Analysis of Physician Racial Discrimination Claims in Boles v. Greenwood Leflore Hospital

• February 15, 2023

• Sydney Menack , McGuireWoods LLP

On December 27, 2022, the U.S. District Court for the Northern District of Mississippi allowed a physician’s racial discrimination claim against a hospital to proceed, holding that a reasonable jury could find that “the [h]ospital’s proffered reason for the difference in pay is pretextual.”[1] This ruling should serve as a reminder for hospitals, health care systems, and other health care entities that employ health care providers, and their counsels, to be mindful of any discrepancies between and among similarly situated health care providers’ employment agreements as it relates to the health care providers’ base salary and production bonus schedule, so the hospital, health care system, or health care entity as a whole may be afforded protection in the event litigation ensues.

Federal Protections Against Racial Discrimination by Employers

Title VII of the Civil Rights Act of 1964

Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, and national origin.[2] Title VII specifically prohibits an employer from discriminating against “any individual with respect to compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.”[3]

To prevail in a prima facie case of pay discrimination under Title VII, a plaintiff must satisfy three elements: (1) that the plaintiff was a member of a protected class of people; (2) that the plaintiff was paid less than a non-member; and (3) that the plaintiff’s circumstances are nearly identical to those of the better-paid non-member.[4] In determining whether the plaintiff and the non-member are similarly situated such that the third element is satisfied, courts will consider a variety of factors, including “job responsibility, experience, and qualifications.”[5]

After successfully establishing a prima facie case, the burden of production shifts from the plaintiff to the employer “to offer non-discriminatory reasons for the pay disparity.”[6] If the employer is able to successfully meet this burden, “then the burden swings back to the plaintiff to show that the employer’s rationale is merely pretext” by providing “substantial evidence to rebut each of the nondiscriminatory reasons” articulated by the employer.[7] Such substantial evidence may include a “showing that a discriminatory motive is more likely than a nondiscriminatory one,” or that the employer’s “explanation is unworthy of credence.”[8]

Boles v. Greenwood Leflore Hospital

Facts of the Case

In the case before the U.S. District Court for the Northern District of Mississippi, Dr. Preston Boles, who is Black, opened his own medical practice in Greenwood, Mississippi in 1992. In 2006, Dr. Boles, a podiatrist, sold his practice to Greenwood Leflore Hospital (Hospital) and subsequently became a Hospital employee.

Pursuant to the Physician Employment Agreement that Dr. Boles and the Hospital entered into at the time of the transaction, Dr. Boles received a salary of $65,000 per year with the potential for a productivity bonus. Specifically, Dr. Boles received an incentive of 90% of productivity, meaning that if his billing exceeded his salary, Dr. Boles would receive a percentage of anything over and beyond that salaried amount. A year later in July 2007, the Hospital significantly increased Dr. Boles’ base salary to $126,000 per year to match the “median level.” Throughout the next couple of years, Dr. Boles and the Hospital continued to renew the employment agreement at the same base salary of $126,000.

Then, in 2009, the Hospital subsidized Dr. Boles at $133,000 due to Dr. Boles’ failure to hit the required productivity levels under his Physician Employment Agreement and as a consequence of Dr. Boles’ failure to complete patient charts in a timely manner, resulting in the Hospital’s inability to receive payment for services Dr. Boles performed. At this time, Boles saw around 240 to 300 patients per month, falling below the Medical Group Management Association’s (MGMA’s) standard of 360 patients per month. Since Dr. Boles’ productivity continued to result in negative numbers, the Hospital decreased Dr. Boles’ salary from $126,000 to $113,400 in December 2012. At this time, Dr. Boles also agreed to modify and amend his payment structure so that his future compensation would be based on a work relative value unit (WRVU) structure. Under this agreed-to structure pursuant to the amended Physician Employment Agreement, Dr. Boles was entitled to the full base salary of $113,400 only if he exceeded 2,500 WRVUs in the employment year. In addition to this condition, Dr. Boles’ Physician Employment Agreement also provided that Dr. Boles was eligible for incentive compensation at a conversion factor of $44.05 for WRVUs exceeding 2,600 in an employment year. Notably, Boles usually exceeded the WRVU’s and would receive a bonus that amounted to nearly double his base salary since the WRVUs were set at a low level. In 2017, Dr. Boles’ annual base salary increased to $115,000 for 2,500 WRVUs with incentive compensation based on a conversion factor of $45.00 for WRVUs exceeding 2,556 in an employment year.

