X OFFICE OF THE ATTORXEY GENERAL - ST.~TE OF TEXAS JOHK CORNYN

September 14,200l

The Honorable Tim Curry Tarrant County Criminal District Attorney 1025 South Jennings, Suite 300 Fort Worth, Texas 76104 Opinion No. JC-0407

Re: Whether ahospital district board ofmanagers may appoint its own members to the board of a health maintenance organization created by the district and whether the health maintenance organization’s board of directors is subject to the Open Meetings Act (RQ-0362-JC)

Dear Mr. Curry:

On behalf ofthe Tarrant County Hospital District (the “Hospital District” or “District”), you ask whether the District’s board ofmanagers may appoint its own members to the board of ahealth maintenance organization (“HMO”) created by the District and whether the HMO’s board of directors is subject to the Open Meetings Act.’

We conclude that the District board ofmanagers may appoint its own members to the board of the HMO, but that members of the board of managers who also serve on the HMO board must comply with chapter 171of the Local Government Code whenever participating in aDistrict vote
ordecision affecting the HMO. Furthermore, inparticipating inHMO matters involving the interests of both entities, HMO board members who are also members of the District’s board of managers must faithfully carry out their duty to the HMO, consulting and complying with the standards and requirements of the Texas Non-Profit Corporation Act.

We also conclude that although the HMO board is not agovernmental body subject to the Open Meetings Act, the group ofDistrict board ofmanagers members who serve on the HMO board may constitute a governmental body in and of itself ifthe board of managers has delegated to the group any authority over District business orrubber-stamps the group’s recommendations regarding District business. Inthat case, meetings ofthe HMO board atwhich the board ofmanagers members consider Hospital District business within that group’s control will be subject tothe Open Meetings Act.

‘Letter from Honorable Tim Curry, Tarrant County Criminal District Attorney, to HonorableJohn Comyn, Texas Attorney General (Mar. 2,200l) (on file with Opinion Committee) [hereinafter Request Letter].The Honorable Tim Curry - Page 2 (JC-0407)

Before addressing your questions, we briefly review the facts presented in your letter. The District is governed by article XI, section 4 ofthe Texas Constitution and chapter 281 ofthe Health and Safety Code. You inform us that the District’s board ofmanagers has eleven members, all of whom are appointed by the Tar-rant County Commissioners Court,* asprovided by section 28 1.02 1 ofthe Health and Safety Code. See TEX.HEALTH & SAFETY

CODE ANN.5281.02 1(b) (Vernon 2001) (“The commissioners court of acounty with apopulation of more than 650,000 but less than 1.18 million in which a district is created under this chapter shall appoint aboard composed of not less than five or more than 15members.“). As authorized by section 281.05 15ofthe Health and Safety Code, the District has established a health maintenance organization, MetroWest Health Plan (“MetroWest”), under chapter 20A of the Insurance Code. See id. 5 281.05 15 (“A district may establish a health maintenance organization in accordance with the Texas Health Maintenance Organization Act (chapter 20A, Vernon’s Texas Insurance Code) to provide or arrange for health
care services for the residents of the district.“).

You inform us that the District established MetroWest in 1997 as a nonprofit taxable corporation under the Texas Non-Profit Corporation Act, TEX.REV.CIV.STATS. ANN. arts. 1396-l .Ol - 11.Ol (Vernon 1997 & Supp. 2001), to serve as ahealth-care-delivery system that would enable the District to participate inthe State’s Medicaid STAR program. See Request Letter, supra note 1,at 2. The Texas Department ofInsurance issued MetroWest acertificate of authority in 1997. See id. District funds establish the necessary reserves for MetroWest to qualify as an HMO. See id. Upon the dissolution ofthe HMO, its assets would be distributed to the District. See ld.

In 1999, MetroWest amended its articles ofincorporation to qualify as atax-exempt entity under section 501(c)(4) of the Internal Revenue Code of 1986. See id. The District board of managers recently adopted aresolution recognizing MetroWest as acharitable organization under section 281.0565 ofthe Health and Safety Code, see id. at4,which authorizes ahospital district to create a charitable organization “to facilitate the management of a district health care program by providing or arranging health care services, developing resources for health care services, or providing ancillary support services for the district.” TEX. HEALTH & SAFETYCODE ANN. 4281.0565(b) (Vemon 2001). A charitable organization created by adistrict under this provision “is aunit oflocal government forpurposes of Chapter 101, Civil Practice and Remedies Code.” Id. 528 1.0565(c).

