Substitute House Bill No. 5645
          Substitute House Bill No. 5645

              PUBLIC ACT NO. 97-188


AN  ACT  REQUIRING  ADVANCE REVIEW AND APPROVAL OF
THE SALE OF NONPROFIT HEALTH  CARE  FACILITIES  TO
FOR-PROFIT ENTITIES.


    Be  it  enacted  by  the  Senate  and House of
Representatives in General Assembly convened:
    Section 1. (NEW) For purposes of this act:
    (1)  "Nonprofit hospital"  means  a  nonprofit
entity licensed as  a hospital pursuant to chapter
368v  of  the  general  statutes  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 or nonprofit health
care center 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 of the general statutes.
    Sec. 2. (NEW)  (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  without  first
having  notified  and,   if  applicable,  received
approval of the  agreement  by the Commissioner of
Health  Care  Access   and  the  Attorney  General
pursuant  to this  act  and  his  authority  under
section  3-125  of   the   general  statutes.  Any
agreement without the  approval  required  by this
act shall be void.
    (b)  Prior to  any  transaction  described  in
subsection  (a) of  this  section,  the  nonprofit
hospital shall give notice to the commissioner and
the Attorney General  by  serving  it  on  them by
certified  mail, return  receipt  requested.  Such
notice shall contain:  (1) The name and address of
the nonprofit hospital;  (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;
and (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  4  of this act. The notice shall
be subject to  disclosure pursuant to section 1-19
of the general statutes.
    (c) Not later than ten days after receipt of a
notice under this  section, the commissioner shall
publish a summary of such agreement in a newspaper
of  general  circulation   where   the   nonprofit
hospital is located.
    (d) Any person  may  seek  to intervene in the
proceedings under this  act  pursuant  to  section
4-177a of the general statutes.
    Sec. 3. (NEW)  (a)  Not later than twenty days
after receipt of  a notice of a proposed agreement
under section 2  of this act, the Attorney General
shall determine whether  the  agreement involves a
material amount of  the  assets or operations or a
change in control  of  operations of the nonprofit
hospital  and shall  notify  the  Commissioner  of
Health Care Access  of  such  determination. If he
determines that the agreement involves a change in
control of operations  or  the amount of assets or
operations involved is  material,  then  he  shall
conduct a review of the proposed agreement.
    (b) Not later  than  one  hundred  twenty days
after receipt of  the notice required by section 2
of this act, the Attorney General shall review the
agreement and shall approve the agreement, with or
without   modifications,   or    disapprove    the
agreement. The one  hundred  twenty  days  may  be
extended by agreement of the Attorney General, the
nonprofit  hospital  and  the  purchaser.  If  the
Attorney General initiates  a  proceeding pursuant
to section 4  of  this  act to enforce a subpoena,
the one hundred  twenty days shall be tolled until
the  final  court   decision  on  the  enforcement
proceeding, including any  appeal  or time for the
filing of such appeal. Unless extended pursuant to
this subsection, failure  to  take  action  on  an
agreement within one  hundred twenty days shall be
deemed approval.
    Sec. 4. (NEW)  (a)  The Attorney General shall
disapprove a proposed  agreement  requiring notice
under section 2  of  this act as not in the public
interest if he  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 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  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;
(4) the nonprofit  hospital  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  will   place   the  nonprofit
hospital's assets at an unreasonable risk; (7) any
management   contract   contemplated   under   the
transaction is not  for reasonable fair value; (8)
a sum equal  to  the  fair  market  value  of  the
nonprofit  hospital's  assets  (A)  is  not  being
transferred to one or more persons selected by the
Superior  Court who  are  not  affiliated  through
corporate structure, governance or membership with
either the nonprofit hospital or the purchaser and
(B) is not  being  used  for  one of the following
purposes: (i) For  appropriate  charitable  health
care  purposes  consistent   with   the  nonprofit
hospital  or  nonprofit   health   care   center'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 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 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
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 3 of this
act: (1) Issue  in  writing and cause to be served
upon any person,  by  subpoena, a demand that such
person appear before  him  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-New Britain
