<section article="gsg" article_name="State Government" number="6.5-101" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="1" subtitle_name="Definitions; General Provisions"> <level label="a"> <text>In this title the following words have the meanings indicated.</text> </level> <level label="b"> <text>“Acquisition” means:</text> <level label="1"> <text>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;</text> </level> <level label="2"> <text>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;</text> </level> <level label="3"> <text>a public offering of stock; or</text> </level> <level label="4"> <text>a conversion to a for–profit entity.</text> </level> </level> <level label="c"> <text>“Administration” means the Maryland Insurance Administration.</text> </level> <level label="d"> <text>“Department” means the Maryland Department of Health.</text> </level> <level label="e"> <text>“Health maintenance organization” has the meaning stated in § 19–701 of the Health – General Article.</text> </level> <level label="f"> <text>“Hospital” has the meaning stated in § 19–301 of the Health – General Article.</text> </level> <level label="g"> <text>“Nonprofit health entity” means:</text> <level label="1"> <text>a nonprofit hospital;</text> </level> <level label="2"> <text>a nonprofit health service plan; or</text> </level> <level label="3"> <text>a nonprofit health maintenance organization.</text> </level> </level> <level label="h"> <text>“Nonprofit health service plan” means a corporation without capital stock with a certificate of authority from the Insurance Commissioner to operate as a nonprofit health service plan or a nonprofit dental plan.</text> </level> <level label="i"> <text>“Public assets” includes:</text> <level label="1"> <text>assets held for the benefit of the public or the community;</text> </level> <level label="2"> <text>assets in which the public has an ownership interest; and</text> </level> <level label="3"> <text>assets owned by a governmental entity.</text> </level> </level> <level label="j"> <text>“Regulating entity” means:</text> <level label="1"> <text>for an acquisition of a nonprofit hospital, the Attorney General in consultation with the Department;</text> </level> <level label="2"> <text>for an acquisition of a nonprofit health service plan, the Administration; and</text> </level> <level label="3"> <text>for an acquisition of a nonprofit health maintenance organization, the Administration.</text> </level> </level> <level label="k"> <text>“Transferee” means the person in an acquisition that receives the ownership or control of the nonprofit health entity that is the subject of the acquisition.</text> </level> <level label="l"> <text>“Transferor” means the nonprofit health entity that is the subject of the acquisition, or the corporation that owns the nonprofit health entity that is the subject of the acquisition.</text> </level> </section> <section article="gsg" article_name="State Government" number="6.5-102" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="1" subtitle_name="Definitions; General Provisions"> <text>A person may not engage in an acquisition of a nonprofit health entity unless the transferor and the transferee receive the approval of the appropriate regulating entity.</text> </section> <section article="gsg" article_name="State Government" number="6.5-103" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="1" subtitle_name="Definitions; General Provisions"> <level label="a"> <text>The Attorney General, the Department, and the Administration shall adopt regulations to carry out this title.</text> </level> <level label="b"> <text>The regulations adopted under subsection (a) of this section shall include provisions that establish hearing and appeal procedures.</text> </level> </section> <section article="gsg" article_name="State Government" number="6.5-104" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="1" subtitle_name="Definitions; General Provisions"> <text>Nothing in this title shall impair the rights and powers of a court and the Attorney General with respect to any asset devoted to charity or with respect to any charitable trust.</text> </section> <section article="gsg" article_name="State Government" number="6.5-201" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="2" subtitle_name="Application Process"> <level label="a"> <level label="1"> <text>A person that seeks to engage in an acquisition of a nonprofit health entity shall submit an application to the appropriate regulating entity.</text> </level> <level label="2"> <text>The application submitted under paragraph (1) of this subsection shall be in addition to any other filing required by law.