2020 -- H 7309 | |
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LC003082 | |
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STATE OF RHODE ISLAND | |
IN GENERAL ASSEMBLY | |
JANUARY SESSION, A.D. 2020 | |
____________ | |
A N A C T | |
RELATING TO HEALTH AND SAFETY - THE HOSPITAL CONVERSION ACT | |
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Introduced By: Representatives Bennett, McEntee, Solomon, Johnston, and Casimiro | |
Date Introduced: January 24, 2020 | |
Referred To: House Finance | |
It is enacted by the General Assembly as follows: | |
1 | SECTION 1. Section 23-17-13.1 of the General Laws in Chapter 23-17 entitled |
2 | "Licensing of Health-Care Facilities" is hereby amended to read as follows: |
3 | 23-17-13.1. Health services council. |
4 | (a) There shall be established a health services council consisting of twelve (12) |
5 | members, four (4) of whom shall be appointed by the speaker of the house, one who shall be an |
6 | expert in healthcare economic and policy matters, and a second who shall represent the insurance |
7 | business; four (4) of whom shall be appointed by the president of the senate, one who shall |
8 | represent the business community, and a second who shall represent the general public; and four |
9 | (4) of whom shall be appointed by the governor, one who shall represent the office of the health |
10 | insurance commissioner, a second who shall represent the executive office of health and human |
11 | services, a third who shall represent the health insurance business, and a fourth who shall |
12 | represent the executive office of commerce. All members shall serve until the first day of July in |
13 | the third year after appointment or until their respective successors are appointed and qualified. |
14 | Any vacancy of a member appointed that may occur in the council shall be filled by appointment |
15 | by the respective appointing authority for the remainder of the unexpired term. The council may |
16 | also serve as an advisory council as authorized by § 23-16-3. twenty-four (24) members, eight (8) |
17 | of whom shall be appointed by the speaker of the house, one of whom shall represent hospital |
18 | service corporations, six (6) of whom shall be appointed by the president of the senate, one of |
19 | whom shall represent hospitals and one of whom shall represent the business community, and ten |
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1 | (10) of whom shall be appointed by the governor, one of whom shall represent the state budget |
2 | office, one of whom shall represent the department of human services and two (2) of whom shall |
3 | be members of the general public that maintain their principal residence within fifteen hundred |
4 | feet (1500') of a licensed hospital. The governor shall appoint members of the council in |
5 | staggered appointments, three (3) members one year, two (2) members the next year, and two (2) |
6 | members the year after that. All members shall serve until their successors are appointed and |
7 | qualified. In the month of February in each year, the governor shall appoint successors to the |
8 | members of the council whose terms shall expire in that year, to hold office commencing on the |
9 | first day of March in the year of appointment until the first day of March in the third year after |
10 | appointment or until their respective successors are appointed and qualified. Any vacancy of an |
11 | appointed member which may occur in the commission shall be filled by appointment by the |
12 | respective appointing authority for the remainder of the unexpired term. The council may also |
13 | serve as an advisory council as authorized by § 23-16-3. |
14 | (b) A person may not be a member of the health services council if the person is required |
15 | to register as a lobbyist as defined under chapter 139 of title 42. |
16 | (c) Notwithstanding any laws, rules, or regulations to the contrary, all recommendations |
17 | of the health services council shall be by a majority vote of its members present at the time the |
18 | vote is taken. |
19 | SECTION 2. Sections 23-17.14-6, 23-17.14-7, 23-17.14-8, 23-17.14-11, 23-17.14-12.1, |
20 | 23-17.14-14, 23-17.14-17, 23-17.14-28 and 23-17.14-30 of the General Laws in Chapter 23-17.14 |
21 | entitled "The Hospital Conversions Act" are hereby amended to read as follows: |
22 | 23-17.14-6. Initial application -- Conversions involving for-profit corporations or |
23 | not-for-profit as acquirors. |
24 | (a) No person shall engage in a conversion with a for profit corporation as the acquiror |
25 | and a not-for-profit corporation as the acquiree involving the establishment, maintenance, or |
26 | operation of a hospital or a conversion subject to § 23-17.14-9 without prior approval of both the |
27 | department of attorney general and the department of health. The review of the two (2) |
28 | departments shall occur concurrently, and neither department shall delay its review or |
29 | determination because the other department has not completed its review or issued its |
30 | determination. The applicant may request that the review by the departments occur concurrently |
31 | with the review of any relevant federal regulatory authority. The transacting parties shall file an |
32 | initial application in accordance with subsection (b) of this section that shall, at minimum, include |
33 | the following information with respect to each transacting party and to the proposed new hospital: |
34 | (1) A detailed summary of the proposed conversion; |
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1 | (2) Names, addresses and phone numbers of the transacting parties; |
2 | (3) Name, address, phone number, occupation, and tenure of all officers, members of the |
3 | board of directors, trustees, executives, and senior managers, including for each position, current |
4 | persons and persons holding such position during the past two (2) years; |
5 | (4) A list of all committees, subcommittees, task forces, or similar entities of the board of |
6 | directors or trustees, including a short description of the purpose of each committee, |
7 | subcommittee, task force, or similar entity and the name, address, phone number, occupation, and |
8 | tenure of each member; |
9 | (5) Agenda and minutes of all meetings of the board of directors or trustees and any of its |
10 | committees, subcommittees, task forces related to the conversion, or similar entities excluding |
11 | those focused on peer review and confidential medical matters, that occurred within the two (2) |
