HOUSE BILL No. 4500 March 13, 1997, Introduced by Reps. Palamara, Price, Gilmer, Schauer, Martinez, Gire, LaForge, Bogardus, Goschka, Thomas, Profit, McBryde, Hanley, Hale, Schermesser, Brewer, Mathieu, Mans, Jaye, Wojno, Olshove, Hammerstrom, Schroer, Law, Griffin, Leland, Murphy, Hood, Owen, Gubow, Freeman, Agee, Rhead and Llewellyn and referred to the Committee on Health Policy. A bill to amend 1982 PA 162, entitled "Nonprofit corporation act," (MCL 450.2101 to 450.3192) by adding sections 871, 872, 873, 874, 875, 876, 877, and 878. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 SEC. 871. (1) THE LEGISLATURE FINDS AND DECLARES ALL OF THE 2 FOLLOWING: 3 (A) EACH HEALTH FACILITY THAT IS A NONPROFIT CORPORATION, 4 INCLUDING, BUT NOT LIMITED TO, A HOSPITAL, HOLDS ALL OF ITS 5 ASSETS IN TRUST, AND THOSE ASSETS ARE IRREVOCABLY DEDICATED, AS A 6 CONDITION OF TAX-EXEMPT STATUS, TO THE SPECIFIC CHARITABLE PUR- 7 POSES SET FORTH IN THE ARTICLES OF INCORPORATION OF THE NONPROFIT 8 CORPORATION. 01834'97 CPD 2 1 (B) THE PUBLIC IS THE BENEFICIARY OF THE TRUST IN WHICH A 2 HEALTH FACILITY THAT IS A NONPROFIT CORPORATION HOLDS ITS 3 ASSETS. 4 (C) EACH HEALTH FACILITY THAT IS A NONPROFIT CORPORATION HAS 5 A SUBSTANTIAL AND BENEFICIAL EFFECT ON THE PROVISION OF HEALTH 6 CARE TO THE PEOPLE OF THIS STATE, PROVIDING AS PART OF ITS CHARI- 7 TABLE MISSION UNCOMPENSATED CARE TO UNINSURED LOW-INCOME FAMILIES 8 AND UNDER-COMPENSATED CARE TO THE POOR, ELDERLY, AND DISABLED. 9 (D) THE TRANSFER OF THE ASSETS OF A HEALTH FACILITY THAT IS 10 A NONPROFIT CORPORATION TO A BUSINESS CORPORATION OR OTHER 11 FOR-PROFIT OR MUTUAL BENEFIT ENTITY, SUCH AS BY SALE, JOINT VEN- 12 TURE, OR OTHER SHARING OF ASSETS, DIRECTLY AFFECTS THE CHARITABLE 13 USE OF THOSE ASSETS AND MAY AFFECT THE AVAILABILITY OF COMMUNITY 14 HEALTH CARE SERVICES. 15 (E) THE STATE ATTORNEY GENERAL IS AUTHORIZED UNDER THIS ACT 16 AND UNDER THE FOLLOWING ACTS TO BRING ACTIONS ON BEHALF OF THE 17 PUBLIC IN THE EVENT OF A BREACH OF THE CHARITABLE TRUST OF A NON- 18 PROFIT CORPORATION AND TO REPRESENT THE PUBLIC IN THE SALE OR 19 OTHER TRANSFER OF THE ASSETS OF A NONPROFIT CORPORATION: 20 (i) THE SUPERVISION OF TRUSTEES FOR CHARITABLE PURPOSES ACT, 21 1961 PA 101, MCL 14.251 TO 14.266. 22 (ii) 1965 PA 169, MCL 450.251 TO 450.253. 23 (F) IT IS IN THE BEST INTEREST OF THE PUBLIC TO ENSURE THAT 24 THE PUBLIC INTEREST IS FULLY PROTECTED IF THE ASSETS OF A HEALTH 25 FACILITY THAT IS A NONPROFIT CORPORATION ARE TRANSFERRED OUT OF 26 THE CHARITABLE TRUST AND TO A BUSINESS CORPORATION OR OTHER 27 FOR-PROFIT OR MUTUAL BENEFIT ENTITY. 