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North Dakota Supreme Court Reviews Negative Reference for Former Physician Employee

on Friday, 30 August 2013 in Health Law Advisory: Zachary J. Buxton, Editor

John Schmitt, M.D. was employed as a surgeon by Dakota Clinic from August 2002 through December 2004, when his contract was not renewed.  He was subsequently employed by MeritCare Health from June 2005 until he terminated his employment effective July 2005.  Dr. Schmitt contracted with a physician placement agency, which found a position for him at St. Joseph’s Hospital in Dickinson, ND, subject to credentialing.  

Dr. Schmitt’s application for employment by St. Joseph’s included a release from liability for “any and all individuals, entities, or organizations who provide [St. Joseph’s] in good faith and without malice, information concerning [Dr. Schmitt’s] professional competence, ethics, character, health status, other qualifications and ability to work cooperatively with others.”  

Dakota Clinic apparently responded “Do not recommend” to a credentialing questionnaire from St. Joseph’s.  MeritCare insisted that Dr. Schmitt sign a separate authorization, granting MeritCare immunity from liability, and agreeing not to sue MeritCare.  Dr. Schmitt initially refused to sign the MeritCare release, but gave in after he learned that St. Joseph’s had rescinded its employment offer to him.  He felt that he signed this authorization under duress.  

MeritCare then completed a preprinted questionnaire, stating that during employment by MeritCare, Dr. Schmitt’s appointment at MeritCare had never been denied or voluntarily revoked, he had not voluntarily or involuntarily changed medical staff membership or surrendered clinical privileges, his practice had not been investigated or monitored as a result of quality determinations, he had not been named in a professional liability case and he had not been a defendant in a felony criminal matter.  In response to a request for a recommendation, MeritCare checked a box that it “Would recommend” with a handwritten note stating “with reservation.”  MeritCare also answered “yes” to the question whether Dr. Schmitt had any disciplinary actions at MeritCare:  “Dr. Schmitt was presented with an action plan based on episodes of insensitive comments and irritability with others.  He submitted his resignation before completing the action plan.  No restriction or limitation of privileges was suggested by the action plan.”  

After MeritCare’s response, St. Joseph did not re-offer employment to Dr. Schmitt, and he was unable to secure employment at other North Dakota and Minnesota medical facilities.  

Dr. Schmitt sued MeritCare and Dakota Clinic, claiming defamation, tortious interference with a prospective business advantage, and violation of state antitrust laws.  The district court granted MeritCare summary judgment, finding that MeritCare’s recommendation with reservation was based on truthful, nondefamatory facts disclosed in the questionnaire and were not susceptible of a defamatory meaning in view of Dr. Schmitt’s admission the statements were “technically true.”  

In an opinion dated July 22, 2013, the North Dakota Supreme Court analyzed Dr. Schmitt’s claim of defamation and libel under North Dakota statutory and case law, finding that MeritCare’s answers to the questionnaire were not fairly susceptible of a defamatory meaning, and affirmed the district court’s grant of summary judgment.  Based on a nuance peculiar to North Dakota defamation law, Dr. Schmitt argued that although the responses were technically true, they still constituted defamation by implication because they used innuendo, insinuation, or sarcasm to convey an untrue and defamatory meaning.  He also argued that MeritCare’s delayed response to the questionnaire was an implied defamatory assertion.  The Court rejected both arguments, finding as a matter of law that MeritCare’s responses, in context were not fairly susceptible of a defamatory meaning.  The Court quoted a 2006 Indiana decision, stating that “It would be an odd use of the defamation doctrine to hold that silence constitutes actionable speech.”  Finally, the Court rejected Dr. Schmitt’s allegation that Dakota Clinic and MeritCare had colluded, contracted or otherwise combined against Dr. Schmitt in violation of the state antitrust laws.  There was simply no evidence of such activity presented.  

Because the Court’s  decision was so dependent upon state law, readers in Iowa and Nebraska cannot be assured of precisely the same result under their state laws.  However, there are a number of observations concerning MeritCare’s approach that can be adopted by physician employers in any state to reduce potential liability when responding to requests for references concerning disruptive physicians:

  1. Make sure that the physician’s authorization of the former employer’s response to credentialing inquiries is sufficiently broad to protect the former employer and its employees, owners, officers, directors and other agents.  Consider an authorization that goes so far as to obtain the physician’s covenant not to sue on the basis of the former employer’s response.  
  2. Avoid discussions with other former employers, local hospital medical staff officers and administrators, that could be construed as collusion to boycott or otherwise exclude the physician from practice.  
  3. In responding to credentialing inquiries, do not feel compelled to adhere strictly to the answers offered by the pre-printed form, or even to respond to all of the questions.  
  4. Respond to credentialing inquiries as factually as possible.  Avoid asserting opinions.  If you provide information of historic disciplinary action, it may be unnecessary to respond to the question of whether you recommend the physician or not.  
  5. While the physician is still employed, take formal action in response to disruptive conduct.  In this manner you will have “facts” to refer to when later asked to provide a reference for the physician.  For example,  MeritCare was able to describe an unfulfilled action plan that had been required of Dr. Schmitt.  

The refreshing thing about the decision in Schmitt v. MeritCare, is that the summary judgment in favor of the former employer suggests that it can be safe to provide an honest reference with regard to a disruptive physician.  All employers of physicians and credentialing health care facilities find themselves in the position of depending upon others for credentialing references.  Yet, when faced with providing a negative reference for a disruptive physician, these employers and facilities invariably have to wonder what kind of litigation will result from their candid response to an inquiry.  While MeritCare certainly became embroiled in litigation as a result of its honest response, at least it was able to resolve the matter relatively promptly through summary judgment.  

Barbara E. Person

Read the Full Newsletter: Health Law Advisory August 30, 2013

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