</text> </level> </level> <level label="b"> <text>An application shall include:</text> <level label="1"> <text>the name of the transferor;</text> </level> <level label="2"> <text>the name of the transferee;</text> </level> <level label="3"> <text>the names of any other parties to the acquisition agreement;</text> </level> <level label="4"> <text>the terms of the proposed acquisition, including the sale price;</text> </level> <level label="5"> <text>a copy of the acquisition agreement;</text> </level> <level label="6"> <text>a financial and community impact analysis report from an independent expert or consultant that addresses the criteria in § 6.5-301 of this title;</text> </level> <level label="7"> <text>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;</text> </level> <level label="8"> <text>an antitrust analysis prepared by an appropriate expert; and</text> </level> <level label="9"> <text>any other documents related to the acquisition.</text> </level> </level> <level label="c"> <level label="1"> <text>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.</text> </level> <level label="2"> <text>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:</text> <level label="i"> <text>are confidential material;</text> </level> <level label="ii"> <text>are not subject to subpoena; and</text> </level> <level label="iii"> <text>may not be made public by the regulating entity or any other person.</text> </level> </level> <level label="3"> <text>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.</text> </level> <level label="4"> <text>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.</text> </level> </level> </section> <section article="gsg" article_name="State Government" number="6.5-202" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="2" subtitle_name="Application Process"> <level label="a"> <text>Within 10 working days after receiving an application, the appropriate regulating entity shall:</text> <level label="1"> <text>publish notice of the application in the most widely circulated newspapers that are part of a nonprofit health entity’s service area; and</text> </level> <level label="2"> <text>notify by first-class mail any person that has requested in writing notice of the filing of an application.</text> </level> </level> <level label="b"> <text>The notice under subsection (a) of this section shall:</text> <level label="1"> <text>state that an application has been received;</text> </level> <level label="2"> <text>state the names of the parties to the acquisition;</text> </level> <level label="3"> <text>describe the contents of the application;</text> </level> <level label="4"> <text>state the date by which a person must submit written comments on the application; and</text> </level> <level label="5"> <text>provide the date, time, and place of the public hearing on the acquisition.</text> </level> </level> <level label="c"> <text>The applicant shall bear the cost of the notice required under this section.</text> </level> </section> <section article="gsg" article_name="State Government" number="6.5-203" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="2" subtitle_name="Application Process"> <level label="a"> <level label="1"> <text>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.</text> </level> <level label="2"> <text>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.</text> </level> </level> <level label="b"> <text>A public hearing under this section shall be a quasi–legislative hearing and not a contested case hearing.</text> </level> <level label="c"> <text>Any person may file written comments and exhibits or make a statement at the public hearing.</text> </level> <level label="d"> <text>The regulating entity may:</text> <level label="1"> <text>subpoena information and witnesses;</text> </level> <level label="2"> <text>require sworn statements;</text> </level> <level label="3"> <text>take depositions; and</text> </level> <level label="4"> <text>use related discovery procedures.</text> </level> </level> <level label="e"> <level label="1"> <text>The regulating entity may contract with experts as reasonably necessary to:</text> <level label="i"> <text>determine whether to approve an acquisition generally;</text> </level> <level label="ii"> <text>perform an independent valuation of the public or charitable assets of the transferor;</text> </level> <level label="iii"> <text>evaluate the impact of the acquisition on the affected community;</text> </level> <level label="iv"> <text>determine whether there has been due diligence by the transferor; and</text> </level> <level label="v"> <text>determine the existence of any conflicts of interest.</text> </level> </level> <level label="2"> <text>The selection of an expert by a regulating entity under paragraph (1) of this subsection shall be subject to the State procurement laws.</text> </level> <level label="3"> <text>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.</text> </level> </level> <level label="f"> <text>Within 60 days after the record, including the public hearing process, has been closed, the appropriate regulating entity shall:</text> <level label="1"> <text>approve the acquisition, with or without modifications; or</text> </level> <level label="2"> <text>disapprove the acquisition.</text> </level> </level> <level label="g"> <level label="1"> <text>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.</text> </level> <level label="2"> <text>The regulating entity is limited to a maximum of two 60–day extensions for making a determination on the same application.