MUNICIPAL HEALTH FACILITIES CORP. S.B. 513:
SUMMARY AS ENACTED
Senate Bill 513 (as enacted) PUBLIC ACT 319 of 2023
Senate Committee: Health Policy
House Committee: Health Policy
CONTENT
The bill amended Section 305a of the Municipal Health Facilities Corporations Act to allow the board of trustees of a municipal health facilities corporation or a subsidiary board to restructure the corporation or subsidiary corporation as a nonprofit corporation if the following conditions are met:
-- The corporation or subsidiary corporation is in a county with a population of more than 5,000 and less than 7,500 as of the most recent Federal decennial census.[1]
-- The restructuring is completed before June 30, 2025.
The restructuring must comply with the requirements of Section 305a (described below), applicable licensing and other regulatory requirements, and the requirements of the Nonprofit Corporation Act.
The bill took effect on December 14, 2023.
BRIEF RATIONALE
According to testimony before the Senate Committee on Health Policy, Helen Newberry Joy Hospital in Luce County, MI is looking to better react to potential business development opportunities and to improve its ability to provide care to its patients. This may include expanding services outside the traditional hospital setting. The Helen Newberry Joy Hospital originally organized under the Municipal Health Facilities Corporations Act. Reportedly, being organized under this Act presents challenges in responding to a rapidly changing healthcare landscape. The bill would allow Helen Newberry Joy Hospital to transition to a more traditional 501(c)(3) nonprofit hospital model, which may result in a more sustainable business model.
PREVIOUS LEGISLATION
(This section does not provide a comprehensive account of previous legislative efforts on this subject matter.)
The bill is a reintroduction of Senate Bill 1055 from the 2021-2022 Legislative Session. Senate Bill 1055 passed the Senate and was reported by the House Committee on Health Policy but received no further action.
BACKGROUND
The Municipal Health Facilities Corporations Act authorizes a county, city, or village to incorporate a public hospital or other health facility, whose property and income are exempt from State and local taxation. Public Act 331 of 2010 added Section 305a to the Act to allow a municipal health facilities corporation or subsidiary corporation to be restructured as a nonprofit corporation. When a restructuring takes effect, the restructured corporation or restructured subsidiary corporation is the same entity that existed before the restructuring and has all the liabilities of the restructuring corporation.
To restructure a municipal health facilities corporation or subsidiary corporation, the board of trustees or subsidiary board must adopt a plan that includes the terms and conditions of the restructuring and the proposed articles of incorporation and bylaws that are to govern the restructured corporation. The articles and bylaws must comply with the Nonprofit Corporation Act. The restructuring of a corporation or a subsidiary corporation must have the prior majority approval of the applicable local legislative body. The restructuring of a subsidiary corporation also requires prior approval of the parent company's board of trustees.
If the restructuring plan is approved, the corporation or subsidiary corporation must file the articles of incorporation with the Department of Licensing and Regulatory Affairs. The restructuring is effective on the effective date of the articles of incorporation under the Nonprofit Corporation Act.
Public Act 331 of 2010 allowed the restructuring of a municipal health facilities corporation in a county with a population of more than 40,000 and less than 44,000, as of the 2010 Federal decennial census if the restructuring was completed before July 1, 2012. Public Act 45 of 2016 allowed the restructuring of a corporation located in a county with a population of more than 24,000 and less than 30,000, as of the 2010 Federal decennial census if the restructuring was completed before June 30, 2017. Public Act 148 of 2017 allowed the restructuring of a corporation located in a county with a population of more than 45,000 and less than 60,000, as of the 2010 Federal decennial census if the restructuring was completed before June 30, 2018.
Legislative Analyst: Alex Krabill
The State, through its Medicaid program, achieves General Fund/General Purpose (GF/GP) savings through a program involving publicly owned hospitals, known as "certified public expenditures". These expenditures reflect uncompensated care provided by public hospitals. The State then receives reimbursement from the Federal government that equates to the Medicaid match that the State would have received had the uncompensated care been covered by Medicaid. The program leads to State savings of roughly $54.0 million GF/GP each year. Conversion of a publicly owned hospital to nonprofit status will reduce the State's GF/GP savings from this program, proportional to the ratio of uncompensated care performed by the given hospital to uncompensated care performed by all public hospitals. Small public hospitals, such as those eligible for restructuring under the bill, represent only a few hundred thousand dollars of these savings.
The bill may have a positive fiscal impact on the affected local government. Conversion of a public hospital owned by a city, county, or other local entity to nonprofit status will lead to local savings if the local government was subsidizing the hospital's operation or if the new owner paid off costs incurred by the local government.
Fiscal Analysts: Bobby Canell
John P. Maxwell
This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.
[1] The counties that meet these population criteria are Luce and Ontonagon, according to the 2020 United States Census.