Business

Atrium Health punches back, countersues as fight over lost medical contract escalates

The exterior of Atrium Health's flagship hospital in Dilworth. Atrium is countersuing a company and its affiliate that supplies anesthesiologists to many of its Charlotte-area hospitals, in the latest escalation of a high-profile fight over a health care contract.
The exterior of Atrium Health's flagship hospital in Dilworth. Atrium is countersuing a company and its affiliate that supplies anesthesiologists to many of its Charlotte-area hospitals, in the latest escalation of a high-profile fight over a health care contract. rlahser@charlotteobserver.com

Lies, defamation and breach of confidentiality were among the claims Atrium Health lobbed at a company and its affiliate that supplies anesthesiologists to many of Atrium's Charlotte-area hospitals.

Those accusations were part of Atrium's countersuit in a high-profile fight over a lost health care contract.

The legal action filed late Wednesday comes after Florida-based Mednax and affiliate Southeast Anesthesiology Consultants sued Atrium last week after losing a contract with the hospital system. In that suit filed in state court in Mecklenburg County March 26, Atrium is accused of stealing Southeast's trade secrets and using the information to help launch a new vendor that now has the contract.

In its suit, Charlotte-based Atrium denied the allegations. It accused Mednax and Southeast of defamation from a marketing campaign that in recent days has included newspaper and radio ads as well as billboard messages across Charlotte.

The campaign highlights Southeast's loss of its contract and suggests that patient health is being put at risk by Atrium's switch to the new vendor. In its suit, Atrium said the campaign has caused it harm, including by leading some patients to cancel procedures.

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Neither side has said how much the lost contract was worth.

The new vendor, Scope Anesthesia of North Carolina, will begin providing anesthesiologists to most of Atrium's Charlotte-area hospitals on July 1. Those facilities are Cleveland, Mercy, Lincoln, Kings Mountain, Pineville, Union and Atrium's flagship location in Dilworth.

Charlotte-based Scope was created in January by Dr. Thomas Wherry, a consultant Atrium brought on last year to evaluate its anesthesiology business. Southeast is also based in Charlotte.

For Atrium, which this year changed its name from Carolinas HealthCare System, it's the second lawsuit it has been hit with in a week.

On Monday, 92 doctors with Mecklenburg Medical Group sued the system in order to break away and operate independently. Atrium has said it would grant that request but still needs to work out how to deal with non-compete restrictions in that case.

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The falling out between Atrium and Mednax resulted in a rare public war of words between two health care giants. It's not unusual for hospital systems to change vendors — but such divorces normally don't erupt into such public disputes.

Atrium's suit also accuses Mednax of breaching confidentiality agreements by giving Atrium's surgical staff sensitive information from presentations that Wherry gave last year. Mednax has used that information to mislead Atrium staff and the public into thinking Atrium will be slashing anesthesiologist staffing at hospitals, Atrium's suit says, adding that such claims are a lie.

In a statement, Southeast said it is seeking, through its lawsuit, to protect investments it has made in patient care over its nearly 40-year relationship with Atrium. It also denied the claims made by Atrium.

"We are not surprised that Atrium would seek to defend itself through these legal actions, given its history of repeated adversarial behavior toward the medical community, and its own employees, throughout Charlotte and Mecklenburg County," Southeast said.

'Preoccupied' with profits

In its suit, Atrium paints publicly traded Mednax as being more focused on its bottom line than patient safety since acquiring Southeast in 2010.

"Mednax has demonstrated itself to be an unstable and unreliable service provider preoccupied with increasing its profits instead of providing healthcare of the quality and consistency that Atrium Health demands," the suit says, adding that Mednax "pursued corporate profits at the expense of Atrium Health and its patients."

For example, Mednax rejected steps that Atrium suggested to lower anesthesiology costs for patients while maintaining the same level of patient care, the suit claims. That rejection was one of the reasons Atrium decided not to renew the contract with Southeast, according to the lawsuit.

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In addition, Atrium said it was forced to intervene to prevent a "public health crisis" Mednax created last summer, when it refused to give its doctors acceptable compensation during negotiations over employment contracts. As a result, a substantial majority of the doctors resigned, a move that risked interrupting surgical services unless Atrium stepped in, the suit says.

"Mednax has ... put life-saving Atrium Health services at risk for the sole purpose of leveraging additional profits on the backs of its physicians," the suit says.

Atrium's suit says more than 50 of Southeast's doctors filed complaints in the past year with the North Carolina Medical Board claiming Southeast and Mednax’s business practices violate N.C. medical ethics rules and state and federal laws. The suit also says that, over the past several months, Duke Raleigh Hospital and Cone Health in Greensboro have declined to renew their anesthesiology contracts with Mednax.

"Ultimately, we were not comfortable in partnering with Mednax, a company that has workforce instability, among other issues," Atrium said in a statement about its lawsuit.

In an internal memo Thursday to Atrium employees obtained by the Observer, Atrium CEO Gene Woods said Mednax "does not have our communities' best interests at heart." Woods also said Scope is ahead of schedule in recruiting and hiring anesthesiologists and that he's confident the transition to the new vendor will be seamless.

Atrium seeks damages

Upset by allegations made in the Charlotte media blitz, Atrium wants damages from Southeast and Mednax for what it describes as misrepresentations designed to force Atrium back to the bargaining table.

In one ad, Southeast says Atrium is considering "radical" changes to anesthesia care, "where physician anesthesiologists may not be in the operating room when you need them most."

In its lawsuit, Southeast says Wherry and Atrium proposed to Southeast last year substantial cuts to the number of anesthesiologists at Atrium facilities. Atrium has said such statements are false and that even during contract discussions with Mednax it indicated it did not anticipate reducing staffing levels.

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"Mednax’s campaign is libelous, malicious, and harmful to Atrium Health and its community," Atrium's suit says.

Mednax’s disinformation campaign has damaged Atrium’s relationships with its surgical staff, the suit says. In addition, patients have cited the false and misleading statements in canceling procedures, according to the suit, which seeks more than $25,000 for those damages alone.

Atrium's filing does not make clear what will happen to the roughly 90 Southeast doctors who work at Atrium facilities.

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