California Appellate Decision Limits Hospital’s Options For Exclusive Contracts

https://files.constantcontact.com/508de6cb001/d3180be0-b816-4328-86e7-74776fe15b8a.pdf

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On February 4, 2019, the California Court of Appeal affirmed a judgment awarding plaintiff, Dr. Kenneth Economy, substantial damages for his suspension and subsequent termination of his staff privileges at defendant Sutter East Bay Hospitals. The Court of Appeal held that, because Dr. Economy’s termination, even though done under the provisions of an exclusive contract, was based on “medical disciplinary cause or reason,” he was entitled to prior notice and a hearing in accordance with Business and Professions Code section 809 et seq. This decision flies in the face of the underlying premise for exclusive contracts: the ability for a hospital to enter into a contractual arrangement that allows it to set superior metrics in exchange for exclusive rights to provide services. Clinical issues have long been mandated to be within the purview of the medical staff but exclusive contracting gives hospitals the ability to contract for higher standards of quality of care. The severity of the Economy decision calls into question the accepted approach to exclusive contracts.

Background

Dr. Economy was an anesthesiologist who had practiced at Sutter East Bay Hospital for 20 years. The hospital operated a “closed” anesthesiology department pursuant to a contract with the East Bay Anesthesiology Medical Group (“East Bay Group”). Under the contract, East Bay Group exclusively provided administrative and coverage services to the hospital’s anesthesiology departments. Importantly, the parties’ contract authorized the hospital to require that East Bay Group immediately remove from the schedule any physician whose actions jeopardized the quality of care provided to the hospital’s patients. In July 2011, Dr. Economy was found responsible for numerous violations that jeopardized patient safety. Consequently, the hospital’s peer review committee recommended to East Bay Group that Dr. Economy complete a continuing education course through the Physician Assessment and Clinical Education (“PACE”) program. Dr. Economy completed the PACE program. Despite this additional training, he was once again found to have performance issues related to clinical care. The hospital then asked East Bay Group to remove Dr. Economy from its schedule pursuant to the parties’ contract. East Bay Group complied and later terminated his employment. Dr. Economy filed suit against the hospital alleging, among other things, a violation of his right to notice and a hearing under Business and California Professions Code section 8091 as well as his common law right to fair procedure.

Trial Court Finds in Favor of Dr. Economy

The trial court found that the hospital’s action of removing Dr. Economy from the anesthesia schedule was indisputably based on a medical disciplinary cause or reason, which ultimately constituted a summary suspension of his right to exercise his privileges and use the hospital’s facilities. The trial court found that the hospital’s failure to provide Dr. Economy with notice of the charges against him and an opportunity for hearing amounted to a violation of Section 809.5, as well as his common law right to fair procedure. Although the trial court awarded Dr. Economy approximately $4 million in damages, it denied his request for attorney’s fees and costs as a prevailing party under Section 809.9.

Court of Appeal Upholds Trial Court Decision

On appeal, the hospital argued that East Bay Group was not a “peer review body” within the meaning of Section 805 and therefore Dr. Economy’s suspension and termination did not trigger a duty to file a report with the state licensing board or to provide a hearing mandated by such reportable actions, which hearings are triggered by medical staff actions. The hospital also argued, to no avail, that Dr. Economy was not entitled to notice and hearing because he was terminated by his employer, East Bay Group, rather than the hospital. The Court of Appeal was not persuaded by the hospital’s arguments and held that the hospital’s request that Dr. Economy be removed from its anesthesiology schedules was tantamount to a decision to suspend and ultimately revoke his privileges. Because the hospital’s contractual terms with East Bay Group prohibited anesthesiologists from performing services at the hospital if not employed or scheduled by the group, the hospital’s decision effectively terminated his right to exercise clinical privileges at the hospital. Under the hospital’s medical staff bylaws, such a decision could be made only by its medical executive committee (“MEC”) after the provision of notice and an opportunity for hearing before the peer review committee. In Economy, it was undisputed that the hospital did not provide notice or a hearing, nor did the MEC review Dr. Economy’s disciplinary action. The Court also concluded the hospital did not delegate its peer review duties to East Bay Group under the terms of their contract. Indeed, the Court specifically noted that the hospital’s medical staff bylaws did not require or authorize a closed department to conduct peer review in lieu of the procedures set forth in its bylaws. The Court further noted that there was no evidence that East Bay Group had any policies or procedures for the conduct of peer reviews. The Court of Appeal reasoned that the hospital was therefore the entity solely responsible for reviewing physician performance pursuant to the contractual relationship. Accordingly, its failure to provide Dr. Economy with notice and an opportunity for hearing was a violation of his statutory and common law rights to due process. The Court of Appeal held that the hospital’s request to remove Dr. Economy from East Bay Group’s anesthesia schedule ultimately constituted a summary suspension of his right to exercise his privileges—a deprivation which could only lawfully be undertaken by way of formal peer review in accordance with Sections 805 and 809.

