U.S. ex rel. Corporate Compliance Assocs. v. N.Y. Soc’ty for the Relief of the Ruptured and Crippled, Maintaining the Hosp. for Special Surgery (Summary)

FALSE CLAIMS ACT – QUI TAM CASE

U.S. ex rel. Corporate Compliance Assocs. v. N.Y. Soc’ty for the Relief of the Ruptured and Crippled, Maintaining the Hosp. for Special Surgery, No. 07 Civ. 292 (PKC) (S.D. N.Y. Aug. 7, 2014)

The United States District Court for the Southern District of New York dismissed a relator’s qui tam action brought under the False Claims Act (“FCA”) against an orthopedic hospital, holding that the relator’s complaint failed to satisfy the pleading requirements set forth in Federal Rule of Civil Procedure 9(b). The relator, a general partnership with no relationship to the hospital, brought a qui tam action under the FCA alleging that the hospital submitted fraudulent claims for Medicare and Medicaid reimbursement, and violated the Stark Law and the Anti-Kickback Statute by inducing physicians’ referrals with monetary incentives. Specifically, the relator alleged, based on information it apparently received from unnamed former officers of the hospital, that the hospital purposely overbilled Medicare and Medicaid by miscoding 335,000 claims and that the hospital paid excessive compensation to its physicians through annual payments for performing clinical, administrative, research and academic services in order to induce in-house service referrals. The relator alleged that these false claims caused $788,000,000 in damages to the United States, which, if treble damages were to apply, would amount to over $2 billion.

The court held that the relator’s complaint failed to satisfy the pleading requirements set forth in Federal Rule of Civil Procedure 9(b). The court explained that Rule 9(b) requires a complaint to allege the particulars of the false claims themselves. This includes the dates that the claims were submitted, the amounts charged in the claims, their allegedly false contents, and the hospital’s standard billing practices. Here, the relator failed to identify the dates or amounts of any allegedly false claims, their false contents, or even how the hospital fraudulently certified them and made only general allegations of a fraudulent scheme.

Alzadon v. Highlands Hosp. Corp. Inc. (Summary)

INCOME GUARANTEE – BREACH OF CONTRACT

Alzadon v. Highlands Hosp. Corp. Inc., No.2012-CA-000102-MR (Ky. Ct. App. Aug. 8, 2014)

The Court of Appeals of Kentucky affirmed a lower court’s entry of summary judgment for a hospital’s breach of contract claim against a surgeon, holding that the facts show the surgeon breached the terms of his employment agreement. The employment agreement included an income guarantee, so long as the surgeon did not have his privileges reduced, suspended, or terminated. Within the first two months of the surgeon’s employment, the hospital received six complaints about his performance. The hospital restricted his privileges, and required him to complete a surgical mini-residency in order to have his full privileges reinstated. After five months without the surgeon completing the surgical mini-residency, the hospital decided to suspend his privileges and sent him a letter informing him he could request a hearing within 30 days. The surgeon responded with a letter from a physician in another state who agreed to provide the required training and the hospital lifted the suspension and allowed the surgeon to complete the surgical mini-residency with this physician. However, in order to be accepted into the physician’s program, the surgeon intentionally concealed his standing with the hospital. When this was discovered, the surgeon was terminated from the program and never completed the required surgical mini-residency. The hospital then terminated the surgeon and set a schedule for the surgeon to pay back his guaranteed income of $305,000. The surgeon paid the hospital a lump sum of $75,000, but never made another payment. The hospital brought this action seeking to recover the rest of the guaranteed income, as well as attorney’s fees.

The court held that all facts show that the surgeon breached the employment agreement with the hospital, and the surgeon failed to present any evidence that suggests otherwise. The surgeon acknowledged that he did not complete the required additional training and intentionally concealed the nature of his training requirements to the prospective program. Additionally, he acknowledged that he did not exhaust all of the administrative remedies available to him. Lastly, the court held that the hospital was entitled to reasonable attorney’s fees pursuant to the employment agreement.

Saint Alphonsus Diversified Care Inc. v. MRI Assocs. (Summary)

BREACH OF CONTRACT

Saint Alphonsus Diversified Care Inc. v. MRI Assocs., No. 40012-2012 (Idaho Aug. 4, 2014)

The Supreme Court of Idaho affirmed a jury’s verdict awarding $52 million to a magnetic resonance imaging (“MRI”) center against a hospital for breach of contract and tortious conduct, holding that the jury’s conclusions were based on sufficient evidence. Plaintiff, an MRI center, entered into a partnership agreement with the hospital to provide MRI services at various locations. Included in the partnership agreement was a provision that, in the event of disassociation, the hospital would not compete with the MRI center for one year. In spite of their agreement, the hospital began discussing a new partnership agreement with the MRI center’s biggest competitor, and even persuaded the MRI center from opening a facility around the competitor. Subsequently, the hospital disassociated with the MRI center and entered into a partnership agreement with the competitor and immediately began competing with the MRI center. The MRI center brought this action in which it claimed breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duties that arise from the partnership.

