Uncharted territory.

Byline: The Register-Guard

When McKenzie-Willamette Hospital announced in January that it would form a partnership with Triad Hospitals Inc., a state law requiring a review by the state attorney general's office was treated as a formality. The AG's role wasn't even mentioned in the news release announcing the deal - what mattered was that the Springfield hospital and the Texas corporation had signed a letter of intent committing McKenzie-Willamette to transfer its assets to Triad in exchange for the construction of a new $80 million hospital.

The attorney general may have a larger role than anticipated. The statute opens the door to thorough scrutiny of the hospital deal by the AG's anti-trust and charitable activities division. It also presents the troubling possibility that important information will be shielded from the public.

The purpose of the statute, enacted in 1997, is to protect the public interest when the assets of a public-benefit corporation such as McKenzie-Willamette are transferred to a for-profit entity. Since McKenzie-Willamette opened in 1955, the public has conferred upon it a variety of benefits through charitable giving and in terms of its favored tax status. The state law is intended to ensure that the fruits of those benefits are not lost to the public when a private, for-profit company like Triad takes over.

The statute has come into play only twice before, and only once in relation to a completed transaction. That lone precedent was the purchase of a hospital in Hood River by the Providence health care system. A merger of the sort agreed to by McKenzie-Willamette and Triad has never been subjected to the AG's review process.

The law allows the AG's office to turn down a transfer of a hospital's assets for a variety of broadly stated reasons. The terms of the transfer must be fair to the public-benefit corporation. The transaction must be at fair market value. The deal must not cause "inurement," or persistent difficulties, to "any private person or entity." The merger must not "significantly decrease the availability or accessibility of health care services to the affected community." Broadest of all, the AG can refuse approval if the "transaction is not in the public interest."

People will have a chance to tell the attorney general's office whether they believe the deal meets these requirements at a public hearing, probably in mid-June. The hearing can't be scheduled until appraisals of McKenzie-Willamette's assets are complete. People's ability to offer an informed judgment of the proposed merger, however, may be constrained. The law allows much of the information about the transaction to be shielded from the public as trade secrets.

Two general public concerns that might be raised at a hearing come to mind. First, people who have supported McKenzie-Willamette through contributions and tax breaks through the years will want to be assured that those investments will continue to benefit the public. Second, they'll want to be able to gauge Triad's commitment to accepting patients who can't be treated profitably - people with Medicaid or Medicare coverage, or no insurance at all.

A spokesperson for the attorney general's office says information relating to these concerns will be available to the public. Yet the statute allows the attorney general to classify "any material" relating to the transaction as a trade secret, unless it is found that the material "is necessary to the determination of an issue being considered" at the public hearing. The AG has wide discretion to decide which documents submitted by McKenzie-Willamette and Triad in support of their proposed merger will be made public. In this unprecedented proceeding, it's vital that the AG's discretion be exercised in a way that generally favors disclosure.

McKenzie-Willamette might be unable to survive without a strong partner like Triad. For that reason, the merger is a welcome means of preserving the public's ability to choose between hospitals. But the merger also must preserve the community's years of investments in McKenzie-Willamette, while also ensuring that the new Triad-built hospital provides its share of charitable and under-reimbursed care. The AG's review can be helpful in obtaining assurances on both of those points, provided that openness is a guiding principle.