Amended in Assembly August 13, 2014

Amended in Assembly August 4, 2014

Amended in Senate April 21, 2014

Senate Bill No. 1094

Introduced by Senator Lara

February 19, 2014

An act to amend Sections 5915 and 5921 of, and to add Sections 5926 and 5927 to, the Corporations Code, relating to health facilities.

LEGISLATIVE COUNSEL’S DIGEST

SB 1094, as amended, Lara. begin delete Health end delete begin insert Nonprofit health end insert facilities: sale of assets: begin insert Attorney General end insert approval.

Existing law requires any nonprofit corporation that is subject to the Nonprofit Public Benefit Corporation Law begin delete and is a health facility, as defined, or is a facility that provides similar health care, end delete begin insert that end insert operates or controls a health facility begin insert , as defined, end insert or operates or controls a facility that provides similar health begin delete care, end delete begin insert care end insert to provide written notice to, and obtain the written consent of, the Attorney General prior to selling or otherwise disposing of a material amount of its assets to a for-profit corporation or begin delete entity or end delete begin insert entity, end insert to a mutual benefit corporation or entity begin insert , or to another nonprofit corporation or entity end insert . Existing law requires the Attorney General to conduct one or more public meetings prior to issuing its decision whether to consent to the proposed agreement or transaction, and, in any case, to issue its decision within 60 days of the receipt of the written notice from the public benefit corporation, subject to one additional 45-day extension under specified circumstances.

This bill would instead require the Attorney General to issue its decision within 90 days of the receipt of the written notice from the public benefit corporation. The bill would additionally authorize the Attorney General to enforce conditions imposed on the approval of an agreement or transaction, and to require the transferee to fulfill all representations made during the application process, as specified. The bill would authorize the Attorney General to amend the conditions after the decision is issued under specified circumstances. The bill would additionally provide that once the agreement or transaction is closed, the parties to the transaction are deemed to have explicitly and implicitly consented to the applicability and compliance with each condition, except for an amended condition, set forth by the Attorney General, as specified.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 5915 of the Corporations Code is
amended to read:

5915.  

Within 90 days of the receipt of the written notice
required by Section 5914, the Attorney General shall notify the
public benefit corporation in writing of the decision to consent to,
give conditional consent to, or not consent to the agreement or
transaction. The Attorney General may extend this period for one
additional 45-day period if any of the following conditions are
satisfied:

(a) The extension is necessary to obtain information pursuant
to subdivision (a) of Section 5919.

(b) The proposed agreement or transaction is substantially
modified after the first public meeting conducted by the Attorney
General in accordance with Section 5916.

(c) The proposed agreement or transaction involves a
multifacility health system serving multiple communities, rather
than a single facility.

SEC. 2.  

Section 5921 of the Corporations Code is amended to
read:

5921.  

Within 90 days of the receipt of the written notice
required by Section 5920, the Attorney General shall notify the
nonprofit corporation in writing of the decision to consent to, give
conditional consent to, or not consent to the agreement or
transaction. The Attorney General may extend this period for one
additional 45-day period if any of the following conditions are
satisfied:

(a) The extension is necessary to obtain relevant information
from any state agency, experts, or consultants.

(b) The proposed agreement or transaction is substantially
modified after the first public meeting conducted by the Attorney
General in accordance with Section 5922.

(c) The proposed agreement or transaction involves a
multifacility health system serving multiple communities, rather
than a single facility.

SEC. 3.  

Section 5926 is added to the Corporations Code, to
read:

5926.  

(a) The Attorney General may enforce conditions
imposed on the Attorney General’s approval of an agreement or
transaction pursuant to Section 5914 or 5920. The Attorney General
may require begin delete the end delete begin insert a end insert transferee to fulfill all representations begin insert material
to the enforcement of the conditions end insert made during the begin delete application end delete
begin insert Attorney General’s review end insert process, including those regarding begin delete levels
of care. end delete begin insert the availability or accessibility of health care services to
the affected community. end insert

(b) The Attorney General may amend the conditions after the
decision is issued, if either of the following occur:

(1) An entity required to comply with the conditions begin delete contained
in end delete begin insert imposed on the Attorney General’s approval of end insert the transaction
or agreement begin delete made end delete begin insert makes end insert material misrepresentations to the
Attorney General. An amended condition imposed by the Attorney
General pursuant to this paragraph shall begin delete be end delete begin insert meet the following
requirements: end insert

begin insert (A) end insert begin insert   end insert begin insert The condition shall be end insert substantially related to the material
misrepresentation made by the begin delete entity and shall end delete begin insert entity. end insert

begin insert (B) end insert begin insert   end insert begin insert The condition shall end insert be made within begin delete three years of the
discovery of the misrepresentation by the Attorney General. end delete begin insert 10
years of the completion of an agreement or transaction pursuant
to Section 5914 or 5920. end insert

(2) An entity required to comply with the conditions begin delete contained
in end delete begin insert imposed on the Attorney General’s approval of end insert the transaction
or agreement begin delete violated end delete begin insert violates end insert the conditions set forth in the
Attorney General’s decision. An amended condition imposed by
the Attorney General pursuant to this paragraph shall begin delete be end delete begin insert meet the
following requirements: end insert

begin insert (A) end insert begin insert   end insert begin insert The condition shall be end insert substantially related to the violation
made by the begin delete entity and shall be end delete begin insert entity. end insert

begin insert (B) end insert begin insert   end insert begin insert The condition shall be end insert necessary to mitigate, and to provide
appropriate restitution for, the effects of the violation.

(c) An amended condition pursuant to this section is subject to
judicial review pursuant to Section 1085 of the Code of Civil
Procedure.

(d) Nothing in this provision precludes the Attorney General
from pursuing any other available legal remedies.

SEC. 4.  

Section 5927 is added to the Corporations Code, to
read:

5927.  

Once the agreement or transaction pursuant to Section
5914 or 5920 is closed, the parties to the transaction are deemed
to have explicitly and implicitly consented to the applicability and
compliance with each condition set forth in the Attorney General’s
consent, and to have waived any right to seek judicial relief with
respect to each condition set forth in the Attorney General’s
consent. This section shall not apply to an amended condition
imposed by the Attorney General pursuant to subdivision (b) of
Section 5926.