Lawsuit says Duke is trying to destroy a large, 90-year-old private physicians group
Months of tension between Duke University, Duke University Health System and a private group of physicians who work at both have surfaced in a lawsuit.
The lawsuit claims Duke University and Duke Health have conspired to undermine the physicians group and force or coerce its members to work for Duke. It says Duke is essentially trying to acquire the 90-year-old private company, comprised of 1,850 physicians, without paying for it.
The result of becoming Duke employees, the suit says, is that the physicians would lose their independence and would likely be paid less for more work in the future.
A spokesman for Duke said the lawsuit “has no basis in fact or law” and that Duke will vigorously fight it.
The suit was filed in Durham County Superior Court late Monday by Dr. Eugene Moretti, an anesthesiologist and critical care specialist, on behalf of the Private Diagnostic Clinic. Founded in 1931, the PDC is a for-profit company that employs doctors who work, teach and do research at Duke University and its medical facilities.
The lawsuit says Duke has tried for years to take over the PDC but that the two sides could not agree on terms. It says Duke has now changed strategies and begun to “pursue unlawful ways of destroying the PDC to take over its business and goodwill.”
Last winter, Dr. Mary E. Klotman, dean of Duke’s medical school, announced the formation of Duke Faculty Practice, an alternative to the PDC controlled by Duke. Transitioning to the new practice was optional, Klotman wrote in a memo to faculty, except for those in clinical departments who do research. They have until July 2022 to join.
“This is consistent with the organizational model used by our peer institutions across the country and aligns with our need to simplify the management of relationships with key research funding organizations,” Klotman wrote.
The shift would mean the PDC would lose 400 doctors, according to the lawsuit, threatening its existence “by draining the physicians group of its most important asset: its members.”
But Michael Schoenfeld, Duke’s chief communications officer, said Duke and the PDC have been in talks over how to better work together and align their missions. Schoenfeld said Duke has simply proposed that faculty physicians who are already employed by Duke for education and research become full-time Duke employees for their clinical practice as well.
“We believe this will lead to greater operational efficiency, a better patient experience, the ability to recruit and retain top talent, and enhancements in community health,” he wrote in an email. “The lawsuit filed by Dr. Moretti, who is not a representative of PDC leadership, is an attempt to obstruct these discussions about alignment and impede Duke’s ability to provide the highest-quality health care services to our patients.”
Complicating the relationship between the PDC and Duke is that the PDC’s leaders hold similar positions in the medical school. The chair of the school’s psychiatry department, for example, heads the same department at the PDC and serves on its governing board.
The suit claims that despite serving on the PDC’s board, five doctors planned to move their medical school departments from the PDC to the new physicians group formed by Duke. It says one of them, Dr. Anthony Joseph Viera, followed through, transferring the PDC’s Department of Family Medicine and Community Health to Duke last summer, in violation, the suit says, of his fiduciary duties to the physicians group.
What is the private physicians group worth?
The lawsuit says the PDC’s board as a whole has not looked out for the interests of its members. It says the board hired two law firms to advise it on Duke’s takeover attempt, then worked to avoid sharing the conclusions of one of those firms with PDC members.
A memo from the firm was leaked to a PDC message board, the lawsuit says. The suit quotes an unnamed lawyer for the New York firm Epstein Becker & Green who said it appeared Duke was pressing some members of PDC’s board to dissolve the practice, against the best interests of the group.
It said by luring or coercing doctors to join its physician practice, Duke was essentially trying to acquire the PDC.
“It seems clear that one of Duke’s overarching objectives here is to terminate PDC by taking over substantially all of PDC’s assets and operations,” the suit quotes from the memo. “Viewed from that perspective, the Duke Employment Offers — if accepted by all or substantially all of PDC’s Physicians — would amount to Duke acquiring PDC for a purchase price of $0.”
The suit says the PDC hired three firms to determine the value of the private physicians group, and that one of them concluded that it was somewhere between $750 million and $1.1 billion.
Finally, the suit says Duke further undermined the PDC in October when Dr. Eugene Washington, Chancellor for Health Affairs and president and CEO of the health system, terminated the agreement Duke and the PDC have operated under since 1972.
The agreement, which has been renewed annually since 1976, includes a clause that says Duke “recognizes the separate and independent status of the PDC and agrees not to interfere in its organization and operations to the extent that such organization and operations relate to the private practice of medicine.”
In his termination letter, Washington said threatened litigation about the relationship between Duke and the PDC had been based “upon an unfortunate misinterpretation” of that clause, according to the lawsuit.
The letter also said Duke had “no intention of taking steps to undermine the PDC or to compromise its continued existence.” The lawsuit argues that requiring doctors who do research at Duke to leave the group does just that.
Other physicians could join lawsuit
Moretti is suing Duke on his own but on behalf of the company. In late August, his attorney, Erica Harris, wrote to the PDC board urging it to file suit to protect the group’s interests.
In an interview Tuesday, Harris, who is based in Houston, said a committee created by the board agrees Moretti’s claims have merit but has not yet decided whether to sue. She said he decided to go ahead on his own.
“It would seem that the other PDC members are concerned about their careers,” Harris said. “Dr. Moretti is an older gentleman who is passionate about what he has devoted his life and much of his career to, and he’s willing to stand up against Duke.”
Other physicians or the PDC itself could join or intervene in the lawsuit, Harris said. “We’re just the first one to file,” she said.
Harris said Moretti is not seeking any direct compensation for himself, other than attorneys fees. The suit seeks unspecified damages for the PDC.
It’s not clear how the outcome of this battle between Duke and a large private group of physicians would affect patients. Harris said keeping the PDC independent would prevent further consolidation in the health care industry that can potentially lead to fewer choices and higher prices.
“In addition, many people would hear about an old institution that has worked independently and worked to build Duke and then Duke turns around and when they can’t buy it or agree to business terms to merge with it, Duke uses its power to basically force the dissolution of the entity or destroy it,” she said. “I think that’s a compelling story that people might care about even if it doesn’t affect their pocket book.”
