MISSISSIPPI LEGISLATURE

1999 Regular Session

To: Public Health and Welfare

By: Representative Holland

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. As used in this act:

(a) "Nonprofit health care entity" means any nonprofit hospital (including corporations and hospitals created under a trust or a will), nonprofit health maintenance organization (HMO) or nonprofit health care insurer, including entities affiliated with any of these through ownership, governance or membership, such as a holding company or subsidiary. Nonprofit health care entity shall include, but not be limited to nonprofit entities that are licensed as hospitals, health maintenance organizations, (HMO) or health care insurers (including mutual corporations holding assets in charitable trust) under the laws of this state.

(b) "Nonprofit health care conversion transaction" means:

(i) The sale, transfer, lease, exchange, optioning, conveyance, or other disposition of a material amount of the assets or operations of a licensed nonprofit hospital, nonprofit health maintenance organization or nonprofit health care insurer, including a mutual corporation holding assets in charitable trust, to an entity or person other than a charity; and

(ii) The transfer of control or governance of a material amount of the assets or operations of a licensed hospital, nonprofit health maintenance organization or nonprofit health care insurer, including a mutual corporation holding assets in charitable trust, to an entity or person other than a charity.

(c) "Nonprofit health care insurer" means any nonprofit provider of health care insurance, including hospital service associations, health service corporations, and physician service organizations, such as Blue Cross and Blue Shield plans.

(d) "Person" means any individual, partnership, trust, estate, corporation, association, joint venture, joint stock company, insurance company, or other organization.

SECTION 2. (1) Any nonprofit health care entity shall be required to provide written notice to, and obtain the approval of, the Attorney General, before entering into any nonprofit health care conversion transaction. At the time of providing notice to the Attorney General, the nonprofit health care entity shall provide the Attorney General with written certification that a copy of this act has been given in its entirety to each member of the board of trustees of the nonprofit health care entity.

(2) The notice to the Attorney General provided for in this section shall include and contain all the information that the Attorney General determines is required. No notice shall be effective until the Attorney General has acknowledged receipt of a complete notice in accordance with regulations adopted under Section 6 of this act or in accordance with protocol establish by the Attorney General.

(3) This act shall not apply to a nonprofit health care entity if the nonprofit health care conversion transaction is in the usual and regular course of its activities and if the Attorney General has given the nonprofit health care corporation a written waiver of this act as to the nonprofit health care conversion transaction.

SECTION 3. Within ninety (90) days of a complete written notice as required by Section 2 of this act, the Attorney General shall notify the nonprofit health care entity in writing of its decision to approve or disapprove the proposed nonprofit health care conversion transaction. The Attorney General may extend this period for an additional sixty-day period, provided the extension is necessary to obtain information pursuant to Section 6(2) or Section 7(1) of this act.

SECTION 4. Before issuing any written decision under Section 3 of this act, the Attorney General shall conduct one or more public meetings, one (1) of which shall be held int he county where the nonprofit health care entity's assets to be transferred are located. At the public meeting, the Attorney General shall hear comments from interested persons desiring to make statements regarding the proposed nonprofit health care conversion transaction. AT least fourteen (14) days before the meeting, the Attorney General shall cause written notice to be provided of the time and place of the meeting through publication in one or more newspapers of general circulation in the affected community, to the county board of supervisors, and if applicable, to the city council of the city where the nonprofit health care entity's assets to be transferred are located.

SECTION 5. (1) In making a decision whether to approve or disapprove a proposed nonprofit health care conversion transaction, the Attorney General shall consider:

(a) Whether the nonprofit health care entity will receive full and fair market value for its charitable or social welfare assets;

(b) Whether the fair market value of the nonprofit health care entity's assets to be transferred has been manipulated by the actions of the parties in a manner that causes the fair market value of the assets to decrease;

(c) Whether the proceeds of the proposed nonprofit health care conversion transaction will be used consistent with the trust under which the assets are held by the nonprofit health care entity and whether the proceeds will be controlled as funds independently of the acquiring or related entities;

(d) Whether the proposed nonprofit health care conversion transaction will result in a breach of fiduciary duty, as determined by the Attorney General, including conflicts of interest related to payments or benefits to officers, directors, board members, executives, and experts employed or retained by the parties;

(e) Whether the governing body of the nonprofit health care entity exercised due diligence in deciding to dispose of nonprofit health care entity's assets, selecting the acquiring entity, and negotiating the terms and conditions of the disposition;

(f) Whether the nonprofit health care conversion transaction will result in private inurement to any person;

(g) Whether health care providers will be offered the opportunity to invest or own an interest in the acquiring entity or a related party, and whether procedures or safeguards are in place to avoid conflict of interest in patient referrals;

(h) Whether the terms of any management or services contract negotiated in conjunction with the proposed nonprofit health care conversion transaction are reasonable;

(i) Whether any foundation established to hold the proceeds of the sale will be broadly based in the community and be representative of the affected community, taking into consideration the structure and governance of the foundation;

(j) Whether the Attorney General has been provided with sufficient information and data by the nonprofit health care entity to evaluate adequately the proposed nonprofit health care conversion transaction or the effects of the transaction on the public, provided the Attorney General has notified the nonprofit health care entity or the acquiring entity of any inadequacy of the information or data and has provided a reasonable opportunity to remedy that inadequacy; and

(k) Any other criteria that the Attorney General considers necessary to determine whether the nonprofit health care entity will receive full and fair market value for its assets to be transferred as required in rules adopted by the Attorney General under Section 6 of this act.

