As Introduced 1
122nd General Assembly 4
Regular Session H. B. No. 242 5
1997-1998 6
REPRESENTATIVES VAN VYVEN-MAIER-SCHURING-BENDER-BOGGS-BRADING- 8
BUCHY-CORBIN-FORD-FOX-GARCIA-GRENDELL-HAGAN-HAINES-HEALY- 9
JACOBSON-JAMES-JERSE-JONES-KREBS-KRUPINSKI-LEWIS-LOGAN- 10
METELSKY-MILLER-MOTTL-MOTTLEY-NETZLEY-OGG-OLMAN-OPFER- 11
ROMAN-SAWYER-SCHULER-SYKES-WESTON-WILSON 12
14
A B I L L
To amend section 109.99 and to enact sections 109.34 16
and 109.35 of the Revised Code to require that 17
the Attorney General review transfers of assets 18
by certain nonprofit health care entities to 19
for-profit entities. 20
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 22
Section 1. That section 109.99 be amended and sections 24
109.34 and 109.35 of the Revised Code be enacted to read as 25
follows: 26
Sec. 109.34. (A)(1) THIS SECTION AND SECTION 109.35 OF 28
THE REVISED CODE APPLY TO A TRANSACTION THAT INVOLVES A TRANSFER 31
OF OWNERSHIP OR CONTROL OF ASSETS OF A NONPROFIT HEALTH CARE 32
ENTITY, WHETHER BY PURCHASE, MERGER, CONSOLIDATION, LEASE, GIFT, 33
JOINT VENTURE, OR OTHER TRANSFER, EQUAL TO EITHER OF THE 34
FOLLOWING:
(a) TWENTY PER CENT OR MORE OF THE ASSETS OF THE ENTITY; 37
(b) ANY ASSETS OF THE ENTITY, IF THE ENTITY IS UNABLE TO 40
FULFILL ITS STATED OR ACTUAL PURPOSE WITHOUT THE ASSETS. 41
IN DETERMINING WHETHER THE AMOUNT TRANSFERRED EQUALS TWENTY 43
PER CENT OR MORE OF THE ASSETS OF AN ENTITY, ALL TRANSFERS 44
DESCRIBED IN THIS SECTION THAT OCCUR IN THE TWENTY-FOUR MONTH 45
PERIOD PRIOR TO THE DATE NOTICE IS SUBMITTED IN ACCORDANCE WITH 46
2
THIS SECTION SHALL BE CONSIDERED. 47
A TRANSACTION DESCRIBED IN THIS SECTION OR SECTION 109.35 49
OF THE REVISED CODE INCLUDES ANY BINDING OBLIGATION IN 51
FURTHERANCE OF THE TRANSACTION. 52
(2) THIS SECTION AND SECTION 109.35 OF THE REVISED CODE DO 56
NOT APPLY TO EITHER OF THE FOLLOWING: 57
(a) TRANSACTIONS INVOLVING ONLY NONPROFIT HEALTH CARE 59
ENTITIES AND PERSONS EXEMPT FROM TAXATION UNDER SECTION 501(a) OF 62
THE "INTERNAL REVENUE CODE OF 1986," 100 STAT. 2085, 26 U.S.C. 66
501, AS AMENDED; 67
(b) A NONPROFIT HEALTH CARE ENTITY THAT, PRIOR TO THE 69
EFFECTIVE DATE OF THIS SECTION, ENTERED INTO A CONSENT DECREE 71
WITH THE ATTORNEY GENERAL THAT REQUIRES DISTRIBUTION OF THE 72
CHARITABLE ASSETS OF THE ENTITY TO AN APPROPRIATE HEALTH-RELATED 73
CHARITY. THIS EXEMPTION DOES NOT LIMIT THE AUTHORITY OF THE 75
ATTORNEY GENERAL TO SEEK REMEDIES FOR BREACHES OF FIDUCIARY DUTY 76
OR OTHER VIOLATIONS OF LAW. 77
