Opinion
Opinion By: Jack Conway, Attorney General; Amye L. Bensenhaver, Assistant Attorney General
Open Records Decision
This matter having been presented to the Office of the Attorney General in an open records appeal, and the Attorney General being sufficiently advised, we find that Owensboro Medical Health Systems, Inc., is a public agency pursuant to KRS 61.870(1)(j) because it is an "agency which is 'established, created, and controlled' by a public agency as defined in the statute." University of Louisville Foundation, Inc. v. Cape Publications, Inc., 2003 WL 22748265 at p. 5 (Ky. App.). Its failure to respond to Jonathan Kirk Haynes' June 29, 2011, request for accreditation records therefore constituted a violation of KRS 61.880(1). 1 The agency, or in this case, agencies, responsible for its establishment, creation, and control are the Daviess County Fiscal Court and the Owensboro Board of Commissioners. Through a series of ordinances, these "county and city governing bodies" 2 transferred control of public hospital assets and operations to successive non-profit corporations from 1991 to 2003 while retaining a strong presence on the corporations' Boards of Directors, approval power over amendments to the corporations' Articles of Incorporation and bylaws, and, upon dissolution of these corporations, the power to convey the remaining public assets "to another entity acceptable to the Daviess County Fiscal Court and to the Board of Commissioners of the City of Owensboro." These facts suggest that efforts "to ensure [OMHS's] Board's authority is independent of any undue influence or control by . . . the City and/or County . . ." were unavailing, and that, in fact, it owes its existence to, and is subject to control by, the City and County.
Having received no response to his June 29 request, Mr. Haynes submitted an appeal to the Attorney General. Pursuant to 40 KAR 1:030 Section 2, OMHS responded to the issues presented in Mr. Haynes' appeal, through counsel, on August 5, 2011. Counsel denied any violation of the Open Records Act, asserting that OMHS is not a public agency within the meaning of KRS 61.870(1)(h) insofar as it does derive at least twenty-five percent of the funds it expends in the Commonwealth from state or local authority funds. 3 OMHS presented sufficient proof to support its position in this regard. Council also denied that OMHS is a public agency within the meaning of KRS 61.870(1)(j) insofar as it was not established and created, and is not controlled, by the City and County : 4
. because it was "'established and created' on July 14, 1995, with the filing of its Articles of Incorporation with the Kentucky Secretary of State under its former name, Owensboro Mercy Health System, Inc. . . . 'as a nonprofit corporation in accordance with Chapter 273 of the Kentucky Revised Code' with one of its purposes to become the sole member of the Kentucky nonprofit corporations Mercy Hospital of Owensboro, Kentucky, Inc. and Owensboro Daviess County Hospital, Inc. n5'";
. because OMHS's bylaws and Articles of Incorporation "make clear who controls OMHS -- the Board of Directors";
. because the City and County may only appoint seven of the fourteen Board members and only six of these appointees may be a member of a public agency;
. because the City and County's "residual blocking rights" recognized in OMHS's Articles of Incorporation and by-laws "have never been triggered"; and
. because "OMHS and the City and/or County are not 'one and the same'" in the manner suggested by University of Louisville Foundation, Inc. v. Cape Publications , above at 7.
We disagree and find that OMHS is the most recent in a line of successors in interest to the public assets of the Owensboro Daviess County Hospital over which the City and County have exercised, and continue to exercise, control. There is no reasonable basis for excluding this "interlocking entity" from the definition of a public agency found at KRS 61.870(1).
In 03-OMD-089, this office adjudicated an open meetings dispute involving ODCH, Inc., the entity established by a 1991 Interlocal Agreement between the City and County. They were:
the beneficial owners of the Owensboro-Daviess County Hospital [and had] operated the Hospital through a Board of Managers, the members of which are appointed by the City and County with legal title to the assets of the Hospital vested in ODCH, a Kentucky nonstock, nonprofit hospital.
ODCH, Inc., in which the Interlocal Agreement vested "ownership of all assets . . . owned by ODCH or acquired by the Board of Managers for the use and benefit of the Hospital," did not dispute its status as a public agency. 6 Indeed, in its bylaws, ODCH "voluntarily committed . . . to comply with the Open Meetings Law and Open Records Act. " 7
In 1995, the City and the County enacted ordinances "authoriz[ing] ODCH to enter into a joint venture with Mercy Health System of Cincinnati (since renamed Catholic Health Partners [or CHP])" and "transfer[ring] to the joint venture the assets then comprising Owensboro Daviess County Hospital and now known as Owensboro Medical Health Systems (OMHS) . . . ." 8 Eight years later, CHP withdrew from the joint venture, and ODCH was "dissolved by ordinance. " 9 In the same ordinance, its interest was transferred to OMHS, there being "no other entity . . . that is acceptable to the Fiscal Court for Daviess County and the City Commission of the City of Owensboro to which ODCH may transfer its assets as a going concern or those assets remaining after the payment of liabilities." 10 Transfer of the public assets originating in Owensboro Daviess County Hospital can thus be traced from the public hospital to OMHS through a line of joint ordinances enacted by the Owensboro Board of Commissioners and Daviess County Fiscal Court.