(2) In making a decision whether to approve or disapprove an application, the Attorney General also shall determine whether the proposed nonprofit health care conversion transaction may have a significant effect on the availability or accessibility of health care services to the affected community. In making this determination, the Attorney General shall consider:

(a) Whether sufficient safeguards are included to assure the affected community continued access to affordable care;

(b) Whether the proposed nonprofit health care conversion transaction creates or has the likelihood of creating an adverse effect on the access to or availability or cost of health care services to the community;

(c) Whether the acquiring entities have made a commitment, at least comparable to the nonprofit health care entity, to provide health care to the disadvantaged, the uninsured, and the underinsured and to provide benefits to the affected community to promote improve health care. Activities and funding provided by the nonprofit health care entity or its successor nonprofit health care entity or foundation to provide that health care or to provide support or medical education and teaching programs or medical research programs shall be considered in evaluating compliance with this commitment;

(d) Whether the nonprofit health care conversion transaction will result int he revocation of hospital privileges;

(e) Whether sufficient safeguards are include to maintain appropriate capacity for health science research and health care provider education; and

(f) Whether the proposed nonprofit health care conversion transaction demonstrates that the public interest will be served considering the essential medical services needed to provide safe and adequate treatment, appropriate access and balanced health care delivery to the residents.

SECTION 6. (1) The Attorney General may adopt such regulations as he or she deems appropriate to implement this act and/or establish such protocols as are necessary to implement this act.

(2) The Attorney General may demand that the nonprofit health care entity giving notice under Section 2 of this act provide such information as the Attorney General reasonable deems necessary to complete his or her review of any proposed nonprofit health care conversion transaction described in Section 5 of this act. A failure by the nonprofit health care entity giving notice under Section 2 of this act to provide timely information as required by the Attorney General shall be a sufficient ground for the Attorney General to disapprove the proposed nonprofit health care conversion transaction.

SECTION 7. (1) Within the time periods designated in Section 3 of this act, the Attorney General may do any of the following to assist in the review of the proposed nonprofit health care conversion transaction described in Section 2 of this act:

(a) Contract with, consult and receive advice from any agency of this state or the United States on such terms and conditions that the Attorney General deems appropriate; or

(b) In the Attorney General's sole discretion, contract with such experts or consultants that the Attorney General deems appropriate to assist him or her in reviewing the proposed nonprofit health care conversion transaction.

(2) Any contract costs incurred by the Attorney General under this section shall not exceed an amount that is reasonable and necessary to conduct the review of the proposed nonprofit health care conversion transaction. The Attorney General shall be exempt from the provisions of any applicable state laws regarding public bidding procedures for purposes of entering into contracts under this section. The nonprofit health care entity giving notice under Section 2 of this act, upon request, shall pay the Attorney General promptly for all costs of contracts entered into by the Attorney General under this section.

(3) The Attorney General shall be entitled to reimbursement from the nonprofit health care entity giving notice under Section 2 of this act for all reasonable and actual costs incurred by the Attorney General in reviewing any proposed nonprofit health care conversion transaction under this act, including attorney's fees at the billing rate used by the Attorney General to bill state agencies for legal services. The nonprofit health care entity giving notice under Section 2 of this act, upon request, shall pay the Attorney General promptly for all those costs.

(4) The failure by the nonprofit health care entity giving notice under Section 2 of this act to promptly reimburse the Attorney General for all costs as provided under subsections (2) or (3) of this section shall be sufficient ground for the Attorney General to disapprove the proposed nonprofit health care conversion transaction.

SECTION 8. All documents submitted to the Attorney General by any person, including nonprofit health care entities giving notice under Section 2 of this act, in connection with the Attorney General's review of the proposed nonprofit health care conversion transaction under this act shall be public records subject to all provisions of the Mississippi Public Records Act of 1983.

SECTION 9. (1) Any nonprofit health care conversion transactions entered into in violation of the notice, review or approval requirements of this act shall be null and void and each member of the governing boards and the chief financial officers of the parties to the nonprofit health care conversion transaction may be subject to a civil penalty of up to One Million Dollars ($1,000,000.00), the amount to be determined by the court of competent jurisdiction in the county in which the nonprofit health care entity's assets to be transferred are located. The Attorney General shall institute proceedings to impose such a penalty. In addition, no permit to operate a hospital may be issued or renewed under any applicable statute or regulation if there is a nonprofit health care conversion transaction entered into in violation of the notice, review and approval requirements of this act.

(2) Nothing in this section shall be construed to limit the common law authority of the Attorney General and the director of charitable trust to protect charitable trust and charitable assets in this state. These penalties and remedies are in addition to, and not a replacement for, any other civil or criminal actions that the Attorney General may take under either the common law or statutory law, including rescinding the nonprofit health care conversion transaction, granting injunctive relief or any combination of these and other remedies available under common law or statutory law.

SECTION 10. This act shall take effect and be in force from and after July 1, 1999.