S T A T E O F N E W Y O R K
________________________________________________________________________
4790
2015-2016 Regular Sessions
I N S E N A T E
April 17, 2015
___________
Introduced by Sen. HANNON -- read twice and ordered printed, and when
printed to be committed to the Committee on Health
AN ACT to amend the public health law and the public authorities law, in
relation to establishing a private equity pilot program
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Section 2801-a of the public health law is amended by
adding a new subdivision 17 to read as follows:
17. (A) THE COMMISSIONER IS AUTHORIZED TO ESTABLISH A PILOT PROGRAM TO
ASSIST IN RESTRUCTURING HEALTH CARE DELIVERY SYSTEMS BY ALLOWING FOR
INCREASED CAPITAL INVESTMENT. PURSUANT TO THE PILOT PROGRAM, THE PUBLIC
HEALTH AND HEALTH PLANNING COUNCIL SHALL APPROVE THE ESTABLISHMENT, IN
ACCORDANCE WITH THE PROVISIONS OF PARAGRAPHS (F), (G) AND (H) OF THIS
SUBDIVISION AND SUBDIVISION THREE OF THIS SECTION, OF NO MORE THAN TEN
BUSINESS CORPORATIONS FORMED UNDER THE BUSINESS CORPORATION LAW. SUCH
BUSINESS CORPORATIONS SHALL AFFILIATE, THE EXTENT OF THE AFFILIATION TO
BE DETERMINED BY THE COMMISSIONER, WITH AT LEAST ONE ACADEMIC MEDICAL
INSTITUTION OR TEACHING HOSPITAL APPROVED BY THE COMMISSIONER. A BUSI-
NESS CORPORATION SHALL NOT BE ELIGIBLE TO PARTICIPATE IN THIS PROGRAM IF
ANY OF ITS STOCK, OR THAT OF ANY OF ITS DIRECT OR INDIRECT OWNERS, IS OR
WILL BE TRADED ON A PUBLIC STOCK EXCHANGE OR ON AN OVER-THE-COUNTER
MARKET.
(B) NOTWITHSTANDING ANY PROVISION OF LAW TO THE CONTRARY, BUSINESS
CORPORATIONS ESTABLISHED PURSUANT TO THIS SUBDIVISION SHALL BE DEEMED
ELIGIBLE TO PARTICIPATE IN DEBT FINANCING PROVIDED BY THE DORMITORY
AUTHORITY OF THE STATE OF NEW YORK, LOCAL DEVELOPMENT CORPORATIONS AND
ECONOMIC DEVELOPMENT CORPORATIONS.
(C) THE FOLLOWING PROVISIONS OF THIS CHAPTER SHALL NOT APPLY TO BUSI-
NESS CORPORATIONS ESTABLISHED PURSUANT TO THIS SUBDIVISION: (I) PARA-
GRAPH (B) OF SUBDIVISION THREE OF THIS SECTION, RELATING TO STOCKHOLD-
ERS, OTHER THAN PRINCIPAL STOCKHOLDERS; (II) PARAGRAPH (C) OF
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD10474-01-5
S. 4790 2
SUBDIVISION FOUR OF THIS SECTION, RELATING TO THE DISPOSITION OF STOCK
OR VOTING RIGHTS; (III) PARAGRAPHS (D) AND (E) OF SUBDIVISION FOUR OF
THIS SECTION, RELATING TO THE OWNERSHIP OF STOCK; AND (IV) PARAGRAPH (A)
OF SUBDIVISION THREE OF SECTION FOUR THOUSAND FOUR OF THIS CHAPTER,
RELATING TO THE OWNERSHIP OF STOCK. NOTWITHSTANDING THE FOREGOING, THE
PUBLIC HEALTH AND HEALTH PLANNING COUNCIL MAY REQUIRE THE DISCLOSURE OF
THE IDENTITY OF STOCKHOLDERS.
(D) THE CORPORATE POWERS AND PURPOSES OF A BUSINESS CORPORATION ESTAB-
LISHED AS AN OPERATOR PURSUANT TO THIS SUBDIVISION SHALL BE LIMITED TO
THE OWNERSHIP AND OPERATION, OR OPERATION, OF A HOSPITAL OR HOSPITALS
SPECIFICALLY NAMED AND THE LOCATION OR LOCATIONS OF WHICH ARE SPECIF-
ICALLY DESIGNATED BY STREET ADDRESS, CITY, TOWN, VILLAGE OR LOCALITY AND
COUNTY; PROVIDED, HOWEVER, THAT THE CORPORATE POWERS AND PURPOSES MAY
ALSO INCLUDE THE OWNERSHIP AND OPERATION, OR OPERATION, OF A CERTIFIED
HOME HEALTH AGENCY OR LICENSED HOME CARE SERVICES AGENCY OR AGENCIES AS
DEFINED IN ARTICLE THIRTY-SIX OF THIS CHAPTER OR A HOSPICE OR HOSPICES
AS DEFINED IN ARTICLE FORTY OF THIS CHAPTER, IF THE CORPORATION HAS
RECEIVED ALL APPROVALS REQUIRED UNDER SUCH LAW TO OWN AND OPERATE, OR
OPERATE, SUCH HOME CARE SERVICES AGENCY OR AGENCIES OR HOSPICE OR
HOSPICES. SUCH CORPORATE POWERS AND PURPOSES SHALL NOT BE MODIFIED,
AMENDED OR DELETED WITHOUT THE PRIOR APPROVAL OF THE COMMISSIONER.
