Howerton v. Harbin Clinic, LLC – July 2015 (Summary)

SEXUAL HARASSMENT

Howerton v. Harbin Clinic, LLC, No. A15A0141 (Ga. Ct. App. July 16, 2015)

A technician was allegedly sexually harassed by a physician with clinical privileges in the hospital where the technician was employed. The technician’s husband confronted the physician, telling him that his wife had recorded her conversations with the physician. The physician proceeded to tell hospital administration that the technician was recording conversations in the operating room. Instead of moving the technician to another shift, the hospital moved the technician to another department, promising her additional hours and overtime pay, which did not materialize. The technician subsequently sued the physician and his clinic for tortious interference, among other things.

The Court of Appeals of Georgia found the technician did allege a claim of tortious interference against the physician because the physician was a “stranger” to the employment contract between the technician and the hospital because he did not have a direct economic interest in the agreement and was not a third-party beneficiary to the agreement. The court also held that a jury question existed as to whether the physician acted with malicious intent, that is, whether the physician reported an alleged HIPAA violation because of a sense of legal obligation or because he was seeking to undermine the technician’s sexual harassment allegations.

The Court of Appeals for Georgia also reversed the trial court’s decision granting summary judgment in favor of the physician on the technician’s intentional infliction of emotional distress claim. The court held that the technician’s allegations were sufficiently outrageous in nature. However, the court did affirm the trial court’s grant of summary judgment for the clinic on the technician’s negligent supervision claim, noting the technician did not reveal the alleged sexual harassment to anyone at the clinic until three weeks before the physician sought employment elsewhere and that the clinic produced evidence showing that a thorough background check on the physician’s prior employment did not reveal any kind of improper conduct on his part.

Bartow HMA, LLC v. Edwards – July 2015 (Summary)

PEER REVIEW PRIVILEGE – EXTERNAL REVIEWS

Bartow HMA, LLC v. Edwards, No. 2D14-3450 (Fla. Dist. Ct. App. July 10, 2015)

A district court in Florida found that external peer review reports fell outside of the scope of Amendment 7 of Florida’s constitution. Amendment 7 preempts that state’s peer review protections by allowing patients access to any records related to an adverse medical incident that were “made or received in the course of business.”

In this case, a patient served a hospital with a request to produce peer review documents, including the results of an external peer review that was ordered by the hospital’s attorney, after she was injured during a gallbladder removal surgery. The hospital would not produce the documents, arguing that the reports were not made in the “course of business” but in response to a letter sent by its counsel. The court agreed, holding that the documents were not made or received in the regular course of business under Amendment 7, since hospitals are not required to retain external experts to evaluate adverse outcomes to determine if the standard of care was met.

Wash. State Hosp. Ass’n v. Wash. State Dep’t of Health – July 2015 (Summary)

CERTIFICATE OF NEED

Wash. State Hosp. Ass’n v. Wash. State Dep’t of Health, No. 90486-3 (Wash. July 9, 2015)

The Washington Supreme Court held that the Department of Health impermissibly expanded the scope of its authority in approving certain types of hospital ownership changes. The Washington legislature’s certificate of need statute indicated a review was needed for any “sale, purchase, or lease of part or all of any existing hospital.”

In July 2013, the Department of Health proposed a new definition of “sale, purchase, or lease” which would include “any transaction in which the control, either directly or indirectly, of part or all of any existing hospital changes to a different person including, but not limited to, by contract, affiliation, corporate membership, restructuring, or any other transaction.” The court held the Department’s new rule interpreted the words “sale, purchase, or lease” in “a manner that departed too far from the plain meaning of those terms.”

LaFlamme v. Rumford Hosp. – July 2015 (Summary)

EMPLOYMENT DISCRIMINATION – NURSING

LaFlamme v. Rumford Hosp., No. 2:13-cv-460-JDL (D. Me. July 9, 2015)

The United States District Court for the District of Maine denied a hospital’s motion for summary judgment in an employment discrimination case. The hospital had fired a Med Surg nurse who had been on disability for over a year after having back surgery.