(B) AS USED IN THIS SECTION AND IN SECTION 109.35 OF THE 79
REVISED CODE:
(1) "NONPROFIT HEALTH CARE ENTITY" MEANS EITHER OF THE 82
FOLLOWING THAT WAS CREATED FOR ANY CHARITABLE OR SOCIAL WELFARE 83
PURPOSE RELATED TO HEALTH CARE:
(a) A HOSPITAL, AS DEFINED IN SECTION 3727.01 OF THE 85
REVISED CODE, THAT IS OWNED OR OPERATED BY A CORPORATION 87
ORGANIZED UNDER CHAPTER 1702. OF THE REVISED CODE OR THE 88
NONPROFIT CORPORATION LAW OF ANOTHER STATE; 89
(b) EITHER OF THE FOLLOWING THAT IS OR HAS BEEN EXEMPT 91
FROM TAXATION UNDER SECTION 501(a) OF THE INTERNAL REVENUE CODE: 94
(i) A HEALTH MAINTENANCE ORGANIZATION GRANTED A 96
CERTIFICATE OF AUTHORITY UNDER CHAPTER 1742. OF THE REVISED CODE; 98
(ii) A DOMESTIC MUTUAL COMPANY GRANTED A CERTIFICATE OF 101
AUTHORITY UNDER CHAPTER 3941. OF THE REVISED CODE THAT IS IN THE 104
BUSINESS OF PROVIDING SICKNESS AND ACCIDENT INSURANCE AND THAT 105
WAS PREVIOUSLY A HOSPITAL SERVICE ASSOCIATION UNDER FORMER 106
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CHAPTER 1739. OF THE REVISED CODE OR CHAPTER 669. OF THE GENERAL 107
CODE OR HAS MERGED OR OTHERWISE CONSOLIDATED WITH A FORMER 109
HOSPITAL SERVICE ASSOCIATION.
(2) "PARTY" INCLUDES A NONPROFIT HEALTH CARE ENTITY THAT 111
IS THE SUBJECT OF A TRANSACTION OR PROPOSED TRANSACTION, AN 112
ACQUIRING PERSON, AND THE RESULTING ENTITY, IF ANY. 113
(3) "FAIR MARKET VALUE" MEANS THE PRICE THAT ASSETS BEING 116
TRANSFERRED WOULD BRING IN A COMPETITIVE AND OPEN MARKET UNDER A 117
FAIR SALE WITH THE BUYER AND SELLER ACTING PRUDENTLY,
KNOWLEDGEABLY, AND IN THEIR OWN BEST INTEREST AND A REASONABLE 118
TIME BEING ALLOWED FOR EXPOSURE IN THE MARKET. 119
(C) A NONPROFIT HEALTH CARE ENTITY PROPOSING TO ENTER INTO 121
A TRANSACTION SUBJECT TO THIS SECTION SHALL NOTIFY THE ATTORNEY 123
GENERAL AND OBTAIN WRITTEN APPROVAL OF THE TRANSACTION IN 124
ACCORDANCE WITH THIS SECTION.
(1) THE NOTICE SHALL BE SUBMITTED ON FORMS PROVIDED BY THE 128
ATTORNEY GENERAL AND INCLUDE ALL OF THE FOLLOWING: 129
(a) THE NAMES AND ADDRESSES OF THE PARTIES, INCLUDING A 131
LIST OF ALL INDIVIDUALS WHO ARE OR HAVE BEEN CHOSEN AS DIRECTORS, 132
OFFICERS, OR BOARD MEMBERS OF THE PARTIES; 133
(b) THE TERMS OF THE PROPOSED TRANSACTION, INCLUDING A 135
SUMMARY OF ALL CONTRACTS OR OTHER AGREEMENTS OF THE PARTIES; 136
(c) THE AMOUNT, SOURCE, AND NATURE OF CONSIDERATION TO BE 138
PAID TO THE NONPROFIT HEALTH CARE ENTITY, ITS DIRECTORS, 139
OFFICERS, BOARD MEMBERS, EXECUTIVES, OR EXPERTS RETAINED BY THE 140
NONPROFIT ENTITY.
