Bill Text: MN HF3356 | 2013-2014 | 88th Legislature | Introduced
Bill Title: Nonprofit hospitals and affiliated medical entities executive compensation regulated.
Sponsorship: Partisan Bill (Democrat 12)
Status: (Introduced - Dead) 2014-04-24 - Introduction and first reading, referred to Commerce and Consumer Protection Finance and Policy [HF3356 Detail]
Download: Minnesota-2013-HF3356-Introduced.html
1.2relating to nonprofit corporations; regulating executive compensation of hospitals
1.3and affiliated medical entities;proposing coding for new law in Minnesota
1.4Statutes, chapter 317A.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. [317A.911] NONPROFIT HOSPITALS AND AFFILIATED MEDICAL
1.7ENTITIES EXECUTIVE COMPENSATION.
1.8 Subdivision 1. Definitions. The terms defined in this section have the meanings
1.9given them.
1.10(a) "Board of directors" has the meaning set forth in section 317A.011, subdivision 4.
1.11(b) "Nonprofit corporation" means a corporation governed by this chapter.
1.12(c) "Nonprofit hospital or affiliated medical entity" means any of the following:
1.13(1) a hospital, defined in section 144.50, subdivision 2;
1.14(2) a hospital group, which means any group of two or more hospitals described in
1.15clause (1) or any person, corporation, partnership, limited liability company, trust, or other
1.16entity that owns, operates, or controls, in whole or in part, any such group;
1.17(3) a hospital-affiliated medical foundation, which means a medical foundation that
1.18is directly or indirectly controlled or owned by, or controlled or owned by the same person
1.19or entity as, a hospital, hospital group, hospital-affiliated physicians group, or nonprofit
1.20corporation that owns, operates, or controls, in whole or in part, a hospital, hospital group,
1.21or hospital-affiliated physicians group; and
1.22(4) a hospital-affiliated physicians group, which means any physicians group or
1.23medical group that is directly or indirectly controlled or owned by, or controlled or owned
1.24by the same person or entity as, a hospital, hospital group, hospital-affiliated medical
2.1foundation, or a nonprofit corporation that owns, operates, or controls, in whole or in part,
2.2a hospital, hospital group, or hospital-affiliated medical foundation.
2.3 Subd. 2. General. (a) The board of directors of a nonprofit corporation that owns,
2.4operates, or controls, in whole or in part, a nonprofit hospital or affiliated medical entity
2.5must ensure that:
2.6(1) no person whose primary duties at or for the nonprofit hospital or affiliated medical
2.7entity are executive, managerial, or administrative receives total annual compensation
2.8from any source for work performed or services provided at or for the nonprofit hospital
2.9or affiliated medical entity that is greater than the annual salary and expense allowance of
2.10the President of the United States as set forth in United States Code, title 3, section 102;
2.11(2) the total value of the compensation or payments authorized or paid under a
2.12severance or similar postservice or postemployment arrangement for any person who
2.13formerly had primary duties at the nonprofit hospital or affiliated medical entity that were
2.14executive, managerial, or administrative does not exceed the annual salary and expense
2.15allowance of the President of the United States as set forth in United States Code, title
2.163, section 102; and
2.17(3) the nonprofit hospital or affiliated medical entity contributes no more than a
2.18pro rata share of the maximums specified in clauses (1) and (2) toward total annual
2.19compensation or severance payments to any person whose primary duties at or for the
2.20nonprofit hospital or affiliated medical entity are or were executive, managerial, or
2.21administrative.
2.22(b) The compensation limits established by this section apply irrespective of
2.23whether the person exercising executive, managerial, or administrative authority is or
2.24was an employee of the nonprofit hospital or medical entity or the nonprofit corporation
2.25that owns, operates, or controls, in whole or in part, the nonprofit hospital or affiliated
2.26medical entity. These limits apply to any person who exercises or exercised this authority
2.27even if the arrangements for the authority or for compensation or both are pursuant to a
2.28contract or subcontract.
2.29(c) Compensation for work performed or services provided at or for a nonprofit
2.30hospital or affiliated medical entity counts toward the limits set forth in paragraph (a) even
2.31if made by a separate entity, including by any for-profit or unincorporated entity.
2.32(d) Compensation by a separate entity that is purported not to be for work
2.33performed or services provided at or for a covered hospital or medical entity but that
2.34is disproportionate to its purported purpose so as to evade the limitations in paragraph
2.35(a) constitutes a violation of this section.
3.1(e) "Total annual compensation" includes all remuneration paid, earned, or accrued
3.2in the course of a fiscal year for work performed or services provided, including the
3.3cash value of all remuneration, including benefits, in any medium other than cash. Total
3.4annual compensation includes, but is not limited to, wages; salary; paid time off; bonuses;
3.5incentive payments; lump-sum cash payments; the fair market value of below market rate
3.6loans or loan forgiveness; housing payments; payments for transportation, travel, meals,
3.7or other expenses in excess of actual documented expenses incurred in the performance of
3.8duties; the cash value of housing, automobiles, parking, or similar benefits; scholarships
3.9or fellowships; the cash value of stock options or awards; payments or contributions for
3.10insurance or to a section 125 cafeteria plan or equivalent arrangement, to a health savings
3.11account, or for severance or its equivalent; and deferred compensation earned or accrued,
3.12even if not yet vested nor paid.
3.13(f) The total value of a severance or similar postemployment or postservice
3.14compensation arrangement or severance payments includes the fair market value of all
3.15cash remuneration as well as the fair market value of all remuneration, including benefits,
3.16paid in any medium other than cash, as defined in paragraph (e).
3.17(g) Any compensation paid for work performed or services provided by a person
3.18whose primary duties are or were executive, managerial, or administrative must be
3.19included in determining the total compensation subject to the limit set forth in paragraph
3.20(a), even if that person also performs or performed other duties.
3.21(h) This subdivision does not impose limits on the compensation of medical or
3.22health care professionals for whom at least 50 percent of their duties involve or involved
3.23the provision of medical services, research, direct patient care, or other nonmanagerial,
3.24nonexecutive, and nonadministrative services.
3.25 Subd. 3. Reporting. (a) Within three months of the close of each fiscal year, the
3.26board of directors of a nonprofit corporation that owns, operates, or controls, in whole or
3.27in part, a nonprofit hospital or affiliated medical entity must submit a report to the attorney
3.28general that contains the following information:
3.29(1) names, positions or titles, and total annual compensation of the ten persons
3.30whose primary duties are executive, managerial, or administrative at or for the nonprofit
3.31hospital or affiliated medical entity who received the greatest total annual compensation
3.32in that fiscal year, and the sources of the compensation. The information provided must
3.33include a detailed breakdown of all wage and nonwage compensation;
3.34(2) names, former positions or titles, and compensation paid pursuant to a severance
3.35or similar postemployment arrangement to the five persons who receive the greatest
3.36severance or similar postemployment payment in that fiscal year and formerly had primary
4.1duties at or for the nonprofit hospital or affiliated medical entity that were executive,
4.2managerial, or administrative, and the sources of the compensation. The information
4.3provided must include a detailed breakdown of all wage and nonwage compensation; and
4.4(3) the identity of all entities that provided compensation, in any form, to the persons
4.5identified pursuant to clauses (1) and (2), and the amount of the compensation.
4.6(b) The board of directors submitting the report pursuant to paragraph (a) must
4.7approve the report before it is submitted to the attorney general. Each director has a duty
4.8to act in good faith and with reasonable care and inquiry in approving the annual report
4.9and in ensuring that the corporation complies with the requirements of this section.
4.10(c) The report submitted pursuant to paragraph (a) must state that it was approved
4.11by the board of directors and set forth the date of the approval, and must be attested
4.12to under penalty of perjury by an authorized representative of the nonprofit hospital or
4.13affiliated medical group addressed by the report.
4.14(d) The report submitted pursuant to paragraph (a) must be submitted on the form or
4.15in the format required by the attorney general.
