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