Lawsuit against Wellmont granted class-action status

Matthew Lane • Apr 4, 2018 at 8:55 AM

KINGSPORT — A multimillion-dollar lawsuit filed by Highland Physicians against Wellmont Health Systems has been granted class-action status.

Highlands Physicians filed the lawsuit in Sullivan County Law Court in February 2016, claiming Wellmont tried for years to undermine or destroy the association. HPI is an independent practice association with 1,500 physicians and other medical practitioners, who are mainly located in Northeast Tennessee and Southwest Virginia.

In July 2017, Sullivan County Chancellor E.G. Moody granted class-action status for the lawsuit. In response, Wellmont appealed the decision to the Tennessee Court of Appeals (which failed) and then to the Tennessee Supreme Court (which also failed).

Meaghan Smith, spokesperson for Ballad Health, said Ballad had no comment on the decision.

In a class action lawsuit, a “class representative” (in this case HPI) sues on behalf of other people who have similar claims. The people together are a “class” or “class members.” One court resolves all issues for everyone in the class, except those who exclude themselves from the class.

The lawsuit is seeking compensatory damages of $15 million to $75 million, plus an additional $3.9 million for the difference in the reimbursement rate under the Wellmont employee health benefit plan.

According to the lawsuit, HPI and Bristol Hospital (a predecessor of Wellmont) formed the Highlands Wellmont Health Network — a physician-hospital organization — in 1993. HPI and Wellmont are both 50 percent owners, and per the stockholders agreement, both organizations are barred from competing with the network.

When Wellmont merged with Holston Valley Hospital some 20 years ago, an amendment was made to the stockholders agreement, but according to the lawsuit, the amendment did not materially change the obligations or relationship between HPI and Wellmont.

From 1993 through 2011, HPI successfully worked with five different administrations at Wellmont, with both sides generally fulfilling their obligations under the stockholders agreement. When occasional disputes arose, they were resolved amicably and constructively, the lawsuit states.

During this time, the network devoted considerable resources to creating and enhancing clinical integration, according to the suit. Clinical integration describes the knitting together of specialties, providers and hospitals into a single, functioning unit to improve medical service, contain costs and improve community health, the lawsuit states.

The deterioration of the relationship between HPI and Wellmont began with the administration of then-Wellmont CEO Denny DeNarvaez in August 2010, the lawsuit claims.

“From the outset, the new senior leadership took an adversary position to doctors not employed by Wellmont,” the lawsuit states.

One example cited in the lawsuit took place in October 2012 when DeNarvaez announced that in Wellmont’s view, the independent doctors were “the real competition,” more so than Mountain States Health Alliance.

The lawsuit claims DeNarvaez and Alice Pope — the executive director of the Highlands Wellmont Health Network — systematically and deliberately undermined HPI, dismantled the network and reduced resources devoted to clinical integration, including making a number of unilateral decisions without HPI’s knowledge.

According to the lawsuit, in June 2012 Wellmont and Humana Medicare Advantage signed a contract that Wellmont had secretly and separately negotiated solely for Wellmont doctors, a move that violated the HWHN stockholders agreement.

HPI officials complained about the action, though they chose not to sue.

The lawsuit states Wellmont repeated a similar action with Cigna, with Pope allegedly telling Cigna officials that the HWHN was not clinically integrated and for that reason Cigna had to deal with Wellmont separately.

HPI claims Wellmont violated the stockholders agreement, has breached its fiduciary duties to HPI and is in breach of contract. The lawsuit further claims Wellmont has failed to pay HPI nearly $300,000 in “tithes.”

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