August 1, 2004 Recent Legal News


Peer Review


Fraud and Abuse


Medical Marijuana



Certificate of Need


Pierce v American Assn. of Med. Colleges

Four people with learning disorders applied and were turned down by the American Association of Medical Colleges for special accommodation in taking the medical entrance exams.  The students are claiming reading disorders which would be covered under the broad California discrimination laws.  The students want an extended time to take the exam.  The Association states that they are committed to providing accommodation to disabled students.  I might add that the California Bar exam does allow extra time and special accommodations.  One of my law school classmates was blind and had to have all questions read to him after which he typed the answers.  He was allowed an extra day for the entire process.    

Murphy v Baptist Health
Supreme Ct. Arkansas

Murphy is one of six physicians who won an preliminary injunction against the hospital allowing them to remain on staff after being removed for economic credentialing.  The six cardiologists own a very small piece of a competing heart hospital.  The current motion is to allow or disallow amicus briefs by the AMA and the American Medical Society as well as a motion by the physicians to supplement the record.  The hospital stated that the decision in the underlying case did not rely on the AMA rules.  The Supreme Court denied the motion to allow the briefs.  The physicians wanted to have the Court consider a pleading filed after the underlying action.  The Court again said this was not allowed.    

Perry v Baptist Health
Ark. Supreme Ct.

A physician sued the hospital for breaching a contract with a LLC.  He stated facts that stated he was a third party beneficiary to the contract.  The physicians formed the LLC to contract with Baptist to perform trauma services.  The contract called for $1000 per day to the LLC and the LLC would provide one surgeon a day for the trauma schedule.  The contract also allowed the hospital to remove from the schedule any surgeon it determined "in its reasonable judgment" to be "unsatisfactory in the performance of his duties".   Perry was removed by Baptist and he sued.  The issue was a refusal to transfer to another institution a patient the physician believed was stable enough for transfer. The trial court agreed that Perry had no cause for suit and dismissed. The high court reversed stating Perry was a third party and not an incidental third party to the suit.   To trial.

Pietsch v Minn. Med. Board
Minn. supreme Ct.

Pietsch, a chiropractor, was accused of unprofessional conduct by the Board for using cappers and runners to obtain patients.  The Board said this was fee splitting and therefore unprofessional conduct.  The courts disagreed.  The use of these people, without more, is not unprofessional conduct.  The Court also said that no evidence against the chiropractor showed the conduct was unethical, deceptive or harmful to the public.  It's what ambulance chasing attorneys do most of the time. 

Vaughn v Laiama
CA Ct. App.

This is a not to be published sexual harassment case.  The physician was accused of sexual harassment and retaliation.  The hospital in which Dr. Laiama was a licensed independent practitioner was previously settled. The doctor made lewd remarks and inappropriate touching of Vaughn.  He also did the same to other nurses.  Vaughn complained to the hospital HR about 16 months of sexual harassment.  Following the report the doctor started the retaliation by verbally harassing her.  The medical staff bylaws state that the physicians are responsible for directing and instructing the nursing staff.  The hospital suspended Dr. Laiama for one week.  He returned after several days claiming he could find no one to care for his patients.  Vaughn then left the hospital.  The jury found that Laiama was a supervisory employee of St. John's Hospital and that Vaughn was an employee. The jury award was $250,000 non-economic damages, $50,500 economic damages and $1 million in punis.  The court reduced the compensatory damages to reflect the prior hospital settlement and also awarded Vaughn attorney fees.  The court found that the physician was an agent of the hospital and therefore liable under FEHA.  The court did reduce the amount of the punis since it was much more that the doctors net worth.  There will be a retrial on the issue of punis amount only.  Although sexual harassment is intolerable, the medical staff bylaws allowed the case to go forward under FEHA.  This is another reason to have medical staffs re-look at their bylaws, rules and regs.    Top

Peer Review

Poliner v Texas Health
N D Texas

Poliner had previously appealed a decision against him obtaining damages against those who conducted peer review against him.  He now brings and loses an appeal stating he can get damages from those who act pursuant to the peer review process.  The count stated all were precluded by HCQIA.    

Joshi v St. Luke's Hosp.
Missouri Ct. App.

Joshi had filed suit against the hospital for removing his privileges as an anesthesiologist.  He lost the underlying suit.  He is appealing the decision and the hospital is cross complaining for attorney fees.  Both lost in the Court of Appeals.  Dr. Joshi had formal peer review following a summary suspension.  He lost in that hearing and did not go to a formal Judicial Review Hearing because he resigned prior to the scheduled hearing to take another position.  Joshi stated that HCQIA was unconstitutional since it took away power reserved to the states.  This was disallowed since Joshi did not bring this up in the underlying action.  The Court of Appeal denied all motions.    Top


Dentists v Aetna

First Aetna settled their slow and no-pay problems with the nations physicians.  Now they are attempting to do the same with the dentists.  They have offered $5 million to settle all the claims.  This means the American Dental Association would get $1 million and the nations dentists $4 million.  But, hold on.  The dentist's attorneys want $1.25 million for their work.  The judge that needs to oversee the settlement and agree to it wants to see the paperwork from the attorneys to justify the claim for fees.  The money would come off the top of the money to go to the dentists. 

