_________ Bill No. _______
Introduced By _______________________________________________________________________________
A Bill for an Act entitled: "An Act providing for conditions and terms for the sale of a charitable and nonprofit hospital to a for-profit entity; requiring approval by the attorney general; requiring notice of an application for approval; specifying the considerations for approval by the attorney general; providing for appeal of the attorney general's decision; providing for payment of costs of the approval process; providing for enforcement by the attorney general; authorizing rulemaking by the attorney general; providing a statutory appropriation; amending section 17-7-502, MCA; and providing effective dates."
STATEMENT OF INTENT
A statement of intent is required for this bill because [section 11] authorizes the attorney general to adopt rules implementing [sections 1 through 11]. The legislature intends that the attorney general adopt rules governing the form and content of applications for approval, the investigation of an applicant for approval and the facts concerning the application, the public meeting held on the application, and fees chargeable to an applicant for the direct and indirect costs of the attorney general's investigation of the application and the applicant.
Be it enacted by the Legislature of the State of Montana:
NEW SECTION. Section 1. Finding and purpose. The legislature finds the following:
(1) Charitable, nonprofit health care facilities, including charitable, nonprofit hospitals, have a substantial and beneficial effect on the provision of health care to the people of the state of Montana, providing as part of their charitable mission uncompensated care to persons without means to pay for health care.
(2) Charitable, nonprofit health care facilities hold their assets in trust for the public benefit, and the public has the reasonable expectation that the assets will be dedicated to the provision of health care and the charitable purposes for which they were granted.
(3) The attorney general of the state of Montana is entrusted by law to represent the public in the sale or other transfer of the assets of a public benefit corporation.
(4) It is in the best interests of the people of the state of Montana to ensure that the public interest is fully protected whenever the assets of a charitable, nonprofit health care facility are acquired by a mutual benefit corporation or a for-profit entity.
(5) The consent of the attorney general is required for any acquisition of a charitable, nonprofit health care facility by a mutual benefit corporation or a for-profit entity.
NEW SECTION. Section 2. Definitions. As used in [sections 1 through 11], the following definitions apply:
(1) "Acquisition" means an acquisition by one or more for-profit entities or mutual benefit corporations of an ownership or controlling interest in a health care facility that is a public benefit corporation or a charitable organization under section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. 501(c)(3), or both, whether the acquisition is by purchase, merger, lease, gift, or otherwise, that results in a change of ownership or control of 20% or greater or in the acquiring entity or entities holding a 50% or greater interest in the ownership or control of the health care facility.
(2) "Fair market value" means the most likely price that the assets being sold would bring in a competitive and open market under all conditions required for a fair sale with both the buyer and seller acting prudently, knowledgeably, and in their own best interest and with a reasonable time being allowed for exposure on the open market.
(3) "Health care facility" has the meaning provided in 50-5-101.
NEW SECTION. Section 3. Acquisition of certain health care facilities prohibited without approval by attorney general. (1) A for-profit entity or mutual benefit corporation may not engage in the acquisition of a health care facility that is a public benefit corporation or that is exempt from taxation under section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. 501(c)(3), without first having applied for and received approval from the attorney general pursuant to [sections 1 through 11].
(2) An application for approval pursuant to [sections 1 through 11] must be submitted to the attorney general on forms specified by the attorney general and must include the following information:
(a) the name of the seller;
(b) the name of the acquiring entity;
(c) the terms of the proposed acquisition;
(d) the sale price;
(e) a copy of the acquisition agreement;
(f) a financial and economic analysis and report of an independent expert or consultant setting forth the effect of the acquisition under the criteria provided in [sections 6 and 7]; and
(g) other related documents and information as the attorney general may reasonably request.
(3) The attorney general shall notify the applicant when all required information has been received and the application is considered complete.
NEW SECTION. Section 4. Notice of application for acquisition required. (1) Within 10 business days after the receipt of a completed application pursuant to [section 3], the attorney general shall publish notice of the application in a newspaper of general circulation in the county or counties where the health care facility that is the subject of the acquisition is located. The attorney general shall also notify by first-class mail all persons that have requested notice of the filing of the application. The notice must include the following information:
(a) that an application has been received;
(b) the name of the parties to the acquisition agreement;
(c) a succinct description of the contents of the application;
(d) the date and location of the public hearing to be held on the application and an invitation for interested persons to appear and submit their views orally or in writing; and
(e) the last date on which written comments concerning the application may be submitted.
