Hospital CEO David Rice said the hospital had no choice, citing an obscure IRS law. that says a non-profit hospital must limit contracts with for-profit doctors to three years. The contract with the ER doctors ran for five years — May 2003 through May 2008.

The law has been on the books since 1997 — long before the hospital signed the 2003 contract with the ER doctors — but Rice said they just discovered it. Rice said the hospital was in violation of this IRS law and had to get out of the contract or risk its non-profit status.

But Rice left out an important part of the law, Jaben said. The law only applies to doctors who get a lump sum from the hospital for their services. The ER doctors don’t get a lump sum from the hospital. The doctors bill the patients directly. The hospital only covers the costs of poor patients who show up at the door but can’t pay, and that’s done on a case-by-case basis, and as not a lump sum.

Jaben said Rice purposely misinterpreted the IRS law to justify a rewrite of their contract.