SUBJECT: PHYSICIAN LIABLE FOR REPAYMENT OF SCHOLARSHIP FUNDS

CASE NAME; U.S. V. ST. THOMAS

CASE CITE: 966 F.2d 476 (C.A. 9, JUNE 4, 1992)

FACTS OF CASE: In 1977 the physician was a medical student. On August 11, 1977 he received a scholarship award of $11,181.25 for the period July 1, 1977 to June 30, 1978. The scholarship award was given by the public health and National Health Service Corps..

The physician signed an agreement accepting the award. One condition was that he agreed to fulfill the service obligation as specified by the public Health Service Act and Regulations. This condition was part of the printed boiler plate language in the award and was also separately typed opposite his name.

He also received scholarship aid of $6058 for 1978 - 1979 and $12,671 for 1979 - 1980 under a different program, the National Health Service Corps. Scholarship Program. The physician was required to enter into a written contract with the Secretary of Health and Human Services to serve a period of obligated service for at least two years in a health professional shortage area assigned by the secretary. The contract also contained a statement of the damages to which the United States was entitled for breach of contract.

The physician was notified by letter dated October 23, 1981 that he had been assigned to a position but due to budget reductions that position became unavailable. He was not matched to a site but was employed briefly in a clinic in Watts. After collection proceedings were begun by the government, he was offered two chances to serve under a special repayment program. He did not reply. The government filed suit against the physician, and a trial court granted summary judgement in favor of the government.

On appeal, the court said the physician was in default of the Public Health Service Scholarship Training Program and owed $11,181.25 plus interest. He was not in default under the National Health Service Corps. Program since the secretary of Health and Human Services failed to assign him as required by statute. The physician did not reject any assignments since the secretary did not make one, and the physician was not in default, the court said. It reversed the award of summary judgement for claims based on the scholarship awarded under the National Health Service Corps. Program.


SUBJECT: NATIONAL HEALTH SERVICE CORPS. RECIPIENT OF PHYSICIAN SELECTS OWN AREA OF SERVICE

CASE NAME: RENDLEMAN V. SULLIVAN

CASE CITE: 760 F.SUPP. 842 (D.OR. 1991)

STATE: OREGON

FACTS OF CASE: A physician received a scholarship benefit through the National Health Service Corps. (NHSC). During his last two years of medical school, the physician had received $32,000 from the NHSC. An important stipulation in arrangements between the government and students is service "in a health manpower shortage area (HMSA) to which they are assigned by the secretary."

After graduation, the student's service was deferred for three years to allow for his completion of a residency. However, he left the residency program an opened a clinic to provide care for indigents. The clinic was not located in a HMSA city; thus the self-appointed service area was not recognized as fulfilling his obligation to the program. He was reassigned a location in Alabama. He refused to go there resulting in a Declaration of Default by Health and Human Services (HHS).

The physician filed suit against the government to set aside the default, and the United States counterclaimed for repayment and treble damages. The Trial Court granted summary judgement in favor of the physician, an Appellate Court reversed and remanded the case to the Trial Court to determine whether the physician was entitled to credit for the time he served in the clinic he established. The government then decided not to give the physician a waiver of the service requirement or credit for time served because he did not set forth any physical or mental disability that could justify a waiver on the ground of impossibility.

Issues before the Trial Court were whether HHS acted arbitrarily in denying the physician's request for a waiver of default and whether treble damages provisions were applicable. Arguments by the HHS centered on the fact that the physician did not qualify for a waiver under any regulation then in force. The physician contended he had served the poor and homeless for six years in a location ultimately designated an HMSA. He also noted that during this time his earnings were insufficient to meet the demand for repayment.

The court decided HHS was not required to give credit for the physician's services. The court observed, however, that HHS had considerable latitude in determining the grounds for granting a waiver. As a result the case would return to HHS to reconsider all facts in which the physician sought entitlement to a waiver.