We understand that MetroWest’s amended bylaws provide that the District is the sole member of MetroWest and that the MetroWest board members are elected by the District’s board of managers, which may also remove such members with or without cause. See Request Letter, supra note 1,at 3. The bylaws require meetings ofthe HMO board to be conducted in accordance with the Open Meetings Act. See id.

MetroWest has contracted with the State of Texas to “arrange for managed health care services for Medicaid beneficiaries” in the District. See id. at 4. MetroWest and the Hospital

*Request Letter, supra note1,at1.The Honorable Tim Curry - Page 3 (JC-0407)

District have entered into acontract “whereby the District iscompensated forproviding MetroWest with administrative personnel and services, office space, equipment and supplies.” Id. In addition, MetroWest has an arrangement with the District to provide health-care services to enrollees and to provide administrative services for the District’s employee health plan. See id.

Three former members ofthe District’s board ofmanagers currently serve on the MetroWest board ofdirectors. The board ofmanagers is contemplating appointing three ofits eleven members to the MetroWest board of directors. Telephone Conversations with Sullivan H. Bradley, Jr., Assistant District Attorney forTax-rantCounty Hospital District (June 21-22,200l). The MetroWest board of directors has five members. Id. In addition, MetroWest is contemplating amending its articles ofincorporation and bylaws to omit the requirement that the MetroWest board of directors conduct its meetings under the Open Meetings Act.

In light ofthe foregoing facts, you ask whether the Hospital District board ofmanagers may appoint some of its current members to the MetroWest board of directors and whether the MetroWest board of directors is subject to the Open Meetings Act. Request Letter, supra note 1,at 4. As you point out, the provisions specifically governing the Hospital District and the HMO - chapter 28 1ofthe Health and Safety Code, the Texas Non-Profit Corporation Act, and chapter 20A ofthe Insurance Code - do not resolve these questions.

You express concern that Hospital District board ofmanagers members may be precluded from serving on the MetroWest board of directors by article XVI, section 40 of the Texas Constitution, which prohibits dual office-holding, providing that “[n]o person shall hold orexercise at the same time, more than one civil office of emolument.” TEX.CONST.art. XVI, 540. As the members of the District’s board of managers serve without compensation, see TEX.HEALTH& SAFETYCODEANN. 8281.024 (Vernon 2001) (“A board member serves without compensation”), they do not to hold civil offices “of emolument” within the meaning of article XVI, section 40, see TEX.CONST.art. XVI, 840; see also Irwin v. State, I77 S.W.2d 970,973 (Tex. Crim. App. 1944) (an “emolument” for purposes of article XVI, section 40, is “any pecuniary profit, gain, or advantage”); Tex. Att’y Gen. Op. No. DM-55 (1991) (term “emolument” does not include the legitimate reimbursement of expenses), and that constitutional prohibition is inapplicable.

You also express concern that Hospital District board of managers members may be precluded from serving on the MetroWest board of directors by the common-law doctrine of incompatibility, which is amore difficult question. The doctrine of common-law incompatibility prohibits public officers from holding offices with inconsistent public duties and precludes a body from appointing one ofits members to another office. See generaZZyTex. Att’y Gen. Op. No. JC-0225 (2000) (“The common-law doctrine of incompatibility bars one person from holding two offices if their duties conflict, Thomas v.Abernathy County Line Indep. Sch. Dist., 290 S.W. 152 (Tex. Comm’n App. 1927, judgm’t adopted)

. . . . It also prevents an individual with appointing power from appointing himself to another office orposition. EhZinger v. Clark, 8S.W.2d 666,674 (Tex. 1928).“). Another strand of the doctrine, not relevant here, prevents apublic officer from serving in an employment position that the public officer supervises. See id. (common-law doctrineThe Honorable Tim Curry - Page 4 (JC-0407)

of incompatibility bars one person from holding “an office and employment if the office has a supervisory role over the employment”) (citing Tex. Att’y Gen. LA-75-l 14). To the extent the doctrine of incompatibility prohibits apublic officer from holding offices with inconsistent public duties or from being appointed to another office, itdoes not apply when one ofthe two positions is not apublic office. See Tex. Att’y Gen. Op. Nos. DM- 194(1992) (common-law rule against holding incompatible offices does not apply where one office is not public office); H-l 309 (1978) at 1 (concluding that doctrine prohibiting holding of incompatible offices does not apply where one office is not apublic office). Thus, whether the doctrine of incompatibility applies here depends upon whether MetroWest’s board members are public officers.

