Hospital of Central Connecticut v. Neurosurgical Associates, P.C. (2013)

MEMORANDUM OF DECISION

I

Procedural History

The present matter is before the court upon remand from the Appellate Court.   Hospital of Central Connecticut v. Neurosurgical Associates, PC, 139 Conn.App. 778, 57 A.3d 794 (2012).   The remaining claim pending from the April 6, 2009 complaint is unjust enrichment.   In a pleading dated February 17, 2010, the defendant responded to the complaint through its answer and special defenses.¹

The plaintiff, the Hospital of Central Connecticut (the “Hospital” or “employer”), seeks to recover $66,666.64, which it argues was inadvertently paid to the defendant, Neurosurgical Associates, P.C. (“physicians” or “Neurosurgical”), for on-call medical services.   The plaintiff contends that the physicians were required by staffing privilege agreements to provide on-call services without financial compensation following the termination of a payment agreement.

The trial was held on June 6, 2013.   The parties introduced testimony and many exhibits.   Thereafter, the parties filed post-trial briefs and proposed findings of fact.

II

DiscussionAFindings of Fact

From the credible evidence presented at trial, the court finds the following relevant facts.

In 2006, the Hospital was formed through the merger of New Britain General Hospital and Bradley Memorial Hospital.

The Hospital has approximately 550 physicians on staff.   Approximately one-quarter of these physicians are employees of the Hospital.   The remaining physicians come from other sources, such as independent group practices.   The Hospital has a surgical department under which there are various divisions.   These divisions include, among others:  neurosurgery, orthopedic surgery, and oncology.

In August 2004, Steven Hanks became employed by the Hospital as the senior vice president and chief medical officer.   Currently, he holds the position of executive vice president and chief medical officer.   In these roles he is responsible for managing the medical staff.

During the relevant period of time, James Massi was employed by the Hospital as the chief of the surgical department.   All of the divisions of surgery reported directly to him.   This included the division of neurosurgery.   His duties consisted of, among others:  administering the protocols and residency program, conducting peer review, and credentialing new members of the Hospital's staff.

The defendant is a neurosurgeon physician practice group.   The principles in this business entity are four neurosurgeons.   They are Howard Lanter, Stephen Calderon, Bruce Chozick and Stephan Lange.   The specialty of neurosurgery involves surgery of the brain, spinal cord, and some peripheral nerves.

Neurosurgical has been affiliated with a number of hospitals.   However, the group's primary work has been with St. Francis Hospital in Hartford, Connecticut.   In fact, they are often referred to as the “St. Francis neurosurgeons.”   Its business address is 1000 Asylum Avenue, Hartford.

During the relevant period of time, Stephen Lange was the president of Neurosurgical.   In the spring of 2004, the Hospital was faced with a predicament.   As a result of the retirement of a staff neurosurgeon, the Hospital only had one neurosurgeon on its active staff.   The Hospital requires at least three neurosurgeons to be available for twenty-four-hour on-call emergencies and other services.   On-call services require the neurosurgeons to be available for a twenty-four-hour period for the urgent needs of patients in the emergency room, or in-patient status.   If a neurosurgeon is not immediately available, the Hospital would be required to transfer the patient to another facility willing to accept the patient.   Emergencies involving neurosurgery can be very time sensitive, so a transfer of a patient could be detrimental to the individual's health and well being.

The Hospital staff executive committee had previously determined that it was unreasonable for a division of the department of surgery to have less than three members, because it would require a surgeon to be on-call every night, or every other night.   The committee concluded that it was reasonable for a surgeon to be on-call every third night.

