HHS' inspector general's office would have oversight authority over the sales of not-for-profit hospitals to for-profit chains under legislation being drafted by Rep. Fortney "Pete" Stark (D-Calif.), MODERN HEALTHCARE has learned.
A copy of the draft legislation was obtained late last week. The measure, which Stark intends to introduce next year, mimics the growing hospital sale oversight movement among state attorneys general.
Under the legislation, the inspector general's office would have the authority to determine whether for-profit companies paid fair market value for any tax-exempt entities they acquire.
In order to make that determination, for-profit buyers would have to disclose to the government the financial terms of their proposed acquisitions. The information supplied to the inspector general's office also would be made available to the public.
After for-profit buyers submit their documentation for review, the inspector general's office would have 120 days to determine if the purchase price represented fair market value and to certify that any management contracts or payments given to officials of the not-for-profit entity are not excessive.
Other aspects of a transaction to be reviewed by the inspector general's office include a determination of whether proceeds from the deals are used for "appropriate charitable purposes" and whether safeguards are in place to "assure the affected community continues access to affordable care."
If a purchaser declines to make the information available, it would be subject to a fine equal to one-half the value of the transaction. If a purchaser submits the information and the inspector general's office determines that fair value wasn't paid, both the purchaser and the seller would be subject to fines and penalties.
In support of his bill, Stark has asked the General Accounting Office, Congress' investigative arm, to determine how the assets of not-for-profit entities should be valued and how the funds from such sales are used (Oct. 28, p. 16). The GAO is expected to release preliminary results of its investigation as early as this summer.