Julian (Bo) D. Bobbitt, Esq. & Dana E. Simpson, Esq.

          The North Carolina Board of Nursing (“BON”) continues its efforts to challenge the longstanding legal standard requiring physician supervision of nurse anesthetists providing anesthesia services in North Carolina.  The BON has decided to appeal the December 31, 2003 order of a Wake County Superior Court judge rejecting the BON’s challenge to the physician supervision standard. 

As you may remember, the BON filed a lawsuit last year challenging the Medical Board’s Position Statement on Office Based Procedures because it requires physician supervision of nurse anesthetists.  The BON claims that a 1994 Consent Order between the BON and the Medical Board created a standard of collaboration, not supervision, between physicians and nurse anesthetists.  The Medical Board, NCSA and N.C. Medical Society (“NCMS”) contend that the Position Statement is simply a reiteration of the existing standard of care in North Carolina and that the 1994 Consent Order did nothing to change this legal standard.

             The BON filed its appeal brief with the North Carolina Court of Appeals in July.  NCSA, NCMS and the Medical Board will file a reply brief in August.  The Court of Appeals will then appoint a three-judge panel to hear the case.  The Court may schedule oral arguments for sometime this Fall. 

             At its essence, the BON case is an attempt to legislate through litigation.  The requirement of physician supervision of anesthesia services has been the law in North Carolina for many years.  If this important patient safety requirement is to be changed, then it should be changed by the General Assembly, not the courts.

            Plaintiffs’ attorneys have turned their attention to non-profit hospitals in recent weeks, filing a flurry of national class action lawsuits, targeting nearly 300 facilities, alleging that certain non-profit hospitals act more like for-profit entities than tax-exempt charities.  The cases are being coordinated by the law firm of Richard Scruggs, who is well known for his work in spearheading the national class action lawsuits against the tobacco industry.  

Some of the hospitals targeted by these lawsuits include the Ochsner Clinic in New Orleans, the Cleveland Clinic, and New York Presbyterian.  No lawsuits have been filed yet in North Carolina, but the outcomes of court decisions in other states will likely impact the operations of non-profit hospitals in this State. 

The lawsuits seek to recover damages for uninsured patients who were allegedly overcharged for hospital services and seek to prevent some of the aggressive hospital collection practices that have garnered significant national publicity in recent months. Among other claims, the lawsuits allege that the non-profit hospitals have breached an implied contract with the public by failing to provide the charity care that helps the hospitals retain their non-profit status with the IRS.  

Of particular interest to NCSA members, the lawsuits allege that non-profit hospitals violate an IRS prohibition against benefiting private parties when such hospitals enter into exclusive contracts with private physicians.  According to the lawsuits, exclusive contracts impermissibly allow private physicians to derive profits from the use of a non-profit facility.  Richard Scruggs told USA Today that he wants non-profit hospitals to stop signing exclusive contracts with physicians that allow the selected physicians to use the hospital facility free of charge, while excluding other physicians.  This allegation fails to recognize the many benefits provided to hospitals by exclusive contracting arrangements, benefits that have been repeatedly affirmed and supported by federal court decisions.  Furthermore, there is no precedent for suggesting that a private party has the right to enforce an implied contract between a hospital and the IRS based on the hospital’s non-profit status.  

The outcomes in these lawsuits are likely to set important precedents governing the future operations of non-profit hospitals.  We will keep you updated as these cases progress.