In 2012 (around the same time that Dr. Boles’ annual base salary was decreased to $113,400), the Hospital recruited and eventually hired Dr. Joseph Assini, who is White, as a new podiatrist for the Hospital. In stark contrast to Dr. Boles’ employment agreement, Dr. Assini’s initial employment agreement valued Dr. Assini’s annual base compensation at $240,000, required that he perform 5,300 WRVUs, and provided for incentive compensation at a conversion rate of $43.00 for WRVUs exceeding 5,580 up to 7,500, and a rate of $46.00 for WRVUs exceeding 7,500. By March 2014, the Hospital awarded Dr. Assini more responsibility at the Hospital and elected him to serve as the Hospital’s Medical Coordinator and Director of Centers of Excellence and Physician Community Liaison. To reflect the additional and greater responsibilities that accompanied these new titles, the Hospital and Dr. Assini amended Dr. Assini’s employment agreement such that Dr. Assini would receive an additional $2,000 per month (which amounted to an additional $24,000 per year).

In 2017, Dr. Boles’ annual base salary slightly increased to $115,000 for 2,500 WRVUs with incentive compensation based on a conversion factor of $45.00 for WRVUs exceeding 2,556 in an employment year. In 2019, based on a report detailing employee’s salaries for fiscal year 2018, Dr. Boles learned that Dr. Assini’s base salary greatly exceeded his own. As a result, Dr. Boles requested an increase in his salary. In June 2019, the Hospital and Dr. Boles amended Dr. Boles’ employment agreement to increase his annual base salary to $215,000 for 4,285 WRVUs and provide incentive compensation for WRVUs over 4,285 at a conversion factor of $45.00. Dr. Boles requested to increase the conversion rate for incentive bonuses to $52.00 (which would amount to 4,800 WRVUs); the Hospital rejected the request since Dr. Boles was “only producing at the 40th percentile of the MGMA.” In an attempt to explain the process utilized by the Hospital to determine physician compensation, a legal agent of the Hospital indicated that “[a] physician’s WRVU production expectation is generally based on performance realized from a previous contract” and that, consistent with MGMA guidelines, the Hospital’s “production expectation schedule correlates with the physician’s utilization percentage.” The Hospital therefore defended its rejection of Dr. Boles’ request by explaining that, because Dr. Boles had a lower production expectation than Dr. Assini in each year they worked together, Dr. Boles consequently had a lower base salary and a lower conversion rate regarding incentive bonuses.

Litigation and Analysis

In August 2021, after the Hospital denied his request for a change in his compensation formula, Dr. Boles filed a complaint in the U.S. District Court for the Northern District of Mississippi against the Hospital. The complaint alleged that the Hospital exhibited racial discrimination by paying Dr. Boles, who is Black, a lesser compensation than his White counterpart, Dr. Assini. After both parties engaged in discovery, the Hospital filed a motion for summary judgment where the Hospital averred that Dr. Boles could not establish a prima facie case of race discrimination because Dr. Boles failed to meet the third element requiring that the plaintiff’s “circumstances are nearly identical to those of the better-paid non-member.” While the Hospital did not dispute that Boles met the first two elements of a race discrimination claim as a member of a protected class and as a recipient of wages lower than Dr. Assini, a non-member, the Hospital maintained that Dr. Assini was not similarly situated to Dr. Boles. In support of its position, the Hospital advanced the following rationale: (1) Dr. Boles negotiated a much lower salary when he first joined the Hospital while Dr. Assini insisted on a higher salary, negotiated directorships to increase his salary, and had a higher WRVU expectation than Dr. Boles; (2) Dr. Boles’ production levels were lower than Dr. Assini’s; and (3) Dr. Assini had additional duties as medical staff liaison and director of the Hospital’s Centers for Excellence.

