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Hospital board steadfast in malpractice suit against law firm

Imagine being a principal administrator of the following hospital.

First, the facility is — more correctly, was — the long-time pride of its local community, operating independently as other hospitals gave in to financial crunches that compelled them to join large regional health care entities.

Then, hospital managers made a mistake. They began paying doctors pursuant to an incentive-based model not permitted under federal law. That landed the facility in federal court, where it ultimately lost and had to dole out more than $72 million to federal regulators. On top of that, the defendant facility shelled out $15 million in legal fees to the law firm that unsuccessfully represented it in court.

That firm was the same entity relied upon by the hospital when it was evaluating the incentive-driven model it ultimately adopted, to its peril. In fact, the firm’s attorneys endorsed the payment scheme.

As a result of its loss, the hospital had to sell all its assets. Although it still operates in the community, it has lost the independent status it so long cherished, and is now affiliated with one of the aforementioned regional giants it long sought to steer clear from.

A volunteer board noted as “winding down the affairs of the old, locally owned” facility is loathe to simply accept the status quo. It has filed a legal malpractice lawsuit against its former legal counsel, citing the law firm’s “misleading and reckless” advice regarding the incentive-payment scheme that led to the facility’s loss of independence.

The suit was recently moved from federal to state court. The board reportedly seeks $117 million in damages.