New legal standards for trustee performance

Until recently, trustees who acted "in good faith" were not held personally liable for mistakes in judgment. But in two recent cases--Smith v. Van Gorkom and Hanson Trust PLC v. MLSCM Acquisition, Inc.--the courts found directors liable for making hasty, ill-informed decisions regarding ownership issues. The rulings said that when boards make major decisions, they must be able to demonstrate that they approved a fair transaction. They can do this by consulting with senior management and corporate counsel and, if needed, with independent authorities. Boards should obtain pertinent documents to review before making a decision and should have ample time to obtain necessary data. Meeting minutes should document these precautions. In their rulings, the courts did not second-guess the boards' business judgment. Rather, they found that the unprepared directors acted so quickly that they could not have made an intelligent decision. The rulings convey a commonsense message: Trustees who exercise authority without adequate information risk damaging the corporation and its services. As trustees attempt to fulfill their legal obligation to probe and question before approving major actions, tensions with management may arise. Boards and corporate officers, however, must find ways to reach corporate consensus on important decisions while maintaining an appropriate division of authority.

Hospital-owned collection agencies: concerns and considerations

Two factors can affect the desirability of a hospital owning and operating a collection agency--the Internal Revenue Code and the Fair Debt Collection Practices Act. From a tax code perspective, the hospital that elects to own its own collection agency cooperatively will have an advantage over the hospital that has its own fully owned subsidiary that collects accounts for other hospitals. From the perspective of the Fair Debt Act, in either case, the hospital must take great care to see that the provisions of the act are followed.

Adverse tax rulings affect exemptions for clergy and religious

Recent court cases illustrate the federal government's changing position toward automatic tax exemptions for members of religious institutes who are employed outside their institute. Before 1977, the IRS seemed inclined to assume that members acted as agents for their institute and that their income would not be taxable. In Fogarty v. U.S. the court ruled that a priest's income from a university teaching position was taxable because he was not acting as an agent for the Jesuits. In Schuster v. Commissioner, the court held for the government, stating that the "triangle relationship" among employee, outside third-party employer, and principal/religious institute was insufficient to warrant the necessary agency relationships. Samson v. U.S. questioned whether Sr. Mary K. Samson's county hospital work constituted "employment" for FICA tax purposes. The court concluded the tax was assessable on her wages because she was a county employee. It denied a rehearing after a dissenting judge concluded that past rulings were inconsistent and had little bearing on FICA taxation. The legal view of religious tax exemption is much narrower than 10 years ago. Catholic institutes must closely analyze the relationship between their members and outside third-party employers to avoid taxation. They must legally assert their control over their members' actions before the employment is in effect.

Juridic status: canonical provisions, possible applications

The 1983 Code of Canon Law presents the basic legislation regarding juridic persons, which are entities brought into existence to assist in carrying out the Church's mission. Juridic persons by nature are perpetual and are not directly identified with their members. The private juridic person, a concept introduced in the 1983 code, operates collegially on behalf of its members or noncollegially on behalf of the things that constitute it. A ministry that receives private juridic status does not share as integrally in the Church's name. The latter therefore has more duties to fulfill in regard to observance of Church law, particularly that concerning the administration of temporal goods. The goods of a private juridic person, in contrast, are not ecclesiastical and thus are not subject to canon law. Instead, the private juridic persons' statutes provide norms for their administration. Canon law in establishing juridic persons enables the ministries they represent to last beyond the lives of those who initiated the ministries. Juridic persons offer both security and possibilities for concerted apostolic activity in the Church.

Private association: opportunity for laity

The Catholic Health Association recently developed two options for Catholic facilities' sponsorship: the private association of the Christian faithful (PACF) and the private juridic person (PrJP). Canonical implications of PACF collaboration in the healing ministry include the following: It is appropriate for laypersons to fulfill their obligation to spread Gospel values by owning and administering an apostolic institution such as a hospital. PACFs are subject to the vigilance of the Holy See and the diocesan bishop. These associations are distinct from other religious institutes and may comprise laity and/or clergy. PACF members guide the association according to its statutes. A PACF can become a juridic person through formal decree by the competent ecclesiastical authority. The membership of a PACF consists of the health facility's board members and other persons important to the facility. The PACF's responsibilities include sponsorship, adherence to Church laws, commitment to Catholic values, and participation in ongoing education programs. The diocesan bishop is responsible for reviewing the PACF's sponsorship according to its statutes. PACFs would benefit from cooperating with similar associations. At present, separately incorporated hospitals with autonomous boards of trustees are the target audiences for testing alternative sponsorship options.

