Capital letters indicate new material to be added to existing statute.

Dashes through the words indicate deletions from existing statute.

First Regular Session

Sixty-first General Assembly

LLS NO. 97­0534.01 BWM HOUSE BILL 97­1256

STATE OF COLORADO

BY REPRESENTATIVES Kaufman and Morrison;

also SENATOR Wham.

HEALTH, ENVIRONMENT,

WELFARE & INSTITUTIONS

A BILL FOR AN ACT

CONCERNING THE TRANSFER OF ASSETS OF NONPROFIT HEALTH CARE ENTITIES TO FOR­PROFIT ENTITIES.

Bill Summary

(Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments which may be subsequently adopted.)

Recognizes the substantial and recent changes in market and health care conditions that are affecting nonprofit hospitals and other nonprofit health care providers and further recognizes the need for appropriate regulatory treatment when nonprofit hospitals and other nonprofit health care providers propose to sell or otherwise dispose of their assets.

Subjects nonprofit health care providers to filing and review requirements prior to a nonprofit health care provider's proceeding with any transaction to sell, transfer, lease, exchange, option, convey, convert, give, merge, or otherwise dispose of its assets or its revenues, other than in the ordinary course of business, to a for­profit entity.

Requires a nonprofit health care provider to give 75 days' notice to the attorney general of its intention to enter into a transaction covered by this act. Requires the attorney general to hold at least one public meeting and to notify the parties to the proposed transaction in writing of the decision to approve or disapprove the proposed transaction. Requires the attorney general to obtain the approval of the executive director of the department of health care policy and financing prior to approving or consenting to the proposed transaction.

Authorizes the attorney general and the executive director of the department of health care policy and financing to adopt regulations, contract with, consult, and receive advice from any other state agency and to contract with experts or consultants as needed. Requires the parties to the proposed transaction to pay the reasonable costs for contract experts assisting in the review of the transactions covered by this act. Requires that an annual report be filed by the parties for 5 years after the transaction. Requires the deposit of funds to provide for agency monitoring for 5 years to determine whether the transaction in fact impacts the community as planned. Makes nonprofit health maintenance organizations subject to the approval requirements of this act.

Be it enacted by the General Assembly of the State of Colorado:

SECTION 1. Title 7, Colorado Revised Statutes, 1986 Repl. Vol., as amended, is amended BY THE ADDITION OF A NEW ARTICLE to read:

ARTICLE 26.5

Nonprofit Health Care Providers

7­26.5­101.  Procedures in case of proposed sale or other disposition of assets of nonprofit health care providers including hospitals ­ legislative declaration. (1)  THE GENERAL ASSEMBLY HEREBY FINDS, DETERMINES, AND DECLARES THAT NONPROFIT HEALTH CARE PROVIDERS, INCLUDING NONPROFIT HOSPITALS, HOLD ALL OF THEIR ASSETS IN TRUST, AND THOSE ASSETS ARE IRREVOCABLY DEDICATED TO THE SPECIFIC CHARITABLE PURPOSE SET FORTH IN THE ARTICLES OF INCORPORATION OR OTHER ORGANIC DOCUMENTS OF THE NONPROFIT ENTITIES. THE PUBLIC IS THE BENEFICIARY OF THE TRUST ON WHICH NONPROFIT HEALTH CARE PROVIDERS HOLD THEIR ASSETS. NONPROFIT HEALTH CARE PROVIDERS HAVE A SUBSTANTIAL AND BENEFICIAL EFFECT ON THE PROVISION OF HEALTH CARE TO THE PEOPLE OF COLORADO, PROVIDING AS PART OF THEIR CHARITABLE MISSION UNCOMPENSATED CARE TO THE UNINSURED OR UNDERINSURED, AND PROVIDING MONEYS FOR HEALTH­RELATED RESEARCH AND EDUCATION. TRANSFERS OF THE ASSETS OR REVENUES OF NONPROFIT HEALTH CARE PROVIDERS TO THE FOR­PROFIT SECTOR MAY DIRECTLY AFFECT THE CHARACTER AND EXTENT OF THE CHARITABLE USE OF THOSE ASSETS OR THE PROCEEDS THEREFROM. THE GENERAL ASSEMBLY BELIEVES IT IS IN THE BEST INTEREST OF THE PUBLIC TO ENSURE THAT THE PUBLIC INTEREST IS FULLY PROTECTED WHENEVER THE ASSETS OR REVENUES OF A NONPROFIT HEALTH CARE PROVIDER ARE TRANSFERRED FROM THE NONPROFIT ENTITY TO A FOR­PROFIT ENTITY EXCEPT IN THE ORDINARY COURSE OF BUSINESS, SUCH AS A SALE OF OBSOLETE EQUIPMENT. THIS ARTICLE IS INTENDED TO PROTECT THE PUBLIC INTEREST, TO ASSURE THAT NONPROFIT ASSETS ARE PRESERVED FOR THE PUBLIC AND CONTINUE TO BE DEDICATED TO MEETING THE PUBLIC'S HEALTH NEEDS, AND SHALL BE CONSTRUED WITH THAT PURPOSE IN MIND.