THE NOTICE SHALL STATE THAT THE NONPROFIT HEALTH CARE 142
ENTITY IS UNDER A CONTINUING DUTY TO NOTIFY THE ATTORNEY GENERAL 143
OF ANY CHANGES IN THE INFORMATION CONTAINED IN THE NOTICE OR 144
OTHER DOCUMENTS REQUIRED BY THIS SECTION AND THAT A VIOLATION OF 146
THIS DUTY MAY DELAY APPROVAL OF THE TRANSACTION. THE STATEMENT 147
SHALL BE ACKNOWLEDGED BY THE SIGNATURE OF A REPRESENTATIVE OF THE 148
NONPROFIT HEALTH CARE ENTITY AT THE TIME THE NOTICE IS SUBMITTED 149
TO THE ATTORNEY GENERAL. NOT LATER THAN TWO BUSINESS DAYS AFTER 150
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THE DISCOVERY OF ANY CHANGES IN INFORMATION, THE NONPROFIT HEALTH 151
CARE ENTITY SHALL PROVIDE COPIES TO THE ATTORNEY GENERAL OF ANY 152
DOCUMENTS AND OTHER MATERIAL RELEVANT TO THE CHANGES. THE 153
ATTORNEY GENERAL MAY DELAY APPROVAL OF THE TRANSACTION UP TO 155
THIRTY DAYS, IN ADDITION TO THE NINETY-DAY EXTENSION AUTHORIZED 156
BY DIVISION (A) OF SECTION 109.35 OF THE REVISED CODE, FOLLOWING
RECEIPT OF THE DOCUMENTS AND OTHER MATERIAL. 157
(2) IN ADDITION TO THE NOTICE DESCRIBED IN THIS DIVISION, 159
THE NONPROFIT ENTITY SHALL SUBMIT ALL OF THE FOLLOWING: 160
(a) AUDITED FINANCIAL STATEMENTS FOR THE NONPROFIT HEALTH 162
CARE ENTITY FOR THE THREE FISCAL YEARS PRIOR TO THE DATE OF 163
SUBMISSION;
(b) A VALUATION STATEMENT PREPARED BY AN INDEPENDENTLY 166
QUALIFIED EXPERT, SUCH AS AN INVESTMENT BANKER, ACTUARY, 167
APPRAISER, CERTIFIED PUBLIC ACCOUNTANT, OR OTHER EXPERT, THAT 168
ASSESSES THE FULL AND FAIR MARKET VALUE OF THE NONPROFIT HEALTH 169
CARE ENTITY;
(c) COPIES OF ALL CONTRACTS AND OTHER AGREEMENTS BETWEEN 172
THE PARTIES OR THEIR OFFICERS, DIRECTORS, BOARD MEMBERS, OR OTHER 173
FIDUCIARIES, INCLUDING ANY CONTRACTS OR OTHER FINAL AGREEMENTS 174
RELATING TO THE CLOSE OF THE PROPOSED TRANSACTION; 175
(d) ANY ADDITIONAL INFORMATION THE ATTORNEY GENERAL 177
CONSIDERS NECESSARY TO VALUE THE NONPROFIT HEALTH CARE ENTITY'S 178
ASSETS AS REQUIRED IN RULES ADOPTED BY THE ATTORNEY GENERAL. 180
(3) THE APPLICATION AND ALL OTHER DOCUMENTS OR MATERIALS 182
SUBMITTED PURSUANT TO THIS SECTION ARE PUBLIC RECORDS UNDER 183
SECTION 149.43 OF THE REVISED CODE. 185
(D) NOT LATER THAN SEVEN DAYS AFTER SUBMITTING THE NOTICE 187
AND OTHER DOCUMENTS REQUIRED BY THIS SECTION, THE NONPROFIT 188
HEALTH CARE ENTITY SHALL PUBLISH NOTICE OF THE PROPOSED 189
TRANSACTION IN AT LEAST ONE DAILY NEWSPAPER OF GENERAL 190
CIRCULATION IN THE COUNTY WHERE THE NONPROFIT HEALTH CARE ENTITY 191
HAS ITS PRINCIPAL PLACE OF BUSINESS. THE NOTICE SHALL STATE THAT 192
AN APPLICATION HAS BEEN RECEIVED, THE NAMES OF THE PARTIES, AND A 193
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DESCRIPTION OF THE PROPOSED TRANSACTION.
