Health and Safety
The Hospital Conversions Act
R.I. Gen. Laws § 23-17.14-10
§ 23-17.14-10. Review process of department of attorney general and department of health and criteria by department of attorney general — Conversions limited to not-for-profit corporations.
(a) In reviewing an application of a conversion involving a hospital in which the transacting parties are limited to not-for-profit corporations, except as provided in § 23-17.14-12.1, the department of attorney general and department of health shall adhere to the following process:
(1) Within thirty (30) days after receipt of an initial application, the department of attorney general and department of health shall jointly advise the applicant, in writing, whether the application is complete, and, if not, shall specify all additional information the applicant is required to provide;
(2) The applicant will submit the additional information within thirty (30) working days. If the additional information is submitted within the thirty-day (30) period, the department of attorney general and department of health will have ten (10) working days within which to determine acceptability of the additional information. If the additional information is not submitted by the applicant within the thirty-day (30) period or if either agency determines the additional information submitted by the applicant is insufficient, the application will be rejected without prejudice to the applicant's right to resubmit, the rejection to be accompanied by a detailed written explanation of the reasons for rejection. If the department of attorney general and department of health determine the additional information to be as requested, the applicant will be notified, in writing, of the date of acceptance of the application;
(3) Within thirty (30) working days after acceptance of the initial application, the department of attorney general shall render its determination on confidentiality pursuant to § 23-17.14-32 and the department of attorney general and department of health shall publish notice of the application in a newspaper of general circulation in the state and shall notify by United States mail any person who has requested notice of the filing of the application. The notice shall:
(i) State that an initial application has been received and accepted for review;
(ii) State the names of the transacting parties;
(iii) State the date by which a person may submit written comments to the department of attorney general or department of health; and
(iv) Provide notice of the date, time, and place of informational meeting open to the public which shall be conducted within sixty (60) days of the date of the notice;
(4) The department of attorney general and department of health shall each approve, approve with conditions directly related to the proposed conversion, or disapprove the application within one hundred twenty (120) days of the date of acceptance of the application.
(b) In reviewing an application of a conversion involving a hospital in which the transacting parties are limited to not-for-profit corporations, the department of attorney general may consider the following criteria:
(1) Whether the proposed conversion will harm the public's interest in trust property given, devised, or bequeathed to the existing hospital for charitable, educational, or religious purposes located or administered in this state;
(2) Whether a trustee or trustees of any charitable trust located or administered in this state will be deemed to have exercised reasonable care, diligence, and prudence in performing as a fiduciary in connection with the proposed conversion;
(3) Whether the board established appropriate criteria in deciding to pursue a conversion in relation to carrying out its mission and purposes;
(4) Whether the board considered the proposed conversion as the only alternative or as the best alternative in carrying out its mission and purposes;
(5) Whether any conflict of interest exists concerning the proposed conversion relative to members of the board, officers, directors, senior management, experts, or consultants engaged in connection with the proposed conversion including, but not limited to, attorneys, accountants, investment bankers, actuaries, healthcare experts, or industry analysts;
(6) Whether individuals described in subsection (b)(5) of this section were provided with contracts or consulting agreements or arrangements that included pecuniary rewards based in whole, or in part on the contingency of the completion of the conversion;
(7) Whether the board exercised due care in engaging consultants with the appropriate level of independence, education, and experience in similar conversions;
(8) Whether the board exercised due care in accepting assumptions and conclusions provided by consultants engaged to assist in the proposed conversion;
(9) Whether officers, directors, board members, or senior management will receive future contracts;
(10) Whether any members of the board will retain any authority in the new hospital;
(11) Whether the board accepted fair consideration and value for any management contracts made part of the proposed conversion;
(12) Whether individual officers, directors, board members, or senior management engaged legal counsel to consider their individual rights or duties in acting in their capacity as a fiduciary in connection with the proposed conversion;
(13) Whether the proposed conversion results in an abandonment of the original purposes of the existing hospital or whether a resulting entity will depart from the traditional purposes and mission of the existing hospital such that a cy pres proceeding would be necessary;
(14) Whether the proposed conversion contemplates the appropriate and reasonable fair market value;
(15) Whether the proposed conversion was based upon appropriate valuation methods including, but not limited to, market approach, third-party report, or fairness opinion;
(16) Whether the conversion is proper under the Rhode Island Nonprofit Corporation Act;
(17) Whether the conversion is proper under applicable state tax code provisions;
(18) Whether the proposed conversion jeopardizes the tax status of the existing hospital;
(19) Whether the individuals who represented the existing hospital in negotiations avoided conflicts of interest;
(20) Whether officers, board members, directors, or senior management deliberately acted or failed to act in a manner that impacted negatively on the value or purchase price;
(21) Whether the transacting parties are in compliance with the Charitable Trust Act, chapter 9 of title 18; and
(22) Whether the proposed conversion is proper under chapter 36 of title 6 ("Rhode Island Antitrust Act").
History of Section.
P.L. 1997, ch. 372, § 1; P.L. 2000, ch. 325, § 1; P.L. 2012, ch. 258, § 1; P.L. 2012, ch. 259, § 1; P.L. 2020, ch. 63, § 1; P.L. 2020, ch. 70, § 1.