State Codes and Statutes

State Codes and Statutes

Statutes > North-carolina > Chapter_131E > GS_131E-13

§ 131E‑13.  Lease or sale of hospital facilitiesto or from for‑profit or nonprofit corporations or other businessentities by municipalities and hospital authorities.

(a)        A municipality or hospital authority as defined in G.S. 131E‑16(14),may lease, sell, or convey any hospital facility, or part, to a corporation,foreign or domestic, authorized to do business in North Carolina, subject tothese conditions, which shall be included in the lease, agreement of sale, oragreement of conveyance:

(1)        The corporation shall continue to provide the same orsimilar clinical hospital services to its patients in medical‑surgery,obstetrics, pediatrics, outpatient and emergency treatment, including emergencyservices for the indigent, that the hospital facility provided prior to thelease, sale, or conveyance. These services may be terminated only as prescribedby Certificate of Need Law prescribed in Article 9 of Chapter 131E of theGeneral Statutes, or, if Certificate of Need Law is inapplicable, by reviewprocedure designed to guarantee public participation pursuant to rules adoptedby the Secretary of the Department of Health and Human Services.

(2)        The corporation shall ensure that indigent care is availableto the population of the municipality or area served by the hospital authorityat levels related to need, as previously demonstrated and determined mutuallyby the municipality or hospital authority and the corporation.

(3)        The corporation shall not enact financial admission policiesthat have the effect of denying essential medical services or treatment solelybecause of a patient's immediate inability to pay for the services ortreatment.

(4)        The corporation shall ensure that admission to and servicesof the facility are available to beneficiaries of governmental reimbursementprograms (Medicaid/Medicare) without discrimination or preference because theyare beneficiaries of those programs.

(5)        The corporation shall prepare an annual report that showscompliance with the requirements of the lease, sale, or conveyance.

The corporation shall further agree that if it fails to substantiallycomply with these conditions, or if it fails to operate the facility as acommunity general hospital open to the general public and free ofdiscrimination based on race, creed, color, sex, or national origin unlessrelieved of this responsibility by operation of law, or if the corporationdissolves without a successor corporation to carry out the terms and conditionsof the lease, agreement of sale, or agreement of conveyance, all ownership orother rights in the hospital facility, including the building, land andequipment associated with the hospital, shall revert to the municipality orhospital authority or successor entity originally conveying the hospital;provided that any building, land, or equipment associated with the hospitalfacility that the corporation has constructed or acquired since the sale mayrevert only upon payment to the corporation of a sum equal to the cost lessdepreciation of the building, land, or equipment.

This section shall not apply to leases, sales, or conveyances ofnonmedical services or commercial activities, including the gift shop,cafeteria, the flower shop, or to surplus hospital property that is notrequired in the delivery of necessary hospital services at the time of thelease, sale, or conveyance.

(b)        In the case of a sale or conveyance, if either generalobligation bonds or revenue bonds issued for the benefit of the hospital to beconveyed are outstanding at the time of sale or conveyance, then thecorporation shall agree to the following:

By the effective date of sale or conveyance, the corporation shallplace into an escrow fund money or direct obligations of, or obligations theprincipal of and interest on which, are unconditionally guaranteed by theUnited States of America (as approved by the Local Government Commission), theprincipal of and interest on which, when due and payable, will providesufficient money to pay the principal of and the interest and redemptionpremium, if any, on all bonds then outstanding to the maturity date or dates ofsuch bonds or to the date or dates specified for the redemption thereof. Thecorporation shall furnish to the Local Government Commission such evidence asthe Commission may require that the securities purchased will satisfy therequirements of this section. A hospital which has placed funds in escrow toretire outstanding general obligation or revenue bonds, as provided in thissection, shall not be considered a public hospital, and G.S. 159‑39(a)(3)shall be inapplicable to such hospitals.

No bonds, notes or other evidences of indebtedness shall be issued by amunicipality or hospital authority to finance equipment for or the acquisition,extension, construction, reconstruction, improvement, enlargement, orbetterment of any hospital facility if the facility has been sold or conveyedto a corporation, foreign or domestic, authorized to do business in NorthCarolina.

