Duke University is facing a lawsuit alleging that it tried to absorb an affiliated independent, multispecialty physician practice through “unlawful, unfair and improper tactics.”
The suit claims that following prior unsuccessful attempts to purchase the group, the university and its health system “conspired” with department chairs to break off and assimilate five departments from the physician group into a new faculty practice, a move that would “cause irreparable harm” to the independent group and its members.
Speaking to North Carolina-based outlet The News & Observer, a representative of the university denied the lawsuit’s claims and said the organization will fight it in court. Fierce Healthcare has reached out to Duke for confirmation of these statements.
The complaint was filed Monday in Durham County Superior Court by Eugene Moretti, M.D., a Duke faculty member, on behalf of Private Diagnostic Clinic (PDC), of which he is a member.
The 80-year-old practice, which has roughly 1,850 physician members and about $1 billion in generated annual revenues, has participated in a formal partnership agreement with the university and its academic medical center for nearly 50 years, according to the suit. In October, the university delivered a notice of termination for the agreement effective at the end of 2021, according to the plaintiff.
Duke had twice looked to negotiate a merger between PDC and its health system since 2008 but could not reach terms and abandoned each attempt, per the complaint. Following these failures, the university then “devised a plan to take over the PDC without input from the PDC’s members and without paying fair compensation for the value of the enterprise,” according to the suit.
Moretti alleged “upon information and belief” that Duke University School of Medicine Dean Mary Klotman, M.D., met with five department chairs, each of whom are managers of PDC, to break off their departments from the independent group and into a new faculty practice (Duke Faculty Practice) (PDF) that would see their members become employees of Duke’s School of Medicine.
Additionally, the university announced a policy requiring physicians performing research at Duke to quit PDC and join the faculty practice by July 2022.
“At least 400 members of the PDC perform research at Duke,” the plaintiff wrote in the suit. “Duke’s mandate thus means that approximately 21% of PDC’s members have been forced to choose between, on the one hand, staying with the PDC and losing the research grants that they receive through Duke and, on the other, continuing their research but having to quit the PDC to become exclusively employed by Duke.”
The university and department chairs made these plans that threaten “hundreds of millions of dollars of revenue” without informing the “rank and file” members of PDC, Moretti alleged. The alleged plans are also a violation of the longstanding partnership agreement between the organizations, which includes language specifying that Duke would “not interfere in [PDC’s] organization and operations,” according to the suit.
Alongside the allegations against Duke, Moretti’s case also alleges that department heads including Anthony Joseph Viera, M.D., breached their fiduciary duties toward PDC. Moretti, on behalf of PDC, asked the court to award compensatory and treble damages to the physician group.
“After trying and failing for years to negotiate a purchase and merger with the PDC, Duke decided to interfere with the operations of the PDC in violation of its contractual agreements and to pressure and entice department chairs to breach their fiduciary duties to the PDC,” Erica Harris, a partner at Susman Godfrey representing Moretti, said in a statement. “Dr. Moretti has devoted the past 25 years of his career to the PDC and Duke. He is disappointed and saddened that some of Duke’s administrators have resorted to unlawful tactics to destroy what so many have worked so hard to build.”