What began as an employment dispute between a radiology physician practice and its founding doctor has mushroomed into a full-blown investigation of the dominant hospital in Jackson, Tenn., by the state attorney general's office.
Attorney General Paul Summers cited the ongoing investigation in recently seeking to unseal documents that are part of two lawsuits C. Vinson Alexander Jr., M.D., filed against Jackson Radiology Associates and its shareholding doctors; James Moss, president and chief executive officer of six-hospital West Tennessee Healthcare system; and West Tennessee's flagship, 697-bed Jackson-Madison County General Hospital.
The lawsuits, filed in May 2001 in Madison County Circuit Court, alleged that Alexander was fired from the practice because he refused to raise its fees as much as the other physicians wanted. Exhibits filed by Alexander stated that fees were as much as doubled within eight months of his termination in June 1999. In the lawsuit filed against Jackson Radiology, Alexander estimates that each of the shareholding physicians earned $1.1 million in calendar 1999 as a result of the fee increases. The practice has an exclusive contract with the hospital for radiology services, according to the lawsuits.
Jackson General's joint annual report to the Tennessee Health Department shows it earned nearly $1.8 million on operations and $19.3 million overall in the fiscal year ended June 30, 2000, the latest year for which figures were available. Revenue for the public hospital was $253.3 million.
An attorney for the practice and its shareholders denied any connection between Alexander's termination and the fee increases. The hospital neither denied nor admitted the charges; in a statement, it said it regrets being dragged into a dispute between Alexander and the practice.
The case illustrates how state attorneys general are cracking down on providers' anticompetitive practices, with states from California to Connecticut scrutinizing mergers and acquisitions, contract negotiations between providers and health plans, and collaborative agreements between providers (Feb. 11, p. 18).
In his written request to unseal the documents, Summers told the Tennessee Supreme Court that depositions and exhibits in the Alexander lawsuits "may be crucial to an investigation" by his office into the relationship between Jackson General and Jackson Radiology Associates for possible violations of the Tennessee Consumer Protection Act and the Sherman Act, the federal antitrust law. Summers wrote that his office also is probing whether the hospital violated its corporation charter or the state's not-for-profit corporation law.
Since a Madison County judge made almost all of the documents public last month, Summers withdrew his request.
Nancy Jones, a healthcare attorney with Waller Lansden Dortch & Davis, Nashville, and a former federal prosecutor, said the attorney general appears to be investigating whether the hospital had an arrangement to steer patients to Jackson Radiology. Such an arrangement, she said, would violate the Sherman Act. Jones is not involved in the case and reviewed the attorney general's brief at Modern Healthcare's request.
"If you do an analysis under the federal healthcare law, (a prosecutor) might look to see if there are illegal kickbacks," Jones said. "If the hospital refers patients and pays more than fair market value, it might be perceived as a federal kickback."
Jones also said, "If they were charging higher than fair market value to the patients, then that would implicate the Tennessee Consumer Protection Act, because that statute basically requires that you don't gouge, or charge more than something is worth."
Summers pointed to Jackson General's status as a public hospital whose board members are chosen by elected officials in the city of Jackson and the county of Madison. Summers argued that, under Tennessee law, such hospitals are prohibited from signing contracts with providers "who receive an impermissible private benefit," such as the alleged windfall in fees Alexander said his former partners earned after his termination. Summers also wrote that he has the authority to review the hospital's conduct under the state's not-for-profit law.
In the original lawsuits, which have since been combined into one case in Madison County Circuit Court, Alexander stated that he was fired from the practice in June 1999 because, as its president, he resisted attempts to raise fees. The hospital revoked Alexander's privileges to practice medicine at the hospital, according to the lawsuits.
Larry Butler, a Jackson attorney representing Jackson Radiology and its shareholders, said there is no connection between Alexander's termination and subsequent increases in fees. Butler said the defendants fired Alexander because he allegedly was abusive to his fellow physicians and hospital staff members, including his getting into a physical altercation with Jim Ellis, M.D., a member of the practice, in April 1999 at Jackson General. The incident was not documented but was witnessed by at least two people, Butler said. The other physicians offered Alexander a chance to resign, and when he declined, he was fired on June 25, 1999, Butler said.
C. Barry Ward, a Memphis attorney representing Alexander, said Ellis provoked Alexander and Ellis took a central role in raising the practice's fees. Ward added that there is no evidence that other members of the practice ever confronted Alexander, either in writing or in a meeting, about his alleged abusive behavior.
In a prepared statement, Jan Boud, West Tennessee Healthcare's executive director of marketing and public relations, said, "The original lawsuit arose out of irreconcilable differences between Dr. Alexander and his partners at Jackson Radiology Associates. We regret that the hospital and its leadership were brought into the matter at a later date." Moss, West Tennessee's chief, has been advised by his attorney not to discuss the case, Boud said.
Alexander seeks at least $21 million in damages, including $9 million in punitive damages against Ellis, from the practice and its shareholders, as well as attorney fees and court costs, according to the lawsuit.