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OLR Bill Analysis
HB 6731 (as amended by House "A")*
AN ACT CONCERNING THE DEPARTMENT OF PUBLIC HEALTH'S
RECOMMENDATIONS REGARDING CHANGE IN OWNERSHIP OF
HEALTH CARE FACILITIES.
SUMMARY
This bill generally 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 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) 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. The bill allows DPH to inspect facilities before approving
an ownership change; current law requires an inspection.
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). It prohibits someone
from applying to acquire ownership in a facility if DPH denied a prior
application by the person’s relative.
The bill gives the commissioner the discretion to waive specified
requirements for certain applicants. It also creates an exemption from
prior approval requirements for certain transfers involving outpatient 2023HB-06731-R010837-BA.DOCX
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surgical facilities or nonprofit hospitals.
The bill makes related changes by lowering the ownership threshold,
from 10% to 5%, for certain notification requirements concerning
nursing home licensing and ownership transfers.
It also makes technical and conforming changes.
*House Amendment “A” (1) delays the bill’s effective date by three
months; (2) makes several changes to the underlying bill, such as
allowing DPH to waive information submission requirements in certain
circumstances and exempting certain transfers involving outpatient
surgical facilities or nonprofit hospitals; and (3) adds the provisions
lowering the ownership threshold for certain nursing home-related
notifications.
EFFECTIVE DATE: October 1, 2023
APPROVAL PROCESS FOR HEALTH CARE FACILITY OWNERSHIP
CHANGES
Scope of Requirement
The bill generally 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 2023HB-06731-R010837-BA.DOCX
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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.
Similar to current law, the following are not considered to be
ownership changes and do not require DPH approval: (1) a change in a
licensee’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).
Additionally, the bill provides that, under certain conditions, the
change in ownership of, or to, a 501(c)(3) nonprofit business entity
licensed as a hospital is not considered to be an ownership change
requiring approval. This applies if the ownership transfer is exempt
from review under the law on nonprofit hospital transfers to for-profit
entities. As with the other exemptions above, the owner must give DPH
information about the change, as the department requires, to properly
identify the current ownership status.
The bill also exempts from these requirements transfers of ownership
or beneficial ownership of 10% or less of an outpatient surgical facility
to a physician, as long as the facility gives DPH information (in a manner
the commissioner sets) to update the facility’s licensing information.
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
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; 2023HB-06731-R010837-BA.DOCX
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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
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 by a government
authority. Additionally, it must disclose whether each facility has been
subject to the following:
1. three or more civil penalties imposed through DPH final orders 2023HB-06731-R010837-BA.DOCX
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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 solely due to the provider’s failure to correct
deficiencies or non-compliance with regulatory requirements,
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 actual 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
requirements caused, or is likely to cause, a resident’s serious
injury, harm, impairment, or death);
4. a determination, on a second revisit, that the facility failed to
correct cited deficiencies from a prior survey that led to CMS
denying payment for new admissions or DPH requiring the 2023HB-06731-R010837-BA.DOCX
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facility to curtail admissions; or
5. a determination that the provider is a poor performer as defined
by CMS 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 and Compliance With Regulatory Requirements
The bill allows DPH, after receiving an application for an ownership
change, to inspect the facility to ensure its compliance with applicable
laws and regulations. Current law requires an inspection.
As under current law, the bill conditions DPH’s approval on the
facility showing that it has complied with all applicable requirements of
the health care institution statutes, licensure regulations, and other
applicable regulations. The bill also specifies that approval is
conditioned upon the proposed new owner or beneficial owner meeting
the bill’s requirements as to character and competence, quality of care,
and an acceptable history of regulatory compliance (see below).
Permissible Waiver
The bill allows DPH to waive certain requirements.
For ownership or beneficial ownership changes resulting in a transfer
to a person related by blood or marriage to an owner or beneficial
owner, she may waive the requirement to submit specified information
on other health care facilities they owned or operated during the past
five years (see above). 2023HB-06731-R010837-BA.DOCX
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For ownership or beneficial ownership changes of 5% or less of the
ownership of a business entity that is a licensed institution, she may
waive (1) the submission of some or all of the information required
under the bill or (2) the determination as to the owner’s character,
competence, and related matters (see below).
Under the bill, the commissioner must develop a waiver application
process and the criteria for evaluating waiver requests. When
developing the application process and criteria, the commissioner must
consult with long-term care industry representatives.
Grounds to Deny or Stay an 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:
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 stay the
department’s decision on 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 th e investigation, if
substantiated, would constitute a threat to patient or resident life, safety, 2023HB-06731-R010837-BA.DOCX
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or quality of care. She may delay the decision 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.
§§ 2 & 3 — NURSING HOME OWNERSHIP INTERESTS
The bill requires applicants for a nursing home license to give DPH
the names of anyone with a 5% or greater ownership interest in the
owner, rather than 10% or greater as under current law.
The bill makes a related change to the application for a nursing home
ownership change. Existing law requires DPH to include on the
application 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 administrative sanctions, for abuse or
neglect of a resident by a nursing home employee. In addition to certain
other listed positions, current law applies this notice provision to
anyone having at least a 10% ownership interest in the nursing home or
entity that owns it. The bill lowers this threshold to 5%.
COMMITTEE ACTION
Public Health Committee
Joint Favorable
Yea 25 Nay 12 (03/20/2023)
Human Services Committee
Joint Favorable
Yea 14 Nay 7 (04/17/2023)