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Pacific Radiation Oncology, LLC, A Hawaii Limited v. the Queen's Medical Center

February 3, 2012

PACIFIC RADIATION ONCOLOGY, LLC, A HAWAII LIMITED LIABILITY CORPORATION, ET AL., PLAINTIFFS,
v.
THE QUEEN'S MEDICAL CENTER, A HAWAII NON-PROFIT CORPORATION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Leslie E. Kobayashi United States District Judge

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR A TEMPORARY RESTRAINING ORDER

On January 27, 2012, Plaintiffs Pacific Radiation Oncology, LLC, a Hawai`i Limited Liability Corporation, PRO Associates, LLC, a Hawai`i Limited Liability Corporation, and John Lederer, M.D., Individually and as a Manager of the LLCs appearing for the Pacific Radiation Oncology Physicians (collectively "Plaintiffs") filed the instant Motion for Temporary Restraining Order ("Motion")*fn1 with their complaint in state court. Defendants The Queen's Medical Center, a Hawai`i Non-Profit Corporation, Queen's Development Corp, a Hawai`i for Profit Corporation, and the officers and/or trustees of Queen's Medical Center, in their individual and official capacities (collectively "Defendants"), removed this action on January 31, 2012, and filed their memorandum in opposition to the Motion on February 2, 2012. John Doe filed a motion to intervene on February 1, 2012, and this Court has permitted his counsel to participate in the proceedings on the Motion pending this Court's decision on the motion to intervene. The Court finds this matter suitable for disposition without a hearing pursuant to Rule LR7.2(d) of the Local Rules of Practice of the United States District Court for the District of Hawai`i ("Local Rules").*fn2

After careful consideration of the Motion, supporting and opposing memoranda, the relevant legal authority, and the representations of counsel at the status conferences, Plaintiffs' Motion is HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set forth below.

BACKGROUND

Plaintiff Pacific Radiation Oncology, LLC ("PRO LCC") has five equity members and one employee physician. All six are physicians licensed to practice in the State of Hawai`i, and collectively they have over 140 years of experience in radiation and oncology. Plaintiffs' Verified Complaint for Declaratory and Injunctive Relief and for Damages ("the Complaint") states that PRO LLC is the largest radiation oncologist group in Hawai`i, and it employs more than half of the radiation oncologist in Hawai`i. Until recently, PRO LLC provided services to its patients at The Queen's Medical Center ("Queen's"), the Cancer Centers of Hawai`i in Ewa Beach and Liliha, which are affiliated with, respectively, Hawai`i Medical Center - West ("HMC-West") and Hawai`i Medical Center - East ("HMC-East"), and Wilcox Health on Kauai. [Complaint at ¶ 3.] According to the Complaint, PRO LLC "is the only group practice in Hawai`i to offer head, neck, and GYN interstitial brachytherapy, which is a procedure that can only be performed in the operating room of a hospital that has received approval from the Nuclear Regulatory Commission" ("NRC"). [Id.] Queen's is the only NRC-licensed facility on Oahu with an operating room. When a necessary procedure does not require a hospital, a PRO LLC physician will seek to perform the procedure at the facility of the patient's choice. Facilities that compete with Queen's have available facilities for radiation oncology, but Queen's facilities are "the most recognized and frequently-used facilities on Oahu." [Id.]

The instant case has arisen because in 2011, after an approximately forty-year professional relationship with Plaintiffs, Defendants made the decision to transition the Queen's radiation oncology department to a closed facility. In other words, only physicians who are employed by Queen's would be granted privileges for Queen's facilities. Defendants state that they decided to transition to the closed-facility model because it is more efficient and enhances the quality of and satisfaction with patient care.

As a result, the PRO LLC physicians*fn3 were informed by letter on September 15, 2011 that Queen's Board of Directors ("the Board") had approved a resolution, dated August 29, 2011, that only physicians employed by Queen's would be allowed exercise clinical privileges to provide radiation oncology services at Queen's. The policy change was to take effect on February 1, 2012. [Complaint at ¶ 19.] In the period since issuing that letter, Queen's opened the possibility of employment at Queen's to the PRO LLC physicians, but these six physicians did not accept. Their refusal was, due in part, to their objection to Queen's requirement that they would have to: 1) terminate their interest in facilities that compete with Queen's; and 2) stop providing services at competing facilities. [Id. at ¶ 21.] Plaintiffs' attempts to negotiate with Queen's regarding these demands or to extend the date that the policy change was to take effect were unsuccessful.

On December 28, 2011, HMC-West closed, and, on January 5, 2012, HMC-East closed, eliminating the only nonQueen's medical group facilities where Plaintiffs could provide radiation oncology therapies that required a hospital setting. Plaintiffs have applied to other facilities for clinical privileges, but none of those facilities has a NRC license. [Id. at ¶¶ 22-24.]

The Complaint alleges that, in deciding to terminate Plaintiffs' hospital privileges, the Board "did not follow any of the constitutional, legal, or due process requirements provided for in both the [Queen's] Bylaws and applicable Hawai`i law to ensure that the Plaintiffs' substantive and procedural rights to due process were not violated." [Id. at ¶ 19.] Plaintiffs allege that Defendants' stated reason for adopting the closed-facility model - "'to standardize and to achieve improved clinical outcomes, enhance patient satisfaction, achieve better quality and continuity of care'" - is a pretext, and the real reason behind the policy change is to deny patients the opportunity to be treated at non-Queen's facilities and to prevent Plaintiffs from providing services which compete with Queen's. [Id. at ¶¶ 25-26.] Plaintiffs also argue that, in enacting the resolution, Defendants acted "arbitrarily, capriciously, dishonestly, and maliciously with the specific and deliberate intent of harming Plaintiffs and destroying Plaintiffs' ability to treat patients at facilities competing with [Queen's]." [Id. at ¶ 27.] Further, Plaintiffs allege that Defendants acted "intentionally, knowingly, grossly negligently and in conscious and in wanton disregard to rights of the Plaintiffs warranting an award of exemplary and punitive damages." [Id. at ¶ 29.]

