Connecticut Seal

General Assembly

 

Committee Bill No. 811

January Session, 2015

 

LCO No. 5737

 

*05737SB00811PH_*

Referred to Committee on PUBLIC HEALTH

 

Introduced by:

 

(PH)

 

AN ACT CONCERNING PARITY IN HOSPITAL SALES OVERSIGHT.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 19a-486 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2015):

For purposes of sections 19a-486 to 19a-486h, inclusive, as amended by this act:

(1) ["Nonprofit hospital" means a nonprofit] "Hospital" means an entity licensed as a hospital pursuant to this chapter and any entity affiliated with such a hospital through governance or membership, including, but not limited to, a holding company or subsidiary.

(2) "Purchaser" means a person acquiring any assets of a [nonprofit] hospital through a transfer.

(3) "Person" means any individual, firm, partnership, corporation, limited liability company, association or other entity.

(4) "Transfer" means to sell, transfer, lease, exchange, option, convey, give or otherwise dispose of or transfer control over, including, but not limited to, transfer by way of merger or joint venture not in the ordinary course of business.

(5) "Control" has the meaning assigned to it in section 36b-41.

(6) "Commissioner" means the Commissioner of Public Health or the commissioner's designee.

(7) "Department" means the Department of Public Health.

(8) "Affected community" means a municipality where the hospital is physically located or a municipality whose inhabitants are regularly served by the hospital.

(9) "Transacting party" means a person that is a party to a proposed agreement who submits an application to the commissioner and the Attorney General pursuant to section 19a-486a, as amended by this act.

(10) "New hospital" means a hospital as it exists after the approval of an agreement pursuant to section 19a-486b, as amended by this act.

Sec. 2. Section 19a-486a of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2015):

(a) No [nonprofit] hospital shall enter into an agreement to transfer a material amount of its assets or operations or a change in control of operations to [a person that is organized or operated for profit] any person without first having received approval of the agreement by the commissioner and the Attorney General pursuant to sections 19a-486 to 19a-486h, inclusive, as amended by this act, and pursuant to the Attorney General's authority under section 3-125. Any such agreement without the approval required by sections 19a-486 to 19a-486h, inclusive, as amended by this act, shall be void.

(b) Prior to any transaction described in subsection (a) of this section, the [nonprofit hospital and the purchaser] transacting parties shall concurrently submit a certificate of need determination letter as described in subsection (c) of section 19a-638 to the commissioner and the Attorney General by serving it on them by certified mail, return receipt requested, or delivering it by hand to each department or office. The certificate of need determination letter shall contain: (1) The name and address of the [nonprofit] hospital that is proposed to be acquired; (2) the name and address of the purchaser; (3) a brief description of the terms of the proposed agreement; and (4) the estimated capital expenditure, cost or value associated with the proposed agreement. The certificate of need determination letter shall be subject to disclosure pursuant to section 1-210.

(c) Not later than thirty days after receipt of the certificate of need determination letter by the commissioner and the Attorney General, the purchaser and the [nonprofit] hospital that is proposed to be acquired shall hold a hearing on the contents of the certificate of need determination letter in the municipality in which the new hospital is proposed to be located. The [nonprofit] hospital that is proposed to be acquired shall provide not less than two weeks' advance notice of the hearing to the public by publication in a newspaper having a substantial circulation in the affected community for not less than three consecutive days. Such notice shall contain substantially the same information as in the certificate of need determination letter. The purchaser and the [nonprofit] hospital that is proposed to be acquired shall record and transcribe the hearing and make such recording or transcription available to the commissioner, the Attorney General or members of the public upon request.

(d) The commissioner and the Attorney General shall review the certificate of need determination letter. The Attorney General shall determine whether the agreement requires approval pursuant to this chapter. If such approval is required, the commissioner and the Attorney General shall transmit to the [purchaser and the nonprofit hospital] transacting parties an application form for approval pursuant to this chapter, unless the commissioner refuses to accept a filed or submitted certificate of need determination letter.

(e) Such application form shall require the following information: (1) The name and address of the [nonprofit] hospital that is proposed to be acquired; (2) the name and address of the purchaser; (3) a description of the terms of the proposed agreement; (4) copies of all contracts, agreements and memoranda of understanding relating to the proposed agreement; (5) a fairness evaluation by an independent person who is an expert in such agreements, that includes an analysis of each of the criteria set forth in section 19a-486c, as amended by this act; (6) documentation that the [nonprofit] hospital that is proposed to be acquired exercised the due diligence required by subdivision (2) of subsection (a) of section 19a-486c, as amended by this act, including disclosure of the terms of any other offers to transfer assets or operations or change control of operations received by [the nonprofit] such hospital and the reason for rejection of such offers; and (7) such other information as the commissioner or the Attorney General deem necessary to their review pursuant to the provisions of sections 19a-486 to 19a-486f, inclusive, as amended by this act, and chapter 368z. The application shall be subject to disclosure pursuant to section 1-210.

