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Iowa ASC sues physician group, physicians over building $37M Nebraska ASC, allege non-compete violations: 6 things to know

Sioux City, Iowa-based Pierce Street Same Day Surgery filed a lawsuit against several of its physician owners to enforce a non-compete clause in their contracts and prevent them from moving forward with plans to open another ASC across the border in Nebraska, according to the Sioux City Journal.

 

Here are six things to know:

1. Pierce Street, a joint venture ASC between UnityPoint Health and physician owners, is suing Sioux City-based Tri-State Specialists and its CEO Lee Hilka to prevent the group from partnering with four of the center's physician partners in the development and promotion of Riverview Surgical Center, currently under construction across the Missouri River in South Sioux City, Neb. The ASC is also seeking an injunction against four physicians from owning, operating or being employed by Riverview.

2. Tri-State Specialists broke ground on the $37 million Riverview Surgical Center in November. The ASC offers many of the same services as Pierce Street and is scheduled to open in 2019. Riverview is differentiated in one key aspect: the 50,000-square-foot ASC is located adjacent to Delta Hotels by Marriott, allowing patients with more complex procedures to stay at the hotel overnight next to the center. Another key difference is certificate of need requirements; Iowa is a CON state requiring state permission to build or expand medical facilities while Nebraska does not require a review process prior to construction.

3. In the lawsuit, Pierce Street maintains physicians who are current or former members of the center have operating agreements with non-compete provisions that would prohibit them from becoming involved in Riverview or any other hospitals or ASCs within 30 miles of Pierce Street while members or for one year after terminating membership. Riverview is less than four miles away from Pierce Street, which could lose up to 60 percent of its patient volume currently referred by Tri-State physicians.

4. According to the report, Pierce Street alleges physicians named in the suit began recruiting other physicians to Riverview while still members at Pierce Street. The lawsuit claims "breach of contract, intentional interference with a contract and with prospective business advantage, breach of duty of loyalty and conspiracy."

5. Pierce Street and Tri-State both operate out of the same building on the UnityPoint Health-St. Luke's campus in Sioux City. The suit contends Mr. Hilka, who previously served as Pierce Street's CEO, and physician partners distributed Riverview-branded materials including mugs and pens to staff and patients, which Pierce Street says has made recruiting additional investors challenging. They also had access to Pierce Street's building and business plans.

6. Tri-State disputes the suit and plans to move forward with Riverview's construction, set to begin in the spring of 2018. A hearing for the suit is scheduled for Jan. 10, according to the report.

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