Healthcare Law and the Benefit Corporation

Healthcare providers have increasingly assumed responsibility for patient care through the Integrated Delivery Network (IDN) model. This has been accompanied by litigation asserting that hospitals now have enhanced fiduciary duties and thus liability as “comprehensive healthcare centers” acting as co-fiduciaries of the attending physician. This contrasts with traditional “physician’s workshops,” where only the physician assumed a fiduciary relationship with the patient and made the key decisions.  However, elevating patient care to a public good often conflicts with the prime directive of maximizing shareholder value. This talk addresses judicial and legislative efforts to manage these contravening forces from constituency statutes that weakly moderate the business judgment rule, to reincorporating as a benefit corporation, to legislation enhancing fiduciary duties. Regardless of the legal strategy ultimately chosen, recognizing the legal advantages and disadvantages of the available options is critical for the healthcare sector to conduct a proper risk assessment of its potential liability exposure.

Discussions will include:

• The business judgment rule first clearly articulated in Dodge v. Ford Motor Co. (1919) and many cases since such as CMH Liquidating Trust v. Anderson (2018) contrast to the rise of the “best judgment rule” influencing constituency statutes in multiple states permitting corporate boards to widen their decision-making parameters beyond purely shareholder value.
• The historical mission and services of hospitals as “physician workshops” in contradistinction to today’s Integrated Delivery Network (IDN) model and the associated “co-fiduciary” status of hospitals and physicians for patients first articulated in the early case of Darling v. Charleston Community Memorial Hospital (1965).
• COVID-19 as a catalyst for expanding fiduciary duties and potentially enhanced liability of healthcare organizations and the pharmaceutical industry. 
• The advantages and disadvantages to the healthcare sector (e.g., both healthcare organizations and the larger healthcare industry including pharmaceuticals) of incorporating or reincorporating under benefit corporation statutes.

Attorneys, from all experience levels, representing healthcare sector clients (e.g., hospitals, insurance companies, pharmaceuticals), patients or patient groups, financial sector clients, or public sector clients that have enhanced fiduciary duties, will benefit by attending this program.

Learning Objectives:

• Review the historic legal significance of the transition of hospitals from physicians’ workshops to the Integrated Delivery Network Model (IDN)
• Evaluate the expansion of fiduciary duties in the healthcare sector
• Explore the Benefit Corporation option as an alternative means of  satisfying enhanced fiduciary duties while satisfying shareholder interests