Open and shut case

Hos­pi­tal deal cre­ates de­bate over records law

Modern Healthcare - - THE WEEK IN HEALTHCARE - Ashok Selvam

Merg­ers and ac­qui­si­tions put hos­pi­tal ex­ec­u­tives on their toes for va­ri­ety of po­ten­tial snags, in­clud­ing fi­nan­cial risks, strate­gic is­sues and an­titrust scrutiny. Univer­sity of Louisville Hos­pi­tal is ne­go­ti­at­ing a dif­fer­ent kind of fric­tion as it at­tempts to com­bine with two other Ken­tucky hos­pi­tals.

The pend­ing deal brought scrutiny of the Ken­tucky chap­ter of the Amer­i­can Civil Lib­er­ties Union, cre­at­ing an un­usual de­bate over whether the hos­pi­tal should have to turn over in­for­ma­tion about the agree­ment un­der the state’s open records law.

It’s rare that dis­putes over open records laws slow or kill deals, although ear­lier this year, a Florida judge’s in­ter­pre­ta­tion of the state’s Sun­shine law tanked plans be­tween Ad­ven­tist Health Sys­tem of Win­ter Park, Fla., and 112-bed Bert Fish Med­i­cal Cen­ter, a hos­pi­tal op­er­ated by a pub­lic hos­pi­tal district in New Smyrna Beach, Fla.

The par­ties agreed to the deal in May 2010, but the hos­pi­tal’s foun­da­tion sued to stop it, com­plain­ing that the se­lec­tion of Ad­ven­tist as a part­ner was tainted by meet­ings con­vened in se­cret.

The $620 mil­lion deal be­tween Univer­sity Hos­pi­tal, Jewish Hos­pi­tal & St. Mary’s Health­Care in Louisville and Catholic Health Ini­tia­tives’ St. Joseph Health Sys­tem in Lex­ing­ton, Ky., re­ceived fed­eral an­titrust clear­ance ear­lier this year. The par­ties still need ap­proval from Ken­tucky Gov. Steve Bes­hear, as well as from the Ro­man Catholic Church.

Last week, the Louisville Metro Board of Health re­leased its find­ings and rec­om­men­da­tions for the deal, say­ing that with­out bet­ter ac­cess to state­ments, they could not fully de­ter­mine the fi­nan­cial need for the merger.

Mean­while, Ken­tucky At­tor­ney Gen­eral Jack Con­way agreed with the opinion of the ACLU and lo­cal me­dia out­lets in Louisville: He ruled Univer­sity Hos­pi­tal needed to re­lease doc­u­ments re­lated to the trans­ac­tion.

Univer­sity Hos­pi­tal of­fi­cials coun­tered with their own law­suit claim­ing the hos­pi­tal as a pri­vate en­tity. The law­suit serves as an ap­peal of the Con­way’s rul­ing and named Con­way, the Ken­tucky chap­ter of the ACLU, ABC af­fil­i­ate WHAS-TV and Gan­nett Co.’s Couri­erJour­nal news­pa­per as de­fen­dants.

Bill Sharp, at­tor­ney for the Ken­tucky chap- ter of the ACLU, said the pub­lic is en­ti­tled to the records sought by ACLU and the lo­cal tele­vi­sion and news­pa­per. He said he was not sur­prised by the ap­peal and is pre­pared for a lengthy le­gal bat­tle: “We will ag­gres­sively lit­i­gate this case to es­tab­lish the sound­ness of the at­tor­ney gen­eral’s de­ci­sion and we look for­ward to present these ar­gu­ments in court.”

In an ear­lier in­ter­view with Modern Health­care, Univer­sity Hos­pi­tal CEO James Tay­lor said the law­suit sug­gests the Couri­erJour­nal was on a “mis­sion” in scru­ti­niz­ing the deal. He main­tains the three hos­pi­tals need the additional cap­i­tal from the merger and won’t other­wise be able to con­tinue the same level of ser­vices. Op­po­nents also worry about re­pro­duc­tive ser­vices that would be banned as a re­sult of the need to abide by Ro­man Catholic doc­trine, although the Univer­sity of Louisville Hos­pi­tal has said pa­tients would be able to re­ceive some of those ser­vices at a nearby hos­pi­tal.

In the 1980s, law­mak­ers in Mas­sachusetts sought to pro­tect pub­lic fa­cil­i­ties from dis­clos­ing sen­si­tive doc­u­ments by ex­empt­ing them from the state’s open records law, said Steve Weiner, a mem­ber of the law firm Mintz Levin in Bos­ton. State hos­pi­tals sought the ex­emp­tion be­cause they were wor­ried about be­ing com­pelled to re­veal in­for­ma­tion to com­peti­tors while vy­ing for sur­vival in an in­creas­ingly volatile hos­pi­tal mar­ket.

“Strate­gic-re­lated doc­u­ments would be ex­empt from pub­lic dis­clo­sure,” Weiner said. “You can’t pro­vide all the strate­gic-plan­ning doc­u­ments to their com­peti­tors.” He said he would ad­vise Univer­sity of Louisville Hos­pi­tal to pe­ti­tion for such an ex­emp­tion if the Ken­tucky courts agreed with the at­tor­ney gen­eral’s rul­ing that the hos­pi­tal should be con­sid­ered a pub­lic in­sti­tu­tion.

Weiner also noted that the law failed to pro­tect the pub­lic hos­pi­tals from com­pe­ti­tion; there aren’t any left.

Monte Dube, a part­ner in the law firm Proskauer Rose in Chicago, called the dis­pute in Louisville “fairly ex­tra­or­di­nary and not likely to be repli­cated in fu­ture deals with other pub­lic hos­pi­tals.” Whether a hos­pi­tal is con­sid­ered a pub­lic en­tity and sus­cep­ti­ble to open records laws is gen­er­ally de­ter­mined—and should be—be­fore a deal is ne­go­ti­ated.

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