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The Commissioner had jurisdiction under the enabling legislation to review and rule upon the proposed consolidation of Blue Shield and BCWP. The enabling statutes establish the broad powers of the Commissioner to oversee and regulate virtually all aspects of the operations of Blue Shield and BCWP. 40 Pa. C.S.A. SS 6101, et @.; 40 Pa. C.S.A. SS 6301, et seq., The silence of the statute on the particular issue of a consolidation is explained, not by an intent of the legislature to allow such a fundamental change to go forward without any regulatory oversight, but by the intent of the legislature not to permit such consolida-tion at all. The Commissioner erred in concluding that she had no jurisdiction over the consolidation.
There is no provision in the enabling legislation that permits a single corporation to operate both a hospital plan and a health service plan. Unlike the statutes of other states, which expressly permit dual licensure, the Pennsylvania statutes make no provision for consolidation. To the contrary, the legislature enacted two separate statutes, with distinct provisions, and with no provision to enable a single corporation to operate both plans. Despite numerous other amendments over the years, the General Assembly has never modified this aspect of the statutory scheme. The Consolidating Companies may not exceed the authority specifically granted by the enabling acts. The Commissioner erred in concluding, as a matter of law, that dual licensure was permitted.
The Commissioner also erred in concluding, as a matter of law, that the certificates of authority of Blue Shield and BCWP passed automatically, by operation of law, to Highmark upon consolidation. Highmark is a new not-for-profit corporation, created by filing articles of incorporation in December, 1996. No corporation may commence to operate a health service plan or professional health service plan until it has received, from the Insurance Department, a certificate of authority, issued only after the Department has conducted the full and public investigation specifically required by statute. 40 Pa. C.S.A. SS SS 6304, 6308, 6102, 6104. There is no statutory authority which permits the transfer of a certificate of authority from one entity to another. There is no authority for the Commissioner's position that a certificate of authority is a franchise right. The Commissioner erred as a matter of law in allowing Highmark to commence business without completing the application process for a certificate of authority.
The Commissioner attached to her approval of the bylaws of Highmark a variety of conditions. The action taken by the Commissioner in this regard amounts to the attachment of conditions to Highmark's operations in the Commonwealth. While the Commissioner is authorized to attach any appropriate conditions to a certificate of authority, and therefore had it within her power to do so here, she is required first to conduct an exhaustive and public approval process, including a public hearing and such inquiries, audits and other investigations as may be appropriate. 40 Pa. C.S.A. SS 6102(e), 40 Pa. C.S.A. SS 6304(e). The Commissioner erred in failing to follow those procedures in this matter.
Furthermore, the conditions which the Commissioner did attach to Highmark's operations were inadequate. Specifically, she has failed to take adequate steps to assure that the social mission of Blue Shield and BCWP will be protected. The conditions she did impose upon Highmark with respect to the social mission were imposed after private meetings with representatives of the Consolidating Companies, shortly before the Commissioner issued her Decision and Order, and without the opportunity for public comment on the arguments and data presented by the Consolidating Companies to the Commissioner. The public hearing process essential to the issuance of a certificate of authority, was improperly circumvented with serious results.
In reviewing the change in control of the subsidiaries of Blue Shield and BCWP, the Commissioner had a statutory obligation to consider the anticompetitive effects of the transfer of control, and to withhold her consent if the effect of the change in control (i.e., that transfer of ownership of the various subsidiaries to the new consolidated entity, Highmark) would be to lessen competition in the insurance industry in the Commonwealth. 40 P.S. SS 991.1402. That analysis necessarily includes consideration of the consolidation of the parent corporations which, together and acting through their subsidiaries, present, at a minimum, a very serious competitive force in the marketplace. The Commissioner erred, as a matter of law, in limiting her analysis to the incremental effect of the change in control of the subsidiaries. Further, her findings of fact that (1) the relevant market was not health care financing, but the respective segments of Financing of hospital care and financing of physician care, and (2) the relevant geographic market was not western Pennsylvania, but the entire Commonwealth, are not supported by substantial evidence.
The Commissioner was also required by statute to determine that the bylaws of Highmark met statutory standards, including procedures for the nomination and election or appointment of the directors of the corporation. 40 Pa. C.S.A. SS 6328(b)(2),(5). She had the power, but not the obligation, to conduct a hearing on issues related to changes in the bylaws and the power, following a hearing, to order appropriate changes. 40 Pa. C.S.A. SS 6328(b)(6). By failing fully to examine the issues of corporate governance and failing to make specific findings regarding the protection of the interests of subscribers, the Commissioner has failed to fulfill her statutory duty.
The question of whether the Commissioner's actions constitute an appealable adjudication was raised by Highmark in a preliminary motion. The Court (Leadbetter, J.) has properly rejected Highmark's argument that the absence of an adversarial hearing renders the Commissioner's Decision and Order non-reviewable on the theory that there has been no...adjudication." Judge Leadbetter referred to the merits panel (now the court en banc) the question whether the record is adequate for purposes of appellate review -- that is, whether the adjudication is a valid one. The certified record of the proceedings before the Commission, while not including all documents which were presented to the Commissioner, is sufficient to allow this Court to consider the legal and factual issues raised by the Petition for Review. In the event this Court finds the record inadequate, however, the Commissioner's adjudication must be held to have been invalid.
A. The Commissioner Had Jurisdiction Under the Hospital Plan Act and the Health Services Plan Act To Review the Proposed Consolidation.
The nonprofit hospital plan operated by BCWP and the nonprofit health services plan operated by Blue Shield were authorized under statutes enacted originally in 1937 and 19-')9, respectively, for the purpose of ensuring that all Pennsylvanians, including persons of low income, would have access to hospitalization and related health services. Pa. Legis. Journal-House 2228-29 (April 6, 1937) (Exhibit B); 40 Pa. C.S.A. SS 6303. In pursuit of that goal, the General Assembly established comprehensive regulatory schemes under which the Department of Insurance has extensive authority. The Hospital Plan Act, 40 Pa. C.S.A. SS 6101 et seq., and the Health Services Plan Act, 40 Pa. C.S.A. SS 6301 et seq., placed in the hands of the Commissioner extensive and important powers to oversee and regulate virtually all aspects of the operations of Blue Shield and BCWP. Among other things, the Department, after a thorough and mandatory public investigation procedure, will grant or deny the certificate of authority which is required before such entities may operate in this Commonwealth. 40 Pa. C.S.A. SS 6102; 40 Pa. C.S.A. SS 6304. No entity, whether newly formed (as was Highmark) or preexisting, may operate either a health service plan or a hospital plan in this Commonwealth without the Commissioner's approval, by way of a certificate of authority, given after a public investigation. 40 Pa. C.S.A. SS 6104, 40 Pa. C.S.A. SS 6308.
