HF 3356

as introduced - 88th Legislature (2013 - 2014) Posted on 04/24/2014 01:05pm

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 set forth 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, any such 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.
new text end

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.
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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;
new text end

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.
new text end

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 Web site 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