Imaging center case in judge's hands

Bill Kettler

Nov. 1, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- A 2 1/2-year legal battle between Medford's two hospitals over the future of a medical imaging center has exposed the hospitals' mutual animosity and distrust as the case drags toward a conclusion Jackson County Circuit Court Judge Mark Schiveley said Monday he plans to issue a determination "as quickly as I can" in the case involving Providence Medford Medical Center, Rogue Valley Medical Center's parent company, and the physicians of Medford Radiological Group.

The two hospitals and the physicians jointly own Oregon Advanced Imaging, in the Navigators Landing development near the Medford airport. OAI operates Southern Oregon's most powerful MRI scanner, as well as other sophisticated medical imaging equipment.

The case began in July 2007, when Providence sued Asante Health System (RVMC's parent company) for breach of contract after Asante announced that it would end its participation in the joint venture. Documents produced in court at that time indicated that Asante had made a verbal commitment in January 2007 to extend the agreement for five years, but no legal documents had been signed. OAI executives testified that on the strength of that verbal agreement, they invested some $2.5 million to buy a new MRI with more power than any other scanner in the region.

A week after Providence filed its suit, Asante counter-sued, charging Providence and the radiologists had violated the spirit of the operating agreement for OAI. Schiveley ordered OAI to remain open while the partners resolved their differences. Since then, attorneys for both sides have peppered the court with a series of filings, motions and counter-motions. People familiar with the case who declined to speak on the record before Schiveley issues a determination said legal costs for the parties will be well into the hundreds of thousands of dollars.

Attorneys in Schiveley's court last week cited documents that portrayed both hospitals as aggressively seeking financial advantage at the expense of the other in the lucrative medical imaging market.

David Markowitz, Asante's attorney, cited Providence internal correspondence about staking out northern Jackson County as "our turf" and Asante having to "stew" in anger after Providence installed its own imaging equipment nearby in Central Point.

Arden Olson, Providence's attorney, cited internal Asante communication about the need to "push aggressively and compete with Providence."

Bob Meals, attorney for the radiologists, likened the physicians' position to being stuck between two feuding clans.

"We're not the Hatfields and the McCoys," Meals said. "We're the radiologists."

When Meals made a comment that seemed to have a humorous tone, he quickly clarified his remark to Schiveley, saying, "I don't mean to be facetious."

The judge responded, "This case could use a little levity."

Meals said the physicians have never consented to dissolving OAI. "They simply understood the agreement would continue to be renewed," he said.

The radiologists own 18 percent of OAI. Asante owns 43.5 percent and Providence owns 38.5. The three partners share expenses and profits in that ratio. The business has been profitable since the beginning, Meals observed.

"There's never been a company that's been as successful as this one, that one of the partners wanted to blow up," he said.

The dispute over OAI reflects increasing competition between Medford's two hospitals in a number of specialties. Working agreements about chemical dependency treatment and cardiac care have lapsed, and Providence has invested in its own cardiac unit, challenging what was formerly RVMC's specialty. RVMC built a rehabilitation unit on the top floor of its new bed tower, entering a field that has previously been Providence's alone.

Testimony in 2007 revealed growing discord between the two hospitals' executives who were involved in supervising OAI. A retreat that was scheduled in May 2007 to plan for OAI's future had to be cancelled when the two hospitals could not agree on how many people from Asante would be allowed to attend. Asante wanted three people, including a retiring board member, to provide background for a new member. Providence balked, and Asante executives said they would cancel the meeting unless they could have three representatives.

A facilitator who had been hired to conduct the retreat wrote that he observed "a visceral level of distrust" among the hospital representatives and a sense of "overwhelming dysfunctionality" on the board that supervised OAI.

The OAI operating agreement has no provisions for disposing of jointly owned equipment at Navigator's Landing. Schiveley's determination could address how the scanners and other assets are apportioned or create a mechanism for dissolution. One attorney in the case said Schiveley might be expected to issue a determination within two weeks.

Newstex ID: KRTB-0122-39411831