The Commissioner's authority over these plans continues throughout their life. In addition to regulatory authority over rates and contracts, the Commissioner is charged with financial oversight of reserves and other matters. 40 Pa. C.S.A. SS SS 6124, 6125; 40 Pa. C.S.A. SS SS 6321, 6329. Another regulatory function of the Commissioner is particularly significant. No hospital plan corporation, such as BCWP, and no professional health service plan corporation, such as Blue Shield, may dissolve or liquidate without Departmental approval. 40 Pa. C.S.A. SS 6127; 40 Pa. C.S.A. SS 6334. Thus, from their formation to their termination, these corporations, formed for benevolent and charitable purposes and granted exemption from taxation, are subject to the regulatory oversight of the Commissioner.
Notwithstanding this clear regulatory framework, the Commissioner and Highmark argue that because the enabling authority did not specifically address the consolidation of a hospital plan with a professional health services plan, the lack of statutory authority should be interpreted to mean that Blue Shield and BCWP were permitted to consolidate, and to do so without regulatory approval. (Decision and Order at 40, @ 8). To the contrary, the Insurance Department unquestionably does have jurisdiction to review the consolidation. The fact that the statutory scheme does not provide for consolidation means that such consolidation is not permitted under any circumstances; it cannot mean that the companies may fundamentally change how health care is delivered and financed in Pennsylvania without regulatory review.
The effect of the consolidation of BCWP with Blue Shield is that the two predecessor corporations, and their separate statutory mandates, no longer exist. With no effort by the Commissioner to examine the relative financial positions of the two companies, their assets and liabilities have been commingled and the resources of one may be used to feed the creditors of the other. A healthy Blue Shield, financially supported for decades by its member physicians throughout the Commonwealth in furtherance of their charitable goals, may now be cannibalized to pay the debts. 'judgments and expenses of BCWP. And yet all of this, the Commissioner contends, is to be permitted to take place without the exertion of any review or oversight by her Department.
The Insurance Department's jurisdiction over the Plan of Consolidation was both clear and broad. The fact that the legislature provided that no entity may begin to operate a health service plan or hospital plan without the approval of the Commissioner established her jurisdiction. Highmark is a new entity, which seeks to operate such plans, and requires departmental approval. In point of fact, the Commissioner herself did, as an initial matter, recognize her authority over the proposed Consolidation and exerted her jurisdiction. On February 10, 1996 -- six weeks after the Consolidating Companies' initial filing -- the Commissioner published in the Pennsylvania Bulletin a Notice of "Application and Request for Approval of a Plan of Consolidation" and invited written comments on the proposed consolidation. (Supp. App. 1469a). The Commissioner was correct in her initial exercise of authority; her subsequent conclusion that she did not have jurisdiction to review the Consolidation was clearly erroneous.
B. Pennsylvania Law Does Not Permit a Single Entity to Operate as Both a Hospital Plan Corporation and Health Services Plan Corporation.
Blue Shield and BCWP have had a long existence in the Commonwealth as entities exempt, not only from taxation, but from the broad array of statutory and regulatory controls (governing insurance companies doing business in the Commonwealth. They have been permitted to exist not as a matter of right, but because the Pennsylvania legislature, after careful 'consideration and in furtherance of its goal of ensuring that residents of the Commonwealth would have access to hospitalization and related health services, enacted the enabling legislation that permits hospital service plans and health service plans to operate, subject to certain conditions, in this Commonwealth. They may operate only within the parameters of their enabling legislation. Knecht v. Medical Service Assn. of Pa., 186 Pa. Super. 456, 460-61, 143 A.2d 820, 82-) (1958).
Nothing in the enabling legislation permits a single corporation to operate both a hospital plan and a health service plan. To the contrary, the statutory scheme established by the Pennsylvania legislature clearly distinguishes between the two types of plans and contemplates that they will be operated by separate entities. The legislature provided extensively for departmental review and approval of any creation, dissolution or liquidation of plans. 40 Pa. C.S.A. SS SS 6102, 6127; 40 Pa. C.S.A. SS SS 6304, 6334. The silence of the legislature on the question of consolidation is evidence that the legislature did not intend that there should be consolidation. [5] The Commissioner clearly erred in concluding that, in the absence of an express prohibition in the enabling legislation, Highmark could legally operate both a hospital plan and a professional health services plan.
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[5] The 1990 Amendments to the General Association Act, 15 P.S. SS 21205, require the Commissioner to approve any merger or consolidation of for-profit insurance companies. Those amendments, as part of the law generally applicable to insurance companies, do not extend to health service and hospital plans. Neither logic nor the enabling acts, however, permit the conclusion that the exclusion of such plans from the GAA Amendments was intended to allow the unfettered and unsupervised consolidation of such plans.
Neither does the general nonprofit law, properly read, provide authority for such a consolidation. Highmark has argued that because the nonprofit law permits two nonprofits to consolidate, the consolidation of these two nonprofits is permitted by law. But the nonprofit law also provides that, upon a consolidation of two nonprofits, the new corporation "shall not thereby acquire authority to engage in any business or exercise any right which a corporation may not be incorporated ... to engage in or exercise." 15 Pa. C.S.A. SS 5929(a). Thus, the nonprofit law gives no authority beyond that specifically contemplated in the Health Services Plan Act and the Hospital Plan Corporation Act. Highmark cannot obtain, through a consolidation under the nonprofit law, what it could not have been independently created to do. Since those Acts do not authorize dual licensure, Highmark cannot rely on the provisions of the general nonprofit law to achieve dual licensure.
1. The Statutory Scheme.
The Hospital Plan Act and Health Services Plan Act provide for two different types of health service plans: hospital plans and professional health service plans. Hospital plans were first authorized in 1937, and are currently licensed and regulated under Chapter 61 of Title 40. 40 Pa. C.S.A. SS SS 6101 et @. BCWP was a hospital plan corporation, and, as such, was only permitted to cover hospital and related care. Id. at SS 6101. Professional health service plans were first authorized two years later in 1939, and are currently licensed and regulated under Chapter 63 of Title 40. 40 Pa. C.S.A. SS SS 6301 et @. Blue Shield was a professional health service plan, and, as such, was only authorized to cover professional and designated ancillary services. Id. at SS SS 6322(c), 6335.
