It is enacted by the General Assembly as follows:

SECTION 1. Title 23 of the General Laws entitled "HEALTH AND SAFETY" is hereby amended by adding thereto the following chapter:

{ADD 23-17.14-1. Short title. -- ADD} {ADD This act shall be known and may be cited as "The Hospital Conversions Act." ADD}

{ADD 23-17.14-2. Findings. -- ADD} {ADD The general assembly finds and declares that: ADD}

{ADD (1) Rhode Island has a proud history of non-profit hospitals and philantrophic support of medical services, education and research; ADD}

{ADD (2) Hospitals in Rhode Island provide overall high quality care at a reasonable cost; ADD}

{ADD (3) Hospitals in Rhode Island have experienced during the 1990's substantial declines in occupancy as the healthcare system has changed. ADD}

{ADD (4) Hospitals required capital to maintain operations and to modernize facilities and services; ADD}

{ADD (5) Nationally and regionally private investment is being made that results in the conversion of not-for-profit and public hospitals into for-profit hospitals; ADD}

{ADD (6) There are hospitals in Rhode Island that have provided and continue to provide important services to communities that submit that their survival may depend on the ability to enter into agreements that result in the investment of private capital and their conversion to for-profit status; ADD}

{ADD (7) Hospitals both not-for-profit and for-profit are merging and forming networks to achieve integration, stability and efficiency and the presence of such networks affects competition; ADD}

{ADD (8) There are concerns that hospital networks may engage in practices which affect the quality medical services in the community as a whole and for more vulnerable members of society in particular; ADD}

{ADD (9) In order to protect public health and welfare and public and charitable assets, it is necessary to establish standards and procedures for hospital conversions. ADD}

{ADD 23-17.14-3. Purpose of provisions. -- ADD} {ADD The purpose of this chapter is to: ADD}

{ADD (1) assure the viability of a safe, accessible and affordable healthcare system that is available to all of the citizens of the state; ADD}

{ADD (2) to establish a process to evaluate, monitor and review whether the new phenomenon of for profit corporations gaining an interest in hospitals will maintain, enhance, or disrupt the delivery of healthcare in the state and to monitor hospital performance to assure that standards for community benefits continue to be met; ADD}

{ADD (3) to establish a review process and criteria for review of hospital conversions which involve for profit corporations; ADD}

{ADD (4) to establish a review process and criteria for review of hospital conversions which involve only not for profit corporations; ADD}

{ADD (5) to clarify the jurisdiction and the authority of the department of health to protect public health and welfare and the department of attorney general to preserve and protect public and charitable assets in reviewing both hospital conversions which involve for profit corporations and hospital conversions which include only not for profit corporations; and ADD}

{ADD (6) to provide for independent foundations to hold and distribute proceeds of hospital conversions consistent with the acquiree's original purpose or for the support and promotion of health care and social needs in the affected community. ADD}

{ADD 23-17.14-4. Definitions. -- ADD} {ADD For purposes of this chapter: ADD}

{ADD (1) "Acquiree" shall mean the person or persons which lose(s) any ownership or control in the new hospital, as the terms "new hospital" and "person(s)" are defined within the act; ADD}

{ADD (2) "Acquiror" shall mean the person or persons which gain(s) an ownership or control in the new hospital, as the terms "new hospital" and "person(s)" are defined within this act; ADD}

{ADD (3) "Affected community" shall mean any city or town within the state of Rhode Island wherein an existing hospital is physically located and/or those cities and towns whose inhabitants are regularly served by the existing hospital; ADD}

{ADD (4) "Charity care" shall be defined as health care services provided by a hospital without charge to a patient and for which the hospital does not and has not expected payment; ADD}

{ADD (5) "Community benefit" shall mean the provision of hospital services that meet the ongoing needs of the community for primary and emergency care in a manner that enables families and members of the community to maintain relationships with person who are hospitalized or are receiving hospital services, and shall also include, but not be limited to charity care and uncompensated care; ADD}

{ADD (6) "Conversion" shall mean any transfer by a person or persons of an ownership or membership interest or authority in a hospital, or the assets thereof, whether by purchase, merger, consolidation, lease, gift, joint venture, sale, or other disposition which results in a change of ownership or control or possession of twenty percent (20%) or greater of the members or voting rights or interests of the hospital or of the assets of the hospital or pursuant to which, by virtue of such transfer, a person, together with all persons affiliated with such person, holds or owns, in the aggregate, twenty percent (20%) or greater of the membership or voting rights or interests of the hospital or of the assets of the hospital, or the removal, addition or substitution of a partner which results in a new partner gaining or acquiring a controlling interest in the hospital, or any change in membership which results in a new person gaining or acquiring a controlling vote in the hospital; ADD}

{ADD (7) "Department" shall mean the department of health; ADD}

{ADD (8) "Director" shall mean the director of the department of health; ADD}

{ADD (9) "Existing hospital" shall mean the hospital as it exists prior to the acquisition; ADD}

{ADD (10) "For profit corporation" shall mean a legal entity formed for the purpose of transacting business which has as any one of its purposes pecuniary profit; ADD}

{ADD (11) "Hospital" shall mean a person or governmental entity licensed in accordance with chapter 23-17 to establish, maintain and operate a hospital; ADD}

{ADD (12) "New hospital" shall mean the hospital as it exists after the completion of a conversion; ADD}

{ADD (13) "Not-for-profit corporation shall mean a legal entity formed for some charitable or benevolent purpose and not for profit which has been exempted from taxation pursuant to Internal Revenue Code section 501(C)(3); ADD}

