Read the full article on Nebraska Examiner
LINCOLN — This week, the University of Nebraska and Clarkson Regional Health Services questioned the constitutionality of a bill to require legislative approval of any deal over the future ownership of Nebraska Medicine.
The Legislature’s Executive Board considered Legislative Bill 1125, from State Sen. Tony Sorrentino of the Elkhorn area, at a hearing Thursday. No one spoke in support of the bill. NU, in person and in a fiscal analysis, and Clarkson, in a letter, argued the proposal could run afoul of the Nebraska Constitution.
“Accountability is part of the job, but LB 1125 would change a governance structure that has served Nebraska well for generations,” testified Matt Blomstedt, a former state education commissioner and NU’s associate vice president for government relations.
‘Not an abstract policy exercise’
Sorrentino’s bill would require legislative approval before NU could acquire a controlling or sole interest in any hospital or health care facility valued at more than $100 million.
LB 1125 also would prohibit any hospital or academic health center that serves as the primary affiliate of UNMC — in this case, Clarkson — from selling all or part of its share to an out-of-state or for-profit entity, unless the state attorney general, in consultation with the NU Board of Regents, determines such changes are “in the public interest.”
Nebraska Medicine is the hospital, clinical and medical services partner to the University of Nebraska Medical Center. The nonprofit has been split 50-50 between its parent organizations, NU and Clarkson, since 1997.
The targeted transaction involves NU seeking to buy out Clarkson’s 50% share of the nonprofit ($500 million) and purchase related properties ($300 million). Clarkson approached NU about getting out of its ownership share in July 2024.
Clarkson, in return, has pledged to donate $200 million back NU for its $2.19 billion “Project Health” to build up the next generation of health care.
“This bill is not an abstract policy exercise,” Sorrentino said Thursday. “It is a necessary response to a highly consequential — not controversial — transaction that stands to reshape our state’s health care landscape and the financial future of the university system.”
The senator, who said he had a “fairly extensive” background in mergers and acquisitions, said he could have made the bill more restrictive but felt it wasn’t appropriate or necessary to do so.
Board of Regents v. Exon
Among some questions of the deal that Sorrentino listed Thursday were whether it’s prudent to move forward with the $800 million deal, whether proper oversight has been exercised, whether tax dollars will ever be used for the deal, whether taxpayers are getting into the business of health care and where Clarkson College fits into the deal.
“This bill is not about a lack of trust of any individual or any organization associated with the University of Nebraska,” Sorrentino added. “Nothing could be further from the truth.”
Blomstedt said Nebraska did something “pretty special” when it incorporated NU more than 150 years ago in the Nebraska Constitution, choosing an elected board accountable to the people.
To any questions, Blomstedt said, “appropriate leaders will always be ready to address them.”
The Constitution empowers the regents with the “general governance” of NU. Blomsteadt said that includes academic direction, financial stewardship and oversight of capital investments. The Nebraska Supreme Court has similarly upheld NU’s governing power over legislative meddling in a 1977 case, Board of Regents v. then-Gov. Jim Exon.
While Blomstedt did not bring up that Supreme Court case, a fiscal analysis from NU’s chief financial officer did and said the constitutional concerns “may have multiple indeterminable fiscal impacts.” That suggests NU might fight to assert its constitutional authority.
A couple of state senators had similarly questioned LB 1125’s constitutionality under case law.
‘Targeted legislation’
NU and Clarkson first announced the deal Jan. 2, and the NU Board of Regents was set to meet Jan. 9. State Sen. Mike Jacobson of North Platte, an Exec Board member, expressed his appreciation to NU for delaying its vote by one week to give the Legislature more time to get more information.
On Jan. 15, regents unanimously voted to proceed with the transaction without requiring further board action. The deal is expected to be finalized by June 30.
Jacobson asked whether NU was opposed to more legislative involvement generally or if a different threshold would appease NU. Blomstedt said it’s any additional statutory compliance, which could make conversations on such transactions “messier.”
State Sen. Rob Clements of Elmwood asked whether the contract has been finalized. Blomstedt said he didn’t believe so. An NU spokesperson did not respond to a request to confirm.
In a Wednesday letter against the bill, Dr. Bill Lydiatt, CEO of Clarkson, described LB 1125 as “targeted legislation” that is “so narrowly tailored to a specific set of circumstances” it effectively only applies to one transaction: Nebraska Medicine. He said that could make it “impermissible special legislation.”
“While the Nebraska Legislature plays a vital role in shaping public policy for the State of Nebraska, this bill targets a transaction already in process, rather than establishing prospective policy,” Lydiatt wrote.
Lydiatt multiple times referred to the transaction as “pending” and said the bill risks duplicating or overriding established processes or setting up a “problematic precedent of legislative interference.” He said that could discourage future partnerships and deals with NU.
The Clarkson CEO said NU and Clarkson had also asked the Nebraska Attorney General’s Office to review the deal in November, which Lydiatt said found no objections to the deal.
Clarkson College impacts
While no one supported the bill in person, nearly 40 Nebraskans had submitted letters in favor of the legislation. Four letters encouraged the Exec Board to oppose the bill.
Among supporting letters, the comments generally argued the state didn’t need more government in health care, that the deal needed more scrutiny and that LB 1125 could prevent a “potential misuse of public funds.”
Andreia Nebel, president of Clarkson College, was the only other in-person testifier, in a neutral capacity. She said public comments that NU might sunset the college in five years are “inaccurate and insensitive,” and that the “chaos” since the deal was announced has been “disruptive.”
“Although there have been promises publicly made about no changes in operations to the hospital or health system, with all the changes that have occurred in leadership and the number of entities involved already, it seems impossible for there to be no changes or detrimental impacts,” Nebel testified.
The Exec Board took no immediate action on Sorrentino’s bill.
SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