12 | year period prior to submission of the application, including, upon the request of the department |
13 | or attorney general, any meeting packages; |
14 | (6) Articles of incorporation and certificate of incorporation; |
15 | (7) Bylaws and organizational charts; |
16 | (8) Organizational structure for existing transacting parties and each partner, affiliate, |
17 | parent, subsidiary or related corporate entity in which the acquiror has a twenty percent (20%) or |
18 | greater ownership interest; |
19 | (9) Conflict of interest statements, policies and procedures; |
20 | (10) Names, addresses and phone numbers of professional consultants engaged in |
21 | connection with the proposed conversion; |
22 | (11) Copies of audited income statements, balance sheets, other financial statements, and |
23 | management letters for the past three (3) years and to the extent they have been made public, |
24 | audited interim financial statements and income statements together with detailed description of |
25 | the financing structure of the proposed conversion including equity contribution, debt |
26 | restructuring, stock issuance, partnership interests, stock offerings and the like; |
27 | (12) A detailed description of real estate issues including title reports for land owned and |
28 | lease agreements concerning the proposed conversion; |
29 | (13) A detailed description as each relates to the proposed transaction for equipment |
30 | leases, insurance, regulatory compliance, tax status, pending litigation or pending regulatory |
31 | citations, pension current retirement plan descriptions and other employee benefits benefit plan |
32 | descriptions, as well as any planned changes thereto, environmental reports, assessments and |
33 | organizational goals; |
34 | (14) Copies of reports analyzing the proposed conversion during the past three (3) years |
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1 | including, but not limited to, reports by appraisers, accountants, investment bankers, actuaries and |
2 | other experts; |
3 | (15) Copies of any opinions or memoranda addressing the state and federal tax |
4 | consequences of the proposed conversion prepared for a transacting party by an attorney, |
5 | accountant, or other expert; |
6 | (16) A description of the manner in which the price was determined including which |
7 | methods of valuation and what data were used, and the names and addresses of persons preparing |
8 | the documents, and this information is deemed to be proprietary; |
9 | (17) Patient statistics for the past three (3) years and patient projections for the next one |
10 | year including patient visits, admissions, emergency room visits, clinical visits, and visits to each |
11 | department of the hospital, admissions to nursing care or visits by affiliated home health care |
12 | entities; |
13 | (18) The name and mailing address of all licensed facilities in which the for-profit |
14 | corporation maintains an ownership interest or controlling interest or operating authority; |
15 | (19) A list of pending or adjudicated citations, violations, deficiencies or charges against |
16 | the facilities listed in subdivision (a)(18) brought by any governmental agency or accrediting |
17 | agency, including all documentation and communications to and from the joint commission on |
18 | accreditation of health care organizations relative thereto within the past three (3) ten (10) years |
19 | and the status or disposition of each matter with regard to patient care and charitable asset |
20 | matters; |
21 | (20) A list of uncompensated care provided over the past three (3) years by each facility |
22 | listed in subdivision (a)(18) and detail as to how that amount was calculated; |
23 | (21) Copies of all documents related to: |
24 | (i) Identification of all charitable assets |
25 | (ii) Accounting of all charitable assets for the past three (3) years; and |
26 | (iii) Distribution of the charitable assets including, but not limited to, endowments, |
27 | restricted, unrestricted and specific purpose funds as each relates to the proposed transaction; |
28 | (22) A description of charity care and uncompensated care provided by the existing |
29 | hospital for the previous three (3) year period to the present including a dollar amount and a |
30 | description of services provided to patients; |
31 | (23) A description of bad debt incurred by the existing hospital for the previous three (3) |
32 | years for which payment was anticipated but not received; |
33 | (24) A description of the plan as to how the new hospital will provide community benefit |
34 | and charity care during the first three (3) years of operation; |
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1 | (25) A description of how the new hospital will monitor and value charity care services |
2 | and community benefit; |
3 | (26) The names of persons currently holding a position as an officer, director, board |
4 | member, or senior manager who will or will not maintain any position with the new hospital and |
5 | whether any said person will receive any salary, severance stock offering or any financial gain, |
6 | current or deferred, as a result of or in relation to the proposed conversion; |
7 | (27) Copies of capital and operating budgets or other financial projections for the new |
8 | hospital during the first three (3) years of operation; |
9 | (28) Copies of plans relative to staffing during the first three (3) ten (10) years at the new |
10 | hospital; |
11 | (29) A list of all medical services, departments and clinical services, and administrative |
12 | services which will be maintained at the new hospital and the estimated length of time such |
13 | services shall be maintained; |
14 | (30) A description of criteria established by the board of directors of the existing hospital |
15 | for pursuing a proposed conversion with one or more health care providers; |
16 | (31) Copies of reports of any due diligence review performed by each transacting party in |
17 | relation to the proposed conversion. These reports are to be held by the attorney general and |
18 | department of health as confidential and not released to the public regardless of any determination |
19 | made pursuant to § 23-17.14-32 and not withstanding any other provision of the general laws; |
20 | (32) A description of request for proposals issued by the existing hospital relating to |
21 | pursuing a proposed conversion; |
22 | (33) Copies of reports analyzing affiliations, mergers, or other similar transactions |
23 | considered by any of the transacting parties during the past three (3) years, including, but not |