{ADD (14) "Person" shall mean any individual, trust or estate, partnership, corporation (including associations, joint stock companies and insurance companies), state or political subdivision or instrumentality of the state; ADD}

{ADD (15) "Transacting parties" shall mean any person or persons who seeks either to transfer or acquire ownership or a controlling interest or controlling authority in a hospital which would result in a change of ownership, control or authority of twenty percent (20%) or greater; ADD}

{ADD (16) "Uncompensated care" shall mean a combination of free care, which the hospital provides at no cost to the patient, bad debt, which the hospital bills for but does not collect, and less than full medicaid reimbursement amounts. ADD}

{ADD 23-17.14-5. Prior approval required - Department of attorney general and department of health. -- ADD} {ADD (a) A conversion shall require review and approval first from the department of attorney general and subsequently approval from the department of health in accordance with the provisions of this chapter. ADD}

{ADD 23-17.14-6. Initial application - Conversions involving for profit corporations or not for profit as acquirors. -- ADD} {ADD (a) No person shall engage in a conversion with a for profit corporation as the acquiror and a not for profit corporation as the acquiree involving the establishment, maintenance, or operation of a hospital or a conversion subject to section 23-17.14-9 without prior approval of both the department of attorney general and the department of health. The transacting parties shall file an initial application in accordance with subsection (b) of this section which shall, at minimum, include the following information with respect to each transacting party and to the proposed new hospital: ADD}

{ADD (1) a detailed summary of the proposed conversion; ADD}

{ADD (2) names, addresses and phone numbers of the transacting parties; ADD}

{ADD (3) name, address, phone number and occupation of all officers, members of the board of directors, trustees, executive and senior level management including for each position, current persons and persons holding position during the past three (3) years; ADD}

{ADD (4) articles of incorporation and certificate of incorporation; ADD}

{ADD (5) bylaws and organizational charts; ADD}

{ADD (6) organizational structure for existing transacting parties and each partner, affiliate, parent, subsidiary or related corporate entity in which the acquiror has a twenty percent (20%) or greater ownership interest; ADD}

{ADD (7) conflict of interest statements, policies and procedures; ADD}

{ADD (8) names, addresses and phone numbers of professional consultants engaged in connection with the proposed conversion; ADD}

{ADD (9) copies of audited income statements, balance sheets, and other financial statements for the past three (3) years and to the extent they have been made public, audited interim financial statements and income statements together with detailed description of the financing structure of the proposed conversion including equity contribution, debt restructuring, stock issuance, partnership interests, stock offerings and the like; ADD}

{ADD (10) a detailed description of real estate issues including title reports for land owned and lease agreements concerning the proposed conversion; ADD}

{ADD (11) a detailed description as each relates to the proposed transaction for equipment leases, insurance, regulatory compliance, tax status, pending litigation or pending regulatory citations, pension plan descriptions and employee benefits, environmental reports, assessments and organizational goals; ADD}

{ADD (12) copies of reports analyzing the proposed conversion during the past three (3) years including, but not limited to, reports by appraisers, accountants, investment bankers, actuaries and other experts; ADD}

{ADD (13) a description of the manner in which the price was determined including which methods of valuation and what data were used, and the names and addresses of persons preparing said documents, and this information is deemed to be proprietary; ADD}

{ADD (14) patient statistics for the past three (3) years and patient projections for the next one (1) year including patient visits, admissions, emergency room visits, clinical visits, and visits to each department of the hospital, admissions to nursing care or visits by affiliated home health care entities; ADD}

{ADD (15) the name and mailing address of all licensed facilities in which the for profit corporation maintains an ownership interest or controlling interest or operating authority; ADD}

{ADD (16) a list of pending or adjudicated citations, violations or charges against the facilities listed in subsection (15) brought by any governmental agency or accrediting agency within the past three (3) years and the status or disposition of each matter with regard to patient care and charitable asset matters; ADD}

{ADD (17) a list of uncompensated care provided over the past three (3) years by each facility listed in subsection (15) and detail as to how that amount was calculated; ADD}

{ADD (18) copies of all documents related to (a) identification of all charitable assets (b) accounting of all charitable assets for the past three (3) years; and (c) distribution of the charitable assets including, but not limited to, endowments, restricted, unrestricted and specific purpose funds as each relates to the proposed transaction; ADD}

{ADD (19) a description of charity care and uncompensated care provided by the existing hospital for the previous five (5) year period to the present including a dollar amount and a description of services provided to patients; ADD}

{ADD (20) a description of bad debt incurred by the existing hospital for the previous five (5) years for which payment was anticipated but not received; ADD}

{ADD (21) a description of the plan as to how the new hospital will provide community benefit and charity care during the first five (5) years of operation; ADD}

{ADD (22) a description of how the new hospital will monitor and value charity care services and community benefit; ADD}

{ADD (23) the names of persons currently holding a position as an officer, director, board member, or senior level management who will or will not maintain any position with the new hospital and whether any said person will receive any salary, severance stock offering or any financial gain, current or deferred, as a result of or in relation to the proposed conversion; ADD}

{ADD (24) copies of plans relative to staffing during the first three (3) years at the new hospital; ADD}

{ADD (25) a list of all medical services, departments and clinical services, and administrative services which will be maintained at the new hospital; ADD}

{ADD (26) a description of criteria established by the board of directors of the existing hospital for pursuing a proposed conversion with one or more health care providers; ADD}

{ADD (27) a description of request for proposals issued by the existing hospital relating to pursuing a proposed conversion; ADD}

{ADD (28) a copy of proposed contracts or description of proposed contracts or arrangements with management, board members, officers, or directors of the existing hospital for severance consulting services or covenants not to compete following completion of the proposed conversion; ADD}

