Sun Healthcare Group has filed a defamation lawsuit against a union representing workers in eight of its long-term-care facilities in Connecticut.
Sun alleges in the suit that the New England Health Care Employees Union District 1199 published false and misleading statements in a paid advertisement in The Wall Street Journal.
The same day Sun filed the suit, the union announced that 1,100 of its members working in Sun-managed nursing homes in Connecticut had voted to go on strike unless they reach a contract agreement by Oct. 5. Sun filed the lawsuit in U.S. District Court in Hartford, Conn., Sept. 25.
Sun's stock price fell more than a $1 to close at $13.25 in New York Stock Exchange trading on Sept. 21, the day the ad appeared. That was equivalent to $90 million in lost market value, the company said in the complaint.
"We regret that District 1199 has employed this inflammatory tactic to divert attention" from the contract negotiations, said Mark Wimer, president of Sunrise Healthcare Corp., in a written statement. Sunrise is the Sun long-term-care subsidiary involved in the contract talks.
A Sun spokeswoman declined to comment further on the lawsuit.
Titled "The Dark Side of Sun," the ad states that the company is under investigation by the FBI for "allegedly filing fraudulent Medicare claims, including intentionally billing patients for individual treatment when they receive group therapy."
The ad refers to an ongoing federal fraud investigation into Sundance Rehabilitation Corp., Sun's therapy division, which the company disclosed on June 16 (Sept. 4, p. 28).
The language of the ad "would cause a reasonable person to believe that (Sun) is engaged in illegal conduct," Sun said in the suit.
"This lawsuit is frivolous and groundless," union spokesman Paul Kumar said. "The intent of the suit is to have a chilling effect on other potential whistleblowers who have had troubling experiences. If the intent is to chill us, it's badly misguided."
Last November, a month before the investigation began, a former Sundance clinical director informed an agent of HHS' inspector general's office that Sun had issued a verbal "policy to misrepresent group therapy sessions as individual therapy sessions," according to an FBI affidavit.
Kumar said the union ran the ad because members in Connecticut "have called to our attention a set of practices that they suspect are illicit and match concerns raised in the affidavit."
The ad also calls for readers to report irregularities found in bills from Sun to a federal anti-fraud hotline.
Sun is demanding that the union retract the statements in a second advertisement.
"We have no intention of retracting the ad," said Kumar. He said the union intends to take out similar ads in the future.
In the labor dispute in Connecticut, Sunrise's proposals include an across-the-board $1-per-hour wage cut, a five-year wage freeze, cuts of up to $3 per hour for new hires and elimination of benefits for part-time employees.
The two parties also are fighting over whether Sunrise or the union will provide the workers' healthcare benefits package.
The union has demanded improvements in staffing, safety, training and equipment. It has asked for an unspecified wage increase, progress toward the union rate for new members and a guarantee of union rights.