Pirouzian v. Super. Ct. of L.A. Cty. — June 2016 (Summary)

LICENSURE ACTION

Pirouzian v. Super. Ct. of L.A. Cty.
No. B266015 (Cal. Ct. App. June 29, 2016)

The California Court of Appeal granted a physician’s petition, ordering the trial court to enter a new order commanding the Medical Board to set aside its order revoking the physician’s license, and to determine a new form of discipline that is more appropriate.  The physician took medical leave due to depression.  During that leave, the physician submitted claims for and received disability insurance benefits.  After the physician’s psychiatrist cleared him to return to work, the physician returned to his previous hospital on a part-time basis.  He also accepted a full-time offer at another hospital.  The physician did not inform his previous hospital or the insurance provider of his new employment.  The physician then made a series of misrepresentations about his employment status in order to receive income from his positions at the hospitals in addition to receiving disability benefits from the insurance provider as if he were still unemployed.  The insurance provider discovered the misrepresentations, and the physician was charged with insurance fraud.  The physician ultimately reached a plea agreement in which he pled guilty to a misdemeanor and repaid the insurance provider.  His conviction was subsequently expunged.  On the advice of counsel, the physician did not report his conviction to the Medical Board.

Five years later, the Medical Board learned of the physician’s misrepresentations and conviction and, following a hearing, revoked the physician’s medical license.  The Medical Board found that although there was no evidence that the physician’s dishonesty caused harm to any patients, “dishonesty is substantially related to the qualifications, functions and duties of a physician and surgeon.”  The Medical Board also found that not enough time had passed for the physician to be truly rehabilitated and the only discipline that would protect the public was outright revocation of his license.

In reviewing the decision of the Medical Board, the court held that the career ending penalty imposed was “clearly excessive.”  The goal of discipline is not to punish the physician but to protect the public and to rehabilitate the physician.  The court found that the Medical Board’s decision was not necessary to protect the public because there was no evidence that the physician’s misconduct affected the treatment of patients and there was no evidence that the physician would repeat his actions.  The court also found that the Medical Board’s decision was clearly made with the goal of punishing the physician, which is inconsistent with the goals of disciplinary review, and thereby an abuse of discretion.

Knapp Med. Ctr. v. Burwell — June 2016 (Summary)

STARK LAW

Knapp Med. Ctr. v. Burwell
Civil Action No. 15-cv-1663 (RMC) (D.D.C. June 28, 2016)

The United States District Court for the District of Columbia granted a motion to dismiss in favor of the Department of Health and Human Services (“HHS”) against three hospitals that were challenging a decision by HHS (plaintiff hospitals) to approve the expansion of a physician-owned hospital.  As established by the Stark Law, physician-owned hospitals must get permission from HHS before they can expand.  Upon approval, physician-owned hospitals will be permitted to expand up to 100%.  The physician-owned hospital seeking expansion filed two applications with HHS. HHS approved the request for expansion, determining that the requirements for approval were met, and granting permission for the hospital to double in size. The plaintiff hospitals challenged HHS’s approval of expansion on several grounds. In response to the challenge, both HHS and the physician-owned hospital filed a motion to dismiss for lack of subject matter jurisdiction.

Congress has intentionally precluded review of an agency’s process or the decisions resulting from that process by stating that “there shall be no administrative or judicial review…of this title…or otherwise of the process….”  The plaintiff hospitals argued that they sought review of the process of approval used by HHS not the approval itself.  The court concluded that according to Congress’s expressed insulation of agency decisions, the process cannot be separated from the result.

The plaintiff hospitals also argued that without review of the HHS decision, HHS could easily exceed its authority to grant physician-owned hospital expansions. That argument was also rejected by the court.  According to the court, plaintiff hospitals “have not alleged or argued that HHS acted beyond its statutory authority when it granted [the physician-owned hospital’s] request for expansion, but instead worry about the possibility of such action at an unspecified time in the future. Their worry does not constitute a case or controversy.”  Because allegations must be concrete and not hypothetical or abstract, the claim brought by the plaintiff hospitals was dismissed.

Wallace v. Hendersonville Hosp. Corp. — July 2016 (Summary)

TITLE VII EMPLOYMENT DISCRIMINATION

Wallace v. Hendersonville Hosp. Corp.
Civil No. 3:14-01976 (M.D. Tenn. July 1, 2016)

The United States District Court for the Middle District of Tennessee granted a hospital’s motion for summary judgment on claims brought by a nurse working as a House Supervisor under Title VII of the Civil Rights Act for sex discrimination and retaliation.

