2012 -- H 7283 SUBSTITUTE A

=======

LC00326/SUB A/3

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

____________

A N A C T

RELATING TO HEALTH AND SAFETY - THE HOSPITAL CONVERSIONS ACT

     Introduced By: Representatives Mattiello, Azzinaro, Brien, Marcello, and McLaughlin

     Date Introduced: January 31, 2012

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

1-1

     SECTION 1. Sections 23-17.14-2, 23-17.14-3, 23-17.14-4, 23-17.14-5, 23-17.14-6, 23-

1-2

17.14-7, 23-17.14-9, 23-17.14-10, 23-17.14-11, 23-17.14-13, 23-17.14-19, 23-17.14-28, 23-

1-3

17.14-31 and 23-17.14-34 of the General Laws in Chapter 23-17.14 entitled "The Hospital

1-4

Conversions Act" are hereby amended to read as follows:

1-5

     23-17.14-2. Findings. -- The general assembly finds and declares that:

1-6

      (1) Rhode Island has a proud history of non-profit hospitals and philanthropic support of

1-7

medical services, education and research;

1-8

      (2) Hospitals in Rhode Island provide overall high quality care at a reasonable cost;

1-9

      (3) Hospitals in Rhode Island have experienced during the 1990's substantial declines in

1-10

occupancy as the healthcare system has changed.

1-11

      (4) Hospitals required require capital to maintain operations and to modernize facilities

1-12

and services;

1-13

      (5) Nationally and regionally private investment is being made that results in the

1-14

conversion of not-for-profit and public hospitals into for-profit hospitals;

1-15

      (6) There are hospitals in Rhode Island that have provided and continue to provide

1-16

important services to communities that submit that their survival may depend on the ability to

1-17

enter into agreements that result in the investment of private capital and their conversion to for-

1-18

profit status;

1-19

      (7) Hospitals both not-for-profit and for-profit are merging and forming networks to

1-20

achieve integration, stability and efficiency and the presence of these networks affects

2-1

competition;

2-2

      (8) There are concerns that hospital networks may engage in practices that affect the

2-3

quality medical services in the community as a whole and for more vulnerable members of

2-4

society in particular;

2-5

      (9) In order to protect public health and welfare and public and charitable assets, it is

2-6

necessary to establish standards and procedures for hospital conversions.

2-7

     23-17.14-3. Purpose of provisions. -- The purpose of this chapter is to:

2-8

      (1) Assure the viability of a safe, accessible and affordable healthcare system that is

2-9

available to all of the citizens of the state;

2-10

      (2) To establish a process to evaluate, monitor and review whether the new phenomenon

2-11

of for-profit corporations gaining an interest in hospitals will maintain, enhance, or disrupt the

2-12

delivery of healthcare in the state and to monitor hospital performance to assure that standards for

2-13

community benefits continue to be met;

2-14

      (3) To establish a review process and criteria for review of hospital conversions that

2-15

involve for-profit corporations;

2-16

      (4) To establish a review process and criteria for review of hospital conversions that

2-17

involve only not-for-profit corporations;

2-18

      (5)(4) To clarify the jurisdiction and the authority of the department of health to protect

2-19

public health and welfare and the department of attorney general to preserve and protect public

2-20

and charitable assets in reviewing both hospital conversions which involve for-profit corporations

2-21

and hospital conversions which include only not-for-profit corporations; and

2-22

      (6)(5) To provide for independent foundations to hold and distribute proceeds of hospital

2-23

conversions consistent with the acquiree's original purpose or for the support and promotion of

2-24

health care and social needs in the affected community.

2-25

     23-17.14-4. Definitions. -- For purposes of this chapter:

2-26

      (1) "Acquiree" means the person or persons that lose(s) any ownership or control in the

2-27

new hospital as a result of a conversion, as the terms “conversion,” "new hospital," and

2-28

"person(s)" are defined within this chapter;

2-29

      (2) "Acquiror" means the person or persons which gain(s) an ownership or control in the

2-30

new hospital as a result of a conversion, as the terms “conversion,” "new hospital," and

2-31

"person(s)" are defined within this chapter;

2-32

      (3) "Affected community" means any city or town within the state wherein an existing

2-33

hospital is physically located and/or those cities and towns whose inhabitants are regularly served

2-34

by the existing hospital;

3-1

      (4) "Charity care" is defined as health care services provided by a hospital without

3-2

charge to a patient and for which the hospital does not and has not expected payment;

3-3

      (5) "Community benefit" means the provision of hospital services that meet the ongoing

3-4

needs of the community for primary and emergency care in a manner that enables families and

3-5

members of the community to maintain relationships with person who are hospitalized or are

3-6

receiving hospital services, and shall also include, but not be limited to charity care and

3-7

uncompensated care;

3-8

      (6) "Conversion" means any transfer by a person or persons of an ownership or

3-9

membership interest or authority in a hospital, or the assets of a hospital, whether by purchase,

3-10

merger, consolidation, lease, gift, joint venture, sale, or other disposition which results in a

3-11

change of ownership or control or possession of twenty percent (20%) or greater of the members

3-12

or voting rights or interests of the hospital or of the assets of the hospital or pursuant to which, by

3-13

virtue of the transfer, a person, together with all persons affiliated with the person, holds or owns,

3-14

in the aggregate, twenty percent (20%) or greater of the membership or voting rights or interests

3-15

of the hospital or of the assets of the hospital, or the removal, addition or substitution of a partner

3-16

which results in a new partner gaining or acquiring a controlling interest in the hospital, or any

3-17

change in membership which results in a new person gaining or acquiring a controlling vote in

3-18

the hospital;

3-19

     (7) “Current conflict of interest forms” means conflict of interest forms signed within one

3-20

year prior to the date the application is submitted in the same form as submitted to auditors for the

3-21

transacting parties in connection with the preparation of financial statements, or in such other

3-22

form as is acceptable to the attorney general, together with a description of any conflicts of

3-23

interest that have been discovered by or disclosed to a transacting party since the date of such

3-24

conflict of interest forms;

3-25

      (7)(8) "Department" means the department of health. However “departments” shall mean

3-26

the department of health and the department of the attorney general;

3-27

      (8)(9) "Director" means the director of the department of health;

3-28

      (9)(10) "Existing hospital" means the acquiree hospital as it exists prior to the

3-29

acquisition;

3-30

      (10)(11) "For-profit corporation" means a legal entity formed for the purpose of

3-31

transacting business which has as any one of its purposes pecuniary profit;

3-32

      (11)(12) "Hospital" means a person or governmental entity licensed in accordance with

3-33

chapter 17 of this title to establish, maintain and operate a hospital;

4-34

      (12)(13) "New hospital" means the acquiree hospital as it exists after the completion of a

4-35

conversion;

4-36

      (13)(14) "Not-for-profit corporation means a legal entity formed for some charitable or

4-37

benevolent purpose and not-for-profit which has been exempted from taxation pursuant to

4-38

Internal Revenue Code section 501(c)(3), 26 U.S.C. section 501(c)(3);

4-39

      (14)(15) "Person" means any individual, trust or estate, partnership, corporation

4-40

(including associations, joint stock companies and insurance companies), state or political

4-41

subdivision or instrumentality of the state;

4-42

     (16) “Senior managers” or “senior management” means executives and senior level

4-43

managers of a transacting party;

4-44

      (15)(17) "Transacting parties" means the acquiree and the acquiror any person or persons

4-45

who seeks either to transfer or acquire ownership or a controlling interest or controlling authority

4-46

in a hospital which would result in a change of ownership, control or authority of twenty percent

4-47

(20%) or greater;

4-48

      (16)(18) "Uncompensated care" means a combination of free care, which the hospital

4-49

provides at no cost to the patient, bad debt, which the hospital bills for but does not collect, and

4-50

less than full Medicaid reimbursement amounts.