The Court of Appeal further reasoned that if the hospital were permitted to contract with third-party employers such as East Bay Group, who could suspend and terminate a physician without complying with statutory due process requirements, then a hospital could essentially avoid compliance with such statutes altogether, which would be contrary to public policy. Although it found that Dr. Economy was entitled to notice and a hearing, the Court of Appeal denied his request for attorney’s fees and costs, finding that the hospital’s defense was not frivolous, unreasonable, without foundation, or asserted in bad faith.

Exclusive Contracting in the Wake of Economy

As the Court of Appeal acknowledged in footnote 3, “[h]ospitals often enter into closed or ‘exclusive contracts . . . with healthcare entity-based physicians such as pathologists, radiologists, and anesthesiologists, . . . for a variety of reasons including (1) improving the efficiency of the healthcare entity; (2) standardization of procedures; (3) securing greater patient satisfaction; (4) assuring the availability of specific services; (5) cost containment; and (6) improving the quality of care.’ (citing to Health Law Practice Guide (2018) Exclusive Contracts, § 2:24.)” However, the Court of Appeal in Economy clearly took issue with the means by which the hospital enforced the provisions of its contract with East Bay Group. It is unknown at this point whether this case will be appealed to the California Supreme Court. Certainly, there are numerous factual distinctions to be made when considering the ramifications of Economy and every situation would require a careful case by case analysis. However, if Economy stands, it will require careful analysis and should encourage hospitals to consider the parameters of their exclusive contract relationships, the terms of those contracts, and even reweigh the benefits of closed departments in connection with their specific circumstances. At the very least, it is apparent that in the wake of Economy a more conservative approach will be to defer clinical issues to the medical staff for any necessary determinations and action.

 

Illinois hospital moves to suspend services, gives employees 60-day notice of closing

https://www.beckershospitalreview.com/finance/illinois-hospital-moves-to-suspend-services-gives-employees-60-day-notice-of-closing.html

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Citing a staff shortage, Los Angeles-based Pipeline Health announced plans April 9 to suspend services at Westlake Hospital in Melrose Park, Ill. That plan was put on hold after a Cook County Circuit Court judge held that the abrupt closure could have “irreparable harm” to the community, according to the Chicago Sun Times.

In late January, Pipeline acquired Westlake Hospital and two other facilities from Dallas-based Tenet Healthcare. A few weeks after the transaction closed, Pipeline revealed plans to shut down 230-bed Westlake Hospital, citing declining inpatient stays and losses of nearly $2 million a month.

Pipeline said staffing rates have significantly declined in the weeks since it filed the application to close Westlake Hospital.

“Our utmost priority is safety and quality of patient care,” Pipeline Health CEO Jim Edwards said in an April 9 press release. “With declining staffing rates and more attrition expected, a temporary suspension of services is necessary to assure safe and sufficient operations. This action is being taken after considering all alternatives and with the best interest of our patients in mind.”

In addition to announcing the suspension of services, Pipeline also said it gave hospital employees a 60-day notice of closure, which is required by state and federal law.

Pipeline’s plan to immediately suspend services at the hospital was put on hold yesterday evening, when Judge Eve Reilly granted the village of Melrose Park a temporary restraining order to prevent the hospital from closing. The restraining order prevents Pipeline from closing the hospital, cutting services or laying off workers until after the state Health Facilities and Services Review Board considers the application to shut down the hospital on April 30, according to the Chicago Tribune.