24 | limited to, reports by appraisers, accountants, investment bankers, actuaries and other experts; |
25 | (34) A copy of proposed contracts or description of proposed contracts or arrangements |
26 | with senior managers, board members, officers, or directors of the existing hospital for severance |
27 | consulting services or covenants not to compete following completion of the proposed |
28 | conversion; |
29 | (35) A copy or description of all agreements or proposed agreements reflecting any |
30 | current and/or future employment or compensated relationship between the acquiror (or any |
31 | related entity) and any officer, director, board member, or senior manager of the acquiree (or any |
32 | related entity); |
33 | (36) A copy or description of all agreements executed or anticipated to be executed by |
34 | any of the transacting parties in connection with the proposed conversion; |
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1 | (37) Copies of documents or description of any proposed plan for any entity to be created |
2 | for charitable assets, including but not limited to, endowments, restricted, unrestricted and |
3 | specific purpose funds, the proposed articles of incorporation, by-laws, mission statement, |
4 | program agenda, method of appointment of board members, qualifications of board members, |
5 | duties of board members, and conflict of interest policies; |
6 | (38) Description and detailed justification of all departments, clinical, social, or other |
7 | services or medical services that will be eliminated or significantly reduced at the new hospital |
8 | and a transition plan ensuring existing patients' continued access to such services moving forward |
9 | and continued employment for those who lose their jobs; |
10 | (39) Description of staffing levels of all categories of employees, including full-time, |
11 | part-time, and contract employees currently working at or providing services to the existing |
12 | hospital and description of any anticipated or proposed changes in current staffing levels; |
13 | (40) Copies of current conflict of interest forms from all incumbent or recently incumbent |
14 | officers, members of the boards of directors or trustees and senior managers, including the |
15 | medical directors, of the transacting parties on a form acceptable to the attorney general; |
16 | "incumbent or recently incumbent" means those individuals holding the position at the time the |
17 | application is submitted and any individual who held a similar position within one year prior to |
18 | the application's acceptance; |
19 | (41) If the acquiror is a for profit corporation that has acquired a not for profit hospital |
20 | under the provisions of this chapter, the application shall also include a complete statement of |
21 | performance during the preceding one year with regard to the terms and conditions of approval of |
22 | conversion and each projection, plan, or description submitted as part of the application for any |
23 | conversion completed under an application submitted pursuant to this section and made a part of |
24 | an approval for the conversion pursuant to § 23-17.14-7, 23-17.14-8 or 23-14.14-19; |
25 | (42) Copies of IRS Form 990 for any transacting party required by federal law to file |
26 | such a form for each of the three (3) years prior to the submission of the application. |
27 | (b) Two (2) copies of the initial application shall be provided to each of the department of |
28 | health and department of the attorney general simultaneously by United States mail, certified, |
29 | return receipt requested. Filings may be submitted electronically if acceptable to the department |
30 | of health and/or attorney general. |
31 | (c) Except for information determined by the attorney general in accordance with § 23- |
32 | 17.14-32 to be confidential and/or proprietary, or otherwise required by law to be maintained as |
33 | confidential, the initial application and supporting documentation shall be considered public |
34 | records and shall be available for inspection upon request. |
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1 | 23-17.14-7. Review process of the department of attorney general and the |
2 | department of health and review criteria by department of attorney general. |
3 | (a) The department of attorney general shall review all conversions involving a hospital |
4 | in which one or more of the transacting parties involves a for profit corporation as the acquiror |
5 | and a not for profit corporation as the acquiree. |
6 | (b) In reviewing proposed conversions in accordance with this section and § 23-17.14-10, |
7 | the department of attorney general and department of health shall adhere to the following process: |
8 | (1) Within thirty (30) days after receipt of an initial application, the department of |
9 | attorney general and department of health shall jointly advise the applicant, in writing, whether |
10 | the application is complete, and, if not, shall specify all additional information the applicant is |
11 | required to provide; |
12 | (2) The applicant will submit the additional information within thirty (30) working days. |
13 | If the additional information is submitted within the thirty (30) day period, the department of |
14 | attorney general and department of health will have ten (10) working days within which to |
15 | determine acceptability of the additional information. If the additional information is not |
16 | submitted by the applicant within the thirty (30) day period or if either agency determines the |
17 | additional information submitted by the applicant is insufficient, the application will be rejected |
18 | without prejudice to the applicant's right to resubmit, the rejection to be accompanied by a |
19 | detailed written explanation of the reasons for rejection. If the department of attorney general and |
20 | department of health determine the additional information to be as requested, the applicant will be |
21 | notified, in writing, of the date of acceptance of the application; |
22 | (3) Within thirty (30) working days after acceptance of the initial application, the |
23 | department of attorney general shall render its determination on confidentiality pursuant to § 23- |
24 | 17.14-32 and the department of attorney general and department of health shall publish notice of |
25 | the application in a newspaper of general circulation in the state and shall notify by United States |
26 | mail any person who has requested notice of the filing of the application. The notice shall: |