(c)        In the case of a lease, the municipality or hospitalauthority shall determine the length of the lease. No lease executed under thissection shall be deemed to convey a freehold interest. Any sublease orassignment of the lease shall be subject to the conditions prescribed by thissection. If the term of the lease is more than 10 years, and either generalobligation bonds or revenue bonds issued for the benefit of the hospital to beleased are outstanding at the time of the lease, then the corporation shallagree to the following:

By the effective date of the lease, the corporation shall place into anescrow fund money or direct obligations of, or obligations the principal of andinterest on which, are unconditionally guaranteed by the United States ofAmerica (as approved by the Local Government Commission), the principal of andinterest on which, when due and payable, will provide sufficient money to paythe principal of and the interest and redemption premium, if any, on all bondsthen outstanding to the maturity date or dates of such bonds or to the date ordates specified for the redemption thereof. The corporation shall furnish tothe Local Government Commission such evidence as the Commission may requirethat the securities purchased will satisfy the requirements of this section.

No bonds, notes or other evidences of indebtedness shall be issued by amunicipality or hospital authority to finance equipment for or the acquisition,extension, construction, reconstruction, improvement, enlargement, orbetterment of any hospital facility when the facility is leased to acorporation, foreign or domestic, authorized to do business in North Carolina.

(d)        The municipality or hospital authority shall comply with thefollowing procedures before leasing, selling, or conveying a hospital facility,or part thereof:

(1)        The municipality or hospital authority shall first adopt aresolution declaring its intent to sell, lease, or convey the hospital facilityat a regular meeting on 10 days' public notice. Notice shall be given bypublication in one or more papers of general circulation in the affected areadescribing the intent to lease, sell, or convey the hospital facility involved,known potential buyers or lessees, a solicitation of additional interestedbuyers or lessees and intent to negotiate the terms of the lease or sale.Specific notice, given by certified mail, shall be given to the local office ofeach state‑supported program that has made a capital expenditure in thehospital facility, to the Department of Health and Human Services, and to theOffice of State Budget and Management.

(2)        At the meeting to adopt a resolution of intent, themunicipality or hospital authority shall request proposals for lease orpurchase by direct solicitation of at least five prospective lessees or buyers.The solicitation shall include a copy of G.S. 131E‑13.

(3)        The municipality or hospital authority shall conduct apublic hearing on the resolution of intent not less than 15 days after itsadoption. Notice of the public hearing shall be given by publication at least15 days before the hearing. All interested persons shall be heard at the publichearing.

(4)        Before considering any proposal to lease or purchase, themunicipality or hospital authority shall require information on charges,services, and indigent care at similar facilities owned or operated by the proposedlessee or buyer.

(5)        Not less than 45 days after adopting a resolution of intentand not less than 30 days after conducting a public hearing on the resolutionof intent, the municipality or hospital authority shall conduct a publichearing on proposals for lease or purchase that have been made. Notice of thepublic hearings shall be given by publication at least 10 days before thehearing. The notice shall state that copies of proposals for lease or purchaseare available to the public.

(6)        The municipality or hospital authority shall make copies ofthe proposals to lease or purchase available to the public at least 10 daysbefore the public hearing on the proposals.

(7)        Not less than 60 days after adopting a resolution of intent,the municipality or hospital authority at a regular meeting shall approve anylease, sale, or conveyance by a resolution. The municipality or hospitalauthority shall adopt this resolution only upon a finding that the lease, sale,or conveyance is in the public interest after considering whether the proposedlease, sale, or conveyance will meet the health‑related needs ofmedically underserved groups, such as low income persons, racial and ethnicminorities, and handicapped persons. Notice of the regular meeting shall begiven at least 10 days before the meeting and shall state that copies of thelease, sale, or conveyance proposed for approval are available.

(8)        At least 10 days before the regular meeting at which anylease, sale, or conveyance is approved, the municipality or hospital authorityshall make copies of the proposed contract available to the public.

(e)        Notwithstanding the provisions of subsections (c) and (d) ofthis section or G.S. 131E‑23, a hospital authority as defined in G.S.131E‑16(14) or a municipality may lease or sublease hospital land to acorporation or other business entity, whether for profit or not for profit, andmay participate as an owner, joint venturer, or other equity participant with acorporation or other business entity for the development, construction, andoperation of medical office buildings and other health care or hospitