0001|      HOUSE APPROPRIATIONS AND FINANCE COMMITTEE SUBSTITUTE FOR
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0002|                            HOUSE BILL 498
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0003|     43rd legislature - STATE OF NEW MEXICO - second session, 1998
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0010|     
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0011|                                AN ACT
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0012|     RELATING TO THE PUBLIC PEACE, HEALTH, SAFETY AND WELFARE;
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0013|     ENACTING THE NONPROFIT HOSPITAL SALE ACT; ESTABLISHING
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0014|     PROCEDURES AND CRITERIA FOR REVIEW AND APPROVAL OF CERTAIN
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0015|     ACQUISITIONS; DECLARING AN EMERGENCY.
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0016|     
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0017|     BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
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0018|          Section 1.  SHORT TITLE.--This act may be cited as the
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0019|     "Nonprofit Hospital Sale Act".
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0020|          Section 2.  DEFINITIONS.--As used in the Nonprofit
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0021|     Hospital Sale Act:
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0022|               A.  "acquire" or "acquisition" means the acquiring
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0023|     by a person of an interest in a hospital, whether by purchase,
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0024|     merger, conveyance, transfer, lease, gift or otherwise, that
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0025|     results in a change of ownership or control of twenty percent
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<center>- 1 -</center>0001|     or greater or that results in the acquiring person holding a
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0002|     fifty percent or greater interest in the ownership or control
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0003|     of a hospital, but "acquisition" does not include the
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0004|     acquiring of an interest in a hospital owned by a nonprofit
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0005|     corporation if the transferee:
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0006|                    (1)  is a nonprofit corporation having a
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0007|     substantially similar charitable health care purpose as the
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0008|     transferor; and
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0009|                    (2)  will continue representation from the
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0010|     affected community on the local board;
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0011|               B.  "department" means the department of health;
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0012|               C.  "hospital" means a general or acute care or
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0013|     specialty hospital licensed by the department;
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0014|               D.  "nonprofit corporation" means a person exempt
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0015|     from federal income tax pursuant to Section 501(c)(3) of the
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0016|     Internal Revenue Code or a government; and
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0017|               E.  "person" means an individual or other legal
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0018|     entity, including the state or a department, agency,
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0019|     institution or political subdivision of the state.
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0020|          Section 3.  ACQUISITIONS--APPLICATIONS--APPROVALS.--
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0021|               A.  No person shall acquire a hospital owned by a
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0022|     nonprofit corporation without first applying for and receiving
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0023|     the approval of the department and without first notifying the
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0024|     attorney general and, if applicable, receiving approval from
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0025|     the attorney general pursuant to the Nonprofit Hospital Sale
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<center>- 2 -</center>0001|     Act. 
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0002|               B.  Except as provided in Subsection C of this
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0003|     section, no person shall acquire a hospital owned by a nonprofit
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0004|     corporation without first applying for and receiving the approval
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0005|     of the department pursuant to the Nonprofit Hospital Sale Act
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0006|     unless the acquiring person is a nonprofit corporation.  
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0007|               C.  Approval of the department and the attorney
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0008|     general is not required for the acquisition of a hospital if the
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0009|     acquisition is a result of:
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0010|                    (1)  the lease of a county hospital;
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0011|                    (2)  the dissolution of a hospital district; or
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0012|                    (3)  a merger among hospital districts or
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0013|     governmental hospitals.
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0014|               D.  The acquisition application shall be submitted to
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0015|     the department and the attorney general on forms provided by the
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0016|     department and shall include the name of the seller, the name of
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0017|     the purchaser or other parties to the acquisition, the terms of
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0018|     the proposed agreement, the sale price, a copy of the acquisition
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0019|     agreement, a financial and economic analysis and report from an
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0020|     independent expert or consultant of the effect of the acquisition
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0021|     based on the criteria set forth in Sections 7 and 8 of the
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0022|     Nonprofit Hospital Sale Act and all other related documents.  A
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0023|     copy of the application and copies of all additional related
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0024|     materials shall be submitted to the department and to the
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0025|     attorney general at the same time.  Applications and all related
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<center>- 3 -</center>0001|     documents are public records.
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0002|               E.  A person not required to obtain approval for an
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0003|     acquisition shall notify the department and the attorney general
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0004|     at least thirty days before the acquisition.  The notice shall
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0005|     briefly describe the impending acquisition, including any change
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0006|     in ownership of tangible and intangible assets.
