2020 -- S 2572 | |
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LC005057 | |
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STATE OF RHODE ISLAND | |
IN GENERAL ASSEMBLY | |
JANUARY SESSION, A.D. 2020 | |
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A N A C T | |
RELATING TO HEALTH AND SAFETY -- THE HOSPITAL CONVERSIONS ACT | |
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Introduced By: Senators Ruggerio, McCaffrey, Goodwin, Archambault, and Ciccone | |
Date Introduced: February 25, 2020 | |
Referred To: Senate Judiciary | |
(Attorney General) | |
It is enacted by the General Assembly as follows: | |
1 | SECTION 1. Sections 23-17.14-7 and 23-17.14-10 of the General Laws in Chapter 23- |
2 | 17.14 entitled "The Hospital Conversions Act" are hereby amended to read as follows: |
3 | 23-17.14-7. Review process of the department of attorney general and the department |
4 | of health and review criteria by department of attorney general. |
5 | (a) The department of attorney general shall review all conversions involving a hospital in |
6 | which one or more of the transacting parties involves a for profit corporation as the acquiror and a |
7 | not for profit corporation as the acquiree. |
8 | (b) In reviewing proposed conversions in accordance with this section and § 23-17.14-10, |
9 | the department of attorney general and department of health shall adhere to the following process: |
10 | (1) Within thirty (30) days after receipt of an initial application, the department of attorney |
11 | general and department of health shall jointly advise the applicant, in writing, whether the |
12 | application is complete, and, if not, shall specify all additional information the applicant is required |
13 | to provide; |
14 | (2) The applicant will submit the additional information within thirty (30) working days. |
15 | If the additional information is submitted within the thirty (30) day period, the department of |
16 | attorney general and department of health will have ten (10) working days within which to |
17 | determine acceptability of the additional information. If the additional information is not submitted |
18 | by the applicant within the thirty (30) day period or if either agency determines the additional |
19 | information submitted by the applicant is insufficient, the application will be rejected without |
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1 | prejudice to the applicant's right to resubmit, the rejection to be accompanied by a detailed written |
2 | explanation of the reasons for rejection. If the department of attorney general and department of |
3 | health determine the additional information to be as requested, the applicant will be notified, in |
4 | writing, of the date of acceptance of the application; |
5 | (3) Within thirty (30) working days after acceptance of the initial application, the |
6 | department of attorney general shall render its determination on confidentiality pursuant to § 23- |
7 | 17.14-32 and the department of attorney general and department of health shall publish notice of |
8 | the application in a newspaper of general circulation in the state and shall notify by United States |
9 | mail any person who has requested notice of the filing of the application. The notice shall: |
10 | (i) State that an initial application has been received and accepted for review, |
11 | (ii) State the names of the transacting parties, |
12 | (iii) State the date by which a person may submit written comments to the department of |
13 | attorney general or department of health, and |
14 | (iv) Provide notice of the date, time and place of informational meeting open to the public |
15 | which shall be conducted within sixty (60) days of the date of the notice; |
16 | (4) The department of attorney general and department of health shall each approve, |
17 | approve with conditions directly related to the proposed conversion, or disapprove the application |
18 | within one hundred twenty (120) days of the date of acceptance of the application. |
19 | (c) In reviewing an application pursuant to subsection (a) the department of the attorney |
20 | general shall consider the following criteria: |
21 | (1) Whether the proposed conversion will harm the public's interest in trust property given, |
22 | devised, or bequeathed to the existing hospital for charitable, educational or religious purposes |
23 | located or administered in this state; |
24 | (2) Whether a trustee or trustees of any charitable trust located or administered in this state |
25 | will be deemed to have exercised reasonable care, diligence, and prudence in performing as a |
26 | fiduciary in connection with the proposed conversion; |
27 | (3) Whether the board established appropriate criteria in deciding to pursue a conversion |
