ASSEMBLY, No. 2368

 

STATE OF NEW JERSEY

 

INTRODUCED SEPTEMBER 26, 1996

 

 

By Assemblywoman VANDERVALK

 

 

An Act concerning the sale of nonprofit hospitals and supplementing Title 26 of the Revised Statutes.

 

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

    1. In addition to the requirements of P.L.1971, c.136 (C.26:2H-1 et seq.) concerning certificate of need and licensure requirements, a nonprofit acute care hospital licensed pursuant to P.L.1971, c.136 (C.26:2H-1 et seq.) shall give at least 90-days written notice to the Attorney General prior to entering into a sale, lease, exchange or other disposition of a substantial amount of its assets or operations with a person or entity other than a corporation organized in this State for charitable purposes under Title 15A of the New Jersey Statutes.     a. The Attorney General shall conduct a review of the proposed transaction and assess the entity proposing to receive the assets or operations of the nonprofit hospital for reasonable costs related to the review of the proposed transaction, as determined by the Attorney General to be necessary. Reasonable costs may include expert review of the transaction and a process for educating the public about the transaction and obtaining public input.

    b. If a charitable fund results from the transaction and if the nonprofit entity making the disposition does not continue its operation of the nonprofit hospital, the governance of the resulting charitable fund shall be subject to review by the Attorney General, in consultation with the Commissioner of Health and Senior Services, and approval by a court of competent jurisdiction. The governance of the resulting charitable fund shall be broadly based in the community historically served by the predecessor nonprofit hospital. The Attorney General shall conduct a public hearing in connection with his review of the plan for the governance of the resulting charitable fund. An appropriate portion of any resulting proceeds, if determined to be necessary by the Attorney General, shall be used for assistance in the development of a community-based plan for the use of the resulting charitable fund.

    c. The entity receiving the assets or operation of the nonprofit hospital shall, if determined to be necessary by the Attorney General, in consultation with the Commissioner of Health and Senior Services, provide funds, in an amount determined by the Commissioner of Health and Senior Services, for the hiring by the Department of Health and Senior Services of an independent health care access monitor to monitor and report quarterly to the Attorney General and the Department of Health and Senior Services on community health care access by the entity, including levels of uncompensated care for indigent persons provided by the entity. The funding shall be provided for three years after the date of the transaction. The entity receiving the assets or operations shall provide the monitor with appropriate access to the entity's records in order to enable the monitor to fulfill this function.

    To prevent the duplication of any information already reported by the entity, the monitor shall, to the extent possible, utilize data already provided by the entity to the Department of Health and Senior Services.

    No personal identifiers shall be attached to any of the records obtained by the monitor, and all such records shall be subject to the privacy and confidentiality provisions of medical records provided by law.

    d. The trustees and senior managers of the nonprofit hospital making the disposition are prohibited from investing in the for profit entity for a period of three years following the disposition of assets or operations.

 

    2. Notwithstanding the provisions of any law to the contrary, the Commissioner of Health and Senior Services shall not issue a certificate of need or license to operate an acute care hospital to the resulting entity of a disposition of assets or operations under section 1 of this act, unless:

    a. there is a determination by the commissioner of the suitability and responsibility of the prospective licensee, as determined by regulations adopted by the commissioner. For the purposes of this section, the determination of suitability and responsibility shall include, but not be limited to, the following factors:

    (1) the financial capacity of the prospective licensee to operate the hospital in accordance with applicable laws;

    (2) the history of the prospective licensee in providing acute care, including in states other than New Jersey, if any, measured by compliance with the applicable statutes and regulations governing the operation of hospitals in those states;

    (3) the participation of persons residing in the nonprofit entity's primary service area in oversight of the resulting hospital; and

    (4) whether the transaction will have a significant effect on the availability or accessibility of health care services to the affected communities;

      b. the applicant agrees to maintain or increase the percentage of income from operations allocated to uncompensated care for indigent persons, as compared to the average of the annual percentage reported in the previous three years by the predecessor nonprofit hospital; except that the commissioner may permit the applicant to reduce the percentage if the commissioner determines that demographic or other changes in the hospital's service area justify a reduction in the percentage. The commissioner shall, by regulation, provide for the enforcement of this subsection and any agreement made by an applicant concerning uncompensated care; and

    c. the applicant submits a plan, for approval by the commissioner, for the provision of community benefits. In determining whether to approve the plan, the commissioner may take into account the applicant's existing commitment to primary and preventive health care services and community contributions, as well as the primary and preventive health care services and community contributions of the predecessor nonprofit hospital. The commissioner may waive the plan requirement of this subsection, in whole or in part, at the request of the applicant, if the applicant has provided or at the time the application is filed, is providing, substantial primary and preventive health care services and community contributions in its service area.

 

    3. Nothing in this act shall be construed to limit the existing authority of the Attorney General, the Commissioner of Health and Senior Services or any other government official or entity, or the court to review, approve or disapprove conditions related to a transaction or disposition under current law.

 

    4. The Commissioner of Health and Senior Services, in consultation with the Attorney General, shall, in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), adopt regulations to carry out the purposes of this act.

 

    5. This act shall take effect immediately.

 

 

STATEMENT

 

    The purpose of this bill is to protect the public interest in the conversion of nonprofit hospitals to for profit entities.

    The bill requires nonprofit acute care hospitals to give at least 90-days notice to the Attorney General before disposing of a substantial amount of their assets to a for profit entity to enable the Attorney General to conduct a review of the transaction. The proposed for profit purchaser of the nonprofit's assets shall pay the reasonable costs of the Attorney General's review. Also, if a charitable fund results from the transaction, the required broad-based community governance of the charitable fund shall be subject to review by the Attorney General, in consultation with the Commissioner of Health and Senior Services.

    The bill also requires the for profit purchaser of the hospital to pay for an independent health care access monitor, to be hired by the Commissioner of Health and Senior Services, to monitor and report publicly for three years on community health care access, including the level of uncompensated care for indigent persons, provided by the for profit acute care hospital.

    Also, under the provisions of the bill, the trustees and senior managers of the nonprofit entity are prohibited from investing in the for profit entity for a period of three years following the disposition of assets or operations.

     The bill further provides that an applicant for a certificate of need or license to operate a for profit hospital that was formerly a nonprofit hospital, will be required to undergo a determination by the commissioner of the applicant's suitability and responsibility to operate an acute care hospital in the State. The applicant also must agree to maintain or increase the level of uncompensated care provided by the predecessor nonprofit hospital and must develop a plan for providing community benefits and obtain approval of the plan from the commissioner.

 

 

                             

 

Provides for Attorney General and Department of Health and Senior Services review of conversion of nonprofit hospitals to for profit entities.