The Hospital Plan Act defines a "Hospital plan corporation" as a "corporation not-for-profit engaged in the business of maintaining and operating a nonprofit hospital plan." 40 Pa. C.S.A. SS 6101. The Health Services Plan Act similarly defines a "General medical service corporation" as "[a] corporation not-for-profit engaged in the business of maintaining and operating a nonprofit professional health service plan." 40 Pa. C.S.A. SS 6302. Under section 6303 of the Health Services Plan Act, a professional health plan is to provide "adequate professional health services for the residents of this Commonwealth who are unable to provide such services for themselves ... and provide persons of over income with the limited professional health services benefits set forth in this chapter." Hospital benefits are not included within the definition of professional health service benefits. 40 Pa. C.S.A. SS 6302.
To make it absolutely clear that it did not intend for a Hospital Plan Corporation to be licensed as a Health Service Plan, section 63 01 of the Health Services Plan Act specifically excludes two other non-profit insuring entities, including hospital plan corporations:
(a) General rule. -- This chapter shall apply to every person engaged in the business of maintaining and operating a nonprofit health service plan and to every person who shall violate any provision of this chapter.
(b) Exceptions. -- Notwithstanding subsection (a) of this section, this chapter shall not apply to:
(1) Any hospital plan corporations as defined in section 6 1 01 of this title (relating to hospital plan corporation definitions).
(2) Any fraternal benefit society subject to regulation under Chapter 65 of this title (relating to fraternal benefit societies).
40 Pa. C.S.A. SS 63O1 (emphasis added).
A comprehensive review of the Hospital Plan Act and the Health Services Plan Act further supports the legislature's intention that Hospital Plan Corporations be legally distinct from Health Service Plan Corporations. Many provisions are similar. [6] However, there are numerous fundamental differences in the two acts which are inconsistent with the concept of a single, dually-licensed corporation. These include the provisions relating to governance, quality and access, social mission and regulation:
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[6] Both corporations must be non-profit. 40 Pa. C.S.A. SS 6101 (hospital); SS 6302 (professional). Both corporations are exempt from state and local taxes, 40 Pa. C.S.A. SS 6103(b) (hospital) and SS 6307(b) (professional), including the two percent premium tax on indemnity insurers. Finally, traditional insurance matters (reserves, premiums, subscriber contracts, etc.) are regulated in a similar fashion. 72 Pa. C.S.A. SS 7901-7906.
(1) Hospital plan corporations have no governance requirements other than those otherwise applicable to non-profit corporations. In contrast, professional health service plan corporations have additional governance requirements, which are designed to assure adequate professional and subscriber input and distinguish professional health service plans from other profit-driven health insurers. See 40 Pa. C.S.A. SS 6328.
(2) Regulation of the quality of care provided by hospital plan corporations is minimal. In contrast, professional health service plan corporations are subject to stringent quality and access safeguards, including prohibitions on the corporation interfering in a subscriber's choice of doctor or a doctor's plan of care. 40 Pa. C.S.A. SS 6324(b).
(3) While hospital plan corporations are statutorily mandated to be "benevolent and charitable" institutions, the statute imposes no separate social mission obligations. In contrast, professional health service corporations have specific social mission obligations, including open enrollment, continuity of coverage, and low-income programs. See 40 Pa. C.S.A. SS 6325. Indeed, the Act makes it clear that the legislature's sole purpose in authorizing professional health service corporations was to make affordable coverage of professional health services available to the public, especially low-income persons. Id. at SS 6303. (4) Hospital plan corporations are solely regulated by the Insurance Department. 40 Pa. C.S.A. SS 6124(a). In contrast, professional health service plan corporations are regulated by both the Insurance and Health Departments. See 40 Pa. C.S.A. SS SS 6304, 6307. The Insurance Department is responsible primarily for the financial stability and rate structure of an insurer. Id. at SS 6329. The Health Department's 'jurisdiction is focused on the additional quality, access, and social mission obligations imposed on professional health service plan corporations. See id. at SS 6332.
There is no provision in either the Hospital Plan Act or the Health Services Plan Act which contemplates a single corporation being dually licensed to offer both types of coverage. Indeed, such a provision was specifically rejected by the legislature when it first authorized professional health service plans. Prior to the passage of the original Medical Service Corporation Act, a Blue Cross plan lobbied for an amendment to the previously enacted initial Hospital Plan Corporation Act that would permit hospital plans also to cover professional health services. The legislature instead enacted the initial Professional Health Service Corporation Act which provides for a separate corporation to provide those services. William M. Angelos, A Legacy of Value: The Story of Pennsylvania Blue Shield 20 (1989) (hereinafter ".Legacy of Value"). [7] Despite numerous amendments to the two licensure statutes over the years, including their transfer from the Nonprofit Corporation Law (Title 15) to Title 40 in 1972, 1972 Pa. Laws 1063, No. 271, the legislature has always retained two separate licensure statutes and has never authorized an overlap of function.
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[7] Legacy of Value is a history of Pennsylvania Blue Shield, published by that company. A copy of the relevant portions is attached hereto as Exhibit C.
2. A Comparison of Pennsylvania's Statutory Scheme to the Statutes of States Which Permit Dual Licensure.
In this regard, the Pennsylvania statutory scheme for health service plans differs from similar statutes in other states. Most states have a single statute that uniformly regulates non-profit health service plans, regardless of the type of coverage (hospital, professional, or both). For example, New York has multiple health service plans. One plan primarily offers just hospital coverage (Blue Cross of the Rochester Area), another plan primarily offers just professional coverage (Blue Shield of Northeastern New York), and the remainder offer both (e.g., Empire Blue Cross and Blue Shield). New York has a single statute that uniformly regulates all these plans. N.Y. Ins. Law SS SS 4301-4323. [8] Moreover, many states impose stringent governance, quality, access, and social mission obligations on all health service plans, not just those that exclusively offer coverage of professional health services. See N.J. Stat. SS SS 17:48E-3, 17:48E-6.
