2017 Round-Up: Key Decisions Affecting Connecticut Health Care Providers

Connecticut state and federal courts faced a number of significant health care issues last year. We have summarized those cases that we think are particularly relevant to Connecticut hospitals, group practices and individual practitioners. If you would like to discuss any of the matters addressed in these cases, please contact one of our Health Care Law attorneys.

Please also visit Connecticut Health Law, a Pullman & Comley, LLC blog, where we provide insights on developments in the law affecting hospitals, physician groups, pharmaceutical and medical device companies and other health care providers and suppliers.

Informed Consent

Issues surrounding the doctrine of informed consent played out in a few Connecticut courts last year. In one case, the plaintiff argued that the doctor should have disclosed that a certain drug combination meant to treat Crohn’s disease could expose the minor patient to lethal lymphoma. Defendant hospital, the physician and the physician’s medical practice argued, among other things, that it had not been proved that the drug combination causes cancer and, therefore, an unproven risk is not a risk for informed consent purposes. The Superior Court (J.D. Hartford) denied the defendants’ motion to strike, noting that, while doctors do not have to disclose something that isn’t a risk, once there is a possibility of harm the doctor must obtain informed consent if a reasonable person would find the risk material for making a decision about whether to embark on a contemplated course of therapy. Radzik v. Connecticut Children’s Medical Center, Superior Court, judicial district of Hartford, Docket No. CV-095027092-S (January 27, 2017) (63 Conn. L. Rptr. 828).

In another case involving informed consent, a premature infant died after ingesting a tainted dietary supplement administered by a hospital. The infant’s guardian claimed that the hospital failed to convey material information about the supplement that the guardian would have wanted to know, while the hospital argued, among other things, that the guardian’s claim related only to certain infections associated with the supplement and did not include the hospital’s failure to disclose the risk of contamination that was the actual cause of the infant’s death. The Superior Court (J.D. New Haven) refused to decide, at the pleading stage, whether the guardian’s complaint should have articulated a failure to warn of the risk that was the actual cause of the death. Hanes v. Solgar, Inc., Superior Court, judicial district of New Haven, Docket No. CV-156054626-S (January 13, 2017) (63 Conn. L. Rptr. 728).

Importantly, the court in Hanes v. Solgar refused to assess the medical validity of the plaintiff’s claims at the pleading stage, and so the defendant may ultimately prevail on its argument that the risk of fungal contamination (the actual cause of the infant’s death) was not a material risk associated with the dietary supplement that should have been disclosed to the infant’s guardian. Note also that in both cases, the court rejected the defendants’ argument that the doctrine of informed consent is limited to surgical procedures in Connecticut, relying on a 2006 Connecticut Supreme Court decision that held that informed consent applies to any medical treatment or procedure.

Contracts Held Unenforceable under Federal Anti-Kickback Statute

The federal Anti-Kickback Statute (AKS) is a criminal statute that prohibits the knowing and willful exchange of remuneration to induce or reward referrals of federal health care program business, including remuneration intended to induce the purchasing of any good or service paid for by Medicare. The District Court of Connecticut (Shea, J.) considered whether the plaintiff-operator of an auction website for purchasers and suppliers of medical equipment could enforce a contract with the defendant-medical supplier where the operator collected fees based on the value of the equipment that was sold on the website. The medical supplier sold safety needles, syringes and other equipment to various hospitals on the auction website, which the purchasing hospitals used to provide services reimbursable under Medicare and other federal health care programs. When the supplier failed to pay the auction operator all of the fees associated with the transactions, the operator brought an action against the supplier to recover these fees. The supplier’s defense was that the contracts violated the AKS because the operator received remuneration for arranging for the purchase of goods for which payment may be made under a federal health care program and, because the contracts were illegal, they were unenforceable. In two decisions, the court granted the supplier’s motions for summary judgment, finding that the operator arranged for the purchase and sale of goods within the meaning of the AKS, noting in particular that the link between the fees it charged and the volume of sales “points to coverage by the AKS.” The court did not require the supplier to establish that the operator had a willful intent to solicit remuneration in violation of the AKS because it did not determine that the operator was criminally liable under the AKS; rather, the court’s holding was that the contracts themselves were against public policy and illegal and, relying on precedent from other jurisdictions, held that the operator’s intent was not dispositive for this finding., Inc. v. Becton, Dixon and Company, 240 F. Supp. 3d 263 (D. Conn. 2017) and United States District Court, Docket No. 3:13-CV-1545 (MPS), slip op. (D. Conn. April 3, 2017).