The board could postpone the application due a pending lawsuit against Pipeline over the closure, according to the Chicago Tribune.

The village of Melrose Park sued Pipeline in March, alleging Pipeline acquired Westlake Hospital under false pretenses. The lawsuit alleges Pipeline and its owners kept their plans to shut down the hospital secret until after the transaction with Tenet closed to avoid opposition from village leaders and community members.

Pipeline recently filed a motion to dismiss the lawsuit, arguing its application for change of ownership made no promise to keep Westlake Hospital open and that the hospital’s financial troubles were not fully evident at the time the change of ownership was prepared.

“The complete impact of Westlake’s 2018 devastating net operating loss was not known until the year’s end and had not fully occurred in September 2018 when Pipeline submitted its application for change of ownership or even when that application was granted,” Pipeline said in a press release.

Pipeline said Westlake Hospital ended 2018 with a net operating loss of $14 million, and those losses are projected to worsen over time.

 

Ex-hospital exec sues DMC for wrongful discharge, retaliation

https://www.detroitnews.com/story/news/local/michigan/2019/04/01/hospital-exec-sues-dmc-wrongful-discharge-retaliation/3337429002/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202019-04-03%20Healthcare%20Dive%20%5Bissue:20208%5D&utm_term=Healthcare%20Dive

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The former top Detroit Medical Center cardiologist is suing the health system, arguing he was forced out of his job for complaining about alleged fraud at the health system, including unnecessary surgeries billed to Medicare and Medicaid. 

The wrongful discharge and retaliation lawsuit was filed in Detroit U.S. District Court by Dr. Ted Schreiber, who was recruited by the DMC in 2004 and developed a trademarked process to speed life-saving treatment for heart attack patients.  He also was the founding president of the new DMC Heart Hospital that opened with fanfare in 2014.

Schreiber’s accusations are “unsubstantiated,” a DMC spokeswoman said Monday night, and the health system continues to have a “culture of integrity.”

Heart Hospital shares facilities with Harper University Hospital that is poised to be terminated from the federal Medicare program in less than two weeks after failing inspections in October and December. Since Harper and Heart Hospital are considered a single facility by the Centers for Medicare Medicaid Services, both would be barred from the federal health insurance program for the elderly and disabled if Harper fails to pass an unannounced inspection by the April 15 deadline.

Michigan prohibits hospitals barred from receiving Medicare funding from participating in Medicaid, the health insurance program for mostly low-income people that is jointly funded by the state and federal governments. The two programs combined pay for 85 percent of Harper’s inpatient hospital stays, according to Allan Baumgarten, a Minneapolis-based hospital analyst.

The inspections in October and December were prompted by complaints from Schreiber and three other health system cardiologists who said they were forced from their leadership roles in retaliation for complaining about quality of care issues at the DMC. 

Cardiologists Dr. Mahir Elder and Dr. Amir Kaki filed a similar lawsuit last week in Detroit federal court, saying they were forced from leadership posts for complaining to leaders of the DMC about unnecessary surgeries, dirty surgical instruments and other problems. 

In his lawsuit, Schreiber said he brought concerns about physician competency and unnecessary and/or dangerous procedures to DMC peer review meetings in a bid to ensure that they were investigated. But his concerns were ignored by DMC and its for-profit owner, Tenet Healthcare of Dallas, according to Schreiber’s lawsuit.

“(T)he profitability of physicians was being weighed more heavily by DMC and Tenet executives than the physicians’ ability to provide services to patients within the standard of care,” Schreiber alledged in his lawsuit. “This policy resulted in an increase in unnecessary and/or risky procedures conducted by some physicians leading to bad patient outcomes and even patient deaths.”

The DMC continues to argue that Schreiber and the other cardiologists violated the company’s conduct code. The health system’s top priority is delivering “safe, high quality care to the people of Detroit,” said spokeswoman Tonita Cheatham.