The court held the jury had sufficient, competent evidence to find that the hospital breached its contract and tortiously interfered with the MRI center. The court stated that evidence was presented from which the jury could conclude that the hospital decided its long-term plan was to partner with the competitor and the plan was implemented before the yearlong prohibition from competing had concluded.   Furthermore, the hospital dissuaded the MRI center from opening a facility around the competitor resulting in more lost profits to the MRI center.

As to the breach of fiduciary duties claim, the court held that the lower court erred by allowing the jury to decide it. The court stated that the fiduciary duties partners owe each other terminates at disassociation. However, the error was moot and the hospital was not prejudiced by it because the jury award of damages for breach of fiduciary duties was identical to the jury’s award for the breach of contract claims.

Kaufman v. Columbia Mem’l Hosp. (Summary)

EMPLOYMENT — TERMINATION

Kaufman v. Columbia Mem’l Hosp., No. 1:11-CV-667 (MAD/CFH) (N.D. N.Y. Aug. 7, 2014)

The U.S. District Court for the Northern District of New York granted in part and denied in part a physician’s motion in limine and denied the hospital’s motion in limine without prejudice.

The physician alleged that the hospital violated the terms of their employment agreement by suspending him, terminating him, and denying his renewal for medical staff privileges without due process. The hospital argued that there was just cause to justify the physician’s termination, including the physician’s incompetence. The hospital also brought counterclaims of unjust enrichment, alleging that it is entitled to the advance payment the physician received during his suspension. Both parties submitted requests to dismiss portions of the other party’s evidence.

The court denied the physician’s request to preclude any evidence related to his competency to safely practice medicine, holding that the issue was relevant to determine if the hospital did, in fact, have just cause for his termination. The court also denied the physician’s motion to bar certain out-of-court statements referring to his alleged incompetence. Because the court did not know the specific content or context of the statements, it was unable to make a definitive ruling. However, it indicated that statements may be permitted to demonstrate that the hospital’s opinion toward the physician was fair and reasonable. The physician’s motion to preclude the introduction of other doctors’ testimony toward his competence was also denied. Though the witnesses have not been proffered as experts, it is commonly held that physicians may testify as to their opinions of other physicians’ competence. While one of the doctors sought as a witness never worked alongside the physician, the court found that his opinion may still be relevant to determine whether the hospital acted fairly and reasonably in the termination of the physician.

The court did grant the physician’s request to preclude the introduction of evidence regarding prior malpractice settlements. It was determined that allowing such evidence would be highly prejudicial, and could spiral into a “series of mini-trials over allegations of malpractice.” The court also granted the physician’s request to bar the hospital from introducing evidence of a promissory note, as it was not relevant to the issue at trial.

The hospital requested that the court exclude all evidence relating to discrimination. The court denied this request, finding that the hospital’s request lacked sufficient specificity. Additionally, the court determined that the physician would be able to introduce evidence to show that the hospital’s actions were not fair and reasonable, but motivated by discriminatory bias.

Shapira v. Christiana Care Health Services, Inc. (Summary)

VICARIOUS LIABILITY

Shapira v. Christiana Care Health Services, Inc., No. 392, 2013 (Del. Aug. 7, 2014)

The Supreme Court of Delaware affirmed a lower court’s judgment that a surgeon failed to obtain proper consent before performing a procedure on a patient, while remanding for instructions to vacate a supplemental jury verdict.

A patient suffering from multiple rib fractures presented to a hospital, where a thoracic surgeon determined he was a candidate for a non-FDA approved “On-Q” catheter procedure for pain management. The surgeon explained the procedure to the patient and obtained consent. However, the surgeon failed to tell the patient of other viable treatment methods for pain management, such as epidural anesthesia. Additionally, the surgeon failed to disclose that he had a personal interest in the use of the On-Q procedure, as the surgeon was under contract with the manufacturer, was a member of the corporation’s speaker’s bureau, and was conducting a study of the procedure’s effectiveness using patient data. After the surgery, the patient’s catheters became displaced, resulting in internal organ damage. The patient then sued the doctor for negligently failing to obtain proper informed consent, and for negligently performing the procedure. In addition, the patient sued the hospital for negligence because the surgeon was serving as the hospital’s agent. At trial, the jury verdict awarded the patient millions of dollars in damages, attributing 65% of total liability to the surgeon and 35% to the hospital. The hospital then asked the jury to specify what apportionment of its liability was attributable to the agency relationship and what was attributable to the hospital’s failure to properly supervise the surgeon’s study. The Superior Court granted the allowance of the question but refused to revise the verdict based on the jury’s answer. The surgeon appealed to the issue of informed consent, evidence of the experimental nature of the procedure, and pre-judgment and post-judgment interest. The hospital then cross-appealed regarding the supplemental jury question.

