Anesthesia Group Communications and the Attorney-Client Privilege

The attorney-client privilege seems like a simple enough concept, but it is full of complexities.  Anesthesiologists and administrators who handle communications with their groups’ lawyers need to know how to protect the privilege.  Ongoing whistleblower litigation, U.S. ex rel. Baklid-Kunz v. Halifax Hospital Medical Center, Case No: 6:09-cv-1002, 2012 U.S. Dist. LEXIS 158944 (M.D. Fla. Nov. 6, 2012), offers valuable guidance.

The attorney-client privilege shields certain confidential information from discovery or from admission into evidence in a court proceeding.  The communication is protected so long as (1) it was between attorney and client, (2) it was made in confidence for the purpose of rendering legal advice and (3) it remains confidential.  

Communications with outside counsel are presumed to be privileged, but the presumption is rebuttable.  The burden of proving that the privilege has been lost or waived is on the other party.   In the case of communications with in-house counsel, whose roles often include business and not just legal advice, there is no presumption of privilege.  To remain protected, in-house counsel communications should satisfy the primary purpose test, i.e., the principle that a client’s communications with a lawyer are privileged only if legal advice or assistance was the primary purpose of the exchange of information.

On May 8, 2013, a federal district court in Tampa ordered Halifax Hospital Medical Center to turn over a legal memorandum on physician compensation to the Department of Justice (DOJ) and the whistleblower who instigated the litigation, ruling that the memo was not protected by attorney-client privilege because of the crime-fraud exception. This exception voids the privilege when a client is engaged in or is about to engage in criminal or fraudulent conduct, and the attorney’s advice is used to further the crime or fraud.

The whistleblower in Halifax, the director of physician services, alleged that Halifax Hospital Medical Center had entered into several specialty physician employment agreements that provided for compensation that was not commercially reasonable, exceeded fair market value, and/or took into account the volume or value of referrals or other business generated in violation of the Stark Law, and in turn, the federal False Claims Act. The judge decided that certain e-mails between in-house counsel and the hospital’s finance department, indicating that Halifax was about to engage in fraudulent conduct related to making certain payments to oncologists, were subject to the crime-fraud exception and were not protected.

This application of the crime-fraud exception is quite unusual.  Normally it is the attorney who has been made privy to a client’s plan to commit illegal activity who invokes the exception so that the attorney can fulfill his or her ethical obligation to prevent the commission of a crime.  In Halifax, it was the court rather than the attorney who applied the crime-fraud exception to the facts and in the process appeared to question the attorney’s conduct in advising the hospital on physician compensation matters.  The implications for compliance work are disturbing.

Earlier rulings on attorney-client privilege issues by the Halifax court were equally stringent.  Including non-lawyers along with in-house counsel on the “To” line in e-mail headers meant that the contents were not limited to legal advice and thus were discoverable.  Likewise, the lack of an explicit request for legal advice or assistance, or the absence of information reasonably related to the requested legal assistance, were both fatal to privilege. 

Especially noteworthy was the court’s position that compliance-related communications and the hospital’s compliance log were not privileged.  The fact that the compliance department reported to and operated under the supervision and oversight of the legal department was not sufficient to protect the compliance log, or related communications: they did not clearly reflect information gathered for the purpose of the corporation receiving “legal advice” as opposed to “compliance advice.”

The Halifax decision does not bind other federal or state courts, but it has caused a considerable stir among health care lawyers, for reasons that go beyond those mentioned here.  Our readers should regard the case as a cautionary note regarding attorney-client privilege in general. Remember that the privilege protects the communication of confidential information between lawyer and client for the purpose of receiving legal advice.  It does not protect the facts themselves about what clients knew, did, or failed to do merely because those facts have been documented in correspondence to counsel.

Remember also that the lawyer receiving the confidential information must be acting as the client’s attorney—not as a business advisor, and not as an information source. Frequently anesthesiologists will discuss questions with a lawyer on the staff of a medical association or affiliated with an organization like our own, for example, and assume that the discussion will be not just confidential, but protected from disclosure in a legal proceeding, should there be one.  It is not that simple.