27 | (i) State that an initial application has been received and accepted for review, |
28 | (ii) State the names of the transacting parties, |
29 | (iii) State the date by which a person may submit written comments to the department of |
30 | attorney general or department of health, and |
31 | (iv) Provide notice of the date, time and place of informational meeting open to the public |
32 | which shall be conducted within sixty (60) days of the date of the notice; |
33 | (4) The department of attorney general and department of health shall each approve, |
34 | approve with conditions directly related to the proposed conversion, or disapprove the application |
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1 | within one hundred twenty (120) days of the date of acceptance of the application. |
2 | (c) In reviewing an application pursuant to subsection (a) the department of the attorney |
3 | general shall consider the following criteria: |
4 | (1) Whether the proposed conversion will harm the public's interest in trust property |
5 | given, devised, or bequeathed to the existing hospital for charitable, educational or religious |
6 | purposes located or administered in this state; |
7 | (2) Whether a trustee or trustees of any charitable trust located or administered in this |
8 | state will be deemed to have exercised reasonable care, diligence, and prudence in performing as |
9 | a fiduciary in connection with the proposed conversion; |
10 | (3) Whether the board established appropriate criteria in deciding to pursue a conversion |
11 | in relation to carrying out its mission and purposes; |
12 | (4) Whether the board formulated and issued appropriate requests for proposals in |
13 | pursuing a conversion; |
14 | (5) Whether the board considered the proposed conversion as the only alternative or as |
15 | the best alternative in carrying out its mission and purposes; |
16 | (6) Whether any conflict of interest exists concerning the proposed conversion relative to |
17 | members of the board, officers, directors, senior management, experts or consultants engaged in |
18 | connection with the proposed conversion including, but not limited to, attorneys, accountants, |
19 | investment bankers, actuaries, health care experts, or industry analysts; |
20 | (7) Whether individuals described in subdivision (c)(6) were provided with contracts or |
21 | consulting agreements or arrangements which included pecuniary rewards based in whole, or in |
22 | part on the contingency of the completion of the conversion; |
23 | (8) Whether the board exercised due care in engaging consultants with the appropriate |
24 | level of independence, education, and experience in similar conversions; |
25 | (9) Whether the board exercised due care in accepting assumptions and conclusions |
26 | provided by consultants engaged to assist in the proposed conversion; |
27 | (10) Whether the board exercised due care in assigning a value to the existing hospital |
28 | and its charitable assets in proceeding to negotiate the proposed conversion; |
29 | (11) Whether the board exposed an inappropriate amount of assets by accepting in |
30 | exchange for the proposed conversion future or contingent value based upon success of the new |
31 | hospital; |
32 | (12) Whether officers, directors, board members or senior management will receive |
33 | future contracts in existing, new, or affiliated hospital or foundations; |
34 | (13) Whether any members of the board will retain any authority in the new hospital; |
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1 | (14) Whether the board accepted fair consideration and value for any management |
2 | contracts made part of the proposed conversion; |
3 | (15) Whether individual officers, directors, board members or senior management |
4 | engaged legal counsel to consider their individual rights or duties in acting in their capacity as a |
5 | fiduciary in connection with the proposed conversion; |
6 | (16) Whether the proposed conversion results in an abandonment of the original purposes |
7 | of the existing hospital or whether a resulting entity will depart from the traditional purposes and |
8 | mission of the existing hospital such that a cy pres proceeding would be necessary; |
9 | (17) Whether the proposed conversion contemplates the appropriate and reasonable fair |
10 | market value; |
11 | (18) Whether the proposed conversion was based upon appropriate valuation methods |
12 | including, but not limited to, market approach, third party report or fairness opinion; |
13 | (19) Whether the conversion is proper under the Rhode Island Nonprofit Corporation |
14 | Act; |
15 | (20) Whether the conversion is proper under applicable state tax code provisions; |
16 | (21) Whether the proposed conversion jeopardizes the tax status of the existing hospital; |
17 | (22) Whether the individuals who represented the existing hospital in negotiations |
18 | avoided conflicts of interest; |
19 | (23) Whether officers, board members, directors, or senior management deliberately |
20 | acted or failed to act in a manner that impacted negatively on the value or purchase price, or |
21 | employee terms or conditions of employment; |
22 | (24) Whether the formula used in determining the value of the existing hospital was |
23 | appropriate and reasonable which may include, but not be limited to factors such as: the multiple |
24 | factor applied to the "EBITDA" -- earnings before interest, taxes, depreciation, and amortization; |
25 | the time period of the evaluation; price/earnings multiples; the projected efficiency differences |
26 | between the existing hospital and the new hospital; and the historic value of any tax exemptions |
27 | granted to the existing hospital; |
28 | (25) Whether the proposed conversion appropriately provides for the disposition of |
29 | proceeds of the conversion that may include, but not be limited to: |
30 | (i) Whether an existing entity or a new entity will receive the proceeds; |
31 | (ii) Whether appropriate tax status implications of the entity receiving the proceeds have |
32 | been considered; |
33 | (iii) Whether the mission statement and program agenda will be or should be closely |
34 | related with the purposes of the mission of the existing hospital; |
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1 | (iv) Whether any conflicts of interest arise in the proposed handling of the conversion's |
2 | proceeds; |
3 | (v) Whether the bylaws and articles of incorporation have been prepared for the new |
4 | entity; |
5 | (vi) Whether the board of any new or continuing entity will be independent from the new |
