I’ve got nothing personal against Progressive Eldercare Services Inc. My mother was a patient in one of the dozens of nursing homes PES operates in Arkansas when she died in February, and my family and I sincerely appreciate the quality care she received.
However, until I read Senior Editor Mark Friedman’s article about PES in last week’s issue, I had no idea that the facility where my mother lived — like the other PES properties — had been restructured as a nonprofit. It was a for-profit business when she arrived, but in 2018 it had been converted to a nonprofit in a way that was absolutely transparent. That’s because the nonprofit entities created to own these nursing homes then buy all aspects of the care they provide from for-profit entities related to PES.
This is an Opinion
I don’t know whether the family that sued PES over care provided in its Lake Village facility in 2013 has a legitimate case. I haven’t read the complaint and wouldn’t be in a position to evaluate the facts if I did. But PES’ claim that the facility is somehow immune from civil liability because it, too, had been structured as a nonprofit just doesn’t pass the smell test.
So far, this use of the “charitable immunity” defense also isn’t passing the legal test. According to Friedman’s reporting, trial-level judges and appeals courts have repeatedly refused to grant automatic immunity to nonprofit corporations created specifically to contract with related for-profit companies.
In 2016, Arkansas Court of Appeals Judge David Glover, in a concurring opinion in a case involving a PES facility, wrote, “It is a legal fiction that any nursing home today is entitled to charitable immunity simply because its legal form is structured to enable profits to be siphoned off to subsidiary for-profit companies — owned by these same people who own the ‘charitable’ nursing homes.”
PES says it uses the nonprofit structure for a different and entirely altruistic purpose: to effect cultural change in the nursing homes it operates. Again, I am a satisfied family member, but I detected no change in the culture after the conversion, so this explanation rings hollow to me. But even if I’m just not observant enough, changing the culture does not require a change in corporate structure — nor does changing to a nonprofit structure require using charitable immunity as a defense.
But PES keeps using a charitable immunity defense, or trying to. Mark Dossett of Fayetteville, a Kutak Rock attorney who represents PES, says he keeps arguing for charitable immunity because “that’s the law that exists now, and we meet the requirement of it.”
Something’s not right here and perhaps Dossett hit on it. Arkansas, according to John Colombo, who teaches tax law at the University of Illinois College of Law, is one of the few states in which charitable immunity is still available as a defense. If we changed our law to eliminate the temptation to employ a legal fiction that has failed in court after court, perhaps these cases could be streamlined. PES could effect all the cultural changes it wants without paying lawyers to make arguments that are going to fail, and plaintiffs can get on with proving their claims.
Speaking of laws that need to be changed, I recommend Robert Smith’s commentary in this week's issue about the legal limbo in which marijuana-related businesses and federally insured banks remain. Most states have legalized the use of cannabis in some fashion, but the entire industry is illegal under federal law.
Sen. Elizabeth Warren’s bill to provide a safe harbor from federal drug laws for anyone who is complying with state laws seems to me to be the simplest treatment with the fewest side effects. Even members of Congress who aren’t comfortable voting to legalize marijuana can surely appreciate the conundrum and respect states as “laboratories of democracy.”
It would still be only a workaround. A couple of years ago, George Makris, the former beer distributor who is CEO of Simmons First National Corp., suggested that Congress should simply turn marijuana regulation over to the states the way the 21st Amendment did with alcohol. That seems like an ideal and permanent solution; naturally, it doesn’t even seem to be under consideration.
Email Gwen Moritz, editor of Arkansas Business, at GMoritz@ABPG.com and follow her on Twitter at @gwenmoritz.