HB 1727 - Hospitals; certain acquisitions and dispositions; amend provisions

First Reader Summary

A BILL to amend Article 15 of Chapter 7 of Title 31 of the Official Code of Georgia Annotated, relating to acquisitions and dispositions of certain hospitals, so as to change the provisions relating to definitions and required analysis and reports; to delete certain fee requirements but provide for paying certain costs; and for other purposes.

Hudson, Sistie G (120th) Channell, R. M. (Mickey) (111th) Powell, Alan T (23rd)
McCall, Tom (90th) West, Jack (101st) Brown, Jeff (130th)
Status Summary HC: H&E SC: LA: 02/20/98 H - Read 2nd Time
Page Numbers - 1/ 2/ 3/ 4/ 5/ 6/ 7
Code Sections - 31-7-402/ 31-7-403/ 31-7-412
House Action Senate
2/19/98 Read 1st Time
2/20/98 Read 2nd Time

HB 1727                                          LC 11 9392/2 
 
 
 
 
 
 
                        A BILL TO BE ENTITLED 
                               AN ACT 
 
 
  1- 1  To amend Article 15 of Chapter 7 of Title 31 of the Official 
  1- 2  Code of Georgia Annotated, relating to acquisitions and 
  1- 3  dispositions of certain hospitals, so as to change the 
  1- 4  provisions relating to definitions and required analyses and 
  1- 5  reports; to delete certain fee requirements but provide for 
  1- 6  paying certain costs; to change certain certification 
  1- 7  requirements; to change the provisions relating to fines; to 
  1- 8  provide for an effective date; to repeal conflicting laws; 
  1- 9  and for other purposes. 
 
  1-10       BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA: 
 
  1-11                           SECTION 1. 
 
  1-12  Article 15 of Chapter 7 of Title 31 of the Official Code of 
  1-13  Georgia Annotated, relating to acquisitions and dispositions 
  1-14  of certain hospitals, is amended by striking paragraphs (2) 
  1-15  and (5) of Code Section 31-7-400, relating to definitions, 
  1-16  and inserting in their places the following: 
 
  1-17      "(2) 'Acquisition' means a purchase or lease by an 
  1-18      acquiring entity of the assets of a hospital which is 
  1-19      owned, controlled, or operated by a nonprofit 
  1-20      corporation and which meets one or more of the following 
  1-21      conditions: 
 
  1-22        (A) Constitutes a purchase or lease of 50 percent or 
  1-23        more of the assets of a hospital having a permit under 
  1-24        this chapter; or 
 
  1-25        (B) Constitutes a purchase or lease which, when 
  1-26        combined with one or more transfers between the same 
  1-27        or related parties occurring within a five-year 
  1-28        period, constitutes a purchase or lease of 50 percent 
  1-29        or more of the assets of a hospital having a permit 
  1-30        under this chapter; 
 
  1-31      provided, however, that an acquisition does not include 
  1-32      the restructuring of a hospital owned by a hospital 
  1-33      authority involving a lease of assets to any not for 
 
 
 
                                 -1- 
 
 
 
  2- 1      profit or for profit entity which has a principal place 
  2- 2      of business located in the same county where the main 
  2- 3      campus of the hospital in question is located and which 
  2- 4      is not owned, in whole or in part, or controlled by any 
  2- 5      other for profit or not for profit entity whose 
  2- 6      principal place of business is located outside such 
  2- 7      county and does not include the purchase or lease by an 
  2- 8      acquiring entity of the assets of a hospital from a 
  2- 9      related party." 
 
