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NAME AND TITLE: Matthew J.W. Michels, general counsel AGE: 42 ORGANIZATION: Avera Health, based in Sioux Falls, S.D., is a health care system run by two Catholic religious orders — the Benedictine Sisters and the Presentation Sisters — both of which have sponsored hospitals in the area for the past century. Avera Health was created in September 2000 when the two orders decided to combine their respective health ministries. Today the nonprofit owns, leases or manages 25 hospitals, 72 clinics, 17 nursing homes, 12 assisted living facilities and five mental health centers in Iowa, Minnesota, Nebraska, North Dakota and South Dakota, making it the largest private health system in the region. Avera’s 10,000 employees served more than 600,000 patients in 2001. Total revenues were $850 million. LEGAL DEPARTMENT: Michels has two attorneys on staff, both of whom were with him at Presentation Health System before Avera Health was launched. One works in the Sioux Falls office and acts as primary counsel to Avera’s health insurance company, Avera Health Plans. The other one works with Michels in the Yankton, S.D., office and serves as the organization’s federal compliance officer. All three lawyers work on contracts, transactions, human resources, employee benefits, regulations, corporate law and patient case issues, such as questions about terminating life support. Michels also oversees two nonattorneys: Avera’s risk manager in charge of insurance programs and an administrator who manages workers’ compensation claims. Michels’ transactional work focuses on hospital-physician contracts, supplier and service deals and real estate acquisitions and sales. He handles tax-exempt bond issues and manages litigation. Michels also does a lot of public speaking on nursing and physician liability to help prevent malpractice claims. BIGGEST CHALLENGE: “I think the biggest challenge is staying on top of all the dramatic legal and regulatory changes,” Michels said. Right now he’s dealing with the Bush administration’s proposed rules on the privacy of patients’ medical records, which cover issues such as parental consent and who can share health data. The regulations open up an enormous new area of civil and criminal litigation exposure for insurers and health care providers. Violators can face prison time or fines once the rules take effect in April 2003. “We’re still consuming the proposed changes. I read them over and over,” Michels said. The rules are based on a section of the Health Insurance Portability and Accountability Act of 1996. Avera’s HIPAA task force, created at Michels’ suggestion, is helping him analyze them. CREATING AVERA HEALTH: Michels was in charge of all the legal work involved in establishing Avera Health while he was associate general counsel at Presentation Health. He reorganized seven corporations to create the new entity and drafted new articles of incorporation and bylaws for each company. He then had the documents reviewed by Loyola University Chicago School of Law Professor Larry Singer, whose law firm, Singer and Associates, specializes in health-ministry mergers. TAX-EXEMPT BOND ISSUE: Avera Health raised $60 million in April by issuing tax-exempt bonds. The money is being used to build a nursing home and expand one of four regional hospital centers. Standard & Poors upgraded the organization’s credit rating from A to A+ during the process. Michels spent six months doing the legal work for the transaction, which included making sure Avera Health held clear legal title to the property used as collateral, drafting documents and providing all of the information and documents to the underwriters, the bond counsel and Standard & Poors. ACQUISITIONS: Avera Health purchased a hospital and two nursing homes in South Dakota from Banner Health System for an undisclosed amount on May 1. Michels did all the work himself, negotiating the purchase agreement and related real estate documents and filing all of the necessary documents to get approval for the deal from the U.S. Department of Health and Human Services and the South Dakota state health department. LITIGATION: Avera is involved in more than 50 lawsuits. The majority are malpractice claims against its health care providers, Michels said, with the second biggest category involving workers’ compensation claims. A South Dakota Supreme Court decision that Avera won last year helped establish the right of a charitable hospital’s board of directors to limit the number of doctors on the hospital’s staff. A local orthopedic surgeon had sued Avera for refusing to consider his request for hospital privileges. The nonprofit said it didn’t need any more orthopedic surgeons. The doctor unsuccessfully argued that Avera’s board should have gotten its staff’s approval before it stopped accepting new doctors. Michels oversaw the work of the Sioux Falls-based firm of Davenport, Evans, Hurwitz & Smith that represented Avera in the matter. OUTSIDE COUNSEL: Michels generally hires outside law firms only for litigation. He and his in-house attorneys have worked to develop the expertise in most other areas of law that Avera needs, he says. The vast majority of the organization’s lawsuits are handled by two South Dakota law firms: Boyce Murphy in Sioux Falls and the Schutz Law Firm in Aberdeen. The Fitzgibbons Law Firm in Estherville, Iowa, handles Avera’s litigation in that state. ROUTE TO THE TOP: Michels began his health care career early, working as a hospital orderly in high school. He used his 1980 associate nursing degree to work his way through college and law school at the University of South Dakota. He joined the Navy JAG Corps following his first year of law school. After he completed his studies in 1985, the Navy sent him to the U.S. Naval Hospital in Subic Bay in the Philippines, where he worked as a federal prosecutor. He helped negotiate the last military base treaty between the United States and the Philippines. He returned to the states two years later to be chief defense counsel at the Naval Legal Service Office in Mayport, Fla. Michels decided to return home to South Dakota in 1989 rather than be transferred to the Bethesda Naval Hospital near Washington, D.C. So he sent out about 50 r�sum�s to lawyers listed in the South Dakota Bar directory. One of the responses he got was from Don Bierle, the general counsel at Presentation Health System. Michels drove from Mayport to a Disney World hotel where Bierle was vacationing, but Bierle forgot about their interview. Michels’ wife, by phone, convinced him to stay and wait, and after 10 hours, Bierle showed up. It was good advice because Bierle hired him to be a staff attorney. He was promoted to associate general counsel five years later. Michels became general counsel in June 2001 when Bierle stepped down at age 73. Bierle did not retire, but instead switched jobs with Michels. He was still working at Avera when he died in October 2001. POLITICS: Michels, a Republican, has served in the South Dakota House of Representatives in Pierre since 1999 and is currently assistant speaker of the House. He’s sponsored key laws concerning organ donation, child sex abuse and child pornography on the Internet. The session lasts about nine weeks. “I’m away physically. But I work on Avera matters on breaks during the day and nights and weekends,” he said. FAMILY: Michel’s wife, Karen, a former nurse, stays home to take care of their 12-year-old son, Collin. LAST BOOK READ: “The Chamber,” by John Grisham.

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