In its motion for reconsideration the auction operator claimed, among other things, that the court had failed to consider evidence of intent in order to establish a violation of the AKS, but the court stated that the supplier’s contract illegality defense called for a “different inquiry than whether the government can prove all the elements of a criminal statute,” and reiterated its original finding that an agreement may violate public policy even if the parties do not intend to disregard the law.

Connecticut’s Physician Non-Compete Law Does Not Apply Retroactively

Connecticut Public Act 16-95, codified at CGS §20-14p, provides that a non-competition agreement with a physician generally may not restrict the physician’s activities for more than one year or apply to a geographic region larger than 15 miles from the primary site where the physician practices. The statute applies to any covenant not to compete that is “entered into, amended, extended or renewed on or after July 1, 2016.” Last year, the Superior Court (J.D. Hartford) considered whether the statute should apply retroactively to agreements entered into prior to July 1, 2016, specifically, an employment agreement dating back to 2012 which contained a non-competition clause restricting the activities of the employee-physician for 24 months. The physician argued that the public policy implicated in the statute is to limit non-compete provisions applicable to physicians to no longer than twelve months. The court disagreed and found that the Connecticut General Assembly specifically intended that the statute apply only to agreements entered into, amended, extended or renewed on or after July 1, 2016. The court also looked to the statute’s legislative history to support its position. Jefferson Radiology, P.C. v. Baldwin, Superior Court, judicial district of Hartford, Docket No. CV-16-6070917-S (June 8, 2017) (64 Conn. L. Rptr. 668).

This is the only case to date interpreting Connecticut’s physician non-compete statute. Further guidance would be helpful as the statute’s language governing other aspects of physician non-competition clauses is somewhat unclear and capable of different interpretations.

Exceptions to Physician-Patient Privilege

The Appellate Court of Connecticut faced the question of whether a dentist must disclose patient records in response to a subpoena duces tecum issued by the Connecticut Department of Public Health (DPH) in connection with an investigation of the dentist’s allegedly fraudulent billing practices. The dentist was originally ordered to produce the records to an auditor hired by United Healthcare. When the dentist refused to turn over the records, the auditor filed a complaint with the Connecticut Attorney General, who referred the complaint to DPH. The court held that the subpoena fell within an exception to the physician-patient privilege statute (CGS §52-146o) that allows disclosures of patient records to DPH without patient consent in connection with the investigation of a complaint. The court rejected the dentist’s argument that DPH was required to articulate the specific allegations against the dentist before he was required to disclose the records and found that, in accordance with the language of the statute, it was sufficient that the records were “related to” the complaint. The Supreme Court of Connecticut has denied certification. Commissioner of Public Health v. Colandrea, 175 Conn. App. 254, 167 A.3d 471, review denied, 327 Conn. 957 (2017).

This case serves as a reminder that the statutory physician-patient privilege is not absolute and that the statute’s language may afford insurers and potentially other parties a mechanism to use governmental authority to access medical records in certain cases.

