Minnesota Legislature
SF 1681
1st Engrossment - 93rd Legislature (2023 - 2024) Posted on 05/08/2023 04:58pm
Current Version - 1st Engrossment
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A bill for an act
relating to health; specifying requirements for certain health care entity transactions;
extending the moratorium on conversion transactions for certain organizations;
appropriating money; amending Laws 2017, First Special Session chapter 6, article
5, section 11, as amended; proposing coding for new law in Minnesota Statutes,
chapter 144.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
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[144.557] REQUIREMENTS FOR CERTAIN HEALTH CARE ENTITY
TRANSACTIONS.
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new text begin Subdivision 1. new text end
new text begin Definitions. new text end
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(a) For purposes of this section, the following terms have
the meaning given.
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(b) "Captive professional entity" means a professional corporation, limited liability
company, or other entity formed to render professional services in which a beneficial owner
is a health care provider employed by, controlled by, or subject to the direction of a hospital
or hospital system.
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(c) "Commissioner" means the commissioner of health.
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(d) "Health care entity" means:
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(1) a hospital;
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(2) a hospital system;
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(3) a captive professional entity;
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(4) a medical foundation;
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(5) a health care provider group practice;
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(6) an entity organized or controlled by an entity listed in clauses (1) to (5); or
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(7) an entity that owns or exercised substantial control over an entity listed in clauses
(1) to (5).
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(e) "Health care provider" means a physician licensed under chapter 147, a physician
assistant licensed under chapter 147A, or an advanced practice registered nurse as defined
in section 148.171, subdivision 3, who provides health care services, including but not
limited to medical care, consultation, diagnosis, or treatment.
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(f) "Health care provider group practice" means two or more health care providers legally
organized in a partnership, professional corporation, limited liability company, medical
foundation, nonprofit corporation, faculty practice plan, or other similar entity:
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(1) in which each health care provider who is a member of the group provides
substantially the full range of services that a health care provider routinely provides, including
but not limited to medical care, consultation, diagnosis, and treatment, through the joint use
of shared office space, facilities, equipment, or personnel;
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(2) for which substantially all services of the health care providers who are group
members are provided through the group and are billed in the name of the group practice
and amounts so received are treated as receipts of the group; or
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(3) in which the overhead expenses of, and the income from, the group are distributed
in accordance with methods previously determined by members of the group.
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An entity that otherwise meets the definition of health care provider group practice in this
paragraph shall be considered a health care provider group practice even if its shareholders,
partners, or owners include single-health care provider professional corporations, limited
liability companies formed to render professional services, or other entities in which
beneficial owners are individual health care providers.
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(g) "Hospital" means a health care facility licensed as a hospital under sections 144.50
to 144.56.
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(h) "Medical foundation" means a nonprofit legal entity through which physicians or
other health care providers perform research or provide medical services.
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(i) "Transaction" means a single action, or a series of actions within a five-year period,
that constitutes:
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(1) a merger or exchange of a health care entity with another entity;
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(2) the sale, lease, or transfer of 30 percent or more of the assets of a health care entity
to another entity;
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(3) the granting of a security interest of 30 percent or more of the property and assets
of a health care entity to another entity;
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(4) the transfer of 30 percent or more of the shares or other ownership of the health care
entity to another entity;
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(5) an addition or substitution of one or more members of the health care entity's
governing body that effectively transfers control, responsibility for, or governance of the
health care entity to another entity;
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(6) the creation of a new health care entity; or
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(7) substantial investment of 30 percent or more in a health care entity that results in
sharing of revenues without a change in ownership or voting shares.
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new text begin Subd. 2. new text end
new text begin Notice required. new text end
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(a) This subdivision applies to all transactions where:
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(1) the health care entity involved in the transaction has average revenue of at least
$10,000,000 per year; or
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(2) an entity created by the transaction is projected to have average revenue of at least
$10,000,000 per year once the entity is operating at full capacity.
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(b) A health care entity must provide notice to the attorney general and the commissioner
and comply with this subdivision before entering into a transaction. Notice must be provided
at least 180 days before the proposed completion date for the transaction.
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(c) As part of the notice required under this subdivision, at least 180 days before the
proposed completion date of the transaction, a health care entity must affirmatively disclose
the following to the attorney general and the commissioner:
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(1) the entities involved in the transaction;
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(2) the leadership of the entities involved in the transaction, including all directors, board
members, and officers;
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(3) the services provided by each entity and the attributed revenue for each entity by
location;
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(4) the primary service area for each location;
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(5) the proposed service area for each location;
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(6) the current relationships between the entities and the health care providers and
practices affected, the locations of affected health care providers and practices, the services
provided by affected health care providers and practices, and the proposed relationships
between the entities and the health care providers and practices affected;
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(7) the terms of the transaction agreement or agreements;
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(8) the acquisition price;
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(9) markets in which the entities expect postmerger synergies to produce a competitive
advantage;
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(10) potential areas of expansion, whether in existing markets or new markets;
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(11) plans to close facilities, reduce workforce, or reduce or eliminate services;
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(12) the experts and consultants used to evaluate the transaction;
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(13) the number of full-time equivalent positions at each location before and after the
transaction by job category, including administrative and contract positions; and
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(14) any other information requested by the attorney general or commissioner.
