story by Michael Tilley
A lawsuit filed Aug. 2 by Fort Smith-based Cooper Clinic against Mercy Fort Smith and St. Louis-based Sisters of Mercy Health System not only more fully reveals a contentious relationship between former medical sector partners, it may signal an end to the hospital-clinic relationships that have been part of area medicine for almost a century.
In the 17-page complaint filed in Sebastian County Circuit Court, Cooper Clinic officials allege that Mercy and its parent company used their economic power to recruit 15 physicians away from Cooper and to the Mercy Clinic between Oct. 31, 2010 and Aug. 1, 2013.
The physicians who left Cooper Clinic are (in order of departure): Ivelesse Dupree; Merle McClain; Tony Flippin; Douglas Buckley; John Smith; Garreth Carrick; Lane Wilson; David Hunton; Kurt Mehl; Donald Shows; Chris Coleman; Greg Pineau; Robert Nowlin; Jennifer Burks; and John Werner.
Cooper’s complaint also includes Drs. Burks, Nowlin, Shows and Werner as defendants.
“Some or all of the above physicians were contacted prior to the expiration of their contracts with Cooper and actively recruited to come to work for Mercy Entities, notwithstanding the existing contractual obligations between Cooper and said physicians which were known to the Mercy Entities,” notes the Cooper complaint.
The complaint alleges that the loss of physicians “created problems in serving patients” in primary care and several specialties, which “caused harm to Cooper’s financial condition.” By recruiting Cooper physicians, Cooper Clinic officials also allege that Mercy and its parent company “were attempting to economically harm Cooper and punish it for not selling its business to Mercy Entities.”
In a response to questions from The City Wire, Mercy on Tuesday provided this statement: “Mercy has been served with a summons and a complaint filed against it by Cooper Clinic. Those documents have been referred to our counsel for an evaluation and a response. It is our belief that Mercy has done nothing wrong or illegal and will defend itself vigorously against the allegations made by Cooper Clinic in the complaint.”
In a Dec. 8, 2010 letter, Doug Babb, CEO of Cooper Clinic, asked Jeff Johnston, then the CEO of what is now Mercy Fort Smith, to “refrain from further negotiations with Cooper Clinic physicians under executory employment agreements.” The letter also said Cooper preferred to work with Mercy but would not shy away from legal action if necessary.
Babb sent a letter to Johnston on Jan. 21, 2011, to again ask Mercy to stop recruiting its physicians.
“While I appreciated your kind words and warm Christmas wishes in your December 21, 2010 letter, you and your staff nevertheless are continuing to attempt to get at least six more Cooper Clinic physicians to break their employment contracts notwithstanding my request that you stop this anticompetitive practice,” Babb wrote.
POSSIBLE MERGER WITH MERCY, SPARKS
The complaint also reveals that Cooper negotiated with Mercy and with Sparks Health System – and its parent company, Naples, Fla.-based Health Management Associates – about a possible merger, acquisition or “integration” with Cooper physicians.
In a July 25 letter from Mercy (Kim Day, president of Mercy Central Communities; Ryan Gehrig, president of Mercy Hospital Fort Smith; and Dr. Cole Goodman, president of Mercy Clinic Fort Smith) to Babb and Dr. Michael Callaway, chairman of the Cooper Clinic Board of Directors, Mercy offered to “stand still” on negotiations with Cooper Clinic physicians if Cooper would not continue “further discussions with Sparks, HMA, equity investors” or any other group that would create a “Competing Transaction” to Mercy.
Babb responded July 30 with a letter noting that Cooper officials interpreted the Mercy letter as “both a threat and ultimatum” that if Cooper did not accept the terms then more physicians would be lost to Mercy.
“Please be informed that the Clinic has retained counsel to seek redress from this continued pattern of intentionally and tortiously interfering with our physician employment agreements and engaging in anticompetitive and predatory business practices,” Babb concluded in his July 30 response letter.
Cooper’s lawsuit seeks compensatory and punitive damages under six counts: Breach of Contract; Tortious Interference; Violation of Arkansas Deceptive Trade Practices Act; Unjust Enrichment; Civil Conspiracy; and Breach of Contract-Compensation Reimbursement.
COOPER CLINIC STATEMENT
In a response to questions from The City Wire, officials at Cooper Clinic provided this statement:
“While it would be inappropriate to comment outside of court regarding the specifics of this lawsuit, we can provide a brief summary of the actions that led us to seek legal recourse. Locally owned by our doctors since 1920, Cooper Clinic is important to the health of our patients as well as the strength of our community; however, our Clinic is being threatened by Mercy’s continued recruiting of our physicians. Repeatedly, Mercy has negotiated with physicians who are under contract with Cooper Clinic, leading doctors to terminate their employment agreements and join Mercy to accept financial incentives. Despite our requests that these actions cease, Mercy’s actions have continued. This has negatively impacted Cooper Clinic and been disruptive to patient care. Cooper Clinic has been a vital part of our local medical community for more than 90 years. It is crucial that we protect our organization against these practices to secure our independence and our future.”
FIRST HINTS OF TROUBLE
Although well known for several years in regional medical circles, the schism between Cooper Clinic and Mercy bubbled up to the public in early 2012.
Prior to 2012, physicians with Fort Smith-based Cooper Clinic have for decades had privileges only at St. Edward Mercy Medical Center (now Mercy) – part of a two-hospital town dynamic that often saw clinics affiliated entirely with St. Edward or Sparks Health System.
However, a Jan. 31, 2012 letter from Cooper Clinic Drs. Dale Asbury and Jeffrey Medlock informed patients that physicians with Eastside Family Practice are now making rounds at Sparks.
“Whenever possible, we would prefer that our patients who must be hospitalized choose Sparks Regional Medical Center so we can oversee your hospital care,” the two physicians noted in the letter.
Babb said at the time that the letter from Drs. Asbury and Medlock is “information for a specific group of patients and does not reflect a Clinic-wide shift from service at one hospital to the other.” However, Babb noted then in a letter to The City Wire that “this is a shift in the way our doctors have practiced traditionally.”
In a Sept. 7, 2012 address during a Fort Smith Regional Chamber of Commerce event, Babb said the historically pleasant relationship between Cooper and Mercy had become “tense.”
“Cooper Clinic and Mercy, in the 1990s, were very much quasi-partners, and very much working closely with each other, but that’s evolved over time,” Babb said at the chamber event. “The main reason is that HMA and Mercy have different system strategies. HMA wants to work with independent physicians, while Mercy has chosen, and this is not to be critical, to have integrated physicians. In other words, they want physicians to be employees, and that creates tension. … We have been forced to work with Sparks and be as independent as we can, and not to rely just on Mercy. So that relationship has evolved from a partnership to actual competition.”
Mercy officials have not been shy about their plans to expand facilities, services and add physicians in the Fort Smith market.
Officials with the St. Louis-based Sisters of Mercy announced in August 2011 a plan to invest about $192 million in Mercy facilities in the Fort Smith region as part of a 10-year plan to invest $4.8 billion in its operations in Arkansas, Kansas, Missouri and Oklahoma.
“Assuming Mercy’s growth in spending and wages increases at a modest 2% annually over the next 10 years, Mercy will generate almost $3.5 billion in total economic benefits for the city during this time period,” noted the executive summary of a Mercy impact report released in October 2012.
Part of that impact includes the hospital’s continued recruitment of new doctors. Goodman, the Mercy Clinic CEO, said in October 2010 that the clinic plans to add 80 new physicians in the next three to five years, with at least 50 of those being specialists. Those doctors will require a support staff of about 280, which will result in added annual payroll of about $19.7 million.