State of New Mexico House of Representatives FORTY-THIRD LEGISLATURE FIRST SESSION, 1997 March 15, 1997 Mr. Speaker: Your VOTERS AND ELECTIONS COMMITTEE, to whom has been referred SENATE PUBLIC AFFAIRS COMMITTEE SUBSTITUTE FOR SENATE BILL 918 has had it under consideration and reports same with recommendation that it DO PASS, amended as follows: 1. On page 1, line 11, after the second semicolon insert "ENACTING THE NONPROFIT HOSPITAL SALE ACT;". 2. On page 2, line 1, before "citizens" insert "sick and indigent". 3. On page 2, line 8, strike "fifty-five" and insert in lieu thereof "sixty". 4. On page 19, line 18, before "records" insert "those portions of". 5. On page 19, line 19, strike "if the records" and insert in lieu thereof "that". 6. On page 19, between lines 22 and 23, insert the following new sections: "Section 13. [NEW MATERIAL] SHORT TITLE.--Sections 13 through 22 of this act may be cited as the "Nonprofit Hospital Sale Act". Section 14. [NEW MATERIAL] DEFINITIONS.--As used in the Nonprofit Hospital Sale Act: A. "acquire" or "acquisition" means the acquiring by a person of an interest in a hospital, whether by purchase, merger, lease, gift or otherwise, that results in a change of ownership or control of twenty percent or greater or that results in the acquiring person holding a fifty percent or greater interest in the ownership or control of a hospital, but "acquisition" does not include the acquiring of an interest in a hospital owned by a nonprofit corporation if the transferee: (1) is a nonprofit corporation having a substantially similar charitable health care purpose as the transferor; and (2) will continue representation from the affected community on the local board; B. "department" means the department of health; C. "hospital" means a general or acute care or specialty hospital licensed by the department; D. "nonprofit corporation" means a person exempt from federal income tax pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986 or the state or a department, agency, institution or political subdivision of the state; and E. "person" means an individual or other legal entity, not including the state or a department, agency, institution or political subdivision of the state. Section 15. [NEW MATERIAL] ACQUISITIONS--APPLICATIONS-- APPROVALS.-- A. No person shall acquire a hospital owned by a nonprofit corporation without first applying for and receiving the approval of the department and without first notifying the attorney general and, if applicable, receiving approval from the attorney general pursuant to the Nonprofit Hospital Sale Act. B. Except as provided in Subsection C of this section, no person shall acquire a hospital owned by a person other than a nonprofit corporation without first applying for and receiving the approval of the department pursuant to the Nonprofit Hospital Sale Act unless the acquiring person is a nonprofit corporation. C. Approval of the department and the attorney general is not required for the acquisition of a hospital if the acquisition is a result of: (1) the lease of a county hospital; (2) the dissolution of a hospital district; or (3) the merger of hospital districts or governmental hospitals. D. The acquisition application shall be submitted to the department and the attorney general on forms provided by the department and shall include the name of the seller, the name of the purchaser or other parties to the acquisition, the terms of the proposed agreement, the sale price, a copy of the acquisition agreement, a financial and economic analysis and report from an independent expert or consultant of the effect of the acquisition based on the criteria set forth in Sections 7 and 8 of the Nonprofit Hospital Sale Act and all other related documents. 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 are public records. E. A person not required to obtain approval for an acquisition shall notify the department and the attorney general at least thirty days before the acquisition. The notice shall briefly describe the impending acquisition, including any change in ownership of tangible and intangible assets. Section 16. [NEW MATERIAL] APPLICATION--CONTENTS--TIME PERIODS--APPROVALS OR DISAPPROVALS.-- A. Within ten days after receipt of an application, the department shall publish notice of the application in a newspaper of general circulation in the county where the hospital is located and shall notify by mail any person who has requested notice of the filing of applications. The notice shall state that an application has been received, state the names of the parties to the agreement, describe the contents of the application and state the date by which a person may submit written comments about the application to the department. B. Within twenty days after receiving an application, the attorney general shall determine whether to review the application in accordance with Section 7 of the Nonprofit Hospital Sale Act and shall notify the applicant of his decision. If the attorney general reviews the application, he shall approve or disapprove the acquisition within sixty days. C. Within sixty days after receiving an application, the department shall review the application in accordance with the standards set forth in the Nonprofit Hospital Sale Act and shall: (1) approve the acquisition, with or without any specific modifications; or (2) disapprove the acquisition. D. If during its review the department determines that the application is incomplete, it 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. E. The department shall not make its decision subject to any condition not directly related to criteria enumerated in Section 8 of the Nonprofit Hospital Sale Act, and any condition or modification shall bear a direct and rational relationship to the application under review. F. An affected person may appeal a final decision by the department pursuant to the Nonprofit Hospital Sale Act in the same manner as appeals related to the department's denial, suspension or revocation of a hospital license pursuant to Section 24-1-5 NMSA 1978. Section 17. [NEW MATERIAL] PUBLIC HEARING.