MUNICIPAL HEALTH FACILITIES CORP. S.B. 1055:
ANALYSIS AS PASSED BY THE SENATE
Senate Bill 1055 (as passed by the Senate)
Sponsor: Senator Wayne Schmidt
Committee: Health Policy and Human Services
RATIONALE
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 and become subject to the Nonprofit Corporation Act. When a restructuring takes effect, the restructured corporation is considered to be the same entity as the one that existed before the restructuring and has all of the liabilities of the restructuring corporation. Section 305a applies only to a municipal health facilities corporation in a county that meets certain population criteria, and Public Act 331 allowed the restructuring of a corporation located in Mecosta County. Public Act 45 of 2016 amended Section 305a to allow the restructuring of a health facilities corporation in Alpena County. More recently, Public Act 45 of 2016 amended Section 305a to allow the restructuring of a health facilities corporation in Branch County. These amendments were designed to enable an entity incorporated under the Municipal Health Facilities Corporations Act to merge or enter into a partnership with an entity incorporated under the Nonprofit Corporation Act. It was suggested that the Helen Newberry Joy Hospital and Healthcare Center (HNJH) in Luce County be allowed to restructure as a nonprofit corporation in order to pursue similar partnerships or affiliations.
CONTENT
The bill would amend 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 subject to the Nonprofit Corporation Act if both of the following conditions were met:
-- The corporation or subsidiary corporation was located 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 was completed before June 30, 2024.
The restructuring would have to comply with the requirements of Section 305a (described below), applicable licensing and other regulatory requirements, and the requirements of the Nonprofit Corporation Act.
BACKGROUND
The County Health Facilities Corporations Act was enacted in 1987, when approximately 12 county hospitals in the State were operating under either a 1913 or a 1945 statute. Those laws apparently
limited the county hospitals' ability to adjust to changes in the health care industry. After the enactment of the 1987 Act, the county hospitals were considered to be incorporated under that statute (unless a county passed, and annually renewed, a resolution to prohibit the incorporation). Amendments enacted in 1988 extended the Act to cities and villages and renamed it the Municipalities Health Facilities Corporations Act.
As noted above, Section 305a was added in 2010 to allow a corporation or subsidiary corporation to restructure as a nonprofit corporation. In order to do so, 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 will govern the restructured corporation. The articles and bylaws must comply with the Nonprofit Corporation Act. The restructuring of either 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 takes effect on the effective date of the articles of incorporation under the Nonprofit Corporation Act.
ARGUMENTS