[(e) No] (f) Not later than sixty days after the date of mailing of the application form, the [nonprofit] hospital that is proposed to be acquired and the purchaser shall concurrently file an application with the commissioner and the Attorney General containing all the required information. The commissioner and the Attorney General shall review the application and determine whether the application is complete. The commissioner and the Attorney General shall, [no] not later than twenty days after the date of their receipt of the application, provide written notice to the [nonprofit] hospital that is proposed to be acquired and the purchaser of any deficiencies in the application. Such application shall not be deemed complete until such deficiencies are corrected.

[(f) No] (g) Not later than twenty-five days after the date of their receipt of the completed application under this section, the commissioner and the Attorney General shall jointly publish a summary of such agreement in a newspaper of general circulation where the [nonprofit] hospital that is proposed to be acquired is located.

[(g)] (h) Any person may seek to intervene in the proceedings under section 19a-486e, as amended by this act, in the same manner as provided in section 4-177a.

Sec. 3. Section 19a-486b of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2015):

(a) Not later than one hundred twenty days after the date of receipt of the completed application pursuant to [subsection (d) of] section 19a-486a, as amended by this act, the Attorney General and the commissioner shall approve the application, with or without modification, or deny the application. The commissioner shall also determine, in accordance with the provisions of chapter 368z, whether to approve, with or without modification, or deny the application for a certificate of need that is part of the completed application. Notwithstanding the provisions of section 19a-639a, the commissioner shall complete the decision on the application for a certificate of need within the same time period as the completed application. Such one-hundred-twenty-day period may be extended by agreement of the Attorney General, the commissioner [, the nonprofit hospital and the purchaser] and the transacting parties. If the Attorney General initiates a proceeding to enforce a subpoena pursuant to section 19a-486c, as amended by this act, or 19a-486d, the one-hundred-twenty-day period shall be tolled until the final court decision on the last pending enforcement proceeding, including any appeal or time for the filing of such appeal. Unless the one-hundred-twenty-day period is extended pursuant to this section, if the commissioner and Attorney General fail to take action on an agreement prior to the one hundred twenty-first day after the date of the filing of the completed application, the application shall be deemed approved.

(b) The commissioner and the Attorney General may place any conditions on the approval of an application that relate to the purposes of sections 19a-486a to 19a-486h, inclusive, as amended by this act. In determining the conditions to be placed on the approval of an application, the commissioner and the Attorney General shall weigh the value of such conditions against the potential negative impact that such conditions may have, including the failure of the proposed sale to proceed, on (1) the affected community's continued access to high quality and affordable health care after accounting for likely changes in staffing levels, and (2) the provision of services to uninsured and underinsured persons.

Sec. 4. Section 19a-486c of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2015):

(a) The Attorney General shall deny an application as not in the public interest if the Attorney General determines that one or more of the following conditions exist: (1) The transaction is prohibited by Connecticut statutory or common law governing nonprofit entities, trusts or charities; (2) the [nonprofit] hospital that is proposed to be acquired failed to exercise due diligence in (A) deciding to transfer, (B) selecting the purchaser, (C) obtaining a fairness evaluation from an independent person expert in such agreements, or (D) negotiating the terms and conditions of the transfer; (3) the [nonprofit] hospital that is proposed to be acquired failed to disclose any conflict of interest, including, but not limited to, conflicts of interest pertaining to board members, officers, key employees and experts of the hospital, the purchaser or any other [party to the transaction] transacting party; (4) the [nonprofit] hospital that is proposed to be acquired will not receive fair market value for its assets, which, for purposes of this subsection, means the most likely price that the assets would bring in a sale in a competitive and open market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably and in their own best interest, and with a reasonable time being allowed for exposure in the open market; (5) the fair market value of the assets has been manipulated by any person in a manner that causes the value of the assets to decrease; (6) the financing of the transaction by the [nonprofit] hospital that is proposed to be acquired will place [the nonprofit] such hospital's assets at an unreasonable risk; (7) any management contract contemplated under the transaction is not for reasonable fair value; (8) if the hospital that is proposed to be purchased operates on a nonprofit basis, a sum equal to the fair market value of [the] such nonprofit hospital's assets (A) is not being transferred to one or more persons to be selected by the superior court for the judicial district where [the] such nonprofit hospital is located who are not affiliated through corporate structure, governance or membership with either [the] such nonprofit hospital or the purchaser, unless [the] such nonprofit hospital continues to operate on a nonprofit basis after the transaction and such sum is transferred to [the] such nonprofit hospital to provide health care services, and (B) is not being used for one of the following purposes: (i) For appropriate charitable health care purposes consistent with [the] such nonprofit hospital's original purpose, (ii) for the support and promotion of health care generally in the affected community, or (iii) with respect to any assets held by [the] such nonprofit hospital that are subject to a use restriction imposed by a donor, for a purpose consistent with the intent of said donor; or (9) the [nonprofit] hospital that is proposed to be acquired or the purchaser has failed to provide the Attorney General with information and data sufficient to evaluate the proposed agreement adequately, provided the Attorney General has notified [the nonprofit] such hospital or the purchaser of the inadequacy of the information or data and has provided a reasonable opportunity to remedy such inadequacy.

