Health Law

Physician Recruitment Mutual Mistake

By Greg Piche'

This is an extension to our previous post on Physician Recruitment Fraud (January 24, 2007).  There is more and more litigation surfacing between hospitals and recruited physicians when hospitals lure physicians into a new startup practice in their market and the physician is unable to sustain a viable practice in the new community.  The physician is forced to move on to earn a livelihood and the hospital for regulatory reasons feels it is obligated to enforce its contractual obligation with the physician for the repayment of the money if the physician leaves before the forgiveness period (typically 3 years). The physician did not sign on for serving in an Americorp or Peace corps lifestyle and raises a number of defenses including fraud in the inducement and mutual mistake.

In the recent case of Mainegeneral Medical Center v. Eric Hansen, (Case 1:07-cv-00040-MJK) in the United States District Court, District of Maine, Dr. Hansen left the community to which he was recruited in the middle of a two years subsidy because the hospital had allegedly misrepresented to him the number of competing ENT physicians in the market.

When the hospital sued him he raised defenses of fraud in the inducment, material misrepresentation and mutual mistake. A consultant serving as an expert witness for Doctor Hensen testified that physicians generally rely on the recruiting hospital to do due diligence with respect to market need and that Dr. Hensen did so. The hospital moved for summary judgment and the Court denied summary judgment on the basis that there was a justiciable issue as to whether Dr.Hansen's performance was excused because of mutual mistake of the hospital and Dr. Hanesen as to the need for ENT physicians in the hospital's market. (There was no mention of the determination of the fraud issues in the opinion.) 

Mutual mistake arises out of a mistake of the parties as to a mutual fact existing at the time of contracting which was a basic premise upon which the contract arose. There are also other contractual defenses that may or may not apply in a given circumstance to excuse performance by a physician. Sometimes the performance by the physician can be hindered or interfered with by hospital employees and its medical staff potentially resulting in excuse of permformance. Performance can also be excused by intervening impracticality and frustration of purpose where the unexpected intervening events make the physicians performance unduly burdonsome.

Hospitals might be well advised to make more than a cursory investigation as to the real opertunities for a new physician in the market rather than just letting them sink or swim and physicians would be well advised to make sure the alleged opportunity is real and to obtain some real reps and warranties from the recruiting hospital.

Full post as published by Healthcare Law Blog on February 20, 2008 (boomark / email).