The nurse had been promoted to full-time status prior to the surgery, but requested a reduction in her work hours in the months following her back surgery, culminating with a request for medical leave. After six months of medical leave, the hospital and nurse agreed she would be moved from full-time to per diem status. This meant she would have no regular work hours, but would work only when needed to fill in for regular employees. During this time, the hospital attempted to schedule the nurse for a number of shifts over the next six months, but the nurse was unable to be cleared by her physician for work. In November, she informed the hospital that she expected to be cleared to return to work in four weeks. The hospital terminated the nurse in December under its long-standing policy of terminating per diem nurses if they have not worked within the last six months.

In denying the hospital’s motion for summary judgment, the district court found there was a triable issue of fact as to whether it was reasonable for the nurse to ask the hospital to keep her position open after she informed it in November that she would be cleared for full-time work in four weeks. The district court also found that whether the nurse’s employment termination for absenteeism was based on her disability was also a triable issue. Further, the court found the nurse had made a prima facie case for retaliation, explaining a jury could find the hospital’s reasons for firing her (i.e., her unavailability and poor work performance) were pretextual.

Simpson v. St. James Hosp. – July 2015 (Summary)

EMPLOYMENT DISCRIMINATION – NURSING

Simpson v. St. James Hosp., No. 13 CV 5857 (N.D. Ill. July 8, 2015)

The United States District Court for the Northern District of Illinois granted a hospital summary judgment in a nurse’s suit that alleged that she was fired because she was female, African-American, over 40, or pregnant. The hospital asserted that it fired the nurse because she had a two-year pattern of rude and otherwise inappropriate behavior. Between the months of October 2010 and September 2011, the nurse had seven incidents cited and recorded on forms called “Employee Corrective Action Reports.” The conduct written in these reports ranged from disobeying doctors’ orders to removing a patient’s morphine pump as an act of retaliation for complaining about the care provided.

The court found that there was no basis to the nurse’s claims that the hospital applied its rules against her more strictly due to her gender or pregnancy. The court applied further analysis to determine if the hospital’s reasons for the nurse’s termination were pretextual for racial and age discrimination. Because there was undisputed evidence of the nurse violating hospital rules, the court found that the hospital’s proffered explanations were not pretextual, and these violations served as a nondiscriminatory basis of the nurse’s termination.

Kohn v. FirstHealth of the Carolinas, Inc. – July 2015 (Summary)

CREDENTIALING CRITERIA

Kohn v. FirstHealth of the Carolinas, Inc., No. COA14-1210 (N.C. Ct. App. July 7, 2015)

The North Carolina Court of Appeals affirmed summary judgment for the hospital with respect to a physician’s claim that the hospital had been arbitrary and capricious in denying him appointment and clinical privileges because he failed to satisfy the hospital’s threshold eligibility criteria, which included completion of a residency program accredited by the Accreditation Council for Graduate Medical Education (“ACGME”).

The physician, a native of Canada, completed his internship and residency in Canada. In 1999, he applied for appointment and clinical privileges at the hospital. At that time, he was informed that his application could not be accepted because a pre-application screening revealed that he had not completed a residency program approved by the ACGME as required by the medical staff bylaws.

In 2010, the physician reapplied and his application was denied based on the fact that the residency program he attended was in Canada and was certified by the Royal College of Canada and not the ACGME. The physician tried to argue that his program was compliant with the medical staff bylaws because it was “recognized” by the ACGME. However, the hospital argued that it interpreted the word “approved” in their bylaws as “accredited,” and his request was denied. Both the Credentials Committee and Medical Executive Committee reviewed the physician’s complaints, and both groups determined the physician did not meet the minimum standards as set forth in the medical staff bylaws.

