Category Archives: Employee Issues
No, this is not a Shakespearean blog post. The Hamlet in this case is not the Prince of Denmark; it is a hospital system who hired a doctor, Dr. Hernandez as an independent contractor and whose private practice flopped. When the hospital at which he had privileges refused to hire him as an employee, Hernandez sued Hamlet under the False Claims Act (FCA) and Unfair Trade Practices- AND WON!!
Relationships between hospitals and physicians may forever be changed.
In an October 2018 decision, Hamlet H.M.A., LLC V. Hernandez, the NC Court of Appeals ruled that a hospital can be liable to a physician for Unfair and Deceptive Trade Practices (UDTP) – causing a new level of care to be needed in negotiations between hospitals and physicians.
Dr. Hernandez accepted a position with Sandhills Regional Medical Center. The original offer was for Dr. Hernandez to set up his own independent practice and to be an independent contractor for the hospital. The offer guaranteed a minimum collection amount for the first 18 months of the 36-month contract. The base salary was $325,000, with a bonus based on worked RVUs. Dr. Hernandez countered and asked to be considered as an employee instead of as an independent contractor. Sandhills sent an email offering a base salary of $275,000 as an employee. As any reasonable, logical person would do, Dr. Hernandez responded with an email stating that it would be irrational to accept a base salary so much lower in order to obtain employee status. The hospital offered an “employee status option” at the end of 18 months.
Dr. Hernandez then sent Sandhills an email asking to extend the time period of guaranteed income to 24 months, rather than 18 months. Plaintiff replied that it could not extend the period of guaranteed income, but raised the monthly salary from $47,616.82 to $49,500.00 and also added a signing bonus of $30,000.00. After further negotiations, the parties entered into a Physician Recruitment Agreement on March 9, 2011.
Dr. Hernandez’s private practice flopped, and at the end of the first 18-month period, he requested to exercise the employment option in his contract and to become an employee of Sandhills. But Sandhills did not give Dr. Hernandez an employment contract.
On August 29, 2014, Sandhills filed a complaint against Dr. Hernandez alleging breach of contract and demanding repayment of the entire amount paid to Dr. Hernandez, a total of 21 payments amounting to $902,259.66. Dr. Hernandez filed an answer with counterclaims for breach of contract, fraud, unfair or deceptive trade practices, and unjust enrichment. A jury trial was held in Superior Court in Richmond County at the end of August and the beginning of September 2016. The jury returned a verdict for Sandhills for $334,341.14 (a random number).
Dr. Hernandez countered sued the hospital for Unfair and Deceptive Trade Practices (UDTP) alleging that the hospital fraudulently induced him to enter into the contract with the hospital as an independent contractor. His allegations that the hospital violated UDTP because the hospital offered a lower salary to be considered an employee was shocking and unprecedented. Most likely, Sandhills never even contemplated that it could be held liable under UDTP because of a disparity in salary offered to Dr. Hernandez depending on his employment status. Most likely, the man or woman who sent the email to Dr. Hernandez with the disparate salaries never asked its general counsel whether the action could penalize the hospital. Who would have thought to?
One exception to UDTP is the “learned profession” exception. Basically, the courts have held that if the two parties to an agreement are learned professionals and the topic of the contract has to do with the parties’ speciality; i.e, medicine, in this case, then the parties cannot allege UDTP because both parties were knowledgeable. The issue of first impression presented by Hamlet is whether the “learned profession” exception set forth in N.C. Gen. Stat. § 75-1.1(b) applies to a dispute between a physician and a hospital relating to alleged false claims made by the hospital to induce the physician to enter into an employment contract. If the learned profession exception were to apply, then Dr. Hernandez’s UDTP claim against Sandhill would be dismissed.
Dr. Hernandez alleged that the hospital made false representations to induce him to enter into a contract. The Court held that the fact that he is a physician does not change the nature of the negotiation of a business contract. The Court found that the “learned profession” exception does not apply to any negotiation just because the two parties are physicians. For example, if a physician and a hospital were to contract to buy a beach house, then the exception would not apply because the nature of the contract (were something go awry and cause an UDTP lawsuit) because buying a beach house has nothing to do with being a physician or hospital. Similarly, here, the Court held that an employment contract had nothing to do with rendering medicine. Therefore, the exception did not apply. The Court of Appeals reversed the trial court’s directed verdict against Dr. Hernandez.
