The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 6741

December 1, 1992

HOSPITAL FINANCE AUTHORITY:

Eligibility of the Detroit Medical Center to obtain a loan

The Detroit Medical Center qualifies as a hospital for purposes of obtaining a loan under the Hospital Finance Authority Act.

Thomas Letavis

Deputy Executive Director

Michigan State Hospital Finance Authority

P.O. Box 15128

Lansing, Michigan 48901

You have asked whether the Detroit Medical Center (the DMC) qualifies as a "hospital" for purposes of obtaining a loan under the Hospital Finance Authority Act, 1969 PA 38, as amended, MCL 331.31 et seq; MSA 14.1220(1) et seq.

I am informed that the DMC has applied for a loan from the Michigan State Hospital Finance Authority to be used to refinance existing debt incurred by DMC to acquire computer equipment for use by its member hospitals. The DMC is a Michigan private nonprofit corporation which does not own or operate any licensed health care facilities except indirectly through its subsidiary corporations. It is the parent holding company (i.e., sole member or sole shareholder) of the following private nonprofit corporations which own or operate licensed hospital facilities: Children's Hospital of Michigan, Detroit Receiving Hospital and University Health Center, Grace Hospital, Harper Hospital, Huron Valley Hospital, Inc., Hutzel Hospital, and the Rehabilitation Institute, Inc. (together, the Medical Center Hospitals).

A primary rule of statutory construction is to discover and give effect to the intent of the Legislature. Spartan Asphalt Paving Co v Grand Ledge Mobile Home Park, 400 Mich 184, 187; 253 NW2d 646 (1977).

The legislative purpose of the Hospital Finance Authority Act is set forth in section 2, which states:

It is declared that, for the benefit of the people of the state and the improvement of their health, welfare, and living conditions, it is essential that hospitals within the state be provided with appropriate means at reasonable cost to maintain, expand, enlarge, and establish health care, hospitals, and other related facilities; that hospitals be provided with the ability to refinance indebtedness; and that authorities created or incorporated under this act be provided with the ability to refund or to refund in advance obligations of 1 or more of those authorities. This act shall provide a method to enable hospitals in the state to provide or maintain at reasonable cost pursuant to reasonable terms the facilities, structures and services needed to accomplish the purposes of this act, all to the public benefit and good, to the extent and manner provided in this act.

Section 84 of the Hospital Finance Authority Act states:

This act, being necessary for and to secure the public health, safety, convenience and welfare of the citizens of the state, shall be liberally construed to effect the public purposes hereof. [ Emphasis added.]

In WA Foote Memorial Hospital, Inc v Jackson Hospital Authority, 390 Mich 193, 204, 220; 211 NW2d 649 (1973), the Michigan Supreme Court summarized the foregoing public purpose of the Hospital Finance Authority Act and recognized that it should be liberally construed to effectuate such purpose:

Essentially, the public purpose of Act 38 is to encourage adequate health care for Michigan citizens....

 

We believe that the law should be interpreted to make sense and to carry out the legislative and public purpose within the limits of constitutionality.

Section 12 of the Hospital Finance Authority Act authorizes the Authority to "loan money to hospitals for the purpose of refinancing any outstanding indebtedness of a hospital if the state authority determines the refinancing is necessary to realize the objectives and purposes of this act." The Hospital Finance Authority Act defines "hospital" for the purpose of that Act in section 3, MCL 331.33; MSA 14.1220(3), as follows:

(e) "Hospital" means a nonpublic corporation, association, institution, or establishment located within the state for the care of the sick or wounded or of those who require medical treatment, operated without profit to an individual corporation or association. It includes nonprofit corporations or other organizations engaged solely in some phase of hospital activity or in providing a supporting service to hospitals or public corporations which operate or own hospital facilities. [ Emphasis added.]

The foregoing definition of "hospital" includes two types of private entities. The first is a nonprofit health care entity which directly provides care for the sick or wounded or for those who require medical treatment. The second includes those private nonprofit entities which do not directly provide health care but which are engaged solely in some phase of hospital activity or in providing a supporting service to hospitals. The DMC does not provide direct medical care. Therefore, to come within the purview of the statute, it must qualify as a "hospital" under the second part of the definition.

