Singularity Health Law Blog

IRS SPOILS PHYSICIAN RECRUITMENT CONTRACTS

One of the hallmarks of physician recruitment contracts offered by hospitals and physician groups is the incentive of "foregiveness" of "loans" offered t phy;sicians who are financially underwritten as an inducement to relocate and entier profesioal practice ina particular location. Typically, there is a subidiy of the practice for a few years followdd by a three year or so period of continuing practice ofbligaiton in the community, during which the origional subsidy "loan" is written of over time and the physician is given Form 1099C (cancellation of dept) in the later years of the guarantee arrangement.

Last April, a United States District Court judge in the State of Washington, agreed with the Internal Revenue Service that those kinds of "loans" were in fact compensation and not loans at all. It held that the physician group was liable for failure to withhold from the payments to its physicians. The case was The Vancouver Clinic, Inc. v. The United States of America, 111 AFTR 2d paragraph 2031-632 (2013 DC Wash.).

The Hon. Rondal B. Leighton entered summary judgment in favor of the IRS,holding that because both the group and the physician at the inception had no expectatoin that the incentives would be repaid and that there would never be a repayment of the "loan", it was not in fact a loan.

These kind of incentive arrangments will in the future likely to be designed to have the look and feel of actual loans with effective promissory notes and periodic payments over the term of the loan agreements, including the early years. This is just aother level of complexity in the three dimensional chess game of the multiagency oversight regulation of health care systems.

SCOTUS REELS IN “STATE ACTION” ANTITRUST IMMUNITY DEFENSE

The United States Supreme Court, in a unanimous opinion written Justice Sotomayor, overturned an Eleventh Circuit Court of Appeals and Georgia District Court finding “state action” antitrust immunity in the case of FTC v. Phoebe Putney Health System, Inc. et al, No. 11-1160. Had they ruled otherwise there would have opened a huge whole in the FTC’s ability to regulate anticompetitive conduct by state sub-entities under a general grant of state authority. Georgia like many states has a hospital authorities law that permits counties and or municipalities to create quasi governmental entities with broad grants of powers to operate health care facilities.

OIG APPROVES PLAN FOR CALL-PAY

More and more physicians who used to accept on call duty at a hospital as part of their obligations of being part of the medical staff are insisting on receiving some form of remuneration for the inconvenience. On October 30, 2012 the Office of Inspector General of HHS posted an advisory opinion No. 12-15 approving a hospital’s plan to pay for on-call services of physicians on its medical staff.  These are for consulting physicians, not those physicians called on a regular basis to assist the ER, like intensivists, hospitalists, interventional cardiologists, etc. The concern of the OIG was the likely implication of the federal antikickback statute.  The personal services and management contracts safe harbor at 42 CFR Section 1001.952(d) doesn’t apply because it requires the aggregate amount of compensation to be identified in advance.

Gun Rights Trumps Hospital/School Property Rights in Kentucky.

Michael Mitchell was a anesthesia technician at the University of Kentucky Chandler Medical Center when he was discovered to have possession of a loaded semi-automatic pistol in his automobile.  The gun was licensed and he had a concealed weapons permit. In April of 2009, the University fired him for violation of its no guns on campus policy. Mitchell, an at-will employee, brought an action for “wrongful termination” for violation of his constitutional rights to bear arms and his rights under Kentucky statutes. Kentucky, like most states recognizes an exception to an “at will” firing where the firing has been the result of a violation of the clearly expressed public policy of a state. Mr. Mitchell’s suit was dismissed on summary judgment and he appealed to the Kentucky Supreme Court which reversed.

$2M RETALIATION VERDICT FOR CARDIOLOGIST UPHELD

The First U.S. Circuit Court of Appeals has upheld a $ 2 Million Dollar Jury Verdict in favor of a San Juan Puerto Rico Cardiologist who claimed he had been retaliated against for filing an age discrimination case five years earlier.  In actual fact, the plaintiff Dr. Munoz was fired within days of giving a deposition in the case wherein he recounted his evidence. The defendants appealed on the basis that the decision to fire him had been made well before his deposition and could not be the basis for establishing a retaliation claim under the Age Discrimination Act of 1967 (ADEA), 29 U.S.C. Section 623 d. The Court agreed, to a point, but found that the retaliation could relate back to the original filing, given other facts.