This decision definitely creates more tension between hospitals and physicians. Now, in negotiations with employees and independent contractors, hospitals need to be mindful that UDTP claims can be alleged against them. This case is recent precedent for an unfamiliar modern world of health care negotiations.
With so much news about Medicare and Medicaid, I decided to do a general update of Medicare and Medicaid in the news. To the best of my ability, I am trying not to put my own “spin” on the stories, but just relay what is happening. Besides, Hurricane Florence is coming, and we have to hunker down. FYI: There is no more water at Costco.
Here is an overview of current “hot topics” for Medicare and Medicaid:
Affordable Care Act
On September 5, 2018, attorneys argued in TX district court whether the Affordable Care Act should be repealed. The Republican attorneys, who want the ACA repealed will argue that the elimination of the tax penalty for failure to have health insurance rendered the entire law unconstitutional because the Supreme Court upheld the ACA in 2012 by saying its requirement to carry insurance was a legitimate use of Congress’ taxing power. We await the Court’s decision.
In Maine, two hospitals illegally turned away emergency room patients in mental health crises and sometimes had them arrested for trespassing. The hospitals are Central Maine Medical Center and St. Mary’s Regional Medical Center, and they have promised to address and change these policies. It is likely that the hospitals will be facing penalties. Generally, turning away a patient from an ER is over $100,000 per violation.
Six San Francisco Bay Area medical professionals have been indicted for an alleged kickback scheme in which three paid and three received kickbacks for healthcare referrals in home health.
Medicaid Work Requirements
In June, Arkansas became the first state to implement a work requirement into its Medicaid program. The guinea pig subjects for the work requirement were Medicaid expansion recipients aged 30-49, without children under the age of 18 in the home, did not have a disability, and who did not meet other exemption criteria. On a monthly basis, recipients must work, volunteer, go to school, search for work, or attend health education classes for a combined total of 80 hours and report the hours to the Arkansas Department of Human Services (DHS) through an online portal. Recipients who do not report hours any three months out of the year lose Medicaid health coverage until the following calendar year. September 5th was the reporting deadline for the third month of the policy, making today the first time that recipients can lose Medicaid coverage as a result of the work requirement. There are 5,426 people who missed the first two reporting deadlines, which is over half of the group of 30-49 year olds subject to the policy beginning in June. If these enrollees do not do not log August hours or an exemption into the portal by September 5th, they will lose Medicaid coverage until January 2019.
Accountable Care Organizations
According to a report in late August, accountable care organizations (ACOs) that requires physicians to take on substantial financial risk saved Medicare just over $100 million in the model’s first year, the CMS said in a report released Monday.
Lower Medicare Drug Costs
Back in May, the Trump administration published a “blueprint” for lowering drug costs. Advocacy groups are pushing back, saying that his plan will decrease access to drugs.
Balance billing is when a patient presents at an emergency room and needs emergency medical services before the patient is able to determine whether the surgeon at the hospital is “in-network” with his insurance…most likely, because the patient is unconscious and no one has time to check for insurance networks. More and more states are passing laws to protect consumers from balance billing. An example of balance billing was Drew Calver, whose health plan paid $56,000 for his 4-day emergency stay at St. David’s Medical Center. Once he was discharged, he received a bill from the hospital for $109,000. The Employee Retirement Income Security Act (ERISA) regulates company plans that practice this. The hospital eventually reduced the bill to $332.
During a fire, staff at two Santa Rosa, California-based nursing homes “abandoned their residents, many of them unable to walk and suffering from memory problems, according to a legal complaint filed by the California Department of Social Services.” The Department of Social Services accused the staff members of being unprepared for the emergency fire.