(2) (a)  ANY NONPROFIT HOSPITAL, NONPROFIT HEALTH MAINTENANCE ORGANIZATION, OR OTHER NONPROFIT HEALTH CARE PROVIDER THAT INTENDS TO ENTER INTO A COVERED TRANSACTION AS DESCRIBED IN SUBPARAGRAPHS (I) OR (II) OF THIS PARAGRAPH (a) SHALL, PRIOR TO ENTERING INTO SUCH A TRANSACTION (HEREINAFTER REFERRED TO AS A "COVERED TRANSACTION") SECURE WRITTEN APPROVAL FROM THE ATTORNEY GENERAL. SUCH APPROVAL SHALL BE SOUGHT BEFORE ENTERING INTO ANY OF THE FOLLOWING TRANSACTIONS:

(I)  WHEN THE TRANSACTION IS OUTSIDE THE ORDINARY COURSE OF BUSINESS OF THE NONPROFIT ENTITY AND INVOLVES THE SALE, TRANSFER, LEASE, EXCHANGE, OPTION, CONVEYANCE, RESTRUCTURE, CONVERSION, GIFT, MERGER, OR OTHER DISPOSITION OF ITS ASSETS OR REVENUES, INCLUDING, WITHOUT LIMITATION, ENTERING INTO A JOINT VENTURE, TO A FOR­PROFIT ENTITY;

(II)  WHEN THE TRANSACTION IS OUTSIDE THE ORDINARY COURSE OF BUSINESS AND INVOLVES THE TRANSFERENCE OF CONTROL, RESPONSIBILITY, OR GOVERNANCE OF ITS OPERATIONS, OR BUSINESS OF THE NONPROFIT ENTITY TO ANY FOR­PROFIT ENTITY.

(b)  ANY TRANSACTION MAY BE DETERMINED TO BE A TRANSACTION OUTSIDE THE ORDINARY COURSE OF BUSINESS; HOWEVER, ALL TRANSACTIONS, OR SERIES OF TRANSACTIONS TAKING PLACE IN ANY THREE­YEAR PERIOD, INVOLVING IN THE AGGREGATE GREATER THAN FIFTY PERCENT OF THE NONPROFIT ENTITY'S ASSETS OR REVENUES SHALL IN ALL CIRCUMSTANCES BE DEEMED TO BE OUTSIDE THE ORDINARY COURSE OF BUSINESS.

(c)  A NONPROFIT ENTITY AND A FOR­PROFIT ENTITY ENTERING INTO A COVERED TRANSACTION SHALL GIVE WRITTEN NOTICE TO THE ATTORNEY GENERAL AT LEAST SEVENTY­FIVE DAYS BEFORE THEY ENTER INTO SUCH A TRANSACTION. SUCH NOTICE SHALL INCLUDE ALL PROPOSED AGREEMENTS RELATING TO THE PROPOSED TRANSACTION, ALL COLLATERAL TRANSACTIONS THAT RELATE TO THE PRINCIPAL TRANSACTION, AND A THOROUGH EXPLANATION OF HOW THE COMPLETED TRANSACTION WILL COMPLY WITH THE REQUIREMENTS OF SUBSECTION (4) OF THIS SECTION.

(d)  WITHIN SIXTY DAYS AFTER THE FILING REQUIRED BY PARAGRAPH (c) OF THIS SUBSECTION (2), THE ATTORNEY GENERAL SHALL NOTIFY IN WRITING THE PARTIES TO THE TRANSACTION OF THE DECISION TO APPROVE OR DISAPPROVE THE TRANSACTION. THE ATTORNEY GENERAL MAY EXTEND THIS PERIOD FOR AN ADDITIONAL PERIOD OF UP TO NINETY DAYS, IF THE ATTORNEY GENERAL DETERMINES, FOR GOOD CAUSE, THAT ADDITIONAL TIME IS WARRANTED AND SO ADVISES THE PARTIES IN WRITING.