4.16(e) The report submitted pursuant to paragraph (a) must be posted on a publicly
4.17available Web site and made available to any member of the public upon request.
4.18(f) The attorney general is authorized and directed to establish and assess fees, to be
4.19submitted with each report pursuant to paragraph (a), to cover the costs of implementing
4.20and enforcing this subdivision.
4.21 Subd. 4. Penalties. (a) In addition to any other enforcement actions available
4.22under law, and notwithstanding any other provision of law, the attorney general or any
4.23state taxpayer may bring or intervene in a civil action for a violation of this section for
4.24the civil penalties authorized by section 8.31, subdivisions 3 and 3a, any other authorized
4.25civil fines or penalties, and appropriate equitable relief.
4.26(b) Appropriate equitable relief may include, but is not limited to, the following:
4.27(1) revocation of tax-exempt status under section 290.05, subdivision 2, and
4.28revocation of nonprofit corporate status. In the event a nonprofit corporation seeks to
4.29change its status to a for-profit corporation as a result of the revocation, the corporation is
4.30required to distribute all of its charitable assets in accordance with their charitable purposes
4.31with the approval of the attorney general and in compliance with section 317A.735; and
4.32(2) a civil penalty not exceeding $500,000. Each instance in which the annual
4.33limitations established by subdivision 1 are exceeded for any single individual constitutes
4.34a separate violation for purposes of this paragraph, such that multiple violations may
4.35occur and multiple fines may be imposed if more than one individual receives excessive
5.1compensation in a particular year or if a single individual receives excessive compensation
5.2in more than one year.
5.3(c) Notwithstanding any other provision of law or any provision in a nonprofit
5.4corporation's charter or bylaws, the attorney general may, to promote the purposes of this
5.5section, investigate the affairs of and examine the books, accounts, records, and files of a
5.6nonprofit corporation that owns, operates, or controls, in whole or in part, a hospital or
5.7affiliated medical entity, for the purposes of promoting compliance with this section.
5.8(d) The attorney general has the powers in sections 8.31, 501B.40, and 501B.41 to
5.9supervise and investigate nonprofit hospitals and affiliated medical entities under this
5.10chapter and bring proceedings to secure compliance with this section.
5.11(e) All penalties paid to the attorney general pursuant to this section must be
5.12deposited in the general fund in accordance with section 8.31, subdivision 3.
1.3and affiliated medical entities;proposing coding for new law in Minnesota
1.4Statutes, chapter 317A.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. [317A.911] NONPROFIT HOSPITALS AND AFFILIATED MEDICAL
1.7ENTITIES EXECUTIVE COMPENSATION.
1.8 Subdivision 1. Definitions. The terms defined in this section have the meanings
1.9given them.
1.10(a) "Board of directors" has the meaning set forth in section 317A.011, subdivision 4.
1.11(b) "Nonprofit corporation" means a corporation governed by this chapter.
1.12(c) "Nonprofit hospital or affiliated medical entity" means any of the following:
1.13(1) a hospital, defined in section 144.50, subdivision 2;
1.14(2) a hospital group, which means any group of two or more hospitals described in
1.15clause (1) or any person, corporation, partnership, limited liability company, trust, or other
1.16entity that owns, operates, or controls, in whole or in part, any such group;
1.17(3) a hospital-affiliated medical foundation, which means a medical foundation that
1.18is directly or indirectly controlled or owned by, or controlled or owned by the same person
1.19or entity as, a hospital, hospital group, hospital-affiliated physicians group, or nonprofit
1.20corporation that owns, operates, or controls, in whole or in part, a hospital, hospital group,
1.21or hospital-affiliated physicians group; and
1.22(4) a hospital-affiliated physicians group, which means any physicians group or
1.23medical group that is directly or indirectly controlled or owned by, or controlled or owned
1.24by the same person or entity as, a hospital, hospital group, hospital-affiliated medical
2.1foundation, or a nonprofit corporation that owns, operates, or controls, in whole or in part,
2.2a hospital, hospital group, or hospital-affiliated medical foundation.