Makes you wonder what could possibly happen in the fast-approaching hurricane. At least with a hurricane, we have days advance notice. Granted there is no more water in the stores or gasoline at the pumps, but Amazon Prime, one-day service still works…for now.
Attorney/Client Privilege: Its Importance to Health Care Providers, and TIPS to Avoid Potential Pitfalls as to Former Employees
This blog is intended to provide TIPS to health care providers who have any amount of attrition with staff members and why these TIPS as to attorney/client privilege are so important.
First, I’d like to say, for the past few weeks, I have been moving homes and firms, concurrently. Add in a trial or two into the mix and I haven’t been able to blog as often. But I’m fairly moved in now (to both) and have one of the trials mostly wrapped up.
The idea for this blog, in particular, actually came to me while Robert Shaw, Senior Counsel, and I were Santa Fe, New Mexico for a trial.
While preparing the witnesses for trial, I re-realized an important aspect of attorney/client privilege that is vital to health care providers if there is any attrition in their staff.
I say “re-realized” because I already knew the importance of attorney/client privilege, but I realized the importance for health care providers to understand its importance, as well…hence, this blog.
If, for whatever reason, your company is forced to lay off staff or, even, if you have staff voluntarily leave your office, you need to read the entirety of this blog and pay special attention to the TIPS at the bottom.
What if you need to rely on that former employee for testimony in a hearing?
For example, you are CEO of a small or large health care provider company and your Medical Director or Compliance Director leaves your employment and you need the former employee to testify in the future. Your former employee and your attorney will not be protected by attorney/client privilege.
You may be thinking…so what?
But attorney/client privilege is key in trial.
Let me give you an illustrative example:
You own a dental practice and accept Medicaid. Lucy is your office manager. She oversees the Medicaid billing, ensures regulatory compliance, and deals with denials that come from NCTracks. She also enters the data into NCTracks. You, as the dentist, provide dental services, but you have little to do with what Lucy does. You trust her and she does her job well.
DHHS via Program Integrity conducts an audit and determines that you owe $750,000 in alleged overpayments. Maybe the auditor didn’t know that the notation “cavies” means cavities and dinged you for billing for filling a cavity because the auditor could not discern from the service note that a cavity was actually filled. Or, maybe you coded the service for scraping the wall of a gingival pocket, and the auditor did not understand what “curettage” is in the service note.
Regardless, you receive a Notice of Overpayment on May 4, 2015. On May 7, 2015, Lucy tells you that she is having her first baby and wants to be stay at home mother. You congratulate her and begin your search for another office manager. You end up hiring Bill.
By the time that you need to get ready to defend your $750,000 overpayment with your attorney, Lucy has given birth to Annie and hasn’t worked for you for over a year.
But your attorney, in order to defend the overpayment, will need Lucy to testify at court. Before a witness testifies in court, your attorney must meet with him or her to prepare the witness for direct examination and cross examination by opposing counsel. (If your attorney does not, instruct him or her to do so).
When I am in a situation such as the one I have outlined above. I am extremely careful. Because there is no attorney/client privilege between “Lucy” and me because she is a former employee, I am very precise in my prep. For example, I would never discuss legal strategy with Lucy. I would never show privileged information; I would never try to “lead” Lucy’s opinion. Leading a witness’s opinion could come across like, “Lucy, If I ask you on the stand whether your opinion is that curettage means scraping a gingival pocket, you would agree, correct?” Instead, I would ask, “Lucy, what do you understand curettage to mean and how would you normally code the procedure?”
Any attorney worth his or her salt knows that attorney/client privilege does not attach to a former employee.
Why does that matter?
Any opposing attorney worth his or her salt will cross exam Lucy as to every detail possible involving the meeting between Lucy and me. And I mean every detail.
Q: “You met with Ms. Emanuel in preparation for this meeting, correct?”
Q: “When exactly was that?”
A: “Two weeks ago.”
Q: “What documents did Ms. Emanuel show you?”
A: “She showed me my direct examination.”
Q: “What do you mean? A hard copy of the questions that you would be asked?”
Q: “Ms. Emanuel, I expect that you have no problem providing me with a copy of what you showed Lucy?”
