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CARDIOLOGIST AWARDED $366,000,000 IN PEER REVIEW MATTER
08/02/2007
As many of you may know, in 2004 a Dallas jury awarded a Dallas cardiologist over $366,000,000 in damages as a result of a summary suspension of the physician’s privileges to perform cardiac catheterizations and echocardiograms.
On March 27, 2006, the U. S. District Court for the Northern District of Texas, located in Dallas, Texas, issued a Memorandum of Opinion and an order addressing various issues which arose after the jury verdict. Ultimately, it appears that the Court may enter a judgment against the defendants on behalf of the cardiologist in excess of $70,000,000.
You may recall that Dr. Polliner began practicing at Presbyterian Hospital in Dallas. There were several cases he performed that allegedly raised red flags in the Hospital’s quality review process. In particular, the Court after considering various actions of both the Hospital and other physicians on the peer review group, determined that the defendants improperly and maliciously used the peer review process to summarily suspend Dr. Polliner’s privileges which caused damage to his cardiology practice.
The jury apparently did not like that when one of the doctors who had problems with Dr. Polliner testified at trial that he, in fact, did not have enough information to determine if Dr. Polliner posed a “present danger to patients” at the time he asked Dr. Polliner to agree to an abeyance. Furthermore, it was alleged that this physician threatened Dr. Polliner with the immediate suspension of all of his privileges if he refused to sign an abeyance letter. Additionally, Dr. Polliner was offered no other options that were less severe. Dr. Polliner was not permitted to consult an attorney. There was evidence at trial that the defendants would not discuss the patient cases with Dr. Polliner prior to his summary suspension, and additionally, Dr. Polliner was not given any opportunity to be heard or a hearing of any kind prior to summary suspension.
Typically, physicians would be entitled to both Texas statutory immunity and federal statutory immunity while conducting a peer review matter under both the state statutes and the Health Care Quality Improvement Act (HCQIA). Under the federal and state peer review immunity laws, generally, a professional review action must be taken in the reasonable belief that the action is in the furtherance of quality health care after reasonable effort has been made to obtain the facts of the matter, after adequate notice and a hearing, and in the reasonable belief that the action was warranted by facts known after such reasonable effort to obtain the facts and after a meeting with adequate notice and hearing. Under state law, there is a good-faith-belief and a without-malice standard. Both the Court and the jury ultimately found that the defendants were not entitled to immunity.
Additionally, the Court stated that there was a reference in the Hospital’s corporate bylaws related to due process, peer review, and the like, and ultimately thought that the Hospital’s corporate bylaws could pose a problem for the Hospital because, in essence, it allowed Dr. Polliner to claim that there was a contractual right to due process.
It appears now that the plaintiffs have elected the damages for which they will take, and that amounts to $70 million for the defamation claim.
Opportunities to Avoid This in the Future Include:
Due process is an important process.
The language of the medical staff bylaws as
well as the corporate bylaws should be
carefully consulted prior to summary su
pension.
A member of the medical staff should have
access to counsel prior to an important
decision.
The use of pressure to obtain a physician’s
agreement not to exercise certain privileges
should be carefully considered and in most
cases avoided. The Court held that the
letter of abeyance in this case was signed
under duress and constituted a summary
suspension.
Certainly, peer review protection is still alive and well in the State of Texas. It remains to be seen what will be done with this case when it comes under appellate review. Nevertheless, the Court has carefully considered the issues and, in fact, expressed some displeasure at the defense lawyers for post-jury arguments. While parts of this case may ultimately be reversed on appeal, right now this case is out there and emphasizes the problems that can be created by an individual physician who has been wronged in the peer review process. As such, whether you are a physician or a hospital, this case is important to watch. There are many lessons to be learned, particularly relating to medical staff bylaws, fair hearing procedures and even corporate bylaws.
To the extent you need or desire further review of these issues, we certainly would be happy to assist in any way we can.
Texas Legislative Update
08/02/2006
While much of the recent discussion of the 79th Texas Legislature Session has focused on educational reform, there are several provisions that relate to general business in the State of Texas. While a large number of bills were filed and ultimately hundreds passed, several in particular may be of interest to you. 1. Texas Franchise Tax
The current legislature session ended with no agreement to extend the current Texas franchise tax to partnerships. Even though several special sessions were called, there has been no final agreement on changes to the Texas franchise tax.
As a result, partnerships under Texas laws continue to remain unaffected (i.e. not subject to) by the Texas franchise tax. For this reason, many of our clients have converted their Limited Liability Companies or regular corporations, including S Corporations, to partnerships in order to avoid the Texas franchise tax. Whether you now have a C Corporation, S Corporation or a Limited Liability Company, a conversion to a Limited Partnership, avoids the unlimited liability that converting to a general partnership or certain other entities hold. Typically, once a corporation is converted, the newly formed Limited Partnership would elect to be taxed as a corporation for Federal Income Tax purposes. This results in a tax-free “F” reorganization, but would continue to be a Limited Partnership for purposes of Texas State Law. A Limited Liability Company which was previously taxed as a partnership would continue to be taxed as a partnership for Federal Income Tax purposes if it were converted.
If the converting entity is an S Corporation, special care has to be taken in this instance. Nevertheless, these conversions continue to be an effective way to avoid the franchise tax under Texas State Law. If you are currently paying franchise tax, now may be the time to convert as you will have an opportunity to potentially save two more years of franchise tax payments, before the legislature reconsiders whether or not to implement this tax on partnerships.
2. Workers’ Compensation Reform
The Texas legislature ultimately adopted H.B. 7, which is a comprehensive piece of legislation that reforms the Workers’ Compensation System by authorizing the use of Workers’ Compensation healthcare networks (Comp Networks) through amendments to the Texas Insurance Codes. This bill opens the door for various carriers to build their own Comp Networks or to contract with current or existing networks to leverage their managed care expertise to deliver healthcare services to the Texas injured employees.
There was significant structural changes as part of this bill. This includes abolishing the Texas Workers’ Compensation Commission and transferring these powers and duties to a newly created division of Workers’ Compensation within the Texas Department of Insurance. There are a number of transition rules currently being drafted and which are anticipated to go into effect in early 2006. The Commissioner of Workers’ Compensation and the Commissioner of Insurance are to adopt rules relating to the transfer of duties no later than December 1, 2005.
3. Small Business Group Life Insurance
Under current Texas Law, insurance carriers are prohibited from issuing a Group Life Insurance Policy that covers less than 10 employees.
Effective September 1, 2006 S.B.88 lowers the minimum number of employees required to 2 employees.
4. Health Savings Accounts (Creditor Exemption)
H.B. 330, now exempts health savings accounts from seizure for satisfaction of debts, which effectively provides the same creditor exempt status as IRA’s.
Other bills, too numerous to note, have been passed. If you would like further information on a particular bill and how it may affect your business, please do not hesitate to call. If you would like information regarding organizational structures for your business to minimize liability, protect your assets (including Estate Planning and Asset Protection) and minimize taxation or other corporate/business transaction or litigation matters, please let me hear from you.
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