The hospital hired a registered nurse and about a year later promoted him to House Supervisor, a position that put him in charge of the hospital at night.  Approximately six months later, two female nurses complained that the House Supervisor had touched them inappropriately and had made inappropriate comments of a sexual nature to them during their shifts.  The House Supervisor was issued a formal written warning stating that his comments were unacceptable and cautioning that future misconduct would be grounds for immediate termination of his employment.  Two months later, the hospital received an anonymous complaint that the House Supervisor had continued to make sexual comments.  The hospital launched a full investigation and found the allegations to be substantiated by multiple employees.  The House Supervisor was then fired.  He appealed the termination of his employment, but the peer review panel upheld the decision.

In support of his discrimination claim, the House Supervisor argued that the hospital treated him differently from similarly-situated women.  However, the court agreed with the hospital and found that the House Supervisor had only presented one example of a similarly-situated woman in a supervisory position.  The court found the House Supervisor’s conduct in this case (which included touching a co-worker’s breast, telling another co-worker she had a sexy neck, referring to female employees as “bitches” and circulating a photograph of himself in a revealing bathing suit) was far more egregious than the fleeting comment made by the female supervisor about underwear.  Additionally, the court pointed out that the House Supervisor’s disciplinary history was significantly different than the similarly-situated woman.  Therefore, the court ruled that the House Supervisor failed to prove his discrimination claim.

In support of his retaliation claim, the House Supervisor maintained that after he had reprimanded another nurse, she placed an anonymous call to report him to the hospital.  The hospital argued that the House Supervisor never engaged in a protected activity, which is required for a retaliation claim.  The court agreed with the hospital and held that “simply disciplining a subordinate is not enough to constitute a ‘protected activity’ under Title VII.” Therefore, the court granted the hospital’s motion for summary judgment.

Miller v. Warren Hosp. IPA, PA — June 2016 (Summary)

VICARIOUS LIABILITY

Miller v. Warren Hosp. IPA, PA
Civ. Action No. 15-7496 (FLW)(DEA) (D.N.J. June 27, 2016)

The U.S. District Court of New Jersey denied a hospital’s partial motion to dismiss concerning a claim of vicarious liability.  The patient alleged that the hospital was negligent in caring and treating the patient’s mother during the patient’s birth. During the outset of the patient’s mother going into labor, employees of the hospital performed a vaginal smear test and determined that she was suffering from Group B Streptococcus (“Group B Strep”). The patient argued that the standard of care was for any mother diagnosed with Group B Strep to undergo antibiotics and/or a caesarian section to prevent the transmission of Group B Strep to the child through a vaginal birth.

The hospital delivered the patient vaginally, which allegedly caused the patient to develop Group B Strep, which, in turn, developed into hydrocephalus.  As a result of developing hydrocephalus, the patient, among other things, suffered cognitive and physical losses, emotional distress, and academic problems.  Further, the placement of a shunt running from his brain to his abdominal cavity prevented him from participating in certain physical activities.  The patient asserted that the attending physician and the hospital caused these injuries by deciding to deliver the patient vaginally without treating the patient’s mother with antibiotics.

The patient initially began the lawsuit in Pennsylvania and alleged only negligence on the part of the attending physician and the hospital.  After the case was transferred to the U.S. District Court for the District of New Jersey, the patient added a vicarious liability claim against the hospital for not only the attending physician’s actions, but also those of other healthcare providers, who assisted with the delivery of the patient.

The hospital argued that the vicarious liability claim should be dismissed because it was barred by the statute of limitations.  The patient argued that the vicarious liability claim was proper because the allegations in the original complaint put the hospital on notice of the vicarious liability claim.

The court reasoned that because the vicarious liability claim arose from the same set of facts as the original claims against the hospital and doctor, the original claim did give the hospital fair notice that the patient’s claims against it included negligence on the part of any individuals in its employ who treated the patient’s mother during the patient’s birth and not just the attending physician.  Consequently, the court determined that the vicarious liability claim was not barred by the statute of limitations and denied the partial motion to dismiss.

HCA Health Servs. of Fla., Inc. v. Cyberknife Ctr. of the Treasure Coast, LLC — June 2016 (Summary)

BREACH OF CONTRACT; DAMAGES

HCA Health Servs. of Fla., Inc. v. Cyberknife Ctr. of the Treasure Coast, LLC
No. 4D14-3199 (Fla. Dist. Ct. App. June 29, 2016)

The District Court of Appeal of Florida reversed and remanded a trial court’s decision to award a business damages in a breach of contract claim against a hospital.  The hospital and the business entered into an agreement in which the business would provide equipment to the hospital in exchange for a fee on a “per click” basis.  The hospital later terminated its agreement with the business because federal regulations under the Stark Law made “per click” agreements illegal. The business then sued for damages.  The trial court awarded damages for lost profits plus prejudgment interest and costs. The hospital argued that the consequential damages clause of the agreement barred the business from collecting damages by stating “in no event shall either party be entitled to consequential or punitive damages,” and that the business failed to prove its damages of lost profits.  The court determined that the business suffered general damages rather than the consequential damages referenced in the contract, but also noted that the business failed to prove its damages.  Florida law requires the business to prove damages of lost profits with specific evidence of expenses. At trial, the business only presented evidence of lost revenue, not lost profits.  Because there was no proof of the measure of damages, the court reversed and remanded in favor of the hospital.

