Hospital asks court to OK shift of $16.8M

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FARMINGTON – Franklin Memorial Hospital is seeking court approval to transfer an estimated $16.8 million in donor gifts and investments to Franklin Community Health Network.

Hospital attorneys Jon Piper, John Mermin and John Doyle of Preti Flaherty Beliveau and Pacios, filed paperwork requesting a declaratory judgment on the transfer in the Franklin County Superior Court on Dec. 28.

State law requires that the Attorney General’s Office approve transfers of assets owned by public charities to out-of-state charities or non-charities. But the legal action suggests that since the FMH-FCHN transfer would be not only between two charities, but between a subsidiary and a parent corporation, that law does not apply.

According to the attorneys, the reason for the transfer is simple: efficiency.

The charitable donations given to the hospital were donated for the purpose of caring for the health of local people, the complaint states. But, as medicine has changed over the years, the way hospitals work has changed as well, with hospitals becoming increasingly specialized and building up networks and subsidiaries, doctors and public health offices offering outpatient care.

FMH created FCHN in 1991 to oversee the plethora of non-hospital programs being run, the court filing states. Now, the hospital wants its charitable assets to be controlled by FCHN, which will have the power to disburse funds to FMH or the affiliated doctors’ offices and programs with less red tape.

The relationship between FMH and FCHN is becoming a trend in Maine, said Mary Mayhew, a spokeswoman with the Maine Hospital Association. But, she hasn’t encountered the kind of financial arrangement FMH is trying to create, she said.

“There is no doubt that throughout the state hospitals are playing an ever-increasing role in providing a broad array of health care services – in particular, physician services,” she said. Without hospitals operating beyond their traditional scope, she said, many areas in the state would be without primary care services.

“While it is an acute problem in rural areas,” Mayhew said, “the fact of the matter is we are seeing hospital-employed physicians throughout the state. Reimbursement from Medicare and MaineCare is so poor that many doctors just can’t afford to maintain their practices privately.”

John Doyle, one of the attorneys working for the hospital group, said the proposed transfer of funds is not a controversial move. “The declaratory judgment approach is when you have something that raises a legal question, going to a judge and getting him or her to bless it,” Doyle said.

Linda Conte, and assistant attorney general with the state, said they haven’t decided yet what the state’s position is going to be.

“The issue at stake is they want to move all the money to another nonprofit,” Conte said. “I’m trying to determine why they want to do that.”

Conte said it doesn’t look like it was meant to shelter money from malpractice suits.

“That money was dedicated (for charitable purposes) anyway,” she said.

There’s a good reason why FMH is making the move, Doyle said. “It would clearly permit (the donations) to be used for the overall health care purposes of the community and permit the board to make the calls.”

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