(3) (a)  PROMPTLY AFTER THE FILING REQUIRED BY PARAGRAPH (c) OF SUBSECTION (2) OF THIS SECTION, THE ATTORNEY GENERAL SHALL ISSUE A PRESS RELEASE DESCRIBING THE FILING IN NEWSPAPERS OF GENERAL CIRCULATION SERVING THE AREAS IN WHICH THE NONPROFIT ENTITY PROVIDES SERVICES.

(b)  NO LATER THAN THIRTY DAYS AFTER THE ATTORNEY GENERAL HAS RECEIVED THE FILING REQUIRED BY PARAGRAPH (c) OF SUBSECTION (2) OF THIS SECTION, THE ATTORNEY GENERAL SHALL HOLD AT LEAST ONE PUBLIC HEARING IN THE SERVICE AREA OF THE NONPROFIT ENTITY, AT WHICH ANY PERSON MAY EITHER FILE WRITTEN COMMENTS AND EXHIBITS OR APPEAR AND MAKE A STATEMENT ABOUT ANY ASPECT OF THE TRANSACTION, INCLUDING, BUT NOT LIMITED TO, WHETHER THE PROPOSED TRANSACTION COMPLIES WITH THE REQUIREMENTS OF SUBSECTION (4) OF THIS SECTION. AT LEAST SEVEN DAYS PRIOR TO EACH PUBLIC HEARING, THE ATTORNEY GENERAL SHALL SUBMIT A PRESS RELEASE PROVIDING PERTINENT INFORMATION ABOUT THE HEARING, INCLUDING THE TIME AND PLACE OF THE HEARING, TO ONE OR MORE NEWSPAPERS OF GENERAL CIRCULATION IN THE AFFECTED COMMUNITIES AND NOTIFY THE CITY COUNCIL AND BOARD OF COUNTY COMMISSIONERS OF THE CITY AND COUNTY IN WHICH THE NONPROFIT ENTITY IS LOCATED. THE ATTORNEY GENERAL SHALL HAVE THE POWER TO SUBPOENA DOCUMENTS OR WITNESSES, REQUIRE AND ADMINISTER OATHS, AND REQUIRE SWORN STATEMENTS AT ANY TIME PRIOR TO MAKING A DECISION ON AN APPLICATION. THE PUBLIC HEARING SHALL BE A LEGISLATIVE RATHER THAN AN ADJUDICATIVE HEARING.

(c)  EXCEPT FOR DOCUMENTS THE ATTORNEY GENERAL DETERMINES TO BE CONFIDENTIAL AS A MATTER OF LAW, THE DOCUMENTS FILED PURSUANT TO PARAGRAPH (c) OF SUBSECTION (2) OF THIS SECTION SHALL BE AVAILABLE TO THE PUBLIC FOR REVIEW AND COPYING DURING NORMAL BUSINESS HOURS AT BOTH THE ATTORNEY GENERAL'S OFFICE AND THE OFFICES OF THE PARTIES TO THE TRANSACTION. REASONABLE COSTS OF COPYING WILL BE BORNE BY THE PARTIES IF COPIES ARE REQUESTED AT THEIR OFFICES.

(4)  THE PARTIES TO THE PROPOSED TRANSACTION SHALL DEMONSTRATE THAT THE COMPLETED TRANSACTION WILL COMPLY WITH THE FOLLOWING:

(a)  THE TRANSACTION MUST BE IN THE PUBLIC INTEREST. A TRANSACTION IS NOT IN THE PUBLIC INTEREST UNLESS APPROPRIATE STEPS HAVE BEEN TAKEN TO SAFEGUARD THE VALUE OF NONPROFIT ENTITY ASSETS AND ENSURE THAT ANY PROCEEDS OF THE TRANSACTION ARE IRREVOCABLY DEDICATED TO CHARITABLE HEALTH CARE PURPOSES.

(b)  THE TRANSACTION SHALL NOT CREATE OR HAVE THE LIKELIHOOD OF CREATING AN ADVERSE EFFECT ON THE ACCESS TO OR AVAILABILITY OF AFFORDABLE HEALTH CARE SERVICES IN THE AFFECTED COMMUNITY.

