Metro Feels 'Vindicated'

July 1, 2005
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GRAND RAPIDS — The charges against Metropolitan Health Corp. and President and CEO Michael Faas have been dropped, thanks to a motion of summary judgment granted by Judge Richard Alan Enslen last month in U.S. District Court.

The allegations of wrongful dismissal and breach of contract stemmed from a larger complaint filed in 2002 by former Senior Vice President of Network Development Mary Scott.

The lawsuit alleged, among other things, that Metropolitan improperly billed Medicare, and that the organization illegally rewarded and overcompensated physicians for referring patients to the hospital. Furthermore, Scott claimed that she had been wrongly terminated because she expressed her concerns about these matters.

In December 2003, Metropolitan made a $6.25 million settlement with the U.S. Department of Justice, related to alleged Medicare billing irregularities brought to light by Scott (who netted $1.1 million in the settlement). The government did not choose to join in on the charges relating to Scott’s dismissal.

At that time, Metropolitan told the Business Journal that its decision to settle the case out of court was a “sound business decision.” The hospital was in the process of obtaining a new certificate of need (CON) and trying to raise funds for its pending move to a new “health village” in Wyoming. Although the terms of the settlement cleared Metropolitan from any admission of wrongdoing, they did not erase “the harmful effects of being falsely accused,” according to Jim Childress, Metropolitan’s vice president of marketing and public relations.

“The real toll (taken on Metropolitan) was lost opportunities, time and effort,” said Faas. “There were years when almost 25 percent of (key staff members’ time was) spent on this vs. running a hospital, recruiting doctors, looking to try to better the health care, wellness and prevention in the community, working on our new campus. If we had to work on this, we couldn’t work on other things. And that’s what I meant by lost opportunity. What’s the cost of that?

“What if we didn’t bring a service or start a service because we were involved in this? What if we missed out on a fabulous physician who should be in Grand Rapids, but didn’t have the time because we’re involved in this? Those are the kinds of things that I think are the real tragedy in this situation.”

Now, with the dismissal of charges, Metropolitan feels it has finally cleared its good name.

“We knew we were right. We knew we would be vindicated when the truth was told,” said Childress.

But the truth has not yet been told, according to Scott. She still maintains that the hospital fired her because she “blew the whistle” on what she saw as Metropolitan’s unwillingness to comply with federal regulations.

“In general terms, I believe (Judge Enslen’s) decision was wrong both in its factual base and in its legal base,” said J. Laevin Weiner, lead counsel on the Scott case for the Troy-based firm of Frank, Haron, Weiner & Navarro. “I also think that the tone of the opinion was unfortunate at best.”

Weiner said his firm is now “perfecting” the argument it will use on appeal.

Childress was not surprised to learn of the appeal.

“It’s something that we knew was a possibility and is certainly one of her rights,” he said. As to the chances of Scott prevailing on appeal, he added, “I think Judge Enslen’s opinion was very forthright that the case had no merit, as we’ve always felt ourselves.”

Metropolitan’s position, as outlined in Enslen’s opinion, is that Scott was ineffective in her role at the hospital. Her inability to work well with other executives in the organization, and her harsh and unpleasant interpersonal management style — not any plans she may have had to “blow the whistle” — resulted in her termination.

In the winter of 2002, Scott’s responsibilities for overseeing the operation of Metropolitan’s for-profit subsidiaries were taken away and given to new Chief Financial Officer Bob Smedes. At the same time, a “cultural management assessment” — prepared by an independent firm and critical of Scott — was released. Following this, Metropolitan’s Chief People Officer Sandy Sefton reported to Faas concerns about an unhealthy atmosphere of “fear and intimidation” among Scott’s direct reports. Based on Sefton’s report, Faas decided to “remove her subordinates and assign her to a temporary, dead-end position.” He announced this decision to Scott on April 17, 2002. The following day, according to court documents, Scott called an attorney, wishing to discuss “fraud/IRS issues.” On April 22, she reported a “legal compliance” complaint to the executive committee of Metropolitan’s board.

“I think there became a growing concern, based on knowledge of more and more issues that were occurring relative to her performance, that led to a series of attempts to address it. And it finally grew to the point where she had been confronted in a way that made her unhappy and uncomfortable. It was clear to her that there were concerns internally with her performance that resulted in a reassignment of her duties (and) her not getting some duties that she thought she should get,” said Childress. “And it was only after that that she chose to approach our board and say she had these (compliance) concerns. It wasn’t that she approached Mike (Faas) with all these concerns and then suddenly she was reprimanded for performance issues. That’s not a fair or at all accurate understanding of what happened here. Our point is just the opposite. It wasn’t until it was clear to her that her duties were going to be changed — that she was not going to get the position she hoped for here — that she chose to raise these issues to our board.

“The one clear fact is that things were brought to her attention related to her performance, prior to her bringing forward these allegations,” said Childress. “One followed the other.”

“I think the facts in the case clearly support that this was a disgruntled employee who had been confronted about some (performance) issues before she ever chose to raise these (alleged malfeasance) issues the way she did,” said Faas.

That wasn’t Scott’s take on the case.

“I think, to a great extent, the position of the hospital that there were difficulties between Mary and her reports and others in the organization are — to a great extent — fabricated, and were not the reality. And the facts in the case bear that out when they’re looked at objectively,” said Weiner.

The judge’s decision, however, had little to do with Scott’s behavior as an employee or as a manager.

Instead it was simply a matter of satisfying the statutory requirements of the case. Enslen found Scott’s case lacking in regard to the terms of the False Claims Act. This statute was the backbone of her case, as it supplied the anti-retaliation clause that Metropolitan allegedly broke by firing her.

“(W)here the whistleblower is, as in this case, a corporate officer with assigned legal compliance responsibilities,” Enslen wrote, “the corporation must receive heightened notice that the employee intended to further a qui tam/FCA action rather than merely warning the defendant of the consequences of its conduct.”

Enslen found no evidence suggesting that Scott had provided that “heightened warning.”

Having recently secured the funding for the new health village and, now, being “vindicated” by the dismissal of the Scott case, Faas feels Metropolitan Health can finally move forward.

“Those are probably two of the heaviest burdens hanging over this organization in the last two years,” he said. “And, frankly, it feels like we just cut the anchors loose and our boat’s free again.”    

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