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(d) As part of the notice required under this subdivision, at least 180 days before the
proposed completion date of the transaction, a health care entity must affirmatively produce
the following to the attorney general and the commissioner:
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(1) the current governing documents for all entities involved in the transaction and any
amendments to these documents;
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(2) the transaction agreement or agreements and all related agreements;
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(3) any collateral agreements related to the principal transaction, including leases,
management contracts, and service contracts;
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(4) all expert or consultant reports or valuations conducted in evaluating the transaction,
including any valuation of the assets that are subject to the transaction prepared within three
years preceding the anticipated transaction completion date and any reports of financial or
economic analysis conducted in anticipation of the transaction;
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(5) the results of any projections or modeling of health care utilization or financial
impacts related to the transaction, including but not limited to copies of reports by appraisers,
accountants, investment bankers, actuaries, and other experts;
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(6) a financial and economic analysis and report prepared by an independent expert or
consultant on the effects of the transaction;
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(7) an impact analysis report prepared by an independent expert or consultant on the
effects of the transaction on communities and the workforce, including any changes in
availability or accessibility of services;
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(8) all documents reflecting the purposes of or restrictions on any related nonprofit
entity's charitable assets;
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(9) copies of all filings submitted to federal regulators, including any Hart-Scott-Rodino
filing the entities submitted to the Federal Trade Commission in connection with the
transaction;
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(10) a certification sworn under oath by each board member and chief executive officer
for any nonprofit entity involved in the transaction containing the following: an explanation
of how the completed transaction is in the public interest, addressing the factors in subdivision
5, paragraph (a); a disclosure of each declarant's compensation and benefits relating to the
transaction for the three years following the transaction's anticipated completion date; and
a disclosure of any conflicts of interest;
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(11) audited and unaudited financial statements from all entities involved in the
transaction and tax filings for all entities involved in the transaction covering the preceding
five fiscal years; and
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(12) any other information or documents requested by the attorney general or
commissioner.
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(e) The commissioner may adopt rules to implement this section, and may alter, amend,
suspend, or repeal any of such rules. The requirements of section 14.125 do not apply to
the adoption of rules under this paragraph.
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(f) The attorney general may extend the notice and waiting period required under
paragraph (b) for an additional 90 days by notifying the health care entity in writing of the
extension.
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(g) The attorney general may waive all or any part of the notice and waiting period
required under paragraph (b).
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(h) The attorney general or the commissioner may hold public listening sessions or
forums to obtain input on the transaction from providers or community members who may
be impacted by the transaction.
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(i) The attorney general or the commissioner may bring an action in district court to
compel compliance with the notice requirements in this subdivision.
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new text begin Subd. 3. new text end
new text begin Prohibited transactions. new text end
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No health care entity may enter into a transaction
that will:
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(1) substantially lessen competition; or
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(2) tend to create a monopoly or monopsony.
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new text begin Subd. 4. new text end
new text begin Additional requirements for nonprofit health care entities. new text end
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A health care
entity that is incorporated under chapter 317A or organized under section 322C.1101, or
that is a subsidiary of any such entity, must, before entering into a transaction, ensure that:
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(1) the transaction complies with chapters 317A and 501B and other applicable laws;
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(2) the transaction does not involve or constitute a breach of charitable trust;
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(3) the nonprofit health care entity will receive full and fair value for its public benefit
assets;
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(4) the value of the public benefit assets to be transferred has not been manipulated in
a manner that causes or has caused the value of the assets to decrease;
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(5) the proceeds of the transaction will be used in a manner consistent with the public
benefit for which the assets are held by the nonprofit health care entity;
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(6) the transaction will not result in a breach of fiduciary duty; and
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(7) there are procedures and policies in place to prohibit any officer, director, trustee,
or other executive of the nonprofit health care entity from directly or indirectly benefiting
from the transaction.