Based on the information you have provided, it is difficult for us to assess the legal nature of MetroWest and the status of its board members. On the one hand, MetroWest is a legal entity with an identity separate and apart from the District. As we have noted, the District established MetroWest pursuant to section 281.05 15 of the Health and Safety Code, which permits ahospital district to establish a health maintenance organization in accordance with the Texas Health Maintenance Organization Act, chapter 20A of the Texas Insurance Code, “to provide or arrange for health care services for the residents of the district.” TEX.HEALTH& SAFETYCODEANN. 9 281.05 15 (Vernon 2001). Although the Hospital District is authorized by law to establish an HMO, MetroWest is organized as anonprofit corporation under the Texas Non-Profit Corporation Act. Its purpose, as we understand it, is not to govern the Hospital District but to provide and arrange for health-care services, particularly to provide a system for the delivery of health-care services under the state Medicaid program.
On the other hand, the HMO issoclosely affiliated with the Hospital District that we hesitate to conclude that it is aprivate entity. Abrief we have received suggests that HMOs formed under section 281.05 15are essentially subsidiaries ofthe creating hospital districts: “the districts remain the parent company and the HMO is the equivalent of a subsidiary.” Brief of David W. Hilgers, Hilgers &Watkins, at2(May 22,200l) (on file with Opinion Committee). Inthis case, the Hospital District is the sole member of the HMO. See Request Letter, supra note 1, at 2. Furthermore, because the District board of managers appoints the members ofthe IIMO board and may remove them with orwithout cause, see id., the Hospital District exercises significant control over the HMO board. This control would be even more extensive ifthree of the HMO’s five members were also members of the Hospital District board of managers. As a charitable organization under section 281.0565 of the Health and Safety Code, the HMO “is a unit of local government for purposes of Chapter 101, Civil Practice and Remedies Code.” TEX. HEALTH & SAFETY CODE ANN. 8 281.0565(c) (Vernon 2001). District funds establish the necessary reserves for MetroWest to qualify asanHMO and MetroWest’s assets would revert tothe District upon the HMO’s dissolution. See Request Letter, supra note 1, at 2. Given the close relationship between the Hospital District and the HMO and the Hospital District board of manager’s ultimate control over the HMO, it appears that the HMO may actually function as an alter ego of the Hospital District.

In determining whether the doctrine ofincompatibility applies tothe HMOs board members, however, we focus on their authority and duties rather than the legal status and role of the HMO.The Honorable Tim Curry - Page 5 (JC-0407)

This office recently applied the following legal standard to determine whether officers ofanonprofit corporation held public office:

Public office is the right, authority, and duty created and conferred by law, by which, for a given period, either fixed by law,
or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of the government, to be exercised by him for the benefit of the public.

Tex. Att’y Gen. Op. No. JC-345 (citing Kimbrough v.Barnett, 55 S.W. 120, 122 (Tex. 1900)); see also Aldine Indep. Sch. Dist. v. Standley, 280 S.W.2d 578,583 (Tex. 1955) (status as an officer as opposed to an employee is determined by “‘whether any sovereign function of the government is conferred upon the individual tobe exercised byhim forthe benefit ofthe public largely independent of the control of others”‘) (quoting Dunbar v.Brazoria County, 224 S.W.2d 738, 740 (Tex. Civ. App.-Galveston 1949, writ ref d)). Applying these criteria, we conclude that the HMO’s board members are not public officers because their authority and duties are not created and conferred by law. Although a statute authorizes hospital districts to establish HMOs, MetroWest exists not by an act ofthe legislature but rather due to the act ofthe Hospital District in establishing it. Moreover, the HMO board members’ authority and duties derive not from a statute but rather from the HMO’s articles of incorporation and bylaws. We have no information about the actual duties of the HMO board and whether it performs duties that are arguably sovereign functions of the Hospital District. In this regard, we caution that “[n]o governmental agency can, by contract or otherwise, suspend or surrender its functions, nor can it legally enter into any contract which will embarrass or control its legislative powers and duties or which will amount to an abdication thereof.” City of Corpus Christi v. Bayfront Assocs., Ltd., 814 S.W.2d 98, 107 (Tex. App.-Corpus Christi 1991, writ denied); Guerra
v.Rodriguez, 239 S.W.2d 915 (Tex. Civ. App.-San Antonio 1951,no writ); see also Tex. Att’y Gen. Op. No. JC-0335 (2001) (“Absent specific constitutional authorization, a city or county may not transfer control of its governmental functions to another entity.“).

