In late December 2021, Eugene Moretti, MD, MHSc, filed a lawsuit on behalf of Private Diagnostic Clinic (PDC) against Duke University and Duke University Health System, alleging that Duke University and Duke Health conspired to take over PDC without paying fair value.
PDC was founded in 1931 as an independent and for-profit group practice. According to the filing, all members of the PDC hold academic appointments to the faculty of Duke University, PDC was formed to be an independent company controlled by physicians. The PDC has roughly 1,850 physicians that treat almost two million patient visits per year at 140 locations between North Carolina and Virginia, generating roughly $1 billion.
According to the filing, PDC’s Operating Agreement organizes the PDC into departments that correspond to the academic departments of the School of Medicine. The person serving as the chair of a department of the School of Medicine also serves as the chair of the corresponding PDC Department.
In 1972, the PDC and Duke memorialized their arrangement via a partnership agreement. In the Partnership Agreement, Duke recognized the PDC “as a vital part of the Duke University Medical Center.” Under the Partnership Agreement, Duke provides the PDC with “office, laboratory, administrative, diagnostic, library, and related facilities on the Duke campus for the operation of a medical clinic.” In addition to the provision of physical facilities, Duke affords the PDC the “goodwill…from the public association of the PDC with Duke University and the Duke University School of Medicine.” In exchange, PDC pays Duke an amount determined by the two “to be fairly representative of the value of facilities, nonprofessional services, goodwill, and other valuable consideration made available to the PDC by Duke.”
The Partnership Agreement also recognizes the importance of the PDC’s independence, stating, “Major decisions were made by the doctors or with their concurrence, as contrasted to requirements laid down by an administration” and attempts to ensure continued independence of the PDC, saying, “Duke hereby recognizes the separate and independent status of the PDC and agrees not to interfere in its organizations and operations to the extend that such organization and operations relate to the private practice of medicine, so long as the PDC faithfully discharges its responsibilities under this contract.”
On October 22, 2021, though, Duke delivered its notice of the termination of the Partnership Agreement effective at the end of 2021. Duke told the physicians working with PDC who do research at university facilities that they must join Duke or lose their funding. The lawsuit goes into detail about the way in which Duke is allegedly “destroying the PDC to take over its business and goodwill,” including the way Duke has allegedly tried to entice practice heads to move to Duke and bring their doctors with them.
The lawsuit states that the physicians who were employed by the PDC would become Duke employees under this arrangement and would lose their independence they have enjoyed for so long and would likely be paid less for more work in the future.
Statement from Moretti’s Attorney
Moretti is suing Duke on his own, on behalf of the company. According to a local news story, his attorney wrote to the PDC Board in August 2021, urging them to file suit to protect the group’s interests. His attorney, Erica Harris, said that the Board created a committee to evaluate the claim, and agrees that his claims have merit but are unsure on whether to sue. “It would seem that the other PDC members are concerned about their careers,” Harris said. “Dr. Moretti is an older gentleman who is passionate about what he has devoted his life and much of his career to, and he’s willing to stand up against Duke.” Moretti is not seeking direct compensation other than attorneys fees.
Statements from Duke
“This lawsuit has no basis in fact or law and Duke will vigorously defend it,” said Duke spokesperson Michael Schoenfeld in an email, adding that Duke and PDC had been engaged in “productive dialogue” and that Moretti did not represent PDC leadership.