If not-for-profit Baylor Health Care System is sold to a for-profit company, the Texas attorney general says he'll intervene and review any such deal to ensure it doesn't violate state laws on public charities or shortchange the public.
The move is yet another example of increasing state interest in the fate of not-for-profit hospitals that change hands. In this case, state intervention may occur even without a specific hospital sales statute on the books. Such statutes are growing in popularity in a host of other states.
In a March 24 letter to the Baylor University Board of Regents and the Baylor Health Care System board, Texas Attorney General Dan Morales said he wants a full disclosure of the eight-hospital system's assets if it is sold to a for-profit chain.
"In the event of such a sale, my office would insist that the full value of the Dallas community's investment in these entities' charitable assets remain directed toward the charitable public health objectives originally set forth in the articles of incorporation," Morales wrote. "Please be advised that a sale of the assets of the medical center and the system to a private, for-profit entity would represent, in our judgment, a material change in the charitable purposes and objectives of these entities, which would compel the intervention of my office."
A special meeting of the Baylor University Board of Regents and the system's board is scheduled for this week to discuss the fate of the healthcare system.
Morales' office examined articles of incorporation filed in October 1903 that showed "funds donated by several prominent Dallas Baptists" helped form Texas Baptist Memorial Sanitarium, which eventually evolved into Baylor Health Care System.
As the system continued to grow, another document from 1981 says the system was "organized exclusively for religious, charitable, scientific and educational purposes."
In his three-page letter, Morales wrote, "The assets and facilities of these institutions grew and flourished through the efforts of many benevolent donors who were committed to the public purposes and charitable nature of those nonprofit organizations."
Baylor Health Care System views the attorney general's opinion as a vote against for-profit ownership of the system.
"It is a substantial statement of how charitable assets in the state of Texas are viewed by the attorney general, who represents the community, and of where those assets belong," said Jennifer Coleman, vice president of public affairs for the system.
A decision by the regents to consider a sale or merger of the $1.1 billion system caused friction between the healthcare system board and regents over which board ultimately controlled any deal (Jan. 27, p. 3).
Tensions between the boards have since calmed, and they await consultants' reports on whether they will sell or merge the system (March 24, p. 24). The consultants were hired by a joint study committee of university regents and health system trustees.
At deadline, representatives from each board weren't available for comment on how Morales' warning could affect their deliberations.