We also suggest that, in advising the Hospital District with respect to this matter, you consider common-law and statutory conflict-of-interest rules, which aredirected atpreventing public officials from using their authority to benefit their own or other private interests. For example, in Attorney General Opinion H-l 309, this office concluded that while the prohibitions against dual office-holding and incompatibility did not preclude amember of a state commission from serving
on the board of a private nonprofit foundation affiliated with the public entity, common-law prohibitions would limit the ability of the two entities to enter into contracts:

Public officers may not have a direct or indirect pecuniary interest in a contract entered into by the agency or political subdivision they serve. Meyers v. Walker, 276 S.W. 305 (Tex. Civ. App.-Eastland 1925, no writ)

. . . .The Honorable Tim Curry - Page 6 (JC-0407)

Closely related tothe policy against public contracts inwhich
one of the contracting officials has apecuniary interest is the policy against dual agency. An agent may not represent the opposing party in a transaction without the full knowledge and consent of his princip[al]. Anderson v. Grzfith, 501 S.W.2d 695, 700 (Tex. Civ. App.-Fort Worth, writ ref dn.r.e.); Bute v.Stickney, 160 S.W.2d 302 (Tex. Civ. App.-San Antonio 1942, writ ref dw.o.m.). Although this rule has developed in the context ofprivate transactions, we believe it is relevant to the conduct ofpersons acting as agents of the state. Like the policy against conflict of interest in public contracts, it guards against competing interests of apublic official which would

‘prevent him from exercising absolute loyalty and undivided allegiance to the best interest’ ofthe governmental entity he serves.

Tex. Att’y Gen. Op. No. H-1309 (1978) at 2. Significantly, these common-law rules have been largely displaced by statutes, the most relevant of which for our purposes is chapter 171 of the Local Government Code. Chapter 171, which has been construed to apply to members of ahospital district board, see Tex. Att’y Gen. Op. No. JC-210 (2000)’ establishes the duties of local public officials when they are faced with voting
on amatter that will affect abusiness entity in which they have an interest. See TEX.LOC.GOV’T CODEANN. $5 171.002, .003 (Vernon 1999). Specifically, a local public official who has a “substantial interest” in abusiness entity must disclose that interest and abstain from participating in avote or decision on amatter that will have aspecial economic effect on the business entity. See id. 8 171.004. Chapter 171 expressly provides that itpreempts the common-law of conflicts-ofinterest as applied to the local officials who fall within the chapter’s scope. See id. 8 171.007(a). In addition, section 171.009 affirmatively permits a local public official “to serve as amember of the board ofdirectors ofprivate, nonprofit corporations when such officials receive no compensation
or other remuneration from the nonprofit corporation or other nonprofit entity.” Id. 8 171.009.

The MetroWest bylaws provide that directors ofthe HMO serve without compensation, but they do not “preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor.” Request Letter, supra note 1, at 3. Thus, conceivably an HMO board member who isalso amember ofthe Hospital District board ofmanagers could receive asalary from the HMO as an HMO employee. 3 A member of the board of managers who serves on the HMO board and has a substantial interest in the HMO, see TEX.Lot. GOV’T CODEANN. 0 171.002 (Vernon 1999) (defining “substantial interest”), must disclose that interest and refrain from participating in any vote or decision ofthe board ofmanagers that has aspecial economic effect on the HMO, see id. 0 171.004. As chapter 171 preempts the common-law of conflicts-of-interest,