28 | in relation to carrying out its mission and purposes; |
29 | (4) Whether the board formulated and issued appropriate requests for proposals in pursuing |
30 | a conversion; |
31 | (5) Whether the board considered the proposed conversion as the only alternative or as the |
32 | best alternative in carrying out its mission and purposes; |
33 | (6) Whether any conflict of interest exists concerning the proposed conversion relative to |
34 | members of the board, officers, directors, senior management, experts or consultants engaged in |
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1 | connection with the proposed conversion including, but not limited to, attorneys, accountants, |
2 | investment bankers, actuaries, health care experts, or industry analysts; |
3 | (7) Whether individuals described in subdivision (c)(6) were provided with contracts or |
4 | consulting agreements or arrangements which included pecuniary rewards based in whole, or in |
5 | part on the contingency of the completion of the conversion; |
6 | (8) Whether the board exercised due care in engaging consultants with the appropriate level |
7 | of independence, education, and experience in similar conversions; |
8 | (9) Whether the board exercised due care in accepting assumptions and conclusions |
9 | provided by consultants engaged to assist in the proposed conversion; |
10 | (10) Whether the board exercised due care in assigning a value to the existing hospital and |
11 | its charitable assets in proceeding to negotiate the proposed conversion; |
12 | (11) Whether the board exposed an inappropriate amount of assets by accepting in |
13 | exchange for the proposed conversion future or contingent value based upon success of the new |
14 | hospital; |
15 | (12) Whether officers, directors, board members or senior management will receive future |
16 | contracts in existing, new, or affiliated hospital or foundations; |
17 | (13) Whether any members of the board will retain any authority in the new hospital; |
18 | (14) Whether the board accepted fair consideration and value for any management |
19 | contracts made part of the proposed conversion; |
20 | (15) Whether individual officers, directors, board members or senior management engaged |
21 | legal counsel to consider their individual rights or duties in acting in their capacity as a fiduciary in |
22 | connection with the proposed conversion; |
23 | (16) Whether the proposed conversion results in an abandonment of the original purposes |
24 | of the existing hospital or whether a resulting entity will depart from the traditional purposes and |
25 | mission of the existing hospital such that a cy pres proceeding would be necessary; |
26 | (17) Whether the proposed conversion contemplates the appropriate and reasonable fair |
27 | market value; |
28 | (18) Whether the proposed conversion was based upon appropriate valuation methods |
29 | including, but not limited to, market approach, third party report or fairness opinion; |
30 | (19) Whether the conversion is proper under the Rhode Island Nonprofit Corporation Act; |
31 | (20) Whether the conversion is proper under applicable state tax code provisions; |
32 | (21) Whether the proposed conversion jeopardizes the tax status of the existing hospital; |
33 | (22) Whether the individuals who represented the existing hospital in negotiations avoided |
34 | conflicts of interest; |
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1 | (23) Whether officers, board members, directors, or senior management deliberately acted |
2 | or failed to act in a manner that impacted negatively on the value or purchase price; |
3 | (24) Whether the formula used in determining the value of the existing hospital was |
4 | appropriate and reasonable which may include, but not be limited to factors such as: the multiple |
5 | factor applied to the "EBITDA" -- earnings before interest, taxes, depreciation, and amortization; |
6 | the time period of the evaluation; price/earnings multiples; the projected efficiency differences |
7 | between the existing hospital and the new hospital; and the historic value of any tax exemptions |
8 | granted to the existing hospital; |
9 | (25) Whether the proposed conversion appropriately provides for the disposition of |
10 | proceeds of the conversion that may include, but not be limited to: |
11 | (i) Whether an existing entity or a new entity will receive the proceeds; |
12 | (ii) Whether appropriate tax status implications of the entity receiving the proceeds have |
13 | been considered; |
14 | (iii) Whether the mission statement and program agenda will be or should be closely related |
15 | with the purposes of the mission of the existing hospital; |
16 | (iv) Whether any conflicts of interest arise in the proposed handling of the conversion's |