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new text begin Subd. 5. new text end
new text begin Attorney general enforcement and supplemental authority. new text end
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(a) The attorney
general may bring an action in district court to enjoin or unwind a transaction or seek other
equitable relief necessary to protect the public interest if a health care entity or transaction
violates this section, if the transaction is contrary to the public interest, or if both a health
care entity or transaction violates this section and the transaction is contrary to the public
interest. Factors informing whether a transaction is contrary to the public interest include
but are not limited to whether the transaction:
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(1) will harm public health;
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(2) will reduce the affected community's continued access to affordable and quality care
and to the range of services historically provided by the entities or will prevent members
in the affected community from receiving a comparable or better patient experience;
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(3) will have a detrimental impact on competing health care options within primary and
dispersed service areas;
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(4) will reduce delivery of health care to disadvantaged, uninsured, underinsured, and
underserved populations and to populations enrolled in public health care programs;
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(5) will have a substantial negative impact on medical education and teaching programs,
health care workforce training, or medical research;
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(6) will have a negative impact on the market for health care services, health insurance
services, or skilled health care workers;
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(7) will increase health care costs for patients; or
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(8) will adversely impact provider cost trends and containment of total health care
spending.
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(b) The attorney general may enforce this section under section 8.31.
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(c) Failure of the entities involved in a transaction to provide timely information as
required by the attorney general or the commissioner shall be an independent and sufficient
ground for a court to enjoin the transaction or provide other equitable relief, provided the
attorney general notified the entities of the inadequacy of the information provided and
provided the entities with a reasonable opportunity to remedy the inadequacy.
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(d) The attorney general shall consult with the commissioner to determine whether a
transaction is contrary to the public interest. Any information exchanged between the attorney
general and the commissioner according to this subdivision is confidential data on individuals
as defined in section 13.02, subdivision 3, or protected nonpublic data as defined in section
13.02, subdivision 13. The commissioner may share with the attorney general, according
to section 13.05, subdivision 9, any not public data, as defined in section 13.02, subdivision
8a, held by the Department of Health to aid in the investigation and review of the transaction,
and the attorney general must maintain this data with the same classification according to
section 13.03, subdivision 4, paragraph (d).
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new text begin Subd. 6. new text end
new text begin Supplemental authority of commissioner. new text end
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(a) Notwithstanding any law to
the contrary, the commissioner may use data or information submitted under this section,
section 62U.04, and sections 144.695 to 144.705 to conduct analyses of the aggregate impact
of health care transactions on access to or the cost of health care services, health care market
consolidation, and health care quality.
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(b) The commissioner shall issue periodic public reports on the number and types of
transactions subject to this section and on the aggregate impact of transactions on health
care cost, quality, and competition in Minnesota.
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new text begin Subd. 7. new text end
new text begin Relation to other law. new text end
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(a) The powers and authority under this section are in
addition to, and do not affect or limit, all other rights, powers, and authority of the attorney
general or the commissioner under chapter 8, 309, 317A, 325D, 501B, or other law.
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(b) Nothing in this section shall suspend any obligation imposed under chapter 8, 309,
317A, 325D, 501B, or other law on the entities involved in a transaction.
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new text begin EFFECTIVE DATE. new text end
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This section is effective the day following final enactment and
applies to transactions completed on or after that date. In determining whether a transaction
was completed on or after the effective date, any actions or series of actions necessary to
the completion of the transaction that occurred prior to the effective date must be considered.
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Sec. 2.
Laws 2017, First Special Session chapter 6, article 5, section 11, as amended by
Laws 2019, First Special Session chapter 9, article 8, section 20, is amended to read:
Sec. 11. MORATORIUM ON CONVERSION TRANSACTIONS.
(a) Notwithstanding Laws 2017, chapter 2, article 2, a nonprofit deleted text begin healthdeleted text end service plan
corporation operating under Minnesota Statutes, chapter 62C, or a nonprofit health
maintenance organization operating under Minnesota Statutes, chapter 62D, as of January
1, 2017, may only merge or consolidate with; convert; or transfer, as part of a single
transaction or a series of transactions within a 24-month period, all or a material amount of
its assets to an entity that is a corporation organized under Minnesota Statutes, chapter
317A; or to a Minnesota nonprofit hospital within the same integrated health system as the
health maintenance organization. For purposes of this section, "material amount" means
the lesser of ten percent of such an entity's total admitted net assets as of December 31 of
the previous year, or $50,000,000.
(b) Paragraph (a) does not apply if the nonprofit service plan corporation or nonprofit
health maintenance organization files an intent to dissolve due to insolvency of the
corporation in accordance with Minnesota Statutes, chapter 317A, or insolvency proceedings
are commenced under Minnesota Statutes, chapter 60B.
(c) Nothing in this section shall be construed to authorize a nonprofit health maintenance
organization or a nonprofit service plan corporation to engage in any transaction or activities
not otherwise permitted under state law.
(d) This section expires July 1, deleted text begin 2023deleted text end new text begin 2026new text end .
new text begin EFFECTIVE DATE. new text end
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This section is effective the day following final enactment.
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Sec. 3. new text begin APPROPRIATIONS.
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$....... in fiscal year 2024 and $....... in fiscal year 2025 are appropriated from the general
fund to the commissioner of health for purposes of Minnesota Statutes, section 144.557.
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