Class Action Challenging Placement of Medicare Patients in Observation Status Proceeds

The decision about whether a Medicare beneficiary should be admitted to a hospital as an inpatient (for which services are covered by Medicare Part A) or placed in observation status (for which services are covered by Medicare Part B) can have significant financial consequences for both the patient and the hospital. Not only are Part B services reimbursed at a lower rate than Part A services, but Medicare covers the cost of post-hospital care at a skilled nursing facility only if the individual was classified as an inpatient at the hospital for at least three consecutive days. Official Medicare policy leaves the inpatient/observation status decision to the discretion of the treating physician, but the question of how much control the federal government actually exerts over the physician’s discretion has been the subject of debate. Last year, the District Court of Connecticut (Shea, J.) addressed the rights of certain Medicare beneficiaries who were placed in observation status beginning in 2009. These patients (or their representatives) had sued the U.S. Department of Health and Human Services (HHS) in 2011, arguing that their failure to receive written notice of their placements in observation status, and the lack of any administrative right to challenge the placements, violated both the Medicare Act and federal due process. In 2015, the Second Circuit Court of Appeals affirmed that the Medicare Act was not violated, but with respect to the due process claims, the court held that the plaintiffs were entitled to test whether they possessed a constitutionally-protected property interest in being admitted to the hospital as inpatients.

On remand to the District Court, the plaintiffs argued that they were deprived of their due process rights because the utilization review process at the hospitals they received services from applied fixed criteria set by HHS to determine their observation status, and further, because the Centers for Medicare and Medicaid Services (CMS) pressures hospitals to place more patients in observation status and to make patient status determinations using computer algorithms. HHS argued that the final decision about a patient’s status is made by the physician on the basis of clinical judgment and denied that CMS pressures hospitals to apply commercial screening tools that in reality favor placing patients on observation status. The court denied both parties’ motions for summary judgment on the basis that material facts still remain in dispute. HHS had also moved to dismiss the plaintiffs’ claims that their due process rights were violated because no administrative review process exists for Medicare beneficiaries who want to challenge their placement in observation status. HHS conceded that there is no administrative appeal right for Medicare beneficiaries but determined that a patient’s financial interest is nevertheless protected because hospitals have the incentive to file their own appeal claims for Part B services rendered to the patient. The court found HHS’ arguments “implausible” and denied HHS’ motion to dismiss. Alexander v. Cochran, United States District Court, Docket No. 3:11-CV-1703 (MPS), slip op. (D. Conn. February 8, 2017).

Note that the plaintiffs had also claimed that HHS violated their due process right to receive notice of their placement on observation status while they were in the hospital, but the court found that the passage of the federal NOTICE Act in 2015 (requiring hospitals to provide written and oral notice to patients receiving observation services for more than 24 hours) rendered this claim moot.

Companion Agency Services Require a Written Contract

Homemaker-companion agencies offer non-medical care to support the well-being of a person in the home. Not later than seven calendar days after the date on which a homemaker-companion agency begins offering services, it must provide to the person receiving the services (or an authorized representative) a written contract or service plan that prescribes the anticipated scope, type, frequency, duration and cost of the services (CGS §20-679). Last year, the Appellate Court of Connecticut heard a case involving an interpretation of this requirement. A homemaker-companion agency agreed to provide services to a married couple who were both suffering from physical ailments. Several weeks after services commenced, the agency sent a contract to the couple’s son as their agent under a power of attorney. The son never signed the contract and eventually became delinquent on his payments to the agency, ultimately owing over $20,000. The agency first claimed that the son acted in bad faith by intentionally failing to sign the contract and later argued that because the contract was never fully executed, an oral contract had been formed. The Superior Court (J.D. Hartford) found in favor of the agency, but the Appellate Court reversed, finding that, as a matter of first impression, the plain language of CGS §20-679 does not provide an exception to the requirement that home care contracts be in writing. The Appellate Court noted, among other things, that the remedial purposes of the statute would be undermined if a homemaker-companion agency could enforce an oral contract. The Appellate Court also found no direct evidence that the son’s failure to sign the contract was done in bad faith and therefore there was no support for the trial court’s conclusion that the agency’s noncompliance with the statute should be excused. Connecticut Home Health Services, LLC v. Futterleib, 172 Conn. App. 182, 160 A.3d 352 (2017).

