Health Care Legal News: February 14, 2012 • Volume 2, Number 2


In this issue: Fiduciary Duties to Employer Can Prevent Competition by Physicians; Impact of Illegality of Payment Arrangement Under Stark Law on Payment for Services Provided by Referring Physician; and As Consolidation in Healthcare Increases, So Does Antitrust Enforcement: An Application of the State Action Doctrine and an Analysis of Two Instructive Cases.

Excerpt from 'Fiduciary Duties...':

Before resigning employment to work for a competitor or otherwise assisting the competitor, a physician or other individual who provides healthcare services to an employer and who also serves as an officer or director of the employing hospital or practice group should be aware of the potential exposure for breach of fiduciary duty owed to the employer. In a recent Kentucky case, three physicians who were members of the board of directors of a medical facility (“Lexington Clinic P.S.C.”) began negotiations with a recruiter for a company (“Baptist Healthcare System”) that wanted to build a competitive medical facility to that owned by Lexington Clinic P.S.C. In response to these actions, which included signing a letter of intent to become employed by Baptist Healthcare System and actively soliciting fellow physician-board members and staff to join a new primary care clinic that will be established by the competitor, Lexington Clinic P.S.C. filed legal action against the three physicians.

The Kentucky Court of Appeals reversed the trial court’s dismissal of the complaint against the physicians as a result of its failure specifically to refer to the applicable Kentucky statute that governs actions for breach of fiduciary duty against current and former corporate directors. Even though the underlying complaint filed by Lexington Clinic P.S.C. did not refer to the applicable statute, the appellate court found that the complaint generally contained allegations that if found true would create liability under the Kentucky statute.

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