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New California Laws for Nonprofit Health Care: What Facilities Need to Know

Nonprofit health care facilities should evaluate what upcoming California law changes mean for their businesses. The new laws, which impact required notices and approvals from the state Attorney General’s office, take effect January 1, 2018. The primary bill that prompted these changes is California Assembly Bill 651. The changes involve new Attorney General notice, review and consent requirements pertaining to certain nonprofit corporations that own and operate health facilities, and certain transactions.

The most significant legal changes and considerations for facilities are:

  • Notices must include a list of primary languages spoken at the affected facility or facilities.

  • The time that the Attorney General has to provide its decision about consent, conditional consent, or not to consent will be extended from 60 days to 90 days from receipt of written notice. 

  • The California Attorney General will now consider whether the transaction or agreement may create a significant effect on availability and accessibility of cultural interests provided by the facility in the affected community. 

  • Exceptions to consent requirements for transfers to an “affiliate” as defined in California Corporations Code Section 5031 of the California Corporations Code still apply. 

  • The California Attorney General’s authority to enforce conditions confirmed. 

These additional requirements should be factored in when considering the time needed from the beginning of the transaction to its close.

Changes include:

  1. Notices must include a list of primary languages spoken at the affected facility or facilities. In addition to the terms of the transaction, notice to the Attorney General will now require a list of primary languages spoken at the facility and the threshold languages for Medi-Cal beneficiaries, as determined by the State Department for Health Care Services for the county in which the facility is located. The Attorney General may require that the nonprofit corporation provide certain components of the notice in these languages, likely because the notices themselves may be made public and read by the impacted community. As a practical matter, this means that parties may need to consult with the Attorney General before providing the notice to confirm whether the language requirements are subject to additional guidance or regulation from the Attorney General. 

  2. The time that the Attorney General has to provide its decision about consent, conditional consent, or not to consent will be extended from 60 days to 90 days from receipt of written notice. The Attorney General may still extend this period for one additional 45-day period if certain conditions are satisfied. Note that one such condition relates to multi-facility health systems serving multiple communities. This is not a new factor but it may now have more of an effect given new requirements and new considerations about impact on cultural interests of the community served, as discussed below.

  3. The California Attorney General will now consider whether the transaction or agreement may create a significant effect on availability and accessibility of cultural interests provided by the facility in the affected community. This factor and the extension of time for Attorney General review may be the most important developments relating to transactional steps, planning, resources and time needed to close. In the case of multi-facility and location transactions, there may be several affected communities to consider and address.

  4. Exceptions to consent requirements for transfers to an “affiliate” as defined in California Corporations Code Section 5031 of the California Corporations Code still apply. The exception relating to transfers to affiliates (California Corporations Code Section 5920) still applies so long as the Attorney General receives notice from the parties at least 20 days in advance. This likely means the new notice requirements, such as the list of primary languages spoken at the facility and threshold languages for Medi-Cal beneficiaries, would not apply. Stakeholders should continue to watch for additional guidance from the Attorney General that may help confirm or clarify this point. 

  5. The California Attorney General’s authority to enforce conditions confirmed. California AB 651 confirmed the Attorney General’s ability to enforce conditions imposed on consent, including equitable remedies and attorney’s fees and costs. This issue of the Attorney General’s authority was not perceived to be in question, but this clarification is likely the result of a challenge.

© Polsinelli PC, Polsinelli LLP in California

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About this Author

Paul Gomez, Polsinelli Law Firm, Los Angeles, Healthcare Law Attorney
Principal

Paul Gomez brings a deep understanding of the major forces driving many healthcare transactions, including shifting payment models, advances in healthcare technology, and the need to achieve greater economies of scale. He combines that understanding with his knowledge of key health care legal requirements that impact the structure of healthcare deals and contracts to help clients attain their goals in a practical and efficient manner.

Paul's health care transactional and regulatory practice is centered around: 

  • Complex hospital/...
310-556-6762
Associate

Ryan McAteer provides around-the-clock expertise and availability to clients. Ryan’s interest in health care stems from the 2010 Patient Protection and Affordable Care Act and his prior experience working for a global medical device and equipment manufacturer. Ryan is committed to achieving positive outcomes for health care clients, including corporate and regulatory counsel, hospital and health facility merger and acquisition support, and related research and legal guidance. He has been involved in several complex hospital, health system, and pharmacy transactions and played an integral role in their successful culminations.

Prior to joining Polsinelli, Ryan worked as an associate at a Los Angeles-based boutique health care litigation firm, representing clients in California Medical Board hearings, medical staff and peer-review matters, and other physician-focused alignment ventures.

310-203-5368
Richard Rifenbark, Polsinelli Law Firm, Los Angeles, Healthcare Law Attorney
Principal

Richard Rifenbark relies on his knowledge and experience to help clients identify, avoid, and (when necessary) resolve difficult regulatory compliance issues. He regularly advises clients on health care fraud and abuse laws and other regulatory issues, including the federal anti-kickback statute, stark physician self-referral law, false claims act, state licensing issues, corporate practice of medicine doctrines, and state fraud and abuse laws. Richard also negotiates and drafts transactional document agreements, including, merger and acquisition, affiliation,...

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