4-51

     23-17.14-5. Prior approval required -- Department of attorney general and

4-52

department of health. -- (a) A conversion shall require review and approval from the department

4-53

of attorney general and from the department of health in accordance with the provisions of this

4-54

chapter; except as provided for under section 23-17.14-12.1 hereof, but shall remain subject to the

4-55

authority of the attorney general pursuant to section 23-17.14-21 hereof.

4-56

      (b) The review by the departments shall occur concurrently, and neither department shall

4-57

delay its review or determination because the other department has not completed its review or

4-58

issued its determination. The applicant may request that the review by the department occur

4-59

concurrently with the review of any relevant federal regulatory authority.

4-60

     23-17.14-6. Initial application -- Conversions involving for-profit corporations or

4-61

not-for-profit as acquirors. -- (a) No person shall engage in a conversion with a for profit

4-62

corporation as the acquiror and a not-for-profit corporation as the acquiree involving the

4-63

establishment, maintenance, or operation of a hospital or a conversion subject to section 23-

4-64

17.14-9 without prior approval of both the department of attorney general and the department of

4-65

health. The review of the two (2) departments shall occur concurrently, and neither department

4-66

shall delay its review or determination because the other department has not completed its review

4-67

or issued its determination. The applicant may request that the review by the departments occur

4-68

concurrently with the review of any relevant federal regulatory authority. The transacting parties

5-1

shall file an initial application in accordance with subsection (b) of this section that shall, at

5-2

minimum, include the following information with respect to each transacting party and to the

5-3

proposed new hospital:

5-4

      (1) A detailed summary of the proposed conversion;

5-5

      (2) Names, addresses and phone numbers of the transacting parties;

5-6

      (3) Name, address, phone number, occupation, and tenure of all officers, members of the

5-7

board of directors, trustees, executives, and senior level managers, including for each position,

5-8

current persons and persons holding such position during the past three (3) two (2) years;

5-9

      (4) A list of all committees, subcommittees, task forces, or similar entities of the board

5-10

of directors or trustees, including a short description of the purpose of each committee,

5-11

subcommittee, task force, or similar entity and the name, address, phone number, occupation, and

5-12

tenure of each member;

5-13

      (5) Agenda, meeting packages, and minutes of all meetings of the board of directors or

5-14

trustees and any of its committees, subcommittees, task forces related to the conversion, or

5-15

similar entities excluding those focused on peer review and confidential medical matters, that

5-16

occurred within the two (2) year period prior to submission of the application, including, upon the

5-17

request of the department or attorney general, any meeting packages;

5-18

      (6) Articles of incorporation and certificate of incorporation;

5-19

      (7) Bylaws and organizational charts;

5-20

      (8) Organizational structure for existing transacting parties and each partner, affiliate,

5-21

parent, subsidiary or related corporate entity in which the acquiror has a twenty percent (20%) or

5-22

greater ownership interest;

5-23

      (9) Conflict of interest statements, policies and procedures;

5-24

      (10) Names, addresses and phone numbers of professional consultants engaged in

5-25

connection with the proposed conversion;

5-26

      (11) Copies of audited income statements, balance sheets, other financial statements, and

5-27

management letters for the past three (3) years and to the extent they have been made public,

5-28

audited interim financial statements and income statements together with detailed description of

5-29

the financing structure of the proposed conversion including equity contribution, debt

5-30

restructuring, stock issuance, partnership interests, stock offerings and the like;

5-31

      (12) A detailed description of real estate issues including title reports for land owned and

5-32

lease agreements concerning the proposed conversion;

5-33

      (13) A detailed description as each relates to the proposed transaction for equipment

5-34

leases, insurance, regulatory compliance, tax status, pending litigation or pending regulatory

6-1

citations, pension plan descriptions and employee benefits, environmental reports, assessments

6-2

and organizational goals;

6-3

      (14) Copies of reports analyzing the proposed conversion during the past three (3) years

6-4

including, but not limited to, reports by appraisers, accountants, investment bankers, actuaries and

6-5

other experts;

6-6

      (15) Copies of any opinions or memoranda addressing the state and federal tax

6-7

consequences of the proposed conversion prepared for a transacting party by an attorney,

6-8

accountant, or other expert;

6-9

      (16) A description of the manner in which the price was determined including which

6-10

methods of valuation and what data were used, and the names and addresses of persons preparing

6-11

the documents, and this information is deemed to be proprietary;

6-12

      (17) Patient statistics for the past three (3) years and patient projections for the next one

6-13

year including patient visits, admissions, emergency room visits, clinical visits, and visits to each

6-14

department of the hospital, admissions to nursing care or visits by affiliated home health care

6-15

entities;

6-16

      (18) The name and mailing address of all licensed facilities in which the for-profit

6-17

corporation maintains an ownership interest or controlling interest or operating authority;

6-18

      (19) A list of pending or adjudicated citations, violations or charges against the facilities

6-19

listed in subdivision (a)(18) brought by any governmental agency or accrediting agency within

6-20

the past three (3) years and the status or disposition of each matter with regard to patient care and

6-21

charitable asset matters;

6-22

      (20) A list of uncompensated care provided over the past three (3) years by each facility

6-23

listed in subdivision (a)(18) and detail as to how that amount was calculated;

6-24

      (21) Copies of all documents related to:

6-25

      (i) Identification of all charitable assets

6-26

      (ii) Accounting of all charitable assets for the past three (3) years; and

6-27

      (iii) Distribution of the charitable assets including, but not limited to, endowments,

6-28

restricted, unrestricted and specific purpose funds as each relates to the proposed transaction;

6-29

      (22) A description of charity care and uncompensated care provided by the existing

6-30

hospital for the previous five (5) three (3) year period to the present including a dollar amount

6-31

and a description of services provided to patients;

6-32

      (23) A description of bad debt incurred by the existing hospital for the previous five (5)

6-33

three (3) for which payment was anticipated but not received;

7-34

      (24) A description of the plan as to how the new hospital will provide community benefit

7-35

and charity care during the first five (5) three (3) years of operation;

7-36

      (25) A description of how the new hospital will monitor and value charity care services

7-37

and community benefit;

7-38

      (26) The names of persons currently holding a position as an officer, director, board

7-39

member, or senior level management manager who will or will not maintain any position with the

7-40

new hospital and whether any said person will receive any salary, severance stock offering or any

