Dr. Parvathaneni evaluated the heart after harvesting, he
likely would have made the same observation Dr. Foy made after

1 Loyola makes no claim that the standard of care, itself,
was not established by the evidence in light of Dr. Foy’s
testimony that the procuring surgeon is charged with evaluating
the donor heart for transplantation.
27

No. 1-06-1536
first observing the donor heart, that it was a “Hypertrophic
heart!” Dr. Avery, the plaintiff’s expert, explained that had
Dr. Parvathaneni evaluated the heart after it was removed he
would have found: “a thick heart of significant hypertrophy and
considerable plaque in the coronaries.” Dr. Parvathaneni
testified that hypertrophy can most easily be felt after the
heart is removed; he, however, was not trained to manually
inspect the heart after removal. After removal, his role was “to
bring the organ as fast as [he] could” to Loyola. According to
Dr. Foy’s deposition testimony, he was “surprised” by Dr.
Parvathaneni’s description of his role because Dr. Parvathaneni
played a much greater role in evaluating the donor heart. In his
deposition, Dr. Mullen characterized Dr. Parvathaneni’s role in
evaluating the donor heart as “enormous.” As Dr. Avery
testified, Loyola owed a duty of reasonable care to Mr.
Longnecker to ensure that before his native heart was removed,
the donor heart was evaluated as acceptable for transplantation
by each member of the transplant team.
Against this record, Loyola makes three arguments to
challenge the jury’s finding of breach of duty.
First, Loyola argues there is no evidence it knew or should
have known about Dr. Parvathaneni’s noncompliance with transplant
procedures. Loyola cites Pickle, 106 Ill. App. 3d 734, 435

28

No. 1-06-1536
N.E.2d 877, Reynolds v. Mennonite Hospital, 168 Ill. App. 3d 575,
522 N.E.2d 827 (1988), and Rohe v. Shivde, 203 Ill. App. 3d 181,
560 N.E.2d 1113 (1990) as support.
In Pickle, the plaintiff sued the doctor and the hospital,
alleging he suffered injuries as a result of electroconvulsive
therapy. The plaintiff specifically alleged the doctor
administered the therapy in a manner that did not comply with the
hospital’s policies, and the hospital allowed the procedure to be
performed in violation of its policies. The circuit court
dismissed the complaint and we affirmed. We held the complaint
was properly dismissed because the plaintiff failed to allege the
hospital knew or should have known the doctor would violate its
policies. Our decision in Holton v. Resurrection Hospital, 88
Ill. App. 3d 655, 659, 410 N.E.2d 969 (1980), which held that a
hospital has a duty to use reasonable care to discern the medical
qualifications of those practicing within the hospital and that a
hospital breaches that duty where it allows a doctor to practice
where it knows or should know the doctor is unqualified, provided
the authority for our holding. We refused to “recognize the
existence of a duty on the part of the hospital’s administration
to insure that each of its staff physicians will always perform
his duty of due care,” because that would amount to requiring the
hospital to act as an insurer of a patient’s safety. Pickle, 106

29

No. 1-06-1536
Ill. App. 3d at 739.
Similar claims were raised in Reynolds and Rohe. Rohe, 203
Ill. App. 3d at 200 (alleging the defendant hospital allowed a
pediatrician to practice where the pediatrician violated several
hospital policies); Reynolds, 168 Ill. App. 3d at 577 (alleging
the defendant hospitals failed to review and supervise the
doctors’ work where the doctors misdiagnosed the plaintiffs and
performed unnecessary surgery). In both cases, we held the
hospitals were entitled to summary judgment because the
plaintiffs failed to allege the hospitals were aware of the
doctors’ actions. Rohe, 203 Ill. App. 3d at 203; Reynolds, 168
Ill. App. 3d at 578-79.
Pickle, Reynolds, and Rohe do not control this case. Each
of the three cases involved a “rouge” doctor practicing medicine
in violation of the policies set forth by the hospital.
Unaddressed in those cases is the issue here–whether the
hospital adequately informed a doctor of his duties while working
as a member of a team of doctors. The allegation against Loyola
is not that Dr. Parvathaneni harvested hearts in violation of
Loyola’s policies. Rather, the allegation is that Loyola never
informed Dr. Parvathaneni that his duty as a harvesting surgeon
encompassed “evaluating a heart for transplantation.” The
plaintiff’s claim of reasonable care owed by Loyola was not to

30

No. 1-06-1536
insure that each member of the heart transplant team will always
perform his duty of reasonable care to his patient; rather, the
plaintiff contends Loyola breached its duty to ensure Dr.
Parvathaneni knew his role as part of the heart transplant team
was not simply to examine but to evaluate the donor heart.
Second, Loyola argues the plaintiff “failed to proffer any
evidence that if Loyola had done something differently with
respect to the training or supervision of Dr. Parvathaneni, his
alleged noncompliance would have been discovered.” Loyola’s
contention, by linking Loyola’s shortfall on “training or
supervision of Dr. Parvathaneni” to the discovery of the alleged
noncompliance, misses the point. As we have made clear above, it
is not the discovery of Dr. Parvathaneni’s “alleged
noncompliance” with a Loyola policy that is at issue; rather, at
issue is Loyola’s alleged failure to ensure Dr. Parvathaneni was
aware of its policy that the procuring surgeon had a role in
evaluating the heart for transplantation.
Finally, Loyola argues Dr. Avery’s testimony was conclusory.
Dr. Avery testified Dr. Parvathaneni’s deposition testimony
conflicted with that of Drs. Foy and Mullen regarding the role of
the procuring surgeon. According to Dr. Avery, Loyola breached
the standard of care because “everybody needs to be on the same
page in terms of what each team member’s role is in the team.”