(c)  NO DIRECTOR, OFFICER, AGENT, OR EMPLOYEE OF THE NONPROFIT ENTITY SUBMITTING THE PLAN OR THE NONPROFIT CHARITABLE ORGANIZATION RECEIVING THE PROCEEDS OF THE COVERED TRANSACTION SHALL BENEFIT DIRECTLY OR INDIRECTLY FROM THE TRANSACTION.

(d)  THE NONPROFIT ENTITY PROPOSING THE TRANSACTION SHALL USE DUE DILIGENCE IN SELECTING THE FOR­PROFIT ENTITY THAT IS A PARTY TO THE TRANSACTION, AND IN NEGOTIATING THE PRICE AND OTHER TERMS AND CONDITIONS OF THE TRANSACTION.

(e)  PROCEEDS OF THE COVERED TRANSACTION SHALL BE SET ASIDE IN AN AMOUNT EQUAL TO THE FAIR MARKET VALUE OF THE NET ASSETS OF THE NONPROFIT ENTITY INVOLVED IN THE TRANSACTION. FAIR MARKET VALUE SHALL BE DETERMINED AT THE TIME OF THE TRANSACTION, AS IF THE NET ASSETS WERE FREELY TRANSFERABLE AND AVAILABLE FOR PURCHASE WITHOUT RESTRICTIONS. IN DETERMINING FAIR MARKET VALUE, CONSIDERATION SHALL BE GIVEN TO MARKET VALUE, INVESTMENT OR EARNINGS VALUE, NET ASSET VALUE, AND A CONTROL PREMIUM IF ANY.

(f)  THE DISTRIBUTION OF THE PROCEEDS OF THE COVERED TRANSACTION SHALL BE DEDICATED ONLY TO AN EXISTING OR NEW TAX­EXEMPT CHARITABLE ORGANIZATION OPERATING PURSUANT TO 26 U.S.C. SEC. 501(c)(3) OF THE FEDERAL "INTERNAL REVENUE CODE OF 1986", AS AMENDED.

(g)  EACH NONPROFIT CHARITABLE ORGANIZATION RECEIVING THE PROCEEDS OF THE COVERED TRANSACTION, ITS DIRECTORS, OFFICERS, AND STAFF SHALL BE AND REMAIN INDEPENDENT OF THE PARTIES TO THE TRANSACTION AND THEIR AFFILIATES. NO PERSON WHO IS AN OFFICER, DIRECTOR, OR STAFF MEMBER OF ANY PARTY TO THE TRANSACTION SUBMITTING THE PLAN, AT THE TIME THE PLAN IS SUBMITTED, OR AT THE TIME OF THE TRANSACTION, OR THEREAFTER, SHALL BE QUALIFIED TO BE AN OFFICER, DIRECTOR, OR STAFF MEMBER OF THE NONPROFIT CHARITABLE ORGANIZATION RECEIVING THE PROCEEDS OF THE COVERED TRANSACTION. THE NONPROFIT ENTITY THAT IS A PARTY TO THE PROPOSED TRANSACTION SHALL PROPOSE THE MEMBERSHIP OF THE INITIAL BOARD OF DIRECTORS OF THE NONPROFIT CHARITABLE ORGANIZATION THAT IS TO RECEIVE THE PROCEEDS OF THE COVERED TRANSACTION FOR APPROVAL BY THE ATTORNEY GENERAL, AND IN GIVING THIS APPROVAL THE ATTORNEY GENERAL SHALL TAKE INTO CONSIDERATION WHETHER THE PROPOSED BOARD OF DIRECTORS IS BOTH INDEPENDENT OF THE PARTIES TO THE TRANSACTION, AND REPRESENTATIVE OF THE COMMUNITY AFFECTED BY THE TRANSACTION.

(h)  THE NONPROFIT CHARITABLE ORGANIZATION RECEIVING THE PROCEEDS OF THE COVERED TRANSACTION SHALL PUT MECHANISMS IN PLACE TO AVOID CONFLICTS OF INTEREST AND TO PROHIBIT GRANTS OR OTHER ACTIONS BENEFITING ITS BOARD OF DIRECTORS OR MANAGEMENT BEYOND THE REASONABLE VALUE OF THEIR SERVICES OR SUBSTANTIALLY BENEFITING THE FOR­PROFIT ENTITY.

