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Chapter 70.45 RCW

ACQUISITION OF NONPROFIT HOSPITALS

RCW Sections

70.45.010Legislative findings.
70.45.020Definitions.
70.45.030Department approval required -- Application -- Fees.
70.45.040Applications -- Deficiencies -- Public notice.
70.45.050Public hearings.
70.45.060Attorney general review and opinion -- Department review and decision -- Adjudicative proceedings.
70.45.070Department review -- Criteria to safeguard charitable assets.
70.45.080Department review -- Criteria for continued existence of accessible, affordable health care.
70.45.090Approval of acquisition required -- Injunctions.
70.45.100Compliance -- Department authority -- Hearings -- Revocation or suspension of hospital license -- Referral to attorney general for action.
70.45.110Authority of attorney general to ensure compliance.
70.45.120Acquisitions completed before July 27, 1997, not subject to this chapter.
70.45.130Common law and statutory authority of attorney general.
70.45.140Rule-making and contracting authority.
70.45.900Severability -- 1997 c 332.


70.45.010
Legislative findings.

The health of the people of our state is a most important public concern. The state has an interest in assuring the continued existence of accessible, affordable health care facilities that are responsive to the needs of the communities in which they exist. The state also has a responsibility to protect the public interest in nonprofit hospitals and to clarify the responsibilities of local public hospital district boards with respect to public hospital district assets by making certain that the charitable and public assets of those hospitals are managed prudently and safeguarded consistent with their mission under the laws governing nonprofit and municipal corporations.

[1997 c 332 § 1.]




70.45.020
Definitions.

The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

     (1) "Department" means the Washington state department of health.

     (2) "Hospital" means any entity that is: (a) Defined as a hospital in RCW
70.41.020 and is required to obtain a license under RCW 70.41.090; or (b) a psychiatric hospital required to obtain a license under chapter 71.12 RCW.

     (3) "Acquisition" means an acquisition by a person of an interest in a nonprofit hospital, whether by purchase, merger, lease, gift, joint venture, or otherwise, that results in a change of ownership or control of twenty percent or more of the assets of the hospital, or that results in the acquiring person holding or controlling fifty percent or more of the assets of the hospital, but acquisition does not include an acquisition if the acquiring person: (a) Is a nonprofit corporation having a substantially similar charitable health care purpose as the nonprofit corporation from whom the hospital is being acquired, or is a government entity; (b) is exempt from federal income tax under section 501(c)(3) of the internal revenue code or as a government entity; and (c) will maintain representation from the affected community on the local board of the hospital.

     (4) "Nonprofit hospital" means a hospital owned by a nonprofit corporation organized under Title 24 RCW.

     (5) "Person" means an individual, a trust or estate, a partnership, a corporation including associations, limited liability companies, joint stock companies, and insurance companies.

[1997 c 332 § 2.]




70.45.030
Department approval required — Application — Fees.

(1) A person may not engage in the acquisition of a nonprofit hospital without first having applied for and received the approval of the department under this chapter.

     (2) An application must be submitted to the department on forms provided by the department, and at a minimum must include: The name of the hospital being acquired, the name of the acquiring person or other parties to the acquisition, the acquisition price, a copy of the acquisition agreement, a financial and economic analysis and report from an independent expert or consultant of the effect of the acquisition under the criteria in RCW
70.45.070, and all other related documents. The applications and all related documents are considered public records for purposes of chapter 42.56 RCW.

     (3) The department shall charge an applicant fees sufficient to cover the costs of implementing this chapter. The fees must include the cost of the attorney general's opinion under RCW 70.45.060. The department shall transfer this portion of the fee, upon receipt, to the attorney general.

[2005 c 274 § 335; 1997 c 332 § 3.]

Notes:

     Part headings not law -- Effective date -- 2005 c 274: See RCW 42.56.901 and 42.56.902.