Patients v Insurers

 A coalition of patients in California have filed suit against multiple insurers in LA court alleging the insurers have not performed their oversight of hospitals.  The consumers have been balance billed by the hospitals against the law the requires the insurance companies to make sure this does not happen.  This does not occur if there is a third party involved such as an auto accident.   

Sutter v Horizon Blue Cross
New Jersey Class Action

Dr. Sutter sued Horizon in New Jersey state court for breach of contract and violations of the prompt pay law.  The case has now been certified as a class action against the defendant.  The judge allowed all pediatricians as one class for damages.  He would allow nonpediatricians as a class for injunctive relief on downcoding, bundling and refusal to recognize modifiers.  The last group for all New Jersey physicians regarding capitated payments. Horizon may appeal the decision.          Top

Fraud and Abuse

US v Chase
Potential Overturn

The judge who presided over the acquittal of the Tap Pharmaceutical representatives may overturn his prior ruling allowing a guilty plea by Ms. Chase a sales manager for Tap.  The trial has made the judge rethink his decision due to previously unknown information that came out in the trial.  Chase was accused of offering a bribe to an HMO to use Lupron.  This is not illegal under the kickback rules since there was offer to a physician. 

US v Ernst & Young

Ernst & Young was accused of causing nine hospitals to submit bills to the Medicare program for tests that were medically unnecessary.  The consultants then falsified their reports to the feds on behalf of the hospitals.  They paid $1.5 million to settle the claims.   

US v Schering-Plough

The company was accused of overcharging Medicaid for drugs.  They are supposed to give Medicaid the lowest price but didn't by giving to private providers under the table patient education grants.  The whistleblowers got them. Schering also pled guilty to one count of criminal payment.  The fine in the criminal case was $52.5 million and in the civil case $293 million.  The company will receive from the government $53.6 million in Medicaid rebates that it had previously paid before the settlement.   Top


Calif. v Unity Outpatient Ctr.

The Orange County DA has filed charges against the clinic for bringing patients in to the clinic for surgery they did not need.  Each person was given money toward the surgery.  The clinic operators were all arrested and scheduled for arraignment.  If convicted they would all get over 25 years in prison.  The DA states that there were shell corporations that billed $97 million and collected $14 million using different addresses.  The physicians who performed the surgeries should be sweating about now since more arrests are imminent.        Top

Medical Marijuana

Pro-Marijuana Grps v DEA

Multiple pro-marijuana groups sued the DEA and the National Institute on Drug Abuse for intentionally delaying research on medical marijuana.          Top


Cook v Newman
Mo. Ct. App.

The Missouri Court of Appeals has stated that multiple plaintiffs in a malpractice suit should be treated as a single plaintiff in regard to non-economic damages.  However, there may be multiple causes of damages in a single case allowing non-economic damages for each issue.  In the underlying case there was a $7.2 million award against two physicians and the professional corporation. The suit was for three plaintiff survivors of a woman who died of peritonitis post laproscopy.  

Howard v Patel, MD
Michigan Supreme Ct.

The court stated that wrongful death lawsuits based on medical malpractice are covered under the tort reform laws of the state.  The decision was 5-2.   

Burless v West Va. Univ. Hosp.
West Virginia Supreme Court

 Burless, a pregnant female, had prenatal care at a clinic and went to West Virginia Hospital for an ultrasound.  At that visit she signed a paper acknowledging the physicians were not employees of the hospital.  She had hypertension and delivered by C-Section with damage to the child.  She sued the University on apparent agency as the employer of the physicians and residents who cared for her.  In another case Pritt came to the ED at West Virginia Hospital with abdominal pain.  She was determined to be pregnant and had an ovarian cyst.  She signed three consent forms in the OB clinic stating the people caring for her were not hospital employees.  At twenty three weeks she had an operation to remove the ovarian cyst which broke at surgery.  She was infected and went into premature labor with resultant injury to her son.  She also sued the hospital for recommending and performing the surgery.  The two actions were consolidated.  The trial court stated no apparent agency and dismissed the suit.  The appeals court reversed.  The Supreme Court agreed that there was no actual agency but also stated there was apparent agency.  The Supreme Court did not like the wording on the consent form stating that faculty and resident physicians were not employees.  This would make the patient ask each person involved in their care what their status was.  This allowed there to be enough question to overcome the summary judgment and to allow the case to go to trial.          

Castillo v Emergency Med.
4th Circ.

