The federal judge who sided with the Federal Trade Commission in the Poplar Bluff, Mo., antitrust case (Aug. 3, p. 3) couldn't resist slamming the agency's attorneys, who in her mind are no legal eagles.
"There is no doubt that the government agencies (the FTC and Missouri attorney general) in this case were `out-lawyered' by the defendants," U.S. District Judge Catherine Perry in St. Louis wrote in her 28-page decision granting the agencies a preliminary injunction to halt the merger of Lucy Lee Hospital, owned by Tenet Healthcare Corp., and Doctors Regional Medical Center.
Spearheading the losing legal team was Charles James, an antitrust attorney with Jones Day Reavis & Pogue in Washington and a former Department of Justice official. Poplar Bluff is believed to be the first hospital merger case lost by Jones Day, a firm that prides itself on its winning record.
Perry wrote in her opinion: "As the trier of fact and judge of equity, however, the court must carefully weigh the evidence, the law and the equities, and must, to the extent possible, disregard any differences in levels of skill and preparation by the attorneys. The court has done so here."
In other words, the defense's case had to be so weak that not even the most highly paid and gifted counsel could save it. Or the government's case was so strong that not even the most inept attorney could bungle it. You decide.
Getting in on the action. There's no shortage of law firms attempting to cash in on angry investors in the physician practice management industry.
Outliers found at least 10 law firms that have initiated shareholder class-action lawsuits against Tarrytown, N.Y.-based Advanced Health, its officers and directors, since the company's June 30 announcement of a $4 million second-quarter operating loss.
That compares with more than 20 similar claims pending against San Diego-based FPA Medical Management, which sought Chapter 11 bankruptcy protection in July.
Typically, plaintiffs allege that the companies withheld key financial information from investors.
But shareholder suits are a hit-or-miss proposition. Late last month, a federal judge in North Carolina dismissed a class-action lawsuit against Durham, N.C.-based Coastal Physician Group, which blazed a trail in 1996 as the first major PPM to suffer financial distress. A state court judge issued a similar ruling in favor of Coastal. That ruling is being appealed.
"It's extremely frustrating," says Mark Levine, an attorney with the New York law firm Stull, Stull & Brody, which filed the lawsuit against Coastal. His firm also was among the first to jump in with claims against FPA and Advanced Health.
Levine hopes the Coastal case doesn't bode poorly for other actions against PPMs. "Hopefully, each judge will look at claims on their own merits," he says.
One victory for the lawyers: Coastal settled a separate class-action suit earlier this year for $8.5 million. All but $1 million of the settlement was covered by the company's insurance. A Coastal spokesman says a key difference between the cases is when the plaintiffs bought stock.
Doing their homework. You can't fault the Watson Clinic in Lakeland, Fla., for skimping on due diligence.
Before signing a letter of intent to affiliate with PhyCor in May, top executives at the 180-physician clinic phoned physician leaders at every one of PhyCor's 61 affiliated clinics. They also sent a consultant to PhyCor headquarters in Nashville last month to peruse the physician practice management firm's books. In addition, nine top PhyCor executives including Chief Executive Officer Joe Hutts visited Lakeland to answer doctors' questions last month.
Financial and managerial problems at other leading PPM firms led the clinic to be "extremely cautious," says clinic Chairman and CEO Robert Chapman, M.D. "A lot of our concerns were allayed by the due diligence."
PhyCor will pay cash for the clinic's assets.
Still, Chapman isn't sure the deal will occur, because some doctors are nervous that PhyCor's recent plunge in the stock market will hinder its ability to provide capital.
Approval of 75% of the clinic's 132 partner physicians is required. Stay tuned; results of a vote are expected by the end of the month.
Now it's personal. The saga of former White House healthcare guru Ira Magaziner's five-year court case is still far from over. The case stems from his days as the head of Hillary Rodham Clinton's healthcare reform task force.
In the latest development, Magaziner wrote a letter to two House Republican leaders, Bill Archer of Texas, chairman of the Ways and Means Committee, and J. Dennis Hastert of Illinois, head of the GOP healthcare task force, asking them to stop criticizing him.
Last month, the two released a statement calling on Magaziner to drop his appeal of a 1997 ruling by U.S. District Court Judge Royce Lamberth and to resign from the Clinton administration.
Lamberth ruled that the administration and Magaziner intentionally tried to deceive the court about the nature of the healthcare reform task force (Dec. 22-29, 1997, p. 4). He also fined the administration nearly $300,000 for its actions. The suit was filed by a conservative physicians group that wanted the task force's 1993 meetings opened to the public. The Clinton administration argued that the task force was a government group and therefore not subject to open-meetings laws. Lamberth disagreed and criticized the administration for misleading the court.
Magaziner, who's now the White House Internet guru, continues to maintain his innocence and has appealed Lamberth's decision.
That didn't sit well with Archer and Hastert, who called on Magaziner to drop the appeal. They also want the administration to promise not to pay the fine using taxpayer money.
In his letter, Magaziner addressed each congressman personally and asked them to refrain from criticism until the appeal is decided, says a GOP aide familiar with the letter.
Quotable. "That bill's the worst thing to happen to privacy since Allen Funt."
-- Vice President Al Gore, commenting on provisions in the House Republican patient-protection bill that he said would allow more people to view patients' medical records.