7-41

financial gain, current or deferred, as a result of or in relation to the proposed conversion;

7-42

      (27) Copies of capital and operating budgets or other financial projections for the new

7-43

hospital during the first three (3) years of operation;

7-44

      (28) Copies of plans relative to staffing during the first three (3) years at the new

7-45

hospital;

7-46

      (29) A list of all medical services, departments and clinical services, and administrative

7-47

services which will be maintained at the new hospital;

7-48

      (30) A description of criteria established by the board of directors of the existing hospital

7-49

for pursuing a proposed conversion with one or more health care providers;

7-50

      (31) Copies of reports of any due diligence review performed by each transacting party

7-51

in relation to the proposed conversion. These reports are to be held by the attorney general and

7-52

department of health as confidential and not released to the public regardless of any determination

7-53

made pursuant to section 23-17.14-32 and not withstanding any other provision of the general

7-54

laws;

7-55

      (32) A description of request for proposals issued by the existing hospital relating to

7-56

pursuing a proposed conversion;

7-57

      (33) Copies of reports analyzing affiliations, mergers, or other similar transactions

7-58

considered by any of the transacting parties during the past three (3) years, including, but not

7-59

limited to, reports by appraisers, accountants, investment bankers, actuaries and other experts;

7-60

      (34) A copy of proposed contracts or description of proposed contracts or arrangements

7-61

with management senior managers, board members, officers, or directors of the existing hospital

7-62

for severance consulting services or covenants not to compete following completion of the

7-63

proposed conversion;

7-64

      (35) A copy or description of all agreements or proposed agreements reflecting any

7-65

current and/or future employment or compensated relationship between the acquiror (or any

7-66

related entity) and any officer, director, board member, or senior level manager of the acquiree

7-67

(or any related entity);

8-68

      (36) A copy or description of all agreements executed or anticipated to be executed by

8-69

any of the transacting parties in connection with the proposed conversion;

8-70

      (37) Copies of documents or description of any proposed plan for any entity to be

8-71

created for charitable assets, including but not limited to, endowments, restricted, unrestricted and

8-72

specific purpose funds, the proposed articles of incorporation, by-laws, mission statement,

8-73

program agenda, method of appointment of board members, qualifications of board members,

8-74

duties of board members, and conflict of interest policies;

8-75

      (38) Description of all departments, clinical, social, or other services or medical services

8-76

that will be eliminated or significantly reduced at the new hospital;

8-77

      (39) Description of staffing levels of all categories of employees, including full-time,

8-78

part-time, and contract employees currently working at or providing services to the existing

8-79

hospital and description of any anticipated or proposed changes in current staffing levels;

8-80

      (40) Current, signed original Copies of current conflict of interest forms from all

8-81

incumbent or recently incumbent officers, directors, members of the board, boards of directors or

8-82

trustees, and senior management, managers, including the medical directors, of the transacting

8-83

parties chairpersons or department chairpersons and medical directors on a form acceptable to the

8-84

attorney general; "incumbent or recently incumbent" means those individuals holding the position

8-85

at the time the application is submitted and any individual who held a similar position within one

8-86

year prior to the application's acceptance;

8-87

      (41) If the acquiror is a for profit corporation that has acquired a not for profit hospital

8-88

under the provisions of this chapter, the application shall also include a complete statement of

8-89

performance during the preceding one year with regard to the terms and conditions of approval of

8-90

conversion and each projection, plan, or description submitted as part of the application for any

8-91

conversion completed under an application submitted pursuant to this section and made a part of

8-92

an approval for the conversion pursuant to section 23-17.14-7, or 23-17.14-8 or 23-14.14-19;

8-93

      (42) Copies of IRS Form 990 for any transacting party required by federal law to file

8-94

such a form for each of the five (5) three (3) years prior to the submission of the application.

8-95

      (b) Two (2) copies of the initial application shall be provided to each of the department

8-96

of health and department of the attorney general simultaneously by United States mail, certified,

8-97

return receipt requested. Filings may be submitted electronically if acceptable to the department

8-98

of health and/or attorney general.

8-99

      (c) Except for information determined by the attorney general in accordance with section

8-100

23-17.14-32 to be confidential and/or proprietary, or otherwise required by law to be maintained

8-101

as confidential, the initial application and supporting documentation shall be considered public

8-102

records and shall be available for inspection upon request.

9-1

     23-17.14-7. Review process of the department of attorney general and the

9-2

department of health and review criteria by department of attorney general. -- (a) The

9-3

department of attorney general shall review all conversions involving a hospital in which one or

9-4

more of the transacting parties involves a for profit corporation as the acquiror and a not for profit

9-5

corporation as the acquiree.

9-6

      (b) In reviewing proposed conversions in accordance with this section and section 23-

9-7

17.14-10, the department of attorney general and department of health shall adhere to the

9-8

following process:

9-9

      (1) Within thirty (30) days after receipt of an initial application, the department of

9-10

attorney general and department of health shall jointly advise the applicant, in writing, whether

9-11

the application is complete, and, if not, shall specify all additional information the applicant is

9-12

required to provide;

9-13

      (2) The applicant will submit the additional information within thirty (30) working days.

9-14

If the additional information is submitted within the thirty (30) day period, the department of

9-15

attorney general and department of health will have ten (10) working days within which to

9-16

determine acceptability of the additional information. If the additional information is not

9-17

submitted by the applicant within the thirty (30) day period or if either agency determines the

9-18

additional information submitted by the applicant is insufficient, the application will be rejected

9-19

without prejudice to the applicant's right to resubmit, the rejection to be accompanied by a

9-20

detailed written explanation of the reasons for rejection. If the department of attorney general and

9-21

department of health determine the additional information to be as requested, the applicant will be

9-22

notified, in writing, of the date of acceptance of the application;

9-23

      (3) Within thirty (30) working days after acceptance of the initial application, the

9-24

department of attorney general shall render its determination on confidentiality pursuant to

9-25

section 23-17.14-32 and the department of attorney general and department of health shall publish

9-26

notice of the application in a newspaper of general circulation in the state and shall notify by

9-27

United States mail any person who has requested notice of the filing of the application. The

9-28

notice shall:

9-29

      (i) State that an initial application has been received and accepted for review,

9-30

      (ii) State the names of the transacting parties,

9-31

      (iii) State the date by which a person may submit written comments to the department of

9-32

attorney general or department of health, and

9-33

      (iv) Provide notice of the date, time and place of informational meeting open to the

9-34

public which shall be conducted within sixty (60) days of the date of the notice;

10-1

      (4) The department of attorney general and department of health shall each approve,

10-2

approve with conditions directly related to the proposed conversion, or disapprove the application

10-3

within one hundred and eighty (180) one hundred twenty (120) days of the date of acceptance of

10-4

the application.

