Circuit Court Judge Bynum Gibson’s March 2011 summary judgment in favor of the Ashley County Medical Center, sued by an orthopedic surgeon for breach of contract, was upheld Wednesday by the Arkansas Court of Appeals.
In October 2003, Dr. William C. Go, Jr. and the Ashley County Medical Center entered into a 2-year contract in which Go would provide services as an orthopedic surgeon in the Crossett area.
According to the agreement, the medical center would supplement Go’s income so that he was guaranteed to earn a net income of $400,000 per year but the guaranteed supplement, which would be paid in monthly installments, would be paid on the condition that Go repaid the money or be forgiven if he remained in practice in Crossett for two years beyond the contracted two years, which would end in October 2005.
However, Go’s medical practice did not generate as much income as either Go or the hospital expected and they entered into a modified agreement on March 1, 2005.
Under the terms of the modified agreement, Go’s guaranteed annual income would be reduced to $300,000 and would continue through December 31, 2005. Go’s debt to the hospital, which was nearly $457,000 as of January 2005, would be forgiven and Go would assume responsibility for his professional liability insurance and donate to the hospital radiology equipment valued at $10,000.
The modified agreement also provided that the hospital would actively recruit an orthopedic surgeon to replace Go. The replacement would begin practice as of January 1, 2006 or earlier if mutually agreed by Go and the hospital.
“It is specifically understood and agreed that this modification agreement is mutually agreed to by the medical center and physician because the business practice of (Go) has not been successful as originally planned, and that this agreement does not reflect negatively on (Go’s) professional practice in any way,” the modified agreement reads. “William C. Go Jr., has indeed met all of his responsibilities as a member of the medical staff of Ashley County Medical Center and has conducted himself as a gentleman in all respects. His resignation from the medical staff will be due solely to the closure of his practice. He has been a member in good standing of the medical staff of Ashley County Medical Center throughout his tenure in Crossett, Arkansas.”
As per the agreement, Go was paid $25,000 per month for his services from March through December 2005.
However, in June 2008, Go filed a breach of contract complaint seeking damages. In his complaint, Go alleged that the modification agreement strictly benefited the hospital and he received no consideration for entering into the subsequent agreement. He further alleged that the modified agreement essentially terminated his practice in Ashley County.
In the complaint, he said he was entitled to recover damages including $400,000 a per year for the two years beginning October 2003, less any payments the hospital had previously paid, as well as $65,379 that he paid for his professional liability insurance and other damages associated with his moving from his home and office.
The hospital filed a motion to dismiss Go’s complaint and Ashley County Medical Center CEO Russ Sword subsequently submitted an affidavit saying that the hospital had fully performed its obligations under the both initial agreement and the modified agreement.
Go submitted his own affidavit saying he did enter into both agreements but prior to the execution of the modified agreement, Sword called him into his office and told him that he “was done.”
“He intended to terminate my contract immediately,” Go wrote in the affidavit. “I explained to Mr. Sword that I could not do this because patients that I had already performed surgery on required follow-up treatment, and I would be abandoning my patients.”
As a result, Go said, Sword agreed to a modification so that he could remain at the hospital for a period of time to follow-up with his patients.
“In order to obtain this additional time, I had to agree to a reduction in my income,” Go said.
Go said as a result of the modification he was forced to give up his hospital privileges and his leased office space in the hospital.
“I was planning to remain at the Ashley County Medical Center for the two years that I was required to stay in the original agreement,” he said. “I had already purchased a house in Crossett. I lost $100,000 on the sale of the house when my arrangement was terminated. I was never reimbursed for my medical malpractice insurance that was required under both the original agreement and the modification agreement. Furthermore, under the terms of the modification agreement I was required to pay an additional $70,000 to extend coverage following my termination.”
Go said had he not been terminated or told “I was done” he would have remained in Crossett and continued his practice for the 2-year follow-up period required to obtain forgiveness of the debt that he had incurred.
“I believe that I was terminated because the (original) contract entered into by the hospital… had proved to be unprofitable for the hospital and the hospital wanted out of the contract,” Go said. “I was forced to sign the modification agreement or abandon my patients.”
On March 11, 2011, Circuit Judge Bynum Gibson granted the hospital’s motion to dismiss the complaint, which he treated as a summary judgment.
Go subsequently appealed that decision.
On appeal, Go conceded that the hospital did what it was required to do under the modification agreement but it was not a valid contract because it was not met with any additional consideration that was not considered in the original agreement.
In affirming Gibson’s summary judgment, the Arkansas Court of Appeals said Go correctly asserted that the modification agreement imposed additional obligations on him and benefited the hospital, but it also benefited Go in that it forgave Go’s $456,816 debt to the hospital and further provided Go an income guarantee through December 2005 with no requirement that he reimburse the hospital for those payments or remain in Crossett for an additional two years to have the debt forgiven.
“Considering the undisputed fact that his practice had not been as successful as expected and was not expected to be more successful in the future, the additional consideration was evident,” Judge John Robbins wrote in Wednesday’s opinion affirming the summary judgment in favor of Ashley County Medical Center.