31

No. 1-06-1536
According to Loyola, “To sustain Plaintiff’s burden, Dr. Avery
was required to explain specifically how Loyola allegedly
breached the applicable standard of care–to identify what Loyola
failed to do that a ‘reasonably careful’ hospital would have done
under similar circumstances to ensure that individual members of
the Transplant Team understood their respective roles.” Loyola
again relies on Reynolds.
As discussed above, Reynolds affirmed summary judgment in
favor of the defendant hospitals because the plaintiffs failed to
establish the defendant hospitals knew or had reason to know of
the doctors’ alleged malpractice. The court also addressed
whether testimony from the plaintiffs’ expert was sufficient to
establish the hospitals’ knowledge. We held it was not.
Although the expert opined that the hospitals should have known
of the doctors’ improper diagnoses of thoracic outlet syndrome,
the plaintiffs failed to allege any facts “to substantiate that
opinion.” Reynolds, 168 Ill. App. 3d at 579. Thus, in Reynolds,
the expert asserted a conclusion without factual support that the
hospital should have known of the doctors’ noncompliance through
proper review.
Here, the facts underlying Dr. Avery’s opinion go directly
to the claimed breach by Loyola of its duty of reasonable care
owed to Mr. Longnecker that each team member evaluate the heart

32

No. 1-06-1536
for transplantation. Dr. Parvathaneni testified he was not
trained to “evaluate” the donor heart for hypertrophy even though
such an evaluation could be quickly made based on Dr. Foy’s
immediate observation after removing the donor heart from the
transport container that it was a “Hypertrophic heart!” Drs. Foy
and Mullen each provided deposition testimony that Dr.
Parvathaneni had an enormous role in evaluating the donor heart
for transplantation. This enormous role Dr. Parvathaneni was
expected to play in evaluating the donor heart for
transplantation is confirmed by Dr. Foy’s decision to remove Mr.
Longnecker’s heart before he personally viewed the donor heart.
Dr. Avery’s opinion that Loyola breached the standard care
by failing to ensure that each member of the transplant team
evaluated the donor heart had sufficient factual support in the
record to establish that Loyola breached its duty of care to Mr.
Longnecker.

C. Proximate Cause
Loyola next argues the plaintiff failed to establish
proximate cause. Loyola argues “there was no evidence that if
Loyola had done something differently with respect to the
training or supervision of Dr. Parvathaneni, then Dr.
Parvathaneni and Dr. Foy would have rejected the donor heart for
transplantation in Mr. Longnecker.” As authority for its “no

33

No. 1-06-1536
proximate cause” contention, Loyola relies on Snelson v. Kamm,
204 Ill. 2d 1, 787 N.E.2d 796 (2003), a case not involving a
claim of institutional negligence.
In Snelson, under Dr. Kamm’s care, Snelson underwent a
“radiological procedure known as an aortogram or aroteriogram,
[performed by a radiologist practicing at the hospital,] to
determine the location of arterial blockages.” Snelson, 204 Ill.
2d at 10. The procedure was terminated because of the difficulty
in inserting “the guide wire.” Snelson, 204 Ill. 2d at 10. Dr.
Kamm, a general surgeon, was informed that the test was not
completed and that Snelson complained of back and abdominal pain
following the unsuccessful procedure. Snelson, 204 Ill. 2d at
11. After ameliorative treatments over the course of a day and a
half to address Mr. Snelson’s severe abdominal pain were
exhausted, Dr. Kamm performed emergency exploratory surgery,
which revealed portions of the small and large bowel loops were
dead. At trial, the radiologist opined that the “unsuccessful
*** aortogram caused the death of portions of Snelson’s
intestine[s].” Snelson, 204 Ill. 2d at 15.
The action against the hospital was based on Snelson’s claim
that the attending nurses negligently failed to inform Dr. Kamm
that they had inserted a catheter before Dr. Kamm ordered one and
that Snelson was experiencing high levels of pain. This, Snelson

34

No. 1-06-1536
contended, affected the treatment he received from Dr. Kamm.
Snelson, 204 Ill. 2d at 13. After a verdict was returned against
Dr. Kamm and the hospital, the circuit court entered a judgment
n.o.v. for the hospital, finding no causal connection between the
alleged failures of the nurses and the medical treatment rendered
by Dr. Kamm. Snelson, 204 Ill. 2d at 13. The appellate court
affirmed. The supreme court granted leave to appeal.
The supreme court began its discussion of Snelson’s claim
that the judgment n.o.v. was error with observations based on the
record evidence. “Snelson acknowledges that he presented no
expert testimony indicating that [the hospital’s] conduct was a
proximate cause of his injury. He also acknowledges that Kamm
testified that no act or omission of the nursing staff affected
his course of treatment ***. Nevertheless, Snelson argues that a
question of fact as to proximate cause was sufficiently
established by the evidence.” Snelson, 204 Ill. 2d at 42.
Here, Loyola does not assert, nor can it based on the record
before us, that the plaintiff acknowledges similar shortfalls in
the evidence. Snelson is thus factually distinguishable. We
nonetheless address Loyola’s contention that under a Snelson-type
analysis, proximate cause was not shown here.
According to Loyola, as to Dr. Foy’s decision to transplant
the donor heart, the record evidence supports but one conclusion:

35

No. 1-06-1536
“[E]ven though the donor heart had more hypertrophy than Dr. Foy
expected based on the echocardiogram, Dr. Foy decided that the
heart was acceptable for transplant in Mr. Longnecker.” Thus,
Loyola argues, because the donor heart was found acceptable for
transplantation by Dr. Foy, there was no causal connection
between Dr. Parvathaneni’s failure to evaluate the heart after
harvest and Dr. Foy’s decision to transplant the donor heart.
It is true that Dr. Foy testified that he decided the heart
was suitable for transplant and that he had the alternative
option of using an artificial heart if he found the donor heart
unacceptable. Loyola ignores, however, that the jury also had
before it Dr. Foy’s deposition testimony that once he removed Mr.
Longnecker’s native heart, “the die is cast, [there is] no choice
but to implant [the donor] heart.” The discovery by Dr. Foy that
the donor heart was hypertrophic was simply too late once the
donor heart was on the “operative field.” The jury also heard
the testimony of Dr. Higgins, an expert called on behalf of
Loyola, that he would not transplant a heart with two-centimeter
hypertrophy and severe coronary artery disease. At the autopsy,
the donor heart measured two centimeters in thickness at the left
ventricle and exhibited “moderate to severe” coronary artery
disease.
This conflict in the evidence made it a jury question

36

No. 1-06-1536
whether the alleged breach of Loyola’s institutional standard of
care proximately caused the death of Mr. Longnecker.
Our conclusion that proximate cause was a question of fact
for the jury is supported by the conclusion reached by the
supreme court in Jones on the issue of proximate cause in an
institutional negligence case. In Jones, in response to Chicago
HMO’s argument that there was no causal connection between
Shawndale’s claim and the failure of Chicago HMO to schedule a
needed appointment in which Shawndale’s illness would have been
discovered, the court observed: “We can easily infer from this
record that Dr. Jordan’s failure to see Shawndale resulted from
an inability to serve an overloaded patient population. A lay
juror can discern that a physician who has thousands more
patients than he should will not have time to service them all in
an appropriate manner.” Jones, 191 Ill. 2d at 301. This
reasonable inference, along with additional evidence in the
record that Chicago HMO was soliciting more patients, the supreme
court concluded, presented a material question of fact to
overcome summary judgment “on Jones’ claim of institutional
negligence for assigning too many patients to Dr. Jordan.”
Jones, 191 Ill. 2d at 304.
Likewise here, the jury could have inferred that Dr. Foy
removed Mr. Longnecker’s native heart, not because it was in