(E)(1) IN DISCHARGING THE DUTIES OF THEIR RESPECTIVE POSITIONS, THE
BOARD OF DIRECTORS, COMMITTEES OF THE BOARD AND INDIVIDUAL DIRECTORS AND
OFFICERS OF A BUSINESS CORPORATION ESTABLISHED PURSUANT TO THIS SUBDIVI-
SION SHALL CONSIDER THE EFFECTS OF ANY ACTION UPON:
(A) THE ABILITY OF THE BUSINESS CORPORATION TO ACCOMPLISH ITS PURPOSE;
(B) THE SHAREHOLDERS OF THE BUSINESS CORPORATION;
(C) THE EMPLOYEES AND WORKFORCE OF THE HOSPITAL OR HOSPITALS;
(D) THE INTERESTS OF PATIENTS OF THE HOSPITAL OR HOSPITALS;
(E) COMMUNITY AND SOCIETAL CONSIDERATIONS, INCLUDING THOSE OF ANY
COMMUNITY IN WHICH FACILITIES OF THE HOSPITAL OR HOSPITALS ARE LOCATED;
AND
(F) THE SHORT-TERM AND LONG-TERM INTERESTS OF THE BUSINESS CORPO-
RATION, INCLUDING BENEFITS THAT MAY ACCRUE TO THE BUSINESS CORPORATION
FROM ITS LONG-TERM PLANS.
(2) THE CONSIDERATION OF INTERESTS AND FACTORS IN THE MANNER REQUIRED
BY SUBPARAGRAPH ONE OF THIS PARAGRAPH:
(A) SHALL NOT CONSTITUTE A VIOLATION OF THE PROVISIONS OF SECTION
SEVEN HUNDRED FIFTEEN OR SEVEN HUNDRED SEVENTEEN OF THE BUSINESS CORPO-
RATION LAW; AND
(B) IS IN ADDITION TO THE ABILITY OF DIRECTORS TO CONSIDER INTERESTS
AND FACTORS AS PROVIDED IN SECTION SEVEN HUNDRED SEVENTEEN OF THE BUSI-
NESS CORPORATION LAW.
(F) WHILE ANY DECISION TO APPROVE A BUSINESS CORPORATION UNDER THIS
SECTION MUST WEIGH AND BALANCE A NUMBER OF FACTORS, IN DETERMINING
WHETHER TO APPROVE A BUSINESS CORPORATION UNDER THIS SECTION, THE PUBLIC
HEALTH AND HEALTH PLANNING COUNCIL, IN CONSULTATION WITH THE COMMISSION-
ER, SHALL CONSIDER THE EXTENT TO WHICH THE BUSINESS CORPORATION:
(1) PROVIDES FOR EITHER EQUAL OR MAJORITY GOVERNANCE RIGHTS OF THE
NOT-FOR-PROFIT HOSPITAL PARTNER, REGARDLESS OF EQUITY STAKES, THROUGH
WEIGHTED CLASS VOTING STRUCTURE OR OTHERWISE;
(2) INCORPORATES A REPRESENTATIVE GOVERNANCE MODEL THAT:
(A) CLEARLY DELINEATES AUTHORITY AND RESPONSIBILITY FOR THE HOSPITAL'S
OPERATIONS; AND
(B) DEFINES MECHANISMS FOR APPROVAL OF DESIGNATED SHAREHOLDERS OR
INVESTORS;
S. 4790 3
(3) IS INCORPORATED AS A BENEFIT CORPORATION UNDER THE BUSINESS CORPO-
RATION LAW;
(4) COMMITS TO MAINTAINING OR ENHANCING EXISTING LEVELS OF SERVICES,
CHARITY CARE AND CORE COMMUNITY BENEFITS;
(5) IDENTIFIES AN ACTIONABLE STRATEGY TO MONITOR AND MAINTAIN OR
IMPROVE QUALITY OF CARE;
(6) EXPLAINS THE LEVEL OF CAPITAL COMMITMENT AND THE MECHANISM OR
MECHANISMS FOR INFUSING CAPITAL INTO THE NOT-FOR-PROFIT HOSPITAL PART-
NER;
(7) EXPLAINS HOW IT WILL RETAIN THE WORKFORCE, EITHER IN EXISTING JOBS
OR THROUGH RETRAINING, AND ADDRESSES OBLIGATIONS OWED TO EMPLOYEE BENE-
FIT PLANS AND PENSIONS;
(8) WILL CREATE A FOUNDATION TO ADDRESS THE PUBLIC HEALTH NEEDS OF THE
COMMUNITY; AND
(9) IDENTIFIES HOW PROFIT DISTRIBUTIONS SHALL BE MADE IN A WAY TO
ENSURE THAT THE COMMUNITY'S ACCESS TO QUALITY CARE AND CORE COMMUNITY
BENEFITS ARE NOT COMPROMISED AND ACCESS TO CAPITAL IS NOT COMPROMISED.
