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St. Francis sues OrthoIndy over new surgery center

December 30, 2009

St. Francis Hospital and Health Centers has sued three physicians affiliated with OrthoIndy over the group's new $20 million Indiana Orthopaedic Hospital, scheduled to open in Greenwood next year. The complaint alleges the new facility breaches a partnership deal struck in 2001.

According to St. Francis’ civil complaint, filed Dec. 18 in Hamilton County Superior Court, St. Francis and Ol South LLC, an OrthoIndy affiliate, in 2001 agreed to become equal partners in another facility — the Indiana Orthopaedic Surgery Center at 5255 E. Stop 11 Road on the St. Francis campus.

“We’re surprised and disappointed St. Francis has sued three of our doctors," said OrthoIndy’s attorney, David Herzog, a partner with Indianapolis-based Baker & Daniels LLP. "We believe the suit has no merit, and we intend to defend it vigorously.”

Owned by physicians practicing in pain management, orthopedic surgery, neurosurgery and anesthesia, the Indiana Orthopaedic Surgery Center opened in spring 2005. According to St. Francis’ complaint, its profit exceeded $8 million in 2007 and 2008. Its managers included OrthoIndy physicians Dr. Scott Gudeman, Dr. Robert Falender and Dr. H. Jeffery Whitaker.

OI South merged into OrthoIndy’s Indiana Orthopaedic Hospital in July 2007. St. Francis alleges that in December 2008 it learned, via a press release, that Indiana Orthopaedic Hospital had purchased property four miles from the Indiana Orthopaedic Surgery Center and planned to construct a competing 75,000-square-foot surgery center and clinic. St. Francis claims it was never advised about Indiana Orthopaedic Hospital’s plans, which it argues violate their earlier deal.

On Dec. 23, St. Francis CEO Robert Brody sent an internal e-mail to all St. Francis physicians explaining the situation. In it, Brody said the lawsuit alleges a breach of fiduciary duty and constructive fraud on the part of OrthoIndy. It seeks both compensatory and punitive damages resulting from a criminal conspiracy and breach of contract.

“We have made numerous attempts to discuss, and resolve, the situation with OrthoIndy leadership,” Brody wrote. “To date, they have failed to engage in constructive dialogue regarding their plans to construct the competing facility. In fact, they continue to forge ahead in the process, despite the ramifications to patients and their partnership with St. Francis. OrthoIndy broke ground on their planned facility three months ago and it is expected to be completed in spring 2010.”

“We have reluctantly, but justifiably, chosen the only option available to us at this juncture.”

According to an OrthoIndy press release, the new Indiana Orthopaedic Hospital will be located at 1260 Innovation Parkway in Greenwood. It will feature 42 exam rooms, four operating rooms, physical therapy and MRI services as well as 21 OrthoIndy physicians. It was designed by Indianapolis-based BSA LifeStructures. Fishers-based Meyer Najem is the project’s construction manager. Indianapolis-based Hokanson Cos. Inc. and McCormack Development are also affiliated with the project.

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