Finally, in many states in which there has been a merger or consolidation of a hospital plan corporation and a professional health service plan corporation, the merger has been expressly permitted under the pertinent state statute. For example, the New Jersey statute explicitly authorizes the merger of the New Jersey equivalents of a hospital plan corporation and a professional health service plan corporation and sets forth specific requirements for such a merger. N.J. Stat. SS SS 17:48-2.1, 17:48E-2 - 17:48E-6; Mich. Comp. Laws SS 550.1216; N.Y. Ins. Law SS 43Ol(a),(g)-(h); W.V. Code SS 33-24-2(h). [9] The New Jersey merger authorization was added in 1985, immediately prior to the merger of the New Jersey Blue Cross and Shield plans.
Unlike these other states, Pennsylvania's statutory law does not, either explicitly or implicitly, authorize a single entity to operate both a hospital plan and a professional health services plan. To the contrary, the General Assembly rejected dual licensure and instead passed two separate acts. Surely, had the Pennsylvania General Assembly intended to provide for this authority, it could have followed the example of these other states' statutes. Therefore, under the most elementary and basic principles of statutory construction, [10] the proposed new corporation lacks authority to operate both a hospital plan and a professional health services plan.
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[8] A copy of pertinent portions of the New York statute is attached as Exhibit D. A copy of the relevant New Jersey statutory provisions is attached as Exhibit E.
[9] Copies of the relevant portions of the Michigan and West Virginia statutes are attached as Exhibits F and G, respectively.
[10] Where some things are specifically designated in a statute, things omitted (sic) should be understood as having been excluded; this principle is that expressed by the maxim 'expressio unius est exclusio alterius."' Aetna Casualty & Surety Co. v. Commonwealth, Ins. Dept., 536 Pa. 105, 114, 638 A.2d 194, 198 (1994). ju I Pa. C.S.A. SS 1924.
3. Blue Shield Should Not Be Permitted to Effect the Consolidation and Exceed its Authority Under the Nonprofit Medical Service Corporation Act of 1939.
The Pennsylvania Superior Court has recognized the limiting nature of the statute authorizing the existence of Blue Shield. In Knecht v. Medical Service Assn. of Pa., 186 Pa. Super. 456, 143 A.2d 820 (1958), the court concluded that Blue Shield was permitted to exclude from its plan services provided in a hospital that was not "accredited." In discussing the legislative history of Blue Shield, the court stated that "[S]ince defendant [Blue Shield] was created under authority of the Act of June 27, 1939, P. L. I 1 21 (further citation omitted), for the purposes therein expressed (additional citation omitted), it may not exceed the authority granted or alter the provisions of the statute." Id. at 460-61, 143 A.2d at 823 (emphasis added). The court noted that the original "Medical Service Association" was authorized by the Nonprofit Medical Service Corporation Act of 1939, which was an amendment to the Nonprofit Corporation Act of 1933.
The 1939 Act did not include the services of dentists or osteopaths, which were added in 1949. See 1949 Pa. Laws 583, 587, 1261 and 1274. Other services were added over the years, including those of chiropractors, physical therapists, and psychologists. See, env., 1980 Pa. Laws 80 1, No. 15 1; 1982 Pa. Laws 220, No. 70; 1988 Pa. Laws ' )63, No. 57. At any point, the General Assembly could have expanded the authority of Blue Shield to include operation of a hospital plan or of Blue Cross to include operation of a professional health services plan. The General Assembly did not do either of those things, nor did it authorize a single combined entity to operate both programs.
As discussed above, when the Medical Service Association was created in 1939, there were proposals to allow hospital plan corporations to sell medical services as part of a hospitalization plan. Instead, the Nonprofit Medical Corporation Act was passed without any such amendment. While the two plans were kept separate, Blue Shield cooperated with the Hospital Service Association of Pittsburgh (now BCWP) from the very beginning in marketing their plans together. Legacy of Value at 22. Eventually, in 1947, the corporations agreed on the terms of the original Joint Operating Agreement which also applied to the other Blue Cross plans. Id. at 28.
In sum, the Pennsylvania statutory scheme for health service plans requires that hospital and professional coverage be offered by two separate corporations. Therefore, BCWP and Blue Shield may not legally consolidate as both a nonprofit hospital plan and a nonprofit professional health services plan unless the General Assembly amends the laws to permit such consolidation.
C. Highmark, the Entity Arising from the Consolidation, May Not Operate Either a Health Services Plan or a Hospital Plan Unless and Until It Obtains Its Own Certificate of Authority After a Thorough Investigation by the Commissioner.
The Health Services Plan Act requires a corporation to obtain a certificate of authority prior to commencing business as a professional health service plan. 40 Pa. C.S.A. SS SS 6-')04(a), 6308.
A corporation not-for-profit incorporated for the purpose of establishing, maintaining and operating a nonprofit professional health service plan ... shall not commence business until it shall have received from the department a certificate of authority authorizing the corporation to establish, maintain and operate a nonprofit professional health service plan ....
40 Pa. C.S.A. SS 6304(a).
A certificate may not be issued unless both the Insurance Department and the Health Department [11] severally determine that the applicant is in compliance with the provisions of the Act under their respective regulatory authority. 40 Pa. C.S.A. SS 6304(d). Prior to making any determination, the applicant must furnish extensive information, 40 Pa. C.S.A. SS 6')04(c); and each Department must publish notice in the Pennsylvania Bulletin, provide interested parties with an opportunity for review and comment, and hold a public hearing, 40 Pa. C.S.A. SS 6')04(e). Any health service plan may, prior to being issued a certificate, be made subject to whatever conditions the Departments deem appropriate to that particular plan. 40 Pa. C.S.A. SS 6102(e). The Hospital Plan Act includes separate but identical requirements, except for the Department of Health involvement. 40 Pa. C.S.A. SS SS 6102, 6104.
Highmark is a newly incorporated entity created in December 1996 for the purpose of establishing, maintaining and operating a professional health service plan and hospital plan. The Commissioner, while acknowledging her regulatory jurisdiction over the licensure of health plan corporations (Decision and Order at 40, T 9), has declined to exercise that 'jurisdiction over Highmark. She held, instead, that by virtue of the consolidation, Highmark became vested with the certificates of authority of the Consolidating Companies. (Decision and Order at 40, @ 15 1).