  2-10      "(5) 'Disposition' means a sale or lease of the assets 
  2-11      of a hospital which is owned, controlled, or operated by 
  2-12      a nonprofit corporation to an acquiring entity which 
  2-13      meets one or more of the following conditions: 
 
  2-14        (A) Constitutes a sale or lease of 50 percent or more 
  2-15        of the assets of a hospital having a permit under this 
  2-16        chapter; or 
 
  2-17        (B) Constitutes a sale or lease which, when combined 
  2-18        with one or more transfers between the same or related 
  2-19        parties occurring within a five-year period, 
  2-20        constitutes a sale or lease of 50 percent or more of 
  2-21        the assets of a hospital having a permit under this 
  2-22        chapter; 
 
  2-23      provided, however, that a disposition does not include 
  2-24      the restructuring of a hospital owned by a hospital 
  2-25      authority involving a lease of assets to any not for 
  2-26      profit or for profit entity which has a principal place 
  2-27      of business located in the same county where the main 
  2-28      campus of the hospital in question is located and which 
  2-29      is not owned, in whole or in part, or controlled by any 
  2-30      other for profit or not for profit entity whose 
  2-31      principal place of business is located outside such 
  2-32      county and does not include the sale or lease of the 
  2-33      assets of a hospital by a related party to an acquiring 
  2-34      entity." 
 
  2-35                           SECTION 2. 
 
  2-36  Said article is further amended by striking Code Section 
  2-37  31-7-402, relating to notices to the Attorney General, and 
  2-38  inserting in its place the following: 
 
  2-39    "31-7-402. 
 
  2-40    (a) Notice to the Attorney General required by this 
  2-41    article shall include the name of the seller or lessor; 
  2-42    the name of the acquiring entity and other parties to the 
 
 
                                 -2- 
 
 
 
  3- 1    acquisition; the county in which the main campus of the 
  3- 2    hospital is located; the terms of the proposed agreement 
  3- 3    and any related agreements including leases, management 
  3- 4    contracts, and service contracts; the acquisition price; a 
  3- 5    copy of the acquisition agreement and any related 
  3- 6    agreements including leases, management contracts, and 
  3- 7    service contracts; any valuations of the hospital's assets 
  3- 8    prepared in the three years immediately preceding the 
  3- 9    proposed transaction date; a financial and economic 
  3-10    analysis and report from any expert or consultant retained 
  3-11    by the seller or lessor which addresses each of the 
  3-12    criteria set forth in Code Section 31-7-406; articles of 
  3-13    incorporation and bylaws of the nonprofit corporation and 
  3-14    related entities and foundations; all donative documents 
  3-15    reflecting the purposes of prior gifts of more than 
  3-16    $100,000.00 in value by donors to the nonprofit 
  3-17    corporation or any related entities or foundations for or 
  3-18    on behalf of the hospital; and all documents pertaining to 
  3-19    the disposition of assets, including those documents which 
  3-20    are included as schedules or exhibits to the acquisition 
  3-21    agreement and any related agreements. 
 
  3-22    (b) In addition to the information required by subsection 
  3-23    (a) of this Code section, the seller or lessor shall 
  3-24    include with the notice to the Attorney General a report 
  3-25    and opinion of an expert which shall set forth the value 
  3-26    of the hospital assets to be transferred and acquired. 
  3-27    The seller or lessor shall also either: 
 
  3-28      (1) Provide the Attorney General with a report and 
  3-29      opinion of an expert which address the fairness and 
  3-30      reasonableness of the transaction to the seller or 
  3-31      lessor in light of the criteria set forth in Code 
  3-32      Section 31-7-406; or 
 
  3-33      (2) Otherwise demonstrate by an actual competitive 
  3-34      market process that the transaction is fair and 
  3-35      reasonable to the seller or lessor in light of the 
  3-36      criteria set forth in Code Section 31-7-406.  Any such 
  3-37      actual, competitive market process shall include the 
  3-38      offering of the hospital assets for sale or lease in an 
  3-39      open market by requesting proposals or bids to purchase 
  3-40      or lease the hospital assets. 
 
  3-41    (b)(c) The Attorney General may prescribe a form of notice 
  3-42    to be utilized by the seller or lessor and the acquiring 
  3-43    entity and may require information in addition to that 
  3-44    specified in this article if the disclosure of such 
 
 
                                 -3- 
 
 
 
  4- 1    information is determined by the Attorney General to be in 
  4- 2    the public interest.  The notice to the Attorney General 
  4- 3    required by this article and all documents related thereto 
  4- 4    shall be considered public records pursuant to Code 
  4- 5    Section 50-18-70.  
 