10-5

      (c) In reviewing an application pursuant to subsection (a) the department of the attorney

10-6

general shall consider the following criteria:

10-7

      (1) Whether the proposed conversion will harm the public's interest in trust property

10-8

given, devised, or bequeathed to the existing hospital for charitable, educational or religious

10-9

purposes located or administered in this state;

10-10

      (2) Whether a trustee or trustees of any charitable trust located or administered in this

10-11

state will be deemed to have exercised reasonable care, diligence, and prudence in performing as

10-12

a fiduciary in connection with the proposed conversion;

10-13

      (3) Whether the board established appropriate criteria in deciding to pursue a conversion

10-14

in relation to carrying out its mission and purposes;

10-15

      (4) Whether the board formulated and issued appropriate requests for proposals in

10-16

pursuing a conversion;

10-17

      (5) Whether the board considered the proposed conversion as the only alternative or as

10-18

the best alternative in carrying out its mission and purposes;

10-19

      (6) Whether any conflict of interest exists concerning the proposed conversion relative to

10-20

members of the board, officers, directors, senior management, experts or consultants engaged in

10-21

connection with the proposed conversion including, but not limited to, attorneys, accountants,

10-22

investment bankers, actuaries, health care experts, or industry analysts;

10-23

      (7) Whether individuals described in subdivision (c)(6) were provided with contracts or

10-24

consulting agreements or arrangements which included pecuniary rewards based in whole, or in

10-25

part on the contingency of the completion of the conversion;

10-26

      (8) Whether the board exercised due care in engaging consultants with the appropriate

10-27

level of independence, education, and experience in similar conversions;

10-28

      (9) Whether the board exercised due care in accepting assumptions and conclusions

10-29

provided by consultants engaged to assist in the proposed conversion;

10-30

      (10) Whether the board exercised due care in assigning a value to the existing hospital

10-31

and its charitable assets in proceeding to negotiate the proposed conversion;

10-32

      (11) Whether the board exposed an inappropriate amount of assets by accepting in

10-33

exchange for the proposed conversion future or contingent value based upon success of the new

10-34

hospital;

11-1

      (12) Whether officers, directors, board members or senior management will receive

11-2

future contracts in existing, new, or affiliated hospital or foundations;

11-3

      (13) Whether any members of the board will retain any authority in the new hospital;

11-4

      (14) Whether the board accepted fair consideration and value for any management

11-5

contracts made part of the proposed conversion;

11-6

      (15) Whether individual officers, directors, board members or senior management

11-7

engaged legal counsel to consider their individual rights or duties in acting in their capacity as a

11-8

fiduciary in connection with the proposed conversion;

11-9

      (16) Whether the proposed conversion results in an abandonment of the original

11-10

purposes of the existing hospital or whether a resulting entity will depart from the traditional

11-11

purposes and mission of the existing hospital such that a cy pres proceeding would be necessary;

11-12

      (17) Whether the proposed conversion contemplates the appropriate and reasonable fair

11-13

market value;

11-14

      (18) Whether the proposed conversion was based upon appropriate valuation methods

11-15

including, but not limited to, market approach, third party report or fairness opinion;

11-16

      (19) Whether the conversion is proper under the Rhode Island Nonprofit Corporation

11-17

Act;

11-18

      (20) Whether the conversion is proper under applicable state tax code provisions;

11-19

      (21) Whether the proposed conversion jeopardizes the tax status of the existing hospital;

11-20

      (22) Whether the individuals who represented the existing hospital in negotiations

11-21

avoided conflicts of interest;

11-22

      (23) Whether officers, board members, directors, or senior management deliberately

11-23

acted or failed to act in a manner that impacted negatively on the value or purchase price;

11-24

      (24) Whether the formula used in determining the value of the existing hospital was

11-25

appropriate and reasonable which may include, but not be limited to factors such as: the multiple

11-26

factor applied to the "EBITDA" -- earnings before interest, taxes, depreciation, and amortization;

11-27

the time period of the evaluation; price/earnings multiples; the projected efficiency differences

11-28

between the existing hospital and the new hospital; and the historic value of any tax exemptions

11-29

granted to the existing hospital;

11-30

      (25) Whether the proposed conversion appropriately provides for the disposition of

11-31

proceeds of the conversion that may include, but not be limited to:

11-32

      (i) Whether an existing entity or a new entity will receive the proceeds;

11-33

      (ii) Whether appropriate tax status implications of the entity receiving the proceeds have

11-34

been considered;

12-1

      (iii) Whether the mission statement and program agenda will be or should be closely

12-2

related with the purposes of the mission of the existing hospital;

12-3

      (iv) Whether any conflicts of interest arise in the proposed handling of the conversion's

12-4

proceeds;

12-5

      (v) Whether the bylaws and articles of incorporation have been prepared for the new

12-6

entity;

12-7

      (vi) Whether the board of any new or continuing entity will be independent from the new

12-8

hospital;

12-9

      (vii) Whether the method for selecting board members, staff, and consultants is

12-10

appropriate;

12-11

      (viii) Whether the board will comprise an appropriate number of individuals with

12-12

experience in pertinent areas such as foundations, health care, business, labor, community

12-13

programs, financial management, legal, accounting, grant making and public members

12-14

representing diverse ethnic populations and the interests of the affected community;

12-15

      (ix) Whether the size of the board and proposed length of board terms are sufficient;

12-16

      (26) Whether the transacting parties are in compliance with the Charitable Trust Act,

12-17

chapter 9 of title 18; and

12-18

      (27) Whether a right of first refusal to repurchase the assets has been retained; .

12-19

      (28) Whether the character, commitment, competence and standing in the community, or

12-20

any other communities served by the transacting parties are satisfactory;

12-21

      (29) Whether a control premium is an appropriate component of the proposed

12-22

conversion; and

12-23

      (30) Whether the value of assets factored in the conversion is based on past performance

12-24

or future potential performance.

12-25

     23-17.14-9. Initial application -- Conversions limited to not-for-profit corporations. -

12-26

- All conversions which are limited to not-for-profit corporations which involve the

12-27

establishment, maintenance, or operation of a hospital require prior approval of both the

12-28

department of attorney general and the department of health or, if eligible for expedited review

12-29

under section 23-17.14-12.1, prior approval of the department of health and subject to the

12-30

authority of the attorney general pursuant to section 23-17.14-21 hereof. The review by the two

12-31

(2) departments shall occur concurrently and neither department shall delay its review or

12-32

determination because the other department has not completed its review or issued its

12-33

determination. The applicant may request that the review by the departments occur concurrently

12-34

with the review of any relevant federal regulatory authority. The transacting parties shall file an

13-1

initial application pursuant to the provisions set forth in section 23-17.14-6 or section 23-17.14-

13-2

12.1.

13-3

     23-17.14-10. Review process of department of attorney general and department of

13-4

health and criteria by department of attorney general -- Conversions limited to not-for-

13-5

profit corporations. -- (a) In reviewing an application of a conversion involving a hospital in

13-6

which the transacting parties are limited to not-for-profit corporations, except as provided in

13-7

section 23-17.14-12.1, the department of attorney general and department of health shall adhere

13-8

to the following process:

13-9

      (1) Within thirty (30) days after receipt of an initial application, the department of

13-10

attorney general and department of health shall jointly advise the applicant, in writing, whether

13-11

the application is complete, and, if not, shall specify all additional information the applicant is

13-12

required to provide;

13-13

      (2) The applicant will submit the additional information within thirty (30) working days.

