HF 1602

as introduced - 92nd Legislature (2021 - 2022) Posted on 02/25/2021 03:26pm

A bill for an act
relating to nonprofit corporations; regulating executive compensation of hospitals
and affiliated medical entities; proposing coding for new law in Minnesota Statutes,
chapter 317A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [317A.911] NONPROFIT HOSPITALS AND AFFILIATED MEDICAL
ENTITIES EXECUTIVE COMPENSATION.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin The terms defined in this section have the meanings given
them.
new text end

new text begin (a) "Board of directors" has the meaning given in section 317A.011, subdivision 4.
new text end

new text begin (b) "Nonprofit corporation" means a corporation governed by this chapter.
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new text begin (c) "Nonprofit hospital or affiliated medical entity" means any of the following:
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new text begin (1) a hospital, defined in section 144.50, subdivision 2;
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new text begin (2) a hospital group, which means any group of two or more hospitals described in clause
(1) or any person, corporation, partnership, limited liability company, trust, or other entity
that owns, operates, or controls, in whole or in part, a hospital group;
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new text begin (3) a hospital-affiliated medical foundation, which means a medical foundation that is
directly or indirectly controlled or owned by, or controlled or owned by the same person or
entity as, a hospital, hospital group, hospital-affiliated physicians group, or nonprofit
corporation that owns, operates, or controls, in whole or in part, a hospital, hospital group,
or hospital-affiliated physicians group; and
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new text begin (4) a hospital-affiliated physicians group, which means any physicians group or medical
group that is directly or indirectly controlled or owned by, or controlled or owned by the
same person or entity as, a hospital, hospital group, hospital-affiliated medical foundation,
or a nonprofit corporation that owns, operates, or controls, in whole or in part, a hospital,
hospital group, or hospital-affiliated medical foundation.
new text end

new text begin Subd. 2. new text end

new text begin General. new text end

new text begin (a) The board of directors of a nonprofit corporation that owns,
operates, or controls, in whole or in part, a nonprofit hospital or affiliated medical entity
must ensure that:
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new text begin (1) no person whose primary duties at or for the nonprofit hospital or affiliated medical
entity are executive, managerial, or administrative receives total annual compensation from
any source for work performed or services provided at or for the nonprofit hospital or
affiliated medical entity that is greater than the annual salary and expense allowance of the
President of the United States as set forth in United States Code, title 3, section 102;
new text end

new text begin (2) the total value of the compensation or payments authorized or paid under a severance
or similar postservice or postemployment arrangement for any person who formerly had
primary duties at the nonprofit hospital or affiliated medical entity that were executive,
managerial, or administrative does not exceed the annual salary and expense allowance of
the President of the United States as set forth in United States Code, title 3, section 102;
and
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new text begin (3) the nonprofit hospital or affiliated medical entity contributes no more than a pro rata
share of the maximums specified in clauses (1) and (2) toward total annual compensation
or severance payments to any person whose primary duties at or for the nonprofit hospital
or affiliated medical entity are or were executive, managerial, or administrative.
new text end

new text begin (b) The compensation limits established by this section apply irrespective of whether
the person exercising executive, managerial, or administrative authority is or was an employee
of the nonprofit hospital or medical entity or the nonprofit corporation that owns, operates,
or controls, in whole or in part, the nonprofit hospital or affiliated medical entity. These
limits apply to any person who exercises or exercised this authority even if the arrangements
for the authority or for compensation or both are pursuant to a contract or subcontract.
new text end

new text begin (c) Compensation for work performed or services provided at or for a nonprofit hospital
or affiliated medical entity counts toward the limits set forth in paragraph (a) even if made
by a separate entity, including by any for-profit or unincorporated entity.
new text end

new text begin (d) Compensation by a separate entity that is purported not to be for work performed or
services provided at or for a covered hospital or medical entity but that is disproportionate
to its purported purpose so as to evade the limitations in paragraph (a) constitutes a violation
of this section.
new text end

new text begin (e) "Total annual compensation" includes all remuneration paid, earned, or accrued in
the course of a fiscal year for work performed or services provided, including the cash value
of all remuneration, including benefits, in any medium other than cash. Total annual
compensation includes, but is not limited to, wages; salary; paid time off; bonuses; incentive
payments; lump-sum cash payments; the fair market value of below market rate loans or
loan forgiveness; housing payments; payments for transportation, travel, meals, or other
expenses in excess of actual documented expenses incurred in the performance of duties;
the cash value of housing, automobiles, parking, or similar benefits; scholarships or
fellowships; the cash value of stock options or awards; payments or contributions for
insurance or to a section 125 cafeteria plan or equivalent arrangement, to a health savings
account, or for severance or its equivalent; and deferred compensation earned or accrued,
even if not yet vested nor paid.
new text end