17 | proceeds; |
18 | (v) Whether the bylaws and articles of incorporation have been prepared for the new entity; |
19 | (vi) Whether the board of any new or continuing entity will be independent from the new |
20 | hospital; |
21 | (vii) Whether the method for selecting board members, staff, and consultants is |
22 | appropriate; |
23 | (viii) Whether the board will comprise an appropriate number of individuals with |
24 | experience in pertinent areas such as foundations, health care, business, labor, community |
25 | programs, financial management, legal, accounting, grant making and public members representing |
26 | diverse ethnic populations and the interests of the affected community; |
27 | (ix) Whether the size of the board and proposed length of board terms are sufficient; |
28 | (26) Whether the transacting parties are in compliance with the Charitable Trust Act, |
29 | chapter 9 of title 18; and |
30 | (27) Whether a right of first refusal to repurchase the assets has been retained.; |
31 | (28) Whether the character, commitment, competence and standing in the community, or |
32 | any other communities served by the transacting parties are satisfactory; |
33 | (29) Whether a control premium is an appropriate component of the proposed conversion; |
34 | and |
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1 | (30) Whether the value of assets factored in the conversion is based on past performance |
2 | or future potential performance; and |
3 | (31) Whether the proposed conversion is proper under chapter 36 of title 6 (" Rhode Island |
4 | Antitrust Act"). |
5 | 23-17.14-10. Review process of department of attorney general and department of |
6 | health and criteria by department of attorney general -- Conversions limited to not-for-profit |
7 | corporations. |
8 | (a) In reviewing an application of a conversion involving a hospital in which the transacting |
9 | parties are limited to not-for-profit corporations, except as provided in § 23-17.14-12.1, the |
10 | department of attorney general and department of health shall adhere to the following process: |
11 | (1) Within thirty (30) days after receipt of an initial application, the department of attorney |
12 | general and department of health shall jointly advise the applicant, in writing, whether the |
13 | application is complete, and, if not, shall specify all additional information the applicant is required |
14 | to provide; |
15 | (2) The applicant will submit the additional information within thirty (30) working days. |
16 | If the additional information is submitted within the thirty (30) day period, the department of |
17 | attorney general and department of health will have ten (10) working days within which to |
18 | determine acceptability of the additional information. If the additional information is not submitted |
19 | by the applicant within the thirty (30) day period or if either agency determines the additional |
20 | information submitted by the applicant is insufficient, the application will be rejected without |
21 | prejudice to the applicant's right to resubmit, the rejection to be accompanied by a detailed written |
22 | explanation of the reasons for rejection. If the department of attorney general and department of |
23 | health determine the additional information to be as requested, the applicant will be notified, in |
24 | writing, of the date of acceptance of the application; |
25 | (3) Within thirty (30) working days after acceptance of the initial application, the |
26 | department of attorney general shall render its determination on confidentiality pursuant to § 23- |
27 | 17.14-32 and the department of attorney general and department of health shall publish notice of |
28 | the application in a newspaper of general circulation in the state and shall notify by United States |
29 | mail any person who has requested notice of the filing of the application. The notice shall: |
30 | (i) State that an initial application has been received and accepted for review, |
31 | (ii) State the names of the transacting parties, |
32 | (iii) State the date by which a person may submit written comments to the department of |
33 | attorney general or department of health, and |
34 | (iv) Provide notice of the date, time and place of informational meeting open to the public |
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1 | which shall be conducted within sixty (60) days of the date of the notice; |
2 | (4) The department of attorney general and department of health shall each approve, |
3 | approve with conditions directly related to the proposed conversion, or disapprove the application |
4 | within one hundred twenty (120) days of the date of acceptance of the application. |
5 | (b) In reviewing an application of a conversion involving a hospital in which the transacting |
