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OLR Bill Analysis
HB 6731
AN ACT CONCERNING THE DEPARTMENT OF PUBLIC HEALTH'S
RECOMMENDATIONS REGARDING CHANGE IN OWNERSHIP OF
HEALTH CARE FACILITIES.
SUMMARY
This bill expands the circumstances under which licensed health care
facility or institution (“facility”) ownership changes need prior approval
from the Department of Public Health (DPH). It does so 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 (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) a copy of the sale or transfer agreement; (2) organizational charts,
if applicable; and (3) information on certain prior penalties or sanctions
in any state. As under current law, the bill requires DPH to inspect
facilities before approving an ownership change.
The bill establishes the criteria that the commissioner must consider
when evaluating an application and sets conditions under which she
may deny it (for example, if other facilities the person owned or
operated were subject to specified adverse actions). The bill prohibits
someone from applying to acquire ownership in a facility if DPH denied
a prior application by the person’s relative.
It also makes technical and conforming changes. 2023HB-06731-R000474-BA.DOCX
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EFFECTIVE DATE: July 1, 2023
APPROVAL PROCESS FOR HEALTH CARE FACILITY OWNERSHIP
CHANGES
Scope of Requirement
The bill subjects all transfers of ownership or beneficial ownership of
DPH-licensed health care facilities to prior approval by the department.
This includes (1) direct ownership changes or (2) changes in the
ownership of the business 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 these
transfers unless they involve (1) at least 10% of the ownership or
beneficial ownership of the entity that owns, operates, or maintains
more than one facility; (2) multiple facilities; or (3) a facility that is the
subject of a pending complaint, investigation, or licensure action. The
bill specifies that changes in ownership or beneficial ownership
resulting in transfers to these relatives to owners or beneficial owners
are subject to prior approval.
By law, unchanged by the bill, the following are not considered to be
ownership changes and do not require DPH approval: (1) a change in
an entity’s legal form of ownership (e.g., a corporation becoming a
limited liability company) that does not change the beneficial ownership
or (2) a public stock offering meeting certain requirements (e.g., it does
not result in someone owning 10% or more of the stock).
Application Process
Current law requires at least 120 days’ prior notice to DPH before a
proposed facility ownership change, but it does not specify the 2023HB-06731-R000474-BA.DOCX
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application process.
The bill requires the proposed new owner (or current owner, for
changes in beneficial ownership) to apply within this same timeframe,
in a way the commissioner sets. The application must include the
following materials and information:
1. a cover letter identifying the facility by name, address, county,
and number and type of licensed beds;
2. a description of the proposed transaction;
3. the names of each current owner and proposed new owner or
beneficial owner;
4. the names of each owner of any non-publicly traded parent
corporation of each proposed new owner and beneficial owner;
5. if applicable, organizational charts for the (a) current owner
(showing the change in beneficial ownership) and (b) proposed
new owner, its parent business entity, and its wholly owned
subsidiaries;
6. a copy of the sale agreement or other transfer of ownership
document and any lease or management agreements;
7. disclosures of whether each proposed new owner was ever
convicted or pled guilty to fraud, patient or resident abuse or
neglect, or a crime of violence or moral turpitude; and
8. various disclosures for certain other facilities (see below).
Other Facilities. Under the bill, the application also must include the
name and address of any U.S.-based (including territories) licensed
health care facility each proposed new owner or beneficial owner
owned, operated, or managed during the prior five years. The bill
requires several disclosures related to these facilities.
The application must disclose any direct or indirect interest arising
from the person’s ownership, operation, or management of these 2023HB-06731-R000474-BA.DOCX
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facilities. This includes interests in intermediate entities; parent,
management, and property companies; and other related entities.
The application must disclose whether each facility is the subject of a
pending complaint, investigation, or licensure action. Additionally, it
must disclose whether each facility has been subject to the following:
1. three or more civil penalties imposed through DPH final orders
or civil penalties in other states during the prior two years;
2. Medicare or Medicaid sanctions in any state, other than civil
penalties of $20,000 or less;
3. termination or nonrenewal of a Medicare or Medicaid provider
agreement;
4. any violations of any state licensing or federal certification
standard on inappropriate admission denials or discharges; and
5. any state licensure or federal certification deficiency, during the
prior five years, that presented a serious risk to the life, safety, or
quality of care of the facility’s patients or residents.
Under the bill, these serious risks include deficiencies that led to:
1. a state or federal agency action to ban, curtail, or temporarily
suspend facility admissions or suspend or revoke its license;
2. a Medicare or Medicare decertification, termination, or exclusion
from participation, including denying payment for new
admissions, imposed by DPH or the federal Centers for Medicare
and Medicaid Services (CMS), due to noncompliance with
Medicare or Medicaid conditions of participation;
3. a citation of any deficiency that constitutes a pattern or
widespread scope of harm or immediate jeopardy, or any
deficiency causing widespread actual harm, as described in
specified CMS regulations (for these purposes, “immediate
jeopardy” is a situation where noncompliance with certain CMS 2023HB-06731-R000474-BA.DOCX
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requirements caused, or is likely to cause, a resident’s serious
injury, harm, impairment, or death);
4. a determination that the facility failed to correct cited deficiencies
that led to CMS denying payment for new admissions or DPH
requiring the facility to curtail admissions; or
5. a determination that the provider is a poor performer based on a
finding of substandard quality of care or immediate jeopardy on
the current survey and on a survey in either of the two prior
years.
Under the bill, “substandard quality of care” means the failure to
meet specified CMS requirements that constitute either (1) immediate
jeopardy to resident health or safety; (2) a pattern of or widespread
actual harm that is not immediate jeopardy; or (3) a widespread
potential for more than minimal harm, but less than immediate
jeopardy, with no actual harm. Generally, these requirements concern
long term care facility (1) admission, transfer, and discharge rights and
(2) quality of care in numerous areas (e.g., respiratory care and pain
management) (42 C.F.R. §§ 483.15 & 483.25).
Inspection
Similar to current law, the bill requires DPH, after receiving an
application for an ownership change, to inspect the facility to ensure its
compliance with applicable laws and regulations.
Grounds to Deny Application
The bill requires the commissioner, when evaluating an application,
to consider whether each proposed new owner and beneficial owner
demonstrates character and competence and quality of care. She must
also consider whether any licensed facilities they owned, operated, or
managed (in the U.S. and its territories) has an acceptable history of
compliance in the past five years with (1) state licensure and regulatory
requirements and (2) federal requirements.
Under the bill, the commissioner may deny an application if these
qualities are not demonstrated, as shown by the following: 2023HB-06731-R000474-BA.DOCX
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1. the facility was subject to any adverse action listed in the
application (e.g., termination of a Medicare or Medicaid provider
agreement or certain licensing or certification deficiencies);
2. the facility had continuing violations, or a pattern of them, of
state licensure or federal certification standards; or
3. the applicant’s criminal conviction or guilty plea to any crime
listed on the application (e.g., patient abuse or neglect).
The bill also allows the commissioner to temporarily deny an
application if she determines that there are certain pending
investigations of the applicant’s actions at any facility it operates or
manages. This applies when the investigation, if substantiated, would
constitute a threat to patient or resident life, safety, or quality of care.
She may deny the application until there is a final determination of the
investigation.
Additionally, if the commissioner denies 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
Yea 25 Nay 12 (03/20/2023)