13-14

If the additional information is submitted within the thirty (30) day period, the department of

13-15

attorney general and department of health will have ten (10) working days within which to

13-16

determine acceptability of the additional information. If the additional information is not

13-17

submitted by the applicant within the thirty (30) day period or if either agency determines the

13-18

additional information submitted by the applicant is insufficient, the application will be rejected

13-19

without prejudice to the applicant's right to resubmit, the rejection to be accompanied by a

13-20

detailed written explanation of the reasons for rejection. If the department of attorney general and

13-21

department of health determine the additional information to be as requested, the applicant will be

13-22

notified, in writing, of the date of acceptance of the application;

13-23

      (3) Within thirty (30) working days after acceptance of the initial application, the

13-24

department of attorney general shall render its determination on confidentiality pursuant to

13-25

section 23-17.14-32 and the department of attorney general and department of health shall publish

13-26

notice of the application in a newspaper of general circulation in the state and shall notify by

13-27

United States mail any person who has requested notice of the filing of the application. The

13-28

notice shall:

13-29

      (i) State that an initial application has been received and accepted for review,

13-30

      (ii) State the names of the transacting parties,

13-31

      (iii) State the date by which a person may submit written comments to the department of

13-32

attorney general or department of health, and

13-33

      (iv) Provide notice of the date, time and place of informational meeting open to the

13-34

public which shall be conducted within sixty (60) days of the date of the notice;

14-1

      (4) The department of attorney general and department of health shall each approve,

14-2

approve with conditions directly related to the proposed conversion, or disapprove the application

14-3

within one hundred and eighty (180) one hundred twenty (120) days of the date of acceptance of

14-4

the application.

14-5

      (b) In reviewing an application of a conversion involving a hospital in which the

14-6

transacting parties are limited to not-for-profit corporations, the department of attorney general

14-7

may consider the following criteria:

14-8

      (1) Whether the proposed conversion will harm the public's interest in trust property

14-9

given, devised, or bequeathed to the existing hospital for charitable, educational or religious

14-10

purposes located or administered in this state;

14-11

      (2) Whether a trustee or trustees of any charitable trust located or administered in this

14-12

state will be deemed to have exercised reasonable care, diligence, and prudence in performing as

14-13

a fiduciary in connection with the proposed conversion;

14-14

      (3) Whether the board established appropriate criteria in deciding to pursue a conversion

14-15

in relation to carrying out its mission and purposes;

14-16

      (4) Whether the board considered the proposed conversion as the only alternative or as

14-17

the best alternative in carrying out its mission and purposes;

14-18

      (5) Whether any conflict of interest exists concerning the proposed conversion relative to

14-19

members of the board, officers, directors, senior management, experts or consultants engaged in

14-20

connection with the proposed conversion including, but not limited to, attorneys, accountants,

14-21

investment bankers, actuaries, health care experts, or industry analysts;

14-22

      (6) Whether individuals described in subdivision (b)(5) were provided with contracts or

14-23

consulting agreements or arrangements which included pecuniary rewards based in whole, or in

14-24

part on the contingency of the completion of the conversion;

14-25

      (7) Whether the board exercised due care in engaging consultants with the appropriate

14-26

level of independence, education, and experience in similar conversions;

14-27

      (8) Whether the board exercised due care in accepting assumptions and conclusions

14-28

provided by consultants engaged to assist in the proposed conversion;

14-29

      (9) Whether officers, directors, board members or senior management will receive future

14-30

contracts;

14-31

      (10) Whether any members of the board will retain any authority in the new hospital;

14-32

      (11) Whether the board accepted fair consideration and value for any management

14-33

contracts made part of the proposed conversion;

15-34

     (12) Whether individual officers, directors, board members or senior management

15-35

engaged legal counsel to consider their individual rights or duties in acting in their capacity as a

15-36

fiduciary in connection with the proposed conversion;

15-37

      (13) Whether the proposed conversion results in an abandonment of the original

15-38

purposes of the existing hospital or whether a resulting entity will depart from the traditional

15-39

purposes and mission of the existing hospital such that a cy pres proceeding would be necessary;

15-40

      (14) Whether the proposed conversion contemplates the appropriate and reasonable fair

15-41

market value;

15-42

      (15) Whether the proposed conversion was based upon appropriate valuation methods

15-43

including, but not limited to, market approach, third-party report or fairness opinion;

15-44

      (16) Whether the conversion is proper under the Rhode Island Nonprofit Corporation

15-45

Act;

15-46

      (17) Whether the conversion is proper under applicable state tax code provisions;

15-47

      (18) Whether the proposed conversion jeopardizes the tax status of the existing hospital;

15-48

      (19) Whether the individuals who represented the existing hospital in negotiations

15-49

avoided conflicts of interest;

15-50

      (20) Whether officers, board members, directors, or senior management deliberately

15-51

acted or failed to act in a manner that impacted negatively on the value or purchase price;

15-52

      (21) Whether the transacting parties are in compliance with the Charitable Trust Act,

15-53

chapter 9 of title 18.

15-54

     23-17.14-11. Criteria for the department of health -- Conversions limited to not-for-

15-55

profit corporations. -- In reviewing an application of a conversion involving a hospital in which

15-56

the transacting parties are limited to not-for-profit corporations, the department shall consider the

15-57

following criteria:

15-58

      (1) Whether the character, commitment, competence, and standing in the community, or

15-59

any other communities served by the proposed transacting parties are satisfactory;

15-60

      (2) Whether sufficient safeguards are included to assure the affected community

15-61

continued access to affordable care;

15-62

      (3) Whether the transacting parties have provided satisfactory evidence that the new

15-63

hospital will provide health care and appropriate access with respect to traditionally underserved

15-64

populations in the affected community;

15-65

      (4) Whether procedures or safeguards are assured to insure that ownership interests will

15-66

not be used as incentives for hospital employees or physicians to refer patients to the hospital;

15-67

      (5) Whether the transacting parties have made a commitment to assure the continuation

15-68

of collective bargaining rights, if applicable, and retention of the workplace workforce;

16-1

      (6) Whether the transacting parties have appropriately accounted for employment needs

16-2

at the facility and addressed workforce retraining needed as a consequence of any proposed

16-3

restructuring;

16-4

      (7) Whether the conversion demonstrates that the public interest will be served

16-5

considering the essential medical services needed to provide safe and adequate treatment,

16-6

appropriate access and balanced health care delivery to the residents of the state.

16-7

     23-17.14-13. Reports, use of experts, costs. -- The department of health or the

16-8

department of attorney general may in effectuating the purposes of this chapter engage experts or

16-9

consultants including, but not limited to, actuaries, investment bankers, accountants, attorneys, or

16-10

industry analysts. All copies of reports prepared by experts and consultants, and costs associated

16-11

with the reports, shall be made available to the transacting parties and to the public. All costs

16-12

incurred under this provision shall be the responsibility of one or more transacting parties in an

16-13

amount to be determined by the attorney general or the director as they deem appropriate and

16-14

consistent with 23-17.14-12.1, if applicable. No application for a conversion made pursuant to the

16-15

requirements of this chapter shall be considered complete unless an agreement has been executed

16-16

with the attorney general or the director for the payment of costs in accordance with this section.