Any suggestion that Highmark is new "in name only" is specious. Highmark did not simply come into existence upon the agreement of the Consolidating Companies: to be recognized under Pennsylvania law, it had to file its own, independent articles of incorporation. See 5 Pa. C.S.A. SS 5309. It has its own bylaws, and a broader corporate purpose than its predecessors. (See R. 6a-27a; Supp. App. I 369a). It has a different scope of operations than either of its predecessors and, in combining the assets and liabilities of two corporations, it very definitely has a new and different balance sheet. The financial viability and operations of Highmark must be examined and passed upon by the Commissioner before Highmark may lawfully conduct business in this Commonwealth as either a health service plan or a hospital plan.
The Insurance Commissioner's Order concludes erroneously that a consolidated corporation may "inherit" the existing certificates of authority of BCWP and Blue Shield and does not need to apply for its own certificates of authority. (Decision and Order at 40, 1 15). The suggestion that the legislature mandated this careful system of controls, only to permit them to be circumvented by an agreement of two corporations, flies in the face of the statutes. Both Acts include a grandfather clause that exempts plans licensed under a predecessor statute from the certificate of authority requirement. 40 Pa. C.S.A. SS 6102(b) (hospital); 40 Pa. C.S.A. SS 6304(b) (professional). No other exception is provided. [12] In particular, neither Act permits a plan automatically to transfer its license to a successor corporation. Neither Act contains any provision whereby a certificate of authority may be obtained from anyone other than the Departments.
The Commissioner's position that the certificates of authority of the Consolidating Companies are transferable assets of those corporations in the nature of a franchise cannot be supported. If true, it would necessarily apply in all circumstances. It would apply regardless of the identity of the incorporators of the new corporation, notwithstanding the express provisions of the Health Service Plan Act that all incorporators meet certain residency requirements. 40 Pa. C.S.A. SS 6306. Such an interpretation would undermine the express provisions of the enabling acts directing the Commissioner to issue certificates of authority on a case-by-case basis, attaching to a certificate of authority specific conditions, tailored to the circumstance of the particular applicant, as may be appropriate. It would mean, in effect, that the tax exempt status which is the concomitant of a certificate of authority rises to the level of a permanent entitlement which, having been obtained by one company, could then be bartered by that company or held out as an inducement to merger, with the Commonwealth having no power to interfere. There is no sound basis in the statute or in logic for this position.
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[11] The Insurance Department shall forward the written application for a Certificate of Authority to the Department of Health for action thereon and report to the Insurance Department. 40 Pa. C.S.A. SS 6')04(c).
[12] Exceptions expressed in a statute shall be construed to exclude all others. I Pa. C.S.A. SS 1924.
A certificate of authority is not a franchise, but a license to do business, personal to the holder and not transferable, and has been recognized as such in various related contexts. See 31 Pa. Code SS 1.32 (insurance certificates of authority shall be classified as an insurance department license); 31 Pa. Code SS 151.3(b) (a certificate of authority authorizes only the provider named therein to conduct business of continuing care and may not be transferred); 31 Pa. Code SS 151.6 (transfer of ownership of a continuing care provider facility may not be consummated until the person to whom ownership is being transferred obtains a certificate of authority). The Health Services Plan Corporation Act and the Hospital Plan Corporation Act both provide that a newly incorporated entity may not begin to do business in this Commonwealth until it obtains a certificate of authority from the Department; the Acts say nothing about obtaining a certificate from another corporation. [13]
In sum, the Department does not have the discretion to allow Highmark to avoid the application processes for certificates of authority under the enabling acts.
D. The Commissioner Is Required to Hold a Full Adversarial Hearing Before Issuing a Certificate of Authority, and Also Erred in Proceeding to Approve Highmark's Bylaws and the Change in Control of Blue Shield and BCWP Subsidiaries Without Following the Full Review and Approval Process Mandated by the Health Services Plan Act.
It being established that the Commissioner had jurisdiction which should have been. exercised to require Highmark to obtain a new certificate of authority, in its own right, to operate either a health services plan or a hospital plan, there can be no question regarding the Commissioner's obligation to hold a hearing. The statute mandates an exhaustive and public approval process, including notice to the public, by publication in the Pennsylvania Bulletin, a full opportunity for public hearing, such inquiries, audits and other investigation by the Commissioner as may be appropriate, and written findings. 40 Pa. C.S.A. SS 6102(e), incorporated by reference in 40 Pa. C.S.A. SS 6'@04(e).
The Commissioner conducted no such hearing in this instance, despite the fact that, insofar as she exerted any authority over the terms on which Highmark would be permitted to operate in this Commonwealth, she attached certain terms and conditions to that operation. In doing so, the Commissioner used the guise of approving Highmark's bylaws to circumvent the statutorily mandated procedures for obtaining a certificate of authority. As discussed below, the terms and conditions that the Commissioner attached to her "approval of bylaws" are inadequate to safeguard the social mission of Blue Shield. (See infra Section E). The Petitioners, and other members of the public, had and have the statutory right to be heard in a full public hearing before Highmark may legally be permitted to eliminate Blue Shield and BCWP and to operate as a new entity in the Commonwealth of Pennsylvania.
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[13] In this regard, the Pennsylvania law sharply contrasts with statutes in other states. For example, the New Jersey statute, which (unlike Pennsylvania) specifically permits the merger of health service plans, also specifically provides that the successor corporation from a merger of two health service plans does not need to apply for a new certificate of authority. N.J. Stat. SS SS 17:48E-3(f), 17:48E-5 (Exhibit E); = M Mich. Comp. Laws SS 550.1216(5) (Exhibit F). Pennsylvania law contains no such provision.
E. The Commissioner Has Failed to Take Adequate Steps to Assure That the Social Mission of Blue Shield and BCWP Will Be Protected.
The social mission of Blue Shield and BCWP is no mere platitude. As non-profit health service plans, Blue Shield and BCWP had, and have, a statutorily mandated responsibility to fulfill a social mission in return for their tax-exempt status. The Health Services Plan Act is explicit: the legislature's purpose in authorizing non-profit professional health service plans was to make affordable health care coverage available to the citizens of this Commonwealth, especially the poor and others who have difficulty obtaining insurance in the main-stream market due to their health status. 40 Pa. C.S.A. SS 6303. The statute imposes specific social mission obligations on Blue Shield including low-income programs, open enrollment and continuity of coverage. See 40 Pa. C.S.A. SS 6325. Blue Shield and BCWP are permitted to engage in traditional insurance activities, but their focus must be on, and the income from their operations in the main-stream insurance market must be used towards, the fulfillment of this social mission.