{ADD (29) copies of documents or description of any proposed plan for any entity to be created for charitable assets, including but not limited to, endowments, restricted, unrestricted and specific purpose funds, the proposed articles of incorporation, by-laws, mission statement, program agenda, method of appointment of board members, qualifications of board members, duties of board members, and conflict of interest policies; ADD}

{ADD (30) description of all departments, clinical, social, or other services or medical services which will be eliminated or significantly reduced at the new hospital; ADD}

{ADD (31) description of staffing levels of all categories of employees, including full-time, part-time, and contract employees currently working at or providing services to the existing hospital and description of any anticipated or proposed changes in current staffing levels; ADD}

{ADD (32) current, signed original conflict of interest forms from all officers, directors, members of the board, trustees, senior management, chairpersons or department chairpersons and medical directors on a form acceptable to the attorney general; ADD}

{ADD (33) if the acquiror is a for profit corporation that has acquired a not for profit hospital under the provisions of this chapter, the application shall also include a complete statement of performance during the preceding one (1) year with regard to the terms and conditions of approval of conversion and each projection, plan, or description submitted as part of the application for any conversion completed under an application submitted pursuant to section 23-17.14-6 and made a part of an approval for such conversion pursuant to sections 23-17.14-7 or 23-17.14-8; ADD}

{ADD (b) Two (2) copies of the initial application shall be provided to the department of health and department of the attorney general simultaneously by United States mail, certified, return receipt requested. ADD}

{ADD (c) Except for information determined by the attorney general in accordance with section 23-17.14-32 to be confidential and/or proprietary, the initial application and supporting documentation shall be considered public records and shall be available for inspection upon request. ADD}

{ADD 23-17.14-7. Review process and review criteria by department of attorney general --ADD} {ADDConversions involving for profit corporation as acquiror. -- (a) The department of attorney general shall review all conversions involving a hospital in which one (1) or more of the transacting parties involves a for profit corporation as the acquiror and a not for profit corporation as the acquiree. ADD}

{ADD (b) In reviewing proposed conversions in accordance with subsection (a) and section 23-17.14-10 the department of attorney general shall adhere to the following process: ADD}

{ADD (1) Within ten (10) working days after receipt of two (2) copies of an initial application pursuant to section 23-17.14-5, the department of attorney general shall publish notice of the application in a newspaper of general circulation in the state and shall notify by United States mail any person who has requested notice of the filing of such application. The notice shall state (a) that an initial application has been received, (b) the names of the transacting parties, (c) the date by which a person may submit written comments to the department of attorney general, and shall provide notice of the date, time and place of a public hearing; ADD}

{ADD (2) within thirty (30) days after receipt of an initial application, the department of attorney general shall advise the applicant in writing whether the application is complete, and, if not, shall specify what additional information is required; ADD}

{ADD (3) the department of attorney general shall, upon receipt of information requested, notify the applicant in writing of the date of completion of the application; ADD}

{ADD (4) the department of attorney general shall approve, approve with conditions directly related to the proposed conversion, or disapprove the application within one hundred and twenty (120) days of the date of completion of the application; ADD}

{ADD (5) the department of attorney general shall transmit a copy of its final determination to the department of health forthwith. ADD}

{ADD (c) In reviewing an application pursuant to subsection (a) the department of the attorney general shall consider the following criteria: ADD}

{ADD (1) whether the proposed conversion will harm the public's interest in trust property given, devised, or bequeathed to the existing hospital for charitable, educational or religious purposes located or administered in this state; ADD}

{ADD (2) whether a trustee or trustees of any charitable trust located or administered in this state will be deemed to have exercised reasonable care, diligence, and prudence in performing as a fiduciary in connection with the proposed conversion; ADD}

{ADD (3) whether the board established appropriate criteria in deciding to pursue a conversion in relation to carrying out its mission and purposes; ADD}

{ADD (4) whether the board formulated and issued appropriate requests for proposals in pursuing a conversion; ADD}

{ADD (5) whether the board considered the proposed conversion as the only alternative or as the best alternative in carrying out its mission and purposes; ADD}

{ADD (6) whether any conflict of interest exists concerning the proposed conversion relative to members of the board, officers, directors, senior management, experts or consultants engaged in connection with the proposed conversion including, but not limited to attorneys, accountants, investment bankers, actuaries, health care experts, or industry analysts; ADD}

{ADD (7) whether individuals described in subsection (6) were provided with contracts or consulting agreements or arrangements which included pecuniary rewards based in whole, or in part on the contingency of the completion of the conversion; ADD}

{ADD (8) whether the board exercised due care in engaging consultants with the appropriate level of independence, education, and experience in similar conversions; ADD}

{ADD (9) whether the board exercised due care in accepting assumptions and conclusions provided by consultants engaged to assist in the proposed conversion; ADD}

{ADD (10) whether the board exercised due care in assigning a value to the existing hospital and its charitable assets in proceeding to negotiate the proposed conversion; ADD}

{ADD (11) whether the board exposed an inappropriate amount of assets by accepting in exchange for the proposed conversion future or contingent value based upon success of the new hospital; ADD}

{ADD (12) whether officers, directors, board members or senior management will receive future contracts in existing, new, or affiliated hospital or foundations; ADD}

{ADD (13) whether any members of the board will retain any authority in the new hospital; ADD}

{ADD (14) whether the board accepted fair consideration and value for any management contracts made part of the proposed conversion; ADD}

{ADD (15) whether individual officers, directors, board members or senior management engaged legal counsel to consider their individual rights or duties in acting in their capacity as a fiduciary in connection with the proposed conversion; ADD}