3This provision raises the issue whether amember ofthe hospital district board ofmanagers may be employed by the HMO. Asyou do not raise this issue, we do not address it.The Honorable Tim Curry - Page 7 (JC-0407)

however, members ofthe Hospital District board ofmanagers who serve onthe HMO board and who donot have asubstantial interest inthe HMO arepermitted toparticipate inboard ofmanagers votes and decisions that affect the HMO. See Tex. Att’y Gen. Op. Nos. JM-1065 (1989) (by virtue of chapter 171, member of city council who serves on board of foundation but does not have a substantial interest inthe foundation may participate invotes and decisions ofthe council concerning agreements between the city and the foundation); JM-424 (1986) at 8 (statutory predecessor to chapter 171 supplants common-law policy against dual agency).
Finally, we caution that chapter 171 governs the duty of members of the Hospital District board ofmanagers to the Hospital District; itdoes not address the duty ofpersons who serve onboth the board ofmanagers and the HMO board to MetroWest. See Tex. Att’y Gen. Op. No. DM-256 (1993). In participating in HMO matters involving the interests ofboth entities, MetroWest board members who are also members of the board ofmanagers must also faithfully carry out their duty to MetroWest, consulting and complying with the standards and requirements of the Texas NonProfit Corporation Act. See, e.g., TEX.REV.CIV. STATS. ANN.arts. 1396-2.28 (duty of director of nonprofit corporation to act in best interest of the corporation); 1396-2.30 (procedures applicable when director has an interest in a contract or transaction between corporation and another entity) (Vernon 1997).

Next we consider whether the Open Meetings Act would apply to the MetroWest board of directors ifthe hospital district appoints three ofits eleven members tothe five-member MetroWest board and MetroWest amends its articles of incorporation and bylaws to omit the requirement that the MetroWest board conduct its meetings under the Open Meetings Act. We conclude that itmay.
The Open Meetings Act (the “Act”) applies to governmental bodies. See TEX.GOV’TCODE ANN. § 551.002 (Vernon 1994) (“Every.

. .meeting of agovernmental body shall be open to the public, except asprovided by this chapter.“) (emphasis added). It defines the term “governmental body” to include the following pertinent entities atthe local level:

(B) acounty commissioners court in the state;
(C) amunicipal governing body in the state;
(D) a deliberative body that has rulemaking or quasi-judicial power and that is classified as a department, agency, or political subdivision of acounty or municipality; 

### (E) a school district board of trustees; 

# m acounty board of school trustees;
(G) acounty board of education;
(H) the governing board of a special district created by law.The Honorable Tim Curry - Page 8 (JC-0407)

Id. 855l-001(3) (Vernon Supp. 2001). The definition of“governmental body” also includes certain nonprofit water supply corporations, see id. 8 551.001(3)(I). Finally, as the result of amendments to the Act in the last legislative session that will become effective September 1, 2001, the term “governmental body” will also include a local workforce development board,4 and “a nonprofit corporation that is eligible to receive funds under the federal community services block grant program and that is authorized by this state to serve ageographic area of this state.“5
Only entities that fall within the definition of “governmental body” are subject to the Act. The hospital district board of managers is a governmental body within the meaning of subsection (H). See Tex. Att’y Gen. Op. No. H-238 (1974) (concluding that the governing body ofthe Harris County Hospital District was a special district subject to the Open Meetings Act); Tex. Att’y Gen. LO-97-O 17(1997). This office has held on several occasions that nonprofit corporations established pursuant to the Texas Non-Profit Corporation Act, that assist local entities pursuant to contract, and that are not delegated governmental authority, are not subject to the Open Meetings Act. See, e.g., Tex. Att’y Gen. Op. No. JC-0327 (2001) (Bryan-College Station Economic Development Corporation not subject to the Open Meetings Act); Tex. Att’y Gen. LO-94-090 (1994) (concluding that Moore County Development, Inc., a nonprofit corporation organized under Texas Non-Profit Corporation Act, was not aspecial district within meaning ofOpen Meetings Act). Thus, assuming that MetroWest has not been delegated governmental authority, we do not believe that its board is
a governmental body within the literal language ofthe Open Meetings Act.

