UK surgeon alleged corruption at UK HealthCare. Judge rules he’s no whistleblower.

Dr. Paul Kearney at his 2015 tribunal in which his clinical privileges at UK were revoked. This month, Kearney’s colleagues elected him to the UK College of Medicine faculty council.
Dr. Paul Kearney at his 2015 tribunal in which his clinical privileges at UK were revoked. This month, Kearney’s colleagues elected him to the UK College of Medicine faculty council. Herald-Leader staff file photo

The University of Kentucky has won a legal battle in its lengthy war against a UK surgeon who has alleged financial corruption at UK HealthCare.

Fayette Circuit Court Judge Ernesto Scorsone ruled that Paul Kearney did not meet state requirements for whistleblower status against UK.

Kearney said Tuesday that he would appeal the decision to the Kentucky Court of Appeals.

The lawsuit’s beginnings go back to 2015, when UK first suspended Kearney, one of UK’s most admired trauma surgeons, for abusive language and behavior toward colleagues and patients. The UK Board of Trustees stripped him of clinical privileges, the first time in UK HealthCare’s history, but let him keep his tenured faculty status. Last year, he was elected to the College of Medicine’s faculty council.

Kearney filed a whistleblower lawsuit in 2016, alleging UK overlooked his behavior until he raised serious questions about financial practices at UK HealthCare and the Kentucky Medical Services Foundation, a $200 million affiliated entity which bills for all UK doctors and UK Chandler Hospital.

In January 2014, Kearney and College of Medicine faculty member Davy Jones found that a committee that was supposed to decide doctor pay had not met for several years. In April, they met with College of Medicine Dean Frederick De Beer, UK General Counsel Bill Thro, then UK HealthCare executive vice president Michael Karpf and faculty trustee John Wilson.

At that meeting, Kearney told the group about the lack of committee meetings and said the foundation needed an audit.

Scorsone’s opinion relies on past case law, which said whistleblower status comes from reporting wrongdoing to those who have the power to remedy it.

“The statements about KMSF were not intended to be a report of wrongdoing because Dr. Kearney merely stated that he thought KMSF needed an audit, and there is no evidence that anyone at the meeting had authority to remedy any potential wrongdoing,” the opinion said. “KMSF is a private corporation and not a public entity.”

Kearney said he disagreed with that conclusion, and with Scorsone’s decision to overlook an alleged threat about his employment made by Karpf after Kearney questioned if outside counsel should look at the physician’s payment plan.

“Fighting the university is an uphill battle,” Kearney said in a statement. “They hold all the cards and they have unlimited resources.”

UK spokesman Jay Blanton praised Scorsone’s ruling.

“This issue has always been about one thing — the expectation we have of each other and everyone who works here to treat people respectfully,” Blanton said. “Those who do not will be held accountable. We appreciate the judge’s recognition of those basic facts and the law surrounding them.”

According to a Herald-Leader investigation, KMSF is run almost entirely by UK doctors and its money is frequently used by UK HealthCare administrators when needed.

For example, UK HealthCare has used some of the foundation’s $200 million coffers to rent private airplanes for hospital executives, pay for construction of a daycare center, and fund millions of dollars in contracts with consultants and lawyers that aren’t subject to state procurement rules and don’t have to go through a bidding process.

KMSF also paid for Karpf’s Keeneland membership, and for fundraisers, such as the upkeep of foxhounds at the Iroquois Hunt Club.

The foundation also paid $1 million to a Washington, D.C. lawyer to clean up billing problems with the federal government by a cardiology practice that the foundation acquired in 2014. And it paid part of the $4 million refund to the federal government.

In 2007, UK quickly borrowed $7 million from KMSF for a lease of Good Samaritan Hospital when it came on the market, plus legal and consulting costs to close a $35 million deal to purchase the hospital. All the money was paid back.

In addition, the foundation’s finances are included as part of UK HealthCare’s financial records.

In 2015, the foundation lost an open records appeal made by a private citizen, former UK medical student Lachin Hatemi. The attorney general’s office ruled that because KMSF was created by UK, is led by UK employees and remains under its control, it should be considered a public entity that is subject to the state’s Open Records Act.

KMSF appealed that decision in Fayette Circuit Court, where the case is still pending.

Herald-Leader Reporter Linda Blackford explains how the secretive Kentucky Medical Services Foundation spends its money.