37

No. 1-06-1536
worse condition than the hypertrophic heart of the donor but
because he relied on Dr. Parvathaneni to have informed him if the
donor heart were hypertrophic, that is, to a greater degree than
indicated in the diagnostic tests of the donor. As the plaintiff
claims, had Loyola properly conveyed to Dr. Parvathenani that as
part of the transplant team his duties included evaluating the
donor heart after harvest, thus leading to the discovery of the
significant hypertrophy in the donor heart, “then Dr. Foy would
have rejected the donor heart for transplantation in Mr.
Longnecker.” That the severity of hypertrophy in the donor
heart, detected by Dr. Foy immediately upon removing the heart
from the transport container, was a shock to Dr. Foy is revealed
by the exclamation notation of “Hypertrophic heart!” in his
operating notes. The jury was not required to believe Dr. Foy’s
testimony in court that he found the heart acceptable for
transplantation over his deposition testimony that once he
removed Mr. Longnecker’s native heart, he “had no choice but to
implant [the donor] heart.” The jury was free to draw the
inference from the evidence that Dr. Foy would not have
“implant[ed] that heart” had he had a real choice, which a
properly trained Dr. Parvathenani would have given him.
Accordingly, there was a causal connection between Loyola’s
failure to ensure that the entire transplant team was “on the

38

No. 1-06-1536
same page” and Mr. Longnecker’s death, caused by the
transplantation of a nonfunctioning heart.
Finally, the circuit court’s conclusion that a verdict in
favor of Dr. Parvathaneni precluded a proximate cause showing as
to the institutional negligence claim, in the context of this
case, is, simply put, wrong. Our supreme court has expressly
stated: “Liability is predicated on the hospital’s own
[institutional] negligence, not the negligence of the physician.”
Jones, 191 Ill. 2d at 292. “[T]he tort of institutional
negligence ‘does not encompass, whatsoever, a hospital’s
responsibility for the conduct of its *** medical
professionals.’ ” Jones, 191 Ill. 2d at 298, quoting Advincula,
176 Ill. 2d at 31.
To hold Dr. Parvathaneni liable, the jury would have had to
conclude that he deviated from the professional standard of care
to which a procuring surgeon is held. The standard of care for
Loyola as to the institutional negligence claim required a
showing of what a reasonably careful hospital would do under the
circumstances of this case. If, in fact, as the circuit judge
concluded, before institutional negligence can be found,
professional negligence on the part of Dr. Parvathaneni must be
found, the claims of professional negligence and institutional
negligence would conflate into a single theory of vicarious

39

No. 1-06-1536
liability. Dr. Parvathaneni’s commission of medical malpractice
would impose vicarious liability on Loyola, as principal to Dr.
Parvathaneni, and render the claim of institutional negligence
against Loyola pointless. The two claims, however, are
independent, as our supreme court has made clear. Because the
jury found in favor of Dr. Parvathaneni, it does not follow that
the jury was compelled to find in favor of Loyola on the
institutional negligence claim. See Collins v. Roseland
Community Hospital, 219 Ill. App. 3d 766, 775, 579 N.E.2d 1105
(1991) (verdicts not inconsistent because care provided at
hospital involved health professionals “requiring differing
degrees of care and subject to differing standards of care”).
Under the facts of this case no such outcome was required. The
jury was properly instructed that Loyola alone could be found
liable under the institutional negligence theory and the jury so
found.
The circuit judge, in concluding the verdict in favor Dr.
Parvathaneni and the verdict against Loyola could not stand, may
have been thinking of a case like Frigo, where the plaintiff
asserted a negligent credentialing claim in the context of
institutional negligence, involving a podiatrist, a nonemployee
of the hospital. Frigo, 377 Ill. App. 3d 43. If the plaintiff
successfully established a deviation of the standard of care of

40

No. 1-06-1536
the hospital resulting in wrongly extending credentials to the
podiatrist, then to establish proximate cause for the injury
inflicted on the plaintiff by the podiatrist on the independent
institutional claim, the plaintiff would also have to establish
that the podiatrist committed medical malpractice that gave rise
to the plaintiff’s injuries. Frigo, 377 Ill. App. 3d at 74-75.
If the podiatrist did not commit medical negligence, there would
be no causal connection between the hospital’s action in
negligently giving surgical privileges to the podiatrist and the
injuries the plaintiff suffered. Frigo, 377 Ill. App. 3d at 75.
Frigo, is much like Reynolds, the case upon which the
dissent so heavily relies. In each case, the plaintiff was
required to prove malpractice by the offending doctors. In
Frigo, the plaintiff had to prove the podiatrist committed
malpractice in order to succeed on her institutional negligence
claim against the hospital. In Reynolds, the plaintiffs were
required to prove not only that the surgeons “were negligent in
their diagnoses of these plaintiffs” but “that the hospitals
should have known, through proper review procedures, that the
surgeons were improperly diagnosing thoracic outlet syndrome.”
Reynolds, 168 Ill. App. 3d at 579.
Here, the plaintiff’s institutional claim was based on
Loyola’s deviation from the standard of care, not on any claimed

41

No. 1-06-1536
deviation of the standard of care by Dr. Parvathaneni. In fact,
the jury found Dr. Parvathaneni did not commit medical
malpractice, a verdict supported by the evidence as the plaintiff
concedes. The focus of the plaintiff’s institutional negligence
claim against Loyola is entirely on Loyola’s training of Dr.
Parvathaneni, as the harvesting surgeon of the heart transplant
team. Even if “notice” under Reynolds were at the crux of the
plaintiff’s claim, it is disingenuous for Loyola to suggest that
it did not have “notice” that Dr. Parvathaneni was not trained to
evaluate the donor heart after harvesting when Loyola itself
trained Dr. Parvathaneni in his role as the harvesting surgeon of
the transplant team. It is no more plausible that Loyola had no
such notice than that Loyola was unaware heart transplants were
taking place in its hospital. As we have made clear, the instant
case is like neither Reynolds nor Frigo.
The dissent intimates that Aguilera v. Mount Sinai Hospital
Medical Center, 293 Ill. App. 3d 967, 691 N.E.2d 1 (1997),
provides guidance on proximate cause in this case.2 We find no