The court affirmed the Superior Court’s ruling that the patient was not given adequate disclosure to allow for proper informed consent. The patient was not made aware of the risks, alternative procedures, or the surgeon’s personal interest in administering the procedure. The court held that the evidence of the conflict of interest was admissible, as it spoke to the surgeon’s lack of disclosure and possible incentive for performing one surgery over another. Additionally, the court ruled that the Superior Court was correct in allowing only expert witnesses to testify as to whether the procedure was or was not experimental. Regarding the surgeon’s appeal to the pre-judgment and post-judgment interest, the court held the statute was clear that the interest applied when the demand was valid for a minimum of 30 days.

The court held that it was a mistake for the Superior Court to allow the hospital’s supplemental question to be presented to the jury. According to the court, the jury verdict should not be disturbed unless it is found to be unreasonable. Therefore, the court found the supplemental verdict invalid and ordered that it be vacated by the Superior Court.

EEOC v. Midwest Reg’l Med. Ctr. (Summary)

NURSE CLAIMS DISCRIMINATION

EEOC v. Midwest Reg’l Med. Ctr., No. CIV-13-789-M (W.D. Okla. Aug. 7, 2014)

The United States District Court for the Western District of Oklahoma granted in part and denied in part cross motions related to the EEOC’s disability claim brought on behalf of a nurse. The nurse began missing work at her employer hospital a month after she began radiation treatment for skin cancer. Over the next several months, the nurse called in sick eight times, which led her supervisor to put her on a leave of absence. The nurse was ultimately terminated for missing several additional days while she was on leave. The EEOC brought this action on behalf of the nurse, alleging the hospital discriminated against her based on her disability.

The court held that a motion to dismiss was not appropriate because there are material issues of fact that need to be decided at a trial. The court concluded that the nurse did have a disability, cancer; however, there was a genuine issue over whether the nurse was discriminated against based on her disability. While the hospital proffered a legitimate nondiscriminatory reason, excessive absenteeism, the EEOC presented sufficient evidence that the hospital’s reason for terminating the nurse was pretextual, based on inconsistencies in its story. The district court focused on the fact that the hospital expected the nurse to still call off work even though she was placed on a leave of absence. The district court did find that the hospital presented sufficient evidence to establish a question as to whether the nurse mitigated her damages.

Hendricks v. Bronson Methodist Hosp., Inc. (Summary)

QUI TAM

Hendricks v. Bronson Methodist Hosp., Inc., No. 1:13-CV-294 (W.D. Mich. July 30, 2014)

The United States District Court for the Western District of Michigan dismissed a physician-relator’s qui tam claims for being insufficiently vague, while allowing a personal claim of termination of employment in violation of public policy to survive.

A physician-relator brought a qui tam action against a hospital alleging that hospital-employed physicians had certified sonogram reports without having acquired the expertise to review them, and, in some instances, issued a report without reviewing the associated sonograms, claiming that billing the federal and state governments based on these practices violated the federal False Claims Act and the Michigan Medicaid False Claims Act. The physician-relator also claimed that soon after she began complaining to the hospital about these practices, she was terminated.

The court found that the physician-relator’s allegations did not satisfy the heightened pleading requirements of those alleging fraud, deeming it insufficient for her to merely point out the existence of a fraudulent scheme, without specifying a given time or place of the alleged violations. The court also found that the physician-relator did not articulate a particular injury – she alleged that the government may have paid claims it would not otherwise have paid – and that was too vague. The physician-relator then argued that a relaxed pleading standard should apply to her, but the court found that her claims lacked the personal knowledge required to meet a relaxed standard. Thus, the court dismissed the qui tam claims.

However, the court did not dismiss the physician-relator’s claim in her individual capacity that the hospital terminated her employment in violation of state public policy (termination for failure or refusal to violate the law during employment), and allowed that claim to go forward.

Powell v. Ashland Hosp. Corp. (Summary)

NEGLIGENT HIRING/SUPERVISION/VICARIOUS LIABILITY

Powell v. Ashland Hosp. Corp., Nos. 2012-CA-002019-MR, 2012-CA-002073-MR (Ky. Ct. App. Aug. 1, 2014)

The Court of Appeals of Kentucky affirmed the decision of the trial court to grant summary judgment in favor of a defendant-hospital and against a plaintiff-nurse, and also affirmed a jury verdict in favor of the plaintiff-nurse against the defendant-physician, in a case in which a physician allegedly kicked a nurse.