70.45.040
Applications — Deficiencies — Public notice.

(1) The department, in consultation with the attorney general, shall determine if the application is complete for the purposes of review. The department may find that an application is incomplete if a question on the application form has not been answered in whole or in part, or has been answered in a manner that does not fairly meet the question addressed, or if the application does not include attachments of supporting documents as required by RCW 70.45.030. If the department determines that an application is incomplete, it shall notify the applicant within fifteen working days after the date the application was received stating the reasons for its determination of incompleteness, with reference to the particular questions for which a deficiency is noted.

     (2) Within five working days after receipt of a completed application, the department shall publish notice of the application in a newspaper of general circulation in the county or counties where the hospital is located and shall notify by first-class United States mail, electronic mail, or facsimile transmission, any person who has requested notice of the filing of such applications. The notice must state that an application has been received, state the names of the parties to the agreement, describe the contents of the application, and state the date by which a person may submit written comments about the application to the department.

[1997 c 332 § 4.]




70.45.050
Public hearings.

During the course of review under this chapter, the department shall conduct one or more public hearings, at least one of which must be in the county where the hospital to be acquired is located. At the hearings, anyone may file written comments and exhibits or appear and make a statement. The department may subpoena additional information or witnesses, require and administer oaths, require sworn statements, take depositions, and use related discovery procedures for purposes of the hearing and at any time prior to making a decision on the application.

     A hearing must be held not later than forty-five days after receipt of a completed application. At least ten days' public notice must be given before the holding of a hearing.

[1997 c 332 § 5.]




70.45.060
Attorney general review and opinion — Department review and decision — Adjudicative proceedings.

(1) The department shall provide the attorney general with a copy of a completed application upon receiving it. The attorney general shall review the completed application, and within forty-five days of the first public hearing held under RCW 70.45.050 shall provide a written opinion to the department as to whether or not the acquisition meets the requirements for approval in RCW 70.45.070.

     (2) The department shall review the completed application to determine whether or not the acquisition meets the requirements for approval in RCW 70.45.070 and 70.45.080. Within thirty days after receiving the written opinion of the attorney general under subsection (1) of this section, the department shall:

     (a) Approve the acquisition, with or without any specific modifications or conditions; or

     (b) Disapprove the acquisition.

     (3) The department may not make its decision subject to any condition not directly related to requirements in RCW 70.45.070 or 70.45.080, and any condition or modification must bear a direct and rational relationship to the application under review.

     (4) A person engaged in an acquisition and affected by a final decision of the department has the right to an adjudicative proceeding under chapter 34.05 RCW. The opinion of the attorney general provided under subsection (1) of this section may not constitute a final decision for purposes of review.

     (5) The department or the attorney general may extend, by not more than thirty days, any deadline established under this chapter one time during consideration of any application, for good cause.

[1997 c 332 § 6.]




70.45.070
Department review — Criteria to safeguard charitable assets.

The department shall only approve an application if the parties to the acquisition have taken the proper steps to safeguard the value of charitable assets and ensure that any proceeds from the acquisition are used for appropriate charitable health purposes. To this end, the department may not approve an application unless, at a minimum, it determines that:

     (1) The acquisition is permitted under chapter
24.03 RCW, the Washington nonprofit corporation act, and other laws governing nonprofit entities, trusts, or charities;

     (2) The nonprofit corporation that owns the hospital being acquired has exercised due diligence in authorizing the acquisition, selecting the acquiring person, and negotiating the terms and conditions of the acquisition;

     (3) The procedures used by the nonprofit corporation's board of trustees and officers in making its decision fulfilled their fiduciary duties, that the board and officers were sufficiently informed about the proposed acquisition and possible alternatives, and that they used appropriate expert assistance;

     (4) No conflict of interest exists related to the acquisition, including, but not limited to, conflicts of interest related to board members of, executives of, and experts retained by the nonprofit corporation, acquiring person, or other parties to the acquisition;

     (5) The nonprofit corporation will receive fair market value for its assets. The attorney general or the department may employ, at the expense of the acquiring person, reasonably necessary expert assistance in making this determination. This expense must be in addition to the fees charged under RCW 70.45.030;

     (6) Charitable funds will not be placed at unreasonable risk, if the acquisition is financed in part by the nonprofit corporation;

