Spring 2007
Attorney General Must Review Certain Transactions
Any Pennsylvania nonprofit, charitable health care organization contemplating a transaction that 1) will result in a fundamental corporate change and 2) involves a transfer of ownership or control of the organization's charitable assets, will be subject to the review protocol established by the Pennsylvania Office of the Attorney General (OAG). Transactions that are subject to this review include sales, mergers, consolidations, leases, options, conveyances, exchanges, transfers, joint ventures, affiliations, management agreements and collaboration arrangements. The rules apply regardless of whether the other party to the transaction is a nonprofit, for-profit, or mutual benefit organization. Transactions in the usual and regular course of the nonprofit's activities may be exempted however.
Because the OAG is charged with ensuring that the public interest in the charitable assets of nonprofit organizations are fully protected, it will review details of each transaction and decide whether or not to object to the proposed transaction. The OAG will also decide its position relative to any Orphans' Court proceedings required under the Nonprofit Corporations Law.
The first step in the review protocol is notice to the Attorney General. The parties to the transaction must provide written notice at least 90 days prior to the expected closing date of the transaction. The OAG has issued a laundry list of documents that may be requested in connection with the review including general corporate information, organizational charts, specific transaction documents, related agreements involving officers, directors and employees, relevant contracts, financial information regarding the post-transaction organization, and information necessary to evaluate the effect of the transaction on all components of the health care system and related entities.
The documents provided will be held in confidence by the OAG as part of its investigative files and no information will be privately or publicly disseminated concerning any transaction unless objections arise or unless ordered by the courts. The OAG will notify all transaction parties of any formal or informal request seeking access to the information provided.
The review process for each transaction may include the following components: 1) information gathering; 2) review of fiduciary responsibilities of directors; 3) fair market valuation analysis; 4) review for private inurement; 5) public interest review to evaluate the transaction's effect upon the availability and accessibility of health care in the affected community; and 6) appropriate cy pres determination to ensure that all restricted funds remain segregated and used for their restricted purposes. The OAG will determine whether the actions of the nonprofit directors satisfy their fiduciary duties to the public beneficiaries of the health care entity, and whether the charitable assets will be preserved and used for their proper charitable purpose. The OAG will also consider the broad public policy issue of whether the transaction is in the public interest. As part of this review, the OAG may require the parties to provide public notice of the proposed transaction to the community/region that may be affected along with affording the community an opportunity to comment on the health care and charitable trust issues to the OAG.
Once the review is complete, if the OAG has no objections, it will issue a letter stating the transaction is unobjectionable. However, if it finds the transaction does not serve the public interest, the OAG has the right to bring judicial proceedings to enjoin or void the transaction, or may take such other action it deems necessary, including requiring approval of the Orphan's Court (more likely in a nonprofit/for-profit transaction).
Finally, the OAG will continue to maintain oversight of the transaction after closing to ensure that subsequently executed contracts or arrangements between the parties or their agents do not conflict with or negate the terms and original purpose of the transaction. Periodic reporting to the OAG by the parties may be required to ensure that the terms of the transaction are fulfilled.
For more information regarding whether a transaction must be reported or for specific reporting requirements, a nonprofit health care organization may contact the author Suzanne S. Becker at ssbecker@nssh.com or the Office of the Attorney General.
EEOC Focus On Healthcare Workers
The Equal Employment Opportunity Commission (EEOC) issued its Questions and Answers about Health Care Workers and the Americans with Disabilities Act (ADA) on February 26, 2007. Due to the challenges innate to the healthcare industry, and the fact that an error can be a matter of life and death, the EEOC intends to focus enforcement upon the ADA accommodation requirements in health care facilities.
The Rules under Title I of the ADA and Section 501-504 of the Rehabilitation Act are the same for all industries; the Q&A Guidance notes that the healthcare industry presents unique issues. The Q &A Guidance explains the conditions under which someone is an employee vs. independent contractor, and specifies the type of reasonable accommodations healthcare workers with disabilities may need and limitations on healthcare employers' obligations for reasonable accommodation.
Regarding employment status, the ADA assessment is fact specific and an individual designated as an independent contractor is not dispositive, nor is an employment agreement. Plus, in addition to being employers, health care facilities are often also state or local governmental services under Title II of the ADA and/or public accommodations under Title III. The Q&A provides several examples of a qualifying disability to assist facilities with compliance.
In light of the EEOC's recent guidance, to prepare adequately for ADA enforcement, facilities should review their job descriptions and ensure that essential functions are noted. "Reasonable" accommodations may entail purchasing equipment. Included within assessment of an accommodation will be consideration of its impact on patient care and safety as the EEOC recognizes the healthcare industry presents "unique safety questions." In accordance with the Guidance, policies on disability determinations and threats to safety should include a review of the individual's medical record rather than reliance solely upon the experience of the healthcare employer, which may be perceived as a bias.
For more information about ADA recommendations for healthcare workers, you may contact the author Lucinda C. Glinn at lcglinn@nssh.com.
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