OMHS's October 31, 2003, Amended and Restated Articles of Incorporation identify it as a separate legal entity possessing "all power and authority to operate the Hospital and . . . reliev[ing] the City of Owensboro and Daviess County from any responsibility or liability in connection with the ownership and operation of the Hospital." The causal connection between the City of Owensboro and the Daviess County Fiscal Court, the enactment of Ordinance No. 43-2003 and Ordinance No. 850.4 (2003), respectively, on October 28, 2003, and the filing of OMHS's Amended and Restated Articles of Incorporation on October 31, 2003, is as clear and direct as the causal relationship between the University of Louisville Foundation and the University of Louisville recognized in University of Louisville Foundation, Inc. v. Cape Publications, Inc. , id. , accord, 11-ORD-054. Thus, OMHS was established and created to assume the public assets and operational duties of the city and county and its predecessors in interest.
While the Articles and bylaws assign operation of the hospital to OMHS, control of the hospital remains in the City and County's hands by virtue of their strong presence on its Board of Directors, the "residual blocking rights" they retained through OMHS's Articles of Incorporation and bylaws, and their power to convey to a suitable entity the remaining public assets upon dissolution of OMHS. As noted above, seven of the Board's fourteen members are appointed by the Daviess County Judge Executive and/or the Mayor of the City of Owensboro, and six of those members may be public officials. That this number represents less than a majority of the Board's total composition is inconsequential since "the selection of directors in itself does not amount to 'control.'" University of Louisville Foundation, Inc. , at 6. "Through these appointments the [City and County] exercise continuing control over [OMHS]." 11-ORD-054, p. 6.
Further, OMHS's characterization of the City and County's "residual blocking rights" as restricted to "limited transactions" is misleading. A cursory review of OMHS's bylaws and Articles of Incorporation reveals an extensive list of powers reserved to the City and County. Article 7, Section 7.01 of OMHS's bylaws, for example, delineate no less than four Articles, and ten sections thereof, "whose amendments are the subject of approval by the City and County." Among these, Article III, Section 3.01, specifies the Board's General Powers that cannot be amended without the City and County's approval, including the power to loan or borrow money; the adoption of the OMHS's annual budget; the sale or disposition of assets; the adoption of the OMHS's business plans, including expansion and reduction of services; the determination of the structure of the medical staff, staff governance, and credentialing; the determination of strategic plans for OMHS, including the scope of services; and "[a]ny other activities determined . . . by the Board . . . to be Major Activities." Under Article III, Section 3.01(c), "an affirmative act of the Fiscal Court of Daviess County and the Commissioners of the City of Owensboro" is required for, among other things, the admission of new members to OMHS; the transfer of management responsibility for OMHS; merger/ consolidation/or similar action that is dilutive of the public assets; and "amendment of Articles 4, 5, 7, 8, and 10 of the Articles of Incorporation and Article VII of the bylaws. " Finally, and perhaps most importantly, it is the City and the County that, upon dissolution of OMHS, must approve any entity to which the remaining public assets are conveyed. Regardless of whether the City and County have had occasion to exercise control, control is nevertheless reposed in them through these corporate documents.
It is, therefore, the decision of this office that OMHS, the City of Owensboro, and Daviess County Fiscal Court "act as one and the same," Louisville Foundation at 6-7, for purposes of furthering the mission of "the only hospital located in Daviess County, Kentucky" and insuring continuity of care in its service area. Here, as in the referenced opinion, we believe "[t]here is no reasonable basis for excluding from the definition of a public agency" these interlocking entities, and that:
[A]n interpretation of KRS 61.870(1) which does not include [OMHS] . . . as a public agency is clearly inconsistent with the natural and harmonious reading of KRS 61.870 considering the overall purpose of the Kentucky Open Records law. The obvious purpose of the Open Records law is to make available for public inspection, all records in the custody of public agencies by whatever label they have at the moment.
As an entity that was established and created by the Owensboro Board of Commissioners and the Daviess County Fiscal Court to assume the public assets and operational duties of their public hospital, and over which they retain control, Owensboro Medical Health Systems, Inc., is a public agency pursuant to KRS 61.870(1)(j). Its failure to respond to Mr. Haynes' request for accreditation records therefore constituted a violation of KRS 61.880(1).