(i)  THE CHARITABLE MISSION AND GRANT­MAKING FUNCTIONS OF THE NONPROFIT CHARITABLE ORGANIZATION RECEIVING THE PROCEEDS OF THE COVERED TRANSACTION SHALL REFLECT THE HISTORICAL CHARITABLE MISSION OF THE NONPROFIT ENTITY, AND SHALL ALSO BE DEDICATED TO SERVING THE HEALTH NEEDS OF THE STATE'S POPULATION THAT HAVE NO, OR INADEQUATE, HEALTH INSURANCE, AND ALSO TO MEDICAL AND CLINICAL EDUCATION AND RESEARCH, FOCUSING ON PROMOTING ACCESS TO CARE AND PREVENTION OF DISEASE OR INJURY. THE PARTIES TO THE TRANSACTION SHALL ASSURE THAT THERE IS NO DIMINUTION OF CHARITABLE CARE AVAILABLE FOR THESE PURPOSES.

(5)  FOR A PERIOD OF NOT LESS THAN FIVE YEARS, THE NONPROFIT CHARITABLE ORGANIZATION RECEIVING THE PROCEEDS OF THE COVERED TRANSACTION SHALL PROVIDE THE ATTORNEY GENERAL AND THE EXECUTIVE DIRECTOR OF THE DEPARTMENT OF HEALTH CARE POLICY AND FINANCING WITH AN ANNUAL REPORT OF ITS GRANT­MAKING AND OTHER CHARITABLE ACTIVITIES RELATED TO ITS USE OF THE PROCEEDS OF THE COVERED TRANSACTION RECEIVED. FOR A PERIOD OF NOT LESS THAN FIVE YEARS, THE FOR­PROFIT ENTITY SHALL PROVIDE THE ATTORNEY GENERAL AND THE EXECUTIVE DIRECTOR WITH AN ANNUAL REPORT DETAILING ITS ACTIVITIES TO COMPLY WITH ANY UNDERTAKINGS BY IT IN THE PLAN OF COMPLIANCE. THESE ANNUAL REPORTS SHALL BE MADE AVAILABLE TO THE PUBLIC AT THE ATTORNEY GENERAL'S OFFICE, THE DEPARTMENT OF HEALTH CARE POLICY AND FINANCING, THE OFFICE OF THE NONPROFIT CHARITABLE ORGANIZATION, AND THE PARTIES TO THE COVERED TRANSACTION. THE ANNUAL REPORT SHALL BE FILED NO LATER THAN NINETY DAYS AFTER THE YEAR WHICH THE REPORT ADDRESSES.

(6)  THE ATTORNEY GENERAL SHALL, IMMEDIATELY UPON RECEIVING THE FILING REQUIRED BY PARAGRAPH (c) OF SUBSECTION (2) OF THIS SECTION, SUBMIT THESE DOCUMENTS TO THE EXECUTIVE DIRECTOR OF THE DEPARTMENT OF HEALTH CARE POLICY AND FINANCING FOR COMMENT AND REVIEW.

(7)  THE ATTORNEY GENERAL, IN CONJUNCTION WITH THE EXECUTIVE DIRECTOR OF THE DEPARTMENT OF HEALTH CARE POLICY AND FINANCING, MAY:

(a)  CONTRACT WITH, CONSULT, AND RECEIVE ADVICE FROM ANY STATE AGENCY ON THOSE TERMS AND CONDITIONS THAT THE ATTORNEY GENERAL AND THE EXECUTIVE DIRECTOR DEEM APPROPRIATE;

(b)  CONTRACT WITH PARTIES INCLUDING, BUT NOT LIMITED TO, ATTORNEYS, ACCOUNTANTS, ACTUARIES, FINANCIAL ANALYSTS, AND HEALTH CARE ANALYSTS AS IS REASONABLE AND NECESSARY TO ASSIST IN REVIEWING A PROPOSED TRANSACTION. CONTRACT COSTS SHALL BE BORNE BY THE PARTIES IN THE TRANSACTION AND SHALL NOT EXCEED AN AMOUNT THAT IS REASONABLY NECESSARY TO CONDUCT THE REVIEW AND EVALUATION.