This case serves as a warning to providers about the importance of complying with the specific requirements of the law and entering into signed agreements. It remains to be seen if the agency can recoup some of its losses through an appeal to the Connecticut Supreme Court.

Claims for Emotional Distress in the Context of Medical Malpractice

Connecticut courts considered various aspects of a health care provider’s liability for infliction of emotional distress in 2017. In one case, the Superior Court (J.D. Waterbury) granted a hospital’s motion to strike a claim that the hospital’s notification to a patient concerning a possible medical error caused him emotional distress. The court assumed, but did not decide, that the hospital had a legal duty to notify the patient of the error, which related to potential exposure to blood-borne pathogens resulting from the possible misuse of a multi-dose insulin pen. The plaintiff sought class certification as he was one of over 3,100 patients who may have been exposed to the error. While conceding that the notice of the error did cause some degree of emotional distress, the court found that the act of sending the letter was not conduct that created an unreasonable risk of emotional distress likely to lead to bodily harm or illness. According to the court, patients would expect to be informed about certain possible medical errors and health care providers should be encouraged to disclose such information. The court also noted that imposing liability on a health care provider for providing voluntary disclosure would be counterproductive to the policy goals of promoting patient safety and furthering patient autonomy in making health care decisions. The court did, however, deny the hospital’s motion to strike the plaintiff’s claims of medical negligence and recklessness for the acts which prompted the error notification, as well as the plaintiff’s class action claims. Diaz v. Griffin Health Services Corp., Superior Court, judicial district of Waterbury, Docket No. CV-15-6029965-S (January 31, 2017) (63 Conn. L. Rptr. 907).

In order to recover on a claim of bystander emotional distress arising from medical malpractice in Connecticut, the plaintiff must allege and prove that he or she suffers as a direct result of contemporaneously observing gross professional negligence such that he or she is aware, at the time, not only that the defendant's conduct is improper but also that it will likely result in the death of, or serious injury to, the primary victim. A psychiatric patient committed suicide hours after being discharged from the behavioral health unit of a hospital. The decedent’s mother claimed that she suffered bystander emotional distress as a result of the negligence of the treating psychiatrists and a registered nurse employed by the hospital. The Superior Court (J.D. Litchfield) found that the mother did not observe the actions that constituted the alleged negligence by the psychiatrists (i.e., the decision to discharge the patient) and granted their motions for summary judgment. However, the court refused to grant similar relief with respect to the nurse’s actions due to conversations between the mother and the nurse that occurred at the time of the decedent’s discharge and shortly thereafter (both in-person and by telephone). During these conversations, the mother disclosed her reservations about the discharge and her opinion that her son was likely to injure himself, and the nurse reassured the mother that the son’s condition was normal, given his transition from an inpatient facility to home. The court held that contemporaneous observations could include these conversations and denied the hospital’s motion for summary judgment. Chelstowski v. Charlotte Hungerford Hospital, Superior Court, judicial district of Litchfield, Docket No. CV-14-6011320-S (March 6, 2017).

In a case involving both bystander emotional distress and negligent infliction of emotional distress, a mother claimed that her obstetrician failed to diagnose the abnormal brain condition of her baby during two prenatal ultrasounds. The Superior Court (J.D. Fairfield at Bridgeport) granted the defendants’ motion to strike the mother’s claim for bystander emotional distress on the basis that a mother cannot be a bystander during the prenatal period or during the birth of her child. The court noted, however, that the attending physician owes a duty of care to both the mother and the baby prior to and during birth and delivery. The court then went on to deny the defendants’ motions to strike the mother’s claims for negligent infliction of emotional distress, finding that, unlike a claim for bystander emotional distress, the claim for negligent infliction of emotional distress was premised on a direct duty owed to the mother. The court found that other trial courts in the state have found a valid claim for negligent infliction of emotional distress in situations where a child is injured due to negligent obstetrical care, but noted that in this case proof of the elements may be problematic at trial, particularly with regard to allegations regarding non-invasive diagnostic examinations. Brown v. Cusick, Superior Court, judicial district of Fairfield, Docket No. CV-16-6060283-S (October 2, 2017). 