01834'97 3 1 (G) THE CONSENT OF THE STATE ATTORNEY GENERAL IS REQUIRED 2 FOR A TRANSACTION INVOLVING A HEALTH FACILITY THAT IS A NONPROFIT 3 CORPORATION IF A MATERIAL AMOUNT OF THE CHARITABLE ASSETS OF THE 4 HEALTH FACILITY IS TRANSFERRED TO A BUSINESS CORPORATION OR OTHER 5 FOR-PROFIT OR MUTUAL BENEFIT ENTITY. 6 (2) AS USED IN THIS SECTION AND SECTIONS 872 TO 878: 7 (A) "HEALTH FACILITY" MEANS A HEALTH FACILITY OR AGENCY 8 LICENSED UNDER ARTICLE 17 OF THE PUBLIC HEALTH CODE, 1978 PA 368, 9 MCL 333.20101 TO 333.22260. 10 (B) "HOSPITAL" MEANS THAT TERM AS DEFINED IN SECTION 20106 11 OF THE PUBLIC HEALTH CODE, 1978 PA 368, MCL 333.20106. 12 SEC. 872. EXCEPT FOR AN AGREEMENT OR TRANSACTION SUBJECT TO 13 SECTION 873(3), A CORPORATION SHALL GIVE WRITTEN NOTICE TO THE 14 ATTORNEY GENERAL NOT LESS THAN 20 DAYS BEFORE IT SELLS, LEASES, 15 CONVEYS, EXCHANGES, TRANSFERS, OR OTHERWISE DISPOSES OF ALL OR 16 SUBSTANTIALLY ALL OF ITS ASSETS, UNLESS THE TRANSACTION IS IN THE 17 USUAL AND REGULAR COURSE OF ITS ACTIVITIES OR UNLESS THE ATTORNEY 18 GENERAL HAS GIVEN THE CORPORATION A WRITTEN WAIVER OF THE 19 REQUIREMENTS OF THIS SECTION AS TO THE PROPOSED TRANSACTION. 20 SEC. 873. (1) A HEALTH FACILITY THAT IS A NONPROFIT CORPO- 21 RATION SHALL PROVIDE WRITTEN NOTICE TO, AND SHALL OBTAIN THE 22 WRITTEN CONSENT OF, THE ATTORNEY GENERAL BEFORE ENTERING INTO AN 23 AGREEMENT OR TRANSACTION TO DO EITHER OF THE FOLLOWING: 24 (A) SELL, TRANSFER, LEASE, EXCHANGE, OPTION, CONVEY, OR OTH- 25 ERWISE DISPOSE OF A MATERIAL AMOUNT OF ITS ASSETS TO A BUSINESS 26 CORPORATION OR OTHER FOR-PROFIT OR MUTUAL BENEFIT ENTITY. 01834'97 4 1 (B) TRANSFER CONTROL, RESPONSIBILITY, OR GOVERNANCE OF A 2 MATERIAL AMOUNT OF THE ASSETS OR OPERATIONS OF THE NONPROFIT 3 CORPORATION TO A BUSINESS CORPORATION OR OTHER FOR-PROFIT OR 4 MUTUAL BENEFIT ENTITY. 5 (2) THE NOTICE TO THE ATTORNEY GENERAL REQUIRED UNDER 6 SUBSECTION (1) SHALL INCLUDE INFORMATION REQUIRED IN THE RULES 7 PROMULGATED UNDER SECTION 877 AND OTHER INFORMATION THAT THE 8 ATTORNEY GENERAL DETERMINES IS REQUIRED FOR THAT PARTICULAR 9 AGREEMENT OR TRANSACTION. 10 (3) SUBSECTION (1) DOES NOT APPLY TO A HEALTH FACILITY THAT 11 IS A NONPROFIT CORPORATION IF AN AGREEMENT OR TRANSACTION 12 DESCRIBED IN SUBSECTION (1) IS IN THE USUAL AND REGULAR COURSE OF 13 ITS ACTIVITIES OR IF THE ATTORNEY GENERAL HAS GIVEN THE CORPORA- 14 TION A WRITTEN WAIVER OF THE REQUIREMENTS OF THIS SECTION AS TO 15 THE PROPOSED AGREEMENT OR TRANSACTION. 