In a case closely watched by the state’s hospital industry, the Georgia Supreme Court has reversed lower court rulings that barred access to Northside Hospital’s financial records.
The unanimous decision, announced Thursday, remands the case back to the trial court. Justice Nels Peterson wrote that the trial court applied the wrong legal standard in ruling against access to the records by plaintiff E. Kendrick Smith, an attorney.
At the heart of the long-running dispute was whether the nonprofit Northside Hospital was subject to the state’s open records law.
The case has involved Northside’s rejection of requests for information about financial documents and other matters. Northside had argued it is not bound by the open records law. The hospital said that because it’s a private nonprofit corporation, not a public entity, this particular law does not apply to it.
Attorney Peter Canfield had argued for the plaintiff that Northside – a hospital system based in Atlanta – is subject to the Georgia Open Records Act because it was created by a public hospital authority, which is a government entity, and that the system operates solely on the authority’s behalf.
The ruling may have a ripple effect on the Georgia hospital industry, because Northside’s corporate structure resembles many others in the state.
Many hospital authorities, for business purposes, have spun off their hospitals into separate nonprofit corporations over the past three decades. Under such an arrangement, the hospital authority leases the assets of the hospital to the corporation.
These restructured hospitals include large urban facilities such as Grady in Atlanta, along with medical centers in Savannah, Augusta, Macon, Rome and Albany, as well as in the Atlanta suburbs.
“At the very least ... Northside’s operation of the Leased Facilities is done on behalf of the Authority,’’ wrote Peterson in the court decision. “How closely the transactions at issue are tied to operating the Leased Facilities will determine whether documents are ‘public records.’ ”
Canfield told Georgia Health News on Thursday that he believes the plaintiffs will prevail at the lower court level. “We believe Northside is going to find it impossible to prove that these records aren’t connected with their operation of Northside Hospital for the authority.’’
He added that the Supreme Court ruling would have an effect on the public availability of records of other hospitals structured similarly to Northside.
The Georgia First Amendment Foundation on Thursday praised the Supreme Court ruling. “The justices said that Northside is bound by principles of open government and transparency,” said Richard T. Griffiths, a board member of the foundation. “The big win for open government is that you can’t allow government agencies to spin off private entities so they can avoid public records scrutiny.”
Griffiths added that “the lower court (now) has to look at these records as though Northside is a public entity and whether there’s an exception’’ to public access under the open records law.
A Northside spokesman, Lee Echols, said that “we are grateful that the Georgia Supreme Court has decisively rejected the appellant’s claim that virtually every Northside Hospital document is a public record, just as the trial court and Court of Appeals previously have stated.
“From the beginning, the single goal of Mr. Smith has been to gain access, on behalf of a Northside Hospital competitor, to confidential business information that is clearly protected from disclosure,’’ Echols said. “Northside Hospital looks forward to prevailing as we move forward in the legal process.”
Northside’s restructuring occurred in the early 1990s. It’s now an extremely successful hospital system, with more than $2 billion in revenues, and is set to add Gwinnett Medical Center, a large suburban system, to its fold. Northside has said for years that its flagship Atlanta hospital delivers more babies than any other community hospital in the nation.
Attorney Canfield told the justices in oral argument in April that “all the assets and liabilities acquired by Northside Inc. during the term of the lease revert to the hospital authority’’ when the lease ends.
“Everything that Northside does (it) is doing for the authority,’’ Canfield said. “All of Northside’s assets come from the authority.’’
An attorney for Northside, Randy Evans, told the court in oral argument that the system is a regional player, owning other hospitals in areas that are not governed by the hospital authority in Fulton County.
“There is no longstanding rule that every (restructured) hospital is necessarily subject to the Open Records Act,’’ Evans said. He said the Georgia Legislature has rejected attempts to change the law to widen access to records involving restructured hospitals.
The fight over Northside’s records and hospital privacy began in 2013, when attorney Smith requested information about Northside’s expenditures in the acquisitions of physicians’ practices.
The AJC that year reported about patients who faced higher bills after the acquisition of two of these practices.
The hospital turned down the request. The plaintiff, a partner of the firm Jones Day, filed suit, and the case was first heard in Fulton County Superior Court. The judge ruled in favor of Northside, saying that the hospital authority had nothing to do with the operations and acquisitions of the hospital.
Smith appealed. The court of appeals, in a split decision, upheld the lower court ruling, and the case then went to the state’s highest court.
The state’s attorney general, Chris Carr, had urged the Georgia Supreme Court to reverse the lower court opinion.
The Georgia Open Records Act, known as a “sunshine law,” was created to let the people of the state know what government agencies are doing. Ordinary citizens, lawyers and reporters routinely use the act to find out how agencies make decisions and spend money.
Media outlets, which make frequent use of open records requests to investigate and report stories, traditionally favor broad access. The Georgia Press Association, the First Amendment Foundation, the Savannah Morning News and the AJC are among organizations that filed amicus briefs supporting the Smith appeal.
Last year, Savannah’s Memorial Health rejected a request from the Savannah Morning News for documents on the relationship between the then-CEO of the health system and a potential buyer, Novant Health. In reply to the request, Memorial Health’s attorney cited Northside v. Smith and the earlier ruling that had favored Northside.
The Georgia Chamber of Commerce, among other organizations, sided with Northside in the Smith case.
Previous to Thursday’s ruling, Northside had said it was protecting its business interests by denying the requests. “If the decision is overturned, it’s certainly possible that other Georgia hospitals could be required to release sensitive business information when they’re not a public body,” it argued.
The decision on Northside is the state Supreme Court’s second big ruling recently involving Georgia hospitals. Last month the court upheld Georgia’s “certificate of need” law in an opinion that said a surgical center could not expand without state approval.