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Breaking News: Texas Court Refuses AAEM Suit against TeamHealth

SoRelle, Ruth MPH

doi: 10.1097/01.EEM.0000387708.57244.70
Breaking News
Dr. Lynn Massingale

Dr. Lynn Massingale

Dr. Howard Blumstein

Dr. Howard Blumstein

The Texas Supreme Court refused to review a corporate practice of medicine suit filed by two Texas emergency physicians and the American Academy of Emergency Physicians and its Texas chapter against TeamHealth, Memorial Health Care Systems, and two physician groups affiliated with TeamHealth. Both sides claimed a victory — of sorts.

A state district court ruled that the physicians and professional groups had no standing in the matter, and the state appeals court affirmed that decision. The issue, according to the suit filed by AAEM and its co-plaintiffs, was that TeamHealth and its affiliates had violated Texas statutes against the corporate practice of medicine because it is a lay corporation that “owns and operates medical practices at [Memorial] Hermann Hospitals,” according to a news release from AAEM.

The suit challenged a contract under which physician-owned ACS Primary Care Physicians provides emergency medicine services at eight Memorial Hermann hospitals. ACS contracts with private physicians to provide the services at the hospitals, and TeamHealth provides management services and assists with physician staffing, according to TeamHealth's general counsel, who described the agreements in a prior interview. (

The suit split two major health care groups in Texas. The Texas Medical Association filed an amicus brief with the Appeals Court on AAEM's behalf, saying that if the trial court opinion were upheld, “it effectively removed much of the teeth against the prohibition of the corporate practice of medicine” because violations could not be challenged in civil court.

The Texas Hospital Association, meanwhile, filed an amicus brief for TeamHealth, noting that hospitals have to provide or arrange for the delivery of health care services to patients and that this often involves contracts with physician management groups that contract with or employ physicians. To allow court challenges of that system would cause confusion and uncertainty in staffing hospitals, THA said, adding that physicians have other avenues through which they can address their concerns about contracts, including the state medical board and the Texas Attorney General.

In a letter to the company's physician leaders, Lynn Massingale, MD, the executive chairman of Tennessee-based TeamHealth wrote: “The legal structures whereby TeamHealth-affiliated entities employ or contract with physicians are no different than those structures used by countless hospitals, small groups, and other large organizations. Given the prevalence of this legal structure combined with the myriad issues threatening emergency medicine today — primarily access, reimbursement, and healthcare reform — it is unfortunate that such a large amount of time, energy, and money was spent by all parties on such an ill-fated issue.”

Dr. Massingale said the decision was a relief, and that he was glad his organization no longer had to fight the suit. He said the fact that his organization contracts with physicians for their services is nothing new. “At this time, experts estimate that 25 to 35 percent of all physicians are employees or independent contractors of someone, and that number is growing,” Dr. Massingale said. “Ours is not a unique model. Hospitals directly employ a lot of doctors.”

He agreed that corporations should not practice medicine, adding that he believes TeamHealth does not violate those laws.

“We believe our model is working for doctors and hospitals. There has been a dramatic improvement in performance at Memorial Hermann on our watch,” he said, such as decreases in patients leaving without treatment and other operational metrics.

Howard Blumstein, MD, the president of AAEM, said his group chose to file the suit in Texas where there was a strong law against the corporate practice of medicine, a law that had been upheld in previous suits. “The downside is that Texas is a very conservative and pro-business state,” he said. “We knew that going in. We felt that the circumstances of the lawsuits were such that we had a good fighting chance.

Dr. Blumstein said AAEM didn't anticipate some of the legal technical issues, which he said were the basis for dismissal of the suits, and then the appellate courts refused to hear their appeal. “I need to stress that the courts never made a judgment about the core issues of the filing,” he said.

AAEM still believes, he said, that TeamHealth is operating in violation of the state's prohibition on the corporate practice of medicine. “They [the courts] never addressed that. If we could have gotten to the point where they could have addressed that issue, we would have won hands down,” said Dr. Blumstein. “There is nothing prohibiting us from filing a complaint the next time another issue pops up in another venue. We are not giving up on trying to address corporations practicing medicine. We believe that the doctors working for them are also violating the law, and that puts them in legal jeopardy.”

He said he knows TeamHealth is claiming victory in the matter, “but that is just not the case,” he said, noting that the courts suggested the matter is better addressed by the Texas Medical Board. “But they have jurisdiction over physicians and not companies,” he said.

Dr. Blumstein said AAEM wants to avoid a situation where doctors end up being disciplined because they enter into “this illegal contractual relationship. The last thing we want is to complain against corporations, and have the medical board turn around and discipline the doctors.”

Dr. Massingale said he knows some AAEM leaders “don't think TeamHealth ought to exist. But there are a lot of opportunities to work in emergency medicine. We believe we are a secure place for doctors to be, and we've proven that over 30 years. We believe we deliver quality care. As long as we focus on that, we will deal with litigation as it comes.”

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