(b) The Attorney General may, during the course of a review required by section 19a-486b: (1) Issue in writing and cause to be served upon any person, by subpoena, a demand that such person appear before the Attorney General and give testimony or produce documents as to any matters relevant to the scope of the review; or (2) issue written interrogatories, to be answered under oath, as to any matters relevant to the scope of the review and prescribing a return date that would allow a reasonable time to respond. If any person fails to comply with the provisions of this subsection, the Attorney General may apply to the superior court for the judicial district of Hartford seeking enforcement of the subpoena. The superior court may, upon notice to such person, issue and cause to be served an order requiring compliance. Service of subpoenas ad testificandum, subpoenas duces tecum, notices of deposition and written interrogatories as provided in this subsection may be made by personal service at the usual place of abode or by certified mail, return receipt requested, addressed to the person to be served at such person's principal place of business within or without this state or such person's residence.

(c) The Attorney General may contract with experts or consultants to assist in reviewing the proposed agreement, including, but not limited to, assistance in independently determining the fair market value of the [nonprofit hospital's] assets of the hospital that is proposed to be acquired. The Attorney General may appoint, or contract with, another person to conduct the review required by this section and make recommendations to the Attorney General. The Attorney General shall submit any bills for such contracts to the purchaser. The purchaser shall pay such bills not later than thirty days after receipt. Such bills shall not exceed five hundred thousand dollars.

Sec. 5. Section 19a-486e of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2015):

Prior to making any decision to approve, with or without modification, or deny any application filed pursuant to subsection (d) of section 19a-486a, as amended by this act, the Attorney General and the commissioner shall jointly conduct one or more public hearings, one of which shall be in the primary service area of the [nonprofit] hospital that is proposed to be acquired. At least fourteen days before conducting the public hearing, the Attorney General and the commissioner shall provide notice of the time and place of the hearing through publication in one or more newspapers of general circulation in the affected community.

Sec. 6. Section 19a-486f of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2015):

If the commissioner or the Attorney General denies an application filed pursuant to subsection (d) of section 19a-486a, as amended by this act, or approves it with modification, the [nonprofit] hospital that is proposed to be acquired or the purchaser may appeal such decision in the same manner as provided in section 4-183, provided that nothing in sections 19a-486 to [19a-486f] 19a-486e, inclusive, as amended by this act, shall be construed to apply the provisions of chapter 54 to the proceedings of the Attorney General.

Sec. 7. Section 19a-486g of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2015):

The Commissioner of Public Health shall refuse to issue a license to, or if issued shall suspend or revoke the license of, a hospital if the commissioner finds, after a hearing and opportunity to be heard, that:

(1) There was a transaction described in section 19a-486a, as amended by this act, that occurred without the approval of the commissioner, if such approval was required by sections 19a-486 to 19a-486h, inclusive, as amended by this act;

(2) There was a transaction described in section 19a-486a, as amended by this act, without the approval of the Attorney General, if such approval was required by sections 19a-486 to 19a-486h, inclusive, as amended by this act, and the Attorney General certifies to the Commissioner of Public Health that such transaction involved a material amount of [the nonprofit hospital's] assets or operations or a change in control of operations of the hospital that is proposed to be acquired; or

(3) The hospital is not complying with the terms of an agreement approved by the Attorney General and commissioner pursuant to sections 19a-486 to 19a-486h, inclusive, as amended by this act.

Sec. 8. Subsection (a) of section 19a-644 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2015):

(a) On or before February twenty-eighth annually, for the fiscal year ending on September thirtieth of the immediately preceding year, each short-term acute care general, [or] children's hospital and health system shall report to the office with respect to its operations in such fiscal year, in such form as the office may by regulation require. Such report shall include: (1) Salaries and fringe benefits for the ten highest paid positions; (2) the name of each joint venture, partnership, subsidiary and corporation related to the hospital; and (3) the salaries paid to hospital and health system employees by each such joint venture, partnership, subsidiary and related corporation and by the hospital to the employees of related corporations. For purposes of this subsection, "health system" has the same meaning as provided in section 19a-508c.

This act shall take effect as follows and shall amend the following sections:

Section 1

October 1, 2015

19a-486

Sec. 2

October 1, 2015

19a-486a

Sec. 3

October 1, 2015

19a-486b

Sec. 4

October 1, 2015

19a-486c

Sec. 5

October 1, 2015

19a-486e

Sec. 6

October 1, 2015

19a-486f

Sec. 7

October 1, 2015

19a-486g

Sec. 8

October 1, 2015

19a-644(a)

Statement of Purpose:

To establish a consistent and fair process for hospital sale oversight by treating all sales equally.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]

Co-Sponsors:

SEN. LOONEY, 11th Dist.; SEN. FASANO, 34th Dist.

REP. CONROY, 105th Dist.

S.B. 813