16-17

     23-17.14-19. Limits to acquisitions -- Community benefits requirements -- Filings

16-18

prohibited. -- (a) In effectuating the purposes of this chapter to evaluate, review and monitor the

16-19

new phenomenon of for-profit corporations gaining an interest in hospitals and the resulting

16-20

impact on the delivery of healthcare in the state, limitations on for-profit corporations involved in

16-21

hospital conversions are necessary Notwithstanding any other provisions in this chapter, nothing

16-22

herein shall be construed to prohibit a for-profit hospital, its subsidiaries or affiliates, from

16-23

applying for and receiving approval of a conversion of more than one hospital in the same year,

16-24

or any subsequent year, and each such application shall require review and approval from the

16-25

attorney general and the department of health in accordance with the provisions of this chapter.

16-26

      (b) No for-profit corporation, or its subsidiaries or affiliates, which applies for and

16-27

receives approval of a conversion of a hospital in accordance with the provisions of this chapter

16-28

shall be permitted to apply for approval of a conversion of a second hospital in this state for a

16-29

period of at least three (3) years after the initial conversion is finalized and implemented. This

16-30

subsection shall not be deemed to prohibit a for-profit corporation, together with its subsidiaries

16-31

and affiliates, from applying for or receiving approval of a conversion of two (2) affiliated

16-32

hospitals in this state provided that: (1) one of the two (2) hospital licenses involved in the

16-33

conversion was issued prior to July 22, 1997; and (2) this license involves a specialty

16-34

rehabilitation hospital that has a maximum of ninety (90) beds. A conversion undertaken pursuant

17-1

to this provision shall be considered one conversion and a for-profit corporation which receives

17-2

approval for the conversion shall be subject to the three (3) year period between the finalization

17-3

and implementation of a first conversion and the application for a second conversion as set forth

17-4

in this subsection.

17-5

      (c)(b) In the event that a for-profit corporation applies to hold, own, or acquire an

17-6

ownership or controlling interest greater than twenty percent (20%) in more than one for

17-7

conversion of an additional hospital one year subsequent to the finalization and implementation

17-8

of a prior license, all provisions of this chapter must be met. and, in In addition to the review

17-9

process and criteria set forth in this chapter, the department shall have the sole authority and

17-10

discretion to determine:

17-11

      (1) Whether the for-profit corporation provided community benefits as required or

17-12

promised in connection with obtaining and holding a license or interest therein during the

17-13

previous license period;

17-14

      (2) Whether all terms and conditions of the prior license have been met, including but

17-15

not limited to, the conditions in sections 23-17.14-19(b) and section 23-17.14-15;

17-16

      (3) Whether all federal, state and local laws, ordinances and regulations have been

17-17

complied with relative to any prior license;

17-18

      (4) Whether the for-profit corporation planned, implemented, monitored and reviewed a

17-19

community benefit program during the prior license period;

17-20

      (5) Whether the for-profit corporation maintained, enhanced or disrupted the essential

17-21

medical services in the affected community or the state;

17-22

      (6) Whether the for-profit corporation provided an appropriate amount of charity care

17-23

necessary to maintain or enhance a safe and accessible healthcare delivery system in the affected

17-24

community and the state; and

17-25

      (7) Whether the for-profit corporation demonstrated a substantial linkage between the

17-26

hospital and the affected community by providing one or more of the following benefits;

17-27

uncompensated care, charity care, cash or in kind donations to community programs, education

17-28

and training of professionals in community health issues, relevant research initiatives or essential

17-29

but unprofitable medical services if needed in the affected community.

17-30

      (d)(c) The director may hold a public hearing to solicit input to assess the performance of

17-31

a for-profit corporation or its affiliates or subsidiaries in providing community benefits in the

17-32

affected community or the state.

17-33

      (e) The director shall have the sole authority to deny a for-profit corporation, its affiliates

17-34

or subsidiaries, or successors, permission for one or more than one license and, for good cause,

18-1

may prohibit a for-profit corporation or its affiliates or subsidiaries from filing an application

18-2

pursuant to this chapter for a period not to exceed ten (10) years.

18-3

     23-17.14-28. Concurrent approval -- License. – (a) The director may consider the

18-4

requirement of this chapter and the requirements of sections 23-17-1 -- 23-17-45 together upon

18-5

completion of the initial application. The director may approve, approve with conditions, or

18-6

disapprove one or both requests filed pursuant to this chapter, including expedited review under

18-7

section 12.1, and sections 23-17-1 -- 23-17-45. The approvals of the director required by this

18-8

chapter shall be subject to chapter 35 of title 42. For any conversion subject to this chapter, the

18-9

director may combine any hearings required by this chapter with any hearings on similar or

18-10

related matters required by sections 23-17-1 -- 23-17-45 and shall consider issues of market share

18-11

especially as they affect quality, access, and affordability of services.

18-12

     (b) Any approval of a conversion involving a for-profit corporation as an acquiror shall

18-13

be subject to any conditions as determined by the director of health, provided those conditions

18-14

relate to the purpose of this chapter. Said conditions may include, but not be limited to, the

18-15

conditions contained in this subsection. In the event the director determines that one or more of

18-16

the conditions contained in this subsection are not appropriate or desirable in a particular

18-17

conversion, the director shall include the rationale for not including such condition(s) in any

18-18

approval.

18-19

     (1) Maintain a governing body for each converted hospital whose membership shall

18-20

include uncompensated, independent individuals who reside in Rhode Island;

18-21

     (2) Make a financially reasonable contribution to support the state’s coordinated health

18-22

planning process;

18-23

     (3) Adhere to reasonable restrictions on financial incentives to patient or health plan

18-24

enrollees to receive hospital services outside of the state of Rhode Island;

18-25

     (4) Keep the new hospital open and operational for a reasonable minimum period of time;

18-26

     (5) Make a reasonable minimum investment to support primary care in the Rhode Island

18-27

communities served by the new hospital;

18-28

     (6) Not enter into any contract or other service or purchasing arrangements with an

18-29

affiliated legal entity except for contracts or arrangements to provide services or products that are

18-30

reasonably necessary to accomplish the health care purposes of the relevant hospital and for

18-31

compensation that is consistent with fair market value for the services actually rendered, or the

18-32

products actually provided;

18-33

     (7) Report to the director on annual distributions of profit to owners; and

19-34

     (8) Require that any corporate allocation, or equivalent charge, to any affiliated

19-35

organization(s) in any hospital fiscal year not exceed reasonable fair market value for the services

19-36

rendered or the assets purchased or leased from such affiliate.

19-37

     (c) Any approval of a conversion involving a for-profit corporation as an acquiror shall

19-38

be subject to any conditions as determined by the attorney general, provided those conditions

19-39

relate to the purpose of this chapter. Said conditions may include, but not be limited to, the

19-40

acquiror’s adherence to a minimum investment to protect the assets, financial health, and well-

19-41

being of the new hospital and for community benefit. In the event the attorney general determines

19-42

that the conditions contained in this subsection are not appropriate or desirable in a particular

19-43

conversion, the attorney general shall include the rationale for not including such condition(s) in

19-44

any approval.