Instead of devoting all available resources to the furtherance of their benevolent and charitable mission, Blue Shield and BCWP have, over the years, accumulated reserves in excess of a billion dollars (62% of total assets) in the case of Blue Shield, and over $600 million (32.65% of total assets) in the case of BCWP. (See R. 21 la, 305a). Even though Blue Shield incurred underwriting losses in 1995, it added over S 1 30 million to its reserve stockpile due to investment and other income. (R. 21 1 a-212a). And it has increased its reserves from $457,372.00 (41% of its total assets) to $1,1 13,553.00 (62% of total assets) over a five year period. (R. 21 la, 280a).
While these enormous reserves are being amassed, the Consolidation threatens to further distance the Blues from their social mission. Lip service has been paid by Highmark to the ongoing social mission, but there has been no adequate articulation of how Highmark will achieve those goals. It appears from the record that the Commissioner held private meetings with representatives of Blue Shield and BCWP, shortly before issuing her Decision and Order, and accepted the Consolidating Companies' cursory submissions regarding Highmark's plans to effectuate its social mission without making those submissions available for public comment. (R. 132la-1334a). The results of these closed door meetings has been that the Commissioner, accepting at face value the representations made by Highmark that it had no current plans to convert to a for-profit corporation and that it would continue to provide existing programs (see Decision and Order at 32, T 204 and 33, T 209) has placed a minimal, but revealing, limitation on Highmark:
Highmark shall not seek to convert from a nonprofit corporation to a for-profit entity for a period of two (2) years from the effective date of the consolidation, unless legislation is enacted specifically authorizing the operation of hospital plans and professional health service plans by for-profit corporations.
(Decision and Order at 5 1, T 23 (emphasis added)). Subsequent to these private communications, the Commissioner also modified her position regarding the funds that she would require Highmark to devote to the fulfillment of its social mission. [14] At the end of that short time, already largely past, Highmark will be free to use every avenue available to it to abandon its status as a charitable institution and use its growing reserves, established during years of operation as a tax-exempt entity, to generate corporate profits. The performance of the Blues' social mission is, indeed, in great jeopardy.
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[14] The Commissioner has required that 1.25% of direct written premiums be devoted to the companies' social mission. (Decision and Order at 47, 1 4). That requirement, imposed after a series of private communications between the Consolidating Companies and Insurance Department representatives (= R. 1321a-1324a), represented a retreat from the Insurance Department's originally intended requirement that Highmark contribute 1.5% of its premium dollars towards its social mission (= R. 1321a), a difference which translates to approximately S 1 3 million per annum. (R. 1333a). The requirement pales in comparison to the rapidly accumulating reserves. It is especially anemic in light of the enormous future cost savings which Highmark has claimed will result from the consolidation. (5= Decision and Order at 35-6 227-33).
F. The Commissioner's Findings Regarding the Anticompetitive Effect of the Change in Control of subsidiaries Are Not Supported by Substantial Evidence.
1. The Commissioner Should Have Considered the Entire Competitive Environment as Part of Her Analysis.
Under Pennsylvania's Insurance Holding Companies Act (the "Act"), 40 P.S. SS 991.1401 et seq, an individual or entity who proposes a transaction which will result in the transfer of "control," either direct or indirect, of a Pennsylvania-domiciled indemnity insurer or HMO must obtain the approval of the Insurance Department. [15] See 40 P.S. SS 991.1402(a)(1) and (g). In reviewing the transfer of control, the Insurance Commissioner must consider the anticompetitive effect of the change of control. 40 P.S. SS 991.1402(f). If the "effect of the . . . acquisition of control would be to substantially lessen competition in insurance in this Commonwealth or tend to create a monopoly," the transaction will not be approved. Id.
By reading the statute narrowly and erroneously disregarding all anticompetitive effects of the consolidation of Blue Shield and BCWP themselves, the Commissioner purported to consider only the effect of the transfer of certain of their HMO and insurance subsidiaries. The statute excludes from the definition of "insurer" nonprofit medical and hospital service associations. 40 P.S. SS 991.1401. Thus, a change in control of Blue Shield or BCWP would not, in and of itself, trigger the analysis of competition. Nowhere, however, does the statute excuse the Commissioner from considering, as part of the analysis of competition triggered by the change in control of the subsidiaries, the entirety of the market, including the power of the parent corporations. Petitioners submit that the Commissioner erred in looking only to the incremental effect of the change in control of the subsidiaries, and ignoring the market power of their parents, as consolidated.
2. The Commissioner's Definition of the Marketplace Was Not Supported by the Evidence and Undermined the Entire Competitive Analysis.
The analysis the Commissioner did undertake was flawed. Her conclusion was premised on two assumptions, not supported by substantial evidence. The first error was in her definition of the "market(s)" as separate segments of the insurance industry. The second was in her definition of the geographic market.
The Commissioner accepted the argument that the two companies "are not in direct competition with each other" because "[e]xcept in a limited manner through their subsidiaries,"Blue Shield did not offer coverage for hospital care and BCWP did not offer coverage for physician care. (Decision and Order at 25, paragraphs 156-57). But the Attorney General for the Commonwealth of Pennsylvania [16] found that the Companies in fact compete today in the same marketplace: health care financing. The Attorney General concluded that, absent Consolidation, Blue Shield and BCWP would have to compete in the future:
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[15] A waiver may be requested if the proposed transaction fits within one of several specified exceptions to the Form A filing. Although the Consolidating Companies applied for such a waiver, the Commissioner rejected the request for waiver. (Decision and Order at 6-7, 27, 30; Supp. App. 1464a-1468a).
[16] The Attorney General, who is charged with protecting the public interest in a competitive marketplace, reviewed the Plan of Consolidation and found the Companies' analysis to be defective and the Plan of Consolidation to raise "serious potential competition concerns." (R. 1085a).
The essence of this competition problem is the inevitable changes in the health care industry will force Pennsylvania Blue Shield to compete with BCWP. If this consolidation occurs, consumers in western Pennsylvania will lose the benefit of that potential competition.
(R. 1085a).
The Commissioner also erred in finding "no indication that a geographic market other than the entire Commonwealth should be adopted as the relevant geographic market for analysis of the Consolidation itself." (Decision and Order at 28, T 180 and at 44, T 41). In this superficial dismissal of the evidence before her, she completely disregards the expert analysis of Dennis G. Shea, Ph.D. and Stephen Earl Foreman, J.D., Ph.D., who concluded, for reasons detailed in their report submitted to the Commissioner, that the appropriate market was western Pennsylvania. (R. 1041a).