Castillo was treated in the ER of Prince William Hospital for abdominal pain.  She was diagnosed with an infection, treated with antibiotics and told to follow up with her physician.  Four days later she called the ED to speak to the physician who examined her because she had not improved.  She could not reach that physician but another ED physician did speak to her and prescribed another antibiotic.  Five days later she was admitted and had surgery for an abdominal infection secondary to a perforated intestine.  She sued the ED physicians and their employer after two years (the statute of limitations). She stated that continued treatment tolled the statute. The trial court did not agree.  They stated that each ED visit was separate and the statute was not tolled.  On appeal the 4th Circuit stated that the Virginia law states that the statute runs from the date of the first action which was several days prior to the two years from the surgery.  This is probably attorney malpractice for not timely filing.

    Swartz v Lester
Cal. Ct. App.

Swartz was being treated by Dr. Lester for skin cancer starting in March, 1995.  In May, 1995, a malignant melanoma was removed and the patient was told it was early and all was removed.  In August, 2000, he was found to have advanced melanoma.  In September, 2001 he filed the necessary notice to sue.  The defendant moved for summary judgment due to the running of the one year statute of limitation.  He was told that the 1995 melanoma was the source of the current disease in August, 2000.  The court agreed the statute had run.  The Appeal Court affirmed stating it is the discovery of facts and not their legal significance that triggers the statute.

Ledbetter v Hunter
Ind. Ct. App.

Ledbetter sued for her birth in 1974.  She sued in 1994.  The trial court dismissed due to the running of the statute of limitations.  The appeals court reversed stating the statute of limitations as applied to minors was unconstitutional.  Shortly after the decision the plaintiff died and the mother was substituted as plaintiff.  On remand the defendants moved to dismiss and the trial court agreed.  Plaintiff again appealed.  The Appeals Court again overturned the trial court since originally the plaintiff had two years from reaching majority to file and when she reached majority the law was changed in 1975, one year after birth, to two years from injury or to age eight if the minor was under six at the time of the incident. The Court stated that this created two different classes of plaintiffs, one with personal injury and one with med mal.  This was against the state constitution.  The disparate treatment was no longer justified since the carriers did not take into consideration the law in setting their premiums.  

Brown v DC

 Brown, a prisoner in a DC prison from 1997-1999.  During that time he complained of abdominal pain and chest pain.  He was diagnosed as indigestion and muscle aches on two occasions.  In 1999, under contract, he was transferred to Virginia prison and then sent to a hospital there on October 2, 1999, for emergency treatment of pneumonia.  He died several days later and an autopsy showed sepsis secondary to a diaphragmatic hernia.  Nine months later the mother filed suit for wrongful death.  The case was dismissed in DC due to a law that states the plaintiff must file a notice to sue within six months of the incident. The Court of Appeal agreed since the incident occurred when the symptoms worsened not the time of death.  This is another case of attorney malpractice for not filing within the time period.  

 Garbert v Columbia/Healthone
Colorado Supreme Ct.

The Colorado Supreme Court in this case affirmed the tort reform act of the state (HCAA).  It affirmed the total malpractice cap as well as the noneconomic cap.  For a toss-in it also affirmed the periodic payments.    Top


Klassy v Physician Plus Ins. Co.
7th Circ.

Klassy sued a HMO for requesting an out of plan physician perform hip surgery because she is a Jehovah Witness and the physician is a "bloodless surgeon'.  The plan states that plan physicians must do the treatment unless their is none.  The surgeon is the only one that does the "bloodless surgery."  The plan allowed the surgery but only by a plan physician.  Klassy sued in state court after she went to another state and had and paid for the surgery herself. The defendant HMO removed the suit to federal court as an ERISA claim and the district and 7th Circuit agreed.  The reason for the continued preemption was the determination of whether the surgery was covered.  This was not a mixed claim decision and was not an approval for therapy since it had been approved.  It was an eligibility claim and not able to be remanded to state court.

Mayeaux v Louisiana Health Serv.
5th Circuit

 Mayeaux was diagnosed as having a connective tissue illness and was prescribed high dose antibiotic treatment.  Her plan denied the therapy as experimental.  The plaintiff sued in state court for bad faith but the plan had the case removed to Federal Court under ERISA.  The plaintiff attempted to amend their complaint to only state claims and this was denied.  The district court tossed all state claims as preempted under ERISA and also stated there was no genuine issue of fact regarding the denial of coverage.  The 5th affirmed.  They stated the district court was right to not allow the change since it was done only several months prior to trial and would have unfairly damaged defendants.  The 5th went on to say that Davila limited mixed claims under Pegram.        Top

Certificate of Need

Martin Med Center v Tenet
Fl. Dist. Ct.

Tenet sued Florida stating the statute that allowed five counties to not have certificate of need for open heart programs.  The hospitals that wanted to put in heart programs were granted leave to intervene and were represented by the state Attorney General.  The lower court allowed summary judgment for Tenet against the state and the other hospitals appealed.  The District Court of Appeals agreed that the law was unconstitutional and found for Tenet.  The legislature had no right to enact a local law that went against the state constitution.        Top 


DISCLAIMER: Although this article is updated periodically, it reflects the author's point of view at the time of publication. Nothing in this article constitutes legal advice. Readers should consult with their own legal counsel before acting on any of the information presented.