</text> </level> </level> <level label="h"> <level label="1"> <text>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:</text> <level label="i"> <text>90 calendar days after the date the determination is made; or</text> </level> <level label="ii"> <text>the date when ratified or rejected by the General Assembly.</text> </level> </level> <level label="2"> <text>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.</text> </level> </level> </section> <section article="gsg" article_name="State Government" number="6.5-301" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="3" subtitle_name="Review Criteria and Penalties"> <level label="a"> <text>The appropriate regulating entity may not approve an acquisition unless it finds the acquisition is in the public interest.</text> </level> <level label="b"> <text>An acquisition is not in the public interest unless appropriate steps have been taken to:</text> <level label="1"> <text>ensure that the value of public or charitable assets is safeguarded;</text> </level> <level label="2"> <text>ensure that the value of public or charitable assets is spent in a manner that corresponds with the potential risk associated with the acquisition;</text> </level> <level label="3"> <text>ensure that:</text> <level label="i"> <text>the fair value of the public or charitable assets of a nonprofit health service plan or a health maintenance organization will be distributed to the Maryland Health Care Trust established under § 6.5-401 of this title; or</text> </level> <level label="ii"> <level label="1"> <text>40% of the fair value of the public or charitable assets of a nonprofit hospital will be distributed to the Maryland Health Care Trust established under § 6.5-401 of this title; and</text> </level> <level label="2"> <text>60% of the fair value of the public or charitable assets of a nonprofit hospital will be distributed to a public or nonprofit charitable entity or trust that is:</text> </level> <level label="A"> <text>dedicated to serving the unmet health care needs of the affected community;</text> </level> <level label="B"> <text>dedicated to promoting access to health care in the affected community;</text> </level> <level label="C"> <text>dedicated to improving the quality of health care in the affected community; and</text> </level> <level label="D"> <text>independent of the transferee;</text> </level> </level> </level> <level label="4"> <text>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</text> </level> <level label="5"> <text>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.</text> </level> </level> <level label="c"> <text>The regulating entity may determine that a distribution of assets of a nonprofit health entity is not required under this section if the transaction is:</text> <level label="1"> <text>determined not to be an acquisition;</text> </level> <level label="2"> <text>in the ordinary course of business; and</text> </level> <level label="3"> <text>for fair value.</text> </level> </level> <level label="d"> <text>In determining fair value, the appropriate regulating entity may consider all relevant factors, including, as determined by the regulating entity:</text> <level label="1"> <text>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;</text> </level> <level label="2"> <text>the value as a going concern;</text> </level> <level label="3"> <text>the market value;</text> </level> <level label="4"> <text>the investment or earnings value;</text> </level> <level label="5"> <text>the net asset value; and</text> </level> <level label="6"> <text>a control premium, if any.</text> </level> </level> <level label="e"> <level label="1"> <text>In determining whether an acquisition is in the public interest, the appropriate regulating entity shall consider:</text> <level label="i"> <text>whether the transferor exercised due diligence in deciding to engage in an acquisition, selecting the transferee, and negotiating the terms and conditions of the acquisition;</text> </level> <level label="ii"> <text>the procedures the transferor used in making the decision, including whether appropriate expert assistance was used;</text> </level> <level label="iii"> <text>whether any conflicts of interest were disclosed, including conflicts of interest of board members, executives, and experts retained by the transferor, transferee, or any other parties to the acquisition;</text> </level> <level label="iv"> <text>whether the transferor will receive fair value for its public or charitable assets;</text> </level> <level label="v"> <text>whether public or charitable assets are placed at unreasonable risk if the acquisition is financed in part by the transferor;</text> </level> <level label="vi"> <text>whether the acquisition has the likelihood of creating a significant adverse effect on the availability or accessibility of health care services in the affected community;</text> </level> <level label="vii"> <text>whether the acquisition includes sufficient safeguards to ensure that the affected community will have continued access to affordable health care; and</text> </level> <level label="viii"> <text>whether any management contract under the acquisition is for fair value.