The Commissioner's analysis is flawed in a number of other respects, as well. The analysis switches variously between the number of lives insured and the direct premiums paid for the applicable line of business. (Decision and Order at 25-6, TI 161-67 and at 27-3 1, @T 175-200). The Commissioner relied upon outdated 1994 information. (Decision and Order at 28, 176). Given these choices, the Order concludes that the proposed change in control of the Companies' subsidiaries will have next to no effect on competition. (Decision and Order at 46, 46). That conclusion, based on faulty premises and analyses, is not supported by substantial evidence in the record.
Consolidations of insurance companies are considered to be prima facie anticompetitive if the market is highly concentrated. 40 P.S. SS 991.1403(d)(2)(i)(A). The Attorney General, using various tests, concluded the proposed Consolidation between the competitors (Blue Shield and BCWP) to be "prima facie illegal" under the Act. (R. 1088a). [17] Further, the potential anticompetitive impact required "full discovery and accounting" to resolve the concentration issue. (R. 1094a). [18] The "full discovery and accounting," called for by the Attorney General and by expert commentors, have not taken place.
Given the Attorney General's express finding that the proposed Consolidation is prima facie anticompetitive and detrimental to the citizens of western Pennsylvania, this Court should require the Commissioner to undertake a vigorous examination of the competitive issues. Consumers, physicians, and their patients are most concerned with the quality of care. Petitioners believe that the greatest harm will arise if the Consolidated Companies can dictate the quality of care because of their overwhelming market dominance. Without effective competition among insurers, the ability of physicians, other health care providers, and their patients to ensure quality care will be severely diminished.
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[17] Further, the Attorney General noted that the only way for the Insurance Commissioner to approve the changes in control given their prima facie illegality was through positive evidence of increased efficiencies or increased availability of insurance in the relevant market. The Attorney General then specifically noted that the Companies had not produced any such evidence:
the description of efficiencies presented by the parties so far is inadequate to meet this burden.
(R. 1089a).
[18] Similarly, the April 29, 1996 report of Dennis G. Shea, Ph.D. and Stephen Earl Foreman, J.D.. Ph.D. concluded that "the proposed consolidation of the two Companies has ' significant antitrust implications that ought to be explored in a full analysis. This analysis should consider a full examination of the market shares and market concentrations in each of the markets and in the developing market for integrated health care delivery systems for the state of Pennsylvania and, especially, for the western areas of [Pennsylvania]." (R. 1056a- 1057a).
G. The Commissioner's Summary Dismissal of the Interests of Medical Providers in the Governance of Highmark and Her Assertion That the Doctors, Including Members of Blue Shield, Had No Legal Right to Challenge the Composition of Highmark's Board Was Unjustified and Improper.
Blue Shield had 3OO corporate members, half of whom were health service doctors and half lay members. (R. 52 l a-523a) The same percentages applied to the Board of Directors: of 3O directors, half were health service doctors. [19] (R. 529a).
Highmark has a very different corporate structure. Its bylaws provide that 75% of the board be made up of lay members, thereby limiting medical providers to no more than a 25% voice in the management of the corporation. (R. l Oa- I la; Decision and Order at 18, 1 107). For members of Blue Shield and for medical providers in this Commonwealth generally, this is a drastic reduction in their ability to shape the direction of the corporation.
In order to understand the significance of this change in the corporate governance structure, it is important to consider the history of physician involvement with Blue Shield. The original legislation, which later became the Health Services Plan Act, was introduced in the General Assembly at the behest of the Pennsylvania Medical Society ("PMS"), an association of physicians. A bill proposing the formation of the Medical Service Association of Pennsylvania was introduced into the legislature on March 23, 1939 and enacted in June of the same year. See 1939 Pa. Laws I 1 21 and I 1 25. There were nine original incorporators, seven of whom were medical doctors. Before the new corporation could begin operations, the Pennsylvania Departments of Health and Insurance required that a fund be established to assure payment of claims. That fund was created with a loan of $25,000 provided by PMS. Legacy of Value at 22. Under the original legislation, the majority of the Board of Directors were physicians. It was not until 1980 that board membership was changed to a 50-50 distribution between physicians and lay directors. Id. at 66. Equal representation among the corporate membership followed a few years later. Id. Petitioners, and others like them, take very seriously the role doctors have historically served on the Blue Shield Board and membership in keeping the, company focused on quality of care and on the vital social mission to make adequate health services available to all.
Highmark's bylaws contain a number of other significant changes. For example, Highmark no longer is required to solicit member nominations from local professional societies. The bylaws superimpose a nominating committee of the Board, from which all nominations for new members must emanate. (R. 19a). The Board-controlled nominating committee is just one component of a circular structure [20] that seems designed to perpetuate the status quo and to frustrate dissent. The Commissioner, however, dismissed this concern with the observation that there was "no significant difference" between the two sets of bylaws (Decision and Order at 2 1, paragraph 127) and that no particular process for nominating the election of directors was fixed by statute (Decision and Order at 21, 1 128).
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[19] The Health Services Plan Act provides that no less than fifty percent of the Board must be lay members. 40 Pa. C.S.A. SS 6328(b). In actual practice, the number of lay members has been limited to approximately fifty percent, the other fifty percent consisting of professional health service doctors.
[20] Under Highmark's bylaws, the Board nominates the members, who in turn elect the Board. (R. 8a, I Ia).
Of equal significance is the removal from the corporate members of the control which they held, as members of Blue Shield, over the content of their own bylaws. Blue Shield's bylaws required a vote of at least 75% of the corporate members to amend the bylaws [21] (R. 547a). Highmark's bylaws take that power out of the hands of the members and turn it over to a vote of the Board. (R. 26a-27a). In other words, whereas it previously took 150 members to change the rules under which Blue Shield conducted its health services plan, Highmark's bylaws may be amended by the affirmative vote of only 19 directors. Even if all of the physician members of the Board opposed a by-law change, they could only muster 11 votes.
Taken together, these changes to the corporate structure amount to a major shift of control and a concentration of power within the management of the new company. It is a movement away from the "grass roots" and towards an insular kind of control structure which protects the entrenched incumbent management. Highmark's initial Board consists of 36 of the current directors of Blue Shield and BCWP, chosen by their respective Boards, not by their corporate memberships. (Supp. App. 1398a). Thus, the emphasis on management control begins with the initial Board of Directors and will be perpetuated as described above. This is far different from the structure of Blue Shield, which was a membership driven organization consistent with its historical purpose and status as a nonprofit health service corporation. Standing alone, or taken together with other threats to the fulfillment of the social mission discussed supra, it endangers the very essence of the health services plan which the legislature envisioned.
