A Waterloo, Iowa physician group suing a local not-for-profit hospital last week consented to a request by the defendant, 281-bed Covenant Medical Center, for more time to respond to the allegations filed earlier this month in a state civil lawsuit.
Cedar Valley Medical Specialists, a 53-physician practice representing 20 specialties, alleged in the lawsuit against Covenant Medical, also of Waterloo, that the defendants conspired to compete unfairly, violate state trademark laws and drive the physicians out of business. The lawsuit was filed in Black Hawk County (Iowa) District Court against Covenant, part of the three-hospital Covenant Health System; its president and chief executive officer, Jack Dusenbery; and its parent company, 13-hospital Wheaton (Ill.) Franciscan Services.
Cedar Valley is seeking a judge's order stopping Covenant from allegedly overpaying its doctors, from barring Cedar Valley members from its medical staff and from using the Cedar Valley Medical name.
Cedar Valley CEO Gil Irey said the group practice asked Covenant not to use the name. "They would not back down on that and we felt our only recourse was through the legal system after we'd tried everything else."
The 10-year-old Cedar Valley Medical Specialists group said in July that Covenant illegally named its 19-acre planned medical development Greater Cedar Valley Medical Center, infringing on its trademark, confusing consumers and trading on its good name and reputation. "Defendants, individually and collectively, have expressly stated that it is their goal to drive plaintiff Cedar Valley Medical Specialists out of business ... capturing a monopoly on the provision of healthcare services in the Cedar Valley community," the lawsuit alleges. The physicians allege that Covenant upcoded charges as part of its scheme to drive them out of business.
The relationship between Covenant and a handful of highly paid physician employees drew the attention of the HHS' inspector general in August; it faxed subpoenas to two Iowa insurers. The inspector general confirmed that it delivered subpoenas, but refused to disclose the nature of the inquiry. Sources close to the story said the government is seeking information about compensation paid to several hospital-employed doctors, two of whom earned more than $2 million apiece from the hospital (Sept. 5, 2005, p. 17). Sources told Modern Healthcare that the investigation focused on whether Covenant paid some physicians in excess of fair market value.
Covenant Vice President of Business Development Chris Hyers said the system's policy is to not respond to pending litigation and declined comment. In September, Hyers said the physicians' high earnings reflected regional shortages of specialists and long hours worked. The state judge granted Covenant until Dec. 2 to respond to the physicians' lawsuit.