Lawyer: Expect more hospital-doc lawsuits

Expect more litigation like the case in Martinsville where Indiana University Health sued to stop a family physician from jumping ship to Franciscan St. Francis Health.

With hospitals having scooped up hundreds of physicians in the past three years—putting nearly all of them under non-compete agreements—there are bound to be legal tussles when some of those physicians decide their new matches aren’t exactly made in heaven.

“That’s a very plausible outcome. I think that’s quite likely,” said Greg Pemberton, an attorney for both physicians and hospitals at Indianapolis-based Ice Miller LLP.

Non-compete agreements have been quite common for physicians, with nearly all hospital systems using them for employed physicians and about 80 percent of physician groups using them, Pemberton said.

But now the stakes are higher. Not only are health plans pressuring hospitals to take responsibility for the health of a specific population of patients, and have some of their reimbursement payments hinge on those patients’ health, but all of Indianapolis’ major hospitals have trampled on one another’s territory in the past decade.

IU Health built hospitals in Carmel and Avon, two areas formerly loyal to St. Vincent Health.

IU Health and St. Vincent are building hospitals in Fishers, in territory formerly claimed by Community Health Network.

Community expanded its hospital on the Johnson County line and formed a partnership with Franklin-based Johnson Memorial Hospital, raising its competitive position against Franciscan, which has dominated the southern suburbs of Indianapolis.

IU Health likes the south side, too, which led to its acquisition this year of Martinsville-based Morgan Hospital & Medical Center. So in response, Franciscan will open an outpatient medical facility in Carmel, with a small number of inpatient beds. And Franciscan is opening a physician office in Martinsville on Sept. 1.

To that Martinsville office Franciscan has recruited two doctors—Dianna Boyer and Thomas Lahr—who both used to work for IU Health’s Morgan Hospital.

Because Boyer’s contract requires her not to compete within a 30-mile radius, IU Health sued. But IU Health failed to win a preliminary injunction, during an Aug. 17 hearing, to stop Boyer from starting at Franciscan on Sept. 1.

“If you don’t win that hearing, then you’re probably not going to win at trial,” Pemberton said.

In these cases, hospitals tend to argue that their business interests will be harmed, not only because the doctor will draw many of his or her patients to the new practice location, but also because the physician will no longer refer patients to the hospital for lucrative surgeries and procedures.

But doctors tend to argue that patient interests should be most important, and they bring in patients to testify that their medical care will be seriously compromised if the doctor is forced to move out of the geographic area to practice.

In Martinsville, some of Boyer’s patients have already written letters to the local newspaper, expressing just that concern.

When doctors lose these cases, they tend to move their practices outside the radius or county stipulated in their non-compete agreement, Pemberton said. Once the term of that provision expires—usually after one to three years—the doctors typically move their practices back into the geography where they used to work.

But in other cases, doctors have an option to buy their way out of the non-compete agreement. It all depends, Pemberton said, on how bad the doctor’s relationship is with his or her employer.


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