Erlanger bonuses trigger opinion from TN attorney general

Tennessee law does not permit hospitals like Erlanger Health System to meet in a closed session to discuss bonuses or salaries, the state's attorney general stated in an opinion released Wednesday.

State law "would not permit the board of a public hospital that is subject to the Tennessee Open Meetings Act and Tennessee Public Records Act to meet in closed session to discuss executive compensation," wrote Attorney General Herbet H. Slatery III in an opinion obtained by the Times Free Press.

The opinion, requested by Rep. Mike Carter, R-Ooltwah, was triggered by local lawmakers' concerns about the actions of the public Erlanger Health System hospital board before a Dec. 4 meeting. At the meeting, all but one board member voted to grant $1.7 million in bonuses to executives and management for year-end performance. Board members later said the matter was discussed in a closed management evaluation committee and a closed dinner meeting before the vote.

The board's decision riled lawmakers, local officials and rank-and-file hospital employees, who had endured a series of cuts to their own benefits as the hospital sought to recover financially. But lawmakers said they were even more perturbed by the process by which the board - which is a public hospital authority - went about their decision: No advance notice was given of the resolution, which was was added to the agenda at the last minute before the public meeting, and besides giving an outline of what the compensation entailed, board members did not engage in any discussion or debate about the bonuses before voting.

After the initial fallout, board members responded by putting the bonuses on hold, saying they would seek their own legal opinion as to whether they violated open meetings law. The board's hired law firm - Spears, Moore, Rebman and Williams - which handles legal counsel for the board, said trustees did not violate open meeting laws and that "no deliberations took place" regarding the incentive plan. The board decided to proceed with the bonuses in two phases.

A state law passed in 2008 gives public hospitals an exception to the Open Meetings Act in order "discuss and develop marketing strategies and strategic plans and closed meetings." Erlanger often relies on that law to discuss matters they say are sensitive as they try to compete with two other large health systems in town.

Carter told the Times Free Press two weeks ago that he would request the AG's opinion as to whether that law would truly permit closed discussion of something like executive compensation. Meanwhile, he and state Sen. Todd Gardenhire, R-Chattanooga, introduced a bill , HB16/SB26, which would remove the 2008 Open Meetings loophole for every public hospital in the state.

At the time, Gardenhire said Erlanger trustees "abused the spirit of the law and since they've done that we need to change the law."

In the opinion, Slatery wrote that based on the language of the law, "it is apparent that the legislature intended the confidentiality provisions of [the law] to apply to a public hospital's discussion and development of its long-term plans for promoting the products and services of the hospital and not the determination of executive compensation and executive bonuses."

"The construction is further supported by the legislative history, which reflects that the intent of this statute was to allow public hospitals to compete with private hospitals by allowing them to conduct their business development meetings in a closed session. Accordingly, the board of a public hospital could not use the provisions of [the law] to conduct a closed session for the purposes of discussing executive compensation and executive bonuses."

Furthermore, Slatery said that any studies or records used in the meetings must be available for public inspection for at least seven days before any vote to adopt strategy, something that Tennessee Coalition for Open Government executive director Deborah Fisher had previously noted.

Follow the Times Free Press as this story develops.

Contact staff writer Kate Belz at kbelz@timesfreepress.com or 423-757-6673.

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