Playing catch-up, the National Association of Attorneys General has unveiled model state legislation giving states' legal enforcers considerable authority over the conversions of not-for-profit healthcare facilities.
The guidelines, which took nearly a year to develop, require not-for-profit hospitals and other providers that want to become for-profit or sell to or merge with a for-profit company to meet certain conditions, including:
Provide written notice of their intentions to the state attorney general, who must approve or reject the deal within 60 days. The attorney general will hold one or more public meetings in the county where the not-for-profit is located.
Provide any and all information the attorney general finds necessary to review the transaction. Failure to comply with requests for information will result in a rejection of the deal.
Reimburse the attorney general for expenses incurred while reviewing the conversion.
The guidelines also suggest a 10-point checklist of issues to examine when reviewing conversions (See box).
"The main goal of this model legislation is to ensure that these healthcare transactions are open to public comment and scrutiny," said Christine Milliken, the NAAG's executive director and general counsel, in a statement. "The general principle behind charitable trust laws is that such trusts are not private business entities and that the public, therefore, has a greater interest in how those trusts are treated because of its investment in them and its reliance on their services."
The model NAAG legislation, however, comes several years after dozens of states began passing not-for-profit hospital conversion laws requiring either specific state approval for such deals or public disclosure of conversions. Forty-eight laws regulating conversions have been passed in 33 states and the District of Columbia since 1990.
The NAAG is soliciting comments on the guidelines until May 15. The final edition of the guidelines is expected to be released at the NAAG's summer meeting in Colorado in July.