The Complaint alleges the following claims: denial of procedural and substantive due process, as guaranteed by Article I of the Hawai`i Constitution and the First and Fourteenth Amendments of the United States Constitution ("Count I"); violations of Queen's bylaws and governing regulations ("Count II"); intentional and tortious interference with Plaintiffs' contractual obligations to facilities which compete with Queen's ("Count III"); intentional and tortious interference with prospective business advantage ("Count IV"); intentional and tortious interference with Plaintiffs' professional and contractual relationship with their patients ("Count V"); unfair, deceptive, anti-competitive and illegal trade practices in violation of Haw. Rev. Stat. Chapter 480 based on the termination of Plaintiffs' privileges ("Count VI"); unfair, deceptive, anticompetitive and illegal trade practices in violation of Chapter 480 based on violations of the Federal Anti-Kickback statute, 42 U.S.C. § 1320a-7b ("Count VII"); unfair, deceptive, anti- competitive and illegal trade practices in violation of Chapter 480 based on attempted economic credentialing ("Count VIII"); unfair, deceptive, anti-competitive and illegal trade practices in violation of Chapter 480 based on the breach of Queen's corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services ("Count IX"); and a claim for breach of fiduciary duty and bad faith ("Count X").

Plaintiffs seek the following relief: temporary, preliminary, and permanent injunctions enjoining Queen's from terminating Plaintiffs' hospital privileges; special, general, and punitive damages under Hawai`i law for the damages caused by Defendants' actions alleged in the Complaint; treble damages under Chapter 480, if greater than the amount of punitive damages Plaintiffs are entitled to; attorneys' fees, interest, and prejudgment interest; restitution, disgorgement of profits, or other equitable relief warranted because of Defendants' breach of their fiduciary duties; and any other appropriate relief.

In the instant Motion, Plaintiffs argue that this case meets all of the requirements for a temporary restraining order.*fn4

Plaintiffs argue that they did not receive notice of the reasons for terminating their privileges, nor any hearing and thus did not have any opportunity to challenge the decision. In addition, Defendants' actions violate both Queen's published bylaws and other anti-competitive statutes. Plaintiffs therefore contend that they are likely to succeed on the merits of their claims. Plaintiffs also argue that their patients will suffer irreparable harm unless the Court grants a temporary restraining order because Plaintiffs will not be able to provide them with necessary radiation oncology therapy at Queen's. Plaintiffs also argue that Defendants will not suffer any prejudice if the Court issues a temporary restraining order, and that the public interest clearly favors issuing a temporary restraining order.

In their memorandum in opposition, Defendants state that there is no basis for a temporary restraining order because Defendants have merely made a rational business decision which they believe will improve the quality and efficiency of medical care. Defendants contend that the instant case does not satisfy any of the requirements for a temporary restraining order. Defendants emphasize that their decision to restrict the exercise of clinical privileges is not based on concerns about Plaintiffs' qualifications; Defendants assert that what Plaintiffs are challenging is a merely a policy decision, of which Defendants gave Plaintiffs prompt notice. Defendants argue that, in deciding to move to a closed-facility model, they made a sound decision in accord with their broad discretionary powers under Hawai`i statutes and case law, and in compliance with Queen's bylaws. Defendants submit that Plaintiffs have not shown a likelihood of success on the merits of their due process claim because there was no decision to terminate or revoke Plaintiffs' privileges based on issues of competency or qualifications. Further, Defendants argue that Plaintiffs are not likely to prevail on their Chapter 480 claims based on allegedly deceptive practices because Plaintiffs are not consumers within the meaning of Haw. Rev. Stat. §§ 480-1 and 480-2(d), and Plaintiffs are not likely to prevail on their unfair competition claim because the Complaint does not sufficiently allege an injury to competition. As to the Chapter 480 claim based on alleged violations of the federal anti-kickback statute, Defendants contend that Plaintiffs are not likely to succeed on the merits because the statute does not allow for a private right of action and the statue is inapplicable to the facts of this case. Defendants also point out that, when Plaintiffs applied for appointment and reappointment to Queen's medical staff, they agreed to extend absolute immunity to Queen's and its Board for any actions relating to hospital privileges. Defendants contend that filing the Complaint violated that agreement, and that the case should be dismissed. In other words, Plaintiffs are not likely to succeed on the merits of any of their claims.

As to the other factors, Defendants assert that no irreparable harm would result if the Court denies the temporary restraining order. Plaintiffs have an adequate legal remedy for their damages from their inability to exercise privileges at Queen's. Defendants also argue that there would be no irreparable harm to Plaintiffs' patients because of the exceptions that Defendants have extended to the new closed-facility policy, including an exception for the proposed intervenor-plaintiff John Doe. Defendants emphasize that the Queen's radiation ontologists are qualified and privileged to conduct all necessary procedures, including seed implantation for prostate cancer. Defendants contend that a temporary restraining order would not be in the public interest because a closed facility will improve the quality of care and, if forced to extend Plaintiffs' privileges, Defendants' efforts to improve care will be thwarted. Finally, Defendants submit that the balancing ...


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