6 | hospital; |
7 | (vii) Whether the method for selecting board members, staff, and consultants is |
8 | appropriate; |
9 | (viii) Whether the board will comprise an appropriate number of individuals with |
10 | experience in pertinent areas such as foundations, health care, business, labor, community |
11 | programs, financial management, legal, accounting, grant making and public members |
12 | representing diverse ethnic populations and the interests of the affected community; |
13 | (ix) Whether the size of the board and proposed length of board terms are sufficient; |
14 | (26) Whether the transacting parties are in compliance with the Charitable Trust Act, |
15 | chapter 9 of title 18; and |
16 | (27) Whether a right of first refusal to repurchase the assets has been retained.; and |
17 | (28) Whether the character, commitment, competence and standing in the community, or |
18 | any other communities served by the transacting parties are satisfactory, failure to fully disclose, |
19 | or intentional obfuscation, misrepresentation, omission or withholding of relevant information |
20 | from state regulators, or failure to otherwise cooperate with state regulators during the regulatory |
21 | review process, shall disqualify the applicant(s) from consideration, resulting in the summary |
22 | rejection of the application under review. Such rejection shall act as a bar against the submission |
23 | of future applications for a period of five (5) years; |
24 | (29) Whether a control premium is an appropriate component of the proposed conversion; |
25 | and |
26 | (30) Whether the value of assets factored in the conversion is based on past performance |
27 | or future potential performance. |
28 | 23-17.14-8. Review process and review criteria by department of health for |
29 | conversions involving for-profit corporation as acquiror. |
30 | (a) The department shall review all proposed conversions involving a hospital in which |
31 | one or more of the transacting parties involves a for-profit corporation as the acquiror and a not- |
32 | for-profit corporation as the acquiree. |
33 | (b) In reviewing an application for a conversion involving hospitals in which one or more |
34 | of the transacting parties is a for-profit corporation as the acquiror the department shall consider |
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1 | the following criteria: |
2 | (1) Whether the character, commitment, competence, and standing in the community, or |
3 | any other communities served by the proposed transacting parties, are satisfactory, failure to fully |
4 | disclose, or intentional obfuscation, misrepresentation, omission or withholding of relevant |
5 | information from state regulators, or failure to otherwise cooperate with state regulators during |
6 | the regulatory review process, shall disqualify the applicant(s) from consideration, resulting in the |
7 | summary rejection of the application under review. Such rejection shall act as a bar against the |
8 | submission of future applications for a period of five (5) years; |
9 | (2) Whether sufficient safeguards are included to assure the affected community |
10 | continued access to affordable care; |
11 | (3) Whether the transacting parties have provided clear and convincing evidence that the |
12 | new hospital will provide health care and appropriate access with respect to traditionally |
13 | underserved populations in the affected community; |
14 | (4) Whether procedures or safeguards are assured to insure that ownership interests will |
15 | not be used as incentives for hospital employees or physicians to refer patients to the hospital; |
16 | (5) Whether the transacting parties have made a commitment to assure the continuation |
17 | of collective bargaining rights, if applicable, the continuation of current employee retirement, |
18 | medical, dental and paid time off benefits, the continuation of current employee wages and hours |
19 | of work, and retention of the workforce; |
20 | (6) Whether the transacting parties have appropriately accounted for employment needs |
21 | at the facility and addressed workforce retraining needed as a consequence of any proposed |
22 | restructuring; |
23 | (7) Whether the conversion demonstrates that the public interest will be served |
24 | considering the essential medical services needed to provide safe and adequate treatment, |
25 | appropriate access and balanced health care delivery to the residents of the state; and |
26 | (8) Whether the acquiror has demonstrated that it has satisfactorily met the terms and |
27 | conditions of approval for any previous conversion pursuant to an application submitted under § |
28 | 23-17.14-6. |
29 | 23-17.14-11. Criteria for the department of health -- Conversions limited to not-for- |
30 | profit corporations. |
31 | In reviewing an application of a conversion involving a hospital in which the transacting |
32 | parties are limited to not-for-profit corporations, the department shall consider the following |
33 | criteria: |
34 | (1) Whether the character, commitment, competence, and standing in the community, or |
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1 | any other communities served by the proposed transacting parties are satisfactory, failure to fully |
2 | disclose, or intentional obfuscation, misrepresentation, omission or withholding of relevant |
3 | information from state regulators, or failure to otherwise cooperate with state regulators during |
4 | the regulatory review process, shall disqualify the applicant(s) from consideration, resulting in the |
5 | summary rejection of the application under review. Such rejection shall act as a bar against the |
6 | submission of future applications for a period of five (5) years; |
7 | (2) Whether sufficient safeguards are included to assure the affected community |
8 | continued access to affordable care; |
9 | (3) Whether the transacting parties have provided satisfactory clear and convincing |
10 | evidence that the new hospital will provide health care and appropriate access with respect to |
11 | traditionally underserved populations in the affected community; |
12 | (4) Whether procedures or safeguards are assured to insure that ownership interests will |
13 | not be used as incentives for hospital employees or physicians to refer patients to the hospital; |
14 | (5) Whether the transacting parties have made a commitment to assure the continuation |
15 | of collective bargaining rights, if applicable, the continuation of current employee retirement, |