The supplemental pages to the Articles of Incorporation of the DMC state the corporate purposes of DMC as follows:

The Corporation is organized for the following purposes:

A. To provide for the development, planning and implementation of health and health-related services and activities, as well as supporting and ancillary activities, including long-range and strategic planning and medical education and research activities, and

B. To provide or further other charitable, scientific and educational activities, toward the purpose of enabling the Corporation, together with the Medical Center institutions (Children's Hospital of Michigan, Detroit Receiving Hospital and University Health Center, Harper-Grace Hospitals, (1) Huron Valley Hospital, Inc., Hutzel Hospital, Rehabilitation Institute, Inc., and Wayne State University) and their affiliated entities to fulfill their collective mission, which is:

To be a cohesive, preeminent academic health center evidencing the interdependent relationship of Wayne State University and the other Medical Center institutions and integrating clinical service, education and research; and

To maintain centers of major program emphasis; and

To provide high quality primary, secondary and tertiary care within the framework of an integrated, synergetic health care delivery system.

The Corporation is further organized:

A. To further any and all charitable, scientific and educational activities in which the Medical Center institutions now are or hereafter may become engaged, in carrying out their respective missions, as long as the Medical Center institutions are organizations described in Section 501(c)(3) and Sections 509(a)(1) or (a)(2) of the Internal Revenue Code of 1954, as amended, or comparable provisions of subsequent legislation (the "Code");

B. To provide a single, unified, functionally-integrated system of governance and management for the Medical Center institutions other than Wayne State University;

C. To facilitate the achievement of the individual missions of the Medical Center institutions and their affiliated entities, consistent with the collective mission; and

D. To otherwise operate exclusively for the benefit of, to perform the functions of, and to carry out any of the purposes of the Medical Center institutions in a manner consistent with their collective mission.

A review of the foregoing articles indicates that the DMC is an organization engaged "solely in some phase of hospital activity or in providing a supporting service to hospitals" and, therefore, comes within the definition of a "hospital" as defined in the Hospital Finance Authority Act.

This conclusion is not altered because the DMC is not licensed as a hospital under the Public Health Code, 1978 PA 368, MCL 333.1101 et seq; MSA 14.15(1101) et seq. I am aware that a prior opinion of this office, OAG, 1987-1988, No 6497, p 272 (February 22, 1988), concluded that a nonprofit cooperative hospital service organization was not a hospital within the meaning of section 3(e) of the Hospital Finance Authority Act because it did not fall within the definition of, and was not licensed as, a "hospital" under the Public Health Code.

However, a later opinion, OAG, 1989-1990, No 6670, p 418, 420 (December 19, 1990), correctly concluded that the broader definition of hospital in section 3(e) of the Hospital Finance Authority Act is controlling in determining whether an entity is a hospital eligible to borrow money under that Act:

Under the foregoing provisions of the Public Health Code, a nursing home facility is treated, for purposes of that Code, as an entity that is separate and distinct from a "hospital." However, the Hospital Finance Authority Act defines the term "hospital" much more broadly than does the Public Health Code. A nursing home clearly does exist to provide "for the care of the sick or wounded or of those who require medical treatment...." Hospital Finance Authority Act, Sec. 3(e); MCL 331.33(e); MSA 14.1220(3)(e). It follows that a nursing home facility does fall within the definition of a "hospital" or "hospital facility" as those terms are defined by the Hospital Finance Authority Act. [ Emphasis added.]

As noted by the later opinion, the Hospital Finance Authority Act does not contain a requirement that all entities which qualify as "hospitals" as defined by that Act must also meet the definition of and be licensed as "hospitals" under the Public Health Code. Indeed, to read such a construction into the Hospital Finance Authority Act would significantly narrow the definition of "hospital" set forth by the Legislature in that Act in contravention of section 84 of the Hospital Finance Authority Act and the Foote case, supra, which require that the Act be liberally construed to effectuate its public purposes.

By providing management services to the Medical Center Hospitals, the DMC provides a "supporting service to hospitals" as contemplated by the second sentence of the definition of "hospital" set forth in section 3(e) of the Hospital Finance Authority Act. It follows that the Legislature intended that entities like the DMC which provide management services be included within the definition of a "hospital" as stated in the Act. OAG, 1987-1988, No 6497, supra, which concluded that a hospital service organization was not a hospital within the meaning of section 3(e) of the Hospital Finance Authority Act because it was not licensed as a hospital under the Public Health Code, is superseded.

It is my opinion, therefore, that the Detroit Medical Center qualifies as a "hospital" for purposes of obtaining a loan under the Hospital Finance Authority Act. Pursuant to section 12(d) of the Act, MCL 331.42(d); MSA 14.1220(12)(d), it is the responsibility of the Authority to determine whether the refinancing of the existing indebtedness incurred by the DMC to acquire the particular computer equipment in question is "necessary to realize the purpose and objectives of [the] act."

Frank J. Kelley

Attorney General

(1 I am informed that Harper-Grace Hospitals have since been reorganized as two separate corporations: "Harper Hospital" and "Grace Hospital)"