This past weekend I was lucky enough to catch the performance of King Lear with Glenda Jackson as the mad king. It was a magnificent production and if you have the chance to see, I would certainly urge you to do so. The production had many interesting features and interpretations which seemed to be great entrees into several compliance topics. Therefore, inspired by octogenarian Jackson and her performance, I am using King Lear as a deep dive into several compliance topics this week. Today, I want to discuss how this production changed the focus of the play, away from the madness of the king to the actions of the three daughters.
Perhaps it was my perception of the play or perhaps it was the director’s intention but the focus in the first half of the play was clearly on the daughters and their families. Both Goneril and Regan played much more prominent roles throughout the first scene and their joint liaisons with Edmund, later the Earl of Gloucester, were key components of this production. Moreover, their husbands, the Duke of Cornwall and the Duke of Albany, also played prominent roles. The Duke of Cornwall, for instance his role in this production was more than the traditional highlight for him, which is the blinding of the original Earl of Gloucester. (Even in this production it still elicited gasps from the audience.)
Even after the intermission, where some of the most powerful scenes in all of Shakespeare playout, including the blinded Earl of Gloucester and the mad Lear wandering the moor, this production held a distinct focus on Lear’s daughters and their families, adding in the complexity of Edmund, the new Earl of Gloucester, having an affair with Goneril while secretly pledged to wed Regan.
This change in the focus of the play informs today’s review of the use of an independent integrity monitor not for a regulatory or enforcement purpose, but in connection with significant business transactions. This is based upon a five-part podcast series I am presenting this week, with Jesse Caplan, Managing Director at Affiliated Monitors, Inc. (AMI), the sponsor of the podcast series.
We began by consider a plethora of business activities; acquisitions, mergers, non-profit conversions, and even capital improvements which are subject to regulatory oversight and scrutiny that may be more intense than in other industries. For example, major capital improvements to hospitals are often subject to a state’s Certificate of Need (CON) or a Determination of Need (DON) approval. Additionally, not-for-profit hospitals which seek to convert to for-profit status, often as part of a merger or acquisition (M&A) transaction, are likely to face scrutiny and require approval by those agencies that regulate and oversee both their licensing and charities functions. This oversight is often by two distinct state agencies, most usually a state department of health for healthcare oversight and a state Attorney General’s Office for charitable concerns. M&A of a hospital, health insurance company, or even a physician practice can also be subject to antitrust scrutiny, by state authorities like the Attorney General’s Offices and possibly federal review by the Department of Justice (DOJ) or the Federal Trade Commission (FTC).
Caplan emphasized that in each of these healthcare transactions, the government agencies involved are not seeking to address compliance violations or to take disciplinary action. However, these transactions are likely to impact the structure and dynamics of the local healthcare market, and the state regulators have both the authority and the objective of ensuring those impacts are a net positive for the local healthcare marketplace by ensuring that the transaction improves the quality of and increases access to healthcare, most particularly for vulnerable and under-served communities, and does so more efficiently.
To meet this burden and to get the approvals required, the healthcare organizations entering into the transaction often offer up representations and concessions about actions, investments and improvements they will agree to take and engage in going forward, actions designed to address the state’s concerns and objectives. Moreover, the state regulators themselves will often seek to impose additional conditions or requirements on the transacting healthcare organizations to address the state’s public policy objectives.
Whenever you have conditions being imposed or being offered as a prerequisite of approval of a healthcare transaction, there is a need to have independent monitoring of whether those conditions are being effectively implemented and sustained. It is always possible that the government agencies can do the monitoring themselves, but may require resources that are not readily available.  This has led regulators and healthcare organizations to agree to an independent integrity monitoring firm to oversee that the conditions, investments and improvements are being timely and effectively implemented.
We next turned to some examples where organizations and government regulators have jointly agreed to use an independent firm to monitor implementation and compliance with conditions of a healthcare transactions. Caplan provided two examples, both of which converted not-for-profit hospitals to for-profit companies as part of major acquisitions. The state Attorney General’s Office was charged with regulating public charities registered with the state. When the not-for-profit healthcare organizations sought to convert to for-profit, the Attorney General’s Office imposed conditions to ensure the charitable assets of the original entities were appropriately used for charitable purposes; that there were no impermissible conflicts of interest, that the entities maintained sufficient local representation and control, and that the new entity followed through on capital investments.  The state Attorney General’s Office, the healthcare organizations and the independent integrity monitor entered into a three-way agreement that provided ongoing monitoring of these conditions. The monitor reported the status and progress of implementation of those conditions to the Attorney General’s Office, but the costs were borne by the healthcare organization.
Caplan also related other areas where regulatory agencies, including the DOJ and FTC, are using independent integrity monitors with healthcare organizations in their review and approval of mergers requiring divestitures of certain assets. These two agencies are relying on independent monitors to make sure that the divestitures are accomplished consistent with the agreements approving the mergers, and in ways which do not otherwise compromise competition.
I hope you will continue to join me this week during my exploration of this most innovate and unique production of King Learas well as the story of one of Shakespeare’s greatest tragedies to introduce a compliance topic each day this week. Join me tomorrow where I consider how Jackson as King Lear added a new level of complexity and nuance to my interpretation of the play.
Join Jesse Caplan and myself for our 5-part exploration of emerging issues in healthcare compliance and monitoring. The podcast will be available on the FCPA Compliance Report, iTunes, JDSupra, Panoply, YouTube, Spotifyand Corporate Compliance Insights.
This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.
© Thomas R. Fox, 2019