     (7) Any management contract under the acquisition will be for fair market value;

     (8) The proceeds from the acquisition will be controlled as charitable funds independently of the acquiring person or parties to the acquisition, and will be used for charitable health purposes consistent with the nonprofit corporation's original purpose, including providing health care to the disadvantaged, the uninsured, and the underinsured and providing benefits to promote improved health in the affected community;

     (9) Any charitable entity established to hold the proceeds of the acquisition will be broadly based in and representative of the community where the hospital to be acquired is located, taking into consideration the structure and governance of such entity; and

     (10) A right of first refusal to repurchase the assets by a successor nonprofit corporation or foundation has been retained if the hospital is subsequently sold to, acquired by, or merged with another entity.

[1997 c 332 § 7.]




70.45.080
Department review — Criteria for continued existence of accessible, affordable health care.

The department shall only approve an application if the acquisition in question will not detrimentally affect the continued existence of accessible, affordable health care that is responsive to the needs of the community in which the hospital to be acquired is located. To this end, the department shall not approve an application unless, at a minimum, it determines that:

     (1) Sufficient safeguards are included to assure the affected community continued access to affordable care, and that alternative sources of care are available in the community should the acquisition result in a reduction or elimination of particular health services;

     (2) The acquisition will not result in the revocation of hospital privileges;

     (3) Sufficient safeguards are included to maintain appropriate capacity for health science research and health care provider education;

     (4) The acquiring person and parties to the acquisition are committed to providing health care to the disadvantaged, the uninsured, and the underinsured and to providing benefits to promote improved health in the affected community. Activities and funding provided under RCW
70.45.070(8) may be considered in evaluating compliance with this commitment; and

     (5) Sufficient safeguards are included to avoid conflict of interest in patient referral.

[1997 c 332 § 8.]




70.45.090
Approval of acquisition required — Injunctions.

(1) The secretary of state may not accept any forms or documents in connection with any acquisition of a nonprofit hospital until the acquisition has been approved by the department under this chapter.

     (2) The attorney general may seek an injunction to prevent any acquisition not approved by the department under this chapter.

[1997 c 332 § 9.]




70.45.100
Compliance — Department authority — Hearings — Revocation or suspension of hospital license — Referral to attorney general for action.

The department shall require periodic reports from the nonprofit corporation or its successor nonprofit corporation or foundation and from the acquiring person or other parties to the acquisition to ensure compliance with commitments made. The department may subpoena information and documents and may conduct on-site compliance audits at the acquiring person's expense.

     If the department receives information indicating that the acquiring person is not fulfilling commitments to the affected community under RCW
70.45.080, the department shall hold a hearing upon ten days' notice to the affected parties. If after the hearing the department determines that the information is true, it may revoke or suspend the hospital license issued to the acquiring person pursuant to the procedure established under RCW 70.41.130, refer the matter to the attorney general for appropriate action, or both. The attorney general may seek a court order compelling the acquiring person to fulfill its commitments under RCW 70.45.080.

[1997 c 332 § 10.]




70.45.110
Authority of attorney general to ensure compliance.

The attorney general has the authority to ensure compliance with commitments that inure to the public interest.

[1997 c 332 § 11.]




70.45.120
Acquisitions completed before July 27, 1997, not subject to this chapter.

An acquisition of a hospital completed before July 27, 1997, and an acquisition in which an application for a certificate of need under chapter 70.38 RCW has been granted by the department before July 27, 1997, is not subject to this chapter.

[1997 c 332 § 12.]




70.45.130
Common law and statutory authority of attorney general.

No provision of this chapter derogates from the common law or statutory authority of the attorney general.

[1997 c 332 § 13.]




70.45.140
Rule-making and contracting authority.

The department may adopt rules necessary to implement this chapter and may contract with and provide reasonable reimbursement to qualified persons to assist in determining whether the requirements of RCW 70.45.070 and 70.45.080 have been met.

[1997 c 332 § 14.]




70.45.900
Severability — 1997 c 332.

If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

[1997 c 332 § 19.]