(c)  ADOPT REGULATIONS AS NECESSARY IN ORDER TO CARRY OUT THE REQUIREMENTS OF THIS SECTION;

(d)  HAVE THE DISCRETION TO DETERMINE, CONSISTENT WITH THE REQUIREMENTS OF PARAGRAPH (b) OF SUBSECTION (3) OF THIS SECTION, THE DEGREE OF ADMINISTRATIVE REVIEW OF THE TRANSACTION WHICH IS NECESSARY TO DETERMINE WHETHER THE TRANSACTION CONFORMS WITH THE REQUIREMENTS OF SUBSECTION (4) OF THIS SECTION. THIS DETERMINATION SHALL BE MADE BY TAKING INTO CONSIDERATION, AMONG OTHER THINGS, THE SIZE OF THE TRANSACTION, THE SIZE OF ALL COMMUNITIES AFFECTED BY THE TRANSACTION, THE IMPACT ON THE COMMUNITIES, AND THE PAST PERFORMANCE OF THE FOR­PROFIT ENTITY.

(8)  THE ATTORNEY GENERAL SHALL DETERMINE WHETHER THE PROPOSED TRANSACTION COMPLIES WITH THIS SECTION, AND IN PARTICULAR WITH PARAGRAPHS (a), (e), (f), (g), AND (h) OF SUBSECTION (4) OF THIS SECTION. THE OPINION OF THE EXECUTIVE DIRECTOR OF THE DEPARTMENT OF HEALTH CARE POLICY AND FINANCING WITH RESPECT TO WHETHER THE PROPOSED TRANSACTION COMPLIES WITH PARAGRAPHS (b), (c), (d), AND (i) OF SUBSECTION (4) OF THIS SECTION SHALL BE BINDING ON THE ATTORNEY GENERAL ON ENTERING AN ORDER PURSUANT TO THIS SECTION. IF ALL OF THE REQUIREMENTS OF PARAGRAPHS (a) TO (i) OF SUBSECTION (4) OF THIS SECTION HAVE BEEN MET, THE ATTORNEY GENERAL SHALL ISSUE A WRITTEN ORDER APPROVING THE TRANSACTION. IF ALL OF THE REQUIREMENTS OF PARAGRAPHS (a) TO (i) OF SUBSECTION (4) OF THIS SECTION HAVE NOT BEEN MET, THE ATTORNEY GENERAL SHALL ISSUE A WRITTEN ORDER DISAPPROVING THE TRANSACTION. AN ORDER OF APPROVAL OR DISAPPROVAL SHALL INCLUDE SPECIFIC FINDINGS ON EACH OF THE REQUIREMENTS OF PARAGRAPHS (a) TO (i) OF SUBSECTION (4) OF THIS SECTION. THE ORDER OF APPROVAL MAY CONTAIN ADDITIONAL REQUIREMENTS CONSISTENT WITH THE PURPOSES OF THIS SECTION. ANY PARTY AGGRIEVED BY THE ORDER OF THE ATTORNEY GENERAL MAY SEEK JUDICIAL REVIEW UNDER SECTION 24­4­106, C.R.S.

(9)  WHEN THE COVERED TRANSACTION FIRST BECOMES EFFECTIVE, THE FOR­PROFIT ENTITY SHALL DEPOSIT WITH THE ATTORNEY GENERAL SUCH SUM AS MAY BE PRESCRIBED BY THE ATTORNEY GENERAL FOR MONITORING FOR THE ENSUING FIVE­YEAR PERIOD THAT THE TRANSACTION REMAINS IN COMPLIANCE WITH THE REQUIREMENTS OF SUBSECTION (4) OF THIS SECTION.

(10)  IF THE ATTORNEY GENERAL OR EXECUTIVE DIRECTOR OF THE DEPARTMENT OF HEALTH CARE POLICY AND FINANCING RECEIVES INFORMATION INDICATING THAT THE NONPROFIT CHARITABLE ORGANIZATION OR FOR­PROFIT ENTITY IS NOT FULFILLING ITS COMMITMENT TO THE AFFECTED COMMUNITY UNDER SUBSECTION (4) OF THIS SECTION, THE ATTORNEY GENERAL SHALL HOLD A HEARING UPON TWENTY DAYS' NOTICE TO THE AFFECTED PARTIES. IF, AFTER SUCH HEARING, THE ATTORNEY GENERAL DETERMINES THAT PROOF OF THE NONCOMPLIANCE IS PROBABLE, IT SHALL INSTITUTE PROCEEDINGS IN DISTRICT COURT TO REQUIRE A CORRECTIVE ACTION PLAN. THE ATTORNEY GENERAL SHALL RETAIN OVERSIGHT OF THE OBLIGATIONS UNDER THE CORRECTIVE ACTION PLAN FOR AS LONG AS NECESSARY TO ENSURE COMPLIANCE WITH THIS SECTION. NOTHING IN THIS SECTION SHALL BE CONSTRUED TO LIMIT THE ATTORNEY GENERAL'S POWER TO ENFORCE COMPLIANCE WITH THIS SECTION AFTER THE EXPIRATION OF THE FIVE­YEAR PERIOD CONTEMPLATED BY SUBSECTION (9) OF THIS SECTION.