2 We find no legal significance to the dissent’s
observations that “there is no expert testimony of how long the
decedent could have lived; how long it would have taken to obtain
a new donor; or if the decedent was placed on a Jarvik-type
artificial heart, how long could the decedent live with the
42

No. 1-06-1536
factual similarities between Aguilera and the case before us.
There is a life and death difference between a claim based on a
delay in ordering a CT scan that would have revealed a brain
hemorrhage that might or might not be operable and a claim that
Loyola removed a functioning heart (albeit, one that gave Mr.
Longnecker a 30% chance of surviving one year) and replaced it
with a nonfunctioning heart resulting in Mr. Longnecker’s death
four days later.
It was for the jury to determine whether there was
sufficient evidence of the breach of duty by Loyola and whether
there was a causal link between that breach and Mr. Longnecker’s
death. Based on the record evidence and the reasonable
inferences that may be drawn therefore, we cannot say “no

artificial heart.” (Slip op. at __.) Much like Dr. Foy’s
decision to remove Mr. Longnecker’s heart before discovering the
donor’s hypertrophic heart, the dissent’s unanswered questions
focus the analysis too late in the sequence of events. The
plaintiff’s claim is that Mr. Longnecker’s native heart should
never have been removed in the first instance when all Loyola had
to replace it with was a hypertrophic heart or other limited
measures that would not have returned Mr. Longnecker to the
position he was in before he was admitted to Loyola for a heart
transplant.

43

No. 1-06-1536
contrary verdict based on that evidence could ever stand.”
Pedrick, 37 Ill. 2d at 510. Loyola was not entitled to judgment
n.o.v. on proximate cause.
II. Legally Inconsistent Verdicts
Dr. Parvathaneni contends the verdicts are not inconsistent
because different standards of care are involved in medical
negligence and institutional negligence. Collins, 219 Ill. App.
3d at 775, 579 N.E.2d 1105 (1991) (verdicts not inconsistent
because care provided at hospital involved health professionals
“requiring differing degrees of care and subject to differing
standards of care”). The plaintiff contends the verdicts are not
inconsistent because ” ‘the same element [was not] found to exist
and not to exist.’ ” Redmond v. Socha, 216 Ill. 2d 622, 649, 837
N.E.2d 883 (2005), quoting Black’s Law Dictionary 1592 (8th ed.
2004). Loyola contends “[t]he verdict in favor of Dr.
Parvathaneni broke any possible causal link between Loyola’s
conduct and Mr. Longnecker’s injuries.”
Loyola’s argument is in effect the reasoning of the circuit
judge that the verdicts were irreconcilable because the verdict
in favor of Dr. Parvathaneni precluded a showing of proximate
cause in the claim against Loyola, which we have already
rejected. Loyola presents no additional argument that we need
address on its claim of inconsistent verdicts.

44

No. 1-06-1536
We also note that a holding of legally inconsistent
verdicts, under supreme court precedent, mandates that both
verdicts be vacated and a new trial ordered against Loyola and
Dr. Parvathaneni. Redmond, 216 Ill. 2d at 651 (“once a trial
court determines that jury verdicts are legally inconsistent,
whether to grant a new trial is not up to the trial court’s
discretion. It is mandatory”). The jury found the plaintiff
failed to prove her case against Dr. Parvathaneni. The plaintiff
does not contest this verdict but agrees with Dr. Parvathaneni’s
contention that “there was evidence from which the jury could
conclude that Parvathaneni was not negligent.” Vacating the
jury’s verdict in favor of Dr. Parvathaneni and remanding for a
new trial against him would be unjust in this case.
CONCLUSION
For the reasons stated above, the order of the circuit court
of Cook County is reversed and the matter is remanded for further
proceedings consistent with this opinion.
Reversed and remanded.
CAHILL, P.J., concurs.
R. GORDON, J., dissents.

45

No. 1-06-1536

JUSTICE ROBERT E. GORDON, dis senting:

I respectfully dissent from the majority opinion where they find that plaintiff proved an

institutional negligence case against Loyola University Medical Center (Loyola). I believe the

trial judge’s decision should be affirmed; however, I agree that the verdicts were not inconsistent.

Illinoi s has long recogn ized that a hospi tal s may be held liab le for i ts own negligence. In

Darling v. Charleston Community Memorial Hospital, 33 Ill. 2d 326, 333 (1965), our Illinois

Supreme Court acknowledged an independent duty of hospitals to assume responsibility for the

care of their patients. “Ordinarily, this duty is administrative or managerial in character.” Jones

v. Chicago HMO Ltd., of Illinois, 191 Ill . 2d 278, 291 (2000 ), cit ing Advincula v. United Blood

Services, 176 Ill. 2d 1, 28 (1996). To fulfill its duty, a hospital must act as a “reasonably careful

hospital” would under similar circumstances. Advincula, 176 Ill. 2d at 29. Liability is

predicated on the hospital’s own negligence, not the negligence of the physician. Jones, 191 Ill.

2d at 284. This independent negligence of the hospital is known as institutional negligence or

direct corporate negligence.

In a medical negligence case, a plaintiff must prove by a preponderance of the evidence

that: (1) the defendant owed a duty of care; (2) the defendant breached that duty; and (3) the

plaintiff’s resulting injury or death was proximately caused by the breach. Hooper v. County of

Cook, 366 Ill. App. 3d 1, 6 (2006). I find no evidence in the record of this case of either a breach

of duty or causation. Plaintiff’s expert, Dr. Avery, testified that Loyola breached its duty because

“basically everybody needs to be on the same page in terms of what each team member’s role is

in the team.” Dr. Avery’s testimony concerning the “same page” was based on the fact that Drs.

46

No. 1-06-1536

Foy and Mullen described the role of a procuring surgeon under the Loyola system differently

than Dr. Paravataneni did. Reynolds v. Mennonite Hospital, 168 Ill. App. 3d 575

(1988) is instructive as to whether the evidence in this case could support a verdict against

Loyola for its claimed failure to instruct Dr. Paravathaneni about his role on the heart transplant

team. In Reynolds, plaintiffs alleged that the hospital was institutionally negligent because it

failed to implement or follow standards of review to ensure the competency of its surgeons to

diagnose thoracic outlet syndrome. Reynolds, 168 Ill. App. 3d at 578-79. The appellate court

affirmed the trial court’s entry of summary judgment for the hospital because there was no

evidence that would have placed the hospital on notice of any malpractice by the surgeons.

