Glen Rose Medical Center & 501a -More on Slush Fund (October 2017)


Glen Rose Medical Center & 501a -More on Slush Fund (October 2017)

25 October 2017 at 2:45:31 PM

In the argument that the Turks are making in their lawsuit against Somervell County Hospital District and Ray Reynolds, there are some references to the 501a monies. From p 9 of Turk's answer to Motion for Summary Judgment re: Ray Reynolds.

Actually, the money that is in the 501a account is part of the Somervell County Hospital District budget, ie, YOU pay for that money to be in an account to be drawn upon. Before, when Glen Rose Medical Center was under Somervell County, and not a district yet, if the doctors ran short of money, GRMC had to go to the Somervell County Commissioners Court and ask for *shortfall* or OSA monies. The idea was, according to part C of the agreement made when GRMC ceased to be a private hospital, was that the doctors would come ask for money, and then, after the fact, show that they had spent the money as requested. I found in 2013, after GRMC became a district  that GRMC, as done by Michael Honea, was simply monitoring the account from which to draw money and if it got low, he'd put some more in to fill it up.

From Sharla Collins on August 28 2013


The CFO manages cash for both the hospital and the 501(a). When payroll or accounts payable are prepared for the hospital and the 501(a) an analysis of avaiable cash is made.  If there is not available cash in the 501(a) account to meet the requirements of the 501(a), the CFO makes a transfer of cash from the hospital operating account to the 501(a) operating account.  A formal request is not made. The transfer of cash is recorded by journal entry and the running total is recorded in the due to and due from balance sheet accounts of both the 501(a) and the Glen Rose Medical Center.

That being the definition of a slush fund, I complained to then Sheriff Doyle. He did nothing. In August of 2014, the Somervell County Hospital District voted AGAINST FOLLOWING THE CONTRACT.  In other words, to heck with accountability!  As I noted in September 2014, including video of Ray Reynolds, Reynolds said the 501a was not following the letter of the law.

You would think that a responsible board would vote to make certain that written contracts are following and especially when it involves taxpayer money. In November 2014, the board voted to follow a new 501a contract, except this one took out the requirement that the doctors would have to come back and prove they spent the money on X, plus the board is out of any OSA approval until money put into the account, as budgeted for by the district, runs out.  

So, really, it IS what Reynolds said in the beginning, money transferring back and forth, but he missed saying "WITHOUT ACCOUNTABILITY TO THE TAXPAYER" AND, again it's part of the Somervell County Hospital District budget. Consider that the money in the budget is optional and does not have to be spent.. at all.

There's a larger question about the 501a, though. Why even have it? Somervell County Hospital District can legally employ doctors. They don't have to use a 501a, otherwise known here as Glen Rose Healthcare Inc, to employ doctors. Why have it then? Why, Reynolds has said the reason for the 501a is to provide financial support to the doctors. IE THROUGH SHORTFALL MONEY.  (September 2014) And again, what is *shortfall?" It's that money that gets transferred back and forth between accounts, without board accountability. 

Let me just add that the 501a budget changes numbers based on the tax rate, as shown in this post from August 2014. If, as Reynolds said at the top of this post, the money were actually coming FROM the doctors TO the doctors, ie, just transferring between themselves from one account to another, there would be no reason to change the numbers in the Somervell County Hospital District budget based on the tax rate. 

Have to add on a related note that the attorney for Somervell County Hospital District pointed out some interesting things in January of this year (2017) The first is that GRMC is not required to even use a 501a, which is an antiquated term (now 162b). The attorney pointed out that they can employ doctors directly (remember, Reynolds wanted the 501a specifically for shortfall)  and they don't have to use 501a. As Reid said

if you went to the act today there is no 501a corporation, not even a section 501a in the act anymore. Currently they're 162b, there's actually 1620001bs and 162001cs, you guys have a b., ... applies to critical access hospitals, (sole?) community hospitals and hospitals in counties of 50,000 or less. Critical access and (sole?) community hospitals all happen in rural communities so the intent of those 3 things were to catch most rural communities, communities similar to yours. Are you critical access or (sole?) community?
Reynolds: No
Reed: You're 50,000 or less so you'd catch the last one, So you could employ if you chose to do that. 

The second thing is that Somervell County Hospital District is a member of the 501a board but apparently didn't even know it until that same meeting; do they now attend meetings of GRHI? 

Margaret Drake: I went through here from top to bottom and I can't find anything that says that we as board members are to be involved directly in the workings of the 501a. Am I totally wrong in that?

Reed: That's probably true but that's in the 501a bylaws. The 501a has separate bylaws, YOu are referred in the 501a to the member of the 501a. The 501a has two things. It has a board of directors and then it has what's called a sole member. And you are the sole member of the 501a. As the sole member of the 501a you have certain powers as sole member. As the sole member of that, you as the board have power in that 501a and those bylaws set out what your power and responsiblity is over the 501a 

Pat Bruce: Who decides who becomes a member of the 501a? 

Reed: It's really the.. this gets a little quirky. The rules provide that the hospital actually controls the compensation piece but the board of the 501a, which is the physicians, actually hires and fires. So the board has to approve hiring and firing but the hospital controls the compensation of people. 

Pat Bruce: How does the 501a benefit the hospital?

Reed: Well, that's.. to me the benefit of the hospital is it allows you to employ these physicians. The original thing was that that was one of the few ways .. we could actually bring people in and connect  them to the hospital and tie them in.

At some point, perhaps some people can run and get voted onto the board that will actually stand up for accountability on the money going out.  Taxpayers deserve more than just "transferring money back and forth" without knowing where and how every nickel, yes, every penny is spent. 


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