“We have a culture of integrity, which means we don’t look the other way, we don’t condone inappropriate behavior of any kind, and we don’t compromise on our priorities,” Cheatham said in a statement.

“That also means we expect physicians to uphold our Standards of Conduct, including treating fellow physicians, nurses and staff members with respect and dignity.  We welcome the opportunity to present the facts underlying the claims made in the complaint.”

In the lawsuit, Schreiber indicated he also complained to Tenet and DMC leaders that some cardiologists were away from the hospital during times they were required to be on-site as members of Cardio Team One’s 24-hour on-call team. He also said he raised concerns about staffing cuts that resulted in poor nursing care for cardiac patients. 

Tenet Healthcare signed a three-year “corporate integrity agreement” as part of a $513 million settlement with the U.S. Department of Justice over allegations of a kick-back scheme involving involving four Tenet hospital subsidiaries in the South, according to Schreiber’s suit. The agreement required Tenet and all of its hospitals to self-report all complaints to the federal Justice Department.

“Senior management, including these Defendants, failed to do so and blatantly allowed legal violations to occur in order to generate more income by cutting medically necessary support and allowing unnecessary medical procedures, among other things,” the former cardiologist executive said in his lawsuit.

Schreiber referred a request for comment on the lawsuit to his attorney, David Ottenwess of Detroit.

“Tenet Healthcare, the current for-profit owner of the DMC, has been continually cited by the federal government for placing profits over people,” Ottenwess said. “Tenet has continued that course with its retaliation against Dr. Schreiber and others at the Heart Hospital who had the courage to question Tenet’s practices of profits over safety.”

 

An unexpected twist in the ACA case

https://www.axios.com/newsletters/axios-vitals-20db892f-3887-47d7-8a2f-075e3afc8bc0.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

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A Florida man is capitalizing on the Trump administration’s sudden legal reversal in an attempt to get off the hook for accusations of Medicare fraud.

Philip Esformes, who operated about 20 nursing homes in the Miami area, was arrested in 2016 and charged with committing $1 billion in Medicare fraud through a complex kickback scheme.

  • But Esformes’s lawyers now argue the charges should be dismissed because of the Justice Department’s new position on the Affordable Care Act. ThinkProgress’ Ian Millhiser was the first to flag this creative argument.

How it works: Some of the specific charges against Esformes stem from parts of the Affordable Care Act. They are, his lawyers say, among the specific sections of law that Judge Reed O’Connor invalidated when he threw out the entire ACA.

  • Esformes’s lawyers acknowledge that those statutes are still on the books.
  • But the Justice Department has said it agrees with all of the O’Connor’s decision — which means it has said that “the very statutes it is seeking to enforce in this trial are unenforceable,” his brief argues.
  • The government shouldn’t be able to prosecute Esformes using legal authorities that it’s simultaneously saying are invalid, the lawyers argue.

My thought bubble: This seems like the kind of thing a good prosecutor will probably find a way to wriggle out of. It also seems like the kind of thing career lawyers at DOJ would have caught, if they had been allowed to shape DOJ’s position in the ACA case.

 

 

CHI Franciscan settles antitrust case: 5 things to know

https://www.beckershospitalreview.com/legal-regulatory-issues/chi-franciscan-settles-antitrust-case-5-things-to-know.html?origin=cfoe&utm_source=cfoe

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An antitrust lawsuit filed by the Washington state attorney general against CHI Franciscan will not go to trial, according to the Kitsap Sun.

Five things to know:

1. The lawsuit, filed in 2017, alleged Tacoma, Wash.-based CHI Franciscan’s affiliation with two physician groups in Kitsap County raised healthcare prices and decreased competition.

2. “Both transactions also enabled CHI Franciscan to capture more patient referrals and shift services to its wholly owned hospital, Harrison Medical Center, the only civilian acute care hospital in Kitsap County,” states an August 2017 press release from the Washington state attorney general’s office. “The transactions have hobbled CHI Franciscan’s competitors while allowing it to reap the benefit of more expensive, hospital-based rates.”

3. A trial in the case was slated to begin March 19 but was called off March 15 after the parties notified the court that the matter was resolved.

