Lee Medical, Inc. v. Beecher

• Decision Date: 24 May 2010
• Docket Number: No. M2008-02496-SC-S09-CV.,M2008-02496-SC-S09-CV.
• Citation: 312 S.W.3d 515
• Parties: LEE MEDICAL, INC. v. Paula BEECHER et al.
• Court: Tennessee Supreme Court

312 S.W.3d 515

LEE MEDICAL, INC. v. Paula BEECHER et al.

No. M2008-02496-SC-S09-CV.

Supreme Court of Tennessee, at Nashville.

September 3, 2009 Session Heard at Knoxville.

May 24, 2010.

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Ron H. Pursell and Edward A. Hadley, Nashville, Tennessee, for the appellant, Lee Medical, Inc.

Steven A. Riley and Sarah J. Glasgow, Nashville, Tennessee, for the appellees, Cathy Philpott, Paula Beecher and All About Staffing, Inc. and Non-Party Subpoena Recipients Hendersonville Medical Center, and Mike Esposito.

George H. Cate, III, Nashville, Tennessee, Timothy J. Rivelli, Cornelius M. Murphy, Linda T. Coberly, and Amanda R. Conley, Chicago, Illinois, for the appellees, Bard Access Systems, Inc. and Heather Chambers.

Marshall T. Cook, Hendersonville, Tennessee, for the appellee, Kim Alsbrooks.

G. Brian Jackson and David L. Johnson, Nashville, Tennessee, for the Amicus Curiae, Tennessee Hospital Association.

OPINION

WILLIAM C. KOCH, JR., J., delivered the opinion of the Court, in which CORNELIA A. CLARK, and SHARON G. LEE, JJ., joined. GARY R. WADE, J., filed a dissenting opinion, in which JANICE M. HOLDER, C.J. joined.

This appeal involves the application of the Tennessee Peer Review Law of 1967 Tenn.Code Ann. § 63-6-219 (Supp.2009) to a hospital system's business decision regarding the provision of vascular access services to patients in its member hospitals. The hospital system had customarily outsourced these services at several of its hospitals, but, following an audit, it decided to discontinue outsourcing the services and to begin providing them using nurses employed by its own hospitals. After several of the system's hospitals cancelled their vascular access services contracts, the vendor that had been providing the services filed two suits in the Circuit Court for Sumner County against the manufacturer of the catheters used to provide the services and one of its employees, a staffing affiliate of the hospital system and two of its employees, and the chief nursing officer at one of the system's hospitals. These suits, which were eventually transferred to the Circuit Court for Williamson County and consolidated, sought damages under numerous theories based on the vendor's allegations that the defendants, all of whom had played a role in the audit, had disparaged the manner in which it had been providing the vascular access services and had improperly interfered with its contracts. During discovery, the vendor sought copies of various records relating to the audit of its services. The defendants claimed that these records were covered by the privilege in Tenn.Code Ann. § 63-6-219(e). After reviewing the disputed records in chambers, the trial court determined that most of the requested records were covered by the privilege. The trial court also granted the vendor permission to pursue an interlocutory appeal to the Court of Appeals; however, the Court of Appeals declined to accept the appeal. We granted the vendor's Tenn. R.App. P. 11 application to address the trial court's interpretation and application of Tenn.Code Ann. § 63-6-219(e). We have determined that the trial court interpreted the privilege in Tenn.Code Ann. § 63-6-219(e) too broadly. Therefore, we vacate the portions of the trial court's discovery orders applying the privilege in Tenn.Code Ann. § 63-6-219(e) and remand the case to the trial court for further proceedings.

I.¹

HCA, Inc. owns and operates the TriStar Health System that consists of twenty-one hospitals in three states. Since 1997, several of the hospitals in the TriStar Health System located in Middle Tennessee outsourced their vascular access services² to Lee Medical, Inc. ("Lee Medical").³ Accordingly, when physicians with patients at one of these hospitals ordered a PICC line or EDPC for their patients, a specially trained nurse employed by Lee Medical performed the procedure.

In July 2005, the TriStar Health System's CNO Council⁴ decided to examine the cost and quality benefits of providing vascular access services internally rather than continuing to outsource them. The CNO Council enlisted the assistance of All About Staffing, Inc. ("All About Staffing"), another HCA-affiliated company,⁵ to assist with its analysis of the provision of vascular access services at the TriStar hospitals. All About Staffing provides nurse staffing to HCA-related hospitals.⁶

In November 2005, while All About Staffing's review of vascular access services was proceeding, Lee Medical submitted a revised contract for services to Cathy Philpott, the chief nursing officer at Hendersonville Medical Center, one of the hospitals in the TriStar Health System. Upon receipt of this contract, Ms. Philpott began evaluating Lee Medical's performance at Hendersonville Medical Center.