In granting summary judgment to the hospital, the court held: “[i]t is not arbitrary, capricious, and discriminatory to [deny staff privileges to physicians who] have been unable to comply with the standards properly established by the [hospital].” In response to the physician’s argument that many hospitals accept Canadian residencies as functionally equivalent to a residency accredited by the ACGME, the court cited to the broad deference given to hospital boards in making staff privileges determinations. According to the court, hospital staffing decisions will be upheld as long as they are (1) reasonably related to the hospital’s operation; (2) rationally compatible with the hospital’s responsibility; and (3) not based on irrelevant considerations. The court found that the hospital’s requirement – that physicians complete an ACGME-accredited residency training program – met these standards.

The court also affirmed the dismissal of the physician’s attempted monopolization claim, noting the physician’s argument relied upon the “essential facility” doctrine, which the court found inapplicable to the case. Lastly, the court dismissed the physician’s race and ethnic discrimination claim, holding the claim was barred by res judicata because the claim could have properly been litigated in his prior action.

Taylor v. Intuitive Surgical, Inc. – July 2015 (Summary)

DUTY TO WARN

Taylor v. Intuitive Surgical, Inc., No. 45052-6-II (Wash. Ct. App. July 7, 2015)

In a case that made headlines in the New York Times a few years ago, “Salesmen in the Surgical Suite,” the Washington Court of Appeals rejected a patient’s argument that the manufacturer of the da Vinci robot had a duty to warn the hospital, in addition to the surgeon, of the risks associated with the device. The court held that under the state’s Tort Reform and Products Liability Act, applying the “learned intermediary” doctrine, a medical device manufacturer only has a duty to warn a physician of the dangers associated with its product; thereafter, it is the physician’s duty to warn the patient.

In this case, the patient’s prostatectomy was performed by a surgeon who used the da Vinci robot. The patient’s surgery was the first time the surgeon used the da Vinci robot without a proctor being present. The surgeon opted to use the robot even though the patient was morbidly obese and the manufacturer warned against using the device for such patients.

The case took more than 15 hours and the patient suffered multiple complications. The patient never fully recovered from the operative complications he endured and he sued the surgeon, the hospital and the manufacturer of the da Vinci robot. After settling with the surgeon and dropping the hospital as a defendant, the case went forward against the manufacturer. The patient argued that the manufacturer had a duty to warn not only the physician but also the hospital. The court disagreed.

The court held that the manufacturer only had a duty to warn the physician of the dangers of the product. According to the court, the patient places “primary reliance” on the physician’s informed judgment, rather than whatever warnings the manufacturer may have included. Therefore, the physician is in a superior position to warn the patient. The court was unpersuaded that the warning should be provided to the hospital because the hospital purchased the equipment. “The learned intermediary doctrine is not concerned with who pays for the product…. Rather, its rationale is based on the physician’s role as gatekeeper.” Thus, the court refused to overturn the jury verdict in favor of the manufacturer.

AHS Hosp. Corp. v. Town of Morristown – June 2015 (Summary)

HOSPITAL PROPERTY TAX EXEMPTION

AHS Hosp. Corp. v. Town of Morristown, Docket Nos: 010900-2007, 010901-2007, 000406-2008 (N.J. Tax Ct. June 25, 2015)

UPDATED SUMMARY — November 2015

As being reported by national and local media, the Morristown Medical Center, which is part of the Atlantic Health System, has agreed to pay $15.5 million, including fines and interest, to the municipality of Morristown, New Jersey, thereby settling this hospital property tax exemption case.  In addition, the Medical Center will begin paying annual taxes of roughly $1 million. This settlement could have an impact on the tax-exempt status of other not-for-profit hospitals, certainly in New Jersey, but quite possibly nationwide as cities look for ways to plug holes in their budgets.

ORIGINAL SUMMARY — June 2015

In a case of first impression, the Tax Court of New Jersey denied a New Jersey hospital’s property tax exemption for the main hospital campus. To reach this decision, the court applied the New Jersey state law profit test to different aspects of the hospital’s operations including: the “for-profit activity carried out by private physicians,” executive compensation, employed physicians’ contracts, third-party agreements, the gift shop, the auditorium, the day care area, fitness center, and the cafeteria.