Sec. 109.35. (A) NOT LATER THAN SIXTY DAYS AFTER RECEIPT 195
OF A NOTICE AND OTHER DOCUMENTS REQUIRED BY SECTION 109.34 OF THE 196
REVISED CODE, THE ATTORNEY GENERAL SHALL APPROVE OR DISAPPROVE 197
THE PROPOSED TRANSACTION, EXCEPT THAT THE ATTORNEY GENERAL MAY 198
EXTEND THIS PERIOD AN ADDITIONAL NINETY DAYS.
(B) IN DETERMINING WHETHER TO APPROVE OR DISAPPROVE A 200
PROPOSED TRANSACTION, THE ATTORNEY GENERAL SHALL CONSIDER: 202
(1) WHETHER THE TRANSACTION IS FAIR TO THE NONPROFIT 204
HEALTH CARE ENTITY; 205
(2) WHETHER THE NONPROFIT HEALTH CARE ENTITY EXERCISED DUE 207
DILIGENCE IN DECIDING TO AGREE TO THE TRANSACTION AND NEGOTIATING 208
THE TERMS AND CONDITIONS OF THE TRANSACTION; 209
(3) THE PROCEDURES USED BY THE NONPROFIT HEALTH CARE 211
ENTITY IN MAKING ITS DECISION, INCLUDING WHETHER APPROPRIATE 212
EXPERT ASSISTANCE WAS USED; 213
(4) WHETHER THE TRANSACTION WILL RESULT IN A BREACH OF 215
FIDUCIARY DUTY, AS DETERMINED BY THE ATTORNEY GENERAL, INCLUDING 217
CONFLICTS OF INTEREST RELATED TO PAYMENTS OR BENEFITS TO 218
OFFICERS, DIRECTORS, BOARD MEMBERS, EXECUTIVES, AND EXPERTS 219
EMPLOYED OR RETAINED BY THE PARTIES;
(5) WHETHER THE NONPROFIT HEALTH CARE ENTITY WILL RECEIVE 221
FULL AND FAIR MARKET VALUE FOR ITS ASSETS; 222
(6) WHETHER THE PROCEEDS OF THE TRANSACTION WILL BE USED 224
CONSISTENT WITH THE NONPROFIT HEALTH CARE ENTITY'S ORIGINAL 226
CHARITABLE PURPOSE;
(7) WHETHER THE ATTORNEY GENERAL HAS RECEIVED FROM THE 228
NONPROFIT HEALTH CARE ENTITY INFORMATION SUFFICIENT TO MAKE A 230
DETERMINATION UNDER THIS SECTION;
(8) ANY OTHER CRITERIA THE ATTORNEY GENERAL CONSIDERS 232
NECESSARY TO DETERMINE WHETHER THE NONPROFIT HEALTH CARE ENTITY 233
WILL RECEIVE FULL AND FAIR MARKET VALUE FOR ITS ASSETS AS 234
REQUIRED IN RULES ADOPTED BY THE ATTORNEY GENERAL. 235
THE ATTORNEY GENERAL MAY RETAIN, AT THE NONPROFIT HEALTH 237
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CARE ENTITY'S EXPENSE, ONE OR MORE INDEPENDENTLY QUALIFIED 238
EXPERTS, INCLUDING AN INVESTMENT BANKER, ACTUARY, APPRAISER, 239
CERTIFIED PUBLIC ACCOUNTANT, OR OTHER EXPERT, AS THE ATTORNEY 240
GENERAL CONSIDERS REASONABLY NECESSARY TO PROVIDE ASSISTANCE IN 241
MAKING A DECISION UNDER THIS SECTION. THE NONPROFIT HEALTH CARE 242
ENTITY SHALL PROMPTLY REIMBURSE THE ATTORNEY GENERAL FOR THE COST 244
OF RETAINING EXPERTS. THE COST OF RETAINING AN EXPERT SHALL NOT 246
EXCEED AN AMOUNT THAT IS REASONABLE AND NECESSARY TO MAKE A 247
DETERMINATION UNDER THIS SECTION. THE CONTRACT TO RETAIN AN 248
EXPERT IS EXEMPT FROM CHAPTER 125. OF THE REVISED CODE. 249
AT ANY TIME WHILE CONSIDERING A PROPOSED TRANSACTION UNDER 251
THIS SECTION, THE ATTORNEY GENERAL MAY REQUEST ANY ADDITIONAL 252
INFORMATION FROM THE NONPROFIT HEALTH CARE ENTITY THAT THE 253
ATTORNEY GENERAL CONSIDERS APPROPRIATE TO THE VALUATION OF THE 254
ENTITY'S ASSETS. THE NONPROFIT HEALTH CARE ENTITY SHALL PROVIDE 255
THE INFORMATION NOT LATER THAN TEN DAYS AFTER THE DATE OF THE 257
REQUEST. THE ATTORNEY GENERAL MAY DELAY APPROVAL OF THE 258
TRANSACTION UP TO THIRTY DAYS, IN ADDITION TO THE NINETY-DAY 259
EXTENSION AUTHORIZED BY DIVISION (A) OF THIS SECTION, FOLLOWING 260
RECEIPT OF DOCUMENTS AND OTHER MATERIAL CONTAINING THE 261
INFORMATION REQUESTED.
(C) THE ATTORNEY GENERAL SHALL APPROVE A PROPOSED 263
TRANSACTION ON FINDING THAT THE NONPROFIT HEALTH CARE ENTITY WILL 264
RECEIVE FULL AND FAIR MARKET VALUE FOR THE ASSETS THAT ARE THE 265
SUBJECT OF THE TRANSACTION. ONCE A TRANSACTION IS APPROVED, ANY 266
SUBSTANTIAL ALTERATION IS A NEW TRANSACTION SUBJECT TO APPROVAL 267
BY THE ATTORNEY GENERAL.
THE NONPROFIT HEALTH CARE ENTITY MAY RESUBMIT A NOTICE AND 269
OTHER DOCUMENTS SEEKING APPROVAL OF A TRANSACTION DISAPPROVED BY 271
THE ATTORNEY GENERAL BUT MAY NOT SUBMIT A NOTICE AND OTHER 272
DOCUMENTS THAT ARE IDENTICAL OR SUBSTANTIALLY SIMILAR TO THE 273
ORIGINAL SUBMISSION.
(D) IF THE ATTORNEY GENERAL APPROVES THE TRANSACTION, THE 276
NONPROFIT HEALTH CARE ENTITY SHALL HOLD A PUBLIC HEARING TO 277
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RECEIVE COMMENT ON THE PROPOSED USE OF THE PROCEEDS OF THE 278
TRANSACTION. THE HEARING SHALL BE HELD IN THE COUNTY WHERE THE 279
NONPROFIT HEALTH CARE ENTITY HAS ITS PRINCIPAL PLACE OF BUSINESS 280
NOT LATER THAN FORTY-FIVE DAYS AFTER RECEIPT OF WRITTEN NOTICE OF 281
THE ATTORNEY GENERAL'S APPROVAL. 282
AT LEAST THIRTY DAYS PRIOR TO THE DATE SET FOR THE HEARING, 285
THE NONPROFIT HEALTH CARE ENTITY SHALL PUBLISH NOTICE OF THE 286
HEARING IN AT LEAST ONE DAILY NEWSPAPER OF GENERAL CIRCULATION IN 287
THE COUNTY WHERE THE NONPROFIT HEALTH CARE ENTITY HAS ITS 288
PRINCIPAL PLACE OF BUSINESS. THE NOTICE SHALL INCLUDE A
STATEMENT THAT A TRANSACTION HAS BEEN APPROVED BY THE ATTORNEY 289
GENERAL, THE NAMES OF THE PARTIES, A DESCRIPTION OF THE PROPOSED 290
TRANSACTION, AND THE DATE, TIME, AND PLACE OF THE HEARING. 292
(E)(1) NO NONPROFIT HEALTH CARE ENTITY SHALL ENTER INTO A 294
TRANSACTION SUBJECT TO THIS SECTION WITHOUT THE APPROVAL OF THE 296
ATTORNEY GENERAL GRANTED IN ACCORDANCE WITH THIS SECTION. 297
(2) NO OFFICER, DIRECTOR, BOARD MEMBER, OR OTHER FIDUCIARY 300
OF A NONPROFIT HEALTH CARE ENTITY SHALL RECEIVE EXCESS
COMPENSATION OF ANY KIND RELATING TO A TRANSACTION DESCRIBED IN 301
THIS SECTION AND SECTION 109.34 OF THE REVISED CODE. 302
(3) THE ATTORNEY GENERAL MAY INSTITUTE AND PROSECUTE A 304
CIVIL OR CRIMINAL ACTION TO ENFORCE THIS SECTION IN THE COURT OF 305
COMMON PLEAS OF THE COUNTY IN WHICH THE NONPROFIT HEALTH CARE 306
ENTITY HAS ITS PRINCIPAL PLACE OF BUSINESS OR THE FRANKLIN COUNTY 307
