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OLR Bill Analysis
sHB 5481
AN ACT CONCERNING THE DEPARTMENT OF PUBLIC HEALTH'S
RECOMMENDATIONS REGARDING CHANGE OF OWNERSHIP IN
HEALTH CARE FACILITIES.
SUMMARY
This bill expands the circumstances in which licensed health care
facility or institution (“facility”) ownership changes are subject to prior
approval from the Department of Public Health (DPH) by eliminating
exemptions in current law for (1) changes in ownership or beneficial
ownership of under 10% of the stock of a corporation that owns or
operates the facility or (2) certain transfers to relatives.
As under current law, these provisions apply to all DPH-licensed
facilities or institutions (e.g., hospitals, behavioral health facilities,
nursing homes, outpatient surgical facilities, or home health care
agencies).
The bill requires proposed new owners to submit several documents
and other information to DPH as part of its review of the transfer, such
as (1) organizational charts, (2) profit and loss and capital budget
projections, and (3) information on certain prior penalties or sanctions
in Connecticut or other states.
As under current law, the bill requires DPH to inspect facilities before
approving an ownership change. The bill explicitly allows the
commissioner to deny an ownership change. Among other things, it also
allows DPH to assess a civil penalty on a facility found to be out of
compliance with applicable laws, regulations, or a consent order.
Existing law requires DPH to include, on the written application for
a change in nursing home ownership, a statement notifying the
potential nursing home licensee and owner that they (and certain other
individuals) may be held civilly or criminally liable, or subject to 2022HB-05481-R000422-BA.DOCX
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administrative sanctions, for abuse or neglect of a resident by a nursing
home employee. Current law limits this notice provision to anyone
having at least a 10% ownership interest in the nursing home or other
entity. As the bill eliminates the 10% threshold exemption as described
above, it makes a corresponding change to the notice to specify that this
liability could apply to anyone having an ownership interest in the
nursing home or entity that owns it.
EFFECTIVE DATE: July 1, 2022
APPROVAL PROCESS FOR HEALTH CAR E FACILITY OWNERSHIP
CHANGES
Scope of Requirement
The bill requires all ownership transfers of DPH-licensed health care
facilities to be subject to prior approval by the department. This includes
(1) direct ownership changes or (2) changes in the ownership of the
entity that owns, operates, or maintains the facility.
The bill does so by eliminating two exemptions from current law.
First, it eliminates the exemption for changes in ownership or beneficial
ownership of under 10% of the stock of a corporation that owns,
operates, or maintains the facility.
Second, it eliminates the exemption for certain transfers to relatives,
including relatives by marriage (specifically parents, spouses, children,
siblings, aunts, uncles, nieces, or nephews). Current law exempts
transfers to relatives from the approval process unless it involves (1) at
least 10% of the ownership or beneficial ownership of the entity that
owns, operates, or maintains the facility; (2) multiple facilities; or (3) a
facility that is the subject of a pending complaint, investigation, or
licensure action.
By law, under specified conditions, the following are not considered
to be ownership changes and thus do not require DPH approval: a (1)
change in an entity’s legal form of ownership (e.g., a corporation
becoming a limited liability company) or (2) a public stock offering
meeting certain requirements. 2022HB-05481-R000422-BA.DOCX
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Application Process
As under current law, the bill requires at least 120 days’ prior notice
to DPH before a proposed ownership change of a health care facility.
The bill requires the proposed new owner to apply within this
timeframe, in a form and manner the commissioner prescribes. The
application must include the following materials and information:
1. a cover letter stating the applicant’s intent to purchase the facility
and identifying the facility by name, address, county, and
number and type of licensed beds;
2. a description of the proposed transaction and the names of the
facility’s current owner, the proposed new owner, and each
owner of any non-publicly traded parent corporation of the new
owner;
3. if applicable, organizational charts for the proposed new owner,
its parent corporation, and its wholly-owned subsidiaries;
4. a copy of the sale agreement and any lease or management
agreements;
5. profit and loss and capital budget projections, including accounts
payable with amount due, days overdue, and details of payments
to these accounts, for the three years following the ownership
change;
6. the name and address of any U.S.-based (including territories)
licensed health care facility each proposed owner owned,
operated, or managed during the prior five years, and audited
financial statements of these facilities for the prior three years;
and
7. a statement that the facility is not the subject of a pending
complaint, investigation, or licensure action in any state.
In addition, the application must disclose the following information:
1. any direct or indirect interests, including in intermediate entities 2022HB-05481-R000422-BA.DOCX
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and parent, management, and property companies and other
related entities;
2. whether the facility has been subject to three or more civil
penalties imposed through DPH final orders or civil penalties in
other states during the prior two years;
3. whether the facility has been subject to Medicare or Medicaid
sanctions in any state, other than civil penalties of $20,000 or less;
and
4. whether any proposed new owner’s Medicare or Medicaid
provider agreement has been terminated or not renewed in any
state.
Inspection, Corrective Action, and Penalties
Similar to current law, the bill:
1. requires DPH to inspect the facility to ensure its compliance with
applicable laws and regulations and
2. allows DPH, if the facility is not in compliance with laws,
regulations, or a corrective action plan, to (a) deny the application
or (b) require the proposed new owner to sign a consent order to
implement a corrective action plan within a specified time.
The bill also allows the commissioner to assess a civil penalty of up
to $1,000 for each day the owner or facility is in violation of the law,
regulations, or consent order. Additionally, if the commissioner
disapproves an application, the bill prohibits the applicant’s relatives
from applying to acquire an ownership interest in the facility.
COMMITTEE ACTION
Public Health Committee
Joint Favorable Substitute
Yea 20 Nay 9 (03/25/2022)