Radiology group sues hospital claiming it waged ‘retaliatory campaign’ after contract talks fell apart

A Virginia radiology group is suing its current hospital partner, claiming the organization has waged a “retaliatory campaign” after recent contract talks fell apart. 

Virginia Medical Imaging officially filed the complaint against Mary Washington Healthcare on June 5 in a Fredericksburg Circuit Court, seeking nearly $3 million in damages. The radiology group contends the “trouble began” in 2024, when the two sides sought to negotiate an amendment to their radiology services agreement ahead of its expiration. 

However, the talks allegedly stalled after the group asked to remove contract changes requiring radiologists to remain on-site for overnight shifts. This, radiologists contend, is “increasingly uncommon across the industry, with remote reading now a widely accepted and proven practice.” 

“The breakdown in negotiations and nonrenewal of the [radiology services agreement] do not form a part of the basis of plaintiff’s claims in this lawsuit. However, these events were the impetus for the retaliatory campaign of minority member oppression and insider dealing by Mary Washington that followed, almost immediately,” the complaint charges. 

Virginia Medical Imaging said Monday it does not comment on pending litigation, declining to be interviewed. 

"We filed this lawsuit because important community imaging services were being put at risk," a VMI representative said in a statement. "Once [Mary Washington] began threatening essential services that patients across the region rely on, we felt we had to act," they added later. 

The hospital system, meanwhile, issued a statement in response to the allegations while declining further comment. 

“Our patients and community should be reassured that Mary Washington Healthcare is committed to providing high-quality radiology services now and for the long term. This is a core part of delivering healthcare services and any allegations to the contrary are simply false,” a representative told Radiology Business Monday. “This is a financially motivated lawsuit that has nothing to do with patient care. We remain steadfast in our mission to improve the health of all people in the communities we serve. This will always be our top priority.”

More on the lawsuit 

Virginia Medical Imaging is closely affiliated with Radiologic Associates of Fredericksburg, a 64-physician private practice first formed in 1948. RAF reported in May 2025 that Mary Washington had allegedly terminated contract talks after the radiology group refused an offer to become employed by the hospital. The new lawsuit sheds further light on those conversations and what led up to their disagreement. 

In 2000, Radiologic Associates of Fredericksburg and Mary Washington formed Medical Imaging of Fredericksburg LLC as a joint venture. Today, it provides comprehensive radiology services across eight locations in the communities of Fredericksburg, Stafford and King George. Radiologic Associates of Fredericksburg is structured so that its shareholders who work locally are afforded a portion of the practice’s ownership stake in Virginia Medical Imaging. Mary Washington healthcare holds 51% of the joint venture (Medical Imaging of Fredericksburg) and three controlling votes, while radiologists (through Virginia Medical Imaging) claim 49% and the other two votes.

“Over the course of the past quarter century, [the radiology group has] helped build [Medical Imaging of Fredericksburg] into the crown jewel of the Mary Washington Healthcare system, consistently receiving national recognition and awards for patient experience, patient care and clinical quality performance,” the complaint claims. 

In June 2024 when the two continued negotiations on a new contract, the hospital presented “material new terms,” including the employment offer, which were “unacceptable for multiple reasons.” Radiologic Associates later that year presented data from a consulting firm, identifying a “significant financial shortfall that limits RAF’s ability to recruit and retain radiologists.” However, despite assurances, the hospital purportedly refused to remove the problematic language. This led RAF to “regrettably” terminate their radiology services agreement in December 2024 “after careful consideration.” 

The decision purportedly pushed Mary Washington into a campaign of attempting to harm and intimidate the imaging group, the lawsuit claims. That same month, the hospital informed radiologists that it would be withholding quarterly joint-venture revenue distributions, without giving a reason. 

“This sudden decision—made eight days after RAF’s notice of nonrenewal—was a departure from the prior 13 years in which [the joint venture] had not once withheld quarterly distributions … including during the COVID pandemic and the simultaneous capital-intensive opening of two imaging centers in the prior year,” the complaint charges.

In January 2025, Mary Washington also said it was not renewing the professional services agreement, even though the pact wasn’t set to expire until February 2027. Same for the joint “management services agreement” between the two sides, which was supposed to go through December 2028. 

In February 2025, the hospital’s CEO also allegedly made personal solicitations, attempting to “poach” radiologists away from RAF to work for Mary Washington. The system also allegedly sought to move PET/CT services directly into the hospital and away from the joint venture in an apparent move to harm the practice. When individual radiologists refused these employment offers, Mary Washington purportedly changed it tack, instead asking to buy the 49% interest that radiologists held in the joint venture. 

Radiologic Associates deemed this as “not a serious offer, both in its proposed price and terms.” An express condition of the sale was that the parties “put the past behind us and cooperate for a seamless transition into an employed radiology model and ‘make this easy’ for MWHC.” Radiologists almost immediately rejected the proposition, according to the complaint. 

“From this point forward, it became clear to plaintiffs that Mary Washington’s aggressive actions were designed to squeeze out [Virginia Medical Imaging] from the company and force a sale on unreasonable terms,” the complaint claims. 

Mary Washington allegedly further escalated its tactics following the rejection. In May 2025, it informed the practice that it would not be automatically renewing the lease for their joint venture Imaging Center for Women, in Fredericksburg, Virginia. Instead, the location would inexplicably be seeing its rent leap by 54% (from $28 per square foot to $43). As a result of the “jacked-up” and “outrageous” rent demands, radiologists are concerned the center will eventually close, eliminating one of the only comprehensive women’s imaging options in the area. 

Separately, the joint venture partners had advanced discussions about relocating another imaging center that was in King George, Virginia, with its lease set to expire on July 31. They renegotiated a short-term extension until January 2027. However, the hospital “abruptly” cut off all relocation conversations for no apparent reason.  

“Mary Washington has provided no explanation for this decision and, as of today, has not identified an alternative site,” attorneys charge.

More recently, the five-member managers committee voted unanimously in March 2026 to extend the physician services agreement with RAF for three years past its expiration, into February 2030. But allegedly, when hospital administration caught wind of this decision, the committee convened a special meeting the following month. At the gathering, a new committee leader was installed by the hospital, and the group voted 3-2 to rescind the extension, at the objection of the radiology group. 

“The unanimous vote was an implicit recognition of the obvious: [The joint venture] cannot survive as a going concern without RAF radiologists to staff its eight locations and Mary Washington’s campaign of retaliation and squeeze-out tactics is doing irreparable harm to the company,” the complaint charges. 

“By orchestrating the rescission of the [physician services agreement] extension and attempting to poach company radiologists, Mary Washington acted in bad faith to destroy the fruits of the agreement for [Virginia Medical Imaging] and the company alike,” attorneys added later. 

Radiologists are alleging wrongful conduct, breach of contract and fiduciary duties to the joint venture, and “self-dealing.” They are seeking damages of at least $2.65 million and a jury trial to decide the matter. 

“These actions constitute a flagrant disregard for the company’s welfare and have caused [the joint venture] to incur unnecessary costs, lose business opportunities and face an existential threat to its continued operations,” plaintiff attorneys charge.

Editor's note on June 20: This story has been updated to include a statement from Virginia Medical Imaging.