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
his principal place  of  business in this state or
his 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.
The Attorney General  shall  submit  any bills for
such contracts to  the  purchaser.  The  purchaser
shall  pay  such   bills  within  thirty  days  of
receipt. Such bills  shall  not exceed one hundred
fifty thousand dollars.
    Sec. 5. (NEW)  (a)  If  the  Attorney  General
determines, pursuant to  section  3  of  this act,
that the proposed  agreement  involves  a material
amount of the  assets or operations or a change in
control of operations  of  the nonprofit hospital,
then not later  than one hundred twenty days after
receipt of a  notice of a proposed agreement under
section 2 of  this act, the Commissioner of Health
Care Access shall  review  the agreement and shall
approve   the   agreement,    with    or   without
modifications, or disapprove  the  agreement.  The
one hundred twenty  day  period may be extended by
agreement  of  the   commissioner,  the  nonprofit
hospital  and  the   purchaser.  If  the  Attorney
General, on behalf  of the commissioner, initiates
a proceeding pursuant  to  subsection  (c) of this
section to enforce  a  subpoena,  the  one hundred
twenty day period  shall be tolled until the final
court decision on  the  proceeding,  including any
appeal or any  time for filing such appeal. Unless
extended pursuant to  this  subsection, failure to
take action on  an  agreement  within  one hundred
twenty days shall be deemed approval.
    (b) The commissioner  shall  not  approve  the
agreement unless he  finds  that: (1) The affected
community will be  assured  of continued access to
affordable health care; (2) the purchaser has made
a  commitment  to   provide  health  care  to  the
uninsured and the  underinsured; and (3) safeguard
procedures are in  place  to  avoid  a conflict of
interest  in  patient   referral  if  health  care
providers  or  insurers   will   be   offered  the
opportunity to invest  or  own  an interest in the
purchaser or an entity related to the purchaser.
    (c) The commissioner may, during the course of
a review required  by  this  section: (1) Issue in
writing and cause to be served upon any person, by
subpoena, a demand  that such person appear before
him and give  testimony or produce documents as to
any matters relevant  to  the scope of the review;
and  (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 commissioner,
through the Attorney  General,  may  apply  to the
Superior  Court  for   the  judicial  district  of
Hartford-New Britain seeking  enforcement  of such
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 his principal place of business in
this state or his residence.
    Sec. 6. (NEW)  Prior to making any decision to
approve  or  disapprove   a   proposed   agreement
requiring notice under  section 2 of this act, the
Attorney General and  the  Commissioner  of Health
Care Access shall  jointly  conduct  one  or  more
public hearings, one  of  which  shall  be  in the
primary service area of the nonprofit hospital. At
least  ten  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. 7. (NEW)  If  the  Commissioner of Health
Care Access or  the Attorney General disapproves a
proposed agreement requiring  notice under section
2 of this  act, or approves it with modifications,
the nonprofit hospital or the purchaser may appeal
such  decision  pursuant  to  chapter  54  of  the
general statutes.
    Sec.  8.  (NEW)  The  Commissioner  of  Public
Health shall refuse  to  issue a license to, or if
issued shall suspend  or  revoke the license of, a
nonprofit  hospital  if  the  commissioner  finds,
after a hearing and opportunity to be heard, that:
    (1)  There  was  a  transaction  described  in
section 2 of  this act without the approval of the
Commissioner  of  Health   Care  Access,  if  such
approval  was  required   by   this  act  and  the
Commissioner of Health  Care  Access  certifies to
the Commissioner of  Public  Health  that approval
was not obtained;
    (2)  There  was  a  transaction  described  in
section 2 of  this act without the approval of the
Attorney General, if such approval was required 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; or
    (3) The nonprofit  hospital  is  not complying
with the terms  of  an  agreement  approved by the
Attorney General and commissioner pursuant to this
act.
    Sec. 9. (NEW)  Nothing  in  this  act shall be
construed  to  limit:   (1)   The  common  law  or
statutory authority of  the  Attorney General; (2)
the statutory authority of the Commissioner of the
Office of Health  Care  Access or the Commissioner
of Public Health  including,  but  not limited to,
licensing and certificate  of  need  authority; or
(3) the application  of the doctrine of cy pres or
approximation.
    Sec. 10. This  act  shall take effect from its
passage.

Approved June 26, 1997