LAW
Transparency triumphs Judge rules for physicians, against hospital
BY CRYSTAL CONDE The Texas Medical Association helped a group of Weslaco physicians win a preliminary victory for financial transparency at nonprofit hospitals in their ongoing legal battle with a local hospital. Thanks in part to TMA’s legal arguments, Judge Israel Ramon Jr. ordered Knapp Medical Center to release balance sheets; cash flow statements; management letters from the external auditor; compensation documentation for all employ- ees; documentation of deferred executive compensation; Internal Revenue Service (IRS) Forms 990 for the years 2008–10; and other financial records. Twenty-six physicians, who
created the Trust of Weslaco, al- leged financial improprieties at the medical center and reported quality-of-care concerns such as inadequate coverage by special- ists, an insufficient number of nurses and support staff, and a high turnover of nurses and sup- port staff.
TMA supported the physician trust in its efforts to obtain finan- cial records from Knapp Medical Center, not in its concerns regard- ing the business decisions of hos- pital administrators. The physicians hired Dallas attorney Jeffrey Grass, JD, after the hospital denied their request for financial records. Sandra Esquivel, MD, a general surgeon and Weslaco native who’s a member of the trust, says the physicians wanted the records to determine whether the hospital administration’s financial decisions meshed with the goal of improving patient care. Mr. Grass asked Knapp for its financial records twice in Feb-
“Patient safety is compromised when hospitals do not use their financial resources to further quality of care.”
documents. The hospital responded to the second request by suing him and asking the court to rule that it didn’t have to respond. Mr. Grass made the request under a section of the Texas Business Organizations Code that requires nonprofit corpo- rations to maintain financial books, records, and annual re- ports for three years and to make them available for public inspection and copying. The law exempts a nonprofit corporation that does not intend to solicit and receive and does not actu- ally raise or receive contributions exceeding $10,000 from a source other than its membership during a fiscal year. The medical center argues it is
exempt because it established the Knapp Medical Center Founda- tion in 1981 to solicit donations from the public rather than seek- ing donations itself.
TMA supports financial accountability
TMA filed an amicus curiae brief in June to support Mr. Grass’s request. In October, the district court judge ruled in his favor. TMA argued in its brief that corporations like Knapp that seek
public donations over $10,000 per year should be “held ac- countable to that same public by keeping and making available certain financial records.” TMA also asserted the foundation is a “sham corporate entity, which exists solely for the purpose of funding the Knapp Medical Center.” Nonprofit hospitals like Knapp rely on public funding. In
ruary 2011. On his second attempt, he also requested copies of bylaws, minutes of the Executive Committee and Board of Directors meetings, federal tax returns dating back to 2006, travel expense reports, a number of IRS forms, and additional
the brief, TMA says hospital medical staff physicians have an interest in a hospital’s operations and in its prudent use of resources.
“This transparency promotes quality patient care and ac- countability. Every employee of and patient treated at a hospi-
March 2012 TEXAS MEDICINE 41
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