{ADD (16) whether the proposed conversion results in an abandonment of the original purposes of the existing hospital or whether a resulting entity will depart from the traditional purposes and mission of the existing hospital such that a cy pres proceeding would be necessary; ADD}

{ADD (17) whether the proposed conversion contemplates the appropriate and reasonable fair market value; ADD}

{ADD (18) whether the proposed conversion was based upon appropriate valuation methods including, but not limited to, market approach, third party report or fairness opinion; ADD}

{ADD (19) whether the conversion is proper under the Rhode Island nonprofit corporation act; ADD}

{ADD (20) whether the conversion is proper under applicable state tax code provisions; ADD}

{ADD (21) whether the proposed conversion jeopardizes the tax status of the existing hospital; ADD}

{ADD (22) whether the individuals who represented the existing hospital in negotiations avoided conflicts of interest; ADD}

{ADD (23) whether officers, board members, directors, or senior management deliberately acted or failed to act in a manner which impacted negatively on the value or purchase price; ADD}

{ADD (24) whether the formula used in determining the value of the existing hospital was appropriate and reasonable which may include, but not be limited to factors such as: the multiple factor applied to the "EBITDA" -- earnings before interest, taxes, depreciation, and amortization; the time period of the evaluation; price/earnings multiples; the projected efficiency differences between the existing hospital and the new hospital; and the historic value of any tax exemptions granted to the existing hospital; ADD}

{ADD (25) whether the proposed conversion appropriately provides for the disposition of proceeds of the conversion which may include, but not be limited to: ADD}

{ADD (a) whether an existing entity or a new entity will receive the proceeds; ADD}

{ADD (b) whether appropriate tax status implications of the entity receiving the proceeds have been considered; ADD}

{ADD (c) whether the mission statement and program agenda will be or should be closely related with the purposes of the mission of the existing hospital; ADD}

{ADD (d) whether any conflicts of interest arise in the proposed handling of the conversion's proceeds; ADD}

{ADD (e) whether the bylaws and articles of incorporation have been prepared for the new entity; ADD}

{ADD (f) whether the board of any new or continuing entity will be independent from the new hospital; ADD}

{ADD (g) whether the method for selecting board members, staff, and consultants is appropriate; ADD}

{ADD (h) whether the board will comprise an appropriate number of individuals with experience in pertinent areas such as foundations, health care, business, labor, community programs, financial management, legal, accounting, grant making and public members representing diverse ethnic populations of the affected community; ADD}

{ADD (i) whether the size of the board and proposed length of board terms are sufficient; ADD}

{ADD (26) whether the transacting parties are in compliance with the Charitable Trust Act, R.I.G.L. section 18-9-1-10; ADD}

{ADD (27) whether a right of first refusal to repurchase the assets has been retained; ADD}

{ADD (28) whether the character, commitment, competence and standing in the community, or any other communities served by the transacting parties are satisfactory; ADD}

{ADD (29) whether a control premium is an appropriate component of the proposed conversion; and ADD}

{ADD (30) whether the value of assets factored in the conversion is based on past performance or future potential performance. ADD}

{ADD 23-17.14-8. Review process and review criteria by department of health for conversions involving for profit corporation as acquiror. --ADD} {ADD (a) The department shall review all proposed conversions involving a hospital in which one (1) or more of the transacting parties involves a for profit corporation as the acquiror and a not for profit corporation as the acquiree. ADD}

{ADD (b) in reviewing proposed conversions in accordance with subsection (a) the department shall adhere to the following process; ADD}

{ADD (1) upon receipt of a determination by the attorney general of the proposed conversion, the department shall, within ten (10) working days publish notice of the application in a newspaper of general circulation in the state, the notice shall state (a) that an initial application has been received, (b) the names of the transacting parties, (c) the date by which a person may submit written comments to the department, and shall provide notice of the date, time and place of a public hearing; ADD}

{ADD (2) within twenty (20) days after receipt of a written determination indicating approval by the department of attorney general, the department shall advise the applicant in writing whether the initial application is complete, and, if not, shall specify what additional information is required; ADD}

{ADD (3) the department shall, upon receipt of information requested, notify the applicant in writing of the date of completion of the initial application; ADD}

{ADD (4) the department shall approve, approve with conditions directly related to the proposed conversion or disapprove the initial application within ninety (90) days of the date of completion of the application; ADD}

{ADD (c) In reviewing an application for a conversion involving hospitals in which one (1) or more of the transacting parties is a for profit corporation as the acquiror the department shall consider the following criteria: ADD}

{ADD (1) whether the character, commitment, competence, and standing in the community, or any other communities served by the proposed transacting parties, are satisfactory; ADD}

{ADD (2) whether sufficient safeguards are included to assure the affected community continued access to affordable care; ADD}

{ADD (3) whether the transacting parties have provided clear and convincing evidence that the new hospital will provide health care and appropriate access with respect to traditionally underserved populations in the affected community; ADD}

{ADD (4) whether procedures or safeguards are assured to insure that ownership interests will not be used as incentives for hospital employees or physicians to refer patients to the hospital; ADD}

{ADD (5) whether the transacting parties have made a commitment to assure the continuation of collective bargaining rights, if applicable, and retention of the workforce; ADD}

{ADD (6) whether the transacting parties have appropriately accounted for employment needs at the facility and addressed workforce retraining needed as a consequence of any proposed restructuring; ADD}

{ADD (7) whether the conversion demonstrates that the public interest will be served considering the essential medical services needed to provide safe and adequate treatment, appropriate access and balanced health care delivery to the residents of the state; and ADD}