16 | medical, dental and paid time off benefits, the continuation of current employee wages and hours |
17 | of work, and retention of the workforce; |
18 | (6) Whether the transacting parties have appropriately accounted for employment needs |
19 | at the facility and addressed workforce retraining needed as a consequence of any proposed |
20 | restructuring; |
21 | (7) Whether the conversion demonstrates that the public interest will be served |
22 | considering the essential medical services needed to provide safe and adequate treatment, |
23 | appropriate access and balanced health care delivery to the residents of the state. |
24 | 23-17.14-12.1. Expedited review for unaffiliated community hospitals or not-for- |
25 | profit hospitals. |
26 | (a) Notwithstanding §§ 23-17.14-6(a) and 23-17.14-10 of this chapter, if a proposed |
27 | conversion involves: (1) Two (2) or more hospitals that are not in common control with another |
28 | hospital; or (2) One hospital not under common control with another hospital and a hospital |
29 | system parent corporation; or (3) Two (2) affiliated hospitals the conversion of which was |
30 | previously approved in accordance with chapter 17.14 of title 23 and another hospital or hospital |
31 | system parent corporation, or (4) One or more hospital(s) that are determined to be distressed as |
32 | under subsection (a)(2) of this section, including hospitals that are part of a not-for-profit hospital |
33 | system parent corporation, as acquiree, such conversion will be reviewed under an expedited |
34 | review process conducted solely by the department of health (without derogation of the authority |
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1 | of the attorney general in accordance with § 23-17.14-21), only if the acquiree and acquiror are |
2 | both nonprofit corporations exempt from taxation under section 501(a) of the United States |
3 | Internal Revenue Service Code as organizations described in section 501(c)(3) of such code, or |
4 | any successor provisions, and: |
5 | (1) The acquiree and acquiror are both nonprofit corporations that have directly or |
6 | indirectly continuously operated at least one licensed hospital either in Rhode Island or in another |
7 | jurisdiction either on its own or it is part of a health care system that has operated for at least the |
8 | preceding three (3) years for at least the preceding three (3) years; and |
9 | (2) The acquiree operates one or more a distressed Rhode Island hospitals hospital facing |
10 | significant financial hardship that may impair its or their ability to continue to operate effectively |
11 | without the proposed conversion and have has been determined to be distressed by the director of |
12 | health based upon whether the hospital(s) hospital meets one or more of the following criteria: |
13 | (i) Operating loss for the two (2) most recently completed fiscal years; |
14 | (ii) Less than fifty (50) days cash-on-hand; |
15 | (iii) Current asset to liability ratio of less than one point five (1.5); |
16 | (iv) Long-term debt to capitalization greater than seventy-five percent (75%); |
17 | (v) Inpatient occupancy rate of less than fifty percent (50%); |
18 | (vi) Would be classified as below investment grade by a major rating agency. |
19 | (b) The transacting parties shall file an initial application pursuant to this section that |
20 | shall include the following the same information as required pursuant to § 23-17.14-6 with |
21 | respect to each transacting party and the proposed conversion: |
22 | (1) A detailed summary of the proposed conversion; |
23 | (2) Charter, articles of incorporation, or certificate of incorporation for the transacting |
24 | parties and their affiliated hospitals, including amendments thereto; |
25 | (3) Bylaws and organizational charts for the transacting parties and their affiliated |
26 | hospitals; |
27 | (4) Organizational structure for the transacting parties and each partner, affiliate, parent, |
28 | subsidiary, or related legal entity in which either transacting party has a twenty percent (20%) or |
29 | greater ownership interest or control; |
30 | (5) All documents, reports, meeting minutes, and presentations relevant to the transacting |
31 | parties' board of directors' decision to propose the conversion; |
32 | (6) Conflict of interest policies and procedures; |
33 | (7) Copies of audited income statements, balance sheets, and other financial statements |
34 | for the past three (3) years for the transacting parties and their affiliated hospitals where |
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1 | appropriate and to the extent they have been made public, audited interim financial statements |
2 | and income statements together with detailed descriptions of the financing structure of the |
3 | proposed conversion including equity contribution, debt restructuring, stock issuance, and |
4 | partnership interests; |
5 | (8) Copies of reports analyzing the proposed conversion during the past three (3) years |
6 | including, but not limited to, reports by appraisers, accountants, investment bankers, actuaries and |
7 | other experts; |
8 | (9) Copies of current conflict of interest forms from all incumbent or recently incumbent |
9 | officers, members of the board of directors or trustees and senior managers of the transacting |
10 | parties; "incumbent or recently incumbent" means those individuals holding the position at the |
11 | time the application is submitted and any individual who held a similar position within one year |
12 | prior to the application's acceptance; |
13 | (10) Copies of all documents related to: (i) Identification of all current charitable assets; |
14 | (ii) Accounting of all charitable assets for the past three (3) years; and (iii) Distribution of |
15 | charitable assets for the past three (3) years including, but not limited to, endowments, restricted, |
16 | unrestricted, and specific purpose funds as each relates to the proposed conversion; |
17 | (11) A description of the plan as to how the affiliated hospitals will provide consolidated |
18 | healthcare services during the first three (3) years following the conversion; |
19 | (12) Copies of plans for all hospital departments and services that will be eliminated or |
20 | significantly reduced during the first three (3) years following the conversion; and |
21 | (13) Copies of plans relative to staffing levels for all categories of employees during the |
22 | first three (3) years following the conversion. |
23 | (c) In reviewing an application under an expedited review process, the department shall |