Capital Health Sys., Inc. v. Horizon Healthcare Servs., Inc. — June 2016 (Summary)

CONTRACTS & INSURANCE COMPANIES/NARROW NETWORKS

Capital Health Sys., Inc. v. Horizon Healthcare Servs., Inc.
Docket No. A-2913-15T2, A-2929-15T2 (N.J. Super. Ct. App. Div. June 23, 2016)

Several hospitals sued Horizon Healthcare Services, Inc. for breach of contract when Horizon established a new network that created a higher tier status for which the suing hospitals were deemed ineligible. The hospitals claimed they did not receive sufficient notice about the new network or how to qualify for the new tier, thereby being subject to unfair competition.  Horizon argued that its contract with the hospitals reserved Horizon’s right to establish a new network and did not guarantee the hospitals’ participation in the new network.

The hospitals sought “key documents” concerning the tier criteria and Horizon’s partnership communications.  The trial court held in the hospitals’ favor.  The Superior Court of New Jersey, Appellate Division, reversed and remanded the trial court’s decision on the grounds that the documents were not relevant to the hospitals’ claims and were Horizon’s protected confidential and proprietary business information.

Horizon did not disclose the standards for inclusion in the new network, nor did it offer the hospitals an opportunity to participate in the new network as it had done in the past. The hospitals sought discovery of the “key documents”; the trial court granted the hospitals that discovery.

Horizon argued that the documents should not be released because they were irrelevant to the hospitals’ claims and they contained confidential and proprietary information.  The heart of the hospitals’ claims concerned a breach of contract.  The appellate court held that disclosing confidential information was not relevant to contract interpretation, and the interest in keeping that information confidential outweighed the hospitals’ asserted need of production.  The court noted that the hospitals were not entitled to confidential information “merely on the strength of having filed a complaint.”

United States v. John Muir Health — June 2016 (Summary)

WRONGFUL DISCHARGE; WHISTLEBLOWER; FALSE CLAIMS ACT

United States v. John Muir Health
Case No. 13-cv-01924-SI (N.D. Cal. June 29, 2016)

The United States District Court for the Northern District of California granted in part and denied in part a hospital’s motions for summary judgment concerning a former hospital employee who claimed that the hospital retaliated against her through wrongful termination. The former hospital employee allegedly had a history of poor communication skills. In discussing her performance concerns, the Executive Director of her department noted that if her communication and leadership skills did not improve, she risked termination. Despite these concerns, the former employee later received positive performance reviews and was promoted.

In accordance with her duties, the former employee attended a conference on Medicare billing procedures and physician supervision requirements.  She was notified that in order for Medicare reimbursements to be billed, physicians had to be present to supervise procedures. After the conference, the former employee discussed the supervision requirements with the hospital’s physicians and expressed concern that there was not always direct supervision at the hospital, which then created concerns of false claims to the government.  The former employee alleged that the physicians disputed their requirements and became hostile, claiming that they could do what they want. A physician then expressed concern that the former employee would report them to CMS. The former employee was later terminated due to what the hospital characterized as “job restructuring” that eliminated her position.

On the primary summary judgment claim, the hospital was denied summary judgment because the court ruled that there was a genuine issue of material fact as to why the former employee was terminated. The former employee claimed the hospital retaliated against her via termination because she was trying to stop the hospital from submitting false claims for payment.  The hospital claims the former employee was terminated because of her well-documented history of poor communication skills that made her hard to work with. Though the hospital presented evidence of a non-retaliatory motive for firing the former employee, the former employee presented evidence of positive performance reviews up until 10 days before her termination and questionable e-mails sent by the director of her department following her termination. Her evidence created a genuine issue of material fact concerning why she was fired and prevented summary judgment.

Tex. Gen. Hosp., LP v. United Healthcare Servs., Inc. — June 2016 (Summary)

BREACH OF CONTRACT; INSURANCE COMPANY LITIGATION

Tex. Gen. Hosp., LP v. United Healthcare Servs., Inc.
Civil Action No. 3:15-CV-02096-M (N.D. Tex. June 28, 2016)

The U.S. District Court for the Northern District of Texas granted in part and denied in part an insurance company’s motion to dismiss claims brought by a for-profit hospital for the insurance company’s failure to pay in full the amount billed for out-of-network services provided to its subscribers. The court dismissed the hospital’s claim for breach of fiduciary duty under ERISA, but denied the insurance company’s motions to dismiss ERISA claims for recovery of benefits, claims for denial of a full and fair review, and various state claims.