Me: “Not at all.”
Boom! By Lucy testifying that I showed her my hard copy of my direct examination questions, opposing counsel is entitled to review my draft questions along with any notes I may have notated on that hard copy of Lucy’s direct testimony. What happens if I have privileged notes contained within my questions? My attorney notes contained within the questions are now discoverable by the other side.
[BTW: I would never show Lucy my actual list of questions, unless I fully anticipated giving my list to opposing counsel.]
But you can see the potential pitfalls. Anything discussed or shown to Lucy by your counsel will be discoverable by opposing counsel. What if your counsel, without thinking, tells Lucy that he or she thinks this is a weak case? Or tells Lucy that he or she hopes the other side doesn’t pick up on…..X?
Even if the attorney prepping Lucy states something disparaging about opposing counsel, or God forbid, the judge, those remarks are discoverable and Lucy must testify to those comments on the stand.
On one occasion, I actually had opposing counsel question my witness about our conversation during a 10 minute break, during which I was smart enough not to speak about the case. My witness answered, “We discussed that I think you are b$#@!” But counsel’s question was valid and allowable. Because just as easily, during the break, I could have said, if I were not worth my salt, “Lucy, I did not like how you answered that question. You need to say…..X.”
Judges do not look favorable on coached testimony.
As a health care provider, what measures can you take that if you are forced to call former employees as witnesses, you are poised for the best result?
1. Try to maintain a cordial relationship with former employees.
I know this can be difficult as every provider needs to terminate staff or has disgruntled employees. But, even if you are firing staff, try to do so in a professional, amicable manner. Explain that it is a business decision, not personal (regardless the reason). Give the soon-to-be-fired employee notice, such as 30 days, if possible. If you would recommend the employee to a colleague, let the employee know and to whom. These small steps can help your future in case of trial.
2. Re-hire the employee.
In my opinion, this avenue has an aura of attempted deceit, and I do not recommend this route unless you are re-hiring the employee in good faith. For example, if you truly did not want to fire the staff member and you genuinely could use that person back in your office, or, if, in the case of Lucy, she decides that she wants to come back to work of her own volition and you still have the need.
An employee is protected by attorney/client privilege, generally.
3. Be knowledgeable or hire a knowledgeable attorney.
If you are concerned that your attorney may disclose something otherwise confidential in witness prep of a former employee, have a lengthy discussion with your attorney prior to the preparation session. Sit in with your attorney during the prep of the former attorney.
Along the same lines as above, come to an understanding with your attorney which documents may be considered “hot docs” and essential to the case, and, which should not be discussed with a former employee at all.
4. Test the waters.
Prior to your attorney contacting Lucy, call Lucy yourself. Have a chat. Catch up. Ask Lucy whether she is willing to testify on your behalf. If Lucy starts cussing you out, you may want to think of alternative witnesses. If there are no alternative witnesses, you may want to discuss with your attorney whether an affidavit or deposition could substitute for Lucy’s testimony at trial.
5. Pay for Lucy’s time
There is nothing wrong or unethical about compensating Lucy for her trial preparation and appearance at trial. Obviously, this compensation is discoverable by opposing counsel and questions can be asked about the compensation situation. But I believe it is better to have a happy Lucy, who feels that her time is valuable, rather than an increasingly frustrated Lucy, as each second ticks along.
6. Think ahead
If you know you will be terminating an employee or if you receive notice that an employee is leaving, think about the most important aspects of his or her job and memorialize the procedures. For example, in the case of Lucy, ask Lucy to draft a memo to the file as to her procedures in billing Medicaid. Have her write which service notes are billed for which codes and the reasons in support and how she manually enters data into NCTracks. It may seem tedious, but these notes will be invaluable during any future litigation.
Along the same vein as above, if possible, have Lucy train Bill prior to her leaving. That way, if Lucy is an undesirable witness, Bill can testify that he follows the same protocol as Lucy because Lucy trained him and he follows her protocol.
Hopefully, these TIPS will be helpful to you in the future in the case of employees leaving your practice. Print off the blog and review it whenever an employee is leaving.