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News and Press: Industry News

Physician Sues Hospital Based on Attempts To Restrict Referrals

Monday, June 4, 2018  
Posted by: Elizabeth Hogue, Esq.
Dr. Stephen Zappala sued Steward Health Care on the basis that the hospital exerted immense personal and financial pressure on him and other physicians to refer patients only to Steward hospitals and specialists in order to increase profits. Specifically, Dr. Zappala claims in his lawsuit that representatives of Steward called his patients and pressured them directly by incorrectly telling them that they had to have their surgeries at a Steward facility even though he recommended another hospital. Representatives of Steward would also cancel appointments made by Dr. Zappala's office staff for patients of his practice at competing hospitals.

Zappala made referrals to other hospitals for an innovative operation in which surgeons removed only a portion of patients' cancerous kidneys, as opposed to the entire kidney, which Zappala said was less risky. He also made referrals for high-dose radiation implants to treat patients with prostate cancer that Zappala believed led to fewer side effects and lower risks of reoccurrence than traditional surgeries. These treatments were not available at Steward hospitals. He also performed robotic surgeries at surgery centers outside of the Steward system because the equipment was not available in Steward facilities. When Zappala explained these reasons to Steward executives, he says he was told to stop sending patients out of the Steward system anyway.

Hospitals and physician networks may discourage doctors from referring patients to competitors, a practice referred to as "patient leakage." They argue that they do so for both quality and financial reasons. In terms of quality of care, hospitals and physician networks argue that doctors generally don't have access to other systems' electronic patient medical records, which makes it harder to coordinate care. Zappala says, however, he has the right under his contract to refer outside the Steward system if patients request it or if it's in the patients' best interests.

Dr. Zappala also says that Steward's activities went too far. Dr. Zappala says, for example, that when he refused to comply with Steward's policies, the Hospital disciplined him for minor infractions and eventually canceled his privileges to operate at Steward Holy Family Hospital in Methuen. Steward, on the other hand, claims that Dr. Zappala was disciplined for legitimate lapses in patient care.

Steward also argued that policies discouraging referrals outside its system are legal and "extremely common," but the Judge wasn't buying this argument! Judge Fahey said that this argument is like a child telling a parent, "All the other kids do it."

Another Steward doctor who was deposed in the case said that Steward rejects referrals to other providers regardless of patients' preferences and publicly "shamed" physicians who refused to comply with these restrictions. During monthly group meetings, Steward executives projected physicians' names on a screen along with the number of their patients who had gone outside the Steward system for care.

Another physician testified that she ended her affiliation with Steward based at least in part on growing frustration with its policies, including patients' right to freedom of choice. The physician testified that she was asked to call an elderly patient to persuade him to cancel his heart surgery at Massachusetts General Hospital a couple of days before the operation and to have the operation at a Steward hospital instead. She refused to make the call. A Steward administrator then contacted the patient instead and the surgery was rescheduled at a Steward hospital.

The doctors said that they first noticed changes in Steward's referral policies in 2010 when Cerberus Capital Management purchased the hospital system that it then renamed Steward. Approximately 20 percent of physicians' pay, for example, was withheld and pay out of these amounts was tied to certain quality goals, including keeping patients with the Steward system.

Steward asked the Court to dismiss Zappala's lawsuit but the Judge refused to do so.

It looks like hospitals face increasing pressure to honor patients' right to freedom of choice of providers from both competitors as well as physicians who practice at them. Hopefully, these lawsuits will provide needed clarification and resolution of important issues.

©2018 Elizabeth E. Hogue, Esq. All rights reserved. No portion of this material may be reproduced in any form without the advance written permission of the author.


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