In an effort to address the unacceptable circumstances, the Hospital entered into discussions with Neurosurgical.   James Massi participated in those negotiations on behalf of the Hospital.   The parties entered into a contract effective April 19, 2004.  (Plaintiff's Ex. 1.) The term of the contract was stated as “April 19, 2004 and shall continue until April 18, 2005 unless sooner terminated hereunder.”  (Id., Addendum § 5.1.) It specified that Neurosurgical “shall initially provide on-call Neurosurgical Services coverage for the Emergency Department and other areas of the Hospital two (2) out of every three (3) days in accordance with a schedule maintained by the Chief of Surgery of the Hospital.   At no additional cost to the Hospital and at its sole discretion, the Hospital may increase the Group's on-call coverage obligations under this Agreement to twenty-four hours (24) hours per day, seven (7) days per week (i.e., 3 out of 3 days) upon fifteen (15) days prior written notice to the Group.”  (Id., § 2.1.) The parties agreed that Neurosurgical would be paid $8,958.33 per month for its on-call services.  (Id., § 4.2.)

Finally, in relevant part, the agreement required that each neurosurgeon employed by Neurosurgical “must apply for, receive, and maintain a Medical Staff appointment and appropriate clinical privileges in accordance with the Medical Staff Bylaws, Rules and [r]egulations.”  (Id., § 2.3.1.)

In the period of time prior to the April 2004 agreement, neurosurgeons Lantner, Calderon, Chozick, and Lange did not have “active medical staff” privileges;  rather, they only maintained “courtesy staff” privileges.   The distinction between the two categories of privileges is significant.   The requirements of each are specified in the Hospital's medical staff bylaws and rules and regulations of medical Staff.  (Pl.'s Ex. 13, 14.)  “Courtesy staff” is stated as consisting of “practitioners qualified for staff membership who admit fewer than six patients to the hospital or to the ambulatory surgery unit each year.   Members of the courtesy staff must be an active staff member of an accredited hospital in the State of Connecticut.” ²  (Pl.'s Ex. 13, § 8.)

In contrast, “active medical staff” is designated as physicians “who assume all the functions and responsibilities of membership on the active medical staff, including, where appropriate, emergency service care and consultation assignments.”  (Id., § 5.) Active medical staff has the right to admit an unlimited number of patients to the Hospital.  (Id.) The responsibilities of a medical staff designation are further stated in the rules and regulations.   (Pl.'s Ex. 14.)   In part, this includes the requirement that “[e]ach member of the active staff is expected to cover the emergency room for both staff service and unassigned private patients on a rotational basis as assigned.   It is the staff member's responsibility to arrange appropriate coverage if unable to fulfill this obligation.”  (Id., ¶ H.)

As a matter of policy, the Hospital typically does not pay active medical staff for on-call coverage because it takes the position that it is a requirement of the designation pursuant to the bylaws, rules and regulations.   Furthermore, it is the Hospital's belief that allowing the physicians the opportunity to bill potential on-call patients directly is adequate compensation for a physician's on-call duty.   Nevertheless, payment is not explicitly prohibited and Neurosurgical was paid each month for on-call services while maintaining active medical staff privileges.   The Hospital insists that physicians who enter into contracts for payment, such as in the present matter, obtain active medical staff status.

Prior to the execution of the April 2004 agreement, the surgeons of Neurosurgical were content with courtesy staff status.   The surgeons obtained active staff status, solely to comply with Neurosurgical's contractual obligations.  (Pl.'s Ex. 1, § 2.3;  5–13.)   The Hospital was aware of this fact and paid Neurosurgical regardless.

The Hospital wanted Neurosurgical to open a medical office in New Britain.   This was memorialized as a term of the contract.  (Pl.'s Ex. 1, p. 1.) Neurosurgical complied with this requirement by renting office space from the Hospital located at 40 Hart Street.  (Def.'s Ex. B, C.)

On a monthly basis, the Hospital would prepare an on-call schedule designating the neurosurgeon who would provide coverage on a particular day.   Each month the Hospital would process a payment for services rendered by Neurosurgical.   Neurosurgical was not required to submit a monthly request for payment.   Rather, it was a standard entry in the accounts payable system.

