44TH LEGISLATURE - STATE OF NEW MEXICO - FIRST SESSION, 1999
RELATING TO HEALTH CARE; ENACTING THE NONPROFIT HOSPITAL SALE ACT; ESTABLISHING PROCEDURES AND CRITERIA FOR REVIEW AND APPROVAL OF CERTAIN HOSPITAL ACQUISITIONS; MAKING AN APPROPRIATION; DECLARING AN EMERGENCY.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. SHORT TITLE.--This act may be cited as the "Nonprofit Hospital Sale Act".
Section 2. DEFINITIONS.--As used in the Nonprofit Hospital Sale Act:
A. "acquire" or "acquisition" means the purchase or ownership by a person of twenty percent or more of the assets, operations or business of a hospital owned by a nonprofit corporation, whether by sale, purchase, merger, conveyance, transfer, lease, gift, disposition or otherwise, or the transfer of control, responsibility or governance of twenty percent or more of the assets, operations or business of a hospital owned by a nonprofit corporation to another person or that results in the acquiring person holding a fifty percent or greater interest in the ownership of a nonprofit hospital;
B. "department" means the department of health;
C. "nonprofit hospital" means a general or acute care or specialty hospital licensed by the department that is owned or operated by a person exempt from federal income tax pursuant to Section 501(c)(3) of the federal Internal Revenue Code of 1986;
D. "person" means an individual, corporation, partnership, association, joint venture, stock company, insurance company or other legal entity that is organized on a for-profit or pecuniary basis; and
E. "successor nonprofit organization" means either an existing or new tax-exempt charitable organization operating pursuant to Section 501(c)(3) of the federal Internal Revenue Code of 1986 that is subject to the restrictions and limitations that apply to private foundations pursuant to Sections 4941 through 4945 of the federal Internal Revenue Code of 1986.
Section 3. NONPROFIT HOSPITAL ACQUISITION--APPLICATION FILING--APPROVAL REQUIRED.--
A. No person shall acquire a nonprofit hospital without first applying for and receiving the approval of the attorney general pursuant to the Nonprofit Hospital Sale Act.
B. The nonprofit hospital shall submit an acquisition application to the attorney general and the department in a format provided by the attorney general. The application shall include:
(1) the name of the seller;
(2) the name of the purchaser or other parties to the acquisition;
(3) the terms of the proposed acquisition or agreement;
(4) the consideration to be paid;
(5) a copy of the acquisition agreement;
(6) a valuation report prepared by an independent expert or consultant;
(7) a health impact analysis prepared by an independent expert or consultant pursuant to the criteria set forth in Section 7 of the Nonprofit Hospital Sale Act; and
(8) any other information the attorney general determines is required consistent with the provisions of the Nonprofit Hospital Sale Act.
C. A copy of the application and copies of all additional related materials shall be submitted to the department and to the attorney general at the same time. Applications and all related documents shall be public records subject to all provisions of the Inspection of Public Records Act and shall be made available at the offices of the attorney general, the department and the nonprofit hospital.
D. If after receiving an application the attorney general determines that the application is incomplete, the attorney general may return the application to the applicant or may request additions or changes to the application. All deadlines are suspended during the time an application is incomplete. Otherwise, all computations of time shall be governed by the Rules of Civil Procedure for the District Courts.
Section 4. APPLICATION REVIEWS BY ATTORNEY GENERAL AND DEPARTMENT OF HEALTH.--
A. Within five business days after receipt of a completed application, the attorney general shall publish notice of the application in a newspaper of general circulation in the service area of the hospital once per week for two weeks. In addition to this public notice, the attorney general shall notify by mail any person who has requested notice of the filing of applications pursuant to the Nonprofit Hospital Sale Act. The notice shall state that a completed application has been received, state the names of the parties to the agreement and describe the contents of the application.
B. Within ninety days of the receipt of a completed application, the attorney general shall notify the nonprofit hospital in writing of the decision either to approve the acquisition, with or without any specific conditions or modifications, or disapprove the acquisition subject to the criteria set forth in the Nonprofit Hospital Sale Act. The attorney general may extend this ninety-day period for an additional sixty days if the extension is necessary to obtain information pursuant to Section 6 or 7 of the Nonprofit Hospital Sale Act.
C. The attorney general shall not make a decision based on any condition not reasonably related to the criteria specified in Section 6 or 7 of the Nonprofit Hospital Sale Act, and any condition or modification shall bear a direct and rational relationship to the application under review.
D. The department shall review a completed application and shall issue a written report of its findings to the attorney general. The department's report shall be based on the criteria set forth in Section 7 of the Nonprofit Hospital Sale Act, and the report shall make a recommendation to approve, with or without conditions, or disapprove the application based on whether the application has met the criteria set forth in Section 7 of that act.
Section 5. PUBLIC HEARING--DISCOVERY PROCEDURES.--
A. The attorney general shall hold at least one public hearing after providing by mail at least fourteen days' notice to the parties to the transaction and any person who has requested notice. The attorney general shall publish notice of the public hearing in a newspaper of general circulation in the service area of the nonprofit hospital at least once each week for two weeks. At a public hearing, the department shall appear and provide a statement or testimony regarding the written report it has produced pursuant to Subsection D of Section 4 of the Nonprofit Hospital Sale Act. The attorney general may hold additional public hearings if:
(1) the application is substantially modified, changed or amended after the public hearing;
(2) the department modifies its written report or recommendation after the public hearing; or
(3) reports or findings made by any experts or consultants retained by the attorney general or the department are not completed until after the public hearing.
B. The attorney general may in his discretion hold additional public hearings based on the size of the community served by the nonprofit hospital and the complexity of the acquisition. At the hearings, any person may file written comments and exhibits or appear and make a statement, provided that the comments, exhibits or statement are relevant to the proposed acquisition. The attorney general may subpoena additional information or witnesses, require and administer oaths, require sworn statements, take depositions and use related discovery procedures for purposes of the hearing and at any time prior to making a decision on the application. The public hearing shall be held not later than sixty days after receipt of a completed application.
Section 6. ATTORNEY GENERAL'S REVIEW--CRITERIA.--
A. Before approving an application, the attorney general shall find that the proposed acquisition meets all of the following criteria:
(1) the acquisition is in the public interest;
(2) the acquisition is permitted by the Nonprofit Corporation Act and other laws of New Mexico and the United States;
(3) the nonprofit hospital exercised due diligence in deciding to sell, selecting the purchaser and negotiating the terms and conditions of the acquisition or agreement;
(4) appropriate expert assistance was used by the nonprofit hospital in making its decision;
(5) the acquisition will not result in a breach of fiduciary duty, including conflicts of interest related to the payments or benefits to officers, directors, board members, executives and experts employed or retained by the parties;
(6) the nonprofit hospital will receive fair market value for its charitable assets. For the purposes of this paragraph, "fair market value" means a likely or reasonable price that the assets being sold would bring 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. To facilitate review of this criteria, the attorney general shall review the independent valuation submitted by the nonprofit hospital, and the attorney general shall use an independent expert or consultant to review the nonprofit hospital's valuation or conduct a separate valuation;
(7) public and charitable funds are not placed at unreasonable risk;
(8) any management contract under the acquisition is for reasonable consideration and fair value;
(9) the proceeds from the acquisition shall be distributed to a successor nonprofit corporation that is broadly based in and representative of the service area of the nonprofit hospital being acquired, taking into consideration the structure and governance of the acquiring entity;
(10) the proceeds from the acquisition shall be used by the successor nonprofit corporation for appropriate charitable health care purposes consistent with the original purpose of the nonprofit hospital being acquired and for the support and promotion of health care in the affected community;
(11) the proceeds from the acquisition shall be controlled by the successor nonprofit corporation as charitable funds independent of the acquiring or related entities;
(12) the successor nonprofit corporation shall have a right of first refusal to repurchase the assets on the same or better terms as that offered to or by another if it is later contemplated that the hospital will be sold to, acquired by or merged with another entity; and
(13) the attorney general has been provided with sufficient information and data by the nonprofit hospital to evaluate adequately the proposed acquisition or the effects thereof on the public. In making this determination, the attorney general shall notify the nonprofit hospital or the acquiring person of any inadequacy of the information or data and provide them a reasonable opportunity to remedy such inadequacy.
B. The attorney general shall not approve an application until the department has issued a favorable report finding that the acquisition meets all of the criteria set forth in Section 7 of the Nonprofit Hospital Sale Act.
Section 7. DEPARTMENT REVIEW CRITERIA.--
A. In reviewing an application, the department shall determine the effect the proposed acquisition will have on the availability, accessibility and affordability of health services to the community served by the nonprofit hospital. The department shall also consider the acquiring entity's ability to maintain and improve health access and quality of services.
B. In making this determination, the department shall determine that the acquisition meets all of the following criteria, in addition to any other factors deemed relevant:
(1) the acquisition is in the public interest;
(2) sufficient safeguards are included to assure the affected community continued access to affordable health care;
(3) the purchaser and parties to the acquisition have made a commitment to provide health care to the disadvantaged, the uninsured and the underinsured and to provide benefits to the affected community to promote health care;
(4) if health care providers will be offered the opportunity to invest or own an interest in the purchaser or an entity related to the purchaser, procedures or safeguards are in place to avoid any conflict of interest in patient referral and there is full disclosure of the nature of these procedures or safeguards; and
(5) the acquisition will result in the provision of essential medical services needed to provide safe and adequate treatment, appropriate access and balanced health care delivery to the residents of the hospital's service area.
Section 8. EXPERTS--ATTORNEY FEES.--
A. The attorney general and the department may retain experts or consultants to assist in their review of a proposed acquisition.
B. The nonprofit hospital shall, upon request, pay the attorney general and the department promptly for all expert, consultant and related acquisition review costs, including reasonable attorney fees.
Section 9. LICENSURE--DENIAL, SUSPENSION OR REVOCATION.--
A. The department may revoke, suspend, refuse to renew or refuse to issue the license to operate a hospital or may impose on a hospital any intermediate sanction and civil monetary penalty provided in Section 24-1-5.2 NMSA 1978 after notice and opportunity for a hearing provided in accordance with Section 24-1-5 NMSA 1978 if:
(1) there is an acquisition of a hospital without first having received the approval of the attorney general pursuant to the Nonprofit Hospital Sale Act;
(2) there is an acquisition of a hospital and there is a judicial determination that the acquisition is not in the public interest; or
(3) the hospital is not fulfilling its commitments pursuant to Sections 6 and 7 of the Nonprofit Hospital Sale Act.
B. Hearings and appeals of department actions pursuant to this section shall be taken in accordance with Section 24-1-5 NMSA 1978.
Section 10. RULES.--The attorney general and the department may adopt rules to implement the provisions of the Nonprofit Hospital Sale Act.
Section 11. APPROPRIATION.--One hundred eighty-three thousand dollars ($183,000) is appropriated from the general fund to the office of the attorney general for expenditure in fiscal year 2000 for the purpose of carrying out the provisions of the Nonprofit Hospital Sale Act. Any unexpended or unencumbered balance remaining at the end of the fiscal year 2000 shall revert to the general fund.
Section 12. EMERGENCY.--It is necessary for the public peace, health and safety that this act take effect immediately.