24 | consider the criteria in § 23-17.14-11. |
25 | (d) Within twenty (20) working days of receipt by the department of an application |
26 | satisfying the requirements of subsection (b) above, the department will notify and afford the |
27 | public an opportunity to comment on the application. |
28 | (e) The decision of the department shall be rendered within ninety (90) days of |
29 | acceptance of the application under this section. |
30 | (f) Costs payable by the transacting parties under § 23-17.14-13 in connection with an |
31 | expedited review by the department under this section shall not exceed twenty-five thousand |
32 | dollars ($25,000) per one hundred million dollars ($100,000,000) of total net patient service |
33 | revenue of the acquiree and acquiror in the most recent fiscal year for which audited financial |
34 | statements are available. |
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1 | (g) Following a conversion, the new hospital shall provide on or before March 1 of each |
2 | calendar year a report in a form acceptable to the director containing all updated financial |
3 | information required to be disclosed pursuant to subsection (b)(7) of this section. |
4 | (h) If an expedited review is performed by the department pursuant to this section, the |
5 | department of attorney general shall perform a review of the proposed transaction pursuant to § |
6 | 23-17.14-10(b) and the criteria for conversions limited to not-for-profits as it deems necessary, |
7 | including, at a minimum, its impact upon the charitable assets of the transacting parties. The |
8 | attorney general's review shall be done concurrently with the department of health review and |
9 | shall not extend the length of the review process. For this review, the department of attorney |
10 | general shall be entitled to costs in accordance with § 23-17.14-13 and subsection (f) of this |
11 | section. |
12 | 23-17.14-14. Investigations -- Notice to attend -- Court order to appear -- Contempt. |
13 | (a) The director or the attorney general shall conduct investigations in discharging the |
14 | duties required under this chapter. For purposes of this investigation, the director or the attorney |
15 | general may require any person, agent, trustee, fiduciary, consultant, institution, association, or |
16 | corporation directly related to the proposed conversion to appear at any time and place that the |
17 | director or the attorney general shall designate, then and there under oath and conducted with a |
18 | stenographic record to produce for the use of the director and/or the attorney general any and all |
19 | documents and any other information relating directly to the proposed conversion that the director |
20 | or the attorney general may require, including, but not limited to, interviews, testimony, or |
21 | statements. |
22 | (b) Whenever the director or the attorney general may require the attendance of any |
23 | person as provided in subsection (a), the director and/or the attorney general shall issue a notice |
24 | setting the time and place when the attendance is required and shall cause the notice to be |
25 | delivered or sent by registered or certified mail to the person at least fourteen (14) days before the |
26 | date fixed in the notice for the attendance. |
27 | (c) If any person receiving notice pursuant to this provision neglects to attend or remain |
28 | in attendance so long as may be necessary for the purposes that the notice was issued, or refuses |
29 | to produce information requested, any justice of the superior court for the county within which |
30 | the inquiry is carried on or within which the person resides or transacts business, upon application |
31 | by the director, the attorney general, or any transacting party shall have jurisdiction to hear and |
32 | consider on an expedited basis the request, and if appropriate and relevant to the consideration of |
33 | proposed conversion, may issue to the person an order requiring the person to appear before the |
34 | director or the attorney general there to produce for the use of the director or the attorney general |
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1 | evidence in accordance with the terms of the order of the court, and any failure to obey the order |
2 | of the superior court may be punished by the court as contempt of court. |
3 | (d) In the event the applicant(s) fails to comply with any aspect of the review process, or |
4 | fails to comply with the conditions attached to a prior conversion, the application(s) shall be |
5 | summarily rejected. |
6 | 23-17.14-17. Perjury. |
7 | Any person who is found to have testified falsely under oath before the legislature, the |
8 | department of health, or the attorney general pursuant to this chapter shall be subject to |
9 | prosecution for perjury and be subject to the penalties set forth in § 23-17.14-30, and the |
10 | application shall be summarily rejected with the applicant being barred from participating in a |
11 | hospital conversion for five (5) years. |
12 | 23-17.14-28. Concurrent approval -- License. |
13 | (a) The director may consider the requirement of this chapter and the requirements of §§ |
14 | 23-17-1 -- 23-17-45 together upon completion of the initial application. The director may |
15 | approve, approve with conditions, or disapprove one or both requests filed pursuant to this |
16 | chapter, including expedited review under § 23-17.14-12.1, and §§ 23-17-1 -- 23-17-45. The |
17 | approvals of the director required by this chapter shall be subject to chapter 35 of title 42. For any |
18 | conversion subject to this chapter, the director may combine any hearings required by this chapter |
19 | with any hearings on similar or related matters required by §§ 23-17-1 -- 23-17-45 and shall |
20 | consider issues of market share especially as they affect quality, access, and affordability of |
21 | services. |
22 | (b) Any approval of a conversion involving a for-profit corporation as an acquiror shall |
23 | be subject to any conditions as determined by the director of health, provided those conditions |
24 | relate to the purpose of this chapter. The conditions may include, but not be limited to, the |
25 | conditions contained in this subsection. In the event the director determines that one or more of |
26 | the conditions contained in this subsection are not appropriate or desirable in a particular |
27 | conversion, the director shall include the rationale for not including the condition(s) in any |
28 | approval. |
29 | (1) Maintain a governing body for each converted hospital whose membership shall |
