Seven CaroMont Health-employed doctors sued a medical group owned by the health system for allegedly using unenforceable noncompete agreements to prevent them from joining Tryon Medical Partners.
Tryon Medical, an independent physician group in Charlotte, N.C. that had to fight a similar battle with Atrium Health to get out of its restrictive covenants, is trying to hire the primary-care doctors to form its ninth clinic in the region. It would also establish a new specialty for Tryon, which now has internal medicine doctors.
Gastonia, N.C.-based CaroMont claimed that working with Tryon in Gaston County would violate their employment agreements, which prevent the doctors from seeing patients within 20 miles of their current South Pint Family Practice location for two years. CaroMont also argued Tryon Medical Partners is an affiliate of Tryon Endoscopy Center, an outpatient facility with four gastrointestinal endoscopy rooms, which violates the provision stating a physician "shall not assist a competing system," defined as "any hospital, healthcare system or licensed healthcare entity or their affiliates."
Tryon and the physicians said that this interpretation is overly broad. The new clinic would be 23 miles away and Tryon Medical nor the endoscopy center constitute an affiliate of a hospital, healthcare system or other licensed healthcare entity, they claim. Also, the prohibition against any operation of a hospital, healthcare system or other licensed healthcare entity or their affiliates—which would include the doctors acting only as business managers or administrators—is broader than reasonably necessary to protect any legitimate business interests of CaroMont, according to the civil lawsuit filed Thursday in Gaston County Superior Court.
"This is all about referrals," Tryon CEO Dale Owen said. "They want to own the physicians so they can steer referrals so they make more money, rather than allowing the physicians to send patients to the best physicians no matter which system they are in."
The doctors treat about 20,000 patients; Tryon works with more than 110,000.
CaroMont said in a statement that it presented several fair and reasonable options that would allow the physicians to join Tryon, but negotiations were declined.
"We were surprised and disappointed to learn of this filing as we have worked in earnest for several weeks to try to resolve the issue," the system said. "Despite today's news, we remain committed to finding a solution that is best for all parties involved, most importantly, our patients."
In initial meetings, Owen said his group tried to meet on collegial terms, but things soured when CaroMont came back with a "ridiculous" settlement, which prevented the doctors from soliciting people CaroMont was even interested in hiring for five years, the doctors and Tryon not opposing their certificate of need applications, and agreeing that the doctors must maintain privileges in CaroMont Health hospitals for five years.
All of that was on top of a payment of $1.8 million, Tryon said in a statement.
"It was so overbearing that there was nothing left to do other than file suit," Owen said. "The restrictive covenants are so broad and unenforceable that they hope the doctors back down because it takes guts and money to solve the problem—well we have both."
Owen added that he is incredibly impressed with ethical and forthright doctors who always put the patient first.
The contentious relationship between health systems and independent physician groups sets the stage for an ongoing power struggle. More doctors will likely leave health systems for independent groups, which claim that their model, untethered from the hospital hub, offers more transparency and flexibility.
Proponents of the moves say that the presence of physician groups not owned by hospitals creates a countervailing force to the power of a health system and improves care. And the stakes are growing ever larger as outpatient care takes on a greater share of revenue in the industry.
The power struggle draws a line in the sand as two what the two types of entities are about, Owen said. Meanwhile, the healthcare industry accounts for nearly a fifth of the U.S. gross domestic product and it does not rank among the top 50 countries in outcomes, he said.
"These hospitals systems are unwilling to look at different avenues—that tells you they are ego-centric," Owen said.
The physicians expect to continue to practice with CaroMont until the end of November at the end of their 90-day resignation notice period and Tryon still aims to open a clinic in Gaston County on Dec. 2.
Correction: An earlier version of this story misstated Tryon's involvement in the lawsuit and the amount of the settlements. These errors have been corrected.