Reynolds, 168 Ill. App. 3d at 580. In Reynolds, the plaintiff’s expert opined that the hospital

should have known, through proper review procedure, that its surgeons were improperly

diagnosing thoracic outlet syndrome; but the trial court concluded that the plaintiff’s expert’s

testimony was insufficient because there were no facts to substantiate that opinion. Reynolds,

168 Ill. App. 3d at 579-80. See also Rohe v. Shivde, 203 Ill. App. 3d 181, 202 (1990) (plaintiff

presented no evidence that the hospital failed to review the performance of the attending

pediatrician as to her compliance with hospital policy in examining newborn infants).

In the case at bar, there was no evidence that Loyola knew or should have known if Dr.

Paravathaneni had ever deviated from Loyola’s institutional policies or did not understand his

role on the heart transplant team. Plaintiff’s expert needed to identify what Loyola failed to do

that a “reasonably careful” hospital would have done under similar circumstances. Advincula,

176 Ill. 2d at 29.

47

No. 1-06-1536

However, even if plaintiff was able to show the second element, namely a breach of the

standard of care, there was no evidence of the third element, namely, a causal relationship

between an alleged breach of duty and the death at issue. “ ‘[I]n order to sustain the burden of

proof, a plaintiff’s expert must demonstrate within a reasonable degree of medical certainty that

the defendant’s breach in the standard of care is more probably than not the cause of the injury.’ ”

Bergman v. Kelsey, 375 Ill. App. 3d 612, 625 (2007), quot ing Knauerhaze v. Nelson, 361 Ill.

App. 3d 538, 549 (2005).

Even if Dr. Paravathaneni had been properly advised of his role to evaluate the donor’s

heart for transplant purposes and advised Dr. Foy of his findings, there is no evidence that Dr.

Foy would not have used the donor’s heart. Plaintiff’s expert, Dr. Avery, testified that if Dr.

Paravathaneni had evaluated the donor heart after it was removed and before he made the “final

phone call” to Dr. Foy, he would have found what Dr. Foy later found: “a thick heart of

significant hypertrophy and considerable plaque in the coronaries.” Even though the donor heart

had more hypertrophy than Dr. Foy expected based on the echocardiogram, Dr. Foy knew this

and still decided that the heart was acceptable to transplant to the decedent. Dr. Foy rejected the

option of using an artificial heart instead.3 Dr. Foy made his decision based on the decedent’s

grave medical condition resulting from his failing heart.

The evidence in the record further indicates that after the heart was removed, Dr.

Paravathaneni found even more hypertrophy than he initially observed. The record contains no

3If Dr. Foy found that the donor’s heart was not suitable,
he testified he could have placed the decedent on a Jarvik-type
artificial heart.

48

No. 1-06-1536

medical testimony concerning the effect of those observations or their medical significance for

causation.

After Dr. Paravathaneni removed the donor heart and made the telephone call to the

hospital , Dr . Foy removed the deceden t’s heart and p laced the deceden t on the hear t mach ine. If

the donor’s heart was not used, there is no expert testimony of how long the decedent could have

lived; how long it would have taken to obtain a new donor; or if the decedent was placed on a

Jarvik-type artificial heart, how long the decedent could have lived with the artificial heart.

This was a complex medical malpractice case that required a medical basis for the

expert’s opinion that Loyola’s breach of duty was a cause of the decedent’s death; and it is not

found in this record.

Dr. Avery’s test imony concerning causation was limited to the fol lowing:

“Q. Was Mr. Longnecker’s death caused as a result of the

deviat ions from the standard of care that we talked about today?

A. I believe they are.”

There was no basis for that opinion; and as a result, the element of causation was lacking. “An

expert’s opinion is only as valid as the basis and reasons for the opinion.” Wilson v. Bell Fuels,

Inc., 214 Ill. App . 3d 868, 875 (1991 ), cit ing McCormick v. Maplehurst Winter Sports, Ltd., 166

Ill. App. 3d 93, 100 (1988). “A party must lay a foundation sufficient to establish the reliability

of the bases for the expert’s opinion.” Petraski v. Thedos, No. 1-06-2914, slip op. at 11 (Ill.

App. C t. March 31, 2008) , citing Turner v. Williams, 326 Ill. App. 3d 541, 552-53 (2001).

In Aguilera v. Mount Sinai Hospital Medical Center, 293 Ill. App. 3d 967, 968 (1997),

49

No. 1-06-1536

the plaintiff’s decedent was taken to the emergency room complaining of numbness on the right

side of his body. About six or seven hours later, a CT scan was taken, revealing a brain

hemorrhage. Aguilera, 293 Ill. App. 3d at 969. The patient died a few days later. Aguilera, 293

Ill. App. 3d at 969. Plaintiff presented two experts who testified that the emergency room

physician’s delay in taking the CT scan caused the decedent’s death. Aguilera, 293 Ill. App. 3d

at 969. It was the plaintiff’s theory that a diagnosis of the condition would have triggered

surgical intervention to prevent the decedent’s death. Aguilera, 293 Ill. App. 3d at 969-70.

However, on cross-examination, plaintiff’s experts admitted that they would defer to a

neurosurgeon as to whether surgery should have even been performed; yet the only

neurosurgeons testifying in the case stated that surgery would not have been appropriate.

Aguilera, 293 Ill. App. 3d at 969-70. This court held that the opinions offered by the plaintiff’s

experts lacked a sufficient factual basis and were therefore based on conjecture. Aguilera, 293

Ill. App. 3d at 975.

There just is not enough evidence in the record concerning breach of duty and causation

for this court to reverse the decision of the trial court. I would affirm.

50

No. 1-06-1536

REPORTER OF DECISIONS – ILLINOIS APPELLATE COURT
_______________________________________________________________
CONNIE LONGNECKER, Individually and as Special Administrator
of the Estate of CARL LONGNECKER, Deceased,
Plaintiff-Appellant,

v.
LOYOLA UNIVERSITY MEDICAL CENTER, and
SIRISH PARVATHANENI, M.D.,
Defendants-Appellees.
_____________________________________________________________
No. 1-06-1536
Appellate Court of Illinois
First District, First Division
Filed: June 25, 2008
_________________________________________________________________
JUSTICE GARCIA delivered the opinion of the court.
CAHILL, P.J., concurs.
R. GORDON, J., dissents.
_________________________________________________________________
Appeal from the Circuit Court of Cook County
Honorable Irwin J. Solganick , Judge Presiding
_________________________________________________________________
Michael W. Rathsack
For PLAINTIFF –
APPELLANT
Tom Leahy
Peter D. Hoste
111 West Washington Street, Suite 962
Chicago, Illinois 60602

Krista R. Frick
For DEFENDANT –
APPELLEE,
John M. Stalmack
Sirish Parvathaneni, M.D. Bollinger, Ruberry & Garvey
500 West Madison, Suite 2300
Chicago, Illinois 60661

For DEFENDANT –
APPELLEE,
Loyola University
Medical Center

Thomas J. Burke, Jr.
Ben Patterson
Hall Prangle & Schoonveld, LLC
200 South Wacker Drive, Suite 3300
Chicago, Illinois 60606

Eugene A. Schoon
Sherry A. Knutson
51

No. 1-06-1536

Sidley Austin, LLP
One South Dearborn Street
Chicago, Illinois 60603

52

Lourdes Med. Pavilion v. Cath. Healthcare Partners, Inc

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION

CIVIL ACTION NO. 5:03CV-231-M

LOURDES MEDICAL PAVILION, LLC PLAINTIFF

v.