16 SEC. 874. WITHIN 60 DAYS OF THE RECEIPT OF THE WRITTEN 17 NOTICE REQUIRED BY SECTION 873, THE ATTORNEY GENERAL SHALL NOTIFY 18 THE CORPORATION IN WRITING OF THE ATTORNEY GENERAL'S DECISION TO 19 CONSENT OR NOT CONSENT TO THE AGREEMENT OR TRANSACTION. THE 20 ATTORNEY GENERAL MAY EXTEND THIS PERIOD FOR 1 ADDITIONAL 45-DAY 21 PERIOD, IF THE EXTENSION IS NECESSARY TO OBTAIN ADDITIONAL 22 INFORMATION. 23 SEC. 875. BEFORE ISSUING A WRITTEN DECISION UNDER 24 SECTION 874, THE ATTORNEY GENERAL SHALL CONDUCT 1 OR MORE PUBLIC 25 HEARINGS, 1 OF WHICH SHALL BE IN THE COUNTY IN WHICH THE HEALTH 26 FACILITY IS LOCATED, TO HEAR COMMENTS FROM INTERESTED PARTIES. 27 AT LEAST 14 DAYS BEFORE CONDUCTING THE PUBLIC HEARING, THE 01834'97 5 1 ATTORNEY GENERAL SHALL PROVIDE WRITTEN NOTICE OF THE TIME AND 2 PLACE OF THE PUBLIC HEARING THROUGH PUBLICATION IN 1 OR MORE 3 NEWSPAPERS OF GENERAL CIRCULATION IN THE AFFECTED COMMUNITY AND 4 TO THE COUNTY BOARD OF COMMISSIONERS OF THE COUNTY IN WHICH THE 5 HEALTH FACILITY IS LOCATED. 6 SEC. 876. THE ATTORNEY GENERAL HAS SOLE DISCRETION TO CON- 7 SENT OR NOT CONSENT TO AN AGREEMENT OR TRANSACTION DESCRIBED IN 8 SECTION 873. THE ATTORNEY GENERAL MAY MAKE HIS OR HER CONSENT 9 SUBJECT TO TERMS OR CONDITIONS THE ATTORNEY GENERAL CONSIDERS 10 APPROPRIATE. IN MAKING THE DETERMINATION TO CONSENT OR NOT CON- 11 SENT UNDER SECTION 874, THE ATTORNEY GENERAL MAY CONSIDER FACTORS 12 THAT THE ATTORNEY GENERAL CONSIDERS RELEVANT, INCLUDING, BUT NOT 13 LIMITED TO, WHETHER 1 OR MORE OF THE FOLLOWING APPLY: 14 (A) THE TERMS AND CONDITIONS OF THE AGREEMENT OR TRANSACTION 15 ARE FAIR AND REASONABLE TO THE NONPROFIT CORPORATION. 16 (B) THE AGREEMENT OR TRANSACTION WILL RESULT IN INUREMENT TO 17 A PRIVATE PERSON OR ENTITY. 18 (C) THE AGREEMENT OR TRANSACTION IS AT FAIR MARKET VALUE. 19 AS USED IN THIS SUBDIVISION AND SUBDIVISION (D), "FAIR MARKET 20 VALUE" MEANS THE MOST LIKELY PRICE THAT THE ASSETS BEING SOLD OR 21 TRANSFERRED WOULD BRING IN A COMPETITIVE AND OPEN MARKET UNDER 22 ALL CONDITIONS REQUISITE TO A FAIR SALE, THE BUYER AND SELLER, 23 EACH ACTING PRUDENTLY, KNOWLEDGEABLY, AND IN THEIR OWN BEST 24 INTEREST, AND A REASONABLE TIME BEING ALLOWED FOR EXPOSURE IN THE 25 OPEN MARKET. 26 (D) THE FAIR MARKET VALUE OF THE ASSETS BEING SOLD OR 27 TRANSFERRED HAS BEEN MANIPULATED BY THE ACTIONS OF THE PARTIES IN 01834'97 6 1 A MANNER THAT CAUSES THE FAIR MARKET VALUE OF THE ASSETS TO 2 DECREASE. 