The nurse filed a lawsuit against a physician for assault and battery after the physician allegedly kicked her after surgery, and, based on his actions, also filed a claim against the hospital for negligent hiring/supervision, and vicarious liability, among other things, based on the physician’s actions. The trial court granted summary judgment in favor of the hospital, which the nurse appealed, and a jury rendered a verdict in favor of the nurse, which the physician appealed.

For the nurse’s appeal, the appeals court found that her claim against the hospital was barred by the exclusive remedy provision in the Workers’ Compensation Act (“Act”) because the record was devoid of any material that the hospital intended for, or engaged in any conduct to encourage, the physician to kick the nurse.

Also, for the nurse’s appeal, the appeals court also found that the hospital was not vicariously liable for the actions of the physician since he was not the hospital’s agent – the nurse did not present any evidence that the physician was acting within the scope of his duties to the hospital when he injured the nurse, which is necessary to establish vicarious liability.

Finally, for the nurse’s appeal, the appeals court affirmed the trial court’s limitation of the nurse’s discovery. The trial court performed an in camera review of the physician’s personnel file, disciplinary records and employee grievances, then deemed a portion of the documents discoverable. The nurse claimed on appeal that she was entitled to review the entire file; however, the appeals court found no abuse of discretion in the trial court performing the in camera review and providing information to the nurse that was relevant to her claims.

The physician appealed, contending that the trial court erred by admitting evidence of his prior bad acts, and that the award of punitive damages was excessive. The appeals court found that the trial court’s admittance of the physician’s prior bad acts was not an abuse of discretion because the physician had placed his mental state in dispute to show that he lacked the intent to kick the nurse. The appeals court also found that there was no record indicating the physician raised the issue of excessive damages in trial court and, therefore, that claim was not properly preserved for review.

Wong v. Sunrise Mountainview Hosp., Inc. (Summary)

HCQIA IMMUNITY

Wong v. Sunrise Mountainview Hosp., Inc., No. 61375 (Nev. July 29, 2014)

The Supreme Court of Nevada upheld a district court’s dismissal of an anesthesiologist’s lawsuit against a hospital, reasoning that the Health Care Quality Improvement Act of 1986 (“HCQIA”) rendered the hospital immune to the suit. The anesthesiologist had sued the hospital after a peer review committee revoked his medical staff membership and privileges.

A hospital can qualify for immunity under the HCQIA so long as its actions meet certain conditions. In particular, the physician under review must be afforded adequate notice and an adequate hearing – otherwise, the hospital will not be afforded immunity under the HCQIA. The anesthesiologist argued that the hospital had not met this adequate notice and hearing requirement, and therefore was not immune to his lawsuit.

The Supreme Court of Nevada ruled that the anesthesiologist had waived his right to challenge the notice and hearing requirement, since he had not raised any objections during the hospital’s own peer review hearing. It concluded that the trial court had not abused its discretion in granting HCQIA immunity to the hospital.

Appleyard v. Governor Juan F. Luis Hosp. and Med. Ctr. (Summary)

TEMPORARY RESTRAINING ORDER

Appleyard v. Governor Juan F. Luis Hosp. and Med. Ctr., CIVIL NO. SX-14-CV-282 (V. I. Super. Ct. July 28, 2014)

The Superior Court of the Virgin Islands granted a temporary restraining order enjoining a hospital from maintaining and enforcing a suspension against a spinal surgeon until a hearing can be held to determine if a preliminary injunction is appropriate.

The plaintiff, a spinal surgeon, was suspended from defendant, a government run hospital, for disruptive behavior. The surgeon brought a motion for a temporary restraining order requesting the court to enjoin the hospital from enforcing the suspension and from reporting the suspension to any national reporting database because the hospital did not follow its own bylaws and procedures. Additionally, the surgeon alleged that the hospital did not provide mandatory notice as required by Virgin Island statute for government employees. As a result of these omissions, the surgeon claimed that her due process rights were violated.

The court held that a temporary restraining order was appropriate until a hearing was held to determine whether a preliminary injunction should be entered. The court stated that the surgeon established a reasonable probability that she would succeed at a preliminary injunction hearing because the hospital’s suspension letter did not include information that was required by law. Furthermore, the surgeon would suffer irreparable harm if an erroneous suspension is reported to a national reporting database and no patients are put at risk from the temporary restraining order because the suspension is for behavioral concerns and not her standard of care. Lastly, the temporary restraining order is in the public’s interest because the public has a strong interest in the government following its own rules and laws.