6 | parties are limited to not-for-profit corporations, the department of attorney general may consider |
7 | the following criteria: |
8 | (1) Whether the proposed conversion will harm the public's interest in trust property given, |
9 | devised, or bequeathed to the existing hospital for charitable, educational or religious purposes |
10 | located or administered in this state; |
11 | (2) Whether a trustee or trustees of any charitable trust located or administered in this state |
12 | will be deemed to have exercised reasonable care, diligence, and prudence in performing as a |
13 | fiduciary in connection with the proposed conversion; |
14 | (3) Whether the board established appropriate criteria in deciding to pursue a conversion |
15 | in relation to carrying out its mission and purposes; |
16 | (4) Whether the board considered the proposed conversion as the only alternative or as the |
17 | best alternative in carrying out its mission and purposes; |
18 | (5) Whether any conflict of interest exists concerning the proposed conversion relative to |
19 | members of the board, officers, directors, senior management, experts or consultants engaged in |
20 | connection with the proposed conversion including, but not limited to, attorneys, accountants, |
21 | investment bankers, actuaries, health care experts, or industry analysts; |
22 | (6) Whether individuals described in subdivision (b)(5) were provided with contracts or |
23 | consulting agreements or arrangements which included pecuniary rewards based in whole, or in |
24 | part on the contingency of the completion of the conversion; |
25 | (7) Whether the board exercised due care in engaging consultants with the appropriate level |
26 | of independence, education, and experience in similar conversions; |
27 | (8) Whether the board exercised due care in accepting assumptions and conclusions |
28 | provided by consultants engaged to assist in the proposed conversion; |
29 | (9) Whether officers, directors, board members or senior management will receive future |
30 | contracts; |
31 | (10) Whether any members of the board will retain any authority in the new hospital; |
32 | (11) Whether the board accepted fair consideration and value for any management |
33 | contracts made part of the proposed conversion; |
34 | (12) Whether individual officers, directors, board members or senior management engaged |
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1 | legal counsel to consider their individual rights or duties in acting in their capacity as a fiduciary in |
2 | connection with the proposed conversion; |
3 | (13) Whether the proposed conversion results in an abandonment of the original purposes |
4 | of the existing hospital or whether a resulting entity will depart from the traditional purposes and |
5 | mission of the existing hospital such that a cy pres proceeding would be necessary; |
6 | (14) Whether the proposed conversion contemplates the appropriate and reasonable fair |
7 | market value; |
8 | (15) Whether the proposed conversion was based upon appropriate valuation methods |
9 | including, but not limited to, market approach, third-party report or fairness opinion; |
10 | (16) Whether the conversion is proper under the Rhode Island Nonprofit Corporation Act; |
11 | (17) Whether the conversion is proper under applicable state tax code provisions; |
12 | (18) Whether the proposed conversion jeopardizes the tax status of the existing hospital; |
13 | (19) Whether the individuals who represented the existing hospital in negotiations avoided |
14 | conflicts of interest; |
15 | (20) Whether officers, board members, directors, or senior management deliberately acted |
16 | or failed to act in a manner that impacted negatively on the value or purchase price; |
17 | (21) Whether the transacting parties are in compliance with the Charitable Trust Act, |
18 | chapter 9 of title 18; and |
19 | (22) Whether the proposed conversion is proper under chapter 36 of title 6 (" Rhode Island |
20 | Antitrust Act"). |
21 | SECTION 2. This act shall take effect upon passage. |
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LC005057 | |
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EXPLANATION | |
BY THE LEGISLATIVE COUNCIL | |
OF | |
A N A C T | |
RELATING TO HEALTH AND SAFETY -- THE HOSPITAL CONVERSIONS ACT | |
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1 | This act would amend the Hospital Conversion Act to add a provision to the criteria for |
2 | review by the attorneys general which asks whether the proposed conversion is proper under the |
3 | Rhode Island Antitrust Act. |
4 | This act would take effect upon passage. |
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LC005057 | |
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