An ASC may have the right to a portion of the fees its director of anesthesia and medical director collected from off-site care, according to a legal opinion released yesterday. The contract dispute between ProHealth Ambulatory Surgery Center of Lake Succcess, N.Y, and its former medical director is headed back to a lower court after state appeals judges ruled that even though part of the contract is illegal, the ASC may get to share in the fees anesthesiologist Kevin Glassman, MD, collected from services performed outside the center.

In an opinion released yesterday, 7 judges on the Court of Appeals of New York wrote that the lower court "shall consider whether the [surgery center] is entitled to a set off derived from the funds, if any, held by the plaintiff."

Dr. Glassman sued the surgery center in 2001 for breach of contract after the surgery center terminated his employment as director of anesthesia and medical director. Dr. Glassman claims the he was let go without cause and entitled to severance pay described in his contract, according to court documents.

In court, the surgery center disputed Dr. Glassman's claims and said that the contract with Dr. Glassman was in fact invalid because the center and anesthesiologist agreed to share the income for anesthesia services provided by Dr. Glassman in the surgery center and off-site, which is illegal. In New York, a surgery center's operating certificate does not allow the facility to collect for off-site care, according to court documents. The surgery center argued that since part of the contract is illegal, the contract is unenforceable.

The center also argued that it had a right to a portion of the fees that Dr. Glassman had collected from off-site care and had not paid to the surgery center. The original contract between Dr. Glassman and the surgery center called for the physician to give all his off-site collections to the surgery center, which would then pay him his portion out of the net anesthesia revenue pool. According to a summary of the case, the surgery center never paid Dr. Glassman and other anesthesia providers any money from the revenue pool, so Dr. Glassman started to withhold some of his off-site collections.

Then, the surgery center required all anesthesiologists to sign an amended contract that eliminated their right to money from the revenue pool. "Glassman refused to sign and he was fired in April 2001," says the case summary.

In a 2007 trial, a state Supreme Court judge in Nassau County agreed with Dr. Glassman and awarded him $754,825 in damages. The surgery center has appealed twice. In the first appeal in October 2008, the court disagreed with the surgery center's claims that the case should have been dismissed because the contract had an illegal aspect that made it unenforceable. The appeals court disagreed. "Where an agreement consists in part of an unlawful objective and in part of lawful objectives, a court may sever the illegal aspects of the agreement and enforce the legal ones," wrote the judges in the first appeal.

The surgery center then took the case to the higher Court of Appeals of New York. There, the judges ordered the trial court to revisit the damages awarded to Dr. Glassman to determine whether they should be adjusted. Although portions of the contract are illegal, the court said, the contract is still enforceable. This means that the surgery center may have a right to some of the fees collected by Dr. Glassman from off-site care. Otherwise, the other courts' rulings stand. "We see no reason to disturb the remaining conclusions of the courts below," wrote the judges in their opinion.

The case now goes back to the Supreme Court in Nassau County.

Kent Steinriede

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