19-45

     (d) For a period of three (3) years following the effective date of the conversion, when

19-46

approval of a conversion involves a for-profit corporation as an acquiror:

19-47

     (1) The acquiror shall file reports with the department and the attorney general on or

19-48

before March 1st of each calendar year detailing compliance with the conditions in subsection (b)

19-49

and any other conditions on the conversion approval or license of the new hospital. Failure to

19-50

comply with any of such conditions or the charity care requirements contained in section 23-

19-51

17.14-15 shall be cause for penalties to be applied in accordance with section 23-17.14-30;

19-52

     (2) The department of health and the department of attorney general shall monitor, assess

19-53

and evaluate the acquiror’s compliance with all of the conditions of approval, as well as annually

19-54

review the impact of the conversion on health care costs and services within the communities

19-55

served; and

19-56

     (3) The acquiror shall pay for the costs of the department of health and the department of

19-57

attorney general in performing such monitoring, evaluation and assessment in an amount to be

19-58

determined by the attorney general or the director as they deem appropriate, which should be

19-59

placed in escrow during the term of the monitoring period. No application for a conversion made

19-60

pursuant to the requirements of this chapter shall be approved unless an agreement has been

19-61

executed with the attorney general and the director for the payment of reasonable costs in

19-62

accordance with this section.

19-63

     23-17.14-31. Powers of the department of health. -- The department may adopt rules,

19-64

including measurable standards, as may be necessary to accomplish the purpose of this chapter. In

19-65

doing so, the department shall review other departmental regulations that may have duplicative

19-66

requirements, including change of effective control regulations and processes, determination of

19-67

need requirements and application requirements under section 23-17.14-18, if applicable, and

19-68

may streamline the process by eliminating duplicative requirements and providing for concurrent

20-1

regulatory review and combined hearings to the maximum extent possible to promote efficiency

20-2

and avoid duplication of effort and resources.

20-3

     23-17.14-34. Judicial review. -- Any transacting party aggrieved by a final order of the

20-4

department of health under this chapter may seek judicial review in the superior court in

20-5

accordance with section 42-35-15. Any transacting party aggrieved by a final order of the

20-6

attorney general under this chapter may seek judicial review by original action filed in the

20-7

superior court.

20-8

     (a) Notwithstanding any other provision of the general laws, any transacting party

20-9

aggrieved by a final order of the department of health or the attorney general under this chapter

20-10

may seek judicial review by original action filed in the superior court. Any preliminary,

20-11

procedural, or intermediate agency act or ruling with respect to the filing of an application for

20-12

conversion, including the completeness of the application, confidentiality of any information or

20-13

documents produced in connection with a conversion, approval or disapproval of a conversion

20-14

and conditions or restrictions proposed or determined with the respect to the approval of a

20-15

proposed conversion, is immediately reviewable.

20-16

     (b) Any action brought under this section shall be given priority by the superior court.

20-17

     (c) In performing such review the superior court shall consider and balance the

20-18

reasonable interests of the transacting parties and the reasonable interest of the citizens of the

20-19

state in a safe, accessible, and affordable healthcare system.

20-20

     (d) The court may affirm the decision of the agency or remand the case for further

20-21

proceedings, or it may reverse or modify the decision if substantial rights of the appellant have

20-22

been prejudiced because the administrative findings, inferences, conclusions, or decisions are:

20-23

     (1) Unreasonable;

20-24

     (2) In violation of constitutional or statutory provisions;

20-25

     (3) In excess of the statutory authority of the agency;

20-26

     (4) Made upon unlawful procedure;

20-27

     (5) Affected by other error or law;

20-28

     (6) Clearly erroneous in view of the reliable, probative, and substantial evidence on the

20-29

whole record; or

20-30

     (7) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted

20-31

exercise of discretion.

20-32

     SECTION 2. Chapter 23-17.14 of the General Laws entitled "The Hospital Conversions

20-33

Act" is hereby amended by adding thereto the following section:

21-34

     23-17.14-12.1. Expedited review for unaffiliated community hospitals. – (a)

21-35

Notwithstanding subsection 23-17.14-6(a) and section 23-17.14-10 of this chapter if a proposed

21-36

conversion involves: (1) Two (2) or more hospitals that are not in common control with another

21-37

hospital; or (2) One hospital not under common control with another hospital and a hospital

21-38

system parent corporation; or (3) Two (2) affiliated hospitals the conversion of which was

21-39

previously approved in accordance with chapter 23-17.14 and another hospital or hospital system

21-40

parent corporation, such conversion will be reviewed under an expedited review process

21-41

conducted solely by the department of health (without derogation of the authority of the attorney

21-42

general in accordance with section 23-17.14-21), only if the acquiree and acquiror are both

21-43

nonprofit corporations exempt from taxation under section 501(a) of the United States Internal

21-44

Revenue Service Code as organizations described in section 501(c)(3) of such code, or any

21-45

successor provisions, and:

21-46

     (1) The acquiree and acquiror are both nonprofit corporations that have directly or

21-47

indirectly continuously operated at least one licensed hospital for at least the preceding three (3)

21-48

years; and

21-49

     (2) The acquiree operates a distressed Rhode Island hospital facing significant financial

21-50

hardship that may impair its ability to continue to operate effectively without the proposed

21-51

conversion and has been determined to be distressed by the director of health based upon whether

21-52

the hospital meets one or more of the following criteria:

21-53

     (i) Operating loss for the two (2) most recently completed fiscal years;

21-54

     (ii) Less than fifty (50) days cash-on-hand;

21-55

     (iii) Current asset to liability ratio of less than one point five (1.5);

21-56

     (iv) Long-term debt to capitalization greater than seventy-five percent (75%);

21-57

     (v) Inpatient occupancy rate of less than fifty percent (50%);

21-58

     (vi) Would be classified as below investment grade by a major rating agency.

21-59

     (b) The transacting parties shall file an initial application pursuant to this section which

21-60

shall include the following information with respect to each transacting party and the proposed

21-61

conversion:

21-62

     (1) A detailed summary of the proposed conversion;

21-63

     (2) Charter, articles of incorporation or certificate of incorporation for the transacting

21-64

parties and their affiliated hospitals, including amendments thereto;

21-65

     (3) Bylaws and organizational charts for the transacting parties and their affiliated

21-66

hospitals;

21-67

     (4) Organizational structure for the transacting parties and each partner, affiliate, parent,

21-68

subsidiary or related legal entity in which either transacting party has a twenty percent (20%) or

22-1

greater ownership interest or control;

22-2

     (5) All documents, reports, meeting minutes and presentations relevant to the transacting

22-3

parties’ board of directors' decision to propose the conversion;

22-4

     (6) Conflict of interest policies and procedures;

22-5

     (7) Copies of audited income statements, balance sheets, and other financial statements

22-6

for the past three (3) years for the transacting parties and their affiliated hospitals where

22-7

appropriate and to the extent they have been made public, audited interim financial statements