NONE OF THE FOREGOING FACTORS SHALL BE DISPOSITIVE IN THE APPROVAL OR
DISAPPROVAL OF THE BUSINESS CORPORATION.
(G) NO BUSINESS CORPORATION SHALL BE APPROVED UNDER THIS SECTION THAT
FAILS TO ATTEST THAT IT WILL PROVIDE THE NOT-FOR-PROFIT HOSPITAL PARTNER
WITH THE EXCLUSIVE AUTHORITY OVER FUNCTIONS RELATING TO ITS EXEMPT
STATUS.
(H) THE BOARD OF DIRECTORS OF A BUSINESS CORPORATION ESTABLISHED
PURSUANT TO THIS SUBDIVISION SHALL BE DEEMED A "GOVERNING BODY" FOR THE
PURPOSES OF SECTION TWENTY-EIGHT HUNDRED THREE-L OF THIS ARTICLE AND
SHALL COMPLY WITH THE PROVISIONS OF SUCH SECTION, REGARDLESS OF THE
CORPORATION'S PROFIT-MAKING STATUS.
(I) A SALE, LEASE, CONVEYANCE, EXCHANGE, TRANSFER, OR OTHER DISPOSI-
TION OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE BUSINESS CORPO-
RATION SHALL NOT BE EFFECTIVE UNLESS THE TRANSACTION IS APPROVED BY THE
COMMISSIONER.
NO SUCH TRANSACTION MAY OCCUR WITHIN THREE YEARS OF THE COMMISSIONER'S
APPROVAL OF THE BUSINESS CORPORATION'S PARTICIPATION IN THE DEMON-
STRATION PROJECT. IN APPROVING SUCH A TRANSACTION, THE COMMISSIONER
SHALL CONSIDER, AMONG OTHER THINGS, WHETHER THE TRANSACTION:
(1) IMPOSES SAFEGUARDS TO PROTECT QUALITY AND ACCESS TO CORE COMMUNITY
SERVICES DURING THE TRANSITION TO THE NEW INVESTOR;
(2) REQUIRES THE SUBSEQUENT INVESTOR TO GUARANTEE ALL OBLIGATIONS,
INCLUDING THOSE DESCRIBED IN SUBPARAGRAPH SEVEN OF PARAGRAPH (F) OF THIS
SUBDIVISION;
(3) WILL MAINTAIN THE HOSPITAL GOVERNANCE STRUCTURE; AND
(4) IMPOSES MINIMUM CAPITALIZATION CRITERIA POST-TRANSACTION.
(J) NO LATER THAN THREE YEARS AFTER THE ESTABLISHMENT OF A BUSINESS
CORPORATION UNDER THIS SUBDIVISION, THE COMMISSIONER SHALL PROVIDE THE
GOVERNOR, THE TEMPORARY PRESIDENT OF THE SENATE AND THE SPEAKER OF THE
ASSEMBLY WITH A WRITTEN EVALUATION OF THE PILOT PROGRAM. SUCH EVALUATION
SHALL ADDRESS THE OVERALL EFFECTIVENESS OF THE PROGRAM IN ALLOWING FOR
ACCESS TO CAPITAL INVESTMENT AND THE IMPACT SUCH ACCESS MAY HAVE ON THE
QUALITY OF CARE PROVIDED BY HOSPITALS OPERATED BY BUSINESS CORPORATIONS
ESTABLISHED UNDER THIS SUBDIVISION.
S 2. Paragraph (b) of subdivision 2 of section 1676 of the public
authorities law is amended by adding a new undesignated paragraph to
read as follows:
SUCH BUSINESS CORPORATIONS AS ARE ESTABLISHED PURSUANT TO SUBDIVISION
SEVENTEEN OF SECTION TWENTY-EIGHT HUNDRED ONE-A OF THE PUBLIC HEALTH LAW
S. 4790 4
FOR THE ACQUISITION, CONSTRUCTION, RECONSTRUCTION, REHABILITATION AND
IMPROVEMENT, OR OTHERWISE PROVIDING, FURNISHING AND EQUIPPING OF A
HOSPITAL OR HOSPITALS.
S 3. Subdivision 1 of section 1680 of the public authorities law is
amended by adding a new undesignated paragraph to read as follows:
SUCH BUSINESS CORPORATIONS AS ARE ESTABLISHED PURSUANT TO SUBDIVISION
SEVENTEEN OF SECTION TWENTY-EIGHT HUNDRED ONE-A OF THE PUBLIC HEALTH LAW
FOR THE ACQUISITION, CONSTRUCTION, RECONSTRUCTION, REHABILITATION AND
IMPROVEMENT, OR OTHERWISE PROVIDING, FURNISHING AND EQUIPPING OF A
HOSPITAL OR HOSPITALS.
S 4. This act shall take effect immediately.
