I
105TH CONGRESS
1ST SESSION
H. R. 443
To amend part A of title XVIII of the Social Security Act to deny Medicare
payment with respect to non-profit hospitals that transfer assets or
control to for-profit entities without approval.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 9, 1997
Mr. STARK (for himself, Mr. FILNER, Mr. KENNEDY of Rhode Island, Mr.
BROWN of Ohio, Mr. WAXMAN, Mr. MCDERMOTT, and Mr. LEWIS of
Georgia) introduced the following bill; which was referred to the Commit-
tee on Ways and Means
A BILL
To amend part A of title XVIII of the Social Security Act
to deny Medicare payment with respect to non-profit
hospitals that transfer assets or control to for-profit enti-
ties without approval.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Medicare Nonprofit
Hospital Protection Act of 1997’’.
SEC. 2. DISQUALIFICATION FROM MEDICARE PAYMENT OF
NON-PROFIT HOSPITALS THAT TRANSFER AS-
SETS OR CONTROL TO A FOR-PROFIT ENTITY
WITHOUT APPROVAL.
(a) IN GENERAL.—Part A of title XVIII of the Social
Security Act is amended by adding at the end the follow-
ing new section:
‘‘DISQUALIFICATION OF CERTAIN NONPROFIT HOSPITALS
FROM
PAYMENT
IF
ASSETS
OR
CONTROL
TRANS-
FERRED
TO
A
FOR-PROFIT
ENTITY
WITHOUT
AP-
PROVAL
‘‘SEC. 1821. (a) REQUIREMENT.—No payment may
be made under this part with respect to inpatient hospital
services of a hospital if the hospital, on or after January
7, 1997, was owned or controlled by a nonprofit entity
and there is an impermissible transfer (as defined in sub-
section (b)) with respect to the hospital or the entity.
‘‘(b) IMPERMISSIBLE TRANSFERS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘impermissible transfer’ means any
covered transfer (as defined in paragraph (2)) that
has not been considered to be approved in accord-
ance with subsection (c).
‘‘(2) COVERED TRANSFER DEFINED.—For pur-
poses of this section, the term ‘covered transfer’
means, with respect to a hospital that is owned or
controlled by a nonprofit entity—
‘‘(A) the sale, transfer, lease, exchange, op-
tion, conveyance, or other disposition of, the as-
sets of the hospital (or of the entity in relation
to the hospital) to a for-profit entity, if a mate-
rial amount of the assets relating to the hos-
pital are involved in such disposition; or
‘‘(B) the transfer of control, responsibility,
or governance of a material amount of the as-
sets or operation of the hospital (or of the en-
tity in relation to the hospital) to any for-profit
entity.
Transfers described in this paragraph may be ef-
fected through sale, joint venture, joint operating
agreement, or any other means.
‘‘(3) OTHER
DEFINITIONS.—For purposes of
this section:
‘‘(A) The term ‘acquired hospital’ means,
with respect to a covered transfer, the non-prof-
it hospital the assets or control of which are the
subject of the transfer.
‘‘(B) The term ‘acquiring entity’ means,
with respect to a covered transfer, the for-profit
entity that is involved in the transfer.
‘‘(B) the acquiring entity;
‘‘(C) other parties to the transfer;
‘‘(D) terms of the proposed transfer;
‘‘(E) the value of consideration to be pro-
vided in connection with the transfer (including
details as to the basis for the valuation);
‘‘(F) copies of documents relating to the
transfer;
‘‘(G) the identity of individuals and per-
sons who are officers, directors, or affiliates of
the nonprofit entity and whether they have any
direct or indirect economic interest in the trans-
fer (including any promise or discussion of fu-
ture employment); and
‘‘(H) such other information as the Sec-
retary may require.
‘‘(3) PUBLIC DISCLOSURE.—The Secretary shall
provide for public disclosure (including disclosure
through electronic means on the Internet) of infor-
mation described in paragraph (3) provided under
paragraph (1)(A) and the report on the transfer de-
scribed in paragraph (1)(B).
‘‘(4) CONDITIONS
FOR
APPROVAL
OF
TRANS-
FERS.—The Secretary may not approve a covered
transfer relating to an acquired hospital owned or
controlled by a nonprofit entity unless, after comple-
tion of the public hearing described in paragraph
(6), the Secretary determines that the following con-
ditions are met:
‘‘(A) Due care was exercised by the non-
profit entity in deciding to enter into the trans-
fer, selecting the acquiring entity, and negotiat-
ing the terms of the transfer.
‘‘(B) The nonprofit entity sought appro-
priate expert assistance in making decisions in
relation to the transfer.
‘‘(C) The nonprofit entity took all reason-
able steps to avoid conflict of interests.
‘‘(D) The nonprofit entity will receive fair
market value for its assets transferred in con-
nection with the covered transfer.
‘‘(E) No charitable funds are placed at
risk in connection with the covered transfer.
‘‘(F) The amount of any compensation
under any management contract entered into in
connection with the covered transfer is fair.
‘‘(G) The proceeds to the nonprofit entity
in connection with the covered transfer will be
used only for appropriate charitable purposes
consistent with the entity’s non-profit charter
and for the promotion of health in the affected
community and such proceeds will be controlled
as charitable funds independent of the acquir-
ing entity.
‘‘(H) Any charitable corporation estab-
lished to hold proceeds of the acquired hospital
in connection with the covered transfer will be
broadly based in the community.
‘‘(I) There are sufficient safeguards to as-
sure the affected community continues to have
access to affordable hospital services.
‘‘(J) The acquiring entity has made a com-
mitment to provide comparable care to the dis-
advantaged, the uninsured, and the under-
insured, and to provide benefits to the affected
community.
‘‘(K) The acquiring entity has no contrac-
tual right to receive or direct future grants in
relation to the acquired hospital.
‘‘(L) The acquiring entity has paid the
Secretary, with respect to the covered transfer,
a fee sufficient to cover the costs of the Sec-
retary in administering this section in relation
to such transfer.
‘‘(6) PUBLIC
HEARING.—Before approving a
covered transfer, the Secretary shall provide for no-
tice and a public hearing to take place in the com-
munity of the acquired hospital concerning the
transfer and publication of a public report on testi-
mony received at the hearing.
‘‘(d) APPLICATION
OF ALTERNATIVE STATE LAW
REQUIREMENTS.—A covered transfer is deemed to meet
an applicable requirement of subsection (c) relating to the
transfer to the extent that the Secretary determines that
there is a State law that imposes a requirement at least
as stringent as the requirement involved with respect to
the transfer.
‘‘(e) DELEGATION OF AUTHORITY.—The Secretary
may exercise the Secretary’s authority under this section
through any appropriate official in the Department of
Health and Human Services.
‘‘(f) NO EFFECT ON OTHER RIGHTS.—The fact that
the Secretary has approved a covered transfer under this
section shall not supersede other rights that any entity
(including the federal government or a State or local gov-
ernment) may have to challenge the transfer on any
grounds.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply with respect to covered transfers
for which agreements or transactions are entered into on
or after January 7, 1997.
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