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0007|          Section 4.  APPLICATION--CONTENTS--TIME PERIODS--APPROVALS
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0008|     OR DISAPPROVALS.--
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0009|               A.  Within ten days after receipt of an application,
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0010|     the department shall publish notice of the application in a
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0011|     newspaper of general circulation in the county where the hospital
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0012|     is located and shall notify by mail any person who has requested
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0013|     notice of the filing of applications.  The notice shall state
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0014|     that an application has been received, state the names of the
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0015|     parties to the agreement, describe the contents of the
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0016|     application and state the date by which a person may submit
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0017|     written comments about the application to the department.
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0018|               B.  Within twenty days after receiving an application,
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0019|     the attorney general shall determine whether to review the
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0020|     application in accordance with Section 7 of the Nonprofit
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0021|     Hospital Sale Act and shall notify the applicant of his decision. 
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0022|     If the attorney general reviews the application, he shall approve
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0023|     or disapprove the acquisition within ninety days.
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0024|               C.  Within ninety days after receiving an application,
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0025|     the department shall review the application in accordance with
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<center>- 4 -</center>0001|     the standards set forth in the Nonprofit Hospital Sale Act and
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0002|     shall:
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0003|                    (1)  approve the acquisition, with or without
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0004|     any specific modifications; or
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0005|                    (2)  disapprove the acquisition.
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0006|               D.  If during its review the department determines
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0007|     that the application is incomplete, it may return the application
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0008|     to the applicant or may request additions or changes to the
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0009|     application.  All deadlines are suspended during the time an
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0010|     application is incomplete.
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0011|               E.  The department shall not make its decision subject
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0012|     to any condition not directly related to criteria enumerated in
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0013|     Section 8 of the Nonprofit Hospital Sale Act, and any condition
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0014|     or modification shall bear a direct and rational relationship to
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0015|     the application under review.
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0016|               F.  An affected person may appeal a final decision by
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0017|     the department pursuant to the Nonprofit Hospital Sale Act in the
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0018|     same manner as appeals related to the department's denial,
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0019|     suspension or revocation of a hospital license pursuant to
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0020|     Section 24-1-5 NMSA 1978.
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0021|          Section 5.  PUBLIC HEARING.--The department and the
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0022|     attorney general shall hold a public hearing in which any person
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0023|     may file written comments and exhibits or appear and make a
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0024|     statement.  The department and the attorney general may subpoena
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0025|     additional information or witnesses, require and administer
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<center>- 5 -</center>0001|     oaths, require sworn statements, take depositions and use related
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0002|     discovery procedures for purposes of the hearing and at any time
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0003|     prior to making a decision on the application.  The hearing shall
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0004|     be held not later than sixty days after receipt of an
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0005|     application.  The hearing shall be held upon ten working days'
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0006|     notice, not including days the application is deemed incomplete.
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0007|          Section 6.  ATTORNEY GENERAL--CRITERIA.--
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0008|               A.  The attorney general shall approve the application
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0009|     unless he finds that the acquisition is not in the public
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0010|     interest.  An acquisition is not in the public interest unless
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0011|     appropriate steps have been taken to safeguard the value of
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0012|     charitable assets and ensure that any proceeds of the transaction
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0013|     are used for appropriate charitable health care purposes as
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0014|     provided in Paragraph (8) of Subsection B of this section.