CATHOLIC HEALTHCARE PARTNERS, INC.

DEFENDANT

MEMORANDUM OPINION AND ORDER

This matter is before the Court on a motion by Defendant, Catholic Healthcare

Partners, Inc., for summary judgment [DN 18]. The Plaintiff, Lourdes Medical Pavilion,

LLC, responded [DN 21] and the Defendant replied [DN 22]. On January 31, 2006, this

matter was transferred to the undersigned. By Order entered February 3, 2006, the Court

requested the parties file additional briefs addressing the applicability of KRS § 275.340.

The parties have filed the requested briefs and responses [DN 28, DN 29, DN 30, DN 31].

Fully briefed, this matter is ripe for decision. For the reasons set forth below, CHP’s Motion

for Summary Judgment is DENIED.

I. FACTS

On May 29, 1998, Lourdes Hospital, Inc. (hereinafter “Lourdes”) and the PAPI

corporate entities1 (hereinafter “PAPI”) formed Lourdes Medical Pavilion, LLC, (hereinafter

“LMP”) with each entity owning fifty percent of the limited liability company. Lourdes is

1The PAPI entities include: Paducah Area Physicians Incorporated; SurgiCare; Paducah
Medical Center Realty; and Health Care Management Resources, Inc.

a nonstock, nonprofit corporation. Catholic Healthcare Partners, Inc. (hereinafter “CHP) is

the sole member of Lourdes. Lourdes and PAPI entered into an Operating Agreement

governing the control and management of LMP. LMP provides diagnostic services,

ambulatory surgery services, and other healthcare services to patients residing in Paducah,

Kentucky and surrounding areas. LMP also operates a medical office building which is

used primarily by members of the medical staff of Lourdes Hospital. Under the Amended

and Restated Operating Agreement of LMP, Lourdes and PAPI agreed not to engage in

owning and operating a multi-purpose medical office building in competition with LMP.

They further agreed not to expand any outpatient surgery centers or otherwise compete with

LMP in the provision of outpatient surgery services. (January 1, 2000 LMP’s Amended and

Restated Operating Agreement at Section 3.7 and Annex E.)

In December of 1998, LMP and CHP entered into a Non-Competition Agreement

under which CHP agreed that it or any affiliate would not engage in “acquiring, starting up,

and owning, operating, disposing of, and otherwise dealing with any of the lines of business

carried on by [LMP]” including owning or operating a multi-purpose medical office building

and expanding Lourdes Outpatient Surgery Center. (LMP/CHP Non-Competition

Agreement at § 1 (a),(b)(citing Annex. E to the Lourdes/PAPI Operating Agreement.)) An

“affiliate” for purposes of the Non-Competition Agreement “means any entity of which CHP

has a greater than 50% interest in the entity’s control or equity.” (Non-Competition

Agreement §1(f).) According to the terms of the Non-Competition Agreement, in the event

of a breach by CHP, LMP “shall be entitled to obtain a temporary restraining order and

2

temporary and permanent injunctive relief . . . [and] the recovery of damages . . .” (Non-

Competition Agreement §5.)

In 2002, CHP announced plans to construct a new $27 million Marshall Nemer

Pavilion, which would contain new medical offices and have more space for outpatient

surgery. CHP did not give PAPI or LMP any notice of these plans, and by April of 2002

PAPI believed that the new project announced by CHP violated the terms of the Non-

Competition Agreement between LMP and CHP. At a LMP Board of Directors meeting on

April 25, 2002, Dr. Robert Meriwether, on behalf of PAPI, moved for LMP to employ legal

counsel to look into the actions of CHP and file legal action against CHP. The motion did

not pass. A subsequent motion made at the next Board of Directors meeting on August 15,

2002 failed as well.

On September 30, 2003, LMP filed this complaint against CHP alleging multiple

breach of contract claims, tortious interference, breach of fiduciary duties, and breach of the

covenant of good faith and fair dealing. Specifically, LMP alleges that CHP breached the

Non-Competition Agreement by expanding outpatient surgery services and construction of

new physician office space. CHP filed this current motion for summary judgment arguing

that LMP lacked the corporate authority to bring suit against CHP and, as a result, the claims

against CHP should be dismissed.

II. STANDARD OF REVIEW

In order to grant a motion for summary judgment, the Court must find that the

pleadings, together with the depositions, interrogatories and affidavits, establish that there

3

is no genuine issue of material fact and that the moving party is entitled to judgment as a

matter of law. Fed. R. Civ. P. 56. The moving party bears the initial burden of specifying the

basis for its motion and of identifying that portion of the record which demonstrates the

absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322

(1986). Once the moving party satisfies this burden, the non-moving party thereafter must

produce specific facts demonstrating a genuine issue of fact for trial. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 247-48 (1986). The inquiry under Fed. R. Civ. P. 56(c) is

“whether the evidence presents a sufficient disagreement to require submission to a jury or

whether it is so one-sided that one party must prevail as a matter of law.” Id. at 251-52

(1986). See also Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989).

III. DISCUSSION

Defendant, CHP, argues that LMP lacked the corporate authority to bring suit against

CHP because a majority of the Board of Directors of LMP never approved this action as

required under the terms of the LMP Operating Agreement, and as a result, summary

judgment in favor of CHP is warranted. LMP disagrees and maintains that the authority to

bring this suit comes from Section 15.9 of the LMP Operating Agreement and KRS

§275.335.

A. The LMP Operating Agreement

Under the terms of the Operating Agreement, LMP is managed by an elected Board

of Directors, five of whom are from Lourdes and five of whom are from PAPI. (Operating

Agreement at § 9.1.) The Board of Directors have the authority to delegate certain action to

4

an Executive Committee consisting of two individuals, one appointed by the Lourdes

Directors and one appointed by the PAPI Directors. (Operating Agreement at § 9.3.)