  4- 6    (c) Notice to the Attorney General shall be accompanied by 
  4- 7    the payment by either the seller or lessor, or by the 
  4- 8    acquiring entity, of a fee in the amount of $50,000.00. 
 
  4- 9    (d) The Attorney General shall be authorized to retain 
  4-10    financial, economic, health planning, or other experts or 
  4-11    consultants to assist in reviewing the transaction and in 
  4-12    addressing each of the criteria set forth in Code Section 
  4-13    31-7-406.  The seller or lessor shall agree to pay the 
  4-14    actual costs, not to exceed $45,000.00, to the experts or 
  4-15    consultants so retained for their assistance in reviewing 
  4-16    the transaction.  The acquiring entity shall agree to pay 
  4-17    the actual costs to: 
 
  4-18      (1) The newspaper for publication of the notice required 
  4-19      by Code Section 31-7-404; 
 
  4-20      (2) The property owners or lessees of any meeting place 
  4-21      where the public hearing is conducted pursuant to Code 
  4-22      Section 31-7-405 when a cost therefor is incurred; 
 
  4-23      (3) Any private person transcribing the hearings; and 
 
  4-24      (4) Any private person publishing the report of findings 
  4-25      under Code Section 31-4-407.1, 
 
  4-26    but the aggregate liability of the acquiring entity for 
  4-27    those costs may not exceed $5,000.00 for the transaction." 
 
  4-28                           SECTION 3. 
 
  4-29  Said article is further amended by striking Code Section 
  4-30  31-7-403, relating to certification and disclosure by 
  4-31  certain parties to the transactions, and inserting in its 
  4-32  place the following: 
 
  4-33    "31-7-403. 
 
  4-34    (a) Except as provided in subsection (c) of this Code 
  4-35    section, notice to the Attorney General required by this 
  4-36    article shall also include a separate certification from 
  4-37    each member of the governing board and the chief executive 
  4-38    officer of the nonprofit corporation which is a party to 
  4-39    the proposed disposition, and from each member of the 
  4-40    governing board and the chief executive officer of any 
 
 
 
                                 -4- 
 
 
 
  5- 1    nonprofit corporation that holds a membership, stock, or 
  5- 2    controlling interest therein, executed under oath, stating 
  5- 3    whether that director or officer of the nonprofit 
  5- 4    corporation is then or may become within the three-year 12 
  5- 5    month period following the completion of the transaction a 
  5- 6    member or shareholder in, or officer, employee, agent, or 
  5- 7    consultant of, or will otherwise derive any compensation 
  5- 8    or benefits, directly or indirectly, from the acquiring 
  5- 9    entity or any related party in connection with or as a 
  5-10    result of the disposition. 
 
  5-11    (b) Except as provided in subsection (c) of this Code 
  5-12    section, notice to the Attorney General required by this 
  5-13    article shall also include a certification from each 
  5-14    member of the governing board and the chief executive 
  5-15    officer of the nonprofit corporation which is a party to 
  5-16    the proposed disposition, and from each member of the 
  5-17    governing board and the chief executive officer of any 
  5-18    nonprofit corporation that holds a membership, stock, or 
  5-19    controlling interest therein, executed under oath: 
 
  5-20      (1) Disclosing any financial interest held by that 
  5-21      individual or that individual's family, or held by any 
  5-22      business in which such individual or the individual's 
  5-23      family owns a financial interest, in any business which: 
 
  5-24        (A) Within the immediately preceding 12 month period 
  5-25        sold products, property interests, or services to the 
  5-26        nonprofit corporation engaged in the disposition; or 
 
