3/30/2017-Updated to add rough transcript in case one cannot see the video
Video is from the Dec 29 2016 Somervell County Hospital District meeting
Rough Transcript: Watch for exact wording.
Reed: If you had an employed person, let's take that person on the left hand side, if they're an employee they're always going to be a W-2 person and they're always going to have hospital employee benefits. And that can potentially be, you get when you run the numbers, that can potentially be a problem if you put all your physicians under your hospital benefits. It isn't for everybody but you have to just run the numbers and see if it is for you or not. For some of our hospitals, it causes a problem because your physicians are at a higher income level and it causes retirement problems. It may or may not cause that problem for you guys. And also the benefits may or may not be where you want them to be. The other thing is that, as employees, they actually fall under your personnel policies. And so because they fall under your personnel policies, you either have to write policies for that specific class of employees for how they're handled for things like discipline because otherwise you have to, I mean, they have PTO like everybody else has PTO, and you have to track it like everybody else has PTO, or vacation time, or you have to somehow figure out how to treat that differently, which can be a problem. The main thing is when you make someone an employee, many of the employee things, people all have to be treated the same. And so, when you throw the physicians in there and you try to terat the physicians like all the other employees that can be a little cumbersome sometimes. Not always, and sometimes there's ways you can adjust that. Sometimes you can do contracts for them even though they're W-2 employees. And in the contracts you can separate out some of those issues in contracts. For example, you could give them a little bit different vacation time because you have a contract which would exempt them a little bit from the regular PTO system. And again you could make some adjustments in your personnel policy, ... that can be a real benefit because when a suit is filed against an employee under the Tort claims act, the employee has to be dismissed. And the suit is actually against the entity in the Tort Claims act. There is a benefit for having them as employees from that perspective.
Now if you look at the other side, I called them 1099's, yours are employees, right? So yours are still W-2 employees even under the non-profit medical corporation, yours are still W-2 employees, they still have different benefits, they're just benefits on that side, on the hospital side. Now they do have a separate insurance policy and there is a separate expense for that insurance policy.. registration process every couple of years but there's not a significant cost associated with maintaining the 501a.
Reynolds: There's no significant cost with the 501a. Kind of interesting on the benefits side, one of the things we've talked about , particularly now that we've changed the benefits on the hospital side where the employees are making a larger contribution to their health insurance and our retirement plan and all that where the physicians on the 501a side, we pay the entire cost of the health insurance for the physician, also they have a reitrement plan now, we participate in, so if they were to come over to the hospital, we'd have to reconcile the differences, particularly on the highly compensated on the health insurance. We'd have to figure out how to manage that piece of it.
Reed: Those are 2 pieces that you're not going to be able to reconcile, you can do things like, you can make exceptions like PTO, you can give them different PTO but you're not going to be able to make their health insurance and retirement different. The health insurance and retirement that you do for all your employees is going to have to be exactly the same, so if you bring them over, they're going to have to be on the health insurance and retirement everybody else is on.
? When I was at (CAC?) they wouldn't put their physicians on their benefits.
Reed: And they wouldn't, because it screws up the benefit plan if they're highly compensated, they probably didn't want all those highly compensated people on their benefit plan.
162b NOT 501a (there is an obvious question here about usage of this term for such a long time when it no longer even exists)
Reed: 501a is the section in the original medical practice act, the place in the act that referred to an exception to the prohibition on corporate practice and that's how people began to refer to all these as 501a corporations. That was the section of the medical practice act that had the exception in it. In a minute I'm going to tell you, that's no longer 1, that section is past.. years and years ago but people still refer to them as 501a corporations and everybody knows what they are, 501a corporations even 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?
Reed: You're 50,000 or less so you'd catch the last one, So you could employ if you chose to do that.
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 1 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.
Drake: Isn't that best handled between Ray and the 501a board?
Reynolds: Well, that's where it starts but we're going to come back to y'all for .. the member is the hospital and the members (? ) the finances, we're going to come back to y'all
Drake: Ultimately .. We are a board of laypeople, we're not in a position...
Reynolds: I think we've made some progress in terms of discussion there and communiction. My position is it doesn't seem to be broke so why should we try to fix it