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In re Petition of University Hospitals Authority

Supreme Court of Oklahoma

December 28, 2017

IN THE MATTER OF THE PETITION OF UNIVERSITY HOSPITALS AUTHORITY, an Agency of the State of Oklahoma, and UNIVERSITY HOSPITALS TRUST, a public trust, Petitioners.

         APPLICATION TO ASSUME ORIGINAL JURISDICTION AND PETITION FOR DECLARATORY JUDGMENT

          V. Glenn Coffee, Cara Rodriguez, Denise Lawson, Glenn Coffee & Associates, PLLC, Oklahoma City, Oklahoma, for Petitioners.

          WINCHESTER, J.

         FACTS AND PROCEDURAL BACKGROUND

         ¶ 0 The University Hospitals Authority and University Hospitals Trust request this Court to assume original jurisdiction and enter a declaratory judgment, pursuant to 63 O.S. 2011 § 3225 (B)(1), finding certain proposed agreements regarding the lease and operation of the University Hospitals are valid. We accepted original jurisdiction to determine the agreements' validity.

         ¶ 1 This original action brought by Petitioners, University Hospitals Authority ("Authority") and University Hospitals Trust ("Trust"), seeks approval by this Court, in conformance with 63 O.S. 2011 § 3225, [1] of the validity of proposed agreements regarding the lease and operation of the University Hospitals. [2] Submitted with Petitioners' Application, the specific agreements to be approved include: (1) the First Amended and Restated Agreement and Plan of Merger dated October 11, 2017, between Oklahoma Holding Company, LLC, Hospital Development Properties, Inc., HCA Health Services of Oklahoma, Inc., the Trust, OU Medicine, Inc. ("OUMI"), and HTI Hospital Holdings, Inc.; (2) the Joint Operating Agreement ("JOA") between the Trust and OUMI; (3) the Sublease Agreement between the Trust and OUMI; and (4) all other documents executed or delivered pursuant to the proposed lease and operations of the University Hospitals.

         ¶ 2 In 1993, through the University Hospitals Authority Act (the "Act"), 63 O.S. 2011 §§ 3201 et seq., the Legislature transferred jurisdiction, supervision, management, and control of the University Hospitals from the Department of Human Services to the University Hospitals Authority. The Legislature amended the Act in 1997 to authorize the creation of a public trust to be called the University Hospitals Trust. See 63 O.S. 2011 § 3224. Under the terms of the Act, the Legislature found that the needs of Oklahoma citizens would best be served if the Authority were "charged with the mission of operating or leasing" the hospitals. 63 O.S. 2011 § 3203 (B). However, before any agreement regarding the lease and operations of the University Hospitals could become effective, such agreement would need to be approved by the Contingency Review Board, the Attorney General, and this Court. See 63 O.S. 2011 §§ 3226 (A) (provides for review and approval by the Attorney General) and 3225 (provides for review and approval by the Contingency Review Board and this Court.). In 1997, this Court first considered, with approval, contractual agreements for the lease (and sublease) and operation of the University Hospitals between the Authority and the Trust and HCA Health Services of Oklahoma, Inc. ("HCA"), a for-profit, private corporation that operated the hospitals together with its own healthcare facilities. See Petition of University Hospitals Authority, 1997 OK 162, 953 P.2d 314 (" University Hospitals I ").

         TODAY'S TRANSACTION

         ¶3 Today, the Authority and Trust have determined that a new arrangement is necessary and desirable to provide effective, efficient administration and to "ensure a dependable source of funding for continuing high quality and comprehensive healthcare services through hospitals and other medical facilities that meet the needs of indigent and nonindigent patients, that serve as teaching and training facilities for medical students, residents, fellows and other trainees enrolled at the University of Oklahoma and that provide a site for conducting medical and biomedical research by faculty members of the University of Oklahoma Health Sciences Center, including but not limited to constructing modern facilities." Pursuant to the Act, both the Attorney General and the Contingency Review Board provided their review and approval of the matter proposed herein. The Petitioners filed their Application to Assume Original Jurisdiction and Petition for Declaratory Judgment with this Court on October 31, 2017, and following the Petitioners' statutory fulfillment of the notice publication requirements, no protests to this process were filed with this Court.

         ¶4 The Petitioners submitted to the Court contractual agreements for the termination of the 1997 transaction approved by the Court in University Hospitals I and the implementation of a merger agreement between HCA, the Trust, and a newly formed, nonprofit corporation, OUMI (the "Transaction"). Pursuant to the Transaction, OUMI will pay HCA $750 million and will survive the merger as the new operator of the hospitals with the Trust performing its statutorily required management oversight. As it did with HCA, the University of Oklahoma Health Sciences Center will continue to contract with the new entity to provide clinical education, research, administrative, and other services, as well as facility leases.

         DISCUSSION

         ¶ 5 This Court has exclusive, original jurisdiction to approve the validity of transactions entered into under the Act and to grant declaratory relief. 63 O.S. 2011 § 3225 (B)(3); Petition of University Hospitals Authority, 1997 OK 162, ¶ 25, 953 P.2d 314, 321. The Petitioners have complied with the Act, have provided the requisite public notice of the pending agreements, and no protest of said agreements was made. We find this matter properly invokes our jurisdiction.

         ¶6 After review of the materials in the record before us, we find, as did the Attorney General and the Contingency Review Board, the proposed Transaction is not in discord with the Act or Oklahoma law. Just as in University Hospitals I, "it is impossible to say what circumstances not evident from the record before us today might arise at some future time that would expose a critical infirmity" in the Transaction. 1997 OK 162, ΒΆ 25, 953 P.2d at ...


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