Session of 1998
By Health Care Reform Legislative Oversight Committee
            9             AN ACT relating to nonprofit hospitals; concerning sales and transfers
10             thereof.
12       Be it enacted by the Legislature of the State of Kansas:
13           Section 1. (a) Any nonprofit hospital that intends to transfer its assets
14       shall notify the attorney general prior to entering into any agreement or
15       transaction to sell, exchange or otherwise dispose of its real property to
16       a corporation or other legal entity when a substantial amount of the assets
17       of the nonprofit hospital are or will be involved in the agreement or
18       transaction.
19           (b) A nonprofit hospital shall give written notice to the attorney gen-
20       eral at least 60 days prior to the execution of the agreement that sells,
21       exchanges or otherwise disposes of its real assets.
22           Sec. 2. Any nonprofit hospital engaging in transactions subject to this
23       act shall comply with the following requirements:
24           (a) The agreement or transaction shall not result in inurement to any
25       private person or entity, including stock options, agreements not to com-
26       pete and other private benefits.
27           (b) A nonprofit hospital shall use due diligence when negotiating and
28       executing an agreement defined in section 1.
29           (c) The proceeds received by a nonprofit hospital pursuant to the
30       agreement shall be distributed to an existing or new tax-exempt charitable
31       organization that (1) is operating pursuant to 26 U.S.C.A. Sec. 501(c)(3)
32       of the internal revenue code, and (2) is serving an appropriate health care
33       charitable purpose within the community.
34           (d) The assets that are the subject of the transaction shall be valued
35       by a qualified, independent third party with no conflicts of interest with
36       the transferor organization or the transferee organization and no financial
37       interest in the transaction.
38           (e) Any officers and directors of a nonprofit hospital transferring or
39       otherwise disposing of assets shall disclose any actual or potential conflicts
40       of interest, including, but not limited to, offers of future employment or
41       remuneration or any other benefits related to the transaction.
42           Sec. 3. The attorney general may:
43           (a) Investigate the nonprofit hospital and the transaction with regard

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  1       to the nonprofit hospital's compliance with all the requirements of section
  2       2 of this act.
  3           (b) Contract with, consult and receive advice from any state agency,
  4       other expert or consultant on any terms and conditions that the attorney
  5       general deems appropriate. Such expenditures shall be made from the
  6       attorney general's budget.
  7           (c) The nonprofit hospital shall disclose to the attorney general all
  8       information requested by the attorney general which is necessary to per-
  9       mit the attorney general to conduct the inquiry under subsection (a) of
10       this section. If the attorney general is not voluntarily provided the infor-
11       mation requested from the nonprofit hospital the attorney general may
12       subpoena such information.
13           (d) All information provided to the attorney general pursuant to this
14       section shall be held confidential by the attorney general and shall not be
15       subject to K.S.A. 45-215 et seq.
16           Sec. 4. The attorney general may seek injunctive relief with regard
17       to any transaction defined in subsection (a) of section 1 if the attorney
18       general has sufficient evidence to support a probable cause finding that
19       the nonprofit hospital disposing of its real assets has violated section 2.
20       Such petition for relief shall be filed no later than 60 days from the receipt
21       of notice pursuant to subsection (b) of section 1. The court shall make a
22       decision with regards to such action pursuant to the code of civil proce-
23       dure. Should the court ultimately find that the nonprofit hospital or an
24       agent thereof violated section 2 of this act, the court may order the vio-
25       lator to pay any costs incurred by the attorney general pursuant to section
26       3.
27           Sec. 5. (a) The nonprofit hospital shall hold a public meeting no later
28       than 60 days after the notice to the attorney general pursuant to subsec-
29       tion (b) of section 1 of this act.
30           (b) Such notice shall be published no less than two times in a news-
31       paper of general circulation in the community where the nonprofit hos-
32       pital is located.
33           (c) Such notice shall state:
34           (1) The names, addresses and telephone numbers of the parties to
35       the intended transaction;
36           (2) the names, addresses and telephone numbers of the attorneys or
37       other persons who represent the parties in connection with the intended
38       transaction;
39           (3) a general summary of the intended transaction;
40           (4) a general description of the assets involved in the intended trans-
41       action and the intended use of the assets after the closing of the intended
42       transaction; and
43           (5) a general summary of all collateral transactions that relate to the

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  1       intended transaction, including the names, addresses and telephone num-
  2       bers of the parties involved in the collateral transactions.
  3           (d) The costs of the public hearing and notice thereof shall be paid
  4       by the nonprofit hospital transferring or otherwise disposing of its assets.
  5           Sec. 6. No transaction involving assets of less than $5,000,000 shall
  6       be subject to the provisions of this act.
  7           Sec. 7. Any charitable, nonprofit organization or foundation receiv-
  8       ing the proceeds of any transaction subject to this act shall make annual
  9       reports to the community concerning the activities of the organization
10       and financial reports thereof.
11           Sec. 8. The word ``hospital'' in this act shall have the meaning as-
12       cribed to it in article 4 of chapter 65 of the Kansas Statutes Annotated,
13       except as otherwise specifically provided in this act.
14           Sec. 9. This act shall take effect and be in force from and after its
15       publication in the statute book.