Cooper Clinic Sues Mercy Over Recruitment Tactics

Cooper Clinic’s frustration with Mercy Health of Chesterfield, Mo., has been simmering since Halloween 2010, when Mercy first lured away one of Cooper’s doctors.

In less than three years, Mercy, which has seven hospitals in Arkansas, including one at Fort Smith, had persuaded 14 more doctors to leave the Fort Smith multi-specialty clinic and come to work for Mercy, according to a lawsuit Cooper filed in in Sebastian County Circuit Court.

The case, filed in August, has not yet been set for trial.

Cooper’s lawsuit provides a peek inside the two health care organizations and reveals that Cooper, which has about 75 doctors and touts itself as the largest physician-owned multi-specialty group in the state, had been in sale talks with both Mercy and Sparks Health System in Fort Smith in 2012.

In the lawsuit, Cooper charges that Mercy knew that some or all of the 15 doctors were under contract with Cooper, but recruited them anyway. Cooper also is suing four of its former doctors for breach of contract for going to work for Mercy.

“The recruitment of Cooper’s physicians created problems with serving patients in primary care, specialties and subspecialties and caused harm to Cooper’s financial condition,” said the lawsuit filed by Cooper’s attorney, G. Alan Wooten of the Fayetteville firm of Conner & Winters LLP.

The lawsuit didn’t say how much money Cooper lost, but when a doctor leaves a practice, his or her patients usually follow the physician.

“Mercy’s attorneys are handling the complaint filed by Cooper Clinic,” Laura Keep, a spokeswoman for Mercy Fort Smith, said in an email to Arkansas Business. “It is our belief that Mercy has done nothing wrong and will defend itself vigorously against the allegations made by Cooper Clinic in the complaint.”

Attorney Mark Moll of Fort Smith is representing three of the doctors who left Cooper — Robert Nowlin, Donald Shows and John Werner. He declined to comment on the case but in court filings denied wrongdoing by his clients.

Attorney Barry Neal of Fort Smith, who represents the other doctor named in the lawsuit, Jennifer Elaine Burks, didn’t return a call seeking comment. He, too, told the court that Burks did nothing wrong.

Cooper didn’t provide Burks with any special training or make available any trade secrets or customer lists that she could use to gain an “unfair competitive advantage,” Neal wrote in his answer.

The Cooper Clinic is seeking unspecified damages from the doctors and Mercy Health, Mercy Clinic Fort Smith Communities and Mercy Health Fort Smith.

Feud Starts

At first, Cooper said in its complaint, it tried to work things out with Jeff Johnston, who was then CEO of the Fort Smith hospital that was then known as St. Edward Mercy Medical Center.

Cooper CEO Doug Babb sent a letter on Dec. 8, 2010, asking Johnston to stop recruiting Cooper’s doctors. At that point, two doctors had left to join Mercy Clinic, which was quickly growing.

When Mercy incorporated its Mercy Clinic in 2008, it had about 20 doctors and 50 workers to support them, according to a news release Mercy issued in October 2012. Within four years, though, Mercy Clinic had grown to 83 doctors, 15 advanced practitioners and 215 clinical and administrative employees.

In his 2010 letter, Babb told Johnston that the loss of the two Cooper doctors “has caused loss of staff, decreased income, and patient care issues.”

Babb reminded Johnston that the two health care organizations had worked together in the past on projects for the good of health care in the area, and he said he would prefer to continue that working relationship.

But if the hospital continued to approach Cooper’s doctors about job openings at Mercy, Babb said, he would consider legal action.

Mercy, however, continued recruiting Cooper’s doctors. Another of Cooper’s doctors left on Jan. 3, 2011, and still more were being recruited, the lawsuit said.

Babb fired off another letter to Johnston on Jan. 21, 2011.

“You and your staff nevertheless are continuing to attempt to get at least six more Cooper Clinic physicians to break their employment contracts notwithstanding my request that you stop this anticompetitive practice,” Babb said in the letter.

“I can only infer that Mercy Clinic and St. Edward are engaged in a continuing and widespread plan to recruit as many Cooper Clinic physicians as possible primarily to weaken our ability to compete with your new Mercy Clinic,” Babb wrote.

Sale Talks

It is unclear from the lawsuit how the relationship between Mercy and Cooper changed between 2011 and 2012.

But sometime in the first half of 2012, Mercy began talking with Cooper officials about the possibility of Mercy buying the Cooper Clinic.

That would have been a tough sell because the Cooper doctors “enjoy the autonomy they have over their practices and our productions-based compensation system and would likely want to remain independent,” Babb said in a July 30, 2012, letter to Kim Day, a Mercy executive who had been involved in the negotiations.

Still, Babb said that under the impending Affordable Care Act, a doctor’s clinic partnering with a hospital would be a necessity.

“In that context, I planned to discuss the Mercy proposal to determine if a substantial majority of our physicians had any interest in a transaction with Mercy,” Babb said.

The talks with Mercy ended there.

Babb was upset about a letter he received from Day just a few days before, on July 25, 2012. Mercy wanted Babb to sign a proposed agreement and if he didn’t, any oral commitments the company had made were off.

And, Day said in the letter, Babb had to stop negotiating with Sparks about a possible sale as long as negotiations with Mercy were continuing.

Mercy agreed it wouldn’t attempt to recruit Cooper’s employees — except for Cooper’s cardiologists and chief medical officer.

Those terms didn’t sit well with Babb.

“We interpret this language as both a threat and ultimatum,” Babb said in his response to Day.

He also said he couldn’t understand why Cooper couldn’t talk to representatives at Sparks, where 37 of Cooper’s doctors had privileges.

“You appear to be attempting to restrain competition in the local health care market,” Babb told Day. “Your attempt to interfere with our relationship with Sparks is inappropriate, and you should not threaten us for working with their Administration.”

As of July 2012, seven of Cooper’s doctors had been lured to work for Mercy.

“If you feel it necessary for your organization to have integrated doctors, why would you not use your resources to recruit them to build the medical community of Fort Smith instead of attempting to dismantle a 92-year-old physician-owned institution like Cooper Clinic to fill your physician slots?” Babb asked.

He said that it was clear that Mercy intended to continue hiring away Cooper’s doctors “with the goal of economically harming our organization and punishing us for not selling our business to you.”

Babb ended the letter by saying the clinic had hired an attorney.