article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Medicare Nonprofit Hospital Protection Act of 1997''. SEC. 2. DISQUALIFICATION FROM MEDICARE PAYMENT OF NON-PROFIT HOSPITALS THAT TRANSFER ASSETS OR CONTROL TO A FOR-PROFIT ENTITY WITHOUT APPROVAL. (a) In General.--Part A of title XVIII of the Social Security Act is amended by adding at the end the following new section: ``disqualification of certain nonprofit hospitals from payment if assets or control transferred to a for-profit entity without approval ``Sec. 1821. (a) Requirement.--No payment may be made under this part with respect to inpatient hospital services of a hospital if the hospital, on or after January 7, 1997, was owned or controlled by a nonprofit entity and there is an impermissible transfer (as defined in subsection (b)) with respect to the hospital or the entity. ``(b) Impermissible Transfers.-- ``(1) In general.--For purposes of this section, the term `impermissible transfer' means any covered transfer (as defined in paragraph (2)) that has not been considered to be approved in accordance with subsection (c). ``(2) Covered transfer defined.--For purposes of this section, the term `covered transfer' means, with respect to a hospital that is owned or controlled by a nonprofit entity-- ``(A) the sale, transfer, lease, exchange, option, conveyance, or other disposition of, the assets of the hospital (or of the entity in relation to the hospital) to a for-profit entity, if a material amount of the assets relating to the hospital are involved in such disposition; or ``(B) the transfer of control, responsibility, or governance of a material amount of the assets or operation of the hospital (or of the entity in relation to the hospital) to any for-profit entity. Transfers described in this paragraph may be effected through sale, joint venture, joint operating agreement, or any other means. ``(3) Other definitions.--For purposes of this section: ``(A) The term `acquired hospital' means, with respect to a covered transfer, the non-profit hospital the assets or control of which are the subject of the transfer. ``(B) The term `acquiring entity' means, with respect to a covered transfer, the for-profit entity that is involved in the transfer. ``(c) Conditions for Approval.--Subject to subsection (d)-- ``(1) In general.--A covered transfer with respect to an acquired hospital owned or controlled by a nonprofit entity is not considered to be approved in accordance with this subsection unless-- ``(A) the acquiring entity has disclosed to the Secretary, in a form and manner specified by the Secretary, the information described in paragraph (2) relating to the transfer; ``(B) there has been an independent fairness review conducted of the proposed transfer and the report on the review concludes that no assets of the acquired hospital in relation to the nonprofit entity have inappropriately benefited any private parties; and ``(C) the Secretary has approved the transfer. ``(3) Information to be disclosed.--The information described in this paragraph is a complete description of the terms of covered transfer, together with a description of all collateral arrangements, including information describing-- ``(A) the acquired hospital and the nonprofit entity that owns or controls the hospital; ``(B) the acquiring entity; ``(C) other parties to the transfer; ``(D) terms of the proposed transfer; ``(E) the value of consideration to be provided in connection with the transfer (including details as to the basis for the valuation); ``(F) copies of documents relating to the transfer; ``(G) the identity of individuals and persons who are officers, directors, or affiliates of the nonprofit entity and whether they have any direct or indirect economic interest in the transfer (including any promise or discussion of future employment); and ``(H) such other information as the Secretary may require. ``(3) Public disclosure.--The Secretary shall provide for public disclosure (including disclosure through electronic means on the Internet) of information described in paragraph (3) provided under paragraph (1)(A) and the report on the transfer described in paragraph (1)(B). ``(4) Conditions for approval of transfers.--The Secretary may not approve a covered transfer relating to an acquired hospital owned or controlled by a nonprofit entity unless, after completion of the public hearing described in paragraph (6), the Secretary determines that the following conditions are met: ``(A) Due care was exercised by the nonprofit entity in deciding to enter into the transfer, selecting the acquiring entity, and negotiating the terms of the transfer. ``(B) The nonprofit entity sought appropriate expert assistance in making decisions in relation to the transfer. ``(C) The nonprofit entity took all reasonable steps to avoid conflict of interests. ``(D) The nonprofit entity will receive fair market value for its assets transferred in connection with the covered transfer. ``(E) No charitable funds are placed at risk in connection with the covered transfer. ``(F) The amount of any compensation under any management contract entered into in connection with the covered transfer is fair. ``(G) The proceeds to the nonprofit entity in connection with the covered transfer will be used only for appropriate charitable purposes consistent with the entity's non-profit charter and for the promotion of health in the affected community and such proceeds will be controlled as charitable funds independent of the acquiring entity. ``(H) Any charitable corporation established to hold proceeds of the acquired hospital in connection with the covered transfer will be broadly based in the community. ``(I) There are sufficient safeguards to assure the affected community continues to have access to affordable hospital services. ``(J) The acquiring entity has made a commitment to provide comparable care to the disadvantaged, the uninsured, and the underinsured, and to provide benefits to the affected community. ``(K) The acquiring entity has no contractual right to receive or direct future grants in relation to the acquired hospital. ``(L) The acquiring entity has paid the Secretary, with respect to the covered transfer, a fee sufficient to cover the costs of the Secretary in administering this section in relation to such transfer. ``(6) Public hearing.--Before approving a covered transfer, the Secretary shall provide for notice and a public hearing to take place in the community of the acquired hospital concerning the transfer and publication of a public report on testimony received at the hearing. ``(d) Application of Alternative State Law Requirements.--A covered transfer is deemed to meet an applicable requirement of subsection (c) relating to the transfer to the extent that the Secretary determines that there is a State law that imposes a requirement at least as stringent as the requirement involved with respect to the transfer. ``(e) Delegation of Authority.--The Secretary may exercise the Secretary's authority under this section through any appropriate official in the Department of Health and Human Services. ``(f) No Effect on Other Rights.--The fact that the Secretary has approved a covered transfer under this section shall not supersede other rights that any entity (including the federal government or a State or local government) may have to challenge the transfer on any grounds.''. (b) Effective Date.--The amendment made by this section shall apply with respect to covered transfers for which agreements or transactions are entered into on or after January 7, 1997.
summary: Medicare Nonprofit Hospital Protection Act of 1997 - Amends part A (Hospital Insurance) of title XVIII (Medicare) of the Social Security Act to disqualify for Medicare payment any non-profit hospital that transfers assets or control to a for-profit entity without appropriate approval by the Secretary of Health and Human Services.