2.3 Subd. 2. General. (a) The board of directors of a nonprofit corporation that owns,
2.4operates, or controls, in whole or in part, a nonprofit hospital or affiliated medical entity
2.5must ensure that:
2.6(1) no person whose primary duties at or for the nonprofit hospital or affiliated medical
2.7entity are executive, managerial, or administrative receives total annual compensation
2.8from any source for work performed or services provided at or for the nonprofit hospital
2.9or affiliated medical entity that is greater than the annual salary and expense allowance of
2.10the President of the United States as set forth in United States Code, title 3, section 102;
2.11(2) the total value of the compensation or payments authorized or paid under a
2.12severance or similar postservice or postemployment arrangement for any person who
2.13formerly had primary duties at the nonprofit hospital or affiliated medical entity that were
2.14executive, managerial, or administrative does not exceed the annual salary and expense
2.15allowance of the President of the United States as set forth in United States Code, title
2.163, section 102; and
2.17(3) the nonprofit hospital or affiliated medical entity contributes no more than a
2.18pro rata share of the maximums specified in clauses (1) and (2) toward total annual
2.19compensation or severance payments to any person whose primary duties at or for the
2.20nonprofit hospital or affiliated medical entity are or were executive, managerial, or
2.21administrative.
2.22(b) The compensation limits established by this section apply irrespective of
2.23whether the person exercising executive, managerial, or administrative authority is or
2.24was an employee of the nonprofit hospital or medical entity or the nonprofit corporation
2.25that owns, operates, or controls, in whole or in part, the nonprofit hospital or affiliated
2.26medical entity. These limits apply to any person who exercises or exercised this authority
2.27even if the arrangements for the authority or for compensation or both are pursuant to a
2.28contract or subcontract.
2.29(c) Compensation for work performed or services provided at or for a nonprofit
2.30hospital or affiliated medical entity counts toward the limits set forth in paragraph (a) even
2.31if made by a separate entity, including by any for-profit or unincorporated entity.
2.32(d) Compensation by a separate entity that is purported not to be for work
2.33performed or services provided at or for a covered hospital or medical entity but that
2.34is disproportionate to its purported purpose so as to evade the limitations in paragraph
2.35(a) constitutes a violation of this section.
3.1(e) "Total annual compensation" includes all remuneration paid, earned, or accrued
3.2in the course of a fiscal year for work performed or services provided, including the
3.3cash value of all remuneration, including benefits, in any medium other than cash. Total
3.4annual compensation includes, but is not limited to, wages; salary; paid time off; bonuses;
3.5incentive payments; lump-sum cash payments; the fair market value of below market rate
3.6loans or loan forgiveness; housing payments; payments for transportation, travel, meals,
3.7or other expenses in excess of actual documented expenses incurred in the performance of
3.8duties; the cash value of housing, automobiles, parking, or similar benefits; scholarships
3.9or fellowships; the cash value of stock options or awards; payments or contributions for
3.10insurance or to a section 125 cafeteria plan or equivalent arrangement, to a health savings
3.11account, or for severance or its equivalent; and deferred compensation earned or accrued,
3.12even if not yet vested nor paid.
3.13(f) The total value of a severance or similar postemployment or postservice
3.14compensation arrangement or severance payments includes the fair market value of all
3.15cash remuneration as well as the fair market value of all remuneration, including benefits,
3.16paid in any medium other than cash, as defined in paragraph (e).
3.17(g) Any compensation paid for work performed or services provided by a person
3.18whose primary duties are or were executive, managerial, or administrative must be
3.19included in determining the total compensation subject to the limit set forth in paragraph
3.20(a), even if that person also performs or performed other duties.
3.21(h) This subdivision does not impose limits on the compensation of medical or
3.22health care professionals for whom at least 50 percent of their duties involve or involved
3.23the provision of medical services, research, direct patient care, or other nonmanagerial,
3.24nonexecutive, and nonadministrative services.