As noted above, asofSeptember 1,200 1,the definition of “governmental body” will extend to a local workforce development boardy6 and “a nonprofit corporation that is eligible to receive funds under the federal community services block grant program and that is authorized by this state to serve ageographic area ofthis state.“7 The former amendment extends the Act to local workforce development boards created under the Workforce and Economic Competitiveness Act, chapter 2308 ofthe Government Code. See Tex. H.B. 936’77th Leg., R.S., ch. 1004,2001 Tex. Sess. Law Serv. (eff. 9/O1

/O1);TEX.GOV’T CODE ANN.92308.253 (Vernon 2000) (providing forthe creation oflocal workforce development board). The HMO does not appear to be a local workforce development board. See id. Furthermore, the latter amendment extends the Act to nonprofit corporations that receive federal community services block grants authorized by the federal Community Services Block Grant Act, 42U.S.C. ch. 106 (1994 & Supp. IV), and administered by the community affairs division ofthe Texas Department ofHousing and Community Affairs, see, e.g., TEX. GOV’T CODE ANN. ch. 2306, subch. E (Vernon 2000) (community affairs division of the Texas Department of

4Tex. H.B. 936, Act of May 24,77th Leg., R.S., ch. 1004,s 1,sec. 551.001(3)(I), 2001 Tex. Sess. Law Serv. (eff. 9/01/01).

‘Tex. H.B. 371, Act ofMay 17,77th Leg., R.S., ch. 633, 0 1, sec. 551.001(3)(J), 2001 Tex. Sess. Law Serv. (eff. 9/01/01).

6Tex. H.B. 936, Act of May 24,77th Leg., R.S., ch. 1004,§ 1,sec. 551.001(3)(I), 2001 Tex. Sess. Law Serv. (eff. 9/01/01).

‘Tex. H.B. 371, Act of May 17,77th Leg., R.S., ch. 633, $ 1, sec. 551.001(3)(J), 2001 Tex. Sess. Law Serv. (eff. 9/01/01).The Honorable Tim Curry - Page 9 (JC-0407)

Housing and Community Affairs); 10TEX.ADMIN. CODE 85.1 (2001) (Tex. Dep’t ofHousing and Community Affairs, Community Services Block Grant) (assurances for community services block grant program).’ The HMO does not appear to receive federal community services block grants.9

This not the end of our analysis, however, because although the HMO board may not be a “governmental body” under section 551.OO 1,the Act will apply to meetings ofthe Metro West board of directors if the three members of the Hospital District board of managers who serve on the MetroWest board function as a subcommittee of the board of managers. The Act defines a “meeting” inpart as“adeliberation between aquorum ofagovernmental body, orbetween aquorum of a governmental body and another person, during which public business or public policy over which the governmental body has supervision or control is discussed or considered.” TEX.GOV’T CODE ANN. 8551.001(4)(A) (Vemon Supp. 2000); see also id. 8551.001(2) (defining “deliberation” tomean “averbal exchange during ameeting between aquorum ofagovernmental body, orbetween
aquorum of a governmental body and another person, concerning an issue within thejurisdiction of the governmental body or any public business”). Generally, meetings of less than a quorum of
agovernmental body are not subject to the Act. While three members do not constitute a quorum of the eleven-member board ofmanagers, see id. 855l.OOl(6) (defining “quorum” as “a majority of a governmental body, unless defined differently by applicable law or rule or the charter of the governmental body”), the Act may apply to meetings ofless than aquorum of agovernmental body in certain circumstances. This office has repeatedly construed the Act to apply to subcommittees of less than a quorum of a governmental body if, for example, the subcommittee supervises or controls business of the governmental body or makes recommendations that are merely rubber-stamped by the governmental body. See, e.g., Tex. Att’y Gen. Op. Nos. JC-0060 (1999)’ JM-1072 (1989), H-772 (1976),H-238 (1974)’ H-3 (1973).
Thus, the group ofthree board ofmanagers members may constitute a governmental body in and of itself if the board of managers has delegated to the group any authority over Hospital District business or rubber-stamps the group’s recommendations regarding Hospital District business. See Tex. Att’y Gen. Op. Nos. JC-203 (2000), H-238 (1974) (standing committees composed ofmembers ofthe hospital district board ofmanagers that have been delegated authority to deliberate and make recommendations in a particular area of hospital district business must comply with the notice and accessibility provisions of the Open Meetings Act). In that case, meetings of the MetroWest board at which the board of managers members consider Hospital District business within that group’s control will be subject to the Act.

