44th legislature - STATE OF NEW MEXICO - first session, 1999

RELATING TO HEALTH CARE; ENACTING THE NONPROFIT HOSPITAL SALE ACT; ESTABLISHING PROCEDURES AND CRITERIA FOR REVIEW AND APPROVAL OF CERTAIN HOSPITAL ACQUISITIONS; DECLARING AN EMERGENCY.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. [NEW MATERIAL] SHORT TITLE.--Sections 1 through 11 of this act may be cited as the "Nonprofit Hospital Sale Act".

Section 2. [NEW MATERIAL] DEFINITIONS.--As used in the Nonprofit Hospital Sale Act:

A. "acquire" or "acquisition" means the purchase or ownership by a person of twenty percent or more of the assets of a nonprofit hospital, whether by sale, purchase, merger, conveyance, transfer, lease, gift, disposition or otherwise, or the transfer of control of twenty percent or more of the assets of a nonprofit hospital to another person or that results in the acquiring person holding a fifty percent or greater interest in the ownership of a nonprofit hospital;

B. "department" means the department of health;

C. "nonprofit hospital" means a general or acute care or specialty hospital licensed by the department that is owned by a governmental entity or a person exempt from federal income tax pursuant to Section 501(c)(3) of the federal Internal Revenue Code of 1986; and

D. "person" means an individual, corporation, partnership, association, joint venture, stock company, insurance company or other legal entity that is organized on a for-profit or pecuniary basis.

Section 3. [NEW MATERIAL] NONPROFIT HOSPITAL ACQUISITION--APPLICATION FILING--APPROVAL REQUIRED.--

A. No person shall acquire a nonprofit hospital without first applying for and receiving the approval of the attorney general pursuant to the Nonprofit Hospital Sale Act.

B. The nonprofit hospital shall submit an acquisition application to the attorney general and the department in a format provided by the attorney general. The application shall include:

(1) the name of the seller;

(2) the name of the purchaser or other parties to the acquisition;

(3) the terms of the proposed acquisition or agreement;

(4) the consideration to be paid;

(5) a copy of the acquisition agreement;

(6) a valuation report prepared by an independent expert or consultant;

(7) a health impact analysis prepared by an independent expert or consultant pursuant to the criteria set forth in Section 7 of the Nonprofit Hospital Sale Act;

(8) a plan for the use of the net sale proceeds from the acquisition; and

(9) disclosure of conflicts of interest, including conflicts of interest related to board members of, executives of and experts retained by the seller, purchaser or other parties to the acquisition.

C. 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 shall be public records subject to all provisions of the Inspection of Public Records Act and shall be made available at the offices of the attorney general, the department and the nonprofit hospital.

D. If after receiving an application the attorney general determines that the application is incomplete, the attorney general 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. Otherwise, all computations of time shall be governed by the Rules of Civil Procedure for the District Courts.

Section 4. [NEW MATERIAL] APPLICATION REVIEWS BY ATTORNEY GENERAL AND DEPARTMENT OF HEALTH.--

A. Within five business days after receipt of a completed application, the attorney general shall publish notice of the application in a newspaper of general circulation in the service area of the hospital once per week for two weeks. In addition to this public notice, the attorney general shall notify by mail any person who has requested notice of the filing of applications pursuant to the Nonprofit Hospital Sale Act. The notice shall state that a completed application has been received, state the names of the parties to the agreement and describe the contents of the application.

B. Within sixty days of the receipt of a completed application, the attorney general shall notify the nonprofit hospital in writing of the decision either to approve the acquisition, with or without any specific conditions or modifications, or disapprove the acquisition subject to the criteria set forth in the Nonprofit Hospital Sale Act. The attorney general may extend this sixty-day period for an additional sixty days if the extension is necessary to obtain information pursuant to Section 6 or 7 of the Nonprofit Hospital Sale Act.

C. The attorney general shall not make a decision based on any condition not reasonably related to the criteria specified in Section 6 or 7 of the Nonprofit Hospital Sale Act, and any condition or modification shall bear a direct and rational relationship to the application under review.

D. The department shall review a completed application and shall issue a written report of its findings to the attorney general. The department's report shall be based on the criteria set forth in Section 7 of the Nonprofit Hospital Sale Act, and the report shall make a recommendation to approve, with or without conditions, or disapprove the application based on whether the application has met the criteria set forth in Section 7 of that act.

Section 5. [NEW MATERIAL] PUBLIC HEARING.--The attorney general shall hold at least one public hearing after providing by mail at least fourteen days' notice to the parties to the transaction and any person who has requested notice. The attorney general shall publish notice of the public hearing in a newspaper of general circulation in the service area of the nonprofit hospital at least once each week for two weeks. At a public hearing, the department shall appear and provide a statement or testimony regarding the written report it has produced pursuant to Subsection D of Section 4 of the Nonprofit Hospital Sale Act. The attorney general may hold an additional public hearing after consultation with the parties. At the hearings, any person may file written comments and exhibits or appear and make a statement, provided that the comments, exhibits or statement are relevant to the proposed acquisition. The public hearing shall be held not later than forty days after receipt of a completed application.