Pursuant to Section 9.4 of the Operating Agreement, “[a]ny act to be taken by the Directors

shall be subject to approval by the majority vote of the Directors.” The Operating Agreement

further provides that “[i]n all such instances, the Lourdes Directors shall have one collective

vote and the PAPI Directors shall have one collective vote.” (Operating Agreement at § 9.4.)

In the event the Directors fail to reach an agreement on matters that come before them,

the Operating Agreement provides that “the Members or the Directors . . . agree to abide by,

and to cause the Company to abide by, the dispute resolution mechanism” set forth in Article

14 of the Operating Agreement. (Operating Agreement Section 14.1.) Further, Section 15.9

of the Operating Agreement entitled “Enforcement,” states in relevant part:

In the event of a breach or threatened breach by a Member or Manager of any
of the provisions of this Agreement, the Company shall be entitled to obtain
a temporary restraining order and temporary and permanent injunctive relief
. . . . Nothing in this Agreement may be construed as prohibiting the Company
from pursuing any other remedy or remedies, including without limitation, the
recovery of damages. . . . Notwithstanding anything to the contrary herein, the
determination of whether the Company shall pursue actions for breach of this
Agreement by a Member shall be made exclusively by (i) Lourdes, if the
alleged breach is by a PAPI Entity, or (ii) the PAPI Entities, if the alleged
breach is by Lourdes.

(Operating Agreement § 15.9.)

B. LMP’s Authority to Sue under Section 9.4 of Operating Agreement

CHP contends that LMP did not have the corporate authority to sue pursuant to

section 9.4 of the Operating Agreement. Section 9.4 provides that “any act” taken by the

5

Board of Directors must be approved by a majority vote. Therefore, under this section, in

order for LMP to bring suit against CHP for the alleged breach of the Non-Competition

Agreement, both the Lourdes Entity and the PAPI Entities had to approve the lawsuit.

(Operating Agreement at § 9.4.) Because Lourdes refused to authorize suit, LMP was not

authorized under the Operating Agreement to file suit. As discussed above, the Operating

Agreement provides that in the event the Members fail to reach an agreement on matters that

come before them, Lourdes and PAPI agree to abide by the dispute resolution mechanism set

forth in Article 14 of the Operating Agreement. (Operating Agreement § 14.1.) Therefore,

under the terms of the Operating Agreement, PAPI and Lourdes were required to participate

in dispute resolution to resolve the issue of whether LMP could file suit against CHP for

breach of the Non-Competition Agreement. Clearly, given the terms of the LMP Operating

Agreement, LMP did not have the corporate authority to sue CHP.

C. LMP’s Authority to Sue under Section 15.9 of the Operating Agreement

LMP maintains that it did not need the majority of the Directors’ votes pursuant to

section 9.4 of the Operating Agreement because Section 15.9 of the Operating Agreement

specifically authorizes an action by LMP against a member in breach of the Operating

Agreement.

Contrary to LMP’s assertion, this action is not an action by one member of the limited

liability company against another member pursuant to Section 15.9 to enforce the terms of

6

the Operating Agreement.2 While the Court recognizes that CHP is the sole member of

Lourdes, there is no indication in the record at this time that CHP and Lourdes are the same

corporate entity. Both parties recognize that Lourdes Hospital is a Kentucky nonstock,

nonprofit corporation and CHP is an Ohio nonprofit corporation. In fact, until this action at

least, it appears that the parties treated CHP and Lourdes as separate, distinct entities. For

instance, in May of 1998, Lourdes and PAPI entered into an Operating Agreement that

governed the management of the limited liability company, LMP. The Operating Agreement

contained a non-competition clause that governed the activity of both Lourdes and PAPI with

respect to LMP. In December of 1998, LMP and CHP then entered into a Non-Competition

Agreement to govern “CHP’s obligations concerning activities that may compete with the

LLC.” (Non-Competition Agreement at p. 1.) If CHP and Lourdes were the same entity then

why would the parties feel it necessary to enter into another non-competition agreement

addressing the same business activities contained in the Operating Agreement between

Lourdes and PAPI.

While the complaint references Lourdes and Lourdes’s conduct, LMP has sued only

CHP. LMP could have properly sued Lourdes for a breach of the Operating Agreement

pursuant to Section 15.9. As discussed above, Section 15.9 provides that “the determination

of whether the Company shall pursue actions for breach of this Agreement by a Member

shall be made exclusively by . . . the PAPI Entities, if the alleged breach is by Lourdes.”

2Interestingly, at times even Defendant refers interchangeably to CHP and Lourdes.

7

Instead, LMP chose to bring this action solely against CHP for breach of contract and

tortious interference relating to the Non-Competition Agreement between LMP and CHP.

Therefore, Section 15.9 of the LMP Operating Agreement does not authorize LMP’s suit

against CHP.

C. Kentucky Limited Liability Company Act

LMP maintains that authority to bring the present action also comes from KRS §

275.335 of the Kentucky Limited Liability Company Act which allows one member of a

limited liability company (hereinafter “LLC”) to bring suit on behalf of the LLC despite the

majority vote requirement if a member has an interest in the vote and/or outcome of the

litigation that would be adverse to the LLC. KRS §275.335 provides:

Unless otherwise provided in a written operating agreement, a suit on behalf
of the limited liability company may be brought in the name of the limited
liability company only by:

(1) One (1) or more members of a limited liability company, whether or not
the operating agreement vests management of the limited liability
company in one (1) or more managers, who are authorized to sue by the
vote of more than one half (½) of the number of members eligible to
vote thereon, unless the vote of all members shall be required pursuant
to KRS 275.175(1). In determining the vote required under KRS
275.175, the vote of any member who has an interest in the outcome of
the suit that is adverse to the interest of the limited liability company
shall be excluded; or

(2) One (1) or more managers of the limited liability company, if an
operating agreement vests management of the limited liability company
in one (1) or more managers, who are authorized to do so by the vote
required pursuant to KRS 275.175 of the managers eligible to vote
thereon. In determining the required vote, the vote of any manager who
has an interest in the outcome of the suit that is adverse to the interest
of the limited liability company shall be excluded.

8

KRS § 275.335.

CHP contends that KRS § 275.335 does not permit LMP to sue because the terms of

the LMP Operating Agreement controls. The Court agrees. Clearly, the phrase “[u]nless

otherwise provided in a written operating agreement” contained in KRS § 275.335 includes

Section 9.4 of the LMP Operating Agreement, which provides that “any act” taken by the

Board of Directors must be approved by a majority vote. Therefore, despite the remainder

of KRS § 275.335 cited by LMP, in order for LMP to bring suit against CHP for the alleged

breach of the Non-Competition Agreement, both the Lourdes Entity and the PAPI Entities

had to approve the lawsuit. (Operating Agreement at § 9.4.) As noted above, because

Lourdes refused to authorize suit, LMP was not authorized under the Operating Agreement

to file suit.