*SeeTex. H.B. 371,77th Leg., R.S., ch. 633,200l Tex. Sess. Law Serv. (amending Government Code section 551 .OOl); Hearings on Tex. H.B. 371 Before the House Comm. on State Afiirs, 77th Leg., R.S. (Mar. 19, 2001) (testimony of author of House Bill 371, Rep. Bob Glaze) (audio tape available from House Video/Audio Services); Debate on Tex. H.B. 371 on the Floor of the House, 77th Leg., R.S. (Apr. 25,200l) (audio tape available from House Video/Audio Services) (“This bill only applies tothose organizations that are certified by the state to serve acertain area and that also meet the requirements to receive funding from the community service block grant. This is administered by the Texas Department of Community and Housing Development.“) (statement of author of House Bill 371, Rep. Bob Glaze).

Tex. Dep’t of Housing and Community Affairs list of CSBG recipients, available at http://www.tdhca.state.tx.us/pdf/ca/con-list.pdf.The Honorable Tim Curry - Page 10 (JC-0407)

Finally, we urge the Hospital District and MetroWest to consider the policy implications of amending the HMO’s articles of incorporation and bylaws to remove the Open Meetings Act safeguard. There appears to be a distinct possibility that Hospital District business could be conducted by the HMO board behind closed doors. Although this will be the case regardless ofthe size of the HMO board, the opportunity for meetings of the HMO board to devolve into meetings of a subcommittee of the Hospital District board of managers will be heightened by the fact that members of the board of managers constitute a majority of the HMO’s five-member board. Furthermore, there is at least the appearance that the HMO is a mere alter ego of the Hospital District. It seems the more prudent course would be for the HMO board to comply with the Open Meetings Act, even ifthe letter of the law does not require it to do so.

In sum, the Hospital District board ofmanagers may appoint its own members to the board of the HMO but members ofthe Hospital District board ofmanagers who also serve on the HMO board must comply with chapter 171ofthe Local Government Code whenever participating in avote
or decision involving the HMO. Furthermore, in participating in HMO matters involving the interests ofboth entities, HMO board members who are also members ofthe board ofmanagers must faithfully carry out their duty to the HMO, consulting and complying with the standards and requirements of the Texas Non-Profit Corporation Act. The group of Hospital District board of managers members who serve on the HMO board may constitute a governmental body in and of itself if the board of managers has delegated to the group any authority over Hospital District business orrubber-stamps the group’s recommendations regarding Hospital District business. Inthat case, meetings of the HMO board at which the board of managers members consider Hospital District business within that group’s control will be subject to the Open Meetings Act.The Honorable Tim Curry - Page 11 (JC-0407)

SUMMARY

The Tarrant County Hospital District board ofmanagers may appoint its own members to the board of the health maintenance organization (“HMO”) established by the Hospital District, but members ofthe board ofmanagers who also serve onthe HMO board must comply with chapter 171 of the Local Government Code whenever participating in a Hospital District vote or decision involving the HMO. Furthertnore, in participating in HMO matters involving the interests ofboth entities, HMO board members who are also members ofthe board ofmanagers must faithfully carry out their duty to the HMO, consulting and complying with the standards and requirements of the Texas Non-Profit Corporation Act. Although the HMO board isnot agovernmental body subject to the Open Meetings Act, the group of Hospital District board of managers members who serve on the HMO board may constitute a governmental body in and of itself if the board of managers has delegated to the group any authority over Hospital District business
or rubber-stamps the group’s recommendations regarding Hospital District business. In that case, meetings ofthe HMO board atwhich the board of managers members consider Hospital District business within that group’s control will be subject to the Open Meetings Act.

N CORNYN Attorney General of Texas

HOWARD G. BALDWIN, JR. First Assistant Attorney General

NANCY FULLER Deputy Attorney General - General Counsel

SUSAN D. GUSKY Chair, Opinion Committee
Mary R. Crouter Assistant Attorney General, Opinion Committee