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Health care: Hospitals go to court to hire doctors in contract dispute

By Charles Swenson
Coastal Observer

Georgetown County’s two hospitals face “a catastrophic disruption” in service if they cannot hire doctors who now work for a third-party management company, according to a suit filed last week in U.S. District Court. The Georgetown Hospital System, now Tidelands Health, and two doctors have asked the court to void non-compete clauses in contracts with doctors who work in Waccamaw Community and Georgetown Memorial hospitals.

Those doctors, known as hospitalists, are employees of Eagle Hospital Physicians and its subsidiary S.C. Inpatient Medicine Associates, under agreements that began in 2006. In January, the management companies, which are based in Georgia, told the hospital system it would end their contracts on July 10, according to court filings. The contracts prevent the hospitals from soliciting or hiring the doctors.

But there is a buy-out provision. Eagle told the hospital system it will cost $2.3 million, according to the suit.

The hospital system says it takes at least six months to hire new physicians and often as long as a year. After that, it takes at least another 90 days to complete “credentialing paperwork.” “Consequently, it will be impossible for GHS to recruit, hire and replace the hospitalists that are currently providing services” through Eagle, according to the suit, “which will result in a disruption of patient care.”

Paying the $2.3 million, the hospital system says, puts its tax-exempt status at risk. If it pays the buy-out fee and fails to hire some of the doctors now under contract with Eagle, there would be no way to recover the money. That could be a violation of its nonprofit standing by enriching private individuals, the suit claims.

The hospital system wants to the court to “preserve the status quo” by enjoining Eagle from enforcing the noncompete agreements. “In order to avoid any disruption in patient care, GHS must be permitted to freely negotiate with the hospitalists currently employed” by Eagle and its subsidiary, the suit states.

Dr. James Principe and Dr. William Meeks are also plaintiffs in the suit. Principe has been a member of the hospitals’ medical staff since 1992. In his 2006 contract with Eagle, he agreed not to work for any other hospital within 10 miles for a year after leaving Eagle. That contract was amended in 2011 to prevent the hospital system from soliciting hospitalists for one year if they left Eagle. It included a $40,000 buyout for Principe and a $75,000 buyout for other doctors.

When Meeks entered into a contract with Eagle in 2015, his contract contained a $100,000 buyout, according to court filings. The hospital claims that the buyout amount was changed without its knowledge, and it alleges fraud as grounds for voiding the agreements.

The break with Eagle came when the company asked for an additional $600,000 a year in management fees, according to the suit.

“Eagle informed GHS that it would unilaterally terminate” the agreement “if GHS did not agree to the increased management fees,” the suit states. When it did not agree, Eagle said it would end the contract and “will not negotiate for continuation of service.”

The hospital system argues that since it is Eagle’s only customer in Georgetown and Horry counties, there is no need for a noncompete clause once Eagle pulls out. “The non-solicitation clause under such a situation does not protect a legitimate business interest,” according to the suit. It also notes that Eagle “has abandoned the marketplace for hospitalist services within those counties.”

The suit also asks the court to rule that the hospital system’s agreement with Eagle doesn’t prohibit the system from talking with or hiring doctors under contract with Eagle who respond to the system’s employment ads.

Principe and Meeks argue that the restrictions are unenforceable. The noncompete clause is “unduly hard and oppressive in curtailing the legitimate efforts of the employee to earn a livelihood,” according to the suit. The doctors also want the contracts declared void.

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