Two more largely not-for-profit hospital markets have taken steps to ensure they stay that way with the passage of stringent hospital conversion approval and disclosure laws.
Last week, the Connecticut Legislature overwhelmingly passed a measure requiring state approval of not-for-profit hospital sales, transfers or shifts of control to for-profit organizations.
And in the District of Columbia, the District Council last week gave preliminary approval to a new law that would require not-for-profit hospitals that convert to for-profit status to pay 10% of what their property taxes would have been for the previous five years if they had been for-profits.
At least six other states have passed similar not-for-profit hospital sales laws in the past two years.
According to the latest available data from the American Hospital Association, none of Connecticut's 34 acute-care hospitals is for-profit. Thirty-three are private not-for-profits, and one is a publicly owned facility. None of the 12 acute-care hospitals in the district is for-profit, but that's about to change.
Connecticut Gov. John Rowland has not indicated whether he'll sign the measure, which would require the state's attorney general to approve such a transaction (See box).
Connecticut's measure didn't arise from any past or pending hospital conversion. Rather, it was introduced in response to the furor in other states over the disposition of a not-for-profit hospital's charitable assets after a conversion.
"It appeared to me that we had an exposure in state law," said state Rep. Patricia A. Dillon (D-New Haven), the bill's author.
Hospitals in Connecticut supported the measure because they want to ensure a level playing field, said Joseph Coatsworth, the Connecticut Hospital Association's vice president of government relations.
Under the state's existing certificate-of-need law, mergers and acquisitions involving two not-for-profits already are subject to state review.
Meanwhile, the District of Columbia's corporation counsel, the equivalent of an attorney general, would review deals between for-profits and not-for-profits under the legislation there.
The legislation passed a "first read" in the District Council by a 10-2 vote. It must pass one more read before becoming law. The final read is scheduled for June 17.
The legislation, which is expected to pass, would affect the pending deal between George Washington University Hospital and Universal Health Services, an investor-owned chain based in King of Prussia, Pa., which in April decided to pay $125 million for an 80% stake in the partnership that will own 346-bed GWU Hospital.
The GWU deal would not have to be reviewed by the corporation counsel because it was inked before the law would take effect. But the hospital would have to pay $500,000 in back property taxes to the district under the new law.
A GWU spokesman said the hospital has voluntarily submitted many details of the deal to the corporation counsel.
-With Jonathan Gardner