A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3), the Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceeding.
Distributed to:
Jonathan Kirk HaynesDr. Jeff BarberRobert A. Heath
Footnotes
Footnotes
1 KRS 61.880(1) provides:
Each public agency, upon any request for records made under KRS 61.870 to 61.884, shall determine within three (3) days, excepting Saturdays, Sundays, and legal holidays, after the receipt of any such request whether to comply with the request and shall notify in writing the person making the request, within the three (3) day period, of its decision. An agency response denying, in whole or in part, inspection of any record shall include a statement of the specific exception authorizing the withholding of the record and a brief explanation of how the exception applies to the record withheld. The response shall be issued by the official custodian or under his authority, and it shall constitute final agency action.
2 KRS 61.870(1)(d).
3 KRS 61.870(1)(h) defines "public agency" as "[a]ny body which derives at least twenty-five percent (25%) of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds[.]
4 KRS 61.870(1)(j) defines "public agency" as "[a]ny board, commission, committee, subcommittee, ad hoc committee, advisory committee, council, or agency, except for a committee of a hospital medical staff, established, created, and controlled by a public agency as defined in paragraph (a), (b), (c), (d), (e), (f), (g), (h), (i), or (j) of this subsection [.]"
6 ODCH did not dispute its status as a public agency in two earlier open records decisions: 93-ORD-144 and 95-ORD-114. At note 3 of 03-OMD-089, the Attorney General recognized that ODCH was a public agency for open meetings purposes pursuant to KRS 61.805(2)(f), regardless of this voluntary commitment.
7 "[T]he intricate legal relationship that exist[ed] between the variousentities" prior to October 28, 2003, was described as follows:
Owensboro's only hospital is known as Owensboro Mercy Health Systems. The hospital is owned and operated by Owensboro Mercy Health Systems, Inc., (OMHS). Owensboro Mercy Health Systems is the survivor of a public hospital known as Owensboro-Daviess County Hospital and Mercy Hospital, which was originally operated by an Order of Roman Catholic sisters. One-half of the Board of Directors of Owensboro Mercy Health Systems, Inc., are appointed by ODCH, Inc., and one-half are appointed by Mercy Health System, Inc. If Owensboro Mercy Health Systems, Inc., is ever dissolved, 81.25% of the assets go to ODCH, Inc. and 18.75% to Mercy Health Systems, Inc. Amended Articles of Incorporation, dated September 29, 1995, recorded at lease, etc. Book 96, page 404, in the Daviess County Court Clerk's Office. Catholic Healthcare Partners, Inc., (CHP, Inc.), acts as successor to the Rights of Mercy Health Systems, Inc.
(April 16, 2003, letter of appeal submitted by Ralph W. Wible on behalf of The Messenger-Inquirer .)
Owensboro Mercy Health System, Inc. ("OMHS") owns and operates the sole hospital located in Owensboro and Daviess County, Kentucky. OMHS is a private, non-stock, non-profit Kentucky corporation organized under KRS Chapter 273. It is not a "public agency" under either the Open Meetings Act or Open Records Act. OMHS is the surviving entity from the 1996 merger of OMHS and two hospitals located in Owensboro: Owensboro-Daviess County Hospital (formerly owned by ODCH) and Mercy Hospital (formerly owned by a subsidiary of Catholic Healthcare Partners, Inc.). The Board of Directors of OMHS consists of twenty members: Eight directors are appointed by ODCH, ten directors are appointed by Catholic Healthcare Partners, Inc. ("CHP"), and one director is appointed by each of the mayor of Owensboro, and the county judge-executive of Daviess County. ODCH and CHP are the only member/owners of OMHS.
ODCH is a non-stock-non-profit Kentucky corporation that is entitled to receive 81.25% of the assets of OMHS, if OMHS is dissolved. ODCH agrees that, for purposes of the Open Meetings Act, it is a "public agency. "
CHP is a non-profit Ohio corporation that is entitled to receive the remaining 18.75% of the assets of OMHS, upon its dissolution. According to public information on its web site, CHP owns or operates 31 hospitals (in addition to a number of other facilities), and as of 2001 had assets of approximately $ 3.6 billion, and net operating revenues of approximately $ 2.9 billion.
(April 24, 2003, supplemental response submitted by James M. Miller and R. Michael Sullivan on behalf of ODCH.) 03-ORD-089, note 4, pp. 5-6.
8 Daviess County Fiscal Court Ordinance No. 850.4 (2003) and City of Owensboro Ordinance No. 43-2003 "jointly authorizing the surrender of ODCH's interest in Owensboro Medical Health Systems, Inc. . . . and the termination of the Interlocal Cooperation Agreement.
9 See footnote 8.
10 See footnote 8.