  5-27        (B) Within the immediately preceding 12 month period 
  5-28        sold or within the three-year 12 month period after 
  5-29        the completion of the transaction may sell products, 
  5-30        property interests, or services to the acquiring 
  5-31        entity; 
 
  5-32      (2) Disclosing any contract pursuant to which a sale was 
  5-33      made or may be made of those products, property 
  5-34      interests, or services regarding financial interests 
  5-35      which are disclosed pursuant to paragraph (1) of this 
  5-36      subsection; 
 
  5-37      (3) Stating that the nonprofit corporation has received 
  5-38      fair market value for its assets or, in the case of a 
  5-39      proposed disposition to a not for profit entity or a 
  5-40      hospital authority, stating that the nonprofit 
  5-41      corporation has received an enforceable commitment of 
  5-42      fair and reasonable community benefits for its assets; 
 
 
 
                                 -5- 
 
 
 
  6- 1      (4) Stating that the market value of the hospital's 
  6- 2      assets has not been manipulated to decrease their value; 
 
  6- 3      (5) Stating that the terms of the transaction are fair 
  6- 4      and reasonable to the nonprofit corporation; 
 
  6- 5      (6) Stating that the transaction is authorized by the 
  6- 6      nonprofit corporation's governing documents and is 
  6- 7      consistent with the intent of any major donors who have 
  6- 8      contributed over $100,000.00; 
 
  6- 9      (7) Stating that the proceeds of the transaction will be 
  6-10      used solely in a manner consistent with the charitable 
  6-11      purposes of the nonprofit corporation and will not be 
  6-12      used, directly or indirectly, to benefit the acquiring 
  6-13      entity; and 
 
  6-14      (8) Stating that the transaction will not adversely 
  6-15      affect the availability or accessibility of health care 
  6-16      services in the county in which the main campus of the 
  6-17      hospital is located. 
 
  6-18    (c) The certification requirements of subsections (a) and 
  6-19    (b) of this Code section shall not apply to any governing 
  6-20    board members who vote to oppose the proposed 
  6-21    disposition." 
 
  6-22                           SECTION 4. 
 
  6-23  Said article is further amended by striking Code Section 
  6-24  31-7-412, relating to fines, and inserting in its place the 
  6-25  following: 
 
  6-26    "31-7-412. 
 
  6-27    (a) Any disposition or acquisition of assets made in 
  6-28    violation of the notice, disclosure, and certification 
  6-29    requirements of this article shall be null and void, and 
  6-30    each member of the governing bodies and the chief 
  6-31    executive officers of the parties thereto nonprofit entity 
  6-32    and acquiring entity engaging in such disposition or 
  6-33    acquisition shall be subject to a fine of up to 
  6-34    $50,000.00, the amount of which shall be determined by the 
  6-35    superior court in the county in which the main campus of 
  6-36    the hospital is located.  The Attorney General shall 
  6-37    institute proceedings to impose such fine within one year 
  6-38    of the unlawful disposition or acquisition. 
 
  6-39    (b) Any person knowingly and willfully making a false 
  6-40    statement in a certification under Code Section 31-7-403 
  6-41    or subsection (b) of Code Section 31-7-405, in addition to 
 
 
                                 -6- 
 
 
 
  7- 1    any criminal penalty which may be imposed pursuant to Code 
  7- 2    Section 16-10-71, shall be subject to a civil fine of up 
  7- 3    to $50,000.00, the amount of which shall be determined by 
  7- 4    the superior court in the county in which the main campus 
  7- 5    of the hospital is located.  The Attorney General shall 
  7- 6    institute proceedings to impose such fine within one year 
  7- 7    of the date of the certification." 
 
  7- 8                           SECTION 5. 
 
  7- 9  This Act shall become effective upon its approval by the 
  7-10  Governor or upon its becoming law without such approval. 
 
  7-11                           SECTION 6. 
 
  7-12  All laws and parts of laws in conflict with this Act are 
  7-13  repealed. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                 -7- 

Clerk of the House
Robert E. Rivers, Jr., Clerk
Last Updated on 04/20/98

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