CALIFORNIA: WILSON SIGNS FOR-PROFIT OVERSIGHT BILL
Gov. Pete Wilson (R) signed a bill last week that gives theThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
state attorney general power to closely examine and "even reject"
business deals involving the transfer of tax-exempt health care
assets to for-profit companies. The law takes effect January 1,
and will cover joint ventures and for-profit conversions of
nonprofit hospitals and deals under which for-profit companies
lease or buy nonprofit hospitals (Shinkman, MODERN HEALTHCARE,
10/7 issue). The bill passed the California Legislature
unanimously last month (see AHL 8/27). Under the law's "review
process" the attorney general must consider the following:
whether the purchase price reflects a "fair market value" and is
fair to the nonprofit entity; the effects on health care
"resources and services in the community" served by the hospital;
"whether the future use of charitable assets will be consistent
with their original purpose;" and whether the deal is in the
public interest. Before making a decision, the attorney general
must hold "at least one" public hearing in the county where the
hospital is located.
WHAT THEY'RE SAYING: MODERN HEALTHCARE reports that "while
some health care business experts" said the new law would have no
effect on the "fast pace of dealmaking among California's 600 or
so hospitals," others disagreed. "It gives one man the
replacement power of a nonprofit's board of directors. It could
have a chilling effect," said Wanda Jones, president of the San
Francisco-based consulting firm New Century Healthcare Institute.
Andy Demetriou, an attorney with the Los Angeles firm of Jones,
Day, Reavis & Pogue, said, "I don't know whether a 'chilling
effect' is the word, but it will raise the bar in terms of the
things that are going to be necessary to do these types of
conversions." Referring to state Attorney General Dan Lungren's
(R) recent history of closely watching such deals, Demetriou
continued, "This is more of a codification of an ongoing process
than a new thing for sellers to face" (10/7 issue).