3 (E) THE PROPOSED USE OF THE PROCEEDS FROM THE AGREEMENT OR 4 TRANSACTION IS CONSISTENT WITH THE CHARITABLE TRUST ON WHICH THE 5 ASSETS ARE HELD BY THE NONPROFIT CORPORATION THAT IS A HEALTH 6 FACILITY. 7 (F) THE AGREEMENT OR TRANSACTION INVOLVES OR CONSTITUTES A 8 BREACH OF TRUST. 9 (G) THE ATTORNEY GENERAL HAS BEEN PROVIDED WITH SUFFICIENT 10 INFORMATION AND DATA BY THE HEALTH FACILITY THAT IS A NONPROFIT 11 CORPORATION TO ALLOW THE ATTORNEY GENERAL TO EVALUATE ADEQUATELY 12 THE AGREEMENT OR TRANSACTION OR THE EFFECTS OF THE AGREEMENT OR 13 TRANSACTION ON THE PUBLIC. 14 (H) THE AGREEMENT OR TRANSACTION MAY HAVE A SIGNIFICANT 15 EFFECT ON THE AVAILABILITY OR ACCESSIBILITY OF HEALTH CARE SERV- 16 ICES TO THE AFFECTED COMMUNITY. 17 (I) THE PROPOSED AGREEMENT OR TRANSACTION IS IN THE PUBLIC 18 INTEREST. 19 SEC. 877. THE ATTORNEY GENERAL MAY PROMULGATE RULES TO 20 IMPLEMENT SECTIONS 872 TO 878 INCLUDING, BUT NOT LIMITED TO, 21 RULES PRESCRIBING THE INFORMATION TO BE INCLUDED IN THE NOTICE 22 REQUIRED UNDER SECTION 873, PURSUANT TO THE ADMINISTRATIVE PROCE- 23 DURES ACT OF 1969, 1969 PA 306, MCL 24.201 TO 24.328. 24 SEC. 878. (1) WITHIN THE TIME PERIODS DESIGNATED IN SECTION 25 874 AND RELATING TO THOSE FACTORS SPECIFIED IN SECTION 876, THE 26 ATTORNEY GENERAL MAY DO 1 OR MORE OF THE FOLLOWING: 01834'97 7 1 (A) CONTRACT WITH, CONSULT, AND RECEIVE ADVICE FROM 1 OR 2 MORE STATE AGENCIES ON THE TERMS AND CONDITIONS OF AN AGREEMENT 3 OR TRANSACTION THAT THE ATTORNEY GENERAL CONSIDERS APPROPRIATE 4 INCLUDING, BUT NOT LIMITED TO, HAVING THE LEGISLATIVE AUDITOR 5 GENERAL VALUE THE ASSETS BEING SOLD OR TRANSFERRED. 6 (B) IN HIS OR HER SOLE DISCRETION, CONTRACT WITH EXPERTS OR 7 CONSULTANTS TO ASSIST IN REVIEWING THE PROPOSED AGREEMENT OR 8 TRANSACTION. 9 (2) CONTRACT COSTS INCURRED UNDER SUBSECTION (1)(B) SHALL 10 NOT EXCEED AN AMOUNT THAT IS REASONABLE AND NECESSARY TO CONDUCT 11 THE REVIEW AND EVALUATION. THE NONPROFIT CORPORATION INVOLVED IN 12 THE AGREEMENT OR TRANSACTION, UPON REQUEST, SHALL PAY THE ATTOR- 13 NEY GENERAL PROMPTLY FOR ALL CONTRACT COSTS INCURRED UNDER 14 SUBSECTION (1)(B). 15 (3) THE ATTORNEY GENERAL IS ENTITLED TO REIMBURSEMENT FROM 16 THE NONPROFIT CORPORATION FOR ALL ACTUAL, REASONABLE, AND DIRECT 17 COSTS INCURRED IN REVIEWING, EVALUATING, AND MAKING THE DETERMI- 18 NATION TO CONSENT OR NOT CONSENT TO THE AGREEMENT OR TRANSACTION 19 UNDER SECTION 874, INCLUDING ADMINISTRATIVE COSTS. THE NONPROFIT 20 CORPORATION SHALL PROMPTLY PAY THE ATTORNEY GENERAL, UPON 21 REQUEST, FOR ALL SUCH COSTS. 01834'97 Final page. CPD