{ADD (8) whether the acquiror has demonstrated that it has satisfactorily met the terms and conditions of approval for any previous conversion pursuant to an application submitted under section 23-17.14-6. ADD}

{ADD 23-17.14-9. Initial application -- Conversions limited to not for profit corporations. -- ADD} {ADD (a) All conversions which are limited to not for profit corporations which involve the establishment, maintenance, or operation of a hospital shall require prior approval of both the department of attorney general and the department of health. The transacting parties shall file an initial application pursuant to the provisions set forth in section 23-17.14-6. ADD}

{ADD 23-17.14-10. Review process and criteria for department of attorney general -- Conversions limited to not for profit corporations. -- ADD} {ADD (a) In reviewing an application of a conversion involving a hospital in which the transacting parties are limited to not for profit corporation, the department of attorney general shall apply the procedural requirements set forth in section 23-17.14-7(b) in a complete or modified manner, provided, however, that in no event shall the process exceed said provisions. ADD}

{ADD (b) In reviewing an application of a conversion involving a hospital in which the transacting parties are limited to not for profit corporations, the department of attorney general may consider the following criteria: ADD}

{ADD (1) whether the proposed conversion will harm the public's interest in trust property given, devised, or bequeathed to the existing hospital for charitable, educational or religious purposes located or administered in this state; ADD}

{ADD (2) whether a trustee or trustees of any charitable trust located or administered in this state will be deemed to have exercised reasonable care, diligence, and prudence in performing as a fiduciary in connection with the proposed conversion; ADD}

{ADD (3) whether the board established appropriate criteria in deciding to pursue a conversion in relation to carrying out its mission and purposes; ADD}

{ADD (4) whether the board considered the proposed conversion as the only alternative or as the best alternative in carrying out its mission and purposes; ADD}

{ADD (5) whether any conflict of interest exists concerning the proposed conversion relative to members of the board, officers, directors, senior management, experts or consultants engaged in connection with the proposed conversion including, but not limited to attorneys, accountants, investment bankers, actuaries, health care experts, or industry analysts; ADD}

{ADD (6) whether individuals described in subsection (5) were provided with contracts or consulting agreements or arrangements which included pecuniary rewards based in whole, or in part on the contingency of the completion of the conversion; ADD}

{ADD (7) whether the board exercised due care in engaging consultants with the appropriate level of independence, education, and experience in similar conversions; ADD}

{ADD (8)_whether the board exercised due care in accepting assumptions and conclusions provided by consultants engaged to assist in the proposed conversion; ADD}

{ADD (9) whether officers, directors, board members or senior management will receive future contracts; ADD}

{ADD (10) whether any members of the board will retain any authority in the new hospital; ADD}

{ADD (11) whether the board accepted fair consideration and value for any management contracts made part of the proposed conversion; ADD}

{ADD (12) whether individual officers, directors, board members or senior management engaged legal counsel to consider their individual rights or duties in acting in their capacity as a fiduciary in connection with the proposed conversion; ADD}

{ADD (13) whether the proposed conversion results in an abandonment of the original purposes of the existing hospital or whether a resulting entity will depart from the traditional purposes and mission of the existing hospital such that a cy pres proceeding would be necessary; ADD}

{ADD (14) whether the proposed conversion contemplates the appropriate and reasonable fair market value; ADD}

{ADD (15) whether the proposed conversion was based upon appropriate valuation methods including, but not limited to, market approach, third party report or fairness opinion; ADD}

{ADD (16) whether the conversion is proper under the Rhode Island nonprofit corporation act; ADD}

{ADD (17) whether the conversion is proper under applicable state tax code provisions; ADD}

{ADD (18) whether the proposed conversion jeopardizes the tax status of the existing hospital; ADD}

{ADD (19) whether the individuals who represented the existing hospital in negotiations avoided conflicts of interest; ADD}

{ADD (20) whether officers, board members, directors, or senior management deliberately acted or failed to act in a manner which impacted negatively on the value or purchase price; ADD}

{ADD (21) whether the transacting parties are in compliance with the Charitable Trust Act, R.I.G.L. section 18-9-1-10; ADD}

{ADD 23-17.14-11. Review process and criteria for the department of health -- Conversions limited to not for profit corporations. -- ADD} {ADD (a) In reviewing an application of a conversion involving a hospital in which the transacting parties are limited to not for profit corporations, the department shall adhere to the process set forth in section 23-17.14-7(b). ADD}

{ADD (b) In reviewing an application of a conversion involving a hospital in which the transacting parties are limited to not for profit corporations, the department shall consider the following criteria: ADD}

{ADD (1) whether the character, commitment, competence, and standing in the community, or any other communities served by the proposed transacting parties are satisfactory; ADD}

{ADD (2) whether sufficient safeguards are included to assure the affected community continued access to affordable care; ADD}

{ADD (3) whether the transacting parties have provided satisfactory evidence that the new hospital will provide health care and appropriate access with respect to traditionally underserved populations in the affected community; ADD}

{ADD (4) whether procedures or safeguards are assured to insure that ownership interests will not be used as incentives for hospital employees or physicians to refer patients to the hospital; ADD}

{ADD (5) whether the transacting parties have made a commitment to assure the continuation of collective bargaining rights, if applicable, and retention of the workplace; ADD}

{ADD (6) whether the transacting parties have appropriately accounted for employment needs at the facility and addressed workforce retraining needed as a consequence of any proposed restructuring; ADD}

{ADD (7) whether the conversion demonstrates that the public interest will be served considering the essential medical services needed to provide safe and adequate treatment, appropriate access and balanced health care delivery to the residents of the state. ADD}