Notably, the court found that the hospital failed the profit test because the hospital allowed its property to be used for forbidden for-profit activities, by entangling and comingling its activities with for-profit entities. Perhaps most surprising was the court’s focus on the work performed at the hospital by private “for-profit” physicians. According to the court, the hospital had for-profit doctors using its facilities to generate private medical bills to patients. Since the activities of for-profit physicians could not separately be accounted for (from employed physicians who preform distinctly non-profit activity), the arrangement with the for-profit physicians directly violated the requirement articulated in New Jersey case law.

The court also examined several executive salaries. The court recognized that tax-exempt organizations are permitted to pay salaries to staff that are not excessive and which are comparable to the salaries paid by similar institutions. However, the court found that the hospital had failed to meet its burden of establishing the reasonableness of the compensation paid to its executives. With respect to the compensation paid to a number of employed physicians, the court also found that the hospital had demonstrated a prohibited “profit-making purpose.”

Thus, the court concluded that the property tax exemption could be preserved only in three areas: the parking garage contract, the operation of the auditorium, and the operation of the fitness center.

El Paso Healthcare Sys., Ltd. v. Murphy – June 2015 (Summary)

RETALIATION

El Paso Healthcare Sys., Ltd. v. Murphy, No. 08-13-00285-CV (Tex. App. June 27, 2015)

The Texas Court of Appeals affirmed a jury award for a certified registered nurse anesthetist (“CRNA”) of over $800,000 for lost wages, past and future compensatory damages and attorney’s fees. The CRNA had sued a healthcare system for firing her after she reported an obstetrician who failed to obtain informed consent from a 19-year-old patient who opposed the idea of having a caesarian section. In her complaint, the CRNA alleged that instead of explaining the risk and benefits of the c-section, the obstetrician rebuked the young woman, telling her “[w]ell, if you want a brain-damaged or dead baby, don’t blame me.”

Two to three hours after reporting the obstetrician, the CRNA was informed that she would not be working at either hospital in the health system until her complaint against the physician and his complaint against her were resolved. The CRNA was later contacted by the chairman of the Credentialing and Peer Review Committee to schedule a meeting. When her request to have an attorney present at the meeting was denied, the CRNA filed suit.

On appeal, the court affirmed the jury’s finding of retaliatory discharge, noting that the CRNA’s report was made in good faith because she presented evidence that the obstetrician failed to disclose the risk and hazards associated with a c-section to the patient. The court also affirmed the jury verdict on the CRNA’s tortious interference claim, noting that her retaliatory discharge was sufficient “tortious or unlawful conduct” to show the health system interfered with a business relationship.

The health system tried to argue that it was simply exercising its right, under its contract with the CRNA’s group, to refuse acceptance of a practitioner at its facility. However, the court concluded that the health system would not be permitted to use a legitimate privilege for illegal or tortious means. The health system also opposed the jury’s award of compensatory damages for mental anguish, but the court rejected the argument, holding the CRNA’s testimony regarding her loss of self-esteem, heightened sense of humiliation, feelings of powerlessness, sleeplessness, and loss of enjoyment in her professional life supported a finding of mental anguish damages.

Howard v. Ark. Children’s Hosp. – July 2015 (Summary)

WHISTLEBLOWER FALSE CLAIMS ACT AND WHISTLEBLOWER HIPAA

Howard v. Ark. Children’s Hosp., No. 4:13CV00310 JLH (E.D. Ark. July 1, 2015)

The United States District Court for the Eastern District of Arkansas denied a hospital’s motion for summary judgment in which the hospital had claimed that its former employees were not entitled to whistleblower status under the False Claims Act or the Health Insurance Portability and Accountability Act (“HIPAA”). The employees were terminated from their positions after raising questions concerning the manner in which the hospital billed the federal government. The court stated that due to ongoing discovery, summary judgment in favor of the hospital was premature on the issue of whether the employees were whistleblowers under the False Claims Act. The court also determined that the employees met their burden of showing that they qualified as whistleblowers under HIPAA.