Lee Medical used catheters manufactured by Bard Access Systems, Inc. ("Bard") in its provision of vascular access services at the TriStar hospitals. Accordingly, All About Staffing sought Bard's assistance with its evaluation of the vascular access services being provided at the TriStar hospitals. Bard's help took two forms. First, two Bard representatives— Heather Chambers⁷ and Kim Alsbrooks⁸ —conducted "chart reviews" at various TriStar hospitals, including hospitals that had contracts with Lee Medical and those that did not. Second, in March 2006, Ms. Chambers provided All About Staffing a "business plan that shows cost justification for your nurses to place the PICCs at bedside." Although the record is unclear on this point, Bard's report, apparently titled "PICC Proposal for Tri-Star System" ("Bard Report") included not only the business plan mentioned by Ms. Chambers but also the results of the "chart reviews" that had been conducted by Mses. Chambers and Alsbrooks.

The record does not precisely define the sequence of events involving TriStar's consideration of All About Staffing's report. According to TriStar's Vice President for Quality and Clinical Performance, the CNO Council "determined that, from a clinical standpoint, the HCA/TriStar Hospitals should bring this service in house and use AAS-staffed⁹ nurses to provide vascular access services." The report was then presented to the TriStar CFO Council.¹⁰ According to TriStar's Vice President for Quality and Clinical Performance, the CFO Council determined "from a financial standpoint ... that the HCA/TriStar Hospitals should use in-house AAS-staffed nurses to provide vascular access services." At some point,¹¹ Ms. Philpott's findings and opinions regarding the provision of vascular access services at Hendersonville Medical Center were also presented to Hendersonville Medical Center's Quality Management Council,¹² the TriStar CNO Council, and the TriStar CFO Council.

In June or July 2006, the president of Lee Medical contacted Paula Beecher, All About Staffing's Regional Vice President for Operations, to discuss entering into a contract to provide vascular access services for the other TriStar hospitals that were not already under contract with Lee Medical. Ms. Beecher invited Lee Medical to submit a proposal. The record contains no indication that Lee Medical was aware that TriStar had been considering bringing vascular access services in house for almost one year.

As a result of the decisions made by its CNO Council and CFO Council, the TriStar System decided to terminate the existing contracts with Lee Medical in due course. Lee Medical submitted a "Proposal for Services" to Ms. Beecher on August 1, 2006, along with an unsolicited confidential report containing "data outcomes related to the quality of services" that Lee Medical had provided at Hendersonville Medical Center and Skyline Medical Center. However, in light of TriStar's decision to perform the vascular access services in house, All About Staffing did not contract with Lee Medical to provide these services at other TriStar hospitals. The record is unclear about when or how All About Staffing or TriStar communicated this decision to Lee Medical.

On October 23, 2006, Tennessee Christian Medical Center became the first TriStar hospital to cancel its contract with Lee Medical.¹³ On October 31, 2006, Randy Oxley, Lee Medical's Director of Operations, sent an email to Ms. Beecher expressing concern that "the results of the audit are being used by the Hendersonville Medical Center as a method to raise some questions with regard to Lee Medical." The following day, Hendersonville Medical Center terminated its contract with Lee Medical.¹⁴ On November 9, 2006, Ms. Beecher "reassured" Mr. Oxley that

the audit we conducted surveyed the use of all intravascular access, Peripheral lines, PICC lines, central lines, etc. for all of our TriStar facilities. We at HCA are dedicated to providing the most appropriate quality care for our patients. The results of the audit were not used to evaluate the quality service of Lee Medical Service. This audit was utilized to ensure proper line utilization for our patients in the most cost effective manner.

Lee Medical was not reassured.

On April 18, 2007, Lee Medical filed suit in the Circuit Court for Sumner County against Bard and Mses. Alsbrooks, Chambers, and Philpott.¹⁵ It sought $15,000,000 in compensatory damages, as well as treble damages and punitive damages, based on various claims, including libel, slander, tortious interference with business relationships, civil conspiracy, negligent misrepresentation, breach of contract, inducement to breach a contract, breach of fiduciary duty, and violation of the Tennessee Consumer Protection Act. On October 25, 2007, Lee Medical filed a second suit in the Chancery Court for Sumner County against Ms. Beecher and All About Staffing.¹⁶ This suit also sought $15,000,000 in damages on claims similar to those asserted in its first lawsuit.

Lee Medical also commenced an aggressive discovery campaign on the day it filed its first complaint. It had subpoenas duces tecum issued;...