</text> </level> </level> <level label="2"> <text>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:</text> <level label="i"> <text>would result in diseconomies of scale; or</text> </level> <level label="ii"> <text>would violate federal or State antitrust laws.</text> </level> </level> </level> <level label="f"> <text>The public or charitable assets distributed to a public or nonprofit charitable entity or trust in accordance with subsection (b)(2) of this section shall be in the form of cash.</text> </level> <level label="g"> <text>The appropriate regulating entity shall determine whether a payment by a nonprofit health entity, required under an agreement or contract for the acquisition of a nonprofit health entity if the agreement or contract is broken by the nonprofit health entity, is in the public interest.</text> </level> </section> <section article="gsg" article_name="State Government" number="6.5-302" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="3" subtitle_name="Review Criteria and Penalties"> <text>In determining whether to approve an acquisition of a nonprofit hospital, the Attorney General shall consider:</text> <level label="1"> <text>the criteria listed in § 6.5-301 of this subtitle; and</text> </level> <level label="2"> <text>whether the affected community will have continued access to affordable health care.</text> </level> </section> <section article="gsg" article_name="State Government" number="6.5-303" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="3" subtitle_name="Review Criteria and Penalties"> <text>In determining whether to approve an acquisition of a nonprofit health service plan or a nonprofit health maintenance organization, the Administration shall consider:</text> <level label="1"> <text>the criteria listed in § 6.5–301 of this subtitle; and</text> </level> <level label="2"> <text>whether the acquisition:</text> <level label="i"> <text>is equitable to enrollees, insureds, shareholders, and certificate holders, if any, of the transferor;</text> </level> <level label="ii"> <text>is in compliance with Title 2, Subtitle 6 of the Corporations and Associations Article; and</text> </level> <level label="iii"> <text>ensures that the transferee will possess surplus in an amount sufficient to:</text> <level label="1"> <text>comply with the surplus required under law; and</text> </level> <level label="2"> <text>provide for the security of the transferee’s certificate holders and policyholders.</text> </level> </level> </level> </section> <section article="gsg" article_name="State Government" number="6.5-304" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="3" subtitle_name="Review Criteria and Penalties"> <level label="a"> <text>A corporation that becomes a for-profit health entity under this title may not be deemed to have abandoned its corporate status by virtue of an acquisition unless the acquisition provides specifically to the contrary.</text> </level> <level label="b"> <text>The certificate of authority, agent appointments, licenses, forms, and any other filings in existence at the time of an acquisition shall continue in full force and effect upon an acquisition if a corporation at all times remains qualified to engage in business in the State.</text> </level> <level label="c"> <text>All outstanding contracts of a transferor shall remain in full force and effect and need not be otherwise endorsed unless ordered by the regulating entity.</text> </level> </section> <section article="gsg" article_name="State Government" number="6.5-305" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="3" subtitle_name="Review Criteria and Penalties"> <level label="a"> <text>The Secretary of the Department may revoke or suspend a license to operate a hospital in accordance with § 19-327 of the Health - General Article if an acquisition occurs without the approval of the Attorney General.</text> </level> <level label="b"> <text>An acquisition of a nonprofit health service plan or a nonprofit health maintenance organization may not occur without the approval of the Administration.</text> </level> <level label="c"> <text>A nonprofit health service plan or a nonprofit health maintenance organization may not be operated for profit.</text> </level> <level label="d"> <text>If the Commissioner determines that a nonprofit health service plan or a nonprofit health maintenance organization is in violation of subsection (b) or (c) of this section, the Commissioner may, in addition to any other remedies authorized by law, require the following:</text> <level label="1"> <text>the divestiture of the acquisition;</text> </level> <level label="2"> <text>that the entity fully comply with this title;</text> </level> <level label="3"> <text>that the entity file a plan for conversion to a for-profit entity as required under this title;</text> </level> <level label="4"> <text>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</text> </level> <level label="5"> <text>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.