State Government (GSG) — Title 6.5. Attorney General -- Acquisition of Nonprofit Health Entities

a sale, lease, transfer, merger, or joint venture that results in the disposal of the assets of a nonprofit health entity to a for–profit corporation or entity or to a mutual benefit corporation or entity when a substantial or significant portion of the assets of the nonprofit health entity are involved or will be involved in the agreement or transaction;

a transfer of ownership, control, responsibility, or governance of a substantial or significant portion of the assets, operations, or business of the nonprofit health entity to any for–profit corporation or entity or to any mutual benefit corporation or entity;

a public offering of stock; or

a conversion to a for–profit entity.

a nonprofit hospital;

a nonprofit health service plan; or

a nonprofit health maintenance organization.

assets held for the benefit of the public or the community;

assets in which the public has an ownership interest; and

assets owned by a governmental entity.

for an acquisition of a nonprofit hospital, the Attorney General in consultation with the Department;

for an acquisition of a nonprofit health service plan, the Administration; and

for an acquisition of a nonprofit health maintenance organization, the Administration.

A person that seeks to engage in an acquisition of a nonprofit health entity shall submit an application to the appropriate regulating entity.

The application submitted under paragraph (1) of this subsection shall be in addition to any other filing required by law.

the name of the transferor;

the name of the transferee;

the names of any other parties to the acquisition agreement;

the terms of the proposed acquisition, including the sale price;

a copy of the acquisition agreement;

a financial and community impact analysis report from an independent expert or consultant that addresses the criteria in § 6.5-301 of this title;

an independent valuation of the nonprofit health entity that was obtained prior to the consideration of any bid or offer to acquire the nonprofit health entity;

an antitrust analysis prepared by an appropriate expert; and

any other documents related to the acquisition.

On request to the regulating entity, and subject to paragraphs (2), (3), and (4) of this subsection, an application and related documents shall be available for public inspection and copying.

Except as provided in paragraphs (3) and (4) of this subsection or otherwise by law, all information and documents that are filed with the regulating entity in compliance with the requirements of this title or that are reported to, obtained by, or otherwise disclosed to the regulating entity or any other person in the course of an examination or investigation made under this title:

Material that otherwise is confidential under paragraph (2) of this subsection may be made public by any person to whom the nonprofit health entity to which the material relates gives prior written consent.

If, after giving a nonprofit health entity notice and an opportunity to be heard, the regulating entity determines that it is in the interest of the policyholders, stockholders, or the public to make public any material relating to the nonprofit health entity that otherwise is confidential under paragraph (2) of this subsection, the regulating entity may make public all or part of the material in an appropriate manner.

publish notice of the application in the most widely circulated newspapers that are part of a nonprofit health entity’s service area; and

notify by first-class mail any person that has requested in writing notice of the filing of an application.

state that an application has been received;

state the names of the parties to the acquisition;

describe the contents of the application;

state the date by which a person must submit written comments on the application; and

provide the date, time, and place of the public hearing on the acquisition.

As soon as practicable, but no later than 90 days after receiving a complete application, including all necessary expert reports, the appropriate regulating entity shall hold a public hearing.

If the nonprofit health entity is a hospital, the regulating entity shall hold the public hearing in the jurisdiction in which the hospital is located.

subpoena information and witnesses;

require sworn statements;

take depositions; and

use related discovery procedures.

The regulating entity may contract with experts as reasonably necessary to:

The selection of an expert by a regulating entity under paragraph (1) of this subsection shall be subject to the State procurement laws.

If a regulating entity contracts for expert assistance under paragraph (1) of this subsection, the transferee shall pay the reasonable cost of the expert assistance, as determined by the regulating entity.

approve the acquisition, with or without modifications; or

disapprove the acquisition.

Subject to paragraph (2) of this subsection, at its discretion, the regulating entity may extend for good cause for a 60–day period the time for making a determination under subsection (f) of this section.

The regulating entity is limited to a maximum of two 60–day extensions for making a determination on the same application.

Except as provided in paragraph (2) of this subsection, a determination made by the appropriate regulating entity under subsection (f) of this section may not take effect until the earlier of:

The appropriate regulating entity may waive the waiting period under paragraph (1)(i) of this subsection if the appropriate regulating entity determines that waiving the waiting period is in the best interest of the public.

ensure that the value of public or charitable assets is safeguarded;

ensure that the value of public or charitable assets is spent in a manner that corresponds with the potential risk associated with the acquisition;

ensure that:

ensure that no part of the public or charitable assets of the acquisition inure directly or indirectly to an officer, director, or trustee of a nonprofit health entity; and

ensure that no officer, director, or trustee of the nonprofit health entity receives any immediate or future remuneration as the result of an acquisition or proposed acquisition except in the form of compensation paid for continued employment with the acquiring entity.

determined not to be an acquisition;

in the ordinary course of business; and

for fair value.

the value of the nonprofit health entity or an affiliate or the assets of such an entity that is determined as if the entity had voting stock outstanding and 100% of its stock was freely transferable and available for purchase without restriction;

the value as a going concern;

the market value;

the investment or earnings value;

the net asset value; and

a control premium, if any.

In determining whether an acquisition is in the public interest, the appropriate regulating entity shall consider:

In determining whether a nonprofit health entity has exercised due diligence as required under paragraph (1)(i) of this subsection, the appropriate regulating entity may not determine that due diligence was exercised unless the nonprofit health entity considered the risks of an acquisition, including whether an acquisition:

is equitable to enrollees, insureds, shareholders, and certificate holders, if any, of the transferor;

is in compliance with Title 2, Subtitle 6 of the Corporations and Associations Article; and

ensures that the transferee will possess surplus in an amount sufficient to:

the divestiture of the acquisition;

that the entity fully comply with this title;

that the entity file a plan for conversion to a for-profit entity as required under this title;

that the certificate of authority of the entity to operate as a nonprofit health service plan or a nonprofit health maintenance organization in this State be revoked or suspended; or

the payment of a penalty as provided for in § 4-113(d)(1) of the Insurance Article for each violation of subsection (b) or (c) of this section.

avoid conflicts of interest; and

prohibit the making of grants that would benefit:

There is a Maryland Health Care Trust.

The Trust is a body corporate, subject to modification or termination by the General Assembly.

The purpose of the Trust is to:

Money expended from the Trust is supplemental to, and is not intended to take the place of, State funds that would otherwise be appropriated by the State for the improvement of the health care status of the residents of the State.

The State Treasurer shall be the trustee of the Trust.

The powers and duties of the Trust shall rest in and be exercised by the trustee.

The State Treasurer shall manage, invest, and reinvest the Trust in the same manner that State funds are invested.

The Trust shall be held and accounted for separate and apart from the funds of the State.

The trustee shall make provision for a system of financial accounting, controls, audits, and reports.

The trustee shall report to the Governor and, in accordance with § 2–1257 of this article, to the General Assembly on or before December 1, 2004, and annually thereafter on the status of the assets of the Trust.