Prime your bylaws ahead of a merger
In today’s culture of consolidation, medical staff offices should ready their bylaws for a merger long before a deal is underway, or even a blip on the executive team’s strategic radar.
Elizabeth “Libby” Snelson, JD, legal counsel to the medical staff, based in St. Paul, Minnesota, advises MSPs to ensure current bylaws address mergers, and that this discussion complies with any applicable state laws.
She also recommends outfitting bylaws with a successor-in-interest clause, which can ensure that the hospital’s bylaws survive—and render silent—another facility’s governance document in the event of a merger. This provision can be especially helpful for medical staffs and MSPs who aren’t given much advance warning of a deal.
Successor-in-interest provisions are regarded as a contract staple in a variety of business contexts and industries. They are also the subject of a long-standing AMA policy, which recommends their inclusion in bylaws to “protect medical staffs from a hospital ignoring the medical staff bylaws, and establishing new medical staff bylaws to apply post-merger, acquisition, affiliation, or consolidation” (AMA Policy Compendium H-235.991).
Despite this recognition, successor-in-interest clauses are rare in the medical staff governance arena, meaning organizations that incorporate one into their own bylaws aren’t likely to run into a competing provision in the event of a merger or acquisition.
While the reason for the clause’s scarcity in medical staff governance remains unclear, Snelson says administration may fear that its use will deter potential business partners, or, in the few states where bylaws aren’t considered contracts, provide courts with more fuel to uphold them as binding legal documents.
However, Snelson maintains that the clause’s wide-spread usage in other sectors—and power to support medical staff stability during organizational changes—make it a worthwhile and fairly innocuous inclusion in bylaws.