The parties entered into a second agreement effective June 6, 2005.  (Pl.'s Ex. 2.) The term of the agreement was June 6, 2005 to June 5, 2006.  (Id., ¶ 5.1.) It further provided that the agreement could be terminated without cause by either party upon sixty days written notification.  (Id., ¶ 5.3.) Neurosurgical was to be paid $8,333.33 per month for its services.  (Id., ¶ 4.2.) The agreement stated that the Hospital had hired a second neurosurgeon and now only needed on-call coverage one out of every three days.  (Pl.'s Ex. 2, p. 1.) Thereafter, on August 31, 2006, the Hospital and Neurosurgical, by agreement, extended the on-call agreement through June 5, 2007 with automatic renewal unless otherwise terminated by thirty-day written notice.  (Pl.'s Ex. 3.)

The parties continued to operate under this arrangement beyond June 5, 2007.   The business relationship between the parties was mutually beneficial.   Both Neurosurgical and the Hospital acquired patients and generated revenue.   Namely, both the Hospital and Neurosurgical billed patients directly for their services.   In August 2007, the Hospital hired a third neurosurgeon.   As a result, the Hospital made a determination that it no longer needed the services of Neurosurgical.   Accordingly, Hanks, on behalf of the Hospital, placed a telephone call to Lange.   He informed him of the Hospital's decision and indicated that written notification would be forthcoming.   In a letter dated August 3, 2007, Hanks wrote to Lange concerning this issue.  (Pl.'s Ex. 4.) The letter states in relevant part, “this letter serves as notice of our intent to terminate the Agreement as of October 8, 2007.   We appreciate the service that was provided by Neurosurgical Associates, P.C. and welcome your continued active participation on our Medical Staff.”  (Id.)

As noted in the letter, copies were sent to James Massi, chief of surgery;  Carolyn Freiheit, finance director;  and Elizabeth Schlaff, hospital in-house counsel.   Schlaff prepared the letter for Hank's signature.

Following October 8, 2007, the Hospital continued to put Neurosurgical on the on-call schedule.  (Def.'s Ex. H.) Neurosurgical physicians performed the work as it was assigned.   The Hospital continued to pay Neurosurgical $8,333.33 per month.   The monthly payments continued notwithstanding Hanks' August 3, 2007 letter.  (Pl.'s Ex. 4.) The executive vice president and chief medical officer, chief of surgery, finance director, and in-house counsel all knew that the contract had been terminated.

In late 2007 or early 2008, Hanks met with Lantner to discuss Neurosurgical's future role in providing on-call services.   Lantner made it very clear to Hanks that no services would be performed without compensation.   He informed Hanks that other hospitals pay Neurosurgical for on-call services.   For example, its primary hospital, St. Francis, pays for on-call work.   Hanks informed Lantner that the Hospital does not pay staff physicians for on-call services.

Nevertheless, in the months that followed, the Hospital continued to put Neurosurgical on the on-call schedule.  (Def.'s Ex. 4.) The work was performed and payments continued to be made.   Neurosurgical performed the work only because it was being paid.   On June 13, 2008, the last payment of $8,333.33 was made.   Between October 8, 2007 and June 13, 2008, Neurosurgical was paid $66,666.64.

In a letter dated September 2, 2008, David Newton, the Hospital chief financial officer, wrote to Lange.  (Pl.'s Ex. 15.)   Newton stated, in relevant part, that “Neurosurgical Associates, P.C. was inadvertently paid monthly from October 2007 through May 2008.   This letter is a formal request that you reimburse the Hospital of Central Connecticut the $66,666.64.”  (Id.) Neurosurgical responded to Newton's demand in a letter dated September 19, 2008.  (Pl.'s Ex. 16.)   The letter stated in part, “We have provided coverage throughout that time, having been placed on the call schedule, and have been appropriately reimbursed by the Hospital of Central CT for this service.”   (Id.)

The Hospital has taken the position that Neurosurgical was required to provide on-call services during the disputed period of time, because the contract had been terminated and it was a requirement of active medical staff status.   (Pl.'s Ex. 14, ¶ H.) In response, the physicians of Neurosurgical reverted to courtesy staff status and terminated the office space lease agreement.  (Def.'s Ex. A, D, E, G.) This occurred because the surgeons only obtained active staff status so that they could comply with the requirements of the contract and be paid for their services.  (Pl.'s Ex. 1, § 2.3;  5–13.)   Again, the Hospital was aware of this fact.