In reviewing the case, the court had to determine whether Dr. Assini was similarly situated to Dr. Boles. To do so, the court considered a variety of factors, including both physicians’ job responsibility, experience, and qualifications. The court found that “[t]o the extent the Hospital relies on Dr. Assini’s additional duties to argue Boles’ circumstances are not nearly identical, such argument fails” since Dr. Assini’s compensation for these additional duties was separate from his base salary (and thus separate from his physician duties), but his base salary was still higher than Dr. Boles’ base salary. Additionally, the court found the fact that Dr. Boles completed fewer WRVUs than Dr. Assini for most of the relevant years to be irrelevant as to whether Dr. Assini should be considered an improper comparator since the two physicians “held similar general job duties.” In so finding, the court reasoned that a jury could find that Dr. Assini was similarly situated and that Dr. Boles had therefore successfully established a prima facie case of racial discrimination that could only be overcome by the Hospital proffering a “legitimate, nondiscriminatory reason for the pay difference.”

In its response, the Hospital focused on the fact that the “compensation differences were based on differing production rates” to satisfy its burden of producing a non-discriminatory reason with sufficient clarity. Consequently, the burden then shifted back to Dr. Boles to show that this proffered reason was “pretextual.” Dr. Boles argued that the Hospital’s explanation was unworthy of credence, and therefore pretextual, since the Hospital’s explanation for the pay discrepancy between the two physicians—that the higher a physician’s minimum WRVU production expectation in the contract, the higher a physician’s conversion factor—contradicted the actual terms in Dr. Boles’ and Dr. Assini’s contracts. Specifically, Dr. Boles pointed to the fact that Dr. Assini’s conversion factor increased in 2015 despite the fact that his WRVUs dropped, and Dr. Boles’ conversion factor remained the same despite the fact that his WRVUs increased from 2,500 to 4,300 in the same year.

Ultimately, the court sided with Dr. Boles since the comparison of the two physicians’ employment agreements “discredits the Hospital’s argument that the conversion factor was determined by productivity.” In reaching this conclusion, the court placed scrutiny on the fact that Dr. Assini still would have earned significantly more even if Dr. Boles and Dr. Assini “achieved the same productivity under their respective contracts.” The court reasoned that because the physicians’ employment agreements “contradict the Hospital’s proffered reason, a reasonable jury could find that the Hospital’s proffered reason for the difference in pay [was] pretextual” and, as a result, the court denied the Hospital’s motion for summary judgment.

Conclusion

Applications for Hospitals, Health Systems, and Health Care Entities

This case adds to the body of court decisions related to workplace discrimination and physician compensation. Particularly in health care settings, those reviewing and making decisions about physician compensation may want to consider whether any compensation structures in agreements include potentially discriminatory practices (even if unintentional), along with regulatory compliance considerations such as the Stark Law and the Anti-Kickback Statute. This could include tracking physician compensation methodology in employment and independent contractor arrangements, so that such entities may fully and accurately record and monitor any developments in such compensation arrangements that could lead to potentially discriminatory practices.

In-house and external legal counsel and others advising on structuring physician compensation plans for health care providers, including physicians on medical staffs like Dr. Boles and Dr. Assini, should note this decision. Although it took place in a district court and may not be binding in certain jurisdictions, it is instructive for legal counsels who should be aware of potential disputes that may arise in connection with disparities in physician compensation. For such legal advisors, this case should serve as a reminder that the burden to provide a non-pretextual non-discriminatory reason behind a discrepancy in pay between two physicians may be significant. As such, legal counsels and those assisting with physician compensation plans may want to consider setting specific policies and procedures related to payment and hiring practices to ensure that similarly situated physicians and individuals receive equal pay.

ARTICLE TAGS

• Medical Staff Credentialing and Peer Review Practice Group
• Diversity, Equity, and Inclusion in Health Care Hub
• Labor and Employment
• Medical Staff, Credentialing, and Peer Review