22-8

and income statements together with detailed descriptions of the financing structure of the

22-9

proposed conversion including equity contribution, debt restructuring, stock issuance and

22-10

partnership interests;

22-11

     (8) Copies of reports analyzing the proposed conversion during the past three (3) years

22-12

including, but not limited to, reports by appraisers, accountants, investment bankers, actuaries and

22-13

other experts;

22-14

     (9) Copies of current conflict of interest forms from all incumbent or recently incumbent

22-15

officers, members of the board of directors or trustees and senior managers of the transacting

22-16

parties; "incumbent or recently incumbent" means those individuals holding the position at the

22-17

time the application is submitted and any individual who held a similar position within one year

22-18

prior to the application's acceptance;

22-19

     (10) Copies of all documents related to: (i) Identification of all current charitable assets;

22-20

(ii) Accounting of all charitable assets for the past three (3) years; and (iii) Distribution of

22-21

charitable assets for the past three (3) years including, but not limited to, endowments, restricted,

22-22

unrestricted and specific purpose funds as each relates to the proposed conversion;

22-23

     (11) A description of the plan as to how the affiliated hospitals will provide consolidated

22-24

healthcare services during the first three (3) years following the conversion;

22-25

     (12) Copies of plans for all hospital departments and services that will be eliminated or

22-26

significantly reduced during the first three (3) years following the conversion; and

22-27

     (13) Copies of plans relative to staffing levels for all categories of employees during the

22-28

first three (3) years following the conversion.

22-29

     (c) In reviewing an application under an expedited review process, the department shall

22-30

consider the criteria in section 23-17.14-11.

22-31

     (d) Within twenty (20) working days of receipt by the department of an application

22-32

satisfying the requirements of subsection (b) above, the department will notify and afford the

22-33

public an opportunity to comment on the application.

23-34

     (e) The decision of the department shall be rendered within ninety (90) days of

23-35

acceptance of the application under this section.

23-36

     (f) Costs payable by the transacting parties under section 23-17.14-13 in connection with

23-37

an expedited review by the department under this section shall not exceed twenty-five thousand

23-38

dollars ($25,000) per one hundred million dollars ($100,000,000) of total net patient service

23-39

revenue of the acquiree and acquiror in the most recent fiscal year for which audited financial

23-40

statements are available.

23-41

     (g) Following a conversion, the new hospital shall provide on or before March 1 of each

23-42

calendar year a report in a form acceptable to the director containing all updated financial

23-43

information required to be disclosed pursuant to subdivision 23-17.14-12.1(b)(7).

23-44

     (h) If an expedited review is performed by the department pursuant to this section, the

23-45

department of attorney general shall perform a review of the proposed transaction as it deems

23-46

necessary, including, at a minimum, its impact upon the charitable assets of the transacting

23-47

parties. The attorney general’s review shall be done concurrently with the department of health

23-48

review and shall not extend the length of the review process. For this review, the department of

23-49

attorney general shall be entitled to costs in accordance with section 23-17.14-13 and subsection

23-50

23-17.14-12.1(f).

23-51

     SECTION 3. Section 23-81-4 of the General Laws in Chapter 23-81 entitled "Rhode

23-52

Island Coordinated Health Planning Act of 2006" is hereby amended to read as follows:

23-53

     23-81-4. Powers of the health care planning and accountability advisory council. --

23-54

Powers of the council shall include, but not be limited to the following:

23-55

      (a) The authority to develop and promote studies, advisory opinions and to recommend a

23-56

unified health plan on the state's health care delivery and financing system, including but not

23-57

limited to:

23-58

      (1) Ongoing assessments of the state's health care needs and health care system capacity

23-59

that are used to determine the most appropriate capacity of and allocation of health care

23-60

providers, services, including transportation services, and equipment and other resources, to meet

23-61

Rhode Island's health care needs efficiently and affordably. These assessments shall be used to

23-62

advise the "determination of need for new health care equipment and new institutional health

23-63

services" or "certificate of need" process through the health services council;

23-64

      (2) The establishment of Rhode Island's long range health care goals and values, and the

23-65

recommendation of innovative models of health care delivery, that should be encouraged in

23-66

Rhode Island;

23-67

      (3) Health care payment models that reward improved health outcomes;

24-68

      (4) Measurements of quality and appropriate use of health care services that are designed

24-69

to evaluate the impact of the health planning process;

24-70

      (5) Plans for promoting the appropriate role of technology in improving the availability

24-71

of health information across the health care system, while promoting practices that ensure the

24-72

confidentiality and security of health records; and

24-73

      (6) Recommendations of legislation and other actions that achieve accountability and

24-74

adherence in the health care community to the council's plans and recommendations.

24-75

      (b) Convene meetings of the council no less than every sixty (60) days, which shall be

24-76

subject to the open meetings laws and public records laws of the state, and shall include a process

24-77

for the public to place items on the council's agenda.

24-78

      (c) Appoint advisory committees as needed for technical assistance throughout the

24-79

process.

24-80

      (d) Modify recommendations in order to reflect changing health care systems needs.

24-81

      (e) Promote responsiveness to recommendations among all state agencies that provide

24-82

health service programs, not limited to the five (5) state agencies coordinated by the executive

24-83

office of the health and human services.

24-84

      (f) Coordinate the review of existing data sources from state agencies and the private

24-85

sector that are useful to developing a unified health plan.

24-86

      (g) Formulating, testing, and selecting policies and standards that will achieve desired

24-87

objectives.

24-88

      (h) Provide an annual report each July, after the convening of the council, to the

24-89

governor and general assembly on implementation of the plan adopted by the council. This

24-90

annual report shall:

24-91

      (1) Present the strategic recommendations, updated annually;

24-92

      (2) Assess the implementation of strategic recommendations in the health care market;

24-93

      (3) Compare and analyze the difference between the guidance and the reality;

24-94

        (4) Recommend to the governor and general assembly legislative or regulatory

24-95

revisions necessary to achieve the long term long-term goals and values adopted by the council as

24-96

part of its strategic recommendations, and assess the powers needed by the council or

24-97

governmental entities of the state deemed necessary and appropriate to carry out the

24-98

responsibilities of the council. The initial priority of the council shall be an assessment of the

24-99

needs of the state with regard to hospital services and to present recommendations, if any, for

24-100

modifications to the Hospital Conversion Act and the Certificate of Need Program to execute the

24-101

strategic recommendations of the council. The council shall provide an initial report and

24-102

recommendations to the governor and general assembly on or before March 1, 2013.

25-1

      (5) Include the request for a hearing before the appropriate committees of the general

25-2

assembly.

25-3

      (6) Include a response letter from each state agency that is affected by the state health

25-4

plan describing the actions taken and planned to implement the plans recommendations.

25-5

     SECTION 4. This act shall take effect upon passage.

=======

LC00326/SUB A/3

========

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO HEALTH AND SAFETY - THE HOSPITAL CONVERSIONS ACT

***

26-1

     This act would comprehensively revise the Hospital Conversions Act.

26-2

     This act would take effect upon passage.

=======

LC00326/SUB A/3

=======