(2) Within 90 days after receiving the completed application, the attorney general shall review the application in accordance with the standards provided in [sections 6 and 7] and approve or disapprove the acquisition.
NEW SECTION. Section 5. Investigation by attorney general -- public meeting required. (1) Within 30 days after receipt of the application, the attorney general shall hold a public meeting at which interested persons may file written comments or exhibits or appear and provide testimony. The provisions of Title 2, chapter 4, part 6, do not apply to a public meeting conducted pursuant to this section.
(2) The attorney general may subpoena documents or witnesses, require and administer oaths, require sworn statements, or take depositions for purposes of performing the responsibilities of the attorney general pursuant to [sections 1 through 11].
NEW SECTION. Section 6. Approval of application by attorney general -- determination of public interest. The attorney general shall approve the acquisition application unless the attorney general finds the acquisition is not in the public interest. An acquisition is not in the public interest unless the attorney general determines that the value of the charitable assets will be protected and that proceeds of the acquisition will be used for appropriate charitable health care purposes as provided in subsections (9) and (11). In determining whether the acquisition is in the public interest, the attorney general may consider any factors determined by the attorney general to be relevant, including:
(1) whether the acquisition is permitted under this chapter and other laws of Montana governing charitable entities;
(2) whether the charitable, nonprofit health care facility exercised due diligence with respect to the proposed acquisition, selecting the acquiring entity, and negotiating the terms of the acquisition;
(3) the procedures used by the charitable, nonprofit health care facility, including whether appropriate expert assistance was employed;
(4) whether conflict of interest was disclosed, including but not limited to conflicts of interest related to board members of, executives of, and experts retained by the charitable, nonprofit health care facility;
(5) whether the charitable, nonprofit health care facility will receive fair market value for its assets. The attorney general may employ, at the charitable, nonprofit health care facility's expense, reasonably necessary expert assistance in making this determination.
(6) whether the market value of the charitable, nonprofit health care facility has been manipulated by the parties to the acquisition agreement in a manner that causes the value of the facility and its assets to decrease;
(7) whether charitable funds are being placed at an unreasonable risk if the acquisition is being financed in part by the charitable, nonprofit health care facility or a successor of the facility;
(8) whether a management contract required by the acquisition is made for a reasonably fair value;
(9) whether the proceeds of the acquisition will be used for appropriate charitable health care purposes consistent with the charitable, nonprofit health care facility's original purpose or for the support and promotion of health care in the affected community and whether the proceeds will be controlled as charitable funds independently of parties to the acquisition;
(10) whether a right of first refusal to repurchase the assets has been retained by a successor nonprofit corporation or foundation if the health care facility is subsequently sold to, acquired by, or merged with another entity; and
(11) whether the acquisition is consistent with the purposes and terms of the documents governing the formation of the corporation and whether the acquisition may have a significant effect on the availability or accessibility of health care services to the service area of the health care facility.
NEW SECTION. Section 7. Action by attorney general -- considerations required. In determining whether to approve, approve with conditions, or disapprove an acquisition application, the attorney general shall consider:
(1) whether sufficient safeguards exist to ensure the continued access to affordable health care in the affected community.
(2) whether the acquiring party has 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 improved health care. Activities and funding provided by the charitable, nonprofit health care facility, the assets of which are being acquired, or by its successor may be considered in determining whether a commitment has been made.
(3) if health care providers will be offered the opportunity to invest in or own an interest in the acquiring entity or an entity related to the acquiring entity, whether procedures or safeguards are in place to avoid conflict of interest in patient referral.
NEW SECTION. Section 8. Action on application -- appeal. (1) The attorney general may approve the application, approve the application with condition, or disapprove the application. If the attorney general does not act on the application within 60 days of receipt of a completed application, the application is considered approved.
(2) An applicant may appeal, in the manner provided in Title 2, chapter 4, part 7, a decision by the attorney general to approve an application with condition or to disapprove an application.
NEW SECTION. Section 9. Fees -- statutory appropriation. The attorney general shall establish by rule fees to be paid by an applicant at the time of filing of an application for approval of an acquisition. The fees must be reasonably related to the indirect and direct costs of the attorney general in acting on the application. Fees may include the costs of retention of accounting, technical, and legal assistance that the attorney general considers necessary for action on an application. The attorney general shall maintain sufficient records to demonstrate the reasonable relationship of the fees to the costs allowed by this section. Fees received pursuant to this section must be deposited in an account in the state special revenue fund. Money in the account is statutorily appropriated to the attorney general, as provided in 17-7-502, for the purposes of carrying out the duties of the attorney general pursuant to [sections 1 through 11].
