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  • Writer's pictureKirk Hartley

North Carolina Whistle-Blower Statute Voids Confidentiality Terms in Private Contracts and Garners M

Amazing how bad decisions can extend themselves. For any easy example, think about athletes that make one mistake and then immediately commit a foul or some other mistake because they are embarrassed about the first mistake. For a litigation and business example, consider the latest chapter in the saga of Baptist Medical Center’s effort to avoid the consequences of its mistakes in overcharging for health care.

In short, some of Baptist’s bad acts were caught by a non-employee whistleblower who reported the bad acts to the state. Having gone that wrong, Baptist then compounded its woes by suing the whistle-blower. That suit went nowhere, and more bad press followed.

Then, Baptist became the target of a separate class action seeking damages for overcharging its employees for healthcare. Baptist finally became more savvy and settled the suit, but then screwed up the deal terms and garnered yet more bad press. The judge then ruled against Baptist on its painfully lame argument, netting more bad press for Baptist.

Could it all get worse? Yes! Now, Baptist is back in the media as North Carolina passed a whistle-blower statute addressed precisely at Baptist over-charging the state, and so the entire tawdry story is being told yet again. If someone ever writes a case book on litigation blunders, the Baptist Medical affair seems a fine candidate to obtain the fame of a poster child.

On the merits, the statute is interesting because whistle-blowers are sometimes are subjected to suits claiming that blowing the whistle constitutes a breach of contract or a tort. That tactic is now tougher to use in North Carolina because the staute has just passed a statute that voids private contracts which impose confidentiality terms on contracts involving its state health plans. The state may later pass a broader bill applicable to contracts outside of health plans. The latest part of the story is told in more detail in this news article from the Winston-Salem Journal.

Conclusion? Health care whistle-blowers in North Carolina now have some valuable protections. For the rest of the world, the lesson is that it’s often best to cut losses by owning up to a foul instead of litigating. Thus, multiple studies have proved that hospitals and doctors best deal with malpractice incidents by apologizing and paying. (Also think about Jamie Dimon’s so far more or less succesful mea culpa for the London Whale affair, but even that may yet blow up again if the losses reach $ 9 billion instead of $ 2-3 billion.) By making the same compound foul mistake that athletes sometimes make, the entity may set in motion a chain of events that will extend its losses out exponentially and might even take it off the playing field. Indeed, one wonders how many future news and blog articles will for how many years repeat the story of Baptist Medical mistreating the whistle-blower, Joe Vincoli.

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