The hospital provided medical service to the insurance company’s subscribers after receiving coverage verification and pre-certification that the services would be covered by the insurance plan.  As a result, the hospital billed the insurance company nearly $140 million, of which the insurance company reimbursed approximately $30 million.

The hospital argued that it had derivative standing to assert ERISA claims for breach of fiduciary duty because it “stepped into the shoes of beneficiaries” when patients registered at the hospital. The insurance company responded that the assignments of benefits payable for care do not provide standing to sue for anything other than plan benefits. The court agreed with the insurance company, holding that the assignments to the hospital did not include any right to pursue non-benefit ERISA claims, and dismissed this claim.

As for the claim for recovery of benefits under ERISA, the insurance company argued that the hospital had not specifically identified the provisions of the ERISA plans that it had allegedly breached, and that the hospital had not exhausted its administrative remedies. The court disagreed and found that the hospital had given adequate notice as to which provisions were breached. Also, the court held that the hospital’s exhaustion of administrative remedies should be excused because the insurance company allegedly failed to provide meaningful access to administrative remedies and the hospital’s efforts to access such remedies were futile.

The insurance company argued that the claim for denial of a full and fair review violating ERISA should be dismissed because that relevant section of ERISA provides no private right of action. The court held that it did not give rise to a private right of action for compensatory relief, but since the hospital was not seeking monetary relief on that count, it declined to dismiss the claim.

U.S. ex rel. Wall v. Vista Hospice Care, Inc. — June 2016 (Summary)

QUI TAM/FALSE CLAIMS ACT

U.S. ex rel. Wall v. Vista Hospice Care, Inc.
No. 3:07-cv-00604-M (N.D. Tex. June 20, 2016)

The U.S. District Court for the Northern District of Texas granted summary judgment for a hospice as to its alleged violations of the False Claims Act (“FCA”) and the Anti-Kickback statute (“AKS”).  However, the claim of retaliation by the individual who brought the lawsuit, called the “relator,” and who was a former social worker for the hospice, survived summary judgment.

The relator claimed that the provider violated the FCA by admitting and maintaining ineligible patients on Medicare.  The court determined that it could not conclude from the evidence that the hospice enrolled and maintained ineligible patients.

The relator also claimed that the hospice offered to pay employees bonuses for hitting admissions targets, an AKS violation. The hospice argued, and the court agreed, that this conduct was protected by the bona fide employee exception of the AKS, and granted summary judgment for the hospice on this claim.  Even if the bonuses had been a violation of the AKS, the court stated that the relator had not met the other elements to prove an FCA claim.

The court denied summary judgment for the hospice as to the relator’s claim of retaliation.  Because the relator had provided evidence of her positive performance reviews before raising concerns and that she was fired within months of doing so, the court held that there was sufficient evidence to connect the relator’s protected activity and her termination.

FTC v. Advocate Health Care — June 2016 (Summary)

HOSPITAL MERGER

FTC v. Advocate Health Care
No. 15 C 11473 (N.D. Ill. June 20, 2016)

The United States District Court for the Northern District of Illinois denied the Federal Trade Commission’s (FTC) motion for preliminary injunction to enjoin the hospital defendants from consummating their proposed merger pending the completion of the FTC’s administrative trial in the merits of the plaintiff’s antitrust claim.  The federal district court ruled that the FTC did not demonstrate that they have a likelihood of succeeding on the merits in a Clayton Act claim against the hospital merger and denied the injunction.

The FTC sought to enjoin hospitals from consummating a proposed merger. In order for the court to grant a preliminary injunction, the FTC had to show that they would likely be successful in a Clayton Act claim against the hospitals. The Clayton Act prohibits a merger “in any line of commerce or in any activity affecting commerce in nay section of the country, the effect of [which] may be substantially to lessen competition, or tend to create a monopoly.”

In order to show that the FTC would likely win their Clayton Act claim, they had to determine both the relevant product market, and the geographic market of that product. All parties agreed that the relevant product in this case was inpatient general acute care services sold to commercial payers and their insured members. However, the parties did not agree on the geographic market.  Therefore, the FTC shouldered the burden of determining the geographic market.

The FTC’s attempt at defining the relevant geographic market failed because it excluded hospitals with relevant production, sales, or services; there was no economic basis for their hospital designations; and they ignored the “commercial realities” of the healthcare industry which point to a decrease in inpatient care and an increase in outpatient care, which effects whether or not a hospital or facility would participate in the monopoly. Because the FTC failed to define the geographic area that would be threatened by the merger, the court could not grant its motion for preliminary injunction.