An article in yesterday's editions of The Sun about Johns Hopkins Health System's legal settlement with the Prudential Insurance Co. of America incorrectly characterized the restrictions Hopkins faces regarding managed care.
The article should have stated that only the Johns Hopkins Medical Services Corp., a subsidiary of the Health System, is restricted to seeing patients of Prudential's HMO. The Johns Hopkins Hospital and the Johns Hopkins Bayview Medical Center, two other Health System subsidiaries, are allowed to contract with any other HMO.
* The Sun regrets the error.
An extraordinary retraction and public apology from the Johns Hopkins Health System Corp. has ended a bitter lawsuit that had threatened to damage the reputations of several of Baltimore's most prominent health care executives and corporations.
The settlement of the $50 million lawsuit was a near-total capitulation by the Hopkins Health System, parent of the Johns Hopkins Hospital, and represents an embarrassing finish to its effort to reclaim its managed care business from the Prudential Insurance Co. of America.
Hopkins also issued a public apology to former Prudential executive Barbara B. Hill, now president of an HMO subsidiary of the Aetna Life Insurance Co. in Chicago.
Although Ms. Hill did not collect any monetary damages under the settlement, she was clearly pleased by the settlement of the lawsuit, which caused her and her family "a lot of pain," she said.
As far as the lawsuit was concerned, she said: "What I think they are is schoolyard bullies," referring to H. Furlong Baldwin, former chairman of Hopkins Health System, and Dr. James A. Block, its president.
"My parents taught me that when the schoolyard bully picks on you, you stand up to him. That's what I did, and now they've had to back down and apologize."
Hopkins' lawsuit, filed in March, accused Ms. Hill of dishonesty and breach of fiduciary duty regarding her role in the 1991 sale of most of Hopkins' health maintenance organization to Prudential.
Ms. Hill, who once ranked among Baltimore's most influential health care executives, ran the HMO for Hopkins and moved to Prudential to continue in that role after the sale.
The lawsuit accused Ms. Hill of secretly using her position at Hopkins to negotiate a contract that unfairly benefited Prudential.
The deal, Hopkins claimed, has cost it millions of dollars a year in losses.
But as part of a settlement signed Friday night and filed with the Baltimore City Circuit Court yesterday, Hopkins issued a formal retraction of its allegations.
"On the basis of our investigation of the facts through pretrial discovery, we withdraw all allegations of any dishonesty, disloyalty, breach of fiduciary duty or other misconduct by you," said the letter, signed by current Hopkins Health System Chairman George L. Bunting Jr. and Dr. Block.
"We apologize for the making of such allegations. . . . We acknowledge and appreciate your talented services to Hopkins over the years, and we recognize that you have become one of the most knowledgeable and respected professionals in the HMO field," the letter stated.
Legal experts found the resolution of the high-profile case stunning. Defamation cases often are settled with public apologies "where the statements were defamatory and irresponsible," said Baltimore litigator Arnold Weiner, who was not involved in the case.
But "it's astounding that somebody at Hopkins would write a letter, and file a lawsuit making such serious charges" without apparent foundation, Mr. Weiner said. "Somebody spent a lot of Hopkins' money pursuing this thing. How did they let it get so out of hand?"
Ms. Hill also agreed not to pursue a $30 million libel counterclaim against Hopkins. That lawsuit alleged that Mr. Baldwin, former chairman of the Hopkins board of trustees, had defamed Ms. Hill in a scathing letter he wrote to Prudential's chairman in &r; December 1993 outlining the charges that would later appear in the lawsuit.
Along with the $50 million claim, Hopkins had asked the court to nullify the sale of the HMO and return it to Hopkins. Except for an rTC agreement to hire independent consultants who would help improve services for the HMO members, the settlement gives Hopkins practically none of what it wanted.
Hopkins declined to comment on the settlement or the apology yesterday.
"We really feel strongly that it will serve no purpose to rehash the details over and over again," said spokeswoman Joann Rodgers. Hopkins simply wants "to focus on the cooperative future relationship" with Prudential, she said.
Prudential spokesman Kevin Heine said yesterday that Prudential was pleased that the settlement vindicated the company and Ms. Hill.
"The most positive aspect of this is that our working relationship with Hopkins remains intact, with the major terms of our agreement essentially the same as they were in 1991," he said.
Mr. Baldwin, who also is chairman of Mercantile Bankshares Corp., did not return calls seeking comment.
Aside from the apology, an important effect of the settlement was that it left the Hopkins Health System without a way to compete on its own in the growing managed care industry. The sale to Prudential, which was an effort by Hopkins to shed its nonmedical business, prevented the Baltimore institution from establishing its own HMO.
The final agreement that Hopkins signed in 1991 barred it from setting up its own HMO or from serving the patients of any HMO besides Prudential for 10 years.
When Dr. Block took the place of then-Hopkins President Robert M. Heyssel in mid-1992, he had planned to establish a managed care business at Hopkins but was unaware of the noncompetition elements of the Prudential contract, according to depositions conducted in the case.
What he found was that the Prudential agreement left the nation's pre-eminent health care institution without an important way to offset the high costs of running an academic hospital in a poor, urban community by owning an HMO.
In addition, the Medical Services Corp. has been losing money since the sale, as much as $10 million a year, according to Mr. Baldwin's 1993 letter to Prudential Chairman Robert C. Winters.
Documents related to the case, and depositions of Hopkins executives and trustees, showed that Dr. Block was frustrated over the noncompete aspect of the Prudential arrangement. He talked with state regulators and hired a former deputy insurance commissioner as a consultant, partly to help Hopkins find a way to renegotiate that part of the contract.
Ultimately, in Mr. Baldwin's letter and in the lawsuit itself, Hopkins accused Ms. Hill of secretly agreeing to be hired by Prudential and rigging the sale negotiations to benefit her prospective employer. Ms. Hill did this, the suit alleged, without the knowledge of her boss at Hopkins or its board of trustees, which includes some of Baltimore's most prominent businessmen.
Court documents and depositions showed Ms. Hill had disclosed her potential conflict and removed herself from negotiations in early 1991. Hopkins then hired several consulting and law firms to iron out details of the sale, according to Dr. Heyssel.
HOPKINS APOLOGIZES
The following is an excerpt from a letter dated Feb. 4 to Barbara B. Hill from George L. Bunting Jr., chairman of the Johns Hopkins Health System, and Dr. James A. Block, president:
"On the basis of our investigation of the facts through pretrial discovery, we withdraw all allegations of any dishonesty, disloyalty, breach of fiduciary duty or other misconduct by you during the time of your employment with Hopkins and through the present date, including the allegations made in the letter of December 3, 1993, in the original and amended complaints, and in any statements that may have been made in any other context. We, therefore, intend to ask the Court to dismiss with prejudice the action against you. We apologize for the making of such allegations in the letter of December 3, 1993, in the litigation documents and in any statements that may have been made in any other context. We acknowledge and appreciate your talented services to Hopkins over the years, and we recognize that you have become one of the most knowledgeable and respected professionals in the HMO field."