Add Georgia, Ohio and Washington to the growing list of states passing not-for-profit hospital sales legislation.
Last week, legislatures in all three states adopted new laws designed to open up such hospital sales to greater public scrutiny and state oversight.
Similar legislation was passed earlier this year in Arizona and last year in California and Nebraska. Not-for-profit hospital sales bills also are pending in at least 11 other states.
In Georgia, Gov. Zell Miller signed a bill that requires county-owned and private not-for-profit hospitals selling to or merging with a for-profit or not-for-profit company to disclose their plans to the state attorney general's office for review.
It is only the second sales bill to apply equally to for-profit and not-for-profit buyers. Arizona passed the first such bill (April 14, p. 14). The Georgia Legislature passed the bill in March.
Before the new law, which takes effect Oct. 31, Georgia's attorney general didn't have the authority to oversee not-for-profit hospital sales.
Under the new law, the parties involved must disclose to the state any financial gain hospital board members, physicians or executives would receive as a result of the sale. The information would be public.
The law also gives the attorney general the power to hold public hearings on the proposed sale and to hire outside experts to determine whether a buyer is paying fair-market value for the assets of the not-for-profit.
The Georgia Hospital Association, whose members include for-profits and not-for-profits, didn't take a position on the bill.
The association has referred all questions to the Georgia Alliance of Community Hospitals, which represents not-for-profit hospitals in the state and lobbied strongly for the bill. "The hospital association has so much pressure," said Montey Veazey, president of the alliance.
The pressure is coming from heavyweights like for-profit Columbia/HCA Healthcare Corp.
Last year, Columbia tried to loosen Georgia's certificate-of-need laws. When the hospital association stood in support of the strict CON laws, Columbia pulled its 18 member hospitals out of the state association. The hospitals rejoined only after the association said it wouldn't take positions on issues that split its membership.
In Ohio, under legislation passed last week by the state Senate, executives of not-for-profit hospitals and health plans risk jail time and hefty fines if they profit from selling a facility's assets or fail to notify the attorney general of a sale.
The measure previously passed the Ohio House, and Gov. George Voin-ovich is expected to sign it.
The penalties are some of the stiffer measures in the bill, which is designed to strengthen state oversight of healthcare conversions. The bill's introduction was sparked largely by the controversy over generous noncompete and consulting agreements for executives of Blue Cross and Blue Shield of Ohio that were part of the plan's failed effort to sell itself to Columbia (Oct. 28, 1996, p. 18)
The legislation gives the state's attorney general the power to approve or reject sales of not-for-profit assets to for-profit companies and requires public disclosure of documents related to the deals.
The Legislature resisted lobbying efforts by Columbia and Quorum Health Group, another for-profit hospital company, to expand the bill to cover deals between two not-for-profit corporations.
However, the bill was amended to require public disclosure of any payment or compensation related to a not-for-profit combination.
In Washington, state lawmakers passed legislation last week requiring greater public scrutiny of the sale of not-for-profit hospitals to for-profit organizations. The law also covers partnership deals between public hospitals and for-profit organizations such as physician groups and management companies.
Although the law doesn't set up the level playing field Columbia had lobbied for when it urged extending the bill to not-for-profit buyers, that issue is expected to come up again in the next legislative session.
The state hospital association, which supported the bill, has no position on the issue of acquisitions by not-for-profit hospitals and plans to bring it before the membership for its consideration, said Andy Davidson, lobbyist for the hospital group.
Gov. Gary Locke is expected to sign the bill by mid-May, and it will take effect immediately upon signing.
The law requires review of the proposed sale by the attorney general and the health department, public hearings and steps to safeguard the value of charitable assets.
-With Mary Chris Jaklevic and Louise Kertesz