COURT OF COMMON PLEAS. IN ADDITION TO ANY CIVIL REMEDIES THAT 308
EXIST UNDER COMMON LAW OR THE REVISED CODE, A COURT MAY RESCIND 309
THE TRANSACTION, GRANT INJUNCTIVE RELIEF, ASSESS A CIVIL PENALTY 310
IN AN AMOUNT NOT EXCEEDING TEN MILLION DOLLARS, OR IMPOSE ANY 311
COMBINATION OF THESE REMEDIES.
(F) THE POWERS OF THE ATTORNEY GENERAL UNDER THIS SECTION 313
AND SECTION 109.34 OF THE REVISED CODE ARE IN ADDITION TO THE 314
ATTORNEY GENERAL'S POWERS HELD AT COMMON LAW AND UNDER SECTIONS 315
109.23 TO 109.33 OF THE REVISED CODE. 317
THIS SECTION AND SECTION 109.34 OF THE REVISED CODE DO NOT 321
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LIMIT OR OTHERWISE AFFECT ANY OF THE FOLLOWING:
(1) ANY OTHER CIVIL OR CRIMINAL RIGHT, CLAIM, OR DEFENSE 323
THAT THE ATTORNEY GENERAL OR PARTIES MAY ASSERT UNDER COMMON LAW 324
OR THE REVISED CODE; 325
(2) THE AUTHORITY OF THE ATTORNEY GENERAL TO INSTITUTE AND 327
PROSECUTE AN ACTION TO ENFORCE SECTIONS 109.23 TO 109.33 OF THE 329
REVISED CODE; 330
(3) THE AUTHORITY OF THE ATTORNEY GENERAL TO INVESTIGATE 332
AND PROSECUTE VIOLATIONS OF ANY STATE OR FEDERAL ANTITRUST LAW. 334
Sec. 109.99. (A) Whoever violates section 109.26 of the 343
Revised Code shall be fined not less than five hundred nor more 344
than ten thousand dollars or be imprisoned not less than one 345
month nor more than one year, or both. 346
(B) Whoever violates division (G)(1) of section 109.573 of 349
the Revised Code is guilty of unlawful disclosure of DNA database 350
information, a misdemeanor of the first degree.
(C) Whoever violates division (G)(2) of section 109.573 of 352
the Revised Code is guilty of unlawful possession of DNA database 353
information, a misdemeanor of the first degree. 354
(D)(1) WHOEVER VIOLATES DIVISION (E)(1) OF SECTION 109.35 357
OF THE REVISED CODE IS GUILTY OF ENTERING INTO A TRANSACTION WITH
A NONPROFIT HEALTH CARE ENTITY WITHOUT THE APPROVAL OF THE 359
ATTORNEY GENERAL, A FELONY OF THE THIRD DEGREE.
(2) WHOEVER VIOLATES DIVISION (E)(2) OF SECTION 109.35 OF 361
THE REVISED CODE IS GUILTY OF RECEIVING EXCESS COMPENSATION 362
RELATING TO A TRANSACTION INVOLVING A NONPROFIT HEALTH CARE 363
ENTITY, A FELONY OF THE THIRD DEGREE.
Section 2. That existing section 109.99 of the Revised 365
Code is hereby repealed. 366