30 | include uncompensated, independent individuals who reside in Rhode Island; |
31 | (2) Make a financially reasonable contribution to support the state's coordinated health |
32 | planning process; |
33 | (3) Adhere to reasonable restrictions on financial incentives to patient or health plan |
34 | enrollees to receive hospital services outside of the state of Rhode Island; |
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1 | (4) Keep the new hospital open and operational for a reasonable minimum period of time; |
2 | (5) Make a reasonable minimum investment to support primary care in the Rhode Island |
3 | communities served by the new hospital; |
4 | (6) Not enter into any contract or other service or purchasing arrangements with an |
5 | affiliated legal entity except for contracts or arrangements to provide services or products that are |
6 | reasonably necessary to accomplish the healthcare purposes of the relevant hospital and for |
7 | compensation that is consistent with fair-market value for the services actually rendered, or the |
8 | products actually provided; |
9 | (7) Report to the director on annual distributions of profit to owners; and |
10 | (8) Require that any corporate allocation, or equivalent charge, to any affiliated |
11 | organization(s) in any hospital fiscal year not exceed reasonable fair-market value for the services |
12 | rendered or the assets purchased or leased from the affiliate.; and |
13 | (9) Make a reasonable minimum investment to maintain current employment levels, |
14 | current employee retirement, medical, dental and paid time-off benefits, current employee rates of |
15 | pay and hours of work. |
16 | (c) Any approval of a conversion involving a for-profit corporation as an acquiror shall |
17 | be subject to any conditions as determined by the attorney general, provided those conditions |
18 | relate to the purpose of this chapter. The conditions may include, but not be limited to, the |
19 | acquiror's adherence to a minimum investment to protect the assets, financial health, and well- |
20 | being of the new hospital and for community benefit. In the event the attorney general determines |
21 | that the conditions contained in this subsection are not appropriate or desirable in a particular |
22 | conversion, the attorney general shall include the rationale for not including the condition(s) in |
23 | any approval. |
24 | (d) For a period of five (5) years following the effective date of the conversion, when |
25 | approval of a conversion involves either a not-for-profit or a for-profit corporation as an acquiror: |
26 | (1) The acquiror shall file reports with the department and the attorney general on or |
27 | before March 1st of each calendar year detailing compliance with the conditions in subsection (b) |
28 | and any other conditions on the conversion approval or license of the new hospital. Failure to |
29 | comply with any of the conditions or the charity care requirements contained in § 23-17.14-15 |
30 | shall be cause for penalties to be applied in accordance with § 23-17.14-30; |
31 | (2) The department of health and the department of attorney general shall monitor, assess, |
32 | and evaluate the acquiror's compliance with all of the conditions of approval, as well as annually |
33 | review the impact of the conversion on healthcare costs and services within the communities |
34 | served; |
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1 | (3) The acquiror shall pay for the costs of the department of health and the department of |
2 | attorney general in performing the monitoring, evaluation, and assessment in an amount to be |
3 | determined by the attorney general or the director as they deem appropriate, which should be |
4 | placed in escrow during the term of the monitoring period. No application for a conversion made |
5 | pursuant to the requirements of this chapter shall be approved unless an agreement has been |
6 | executed with the attorney general and the director for the payment of reasonable costs in |
7 | accordance with this section; and |
8 | (4) The department and/or the attorney general may seek immediate relief in the superior |
9 | court to enforce any conditions of approval of a conversion, and may impose penalties for |
10 | noncompliance pursuant to § 23-17.14-30. |
11 | 23-17.14-30. Failure to comply -- Penalties. |
12 | If any person knowingly violates or fails to comply with any provision of this chapter or |
13 | willingly or knowingly gives false or incorrect information: |
14 | (1) The director or attorney general may, after notice and opportunity for a prompt and |
15 | fair hearing to one or more transacting parties, deny, suspend, or revoke a license, or in lieu of |
16 | suspension or revocation of the license, may order the licensee to admit no additional persons to |
17 | the facility, to provide health services to no additional persons through the facility, or to take any |
18 | corrective action necessary to secure compliance under this chapter, and impose a fine of not |
19 | more than two million dollars ($2,000,000); and |
20 | (2) The attorney general may, after notice and opportunity for a prompt and fair hearing |
21 | to one or more transacting parties, take any corrective action necessary to secure compliance |
22 | under this chapter, and impose a fine of not more than two million dollars ($2,000,000).; and |
23 | (3) Failure to fully disclose, or intentional obfuscation, misrepresentation, omission or |
24 | withholding of relevant information from state regulators, or failure to otherwise cooperate with |
25 | state regulators during the regulatory review process, shall disqualify the applicant(s) from |
26 | consideration, resulting in the summary rejection of the application under review. Such rejection |
27 | shall act as a bar against the submission of future applications for a period of five (5) years. |
28 | SECTION 3. This act shall take effect upon passage. |
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EXPLANATION | |
BY THE LEGISLATIVE COUNCIL | |
OF | |
A N A C T | |
RELATING TO HEALTH AND SAFETY - THE HOSPITAL CONVERSION ACT | |
*** | |
1 | This act would expand the health services council within the licensing of the health care |
2 | facility licensing act from twelve (12) to twenty-four (24) members, and would also amend |
3 | several provisions relative to the review process of the hospital conversion act pertaining to |
4 | maintenance of services and required disclosures. |
5 | This act would take effect upon passage. |
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