Marietta Health Care Physicians, Inc. v. Yoak

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MARIETTA HEALTH CARE PHYSICIANS, INC., Plaintiff, v. MATTHEW YOAK, M.D., Defendant.

No. 2:19-cv-5626

United States District Court, S.D. Ohio, Eastern Division

January 27, 2022

Kimberly A. Jolson Magistrate Judge

OPINION AND ORDER

SARAH D. MORRISON UNITED STATES DISTRICT JUDGE

This contract dispute between an Ohio Professional Corporation that operates and maintains a hospital in Washington County and one of its former employees is before the Court on cross motions for summary judgment. Plaintiff Marietta Health Care Physicians, Inc. (“MHCP”) has moved for summary judgment in its favor on all claims (ECF No. 40), while Defendant Matthew Yoak, M.D. has moved for partial summary judgment (ECF No. 43). The Court held oral argument on the motions on January 12, 2021.^[1] Both motions are ripe for decision.

I. STATEMENT OF FACTS

Dr Yoak is a plastic and reconstructive surgeon who was first employed by MHCP in 2005. (Yoak Dep., ECF No. 42-2, PageID 849.) From March 2013, through February 2019, his employment was governed by an Employment Agreement, to which the parties added two Addenda. (Agreement, ECF Nos. 43-1-43-3.) All three instruments were drafted by MHCP. (Yoak Decl., ECF No. 43-4, ¶ 5.)

Pursuant to the Agreement, Dr. Yoak agreed to provide full-time plastic and reconstructive surgery services at Marietta Memorial Hospital (“MMH”), in exchange for compensation determined as follows:

(a) Compensation. During the time of this Agreement, subject to Section 3(a)(1) below, the Corporation [(MHCP)] shall pay Physician [(Dr. Yoak)], in twenty-six (26) bi-weekly installments, compensation consisting of $896, 943 with adjustments to compensation occurring biannually based upon the following formula:

(1) Work Based Relative Value Units. Physician's total professional worked Relative Value Units (wRVU's) shall be based upon wRVU data as established by MGMA-All, for physicians practicing Plastic and Reconstructive Surgery.

(i) Performance Review. On a biannual basis (April-September & October-March), Physician's total wRVU's will be calculated and Physician shall receive a positive or negative compensation adjustment based upon each wRVU Physician produces above or below 9379.31 during the relevant review period. The dollar figure for each wRVU shall be based upon the seventy-fifth percentile (75%) compensation per wRVU as established by MGMA-All for Plastic and Reconstructive Surgery.

(ii) Covered Services. Physician's wRVU Compensation will not include wRVU's arising from services of nurse practitioners (“NP's”) and physician assistants (“PA's”) supervised by Physician and will not include the technical component of any service.

(2) Product Sales. Physician shall receive on an annual basis forty percent (40%) of net revenue generated through Product Sales of items sold through the Physician's practice.

(Agreement, § 3(a).) Dr. Yoak was also provided paid leave benefits:

(b) Paid Leave. In addition to the foregoing compensation, to be paid under this Agreement, the Corporation shall provide paid time off (“PTO”) for vacation, sick leave and Continuing Medical Education. Physician shall receive a total of six (6) weeks (30 business days) of leave for vacation, sick and continuing education. Such leave shall not accrue and carry-over from year-to-year. The Corporation shall reimburse Physician up to a maximum aggregate amount of $5, 000 annually for all expenses reasonably incurred by Physician with respect to continuing medical education activities attended by Physician on behalf of the Corporation. Holidays are established by the Corporation.

(1) PTO is not cumulative from year to year and unused PTO will not be paid at the end of the fiscal year, or at termination of this Agreement,

(2) PTO will be prorated based on the hire date and the Corporation fiscal year that runs October through September. The maximum PTO amount will be replenished within the Corporation's payroll system in the first pay period of October for tracking purposes.

(3) After notice of termination of this Agreement has been given, any unused PTO may only be taken with the prior consent of the Corporation.

(4) Should Physician use all available PTO and require additional time off due to extended illness, Physician will be subject to individual Short-Term or Long-Term Disability Plans in effect at the time of illness.

(Id., § 3(b).)

The Agreement further provides:

This Agreement may at any time be amended in whole or in part by written instrument executed by each party. . . . No. waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar. No. waiver shall be binding unless executed in writing by the party making the waiver.

(Id., § 10.)

