If your group doesn’t pay you for the services you provided, you may need to act quickly to protect your interests and to recover your lost wages.
A December 2018 article in the Philadelphia Enquirer Daily News described a very good pay dispute between two staffing companies, three hospitals and the emergency physicians providing services at those hospitals.
Prime Healthcare runs three hospitals in the Philadelphia area: Lower Bucks, Roxborough Memorial and Suburban Community Hospital. Prime contracted with Legacy Physician Partners, a Tennessee staffing company founded by Christopher Kelly, to provide emergency department services in those facilities. Only a year after its formation, Legacy filed for Chapter 11 bankruptcy and still owes its contracted physicians about six weeks of back pay.
Prime hired a new group – Progressive Emergency Physicians – that has reportedly promised to reimburse the physicians for their prior shifts as a “retention bonus” if those physicians agree to longer working hours and a 20% pay cut. Prime Healthcare has refused to become involved the dispute, stating that it paid Legacy for the services that the physicians provided and that it was Legacy’s responsibility to pay the physicians. Progressive Emergency Physicians seems to have become wrapped up in this morass because it reportedly won the contract to provide services to the Prime Healthcare hospitals by promising to handle the wages not paid by the prior staffing company. The physicians are stuck in the middle. They have provided care to the hospital’s patients, but have not been paid as promised for their services.
What Can Physicians Do If They Haven’t Been Paid?
The sudden loss of income can be financially devastating. Planning ahead will help physicians protect their interests. Several sources recommend saving the equivalent of at least three month’s expenses for unexpected emergencies. Having such a reserve available will take some of the immediate financial pressures off of a sudden income loss. If you haven’t established an emergency fund, you’ll need to find another source of income. Hopefully you’re on staff at more than one hospital because it often takes many months to find a position at another facility, to get on staff and to start earning a paycheck. If you aren’t on staff at more than one facility and are scrambling to find an income source, you may consider seeking a position at an acute care clinic. In many acute care clinics, there is no lengthy credentialing process needed and a non-hospital affiliated acute care clinic may offer a quicker alternative to start earning income – albeit most likely at a lower hourly rate.
If a group isn’t paying its physicians, chances are that the group isn’t paying its malpractice insurance premiums, either. In the Legacy case above, there was reportedly a lapse in malpractice insurance coverage. Consider contacting the group’s malpractice insurer immediately regarding tail insurance. The easiest way to find the insurer is to look on the certificate of insurance that you requested when you signed your contract. You did request a certificate of insurance when you signed your contract, didn’t you? If not, you can request a copy from the medical staff office at the hospital. Hospitals usually require that groups provide them with proof of malpractice coverage for the group’s physicians. Maintaining malpractice insurance coverage is important. Many malpractice insurance policies have only a 30-day window between the time a policy is canceled and the time that tail insurance must be paid.
Wait too long and you may not be able to purchase tail insurance. Purchasing even a $100,000/$300,000 tail policy that only covers defense costs (with a one-time premium costing $3,000-$5,000), will leave you better protected than having no tail insurance at all. Coverage of tail insurance is the industry standard for emergency medical contracts. You shouldn’t sign an emergency medicine contract in which the group or hospital doesn’t agree to pay for malpractice and tail insurance. If the group is responsible for paying tail insurance and doesn’t do so, any money you are forced to pay for malpractice coverage can be included in the damages you can later claim for breach of contract.
Contract Terms May Affect Your Lost Earnings
Many of your rights depend upon the language in your contract and upon the damages you have sustained. Damages may include past and future lost earnings, money paid out of pocket for malpractice premiums and possibly other expenses associated with finding a new job. Keep track of all your expenses!
Contract language often has specific reasons for which the contract may be immediately terminated. One of those reasons typically occurs if the group loses its contract to provide services with the hospital. If your contract contains this language, the group isn’t in breach of contract for suddenly terminating the agreement. In Legacy case above, it seems as if the group hid from its physicians the fact that there were problems with group management and that the group was at risk for bankruptcy.
For this reason, a fair contract should include language to the effect that the group will promptly notify the physician in writing of any events likely to cause the hospital to terminate its agreement with the group. That way, physicians would be contractually required to get a “heads up” that they may need to start looking for another job.
There may be other contractual liability involved in this case. Legacy representatives reportedly made verbal promises to the physicians that the physicians would continue receiving payments and malpractice coverage. Many contracts contain a section called “Entire Agreement,” which is called an “integration clause” in legal lingo. This means that any promise not contained within the four corners of the contract is not enforceable. Contracts will often state that no amendments to the agreement are enforceable unless they are in writing and signed by both parties. If a contract contains such language, verbal promises that the doctors would continue being paid may not be contractually enforceable. Those promises may give rise to other legal liability.
A contract may force the parties to arbitrate any claims related to the agreement. Arbitration is generally a bad thing for doctors. Not only do parties have to pay for attorneys, but they also have to pay the arbitrators – who often charge hundreds of dollars per hour. Arbitration doesn’t have to follow the rules of evidence required in court and even if you get a judgment in an arbitration case, you still may have to file a court action to enforce it. If the same arbitrators are chosen for multiple cases involving the same corporate entity, there is the potential for a financial bias toward ruling in favor of that entity to get further cases in the future. You can read more about arbitration procedures at the American Arbitration Association’s web site (www.adr.org).
Legal Actions to Recoup Your Lost Earnings
While a breach of contract lawsuit is a consideration if you haven’t been paid for your services, breach of contract lawsuits are often costly and time-consuming. If a group failed to pay its debts, by the time a breach of contract lawsuit is resolved, the group may be bankrupt and there would be no money left to satisfy a judgment.