new text begin (f) The total value of a severance or similar postemployment or postservice compensation
arrangement or severance payments includes the fair market value of all cash remuneration
as well as the fair market value of all remuneration, including benefits, paid in any medium
other than cash, as defined in paragraph (e).
new text end

new text begin (g) Any compensation paid for work performed or services provided by a person whose
primary duties are or were executive, managerial, or administrative must be included in
determining the total compensation subject to the limit set forth in paragraph (a), even if
that person also performs or performed other duties.
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new text begin (h) This subdivision does not impose limits on the compensation of medical or health
care professionals for whom at least 50 percent of their duties involve or involved the
provision of medical services, research, direct patient care, or other nonmanagerial,
nonexecutive, and nonadministrative services.
new text end

new text begin Subd. 3. new text end

new text begin Reporting. new text end

new text begin (a) Within three months of the close of each fiscal year, the board
of directors of a nonprofit corporation that owns, operates, or controls, in whole or in part,
a nonprofit hospital or affiliated medical entity must submit a report to the attorney general
that contains the following information:
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new text begin (1) names, positions or titles, and total annual compensation of the ten persons whose
primary duties are executive, managerial, or administrative at or for the nonprofit hospital
or affiliated medical entity who received the greatest total annual compensation in that fiscal
year, and the sources of the compensation. The information provided must include a detailed
breakdown of all wage and nonwage compensation;
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new text begin (2) names, former positions or titles, and compensation paid pursuant to a severance or
similar postemployment arrangement to the five persons who receive the greatest severance
or similar postemployment payment in that fiscal year and formerly had primary duties at
or for the nonprofit hospital or affiliated medical entity that were executive, managerial, or
administrative, and the sources of the compensation. The information provided must include
a detailed breakdown of all wage and nonwage compensation; and
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new text begin (3) the identity of all entities that provided compensation, in any form, to the persons
identified pursuant to clauses (1) and (2), and the amount of the compensation.
new text end

new text begin (b) The board of directors submitting the report pursuant to paragraph (a) must approve
the report before it is submitted to the attorney general. Each director has a duty to act in
good faith and with reasonable care and inquiry in approving the annual report and in
ensuring that the corporation complies with the requirements of this section.
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new text begin (c) The report submitted pursuant to paragraph (a) must state that it was approved by
the board of directors and set forth the date of the approval, and must be attested to under
penalty of perjury by an authorized representative of the nonprofit hospital or affiliated
medical group addressed by the report.
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new text begin (d) The report submitted pursuant to paragraph (a) must be submitted on the form or in
the format required by the attorney general.
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new text begin (e) The report submitted pursuant to paragraph (a) must be posted on a publicly available
website and made available to any member of the public upon request.
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new text begin (f) The attorney general is authorized and directed to establish and assess fees, to be
submitted with each report pursuant to paragraph (a), to cover the costs of implementing
and enforcing this subdivision.
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new text begin Subd. 4. new text end

new text begin Penalties. new text end

new text begin (a) In addition to any other enforcement actions available under law,
and notwithstanding any other provision of law, the attorney general or any state taxpayer
may bring or intervene in a civil action for a violation of this section for the civil penalties
authorized by section 8.31, subdivisions 3 and 3a, any other authorized civil fines or penalties,
and appropriate equitable relief.
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new text begin (b) Appropriate equitable relief may include, but is not limited to, the following:
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new text begin (1) revocation of tax-exempt status under section 290.05, subdivision 2, and revocation
of nonprofit corporate status. In the event a nonprofit corporation seeks to change its status
to a for-profit corporation as a result of the revocation, the corporation is required to distribute
all of its charitable assets in accordance with their charitable purposes with the approval of
the attorney general and in compliance with section 317A.735; and
new text end

new text begin (2) a civil penalty not exceeding $500,000. Each instance in which the annual limitations
established by subdivision 1 are exceeded for any single individual constitutes a separate
violation for purposes of this paragraph, such that multiple violations may occur and multiple
fines may be imposed if more than one individual receives excessive compensation in a
particular year or if a single individual receives excessive compensation in more than one
year.
new text end

new text begin (c) Notwithstanding any other provision of law or any provision in a nonprofit
corporation's charter or bylaws, the attorney general may, to promote the purposes of this
section, investigate the affairs of and examine the books, accounts, records, and files of a
nonprofit corporation that owns, operates, or controls, in whole or in part, a hospital or
affiliated medical entity, for the purposes of promoting compliance with this section.
new text end

new text begin (d) The attorney general has the powers in sections 8.31, 501B.40, and 501B.41 to
supervise and investigate nonprofit hospitals and affiliated medical entities under this chapter
and bring proceedings to secure compliance with this section.
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new text begin (e) All penalties paid to the attorney general pursuant to this section must be deposited
in the general fund in accordance with section 8.31, subdivision 3.
new text end