Health Care Lawyer Blog

A nursing home’s lawsuit against a long-term care pharmacy provider for failure to provide prescriptions as promised was dismissed by the Michigan Court of Appeals on the grounds that plaintiff’s claims against defendant were grounded in tort law, and not contract law. In Woodward Nursing Home, Inc. v. Medical Arts, Inc., (unpublished opinion issued June 25, 2009), Plaintiff entered into a written contract with Defendant whereby Defendant agreed to provide prescription medications and supplies for Plaintiff’s nursing home residents. Plaintiff alleged that it sent Defendant a prescription order on August 11, 2004, but that Defendant failed to process or deliver the prescription for more than twelve days and then lied about their reasons for nonperformance.

Plaintiff then filed suit in Wayne County Circuit Court, claiming that Defendant’s delay in filling the prescriptions caused it to lose a valuable Medicaid program certification. As a result, Plaintiff was forced to cease operating as a nursing home, was charged with regulatory sanctions, and had its provider agreement with the Michigan Medicaid program terminated.

Plaintiff’s original complaint against Defendant alleged breach of contract, negligence, malpractice and fraud. After Defendant’s Motion for Summary Disposition was denied, Defendants appealed the case to the Michigan Court of Appeals, which held that Plaintiff’s contract claim warranted dismissal because Plaintiff had failed to provide copies of the pertinent contracts pursuant to MCR 2.113(F). The COA further held that Plaintiff should have filed a notice of intent and affidavit of merit with respect to its medical malpractice claims.

Continue reading "Nursing Home's Claim Against Pharmacy for Non-Performance Dismissed; Michigan COA Holds Damages Stemmed From Tort, Not Breach of Contract" »

I am back from a pleasant hiatus. My children, both living out of town, blessed us with two new grandchildren this summer--a grand-daughter and a grandson--and the last few months have been occupied with enjoyable travel.

The U. S. District Court for the Middle District of Georgia was more active than I was, however, when it recently held that a physician who unsuccessfully sued the hospital where he worked, and some other physicians on staff, must pay the defendants' attorneys fees and costs because he had signed an "Applicant's Consent and Release" when he was applying for medical staff privileges at the defendant hospital. The amount to be paid is yet to be determined but could be substantial because there were 3 defendants seeking fees, including two physicians and their group professional corporation.

In the case of Adeduntan v. Hospital Auth. of Clark City, No.3:04-CV-065 (CDL)(M.D. Ga. July 31, 2008), arising out of the medical peer review of plaintiff's performance during an emergency abdominal aortic aneuryism procedure, the Court found that "...[Dr. Adeduntan] was required to execute the form in order to apply for mediacal staff appointment and privileges at Athens Regional and that [his] signature appears on multiple copies."

The language of the document provided:

"If...I [Dr. Azeez Adeduntan] institute legal action against the Hospital [Athens Regional] and/or its Medical Staff members and do not prevail, I agree to reimburse the Hospital and any Medical Staff members named in the action for any and all costs incurred in defending the legal action, including reasonable attorneys fees."

Recognizing that credentialing litigation is on the rise because of numerous decisions allowing such disputes to move into the courts, and most American courts cannot impose attorney fee obligations on losing litigants, in the absence of a contractual requirement, I would expect that most staff privilege applications would be promptly amended to include such language.

Depending on the applicant's specialty, and state law, the language may or may not be negotiable. A good healthcare attorney, however, is essential to review the application, research the issue and attempt to obtain any modifications. As always, even the most innocuously appearing document--a simple "application" may contain time-bombs that lay dormant for many years.

In May, I commented upon the oral arguments presented to the Michigan Supreme Court in the appeal from the Michigan Court of Appeals decision in the case of Miller v Allstate.

This case raised the issue of whether a physical therapy clinic, incorporated under the Michigan Business Corporation Act, was lawfully rendering services entitling it to reimbursement from its auto-accident injured patient's No-fault insurance carrier.

Allstate Insurance Company argued that a physical therapy clinic-a medical service provider-needed to incorporate under Michigan's Professional Service Corporation Act in order to lawfully render services under Michigan's No-Fault auto-insurance act, even though the physical therapist actually performing the services was a lawfully licensed physical therapist.

The lower courts permitted the claim and the Supreme Court issued its opinion affirming those decisions on July 2, 2008, although not for the same reason the lower courts did.

Essentially, the Supreme Court held that once a corporation, of any sort, files its Articles of Incorporation with the State, it is conclusively determined that the incorporation is lawful--unless the state Attorney General successfully challenges that incorporation in a court proceeding. this conclusion was based on statutory language and the Supreme Court's interpretation of long-standing Michigan law.

I believe the result in this case is correct (although one of the two concurring Justices, Elizabeth Weaver, believes that the Court's tortured logic in reaching the decision was incorrect because of a long-standing battle she has on the Court's Standing decisional process (a topic for some law professor's blog some day))because, as the Court stated, allowing challenges to every corporation in every suit brought by a corporation would affect the very stability of the economy. Every patient would have to verify compliance by every provider with every corporate statute before accepting treatment and whether payment would be made would depend on the creativity of every insurance lawyer in every case when payment decisions were made.

For once, the Supreme Court majority seems to have gotten it right.