The court in Brown v. Cusick distinguished medical negligence claims, where the treating physician must be found to have breached a standard of care applicable to the patient, from claims for negligent infliction of emotional distress, which need not necessarily involve a breach of the applicable standard of care by the treating physician.

Paying Health Care Plan Members Directly Does Not Violate ACA

The District Court of Connecticut (Hall, J.) recently dismissed the claim of an out-of-network health care system that Anthem Health Plans violated the Patient Protection and Affordable Care Act (ACA) when it stopped reimbursing the plaintiff directly for the benefits provided to Anthem members and instead, began reimbursing its members who would then be obligated to pay the plaintiff for care. The court recognized that the burden caused by Anthem's changed reimbursement procedure might be substantial—the health care system argued, among other things, that it would have to wait longer for reimbursement payments and that patients are ill-equipped to handle the process of arranging for payments to the hospital— but found that neither the ACA nor its implementing regulations prohibited such a payment procedure. In particular, the court found that the ACA does not require that insurers eliminate all differences in their treatment of out-of-network providers and in-network providers for emergency services, but singles out only two areas where insurers must treat in-network and out-of-network providers equally, and these two areas do not relate to how the insurer pays for what it covers. Hartford Healthcare Corp., et al., v. Anthem Health Plans, Inc., United States District Court, Docket No. 3:17-CV-1686 (JCH) (D. Conn. November 1, 2017).

Note that the court exercised its discretion to decline jurisdiction over the health care system’s state law claims, including the claim that reimbursing the patient directly violates CGS §38a-477a(b)(A)(3), which provides how emergency services rendered by an out-of-network health care provider may be paid. The court determined that the state law claims would be more appropriately decided by a state court.

Fetus Has Cause of Action at “Quickening”

The Superior Court (J.D. New Haven) was confronted last year with the question of whether a nonviable fetus has a cause of action for wrongful death. In Elderkin v. Mahoney, the plaintiff underwent an abortion after being informed that her 17-week old fetus had a life-threatening genetic disorder. Three days after the abortion, the hospital where the abortion took place discovered that the fetus was, in fact, normal and informed the plaintiff of this fact. The plaintiff, along with her husband, sued the hospital, her physician and others claiming wrongful death as a result of negligent testing and treatment. The court noted that the state wrongful death statute (CGS §52-555) does not specify that the decedent must be a “person” and looked to where other areas of the law draw the line in cases involving unborn children. In the law of wills, for example, a child is considered “in being” at the moment of conception, while the law governing abortion recognizes the rights of the fetus separate from the mother at the point of viability and, in the case of criminal law, a child must be born alive to be considered a victim of murder. The court also looked back to some long-standing legal resources for guidance, citing a 1901 Connecticut Supreme Court case which determined that the main purpose of the wrongful death statute is to provide compensation for the loss of life and a 1765 treatise on English common law that identified “quickening” as the point at which life begins (that is, when the fetus begins to move in utero). The court determined that, for purposes of the wrongful death statute, quickening makes “a great deal of common sense” as laypersons can readily understand the concept. Since the court had not received evidence on whether the fetus had quickened at the time of the abortion, it denied summary judgment for the defendants. Elderkin v. Mahoney, Superior Court, judicial district of New Haven, Docket No. CV-15-6056191 (September 28, 2017).

The court noted that if the defendants were able to produce evidence that unambiguously established that the child had not quickened at the time of the abortion, they could resubmit the motion for summary judgment.

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