Contract details between HMO and public hospital must be disclosed

NORTH CAROLINA–The price terms of a contract between an HMO and a public hospital must be released to The Wilmington Morning Star newspaper, a state court of appeals in Raleigh ruled in late January.

The appeals court held that the contract terms were public records and not subject to disclosure exemptions. The court added that while its decision may provide some competitive disadvantage to PHP, “[d]isclosure of prices charged the Government is the cost of doing business with the Government.”

In January 1995, The Wilmington Morning Star requested a complete copy of an agreement between the New Hanover Regional Medical Center and PHP, a managed health care organization. The Medical Center quickly supplied the newspaper with a copy of the agreement, but in accordance with confidentiality provisions of its agreement with PHP did not include the pricing information in the contract. PHP claimed the pricing information was a trade secret, that would put PHP at competitive disadvantage if disclosed.

In May 1995, frustrated in its efforts to obtain the requested information from the Medical Center, The Morning Star filed suit in Superior Court in Wilmington to compel the release of the price terms.

The Superior Court granted summary judgment in favor of The Morning Star in March 1996 and ordered the immediate release of the pricing information, but the medical center immediately appealed.

In affirming the lower court’s decision, the appeals court held that even though state law provides a disclosure exemption for “competitive health care information,” the price terms did not qualify because the exemption only applies to contracts with private hospitals.

In addition, the appeals court held that the price terms were not trade secrets and not exempt from disclosure under the Public Records Act. The court found that the definition of “trade secret” under the Act required three elements: the information must be owned by a “private person,” the information must have added commercial value because it is not known to competitors, and the owner of the information must have taken reasonable steps to keep the information secret. Here, the court said the pricing information was not information owned by a private person. Rather, it was a negotiated term of a contract that belonged to both PHP and the Medical Center. Thus, the court held, the exemption did not apply. (Wilmington Star-News v. New Hanover Regional Medical Center; Media Counsel: Mark Prak, Raleigh)