Breach-of-contract lawsuits are stacking up against NeoDyme Technologies Corp., a College Station, Texas-based healthcare equipment maintenance company. At least four such lawsuits have been filed during the past six months by hospitals, which hired NeoDyme to maintain their equipment, or by equipment manufacturers themselves, which relied on NeoDyme to keep their products working properly.
In general, the lawsuits allege that NeoDyme didn't pay equipment and maintenance vendors as promised, leaving hospitals and manufacturers to arrange and pay for maintenance that they already had paid NeoDyme to handle.
One such lawsuit was filed by Baptist Health System in San Antonio. "As the upkeep of its equipment was essential to its business and to the lives and health of its patients, Baptist was forced to pay many of the invoices of the material providers and the service providers that NeoDyme was required to pay under contract," according to the suit.
The five-hospital not-for-profit system sued NeoDyme in March in U.S. District Court in San Antonio. The trial is scheduled to start Jan. 14, 2002.
NeoDyme officials declined to comment on the lawsuits other than to say the company denies the allegations. Officials also declined to provide any information about the company itself. According to its Web site, NeoDyme was established in 1997 by Glenn Collins, has contracts with more than 200 healthcare facilities and employs 170 people.
NeoDyme essentially acts as a middleman between hospitals and equipment vendors. Hospitals pay NeoDyme to assume responsibility for the management and maintenance of capital equipment-which can include everything from diagnostic imaging machines to computers and telephones. NeoDyme, in turn, acts on behalf of the hospital to negotiate new maintenance contracts with vendors and ensure the vendors are paid for their services.
Some hospitals, however, contend that NeoDyme's promised services never materialized, and the hospitals paid equipment vendors for maintenance NeoDyme was contractually responsible to provide.
For example, according to the Baptist lawsuit, NeoDyme agreed to manage Baptist's capital equipment in a three-year, $9.2 million contract signed in August 1998. In connection with the contract, the lawsuit said, NeoDyme assured Baptist that it would reduce equipment maintenance costs by 30%, translating to $1 million in annual savings.
After paying NeoDyme more than $2.8 million, Baptist terminated the contract on Oct. 1, 1999, saying NeoDyme failed to make payments to third-party vendors and misrepresented its services to Baptist, according to the lawsuit. And, according to Baptist, NeoDyme owes the system $950,000 for payments Baptist had to make to vendors for maintenance that was supposed to be covered under contract.
In another lawsuit, Northern Michigan Hospital in Petoskey is seeking more than $300,000 in damages from NeoDyme, alleging business practices similar to those described by other litigants.
"The bulk of that amount reflects payments (Northern Michigan) had to make to the third-party vendors that should have been the responsibility of NeoDyme," said Gary Mantese, Northern Michigan's lawyer from the Troy, Mich.-based law firm Mantese Miller and Shea.
Northern Michigan filed its suit in May in Emmet County (Mich.) Circuit Court in Petoskey. No trial date has been set, but a status hearing is scheduled for Sept. 24.
Although it never went to court, 250-bed St. Joseph Regional Health Center in Bryan, Texas, also claims NeoDyme failed to make payments to vendors as promised.
"(NeoDyme) put us in jeopardy risk-management-wise because our vendors were refusing to come in because they weren't being paid," said Nick Cram, St. Joseph's director of clinical engineering and telecommunications.
In May, St. Joseph settled its contract dispute without going to court, Cram said. He called it an "amicable separation" in which NeoDyme reduced the amount of its final invoice to St. Joseph.
At least two medical equipment vendors-Medical Resources in Hackensack, N.J., and Stryker Corp. in Kalamazoo, Mich.-also have litigation pending against NeoDyme in federal courts.