(11)  NOTWITHSTANDING ANY OTHER PROVISION OF LAW, WHEN THE ASSETS AND REVENUES OF ANY NONPROFIT HOSPITAL, NONPROFIT HEALTH MAINTENANCE ORGANIZATION, OR OTHER NONPROFIT HEALTH CARE PROVIDER ARE INVOLVED IN A COVERED TRANSACTION, THE PROVISIONS OF THIS SECTION SHALL APPLY, AND NO OTHER PROVISIONS OF THIS TITLE SHALL GOVERN SUCH COVERED TRANSACTION.

SECTION 2.  7­25­107, Colorado Revised Statutes, 1986 Repl. Vol., as amended, is amended BY THE ADDITION OF A NEW SUBSECTION to read:

7­25­107.  Sale, lease, exchange, or mortgage of assets. (2)  THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO ANY TRANSACTION OF A NONPROFIT HOSPITAL OR NONPROFIT HEALTH CARE PROVIDER THAT IS A COVERED TRANSACTION UNDER THE PROVISIONS OF SECTION 7­26.5­101.

SECTION 3.  7­26­103, Colorado Revised Statutes, 1986 Repl. Vol., is amended BY THE ADDITION OF A NEW SUBSECTION to read:

7­26­103.  Distribution of assets. (2)  THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO ANY TRANSACTION OF A NONPROFIT HOSPITAL OR NONPROFIT HEALTH CARE PROVIDER THAT IS A COVERED TRANSACTION UNDER THE PROVISIONS OF SECTION 7­26.5­101.

SECTION 4.  10­16­421.5, Colorado Revised Statutes, 1994 Repl. Vol., is amended to read:

10­16­421.5.  Acquisition of control of or merger of a health maintenance organization. No person may make a tender for or a request or invitation for tenders of, or enter into an agreement to exchange securities for or acquire in the open market or otherwise, any voting security of a health maintenance organization or enter into any other agreement if, after the consummation thereof, that person would, directly or indirectly, (or by conversion or by exercise of any right to acquire) be in control of the health maintenance organization, and no person may enter into an agreement to merge or consolidate with or otherwise to acquire control of a health maintenance organization, unless, at the time any offer, request, or invitation is made or any agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is involved, the person has filed with the commissioner and has sent to the health maintenance organization information required by sections 10­3­801, 10­3­802, 10­3­803 (2) to (10), and 10­3­803.5 and the offer, request, invitation, agreement, or acquisition has been approved by the commissioner. IN ADDITION TO THE APPROVAL OF THE COMMISSIONER DESCRIBED ABOVE, ANY PROPOSAL BY A NONPROFIT HEALTH MAINTENANCE ORGANIZATION TO SELL, TRANSFER, LEASE, EXCHANGE, OPTION, CONVEY, RESTRUCTURE, CONVERT, GIVE, MERGE, OR OTHERWISE DISPOSE OF ITS ASSETS OR REVENUES TO OR WITH A FOR­PROFIT ENTITY, INCLUDING, WITHOUT LIMITATION ENTERING INTO A JOINT VENTURE SHALL BE DEEMED TO BE A COVERED TRANSACTION SUBJECT TO THE PROVISIONS OF SECTION 7­26.5­101, C.R.S.; EXCEPT THAT THE AUTHORITY UNDER THAT SECTION SHALL BE EXERCISED BY THE COMMISSIONER RATHER THAN THE ATTORNEY GENERAL.

SECTION 5.  Effective date. This act shall take effect at 12:01 a.m. on the day following the expiration of the ninety­day period after final adjournment of the general assembly that is allowed for submitting a referendum petition pursuant to article V, section 1 (3) of the state constitution; except that, if a referendum petition is filed against this act or an item, section, or part of this act within such period, then the act, item, section, or part, if approved by the people, shall take effect on the date of the official declaration of the vote thereon by proclamation of the governor.