Notwithstanding, this finding does not resolve the question of whether summary

judgment is appropriate under Kentucky law. KRS § 275.340 of the Kentucky Limited

Liability Company Act prohibits the use of “authority to sue” as a defense in an action

brought on behalf of the LLC. Specifically, KRS § 275.340, entitled “Effect of

determination that member or manager lacks authority to sue on behalf of company,”

provides:

A determination that a member or manager does not have authority to sue on
behalf of the limited liability company shall not be asserted as a defense to an
action brought by the limited liability company or as a basis for the limited
liability company to bring a subsequent suit on the same cause of action.

KRS § 275.340.

9

CHP maintains that while KRS § 275.340 by its terms may not allow it to assert as a

defense that a member or manager did not have authority to bring suit, this statute should not

be allowed to contravene or negate other parts of the Kentucky Limited Liability Company

Act. Specifically, CHP argues that KRS § 275.335 specifically provides that the LMP

Operating Agreement controls and the Operating Agreement requires a majority vote of the

Directors in order to bring suit on behalf of LMP.

The Court rejects CHP’s argument. The language of KRS § 275.340 clearly and

unambiguously provides that the “lack of authority of a member or manager to file suit on

behalf of an LLC may not be used as a defense to an action filed by the LLC.” Thomas

Rutledge and Lady Booth, The Limited Liability Company Act: Understanding Kentucky’s

New Organizational Option, 83 Ky. L.J. 1, 42 (1995). Accordingly, even though the Court

has determined this suit was not authorized by the Board of Directors of LMP, CHP cannot

use this as a defense pursuant to the clear language of KRS § 275.340. For these reasons, the

Court finds summary judgment against LMP is not warranted.

IV. CONCLUSION

For the reasons set forth above, IT IS HEREBY ORDERED that the motion by

Defendant, CHP, for summary judgment [DN 18] is DENIED.

cc: counsel of record

10

Longnecker v. Loyola Univ. Med. Ctr.

NEGLIGENCE – HOSPITAL AND PHYSICIAN

Longnecker v. Loyola Univ. Med. Ctr., No. 1-06-1536 (Ill. App. Ct. June 25, 2008)

A jury found that a heart surgeon who harvested a heart that was alleged to be hypertrophic, and thus inappropriate for transplant, was not negligent. However, the jury then found that the hospital at which the transplant occurred was liable for "institutional negligence." The trial court found that these verdicts were irreconcilable and issued a JNOV. The Appellate Court of Illinois reversed the trial court’s JNOV. The appellate court reasoned that such an outcome was not necessarily inconsistent because a hospital can be liable for institutional negligence irrespective of the physician’s negligence. The appellate court then ordered a new trial on the issue of the hospital’s negligence.

Lourdes Med. Pavilion v. Cath. Healthcare Partners, Inc.

BREACH OF CONTRACT – NONCOMPETITION

Lourdes Med.
Pavilion v. Cath. Healthcare Partners, Inc., No. Civ.A. 5:03CV231M (W.D. Ky.
2006)

The United States District Court for the Western District of Kentucky
denied a hospital’s motion for summary judgment, finding that a state statute
prohibits the use of "authority to sue" as a defense in an action
brought on behalf of a limited liability company (LLC). A hospital agreed to
form an LLC with multiple physician specialty groups, in order to collaborate
in providing various medical services to the community. The hospital then signed
a noncompetition agreement with the LLC, under which it agreed not to engage
in any lines of business that would compete with the LLC. Later, a physician,
on behalf of the LLC, filed a suit against the hospital, alleging it breached
the noncompetition agreement when it expanded its outpatient surgery services
and constructed new physician office space. The hospital filed a motion for
summary judgment, claiming that because it held an equal share in the LLC,
the LLC was not authorized to bring a lawsuit without the hospital’s authorization.
The district court agreed that the physicians did not have the authority to
file suit, but denied the hospital’s motion for summary judgment, finding that
a state statute prohibits the use of "authority
to sue" as a defense in an action brought on behalf of an LLC.

 

 

Lok Tio v. Washington Hosp. Ctr.

PHYSICIAN EMPLOYMENT/ARBITRATION

Lok Tio v. Washington Hosp. Ctr., No. 04-0701(RMU)
(D.D.C. Nov. 5, 2004)

A physician
and his wife brought suit against a hospital for a variety of claims after
his employment was terminated with cause. The United States District Court
for the District of Columbia held that the physician was bound to the arbitration
clause in his employment contract under the Federal Arbitration Act, so all
his claims must be arbitrated. His wife’s claims must also be arbitrated because
they are entirely dependent on the outcome of the physician’s claims. The court
found that the physician should be held to the terms of the agreement because
he signed the contract and negotiated additional terms of the contract, the
contract was not unconscionable, and all of the physician’s claims could be
resolved during arbitration.

 

 

Longstreet v. Holy Spirit Hosp.

UN ITED STA TES CO UR T O F A PPE AL S FO R THE TH IRD CIR CU IT

No . 02 -4351

MARGA RET LONGSTREET ,
Appe l lan t

v .

HOLY S PIR IT HO S PITAL

On A ppea l from the Un i ted S ta tes D is tr ic t Co ur t
for the M iddle D istrict of P enns ylvania
(D .C . No . 01 -cv -00309 )
D is tr ic t Judge : H on . John E . Jones , III

Be for e: SCIR ICA , Ch ie f Judge, SL OV ITE R a nd N YG AA RD , Circu it Judge s

JUDGMENT

Th is cau se came on to be h eard on the record from the Un i ted S ta tes D is tr ic t Co ur t

f or th e M i dd le D is tr ic t o f P e nn syl va ni a a nd w as su bmi tt ed p ur su an t t o T h ir d C ir cu it LAR

34 .1 (a ) on May 22 , 2003 .

On cons ideratio n w hereo f, it is now here O RD ER ED AN D A DJU DG ED by this

Cou r t tha t the o rde r o f the sa id D i s t r ic t Cou r t en te red Novembe r 20 , 2002 be , and the

same i s , a f f i rmed . Co s t s taxed aga in s t Appe l lan t. A l l o f the above in acco rdance w i th the

opin ion o f this C ourt.

Da ted : May 23 , 2003

ATTEST :

Ac t ing C lerk