Both suits challenge the TeamHealth contract based on Texas statute prohibiting the corporate practice of medicine. The Texas State Board of Medical Examiners defines that type of practice as a prohibition against “physicians from entering into partnerships, employee relationships, fee splitting, or other situations with nonphysicians where the physician's practice of medicine is in any way controlled or directed by or fees shared with a nonphysician,” but allows physicians to form independent contractor arrangements with non-physicians. The law, however, leaves it to the courts to determine whether an independent contractor situation exists.
In each case, AAEM held that TeamHealth and ACS Primary Care Physicians Southwest with which it contracted had violated that law. TeamHealth, ACS, and Memorial Hermann held that their contract was legal.
‘AAEM Kicked Out’
ACS, which is physician-owned, contracts with Memorial Hermann to provide emergency medicine services at eight of its hospitals, which in turn contracts with independent physicians to provide those services. “TeamHealth provides management services and assists with staffing physicians,” said Robert Joyner, TeamHealth's executive vice president and general counsel.
“AAEM is kicked out of the fight forever,” Mr. Joyner said. “The court said, ‘If you as AAEM have any threat to your rights or relationship with any defendants or allegations in the complaint, I will let you stay in. AAEM had no scintilla of evidence that they had any part of the allegations.”
The court ruled, he said, that the Humble case could go forward, and that the next phase will be for the Humble physicians to prove they were injured by Memorial Hermann choosing to contract with another group. “That process will probably take years,” he said.
In the suit, Humble Emergency Physicians said TeamHealth had used illegal, unfair, and deceptive business practices aimed at fee splitting with emergency physicians. “Memorial Hermann and TeamHealth entered into agreements whereby a phony and fraudulent bidding scheme would be employed which would ‘select’ TeamHealth as the winner to replace the existing emergency department [groups] at eight hospitals under the Memorial Healthcare System,” the suit said.
When Northeast Medical Center Hospital was acquired by Memorial Hermann in August 2006, Humble Emergency Physicians was invited to bid on the contract for all eight Memorial Hermann emergency departments, which it did, along with TeamHealth, Emergency Consultants, Inc., EmCare Inc., and Greater Texas Emergency Consultants. When TeamHealth won the contract, the suit alleged, “ACS was acquired in order to provide a shell to permit TeamHealth, Inc., and its division, TeamHealth West, to illegally employ physicians, acquire and hold emergency services and physician contracts, … and to split professional fees of physicians.”
The suit also alleged that Memorial Hermann “stacked the deck, selected an illegal vendor with which to do business, and adopted illegal business practices in the bidding selection.” It also said TeamHealth as a for-profit business “is statutorily prohibited from practicing medicine in Texas.”
Business Torts Continue
Robert McNamara, MD, a past president of AAEM, said although AAEM was dismissed from the suit, the business torts continue. “It means that we have to go forward with a full suit, excluding AAEM's claims in the matter. AAEM is out of it; we are not surprised,” he said.
But Larry Weiss, MD, JD, the current president of AAEM, said the academy is “prepared” to go to the Texas Court of Appeals. “Our main claim [that the corporate practice of medicine has been violated] is headed to trial” in the Humble group's suit.
He said AAEM was likely excluded because the judge did not recognize its status with the groups involved in the suit. “We are confident that when we get to the Court of Appeals, they will recognize our association,” Dr. Weiss said. “We feel we should be a party to the suit. In one case, the Humble Emergency Physicians that lost the contract at one of the [Memorial] Hermann hospitals filed a suit essentially claiming that the whole bidding process was unfair because the contract was awarded to an illegal entity.”
He said TeamHealth is an illegal entity in this case because of statutes prohibiting the corporate practice of medicine. “No owners of a professional practice can be laypeople,” he said. “It's black and white. I'm sure that's the claim they [TeamHealth] don't want to reach a courtroom.”
Dr. Weiss said AAEM also plans to appeal dismissal of the other case involving Crystal Cassidy, MD, and Joseph Ybarra, MD. Dr. Cassidy, who had worked at a Memorial Hermann hospital, filed suit because she knew she would lose her job if she didn't sign with TeamHealth, Dr. Weiss said. “If she did sign on, she would run the risk of losing her license because she would be practicing medicine with an illegal entity,” he added.
Dr. Weiss said the Texas Medical Association originally sent AAEM and its attorneys four cases in which such action had been taken against physicians. Dr. Ybarra did sign a contract with TeamHealth, Dr. Weiss said, adding that Dr. Ybarra realized that he had signed a contract with an “illegal entity.”
The judge ruled that neither Dr. Cassidy, who didn't sign a contract with TeamHealth, and Dr. Ybarra, who is no longer working at his former ED, had no standing in the case. “The judge said her court didn't have jurisdiction to hear the case. She didn't provide a reason. In Texas, judges don't have to do that. None of us knows why she didn't have jurisdiction. If she agreed with TeamHealth's argument, it means that TeamHealth is untouchable, and even though they are violating the law, she is saying that no one has standing. We do not believe that decision will stand up on appeal. Dr. Ybarra has standing because he essentially lost his job,” Dr. Weiss said.
He added that Humble Emergency Physicians is in discovery and heading toward trial. “Both cases depend on the corporate practice of medicine claim. That is 99 percent of what's important,” he said.
Lynn Massingale, MD, the founder and chief executive officer of TeamHealth, said he didn't understand why AAEM believes TeamHealth is guilty of violating any corporate practice statute in Texas. “We are spending a lot of time and money on this issue when I think it is pretty clear that we are not engaged in the corporate practice of medicine. This is not the first time TeamHealth has had contracts in Texas. I have no knowledge as to why it has generated this kind of reaction,” he said.© 2008 Lippincott Williams & Wilkins, Inc.