“The purpose of the law requiring disclosure is to ensure hospital administrators exercise proper fiduciary care and duty to patients.”
enterologists, neurologists, and orthope- dists to take call. As a result, patients were transported to other hospitals in the region that did have these specialists available, accord- ing to Dr. Esquivel. She says this is one example of the hospital’s administration prioritizing profits ahead of patient care. “Taking specialists off the call sched- ule upset the physicians and hindered patients’ access to care,” she said. Mr. Grass says Knapp’s lack of criti-
tal is affected by the financial decisions made by those in charge. Financial mis- deeds by hospital leadership are paid for by patients and employees. Patient safe- ty is compromised when hospitals do not use their financial resources to further quality of care,” TMA said in the brief. Knapp attorney Richard Sheehy, JD, of Houston, says the ruling disappoint- ed hospital officials because they have a different view of the application and scope of the Texas Business Organiza- tions Code statute. “Federal law requires the hospital, and other not-for-profit corporations, to dis- close significant financial information that guarantees transparency about their operations, which the hospital has been doing in accordance with the law for years,” Mr. Sheehy said.
He adds that the district court’s order puts the hospital at a competitive disad- vantage with nonprofit hospitals in the same geographic area as Knapp. “This decision, if
Sandra Esquivel, MD
it stands, will have a significant and lasting impact on all not-for-profit or ganizations across the state of Texas, as it opens the floodgates to
42 TEXAS MEDICINE March 2012
requests from competitors for other- wise confidential financial information. Therefore, we don’t believe the court’s order is consistent with the intent and purpose of the statute,” Mr. Sheehy said. At press time, Mr. Sheehy said the hospital was “seriously considering” an appeal. The hospital had 30 days from the Jan. 6 date of the court order to ap- peal, he said. Mr. Grass hopes the court’s decision
prompts the hospital to exercise greater transparency in how it maintains and discloses financial records. He says dis- closure of financial records by the hospi- tal “marks the beginning of improvement of patient care in the community.” “The purpose of the law requiring dis-
closure is to ensure hospital administra- tors exercise proper fiduciary care and duty to patients by making the hospital’s expenditures consistent with patient care improvement,” he said.
Transparency vital at nonprofits “If the hospital isn’t doing anything wrong, it should just turn over the re- cords,” Mr. Grass said. Of particular concern to Dr. Esquivel and her fellow physicians in the trust was the call schedule for the emergency department at Knapp. She says hospital executives decided in 2006 to stop pay- ing specialists such as urologists, gastro-
cal care coverage in specialty areas con- cerned his clients because it has a sig- nificant impact on the community, which has many elderly residents. Dr. Esquivel says the district judge’s decision to require Knapp to disclose fi- nancial records is a “big victory.” “Knapp Medical Center is a nonprofit that’s supposed to invest the money it makes in improving the hospital, not in making the administration wealthier,” Dr. Esquivel said. “Patients will want to come back to the hospital if it’s being managed properly.” Ernst Mitchell “Mitch” Martzen, JD, a Dallas attorney representing Mr. Grass, says the district court judge made the right decision. “The Texas state statutes require all but the smallest nonprofits to keep and disclose virtually all of their financial records,” he said. “Transparency is vital to maintaining public confidence in our nonprofit institutions, and I’m hopeful that the hospital in this case will have that moment of public accountability.”
Widespread ramifications Mr. Martzen says TMA’s support of finan- cial accountability at Knapp was helpful. He adds TMA’s efforts “showed me that this was but one battle in the ongoing war to help physicians find their voice
Legal articles in Texas Medicine are intended to help physicians understand the law by providing legal information on selected topics. These articles are published with the understanding that TMA is not engaged in providing legal advice. When dealing with specific legal matters, readers should seek assistance from their attorneys.
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