B

Applicable Law

“A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another ․ With no other test than what, under a given set of circumstances, is just or unjust, equitable or inequitable, conscionable or unconscionable, it becomes necessary in any case where the benefit of the doctrine is claimed, to examine the circumstances and the conduct of the parties and apply this standard ․ Unjust enrichment is, consistent with the principles of equity, a broad and flexible remedy ․ Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefitted, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs' detriment.”  (Internal quotation marks omitted.)  Stratford v. Castater, 136 Conn.App. 522, 533, 46 A.3d 945, cert. denied, 307 Conn. 903, 53 A.3d 218 (2012).

Essentially, the plaintiff argues that it overpaid the defendants for services rendered.   Unjust enrichment is an appropriate vehicle to analyze such a claim.   See e.g., Computer Clearing House, Inc. v. Stamford Computer Group, Inc., Superior Court, judicial district of Stamford, Docket No. CV 98 0164240 (October 5, 1998, D'Andrea, J.) (allegation that plaintiff overpaid defendant sufficient to support cause of action for unjust enrichment).

It is important to note that accidental payment does not automatically result in unjust enrichment.  “ ‘In this state remedy under the doctrine of unjust enrichment is available whether payment was made under mistake of fact or of law.’  English v. Smith, 123 Conn. 572, 576, 196 A. 781, 783 (1938).   Negligence of the plaintiff in making the mistake, if any, is not a sufficient defense to a recovery.”  Prudential Ins. Co. v. Somers, 20 Conn.Sup. 351, 355, 135 A.2d 365 (1957);  see also Restatement (Third), Restitution & Unjust Enrichment § 6, comment (h) (2011) (“Recipients of mistaken payments can occasionally argue that the payment to them, although the result of mistake, has not resulted in unjust enrichment”).

C

Analysis

In the present case, the court finds that Neurosurgical was not unjustly enriched.   The court finds that the payments made to the defendant were not in error and were part and parcel of the parties' payment arrangement.   Namely, the Hospital received the benefit of Neurosurgical's work and availability in exchange for paying it a monthly fee, in addition to allowing the use of its facilities and direct patient billing.   This is the same arrangement Neurosurgical operated under during the previous contract.

The credible evidence demonstrates the following.   The Hospital continued to place the physicians on-call after the notice of termination.   Additionally, the Hospital's claim that it no longer needed Neurological's services is not credible.   The Hospital knew that the physicians obtained staff privileges only because of the contract and for the sole purpose of being paid for their professional services.   The physicians did not induce the Hospital into making these assignments or the continuing monthly payments.   The Hospital chose to continue to assign the physicians to on-call duty and extend the mutually beneficial paid on-call arrangement that the parties previously agreed to.   In the meeting between Hanks and Lantner held in late 2007 or early 2008, Lantner set forth Neurosurgical's unequivocal position that no services would be performed without financial compensation.   Nevertheless, the payments continued and the Hospital continued to put Neurosurgical on its schedule fully aware of Neurosurgical's payment demands in accordance with the previous arrangement.   In so doing the Hospital received all the benefits of Neurosurgical's work.

The court has examined the circumstances and conduct of the parties and finds that Neurosurgical was not unjustly enriched.

III

Conclusion

Judgment shall enter in favor of Neurosurgical for all of the aforementioned reasons.

SO ORDERED.

BY THE COURT

PETER EMMETT WIESE, JUDGE

FOOTNOTES

FN1. Briefly stated, the special defenses allege that the defendant physicians never agreed to provide medical services without compensation.   Moreover, the plaintiff knew or should have known that payment was required..  FN1. Briefly stated, the special defenses allege that the defendant physicians never agreed to provide medical services without compensation.   Moreover, the plaintiff knew or should have known that payment was required.

FN2. Neurosurgeons Lantner, Calderon, Chozick and Lange were active staff members of St. Francis Hospital..  FN2. Neurosurgeons Lantner, Calderon, Chozick and Lange were active staff members of St. Francis Hospital.

Wiese, Peter E., J.