Let's see if the Michigan Legislature and the Department of Labor and Economic Growth follow suit and picks up on this decision and clarifies the incorporation requirements as Michael Hamblin of our firm has described on his blog, Michigan Business Lawyer, for peripheral medical and other licensed providers.

Until they do, however, every licensed practitioner and other individuals in Michigan must immediately consult competent health care business lawyers such as my firm, to review their corporate status and to consider re-incorporation as Professional Corporations if permitted and advisable.

HAVE A HAPPY AND SAFE 4TH OF JULY HOLIDAY---AND GOD BLESS AND KEEP OUR TROOPS AND THEIR FAMILIES. LET'S BRING THEM HOME SOON!!!

The Michigan Supreme Court recently heard oral arguments in an important case involving the proper incorporation of health care corporations that provide licensed services to the public. The case is Miller v. Allstate. The major issue Miller is whether those providing a service requiring a license must incorporate under the Michigan Professional Services Corporation Act (PSCA) instead of under the Michigan Business Corporation Act (BCA). The Michigan Supreme Court is reviewing the decision of the Michigan Court of Appeals ruled, which ruled that under the language of the PSCA, any licensed professional (including a health care professional) who incorporates must do so under the PSCA and not the BCA.

The Miller decision by the Michigan Court of Appeals has caused quite a stir in the Michigan legal and business communities. It has caught everyone off guard, including the State of Michigan. The State of Michigan has taken the formal position that the Miller decision goes contrary to the plain language and purposes of the business incorporation acts in Michigan, as well as the accepted interpretation of those acts by everyone, including the Michigan Attorney General and the State agency that administers corporate filings.

To understand why the Miller decision has caused such an uproar, it is necessary to understand the history of incorporating professional service corporations in Michigan. Traditionally, only members of the “learned professions” such as doctors and lawyers have been required to incorporate under the PSCA. In the past, any other kind of business that provided professional or personal services had the choice of incorporating under the PSCA or the BCA. This was true even if a license was required to provide the services in question. The Miller decision has changed all of this.

The Miller case concerns a patient who was referred to a physical therapy clinic for treatments. Licensed physical therapists administered the treatments pursuant to medical prescriptions that the patient’s doctor’s properly issued. The physical therapy company was incorporated under the BCA. When Allstate was billed for the patient’s treatments, it refused to pay, because the physical therapy company was supposedly improperly incorporated under the BCA instead of the PSCA.

Allstate claimed that the physical therapy company should have incorporated under the PSCA since its business involves providing professional services that require a license. Allstate took the position that that the physical therapy company’s incorporation was defective because it was incorporated under the BCA instead of the PSCA. Allstate claimed that this alleged technical deficiency gave it the legal right to refuse the charges from the physical Therapy company.

There are a number of interesting and important legal issues involved in the Miller case. But, the issue of which statute professionals should incorporate their businesses under has received the most press. This issue also probably has the most potential to disrupt the businesses that have been incorporated under the BCA and not the PSCA. It appears that a ruling by the Michigan Supreme Court in favor of Allstate point could cause Michigan businesses that incorporated under the BCA and provide licensed services significant difficulties. Some of these difficulties might include difficulty collecting receivables and possible personal shareholder liability for company obligations.

A recent pattern of expert witness intimidation has emerged across the country. Some physicians encouraged by ambitious (to say the least) attorneys, and some professional organizations, are apparently concerned that expert testimony for plaintiffs in medical malpractice cases poses a "threat" to the administration of justice.

John Vail of the American Association of Justice's Center for Constitutional Justice believes that the fury of malpractice defendant physicians, funneled towards colleagues who testify that malpractice did indeed occur, and catalyzed by insurance company pressure to curtail malpractice litigation, has produced new weapons in the war against malpractice plaintiffs: peer review of medical expert testimony and scrutiny of that testimony by licensure boards.

Some states have defined such testimony as the "practice of medicine" and have permitted licensure boards to oversee and consider the testimony in licensing actions. These actions threaten the free flow of information to the courts and chill speech protected by the First Amendment. Wisely, according to Mr. Vail, courts are acting to dampen the threat.

However, credentialing committees and aggressive peer review may still be expected to consider such testimony as long as the AMA and other professional organizations and societies continue to campaign for medical liability "reform" and rail against "trial lawyers."

I am firmly against frivolous lawsuits. When I was chair person of the State Bar of Michigan Standing Committee on Professionalism, our committee addressed this issue, improper advertising by lawyers and lawyer competency, but believed, correctly, that our present Michigan Rules of Professional Conduct, various statutes-, the State Bar of Michigan-and an active Court System--adequately deals with these concerns.

However, the existing court system and vigilant defense lawyers (who also provide services in "trials" and are properly referred to as "trial lawyers" too) have many tools at their disposal to deal with such actions. On the other hand, I believe that physicians and other medical professionals should be able, without fear of retaliation, to support activity designed to compensate victims of malpractice and incompetence and to improve the quality of health care in this country (where the Institute of Medicine has reported that over 98,000 persons die annually from medical errors).

The vast majority of physicians diligently observe the Hippocratic Oath every day in their practices and, of course, care about the quality of services they provide to their patients. Those who don't should be dealt with firmly.

Any physician threatened with adverse or retaliatory consequences for testifying truthfully and in good-faith in a malpractice action should seek the representation of a competent health care lawyer immediately.