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Assessing the impact of Allina's break-up
By Tom Scheck, Minnesota Public Radio
July 20, 2001
Second of two parts
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Attorney General Mike Hatch's audit and investigation of Allina Health System has prompted some concern by other non-profit health care organizations in the state and non-profit organizations overall. Under Minnesota law, the attorney general has the right to investigate any charities or non-profits that operate in the state. Legal experts say such investigations are rare, but many non-profits say Hatch's audit of Allina may change the way they do business.

MPR's Bill Catlin talks about the changes at Allina with (left to right, above) Dr. Judith Shank, vice chair of the Allina Health System board; David Strand, Allina's chief operating officer; Gordon Sprenger, Allina's chief executive officer.Listen.

Roger Feldman, a professor in the School of Public Health at the University of Minnesota, says he's not surprised by the split because the merged health care delivery system didn't make sense economically. Listen.

Dave Durenberger, senior health policy fellow at the University of St Thomas, says from the late 1980s to the early 1990s, there was a lot of market pressure to restrain cost increases in health care. Listen.
ATTORNEYS GENERAL have a long history of overseeing and investigating non-profits. In Old English law, experts say the king's first attorney general had the common law power to oversee the religious organizations that provided health care services.

In Minnesota, the attorney general doesn't have to report to the king, but still has the ability to scrutinize non-profits. "When it comes to investigations, he has virtually unlimited authority," says Rep. Matt Entenza, DFL-St. Paul, is a former assistant attorney general in the charities division under former attorney general Skip Humphrey. He has also represented non-profits in court.

He says the state's constitution has given the attorney general the right to conduct extensive investigations and audits of a non-profit because the state wants to ensure that non-profits are spending their money for the common good of the charity. "The attorney general is the only authority that we have out there to look over the shoulder of non-profits and make sure that they're doing the right thing," Entenza says. "If they disagree, of course, they have the right to force him to go to court if they don't believe in his remedy."

The state charity law also gives the attorney general full powers to investigate non-profits. Entenza says it's rare that a non-profit will take on an attorney general in court since the state's top law enforcement official has the bully pulpit.

The last time an attorney general has taken this kind of action was in 1960, when Miles Lord, the former attorney general, took over the Sister Kenney Institute in Minneapolis. Lord said the charity's executives were accepting bribes.

Although he wouldn't be specific, Lord says there could be other situations at non-profits that could require an attorney general to step in and seek changes. "If I were attorney general, I would be moving in and saying, 'Hey, you're not accountable to anyone, get with it. Change your policies. Change your board of directors or your management.' Somebody has to be able to fire one of these people," Lord said.

Hatch's recent decision to investigate Allina has also put other Minnesota non-profits on notice, especially in the health care field. State law requires that if an HMO wants to insure Minnesotans it must have non-profit status. And under Hatch's tenure, he's conducted investigations into Allina and sued Blue Cross Blue Shield.

HealthPartners CEO George Halvorsen says he expects Hatch to look into the conduct of other Health care organizations as well. "There will be an audit. What he's said is that he's going to audit not only the health plans, but the major hospitals in town. He's going to do an audit similarly to the one he did at Medica. And we anticipate that at sometime that audit will happen and that doesn't give us any concern," Halvorsen said.

But other non-profits say Hatch's moves have prompted concerns on how they conduct their business. Sondra Reis, with the Minnesota Council of Non-profits, says the attorney general's broad power to examine non-profits has the members of her organization nervous. Reis says many non-profits can't afford to attract employees with large salaries, but offer other incentives like quality health insurance.

If managers at non-profits feel their finances are going to be heavily scrutinized by the attorney general's office, Reis says it may force significant changes. "Non-profit employees are some of the most valuable assets a non-profit holds. And non-profit managers need to recognize the efforts of their employees and I'm afraid that certain expenses may not be made because a non-profit manager may be afraid that they may be too closely scrutinized if they choose to recognize the work of their employees," according to Reis.

Reis says she appreciates the attorney general's broad power to investigate non-profits, but is nervous that the attorney general may continue to conduct extensive reviews of non-profits. When asked if her organization may ask the Legislature to limit the attorney general's powers over non-profits, Reis said she wasn't prepared to answer the question.

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