The Insurance Commissioner had clear statutory responsibility in regard to these corporate governance issues. The Health Services Plan Act required her, as well as the Secretary of Health, to determine whether proposed changes to bylaws meet statutory standards, including whether they "provide appropriate procedures for the nomination and election or appointment of the directors of the corporation ... in such a manner that the interests of the subscribers of the corporation will be justly and reasonably represented." 40 Pa. C.S.A. SS 6328(b)(2), (5). Further, she had authority to conduct a hearing on issues related to changes in bylaws, and the power, following a hearing, to order appropriate changes. 40 Pa. C.S.A. SS 6328(b)(6).
The Commissioner acknowledged her obligations under section 6328. (Decision and Order at 17, T 102 and at 20, TI 122-23). However, she summarily dismissed these issues with the holding that health care professionals have no statutory right to have any particular level of representation on Blue Shield's or Highmark's Boards (Decision and Order at 18, 1 1 10) and no legal right to challenge the composition of the Board (Decision and Order at 18, T 1 12). Finding no specific statutory requirement of a specific board composition, the Commissioner rejected all arguments of opposing commentors relating to the governance of Highmark. She made no specific findings of fact as to whether the interests of subscribers would be justly and reasonably represented, but simply asserted, conclusorily, that the bylaws complied with section 6328(b). (Decision and Order at 19, T I 1 3 and at 41, 2 1). By failing to examine the issue fully and make specific findings regarding the protection of the interests of subscribers, the Commissioner has specifically failed to fulfill her statutory duty.
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[21] 'The Consolidating Companies and the Commissioner have repeatedly urged that 75% of the corporate membership approved the consolidation of Blue Shield and BCWP. In fact, less than 75% (specifically, 74.77%) of the membership voted to approve the consolidation. (R. 485a).
H. This Court Has a Sufficient Record on Which to Rule on the Issues Presented or to Remand for Further Agency Action.
In a preliminary motion in these proceedings, Highmark asserted that no adversarial hearing was held below and, therefore, there had been no appealable adjudication. Although claiming that the Commissioner was not required to hold an adversarial hearing and that Petitioners had no right to demand or fully participate in such a hearing, Highmark argued that the failure to hold any hearing precluded appellate review of the Court's order. In an opinion filed March 27, 1997, the Court (Leadbetter, J.) rejected Highmark's argument:
[T]he absence of an adversary hearing below poses no jurisdictional bar to appellate review of the merits of a final administrative order when review is sought by an aggrieved non-party.... [T]o hold otherwise would subject ' the absolute statutory right of appeal of such aggrieved non-parties to the chance circumstance of whether a party below had exercised its right to demand a hearing. Such an interpretation, in addition to making no sense, would fly in the face of the expansive purpose and intent of Section 702 [of the Administrative Agency Law].
Philadelphia County Medical Society v. Kaiser, 3309 C.D. 1996 (Pa. Cmwlth. Ct. Mar. 27, 1997) at 14 (a copy of which opinion is attached hereto as Exhibit H). However, Judge Leadbetter deferred to the merits panel the question of whether there had been a valid adjudication:
This is not to say, however, that the record before the Commissioner is adequate for purposes of appellate review, an issue which is premature and not before the court in these motions. Nonetheless, that issue is necessarily intertwined with the issue here raised. Accordingly, I must conclude that Highmark's argument that the lack of a hearing below precludes this appeal should await consideration by a full panel of the court which will have the record upon which the Commissioner based her decision.
Id.
The issue is not whether there has been an adjudication (there has); the question is whether the written record of the proceedings within the Insurance Department is sufficient to allow the Court to review the action. In the absence of a complete record, the Court cannot conduct the meaningful appellate review contemplated by the Administrative Agency Law. LaFarge Corp. v. Commonwealth of Pennsylvania, Insurance Dept., 1997 WL 913 5 2 at * I I (Pa. Cmwlth. Ct. 1997). In such circumstances, the adjudication is itself invalid and the court may either (1) hear the appeal de novo, or (2) vacate the agency's order and remand the matter for further proceedings. 2 Pa. C.S.A. T 754. See LaFarge, 1997 WL 91352 at * I 1; Turner v. Pennsylvania Public Utility Comn., 683 A.2d 942, 946 (Pa. Cmwlth. 1996).
Here, although there was no hearing, there is a written record of the proceedings before the Commissioner. While the Petitioners submit that the record as certified by the Commissioner is incomplete, the written material is sufficient to allow this Court to consider the legal and factual issues raised by the Petition for Review. [22] Of course, as to issues of law (such as the scope of the Commissioner's jurisdiction, the status of the Consolidating Companies' certificates of authority, and the issue of dual licensure), this Court's review is plenary. And where the record falls to reveal substantial evidence to support the Commissioner's findings of fact, the adjudication should not be affirmed. 2 Pa. C.S.A. SS 754.
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[22] Of course, if this Court finds that the written record is not adequate for purposes of review (even if supplemented by any materials in the supplemental Petitioners' Appendix which the Court deems appropriate), then the Commissioner's adjudication is invalid and has no legal effect.
For the reasons set forth, this Court should rule in favor of Petitioners. First, this Court should hold, as a matter of law, that the enabling acts do not provide for or permit dual licensure of a single entity to operate both a hospital plan and a health services plan. Second, this Court should hold, as a matter of law, that the certificates of authority of the Consolidating Companies did not pass by law to Highmark, and that Highmark may not operate either a hospital plan or a health services plan unless and until it obtains a certificate of authority to do so in accordance with statutory procedures. With respect to these matters, the Commissioner's Decision and Order should be reversed.
This Court should also hold, as a matter of law, that the Commissioner did have jurisdiction over the proposed consolidation of Blue Shield and BCWP and that she should have examined the proposed consolidation in depth, taking into account Blue Shield's and BCWP's statutorily mandated social missions, the anticompetitive effect of the proposed consolidation of the parent companies, and issues of corporate governance. To the extent that the Commissioner did consider those issues and made findings of fact, this; Court should hold that those findings are not supported by substantial evidence contained in the Record.
Dated: April 23, 1997
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