Controversial County Deal with Hospital for $50,000 Fee Raises Legal Questions

Gazette Senior Writer

An unusual county contract set up to funnel taxpayer money into the Martha's Vineyard Hospital continued to cause shock waves this week as local officials tried to sort out the origin of a deal to pay the county a $50,000 fee to administer the contract.

Yesterday, West Tisbury town counsel Ronald H. Rappaport questioned whether the county has the right to charge the fee.

"I question the county's right to make a separate arrangement with the hospital for payment of administrative services," Mr. Rappaport wrote in a letter to the West Tisbury selectmen.

The Dukes County Commission is expected to take up the jumbled matter of the fee at its regular meeting Wednesday night.

The $500,000 in taxpayer money is intended to help defray the cost of emergency services at the hospital.

An agreement signed by the selectmen in all six towns on the Vineyard last year specified that the towns would be billed for any administrative fees in connection with the contract.

But for reasons that are still unclear, at some point a plan to charge the towns an administrative fee was replaced by a plan to have the hospital pay the county a hefty fee.

The hospital has now agreed to pay the county $49,500 to administer a contract for $495,000.

The signed agreement for the $49,500 fee is dated July 27. But this agreement does not appear in the earlier inter-municipal agreement signed by the towns; it does not appear in the main contract between the county and the hospital (also signed on July 27) and it did not appear in the request for proposals (RFP) that went out before the contract was executed.

It remains unclear when the decision was made to change over from a plan to charge an administrative fee to the towns to a plan to have the hospital pay the fee.

"I don't know. I don't know the date," said hospital chief executive officer Kevin Burchill yesterday. "This is the process that the representatives of the county came up with. As I understand it, it's SOP [standard operating procedure]."

County manager Carol Borer could not be reached for comment yesterday. Last week Ms. Borer said the 10 per cent fee is similar to fees charged by the county to administer other grants and contracts.

County and hospital officials could not agree last week on the sequence of events surrounding the fee.

A special county subcommittee was established to manage the contract with the hospital a year ago, but the subcommittee only kept minutes of its meetings for four months. It is unclear whether this is a violation of the Massachusetts open meeting law.

The fee agreement between the county and the hospital has not been part of any public discussion in the last two years surrounding the complicated project to collect public funds for use by the hospital.

The idea of using tax money to support the hospital was first conceived by hospital trustees about two years ago.

The concept was later taken up by county officials, after one county official who was also a trustee for the hospital disclosed that he may have violated the state conflict of interest law. County commissioner Leonard Jason Jr. later resigned from the hospital board of trustees.

State law prohibits using public funds for a private institution except for charity care.

The tax subsidy for the hospital was eventually structured by adopting the complicated intermunicipal agreement among the six towns. The agreement was a necessary legal device to get around what is known as the anti-aid amendment to the state constitution.

County officials consulted attorneys at Ropes & Gray in Boston, who later drafted the agreement.

A series of letters from lawyers at the time reveals that Ronald H. Rappaport, a Vineyard attorney who is town counsel to five of the six Vineyard towns, was skeptical about the plan.

In a letter he wrote to the West Tisbury selectmen in February 2000, responding to their request to examine the proposal before it went to the town meeting floor, Mr. Rappaport cited the anti-aid amendment.

"Public funds cannot be given directly to a private hospital. If this is simply an effort to funnel funds to Martha's Vineyard Hospital, it would run afoul of the anti-aid amendment," Mr. Rappaport wrote.

The intermunicipal agreement written by attorneys at Ropes & Gray is carefully crafted to set up a funding contract for the procurement of emergency services.

The hospital emergency room is not operated as a separate entity and the hospital does not keep separate books for the emergency room, although the contract adopted between the county and the hospital is accompanied by detailed reporting requirements for emergency services.

The intermunicipal agreement was approved by all six towns in a two-step process last year that ended with voters in each town approving their share of the $500,000 funding.

After town meeting approval, the county put out an RFP. As expected, the hospital was the sole bidder, coming in with a bid of $495,000. In July the county commission voted to authorize the county manager to execute a contract with the hospital.

Several versions of the intermunicipal agreement were circulated last year, but the final version included language specifying that any administrative fee would be paid by the towns.

"The county will charge the participating towns fees for administering this agreement. Fees will be enumerated and billed as direct and indirect costs," the intermunicipal agreement states.

Last week, the West Tisbury selectman asked Mr. Rappaport to examine the issue of the fee.

In his letter to the selectmen yesterday, Mr. Rappaport took special note of the conflict between the language in the intermunicipal agreement and the agreement between the hospital and the county.

"I do not know the circumstances surrounding the execution of this agreement, or whether the [county subcommittee] agreed to this arrangement. However, this separate arrangement is inconsistent with the terms of the intermunicipal agreement," Mr. Rappaport wrote.

Mr. Rappaport questioned whether the county had the right to impose the fee, and he suggested that the entire matter be sent back to Ropes & Gray for an opinion.

Mr. Rappaport also noted that the town was billed last December by the county for $499, its proportionate share of $2,994 in costs associated with the intermunicipal agreement.

Following the meeting yesterday, West Tisbury selectman John Alley, who is also a county commissioner, said the board will forward Mr. Rappaport's letter to the county manager.

"We reserve the right to make comments at the Wednesday night meeting of the county commission," Mr. Alley said. "My personal comment: I wasn't a county commissioner at the time, but I knew it was in the intermunicipal agreement that the towns would pay a fee.

"But if it is not enumerated in the actual contract, then the county could very well be in a position where it cannot collect normal administrative expenses. This all should be resolved on Wednesday night."