</text> </level> </level> </section> <section article="gsg" article_name="State Government" number="6.5-306" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="3" subtitle_name="Review Criteria and Penalties"> <level label="a"> <text>Before a public or nonprofit charitable entity or trust may receive a distribution of public or charitable assets in accordance with an agreement, contract, or transaction approved by the regulating entity under this subtitle, it shall have mechanisms in place to:</text> <level label="1"> <text>avoid conflicts of interest; and</text> </level> <level label="2"> <text>prohibit the making of grants that would benefit:</text> <level label="i"> <text>the public or nonprofit charitable entity’s or trust’s board of directors;</text> </level> <level label="ii"> <text>the public or nonprofit charitable entity’s or trust’s management;</text> </level> <level label="iii"> <text>the for-profit stock entity; or</text> </level> <level label="iv"> <text>a mutual entity.</text> </level> </level> </level> <level label="b"> <text>A public or nonprofit charitable entity or trust that receives a distribution of public or charitable assets shall submit an annual report to the office regarding the grant-making and other charitable activities of the entity related to its use of the public or charitable assets received.</text> </level> <level label="c"> <text>The annual report submitted under subsection (b) of this section shall be made available to the public at the principal office of the public or nonprofit charitable entity or trust.</text> </level> </section> <section article="gsg" article_name="State Government" number="6.5-307" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="3" subtitle_name="Review Criteria and Penalties"> <level label="a"> <text>This title does not apply to the acquisition of a foreign nonprofit health entity operating in this State if the appropriate regulating entity determines, based on the standards set forth in this title, that any public or charitable assets of the nonprofit health entity that serve health care needs in this State will be adequately protected.</text> </level> <level label="b"> <text>Any nonprofit health entity that the appropriate regulating entity has determined under subsection (a) of this section that this title does not apply shall submit an information copy of its application to engage in an acquisition to the regulating entity.</text> </level> </section> <section article="gsg" article_name="State Government" number="6.5-401" title_number="6.5" title_name="Attorney General -- Acquisition of Nonprofit Health Entities" subtitle_number="4" subtitle_name="Maryland Health Care Trust"> <level label="a"> <level label="1"> <text>There is a Maryland Health Care Trust.</text> </level> <level label="2"> <text>The Trust is a body corporate, subject to modification or termination by the General Assembly.</text> </level> <level label="3"> <text>The purpose of the Trust is to:</text> <level label="i"> <text>be of general benefit to the residents of the State;</text> </level> <level label="ii"> <text>be charitable in nature; and</text> </level> <level label="iii"> <text>accept and retain money for future expenditures to be used to implement Acts of the General Assembly, other than the State budget bill, that:</text> <level label="1"> <text>improve the health status of residents of the State; and</text> </level> <level label="2"> <text>specifically direct the use of assets of the Trust.</text> </level> </level> </level> <level label="4"> <text>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.</text> </level> </level> <level label="b"> <level label="1"> <text>The State Treasurer shall be the trustee of the Trust.</text> </level> <level label="2"> <text>The powers and duties of the Trust shall rest in and be exercised by the trustee.</text> </level> </level> <level label="c"> <text>The powers and duties of the Trust shall be established and modified solely by the General Assembly.</text> </level> <level label="d"> <text>In accordance with this title, the Trust consists of the public and charitable assets received as a result of the acquisition of a nonprofit health service plan or a nonprofit health maintenance organization, approved by the Administration on or after June 1, 2001, or a nonprofit hospital, approved by the Attorney General in consultation with the Department.</text> </level> <level label="e"> <level label="1"> <text>The State Treasurer shall manage, invest, and reinvest the Trust in the same manner that State funds are invested.</text> </level> <level label="2"> <text>The Trust shall be held and accounted for separate and apart from the funds of the State.</text> </level> </level> <level label="f"> <text>Any interest or other investment earnings of the Trust shall be credited to and paid into the Trust.</text> </level> <level label="g"> <level label="1"> <text>The trustee shall make provision for a system of financial accounting, controls, audits, and reports.</text> </level> <level label="2"> <text>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.</text> </level> </level> </section>