4. Specifics about the settlement have not been released. The parties have until April 29 to file documents outlining the settlement and requesting the case be dismissed, according to the Kitsap Sun.

5. A CHI Franciscan spokesperson told the Kitsap Sun that the settlement will ensure the health system’s affiliations with the two physician groups remain in place.

“This is good for patients and doctors on the peninsula, keeps our highly skilled doctors in our community, and ensures everyone has access to great care close to home,” the spokesperson said.

Access the full Kitsap Sun article here.

 

 

ANA CRITICIZES ‘CRIMINALIZATION OF MEDICAL ERRORS’ AS VANDERBILT NURSE ARRAIGNED

https://www.healthleadersmedia.com/nursing/ana-criticizes-criminalization-medical-errors-vanderbilt-nurse-arraigned?utm_source=silverpop&utm_medium=email&utm_campaign=ENL_190220_LDR_BRIEFING_resend%20(1)&spMailingID=15165362&spUserID=MTY3ODg4NjY1MzYzS0&spJobID=1581568052&spReportId=MTU4MTU2ODA1MgS2

The statement expresses support for handling medical errors with ‘a full and confidential peer review process.’


KEY TAKEAWAYS

The fatal error was made in December 2017, but it didn’t become public until November 2018, with a CMS report.

Vanderbilt was threatened with a loss of its Medicare status over the incident.

The nurse was indicted this month and scheduled for an arraignment Wednesday.

As a former nurse for Vanderbilt University Medical Center in Nashville, Tennessee, was scheduled to appear in court Wednesday morning for an arraignment on felony charges of reckless homicide and impaired adult abuse, the American Nurses Association raised concerns about the precedent the case could set.

Radonda Vaught administered a fatal dose of the wrong medication to a 75-year-old woman in late 2017, after overriding system safeguards, as The Tennessean’s Brett Kelman reported, citing an investigation report by the Centers for Medicare & Medicaid Services. That incident, which VUMC reportedly failed to convey to the medical examiner, prompted CMS to threaten VUMC’s Medicare status last November.

Vaught was indicted earlier this month, prompting the ANA to voice some concerns.

“Health care is highly complex and ever-changing resulting in a high risk and error-prone system,” the ANA said in a statement Tuesday. “However, the criminalization of medical errors could have a chilling effect on reporting and process improvement.”

Related: How DeKalb Medical Fixed Drug Safety Problems After Fatal Error

The statement, which specifically mentions Vaught’s case, expresses support for handling medical errors with “a full and confidential peer review process.”

The ANA also offered its condolences to the those who have suffered as a result of this error.

“This tragic incident should serve as reminder to all nurses, other health care professionals, and administrators that we must be constantly vigilant at the patient and system level,” the ANA added.

 

 

 

UPMC fires back at state AG, seeks to join BCBS antitrust lawsuit

https://www.healthcaredive.com/news/upmc-fires-back-at-state-ag-seeks-to-join-bcbs-antitrust-lawsuit/548993/

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University of Pittsburgh Medical Center filed a counter lawsuit on Thursday against the Pennsylvania attorney general, who is seeking to force the healthcare giant into contracting with rival Highmark. The system is also seeking to insert itself in a broader lawsuit over the ways Blues operate.

The flurry of filings taps into big questions over payer competition and underscores tensions seen throughout the country between insurance companies and providers as they negotiate contracts, particularly in highly concentrated markets. States have stepped up their enforcement of consumer protections against rising healthcare costs — but UPMC is saying its regulators have greatly overstepped their bounds. 

Earlier this month, Shapiro alleged Pittsburgh’s dominant medical provider wasn’t living up to its charitable mission as a nonprofit, accusing the health system of “forsaking its charitable obligations” in exchange for “corporate greed.”

The legal duel stems from a contract dispute between UPMC and its rival Highmark. Until June 30, the two have a legal agreement protecting consumer access to the other’s network through a consent decree. UPMC refuses to modify the decree and contract with Highmark, which risks in-network access to UPMC hospitals for Highmark members.

