The National Association of Attorneys General last month made several recommendations to state legislatures that are considering ways to regulate conversions of non-profit health insurers and hospitals to for-profit status.
NAAG’s recommendations call for advance notice of the transaction to both state authorities and the public; an independent valuation of charitable assets; a prohibition against officers, directors or board members receiving excessive compensation of any kind in connection with the transaction; and a requirement that proceeds from the transaction be put to a use consistent with the charitable purpose of the non-profit.
The resolution adopted by the attorneys general draws from Ohio’s HB 242 (SB14) which would allow the state attorney general to investigate and block transactions involving health insurers and hospitals that "propose selling or transferring more than 20% of their assets to for-profit firms."
Supporters of the bill, which has been passed by the House, argued that the law was particularly vital in Ohio because the state offers blanket confidentiality on the details surrounding conversions of non-profit, charitable health insurers and hospitals.
Here’s how legislation on conversions has fared in several other states:
• Arizona—SB 1288, signed April 8 by Gov. Fife Symington, requires the buyer of any non-profit health-care facility to disclose what will happen to community assets and how they will benefit the community.
• Colorado—Strong support from the attorney general and the insurance commissioner was not enough to win passage of HB 1326, which would have required that any funds generated by the sale of a non-profit hospital, after an independent valuation, be used to continue the charitable mission of the original organization.
• Georgia—SCSFA HB 600, which awaits the governor’s signature, requires that the sale of a non-profit hospital to either a non-profit or for-profit hospital be subject to public hearings and review by the attorney general.
Legislation on the conversion issue also has been under consideration this year in a number of other states including Connecticut, Massachusetts, New Jersey and Rhode Island. Legislatures in California and Nebraska took the lead in approving conversion bills over the past two years.