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0015|               B.  Before approving the application, the attorney
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0016|     general shall find that the proposed acquisition meets all of the
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0017|     following requirements:

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0018|                    (1)  the acquisition is permitted by the
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0019|     Nonprofit Corporation Act and other laws of New Mexico and the
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0020|     United States;
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0021|                    (2)  the nonprofit hospital exercised due
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0022|     diligence in deciding to sell, selecting the purchaser and
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0023|     negotiating the terms and conditions of the sale;
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0024|                    (3)  appropriate expert assistance was used by
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0025|     the nonprofit hospital in making its decision;
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<center>- 6 -</center>0001|                    (4)  conflicts of interest were disclosed,
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0002|     including conflicts of interest related to board members of,
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0003|     executives of and experts retained by the seller, purchaser or
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0004|     other parties to the acquisition;
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0005|                    (5)  the seller will receive reasonable
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0006|     consideration and fair value for its assets.  The attorney
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0007|     general shall employ, at the transacting parties' expense,
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0008|     reasonably necessary expert assistance in making this
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0009|     determination;
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0010|                    (6)  public and charitable funds are not placed
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0011|     at unreasonable risk, if the acquisition is financed in part by
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0012|     the seller;
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0013|                    (7)  any management contract under the
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0014|     acquisition is for reasonable consideration and fair value;
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0015|                    (8)  the sale proceeds will be used for
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0016|     appropriate public and charitable health care purposes consistent
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0017|     with the seller's original purpose or for the support and
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0018|     promotion of health care in the affected community and the
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0019|     proceeds will be controlled as public or charitable funds
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0020|     independent of the purchaser or parties to the acquisition; and
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0021|                    (9)  a right of first refusal has been retained
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0022|     to repurchase the assets by a successor nonprofit corporation or
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0023|     foundation if the hospital is subsequently sold to, acquired by
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0024|     or merged with another entity.
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0025|          Section 7.  DEPARTMENT CRITERIA.--
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<center>- 7 -</center>0001|               A.  Before approving the application, the department
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0002|     shall find that the acquisition meets all of the following
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0003|     requirements:
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0004|                    (1)  sufficient safeguards are included to
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0005|     assure the affected community continued access to affordable and
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0006|     appropriate health care;
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0007|                    (2)  the purchaser and parties to the
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0008|     acquisition have made a commitment to provide health care to the
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0009|     disadvantaged, the uninsured and the underinsured and to provide
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0010|     benefits to the affected community to promote health care. 
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0011|     Activities and funding provided by the seller to provide such
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0012|     health care may be considered in evaluating compliance with this
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0013|     paragraph; and
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0014|                    (3)  if health care providers will be offered
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0015|     the opportunity to invest or own an interest in the purchaser or
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0016|     an entity related to the purchaser, procedures or safeguards are
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0017|     in place to avoid conflict of interest in patient referral and
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0018|     the nature of the procedures or safeguards.
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0019|               B.  This section does not apply higher standards to
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0020|     hospitals covered by the provisions of the Nonprofit Hospital
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0021|     Sale Act than those applicable to hospitals not covered by the
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0022|     provisions of that act.
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0023|          Section 8.  ACQUISITION--FAILURE TO FULFILL OBLIGATIONS--
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0024|     REVOCATION OF LICENSE.--If the department receives information
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0025|     indicating that the acquiring person is not fulfilling the
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<center>- 8 -</center>0001|     commitment to the affected community pursuant to Section 7 of the
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0002|     Nonprofit Hospital Sale Act, the department shall hold a hearing
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0003|     on ten working days' notice to the affected parties.  If after
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0004|     the hearing the department determines that the information is
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0005|     true, it may institute proceedings to revoke the license issued
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0006|     to the purchaser.
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0007|          Section 9.  LICENSURE--DENIAL, SUSPENSION OR REVOCATION.--
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0008|               A.  No license to operate a hospital shall be issued
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0009|     or renewed by the department and a license that has been issued
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0010|     shall be suspended or revoked if:
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0011|                    (1)  there is an acquisition of a hospital
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0012|     without first having received the approval, if applicable, of the
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0013|     department pursuant to the Nonprofit Hospital Sale Act;
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0014|                    (2)  there is an acquisition of a hospital
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0015|     without the approval of the attorney general if the attorney
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0016|     general determines to review the application pursuant to the
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0017|     Nonprofit Hospital Sale Act;
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0018|                    (3)  there is an acquisition of a hospital and
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0019|     there is a judicial determination that the acquisition is not in
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0020|     the public interest; or
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0021|                    (4)  the hospital is not fulfilling its
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0022|     commitment pursuant to Section 8 of the Nonprofit Hospital Sale
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0023|     Act.
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0024|               B.  Hearings and appeals of department actions
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0025|     pursuant to this section shall be taken in the same manner as
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<center>- 9 -</center>0001|     provided for other hospital license suspensions or revocations in
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0002|     Section 24-1-5 NMSA 1978.
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0003|          Section 10.  EMERGENCY.--It is necessary for the public
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0004|     peace, health and safety that this act take effect immediately.
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0005|                               
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