{ADD 23-17.14-12. Review process by department of health for conversions involving for profit corporation as the acquiree. -- ADD} {ADD The department of health shall review all proposed conversions involving a for profit corporation as the acquiree and either a for profit hospital or a not for profit hospital as the acquiror in accordance with the provisions for change of effective control pursuant to sections 23-17-14.3 or 23-17-14.4. ADD}

{ADD 23-17.14-13. Reports, use of experts, costs. -- ADD} {ADD (a) The department of health or the department of attorney general may in effectuating the purposes of this chapter engage experts or consultants including but not limited to actuaries, investment bankers, accountants, attorneys, or industry analysts. All copies of reports prepared by experts and consultants, and costs associated therewith, shall be made available to the transacting parties and to the public. All costs incurred under this provision shall be the responsibility of one (1) or more transacting parties in an amount to be determined by the attorney general or the director as they deem appropriate. No application for a conversion made pursuant to the requirements of this chapter shall be considered complete unless an agreement has been executed with the attorney general or the director for the payment of costs in accordance with this section. ADD}

{ADD 23-17.14-14. Investigations -- Notice to attend -- Court order to appear -- Contempt. -- ADD} {ADD (a) The director or the attorney general may conduct investigations in discharging the duties required under this chapter. For purposes of this investigation the director or the attorney general may require any person, agent, trustee, fiduciary, consultant, institution, association, or corporation directly related to the proposed conversion to appear at such time and place as the director or the attorney general may designate, then and there under oath to produce for the use of the director and/or the attorney general any and all documents and other such information relating directly to the proposed conversion as the director or the attorney general may require. ADD}

{ADD (b) Whenever the director or the attorney general may require the attendance of any person as provided in subsection (a), the director and/or the attorney general shall issue a notice setting the time and place when the attendance is required and shall cause the notice to be delivered or sent by registered or certified mail to the person at least fourteen (14) days before the date fixed in the notice for the attendance. ADD}

{ADD (c) If any person receiving notice pursuant to this provision neglects to attend or remain in attendance so long as may be necessary for the purposes which the notice was issued, or refuses to produce information requested, any justice of the superior court for the county within which the inquiry is carried on or within which the person resides or transacts business, upon application by the director, the attorney general, or any transacting party shall have jurisdiction to hear and consider on an expedited basis the request, and if appropriate and relevant to the consideration of proposed conversion, may issue to the person an order requiring the person to appear before the director or the attorney general there to produce for the use of the director or the attorney general evidence in accordance with the terms of the order of the court, and any failure to obey the order of the superior court may be punished by the court as contempt thereof. ADD}

{ADD 23-17.14-15. Charity Care Requirements.-- ADD}{ADD(a) All licensed hospitals shall, as a condition of initial and/or continued licensure: ADD}

{ADD (1) meet the statewide community needs for the provision of charitable care; ADD}

{ADD (2) meet standards for assurance of the continuance of uncompensated case and community benefits; ADD}

{ADD (3) not discourage persons who cannot afford to pay from seeking essential medical services; and ADD}

{ADD (4) not encourage persons who cannot afford to pay to seek essential medical services from other providers. ADD}

{ADD (b) the director shall on an annual basis review each licensed hospital's level of performance in providing charity care and uncompensated care. ADD}

{ADD (c) the director shall consider the appropriate amount of charity and uncompensated care necessary to provide safe and adequate treatment, appropriate access and balanced health care delivery to the residents of the state; ADD}

{ADD (d) each licensed hospital shall provide on or before March 1st of each calendar year a report in a form acceptable to the director, a detailed description with supporting documentation, evidence of compliance of this section including, but not limited to (1) cost of charity care, (2) bad debt, (3) contracted medicaid shortfalls, and (4) any additional information demonstrating compliance with this section. ADD}

{ADD (e) if the department receives sufficient information indicating that a licensed hospital is not in compliance with this section, the director shall hold a hearing upon ten (10) days notice to the licensed hospital and shall issue in writing findings and appropriate penalties as set forth in 23-17.14-30. ADD}

{ADD 23-17.14-16. Gag rules prohibited.-- ADD}{ADD(a) A hospital shall not refuse to contract with or compensate for covered services with an otherwise eligible provider solely because that provider has in good faith communicated with one (1) or more of his or her patients regarding the provisions, terms, or requirements for services of the hospital's products as they relate to the needs of that provider's patients. ADD}

{ADD 23-17.14-17. Perjury. -- ADD}{ADD(a) Any person who is found to have testified falsely under oath before the legislature, the department of health, or the attorney general pursuant to this chapter shall be subject to prosecution for perjury and be subject to the penalties set forth in section 23-17.14-30. ADD}

{ADD 23-17.14-18. Prior approval -- Closings or significant reduction of medical services. --ADD}{ADD (a) No hospital emergency department or primary care services which existed for at least one (1) year and which significantly serve uninsured or underinsured individuals shall be eliminated or significantly reduced without the prior approval of the director in accordance with this section. ADD}

{ADD (b) Prior to the elimination or significant reduction of an emergency department or primary care services which existed for at least one (1) year and which significantly serve uninsured or underinsured individuals, the hospital shall provide a written plan to the director which shall describe the impact of such proposal on (1) access to healthcare services for traditionally underserved populations; (2) the delivery of such services on the affected community; and (3) other licensed hospitals or healthcare providers in the affected community or in the state. ADD}

{ADD (c) Notwithstanding any other provision in the general laws, the director shall have the sole authority to review all plans submitted under this section and the director shall issue a decision within ninety (90) days or the request shall be deemed approved. The director may if deemed appropriate, issue public notice and allow a written comment period within sixty (60) days of receipt of the proposal. ADD}