3.25 Subd. 3. Reporting. (a) Within three months of the close of each fiscal year, the
3.26board of directors of a nonprofit corporation that owns, operates, or controls, in whole or
3.27in part, a nonprofit hospital or affiliated medical entity must submit a report to the attorney
3.28general that contains the following information:
3.29(1) names, positions or titles, and total annual compensation of the ten persons
3.30whose primary duties are executive, managerial, or administrative at or for the nonprofit
3.31hospital or affiliated medical entity who received the greatest total annual compensation
3.32in that fiscal year, and the sources of the compensation. The information provided must
3.33include a detailed breakdown of all wage and nonwage compensation;
3.34(2) names, former positions or titles, and compensation paid pursuant to a severance
3.35or similar postemployment arrangement to the five persons who receive the greatest
3.36severance or similar postemployment payment in that fiscal year and formerly had primary
4.1duties at or for the nonprofit hospital or affiliated medical entity that were executive,
4.2managerial, or administrative, and the sources of the compensation. The information
4.3provided must include a detailed breakdown of all wage and nonwage compensation; and
4.4(3) the identity of all entities that provided compensation, in any form, to the persons
4.5identified pursuant to clauses (1) and (2), and the amount of the compensation.
4.6(b) The board of directors submitting the report pursuant to paragraph (a) must
4.7approve the report before it is submitted to the attorney general. Each director has a duty
4.8to act in good faith and with reasonable care and inquiry in approving the annual report
4.9and in ensuring that the corporation complies with the requirements of this section.
4.10(c) The report submitted pursuant to paragraph (a) must state that it was approved
4.11by the board of directors and set forth the date of the approval, and must be attested
4.12to under penalty of perjury by an authorized representative of the nonprofit hospital or
4.13affiliated medical group addressed by the report.
4.14(d) The report submitted pursuant to paragraph (a) must be submitted on the form or
4.15in the format required by the attorney general.
4.16(e) The report submitted pursuant to paragraph (a) must be posted on a publicly
4.17available Web site and made available to any member of the public upon request.
4.18(f) The attorney general is authorized and directed to establish and assess fees, to be
4.19submitted with each report pursuant to paragraph (a), to cover the costs of implementing
4.20and enforcing this subdivision.
4.21 Subd. 4. Penalties. (a) In addition to any other enforcement actions available
4.22under law, and notwithstanding any other provision of law, the attorney general or any
4.23state taxpayer may bring or intervene in a civil action for a violation of this section for
4.24the civil penalties authorized by section 8.31, subdivisions 3 and 3a, any other authorized
4.25civil fines or penalties, and appropriate equitable relief.
4.26(b) Appropriate equitable relief may include, but is not limited to, the following:
4.27(1) revocation of tax-exempt status under section 290.05, subdivision 2, and
4.28revocation of nonprofit corporate status. In the event a nonprofit corporation seeks to
4.29change its status to a for-profit corporation as a result of the revocation, the corporation is
4.30required to distribute all of its charitable assets in accordance with their charitable purposes
4.31with the approval of the attorney general and in compliance with section 317A.735; and
4.32(2) a civil penalty not exceeding $500,000. Each instance in which the annual
4.33limitations established by subdivision 1 are exceeded for any single individual constitutes
4.34a separate violation for purposes of this paragraph, such that multiple violations may
4.35occur and multiple fines may be imposed if more than one individual receives excessive
5.1compensation in a particular year or if a single individual receives excessive compensation
5.2in more than one year.
5.3(c) Notwithstanding any other provision of law or any provision in a nonprofit
5.4corporation's charter or bylaws, the attorney general may, to promote the purposes of this
5.5section, investigate the affairs of and examine the books, accounts, records, and files of a
5.6nonprofit corporation that owns, operates, or controls, in whole or in part, a hospital or
5.7affiliated medical entity, for the purposes of promoting compliance with this section.
5.8(d) The attorney general has the powers in sections 8.31, 501B.40, and 501B.41 to
5.9supervise and investigate nonprofit hospitals and affiliated medical entities under this
5.10chapter and bring proceedings to secure compliance with this section.
5.11(e) All penalties paid to the attorney general pursuant to this section must be
5.12deposited in the general fund in accordance with section 8.31, subdivision 3.
