Banner Health System's effort to control the distribution of its assets suffered a potential legal blow in South Dakota, where the state Supreme Court ruled that South Dakota law gives courts the authority to protect not-for-profit assets. The state is one of three that challenged Banner's divestiture of 10 hospitals and 17 long-term-care facilities on the grounds that proceeds from the sale of not-for-profit assets belong in the communities that helped build them. In the South Dakota case, the state argued that not-for-profit corporations hold hospitals and nursing homes in an implied charitable trust. The ruling addressed whether the state had legal grounds for such a claim. Future court proceedings will determine South Dakota's claim over Banner's assets in particular.
Banner, based in Phoenix, contends that multistate hospital systems need flexibility to use assets as needed and has asked the American Hospital Association to lobby against the state challenges. The issue will be on the agenda at a meeting this week of the AHA's 25-member governing council for health systems. Banner also sold facilities in North Dakota and New Mexico. The system ultimately reached a deal with New Mexico; the North Dakota case is pending. -- by Michael Romano