{ADD 23-17.14-19. Limits to acquisitions -- Community benefits requirements -- Filings prohibited. -- ADD}{ADD(a) In effectuating the purposes of this chapter to evaluate, review and monitor the new phenomenon of for profit corporations gaining an interest in hospitals and the resulting impact on the delivery of healthcare in the state, limitations on for profit corporations involved in hospital conversions are necessary. ADD}

{ADD (b) No for profit corporation, or its subsidiaries or affiliates, whch applies for and receives approval of a conversion of a hospital in accordance with the provisions of this chapter shall be permitted to apply for approval of a conversion of a second hospital in this state for a period of at least three (3) years after the initial conversion is finalized and implemented; provided, however, that this subsection shall not be deemed to prohibit a for profit corporation, together with its subsidiaries and affiliates, from applying for or receiving approval of a conversion of two affiliated hospitals in this state provided that (i) one (1) of the two (2) hospital licenses involved in the conversion was issued prior to the effective date of this chapter and (ii) the said license involves a specialty rehabilitation hospital that has a maximum of ninety (90) beds and, a conversion undertaken pursuant to this provision shall be considered one conversion and a for profit corporation which receives approval for such conversion shall be subject to the three year period between the finalization and implementation of a first conversion and the application for a second conversion as set forth above . ADD}

{ADD (c) In the event that a for profit corporation applies to hold, own, or acquire an ownership or controlling interest greater than twenty percent (20%) in more than one hospital one year subsequent to the finalization and implementation of a prior license, all provisions of this chapter must be met and, in addition to the review process and criteria set forth herein, the department shall have the sole authority and discretion to determine: ADD}

{ADD (1) whether the for profit corporation provided community benefits as required or promised in connection with obtaining and holding a license or interest therein during the previous license period; ADD}

{ADD (2) whether all terms and conditions of the prior license have been met; ADD}

{ADD (3) whether all federal, state and local laws, ordinances and regulations have been complied with relative to any prior license; ADD}

{ADD (4) whether the for profit corporation planned, implemented, monitored and reviewed a community benefit program during the prior license period; ADD}

{ADD (5) whether the for profit corporation maintained, enhanced or disrupted the essential medical services in the affected community or the state; ADD}

{ADD (6) whether the for profit corporation provided an appropriate amount of charity care necessary to maintain or enhance a safe and accessible healthcare delivery system in the affected community and the state; and ADD}

{ADD (7) whether the for profit corporation demonstrated a substantial linkage between the hospital and the affected community by providing one or more of the following benefits; uncompensated care, charity care, cash or in kind donations to community programs, education and training of professionals in community health issues, relevant research initiatives or essential but unprofitable medical services if needed in the affected community. ADD}

{ADD (d) the director may hold a public hearing to solicit input to assess the performance of a for profit corporation or its affiliates or subsidiaries in providing community benefits in the affected community or the state. ADD}

{ADD (e) the director shall have the sole authority to deny a for profit corporation, its affiliates or subsidiaries, or successors, permission for one or more than one license and, for good cause, may prohibit a for profit corporation or its affiliates or subsidiaries from filing an application pursuant to this chapter for a period not to exceed ten (10) years. ADD}

{ADD 23-17.14-20. Licensing fees.--ADD} {ADDNothing contained in this chapter shall be deemed to affect the licensing fees set forth in section 23-17-38.1. ADD}

{ADD 23-17.14-21. No derogation of attorney general. --ADD}{ADD (a) No provision of this chapter shall derogate from the common law or statutory authority of the attorney general nor shall any provision be construed as a limitation on the common law or statutory authority of the attorney general, including the authority to investigate at any time charitable trusts for the purpose of determining and ascertaining whether they are being administered in accordance with law and with the terms and purposes thereof. ADD}

{ADD (b) No provision of this chapter shall be construed as a limitation on the application of the doctrine of cy pres or any other legal doctrine applicable to charitable assets and/or charitable trusts. ADD}

{ADD 23-17.14-22. Distribution of proceeds from acquisition -- Selection and establishment of an independent foundation. -- ADD}{ADD (a) In the event of the approval of a hospital conversion involving a not for profit corporation and a for profit corporation results in a new entity as provided for in section 23-17.14-7(25)(a), it shall be required that the proceeds from the sale and any endowments, restricted, unrestricted and specific purpose funds shall be transferred to a charitable foundation operated by a board of directors; ADD}

{ADD (b) the presiding justice of the superior court shall have the authority to (1) appoint the initial board of directors, (2) approve, modify, or reject proposed bylaws and/or articles of incorporation provided by the transacting parties and/or the initial board of directors; ADD}

{ADD (c) the board of directors shall consist of at least seven (7) members and the executive director, who shall serve ex officio. The board members may include one or more members with experience in matters including financial, legal, business, labor, investments, community purpose, grant-making, health care and members who represent diverse populations of the affected community and not more than three (3) members of the board may be prior board members of the existing hospital; ADD}

{ADD (d) the membership terms shall be staggered and shall be four (4) years in duration. The board shall annually elect a chairperson from among its members and other officers it deems necessary for the performance of its duties and board members shall not receive compensation; ADD}

{ADD (e) control of the distribution of the proceeds of the fund is vested solely in the board provided however, the investment responsibility of the proceeds shall be through the "Rhode Island Foundation"; ADD}

{ADD (f) vacancies occurring on such board may be filled by a majority vote of the remaining board members. ADD}

{ADD 23-17.14-23. Powers and duties of the board. --ADD} {ADD(a) The board is vested with full power, authority, and jurisdiction over the foundation and may perform all acts necessary or convenient in the exercise of any power, authority, or jurisdiction over the foundation. ADD}

