Order Halting Non-Essential Surgeries in Ohio May Excuse Contractual Non-Performance for Affected Health Care Providers

Ohio Governor Mike DeWine announced in a press conference on March 17, 2020 that all elective surgeries would be postponed in the State of Ohio effective at 5:00 p.m. on March 18, 2020 until further notice. The Order, issued by Director of the Ohio Department of Health Amy Acton, is available here:

(https://content.govdelivery.com/attachments/OHOOD/2020/03/17/file_attachments/1403950/Director%27s%20Order%20non-essential%20surgery%203-17-2020.pdf). It defines non-essential surgery as a “procedure that can be delayed without undue risk to the current or future health of a patient.” The Order also provided the following “examples of criteria to consider”:

1. Threat to the patient’s life if surgery or procedure is not performed;
2. Threat of permanent dysfunction of an extremity or organ system;
3. Risk of metastasis or progression of staging; or
4. Risk of rapidly worsening to severe symptoms (time sensitive).

The Order also eliminated “non-essential individuals from surgery/procedure rooms and patient care areas.”

Health care providers that are unable to schedule surgeries as a result of this government action may find themselves needing to lay off staff, including medical staff, due to reduced productivity. Because the employment of health care professionals is frequently governed by the terms of a contract, those contractual terms will control termination procedures. In some cases, the contracts themselves contain language governing significant disruptions (sometimes referred to as a force majeure clause). However, when the contract at issue does not provide for termination or layoff as a result of reduced productivity, facilities may find themselves between the proverbial rock and hard place of continuing to employ, and compensate, non-productive medical professionals, or facing breach-of-contract claims when such professionals are laid off or let go. Fortunately, when no force majeure clause governs disruption in the medical professional’s performance under the agreement, state law and common law doctrines may provide some relief.

Events that supervene a party’s ability to perform, or that delay performance according to contractual terms, can give rise to three common law doctrines that may provide relief to an affected party: impossibility; impracticability, or frustration of purpose.

1. Impossibility. The doctrine of impossibility arises when performance becomes objectively impossible because of a supervening event. Performance must be impossible, not just financially unappealing or slightly more difficult, regardless of any amount of time, money, or energy spent. Generally, impossibility is invoked when the subject matter of the agreement is destroyed, or a party’s means of performance is prevented. In the case of COVID-19, an affected party could invoke the doctrine of impossibility where measures taken by government entities make the performance of the contract impossible for a period of time. In such cases, performance may be excused as impossible, but will only be excused for the period in which performance remains legally or physically impossible. Thus, if an affected party relies on governmental action as the excuse for inability to perform on a contract, then such excuse will no longer be valid once government restrictions are lifted.[1] Depending on the specific contract language describing the services to be performed, the order may make performance legally impossible for health care providers.

2. Impracticability. Under the doctrine of impracticability, a contracting party can avoid the contract when government orders render its performance impracticable, even if the government’s orders are invalid. This doctrine has been accepted by Ohio courts, and allows the contracting party to accept government instructions without appealing to a higher authority or risking punishment for violating the government’s instructions.[2]

3. Frustration of Purpose. Under the doctrine of frustration of purpose, if, “after a contract is made, a party’s principal purpose is substantially frustrated without his fault by the occurrence of an event, the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate to the contrary.”[3] Here, since neither the coronavirus outbreak nor the governor’s order was foreseen at the time the contract was made, health care providers may be relieved from performance. However, because the doctrine of frustration of purpose is not widely accepted in Ohio, the impossibility or impracticability doctrines may provide more relief.[4]

Like many other issues that health care providers face in these uncertain and rapidly-changing times, the application of these doctrines to a specific contract is complex and fact-specific. For analysis of obligations under any specific contract, please contact your Dinsmore health care or labor attorney.