Forensic radiology

Like any branch of medicine, radiology has an interface with the law. This has two main facets: first the technical applications of radiology to forensic problems and secondly the legal aspects of radiological practice.

Public hospitals: the legal obstacles of entering into joint ventures

Public hospitals, as public entities, are limited in many of their activities by state constitutions and statutes. One area where activity can be particularly limited is the joint venture. Constitutional and statutory limitations can influence several aspects of the joint venture: scope of activities, geographic boundaries, authority to enter into joint ventures, gift of public funds prohibition, and stock ownership. Therefore, public hospitals must be aware of possible legal obstacles and carefully consider their options.

Recovery of funds in transaction affecting ownership of federally assisted health professions and nurse teaching facilities--HRSA. Statement of general policy

HRSA announces its recovery policy regarding purported leases and sales of (1) health professions teaching facilities or affiliated hospitals constructed with grant funds under Part B of Title VII of the Public Health Service Act, and (2) nurse teaching facilities constructed with grant funds under Title VIII of the Act.

Trouble in Vineville: church property and the civil courts

During the past century the U.S. Supreme COurt has developed a "deference" approach to resolving church property disputes in civil courts. This approach requires a civil court to defer to the decisions of the appropriate superior body in a hierarchical church, absent allegations of fraud or collusion by the church. In the late 1970s, a parallel approach developed, whereby a civil court may resolve church property disputes by applying neutral principles of property law. Insofar as the property documents contain express assertions of church law to be applied in disputes, those laws will be followed. If the church documents are silent, the civil court will not have recourse to other church documents but will decide the matter for itself. This, of course, could result in the civil court deciding contrary to the church tribunal. Both the deference approach and the neutral-principles approach satisfy the demands of the First Amendment because neither, the Supreme Court has said, interferes with the free exercise of religion nor unduly establishes a religion. A strong four-justice dissent in a recent decision may, however, signal trouble ahead for the neutral-principles approach.

Creators of works and their commissioning parties: the new copyright law

This article is the first in a series which will deal with: a) the rights of the creators of literary and artistic works as they are affected by the provisions of the 1978 revised copyright law (CLRA), b) the relationship between creators and their publishers or other commissioning parties, and c) the knowledge and experience required to cope with these factors. The reference to creators, in terms of creators' rights, includes many disciplines: writers, artists, photographers, composers, sculptors, and many others including those of us who produce educational and public relations materials in the field of medicine.

Confidentiality: the confusion continues

The author, a regional health authority administrator, argues that `ownership' is a side issue in legal and moral arguments over confidentiality of medical records. Nor is it practicable, he argues, for doctors alone to control all access to the medical records. He proposes the principle of `custodianship' of confidential information, to be accepted by an institution as a whole, as a possible way of resolving the problem. In commentaries on this and the following article an academic lawyer and a practising physician respond.

A model rights and ownership of educational materials policy for institutions

This paper reports a survey taken of 79 college and university medical schools seeking the status of policy formation regarding in-house created educational materials at each location. About 65% (51) of the institutions had no definitive policies, but over half of those were aware of the need. Twenty-six provided either written documents or a narrative describing how they approach the problem. Only two recognized the special area of media production. A model policy was synthesized from the aggregate. The model provides for support and recognition of creative service units and a philosophical framework upon which the entire group, including content experts, production staff, and parent institution, can share income and recognition equitably.

Legal and financial constraints on the development and growth of multiple hospital arrangements

Health planning legislation strongly encourages a wide variety of multiple hospital arrangements. However, public policy either prohibits or discourages the same multiple hospital arrangements encouraged in the health planning efforts. This article identifies the issues and implications of the seemingly contrary and inconsistent policies.