{ADD 23-17.14-24. Personal liability excluded. --ADD} {ADD(a) The members of the board and officers or employees of the foundation are not liable personally, either jointly or severally, for any debt or obligation created or incurred by the foundation unless such conduct is deemed to be gross misconduct or reckless. ADD}

{ADD 23-17.14-25. Implementation. -- ADD}{ADD(a) The presiding justice may take all steps necessary to effectuate the purposes of this chapter and the board shall be appointed no more than sixty (60) days after the completion of the conversion. The board shall act promptly to appoint an executive director, hire such staff as necessary, acquire necessary facilities and supplies to begin the operation of the foundation; ADD}

{ADD (b) the board shall conduct a public hearing to solicit comments on the proposed mission statement, program agenda, corporate structure, and strategic planning. The board shall hold a public hearing within one hundred eighty (180) days of establishment of the board and on an annual basis thereafter. ADD}

{ADD 23-17.14-26. Annual report. --ADD} {ADD(a) The board shall submit an annual report and a copy of form 990 as required by the Internal Revenue Service to the presiding justice, the governor, the attorney general and the legislature. ADD}

{ADD 23-17.14-27. General powers and limitations. --ADD} {ADD(a) For the purposes of exercising the specific powers granted in this chapter and effectuating the other purposes of this chapter, the foundation: ADD}

{ADD (1) may be sued and sue; ADD}

{ADD (2) may have a seal and alter it at will; ADD}

{ADD (3) may make, amend, and repeal rules relating to the conduct of the business of the foundation; ADD}

{ADD (4) may enter into contracts relating to the administration of the foundation; ADD}

{ADD (5) may rent, lease, buy or sell property in its own name and may construct or repair buildings necessary to provide space for its operations; ADD}

{ADD (6) may hire personnel, consultants and experts and set salaries; and ADD}

{ADD (7)may perform all other functions and exercise all other powers that are necessary, appropriate or convenient to administer the foundation. ADD}

{ADD 23-17.14-28. Concurrent approval -- License. --ADD}{ADD (a) The director may consider the requirement of this chapter and the requirements of 23-17-1 to 45 together upon completion of the initial application. The director may approve, approve with conditions, or disapprove one or both requests filed pursuant to this chapter and 23-17-1 to 45. The approvals of the director required by this chapter shall be subject to chapter 42-35. For any conversion subject to this chapter, the director may combine any hearings required by this chapter with any hearings on similar or related matters required by 23-17-1 to 23-17-45 and shall consider issues of market share especially as they affect quality, access, and affordability of services. ADD}

{ADD 23-27.14-29. Whistleblower protections. -- ADD}{ADD(a) Prohibition against discrimination. -- No person subject to the provisions of this chapter, may discharge, demote, threaten or otherwise discriminate against any person or employee with respect to compensation, terms, conditions, or privileges of employment as a reprisal because the person or employee (or any person acting pursuant to the request of the employee) provided or attempted to provide information to the director or his or her designee or to the attorney general or his or her designee regarding possible violation of this chapter. ADD}

{ADD (b) Enforcement. -- Any person or employee or former employee subject to the provisions of this chapter who believes that he or she has been discharged or discriminated against in violation of subsection (a) may file a civil action within three (3) years of the date of such discharge or discrimination. ADD}

{ADD (c) Remedies. -- If the court determines that a violation has occurred, the court may order the person who committed the violation to: ADD}

{ADD (1) Reinstate the employee to the employee's former position; ADD}

{ADD (2) Pay compensatory damages, costs of litigation and attorneys' fees; and/or ADD}

{ADD (3) Take other appropriate actions to remedy any past discrimination. ADD}

{ADD (d) Limitation. -- The protections of this section shall not apply to any person or employee who: ADD}

{ADD (1) Deliberately causes or participates in the alleged violation of law or regulation; or ADD}

{ADD (2) Knowingly or recklessly provides substantially false information to the director or his or her designee. ADD}

{ADD 23-17.14-30. Failure to comply -- Penalties.--ADD}{ADD (a) If any person knowingly violates or fails to comply with any provision of this chapter or willingly or knowingly gives false or incorrect information the director or attorney general may, after notice and opportunity for a prompt and fair hearing to the applicant or licensee, deny, suspend or revoke a license, or in lieu of suspension or revocation of the license, may order the licensee to admit no additional persons to the facility, to provide health services to no additional persons through the facility, or to take corrective action necessary to secure compliance under this chapter, or (2) the Superior Court may, after notice and opportunity for a prompt and fair hearing, may impose a fine of not more than one million dollars ($1,000,000) or impose a prison term of not more than five (5) years. ADD}

{ADD 23-17.14-31. Powers of the Department of Health. --ADD}{ADD The department may adopt rules, including measurable standards, as may be necessary to accomplish the purpose of this chapter. ADD}

{ADD 23-17.14-32. Powers of the Attorney General. --ADD}{ADDThe Attorney General shall have the power to decide whether any information required by this chapter of an applicant is confidential and/or proprietary. Such decisions by the attorney general shall be made prior to any public notice of an initial application or any public review of such information. ADD}

{ADD 23-17.14-33. Severability.ADD}{ADD If any provision of this chapter or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of the chapter, which can be given effect without the invalid provision or applicable, and to this end the provisions of this chapter are declared to be severable. ADD}

SECTION 2. This act shall take effect upon passage and shall be applied to any pending or future conversion of an existing hospital, or new hospital, provided, however, this act shall not apply to pending conversions pursuant to chapter 17 of title 23 in which the department of health has made a written determination that an initial application was completed on or before May 1, 1997.