 

SMILE: HOSPITAL PHOTO BANNED UPHELD BY NLRB

Given the ubiquity of cell phone cameras, it is not an infrequent experience for relatives visiting patients in hospitals to take pictures of the patients, nurses and others present in the facility.  Doctors and nurses have even been known to pose with patients for group photos.  In 2007, Flagstaff Medical Center in Flagstaff,  Arizona became concerned about the use of cameras in the hospital and banned the “use of cameras for recording videos of patients and/or hospital equipment, properties or facilities.

 

NURSE TERMINATION ON REFUSAL TO ABANDON PATIENT: GROUNDS FOR WRONGFUL DISCHARGE CLAIM.

South Carolina Code. Ann § 40-33-110(24) provides that a nurse may be subject to discipline of his license if he:

abandoned a patient after accepting the patient assignment and establishing a nurse-patient relationship and disengaged the nurse-patient relationship without giving reasonable notice to the appropriate personnel responsible for making arrangements for continuation of nursing care.

 

Eugene Paterson, a South Carolina nurse, was assigned by his employer Gentiva Health Services,   Inc. to provide wound care for a patient, twice a week for two weeks, pursuant to a doctor’s order which remained in effect throughout the two weeks.  Gentiva, however, ordered nurse Paterson to cease providing the care before the order expired. He refused. Gentiva fired him. In Paterson v. Gentiva Health Services, Inc. , D.S.C. 10-cv-3021 (7-25-11).  Gentiva moved to dismiss his claim on the basis that “at will” employees can be terminated by their employer for any reason or no reason.  

 

The Court held that these circumstances fell within the narrow public policy exceptions to the at will employment rule, where the firing is a potential violation of a clear mandate of public policy. In South Carolina there are two categories of exceptions when an employer terminates employment because of the employees refusal to break the law or when the reason for termination is itself a violation of the law.  Here Mr. Paterson alleged that Gentiva fired him for refusing to abandon the patient in violation of the South Carolina State nursing code. The Court agreed with Mr. Paterson.

 

THE VALUE OF CONSENT TO SETTLEMENT CLAUSES IN PROFESSIONAL LIABILITY INSURANCE.

    Many physicians appear to be unaware of the potential impact on their reputations of not having a right to consent to any settlement in their contract for professional liability insurance.  Without such a clause the insurance company, may settle a nuisance claim against a physician for a small token payment, yet in making a payment on behalf of a physician, no matter how small, the insurance company is required to report the payment to the National Practitioner Data Bank under the Healthcare Quality Improvement Act of 1986. It is in fact sometimes better for a physician to make a nuisance payment himself or herself to settle a case if the amount is small enough, because payments made by the physician are not reportable.

UNION LIABILITY FOR LAUNDERING HOSPITAL DIRTY LINEN IN PUBLIC?

    A California Court of Appeals struck down a $17 million dollar defamation judgment in favor of Sutter Health against a union, Unite Here, which was engaged in a labor dispute with a nationwide laundry company, Angelica Textile Services, Inc. Unite Here engaged in a type of secondary picketing, attempting to apply pressure on Sutter Health to pressure Angelica to submit to union demands.  Unite Here directed its fire on the lucrative birthing services of the Sutter Hospitals. It developed what was identified as the Sutter Escalation Plan,” mailing postcards to prospective clients of the Sutter birthing centers or “wealthier women between 25 and 40 who are registered to vote.” The postcards warned that the laundry service (Angelica) used by Sutter did not ensure its lines were free from harmful pathogens and urged potential Sutter Health patients to protect their newborns because Sutter may not be taking adequate precautions against potential infections. One side of the postcard stated: “EXPECTING? You may be bringing home more than your baby if you deliver at a Sutter birthing center.”

    

HOSPITAL/PHYSICIAN INTEGRATION: CAN THEY GET IT RIGHT THIS TIME?

    Healthcare is one of the trendiest industries in the nation. It is always in a state of flux. During the advent of the deep push into managed care in the 90s there was a feeding frenzy of hospitals trying to gobble up physician primary care practices to control the “gatekeepers” and provide hospital leverage with insurance companies. Hospitals paid huge sums to acquire physician practices before competitors beat them to it.