Section 6. [NEW MATERIAL] ATTORNEY GENERAL'S REVIEW--CRITERIA.--

A. Before approving an application, the attorney general shall find that the proposed acquisition meets all of the following criteria:

(1) the terms and conditions of the agreement or acquisition are fair and reasonable;

(2) the agreement or acquisition will not result in inurement to any private person or entity other than the purchaser and will not result in the breach of any fiduciary duty;

(3) the nonprofit hospital will receive fair market value for its charitable assets. For the purpose of this paragraph, "fair market value" means a likely price that the assets being sold would bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and in his own best interest and a reasonable time being allowed for exposure in the open market. To facilitate review of this criteria, the attorney general shall review the independent valuation submitted by the nonprofit hospital, and the attorney general shall use an independent expert or consultant to review the nonprofit hospital's valuation or conduct in a separate valuation;

(4) the market value has not been manipulated by the actions of the parties in a manner that causes the value of the assets to decrease;

(5) the net sale proceeds will be used in New Mexico for appropriate charitable or other health care purposes consistent with the seller's original purpose as defined in the seller's articles of incorporation or for support and promotion of health care in the affected community;

(6) conflicts of interest were 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; and

(7) appropriate steps have been taken to safeguard the value of charitable or public assets and ensure that the net sale proceeds of the transactions are used for appropriate charitable or other health care purposes.

B. The attorney general shall not approve an application until the department has issued a favorable report finding that the acquisition meets all of the criteria set forth in Section 7 of the Nonprofit Hospital Sale Act. The attorney general shall not approve an application unless the obligations set forth in Section 8 of that act are agreed upon.

Section 7. [NEW MATERIAL] DEPARTMENT REVIEW CRITERIA.--

A. In reviewing an application, the department shall determine the effect the proposed acquisition will have on the availability, accessibility and affordability of health services to the community served by the nonprofit hospital. The department shall also consider the acquiring entity's ability to maintain and improve health access and quality of services.

B. In making this determination, the department shall determine that the acquisition meets all of the following criteria:

(1) sufficient safeguards are included to assure the affected community continued access to health care;

(2) 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; and

(3) the acquisition will not result in a reduction in the level of health care services provided by the existing owner or operator; provided, however, that changes in the local health care market conditions or economy shall also be considered.

Section 8. [NEW MATERIAL] EXPERTS--ATTORNEY FEES.--

A. The attorney general and the department may retain experts or consultants to assist in their review of a proposed acquisition.

B. The nonprofit hospital shall, upon request, pay the attorney general and the department promptly for all expert, consultant and related acquisition review costs, including reasonable attorney fees. All costs and fees will be fair and reasonable and will be determined in consultation with the nonprofit hospital.

Section 9. [NEW MATERIAL] LICENSURE--DENIAL, SUSPENSION OR REVOCATION.--

A. The department may revoke, suspend, refuse to renew or refuse to issue the license to operate a hospital or may impose on a hospital any intermediate sanction and civil monetary penalty provided in Section 24-1-5.2 NMSA 1978 after notice and opportunity for a hearing provided in accordance with Section 24-1-5 NMSA 1978 if:

(1) there is an acquisition of a hospital without first having received the approval of the attorney general pursuant to the Nonprofit Hospital Sale Act;

(2) there is an acquisition of a hospital and there is a judicial determination that the acquisition is not in the public interest; or

(3) the hospital is not fulfilling its commitments pursuant to Sections 6 and 7 of the Nonprofit Hospital Sale Act.

B. Hearings and appeals of department actions pursuant to this section shall be taken in accordance with Section 24-1-5 NMSA 1978.

Section 10. [NEW MATERIAL] RULES.--The attorney general and the department may adopt rules to implement the provisions of the Nonprofit Hospital Sale Act.

Section 11. [NEW MATERIAL] EXEMPTION FROM OTHER APPROVALS.--If the seller is a local public body, as that term is defined in Subsection A of Section 13-6-4 NMSA 1978, the provisions of Section 13-6-2.1 NMSA 1978 do not apply to a transaction subject to the Nonprofit Hospital Sale Act.

Section 12. Section 13-6-2.1 NMSA 1978 (being Laws 1989, Chapter 380, Section 1) is amended to read:

"13-6-2.1. LEASES--BOARD OF FINANCE APPROVAL.--

A. Any sale, trade or lease for a period of more than five years but less than twenty-five years in duration of real property belonging to any state agency, local public body, school district or state educational institution or any sale, trade or lease of such real property for a consideration of more than twenty-five thousand dollars ($25,000) but less than one hundred thousand dollars ($100,000) shall not be valid unless it is approved prior to its effective date by the state board of finance.

B. The provisions of this section [shall not be applicable as] do not apply to those institutions specifically enumerated in Article 12, Section 11 of the constitution of New Mexico, the state land office [or], the state highway commission or to transactions subject to the provisions of the Nonprofit Hospital Sale Act."

Section 13. EMERGENCY.--It is necessary for the public peace, health and safety that this act take effect immediately.