The Agreement had a one-year term that was automatically renewed for additional one-year periods. (Id., § 5.) However, the parties could otherwise terminate for cause, for breach, and without cause. (Id., § 5(a).) To terminate without cause, the Agreement required “ninety (90) days written notice to the other party.” (Id., § 5(a)(4).)

The parties also entered into two addenda to the Agreement. Pursuant to the First Addendum, Dr. Yoak agreed to serve as Medical Director for the Center for Wound Healing, for which MHCP would pay $155 per hour for services rendered. (Agreement, First Adden.) As Medical Director, Dr. Yoak reviewed “the medical cases dealing with any difficult medical issues patients might be having, answer[ed] various questions from the nursing director, the program director or other physicians, and review[ed] cases.” (Yoak Dep., PageID 851.) The Second Addendum called for Dr. Yoak to provide additional professional services (including community service and trauma call coverage as those services pertain to plastic surgery), for which MHCP agreed to pay him $50, 000 per year. (Agreement, Sec. Adden. See also Yoak Dep., PageID 851-52.)

A. Dr. Yoak's Compensation Under the Agreement

The dispute now before the Court centers on the compensation payable under Section 3 of the Agreement-including the compensation payable on wRVUs, on product sales, and for paid leave.

1. Productivity-Based Compensation

Both parties agree that calculating Dr. Yoak's productivity-based compensation was a manual and complex process. The starting point was a base of $896, 943. (Agreement, § 3(a).) The base was then adjusted biannually, pursuant to a formula based on Dr. Yoak's production units (the wRVUs). (Id.)

According to the Agreement, on a biannual basis, ^[2] Dr. Yoak would receive a positive or negative adjustment to his salary “based upon each wRVU . . . produce[d] above or below 9379.31 during the relevant review period.”^[3] (Agreement, § 3(a)(1).) The dollar compensation per wRVU was “based upon the seventy-fifth percentile (75%) compensation per wRVU as established by MGMA-All for Plastic and Reconstructive Surgery.” (Id.). For most medical procedures, wRVUs are assigned by Medicare. (Lines Dep., ECF No. 42-1, PageID 811-12.) However, because Medicare does not pay for cosmetic procedures, it does not assign wRVUs for many of the services provide by Dr. Yoak. As a result, MHCP used the Medicare wRVUs for Dr. Yoak's non-cosmetic procedures but created its own for the cosmetic procedures. (Id.)

Until Fall 2017, Karen Lines^[4] handled the biannual adjustments for all MHCP physicians, including Dr. Yoak. She followed the same basic process for approximately 200 physicians. (Id., PageID 811-12.) First, Ms. Lines (or a member of her team) ran a report from MMH's accounting system showing a physician's wRVUs.^[5] (Id., PageID 804.) That report was then used to prepare a spreadsheet calculating a physician's compensation. (Id.) Ms. Lines testified in deposition that this calculation “was a very manual process.” (Id.) Once the calculation was complete, the file was sent to the Finance Department for review before being sent to Eric Young (MMH's Chief Financial Officer) for review and approval. (Id., PageID 809.) After the calculations were approved by both the Finance Department and the CFO, Ms. Lines met with each physician to go over the information, including any necessary adjustments to compensation. (Id., PageID 804-05.) “Once everyone had reviewed and approved [the spreadsheet calculations], ” the information was sent to the Human Resources Department, which made any necessary payroll changes. (Id., PageID 809.)

As Luke Smith (a vice-president at MHCP) recognized, the purpose of the biannual meetings was so “a physician is seeing their wRVUs and . . . that is their opportunity to dispute. If there's no dispute, then they're accepting the work RVUs that have been portrayed to them and thus we make, you know, calculations for compensation adjustments.” (Smith Dep., ECF No. 42-3, PageID 901.) The biannual compensation review process also afforded MHCP the opportunity to reconcile any overpayments or underpayments in physician compensation. (Lines Dep., PageID 810.) In the event of an underpayment, a physician typically took that compensation as a bonus, as opposed to an increase in base salary. (Id.) In the event of an overpayment, the physician's base compensation would be reduced for the next six months. (Id.) When a physician's base compensation was adjusted, Ms. Lines noted that on her spreadsheet as a new hourly rate, which was then sent to the CFO. (Id., PageID 813.)

Ms Lines acknowledged that Dr. Yoak's calculations were “unique” because of the specialty cosmetic procedures for which she also had to do a manual wRVU calculation. (Id., PageID 811-12.) However, consistent with her typical practice, Ms. Lines met with Dr. Yoak biannually until Spring 2017 to review his performance and to implement any necessary...