In response to the attorney general’s initial complaint, UPMC alleges that Shapiro’s attempt to renew and modify an expiring agreement between the Pittsburgh health system and Highmark is “unprecedented and unwarranted.”  The modification would, among other things, remove the majority of UPMC’s board of directors and force the integrated system to contract with any payer. 

The state AG responded on Friday, accusing UPMC of ignoring its mission and noting it would not be intimated by the healthcare behemoth.

“With their filings today, UPMC has shown they intend to spend countless hours and untold resources on a legal battle instead of focusing on their stated mission as a non-profit charity — promoting the public interest and providing patient access to affordable health care,” said Attorney General’s Office spokesman Joe Grace.

In its notice to the AG, UPMC lays out five examples it calls frivolous enough to get Shapiro’s motion dismissed — including previous testimony delivered by Deputy Attorney General Jim Donahue in 2014, when he told state representatives there is “no statutory basis” to make the two companies contract with each other without setting a dangerous economic precedent.

“If we force the resolution in this case, we really could not avoid trying to force a similar resolution in all those other situations, and that is simply and unworkable method of dealing with these problems,” Donahue said at the time. “We’d be putting our finger on the scale, so to speak … and we’re not sure what those effects would be.”

One effect is a class action lawsuit, which UPMC filed separately Thursday. It alleges Shapiro has violated at least four federal laws: Medicare Advantage statutes protecting competition, the Affordable Care Act’s nonprofit payer regulations and the Sherman Act and the Employee Retirement Income Security Act of 1974.

“Purporting to act in his official capacity, General Shapiro has illegally taken over nonprofit healthcare in the Commonwealth of Pennsylvania,” UPMC’s class action states. “Without rulemaking, legislation or public comment, General Shapiro has announced new ‘principles’ that radically (and often in direct contravention of existing federal and state law) change how nonprofit health insurers and providers operate, now rendering the Attorney General the arbiter of how nonprofit health organizations should envision and achieve their mission.”

UPMC says Blues system bad for business

Separate from its battle with the state attorney general, UPMC is attempting to jump in the middle of a legal antitrust battle over how Blue Cross Blue Shield plans operate. UPMC is seeking both a preliminary injunction and a motion to intervene in the years-long federal case in Alabama.

UPMC is asking the Alabama court to stop the Blues plans from enforcing their own market allocation agreements that prevent UPMC from contracting with other Blues plans, according to the filing. UPMC says a significant chunk of its patients have a Blue Cross Blue Shield plan from a different provider other than Highmark.

Joe Whatley, co-lead counsel for provider plaintiffs in the Alabama case, told Healthcare Dive UPMC “presents a good example of how the Blues are abusing their illegal agreement for their benefit and to harm healthcare providers throughout the country.”

UPMC argues that it would contract with other Blue Cross Blue Shield plans, separate from Highmark, but cannot due to the way Blues operate — or limit how they compete with one another. BCBS plans tend to stake out their own geographic areas and avoid competition with one another, a practice the Alabama court has already found is in violation of antitrust laws. A BCBS appeal to the Alabama judge’s opinion was already struck down by the 11th U.S. Circuit Court of Appeals late last year.

UPMC is asking the Alabama court for an injunction, or to step in and stop the Blues plans from enforcing or complying with their own market allocation agreements that are preventing UPMC from contracting with other Blues plans, according to the filing. And because the hometown plan, Highmark, does not have a contract with UPMC after June 30, it means that other Blues plan members that have enjoyed in-network access to UPMC will soon lose access after the consent decree expires.

About 24% of UPMC’s hospital patients have a Blue Cross Blue Shield plan other than Highmark.

UPMC contends that it has tried to contract with other Blues but was turned down. “The average non-Highmark Blues patient does not know that UPMC has offered contracts to each of these plans and been turned down because the Blues’ illegal market allocation prevents them entering into such an agreement with UPMC,” according to the filing.

Without an injunction, UPMC alleges it will suffer irreparable harm to its reputation and will lose a significant number of patients who have a non-Highmark Blues plans.

The Pennsylvania attorney general’s office has not responded to Healthcare Dive’s request for comment and UPMC declined to discuss the case further.