One potential way to get a quick judgment is by filing a lawsuit in small claims court. Small claims cases can often be filed and resolved relatively quickly. The benefit to a quick judgment is that judicial liens (or “judgment liens”) may be considered a “secured debt” rather than an “unsecured debt,” which may put you ahead of many of the other group’s creditors for payment if the group declares bankruptcy. A judgment may also allow you to put liens on any income, real estate or other property that is owned by the group – including payments from other hospitals where the group still holds a contract. The down side to a small-claims case is that you can only sue for damages up to the “small claims” maximum. For example, if you have damages of $20,000, but the maximum damages allowed for a small claims case in your state are $10,000, you either have to file a claim in another division of court and go through a longer drawn out process, or you accept the maximum damages of $10,000 if you win.
If you decide to try to file a civil claim, other potential causes of action you could raise against the group include fraud (if a group or hospital told you that you would be paid, you performed services, and then they didn’t pay you and had no intention of paying you), civil conspiracy (if the group and hospital knew you wouldn’t be paid for your services and conspired to have you provide services anyway) or quantum meruit, a legal theory that allows someone to recover the value of services provided if no contract is in place. A successful plaintiff in a fraud claim may be able to recover attorney’s fees and potentially punitive damages.
If it appears that the group or hospital knew about the termination and planned on not paying you for the work that you performed, it also may be possible to seek criminal charges against the group, the officers in the group or the hospital for theft of services. Depending on the value of the services received, if a state’s attorney agrees to file such charges, those charges could amount to felonies. Avoiding criminal charges would be a strong incentive to pay for services provided.
You could request a temporary restraining order or an emergency injunction preventing the group or hospital from disbursing any money until employees and the malpractice insurance premiums are paid. Technically, TROs and injunctions are equitable remedies where a claimant has to show that monetary damages alone are insufficient as compensation, but it would be fairly easy for a physician to show how goodwill, hospital privileges, future malpractice insurance and even future licensing would be affected by an inability to defend oneself from a malpractice suit. In fact, if malpractice claims may affect a physician’s professional license, Constitutional Due Process issues may even be raised since professional licenses are generally considered “property rights.” Successful Due Process claimants may also be eligible to receive reimbursement for their attorneys’ fees.
If the contracting entity is a corporation, the officers have to “act” like a corporation. If the officers weren’t going through the proper formalities and documentation to operate as a corporation, debtors may be able to “pierce the corporate veil” and hold the owners, officers or the board personally liable for the corporation’s debts. If the corporate veil is pierced, creditors can attach the owners’ home, bank account, investments and other assets to satisfy the corporate debts. Ask your attorney to check any filings the group made with the state and to request copies of all corporate meetings/minutes, etc.
Keep in mind that if you signed a contract that requires arbitration, a court may decide to dismiss your claim and force you to go to arbitration. This is another reason to reject arbitration requirements in contracts — or at least to make arbitration agreements inapplicable for allegations of malfeasance or criminal acts.
Recouping Lost Wages Outside of Court
If you were a group or hospital employee (as opposed to independent contractor), you may be able to file claims for unpaid wages against the group with the US Department of Labor and similar state employment agencies. Employees may also be entitled to file claims for state unemployment compensation. If you are an employee and the group or hospital was not paying unemployment insurance premiums, investigations and threats of fines or penalties may put added pressure on the group or hospital to pay you what they owe.
For an “outside of the box” idea, you may consider filing demands with insurance companies and Medicare/Medicaid that they pay you directly for services you provided to the group/hospital’s patients. In some states, you may be able to file a physician’s lien on such insurance payments. Keep in mind that most physician contracts contain a power of attorney that allows groups to bill for physicians’ services and to retain the money. However, if one party breaches a contract, the other party has a duty to mitigate damages. Collecting money you are owed from the insurance companies would probably fall into that “mitigation” category. You may need to obtain a court order allowing you to collect for the services you performed before you can try to collect the outstanding payments.
Notifying the state Department of Health that there is a potential issue in a hospital’s emergency department staffing where the facility may not be able to provide appropriate patient care could put pressure on the group to continue paying its physicians so that such staffing can be maintained.
If the group has more than one contract at more than one facility, consider notifying administrators at the hospitals where the group has contracts and notifying other physicians who work for the group at those facilities. Doing so will hopefully help the other hospitals and physicians avoid a situation where their contracts are suddenly terminated. Other facilities may also question the group’s solvency and require the group prove it paid its previous providers in order to maintain its contracts at those facilities.
Finally, a call to the media letting investigative reporters know that physicians have provided treatment to a community’s patients, but that the group or hospital hasn’t paid its physicians can be a powerful motivator for a group to adhere to the contract terms. Adding that the physicians are seeking potentially felony criminal charges against the owners of the group for theft of services may put added pressure on the group to pay its debts. News articles regarding the incident would create some internet record so that other physicians and potential business partners doing a search may think twice before working with the group or its officers. If it is a good idea to have a National Practitioner Databank for physicians, there should be some searchable record of corporate and administrative malfeasance as well.
If your group fails to pay you what they owe you, first you need to protect your immediate interests. Establish an emergency savings fund. Never have staff privileges at only one facility. Make sure that your malpractice coverage is in effect. Find some type of steady income stream. After you protect your immediate interests, look for ways to recoup your losses. Remember that the squeaky wheel is often the one that gets the grease.