NEW SECTION. Section 10. Enforcement by attorney general. The attorney general may bring an action in the name of the state against a person violating the provisions of [sections 1 through 11] or to whom approval of an acquisition has been issued in order to enjoin the violation of [sections 1 through 11] or the terms or conditions of the approval. The action may be brought in the district court of a judicial district in which a person violating [sections 1 through 11] or to whom approval has been granted resides or maintains a principal place of business or, with the consent of the parties, in the district court of the first judicial district, Lewis and Clark County.
NEW SECTION. Section 11. Rulemaking authority. The attorney general may adopt rules to implement [sections 1 through 11].
Section 12. Section 17-7-502, MCA, is amended to read:
"17-7-502. Statutory appropriations -- definition -- requisites for validity. (1) A statutory appropriation is an appropriation made by permanent law that authorizes spending by a state agency without the need for a biennial legislative appropriation or budget amendment.
(2) Except as provided in subsection (4), to be effective, a statutory appropriation must comply with both of the following provisions:
(a) The law containing the statutory authority must be listed in subsection (3).
(b) The law or portion of the law making a statutory appropriation must specifically state that a statutory appropriation is made as provided in this section.
(3) The following laws are the only laws containing statutory appropriations: 2-9-202; 2-17-105; 2-18-812; 3-5-901; 5-13-403; 10-3-203; 10-3-310; 10-3-312; 10-3-314; 10-4-301; 15-1-111; 15-23-706; 15-30-195; 15-31-702; 15-37-117; 15-38-202; 15-65-121; 15-70-101; 16-1-404; 16-1-410; 16-1-411; 16-11-308; 17-3-106; 17-3-212; 17-5-404; 17-5-424; 17-5-804; 17-6-101; 17-6-201; 17-7-304; 18-11-112; 19-2-502; 19-6-709; 19-9-1007; 19-17-301; 19-18-512; 19-18-513; 19-18-606; 19-19-205; 19-19-305; 19-19-506; 20-8-107; 20-8-111; 20-9-361; 20-26-1503; 23-5-136; 23-5-306; 23-5-409; 23-5-610; 23-5-612; 23-5-631; 23-7-301; 23-7-402; 32-1-537; 37-43-204; 37-51-501; 39-71-503; 39-71-907; 39-71-2321; 39-71-2504; 44-12-206; 44-13-102; 50-4-623; 50-5-232; [section 9], 50-40-206; 53-6-150; 53-6-703; 53-24-206; 60-2-220; 67-3-205; 75-1-1101; 75-5-1108; 75-6-214; 75-11-313; 76-12-123; 80-2-103; 80-2-222; 80-4-416; 81-5-111; 82-11-136; 82-11-161; 85-1-220; 85-20-402; 90-3-301; 90-4-215; 90-6-331; 90-7-220; 90-7-221; and 90-9-306.
(4) There is a statutory appropriation to pay the principal, interest, premiums, and costs of issuing, paying, and securing all bonds, notes, or other obligations, as due, that have been authorized and issued pursuant to the laws of Montana. Agencies that have entered into agreements authorized by the laws of Montana to pay the state treasurer, for deposit in accordance with 17-2-101 through 17-2-107, as determined by the state treasurer, an amount sufficient to pay the principal and interest as due on the bonds or notes have statutory appropriation authority for the payments. (In subsection (3): pursuant to sec. 7, Ch. 567, L. 1991, the inclusion of 19-6-709 terminates upon death of last recipient eligible for supplemental benefit; and pursuant to sec. 7(2), Ch. 29, L. 1995, the inclusion of 15-30-195 terminates July 1, 2001.)"
NEW SECTION. Section 13. Codification instruction. [Sections 1 through 11] are intended to be codified as an integral part of Title 35, chapter 2, and the provisions of Title 35, chapter 2, apply to [sections 1 through 11].
NEW SECTION. Section 14. Effective dates. (1) [Section 11 and this section] are effective on passage and approval.
(2) [Sections 1 through 10 and 12] are effective October 1, 1997.