Holland & Hart Healthcare Law Blog

TAX COURT: NO CHARITABLE DEDUCTION FOR MEDICAL PRACTICE “GOOD WILL”

Medical Practice “good will” is one of those amorphous concepts like pornography that is difficult to define, but you know it when you see it.  Not infrequently “good will” is deemed the largest component in the appraised value of a medical practice.  In many medical practices the actual hard assets of the practices have little or no value.  Part of the value of intangible good will can be identified in the surrender of the right to compete and the potential for generating revenues and income in the future.  Compliance oriented appraisals of medical practices generally assess the value of future revenue multiples after deducting the expenses and salaries of replacement physicians (with substantially lower compensation levels for physicians without a seasoned practice.)

TEXAS COURT UPHOLDS HOSPITAL CEO NON-COMPETE

In Teel v. Hospital Partners of America, CA No. H-06-3991, a U.S. District Court for the Southern District of Texas – Houston Division, entered summary judgment in favor of the defendant finding as a matter of law that Mr. Teel, a former CEO of Twelve Oaks, an HPA hospital in Houston could not claim damages against HPA for its attempts an enforcing Mr. Teel’s covenant not to compete with HPA, because the covenants were enforceable under the law of the contract (North Carolina) and under the law of the jurisdiction (Texas). Mr. Teel’s contract restricted him from “owning, acquiring, developing or managing a competing hospital located within a 25-mile radius of an HPA facility or a facility that HPA was actively pursuing, for one year after his employment ended. If Mr. HPA terminated his employment without cause, Mr. Teel was to receive a severance package up to one year’s salary and benefits, if he signed an “effective release agreement in form and substance reasonably satisfactory” to HPA.

MONTANA COURT MUZZLES BARKING RADIOLOGIST

In St. James Healthcare v. Cole, Mont., No. DA 07-0084, 2/12/08. the Montana Supreme Court upheld an injunction that  St. James Healthcare obtained against its former exclusive contractor for radiologist services., Dr. Jesse A. Cole. Dr. Cole allegedly made harassing and threatening phone calls to a radiologist a Boston University Medical Center in Massachusetts who obtained the radiology contract after Dr. Cole was dispatched by St. James. Dr. Cole sent emails and phone calls to his replacement warning her of a “predatory situation” and that “bad things can happen to you.”  The Court concluded that an injunction that proscribed speech and conduct that was intended to embarrass, harass or threaten was not protected by the First Amendment to the Constitution and therefore the injunction and restraining order imposed on Dr. Cole was not an illegal prior restraint. Dr. Cole, is a fan of the Second Amendment to the Constitution as well. He maintains two 64 gun vaults, which seems to have generated some considerable concern about the potential of his going “postal.” Other radiologists testified in court about a concern s over threatening interactions with Dr. Cole in the past. Erratic behavior and large gun vaults do tend to focus the mind.

TEXAS & UTAH SPLIT ON EXPERT TESTIMONY REQUIREMENT IN HEALTH CASES.

Two recent cases in Texas and Utah dealing with the requirement of expert testimony in health cases underscore the principal that “law is common sense as amended by the legislature. The Utah Supreme Court in Bowman v. Michael A Kalm, M.D., determined that, while an expert witness is generally required to establish breach of the standard of care and causation of damages because most medical malpractice cases depend upon knowledge of scientific effect of medicine, such requirements do not apply to issues where the factual determination rests upon the common knowledge of the lay jury.
In Bowman, the defendant prescribed sleeping pills to a depressed patient who was known to overuse sleeping pills, which made her drowsy and clumsy.