--The department and the attorney general shall hold a public hearing in which any person may file written comments and exhibits or appear and make a statement. The department and 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 hearing shall be held not later than forty days after receipt of an application. The hearing shall be held upon ten working days' notice, not including days the application is deemed incomplete. Section 18. [NEW MATERIAL] DECLARATORY JUDGMENT.--After the attorney general approves or disapproves the acquisition, the applicant or any person who has submitted comments pursuant to Section 5 of the Nonprofit Hospital Sale Act, if the person has an interest in the hospital being acquired or in another hospital that has contracted with the acquirable hospital for the provision of essential health services, may bring an action for declaratory judgment for a determination that the acquisition is or is not in the public interest as provided in Section 7 of that act. Section 19. [NEW MATERIAL] ATTORNEY GENERAL--CRITERIA.-- A. The attorney general shall approve the application unless he finds that the acquisition is not in the public interest. An acquisition is not in the public interest unless appropriate steps have been taken to safeguard the value of charitable assets and ensure that any proceeds of the transaction are used for appropriate charitable health care purposes as provided in Paragraph (8) of Subsection B of this section. B. In determining whether the acquisition meets the requirements of the Nonprofit Hospital Sale Act, the attorney general shall consider: (1) whether the acquisition is permitted by the Nonprofit Corporation Act and other laws of New Mexico governing public procurement or nonprofit entities; (2) whether the nonprofit hospital exercised due diligence in deciding to sell, selecting the purchaser and negotiating the terms and conditions of the sale; (3) the procedures used by the seller in making its decision, including whether appropriate expert assistance was used; (4) whether conflict of interest was disclosed, including conflicts of interest related to board members of, executives of and experts retained by the seller, purchaser or other parties to the acquisition; (5) whether the seller will receive reasonable consideration and fair value for its assets. The attorney general may employ, at the seller's expense, reasonably necessary expert assistance in making this determination; (6) whether public and charitable funds are placed at unreasonable risk, if the acquisition is financed in part by the seller; (7) whether any management contract under the acquisition is for reasonable consideration and fair value; (8) whether the sale proceeds will be used for appropriate public and charitable health care purposes consistent with the seller's original purpose or for the support and promotion of health care in the affected community and whether the proceeds will be controlled as public or charitable funds independent of the purchaser or parties to the acquisition; and (9) whether a right of first refusal has been retained to repurchase the assets by a successor nonprofit corporation or foundation if the hospital is subsequently sold to, acquired by or merged with another entity. Section 20. [NEW MATERIAL] DEPARTMENT CRITERIA.-- A. In determining whether the acquisition meets the requirements of the Nonprofit Hospital Sale Act, the department shall consider: (1) whether sufficient safeguards are included to assure the affected community continued access to affordable and appropriate health care; (2) whether 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. Activities and funding provided by the seller to provide such health care may be considered in evaluating compliance with this paragraph; and (3) 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, whether procedures or safeguards are in place to avoid conflict of interest in patient referral and the nature of the procedures or safeguards. B. This section does not apply higher standards to hospitals covered by the provisions of the Nonprofit Hospital Sale Act than those applicable to hospitals not covered by the provisions of that act. Section 21. [NEW MATERIAL] ACQUISITION--FAILURE TO FULFILL OBLIGATIONS--REVOCATION OF LICENSE.--If the department receives information indicating that the acquiring person is not fulfilling the commitment to the affected community pursuant to Section 7 of the Nonprofit Hospital Sale Act, the department shall hold a hearing on ten working days' notice to the affected parties. If after the hearing the department determines that the information is true, it may institute proceedings to revoke the license issued to the purchaser. Section 22. [NEW MATERIAL] LICENSURE--DENIAL, SUSPENSION OR REVOCATION.-- A. No license to operate a hospital shall be issued or renewed by the department and a license that has been issued shall be suspended or revoked if: (1) there is an acquisition of a hospital without first having received the approval, if applicable, of the department pursuant to the Nonprofit Hospital Sale Act; (2) there is an acquisition of a hospital without the approval of the attorney general if the attorney general determines to review the application pursuant to the Nonprofit Hospital Sale Act; (3) there is an acquisition of a hospital and there is a judicial determination that the acquisition is not in the public interest; or (4) the hospital is not fulfilling its commitment pursuant to Section 8 of the Nonprofit Hospital Sale Act. B. Hearings and appeals of department actions pursuant to this section shall be taken in the same manner as provided for other hospital license suspensions or revocations in Section 24-1-5 NMSA 1978.". 7. Renumber the succeeding section accordingly., Respectfully submitted, Edward C. Sandoval, Chairman Adopted Not Adopted (Chief Clerk) (Chief Clerk) Date The roll call vote was 9 For 0 Against Yes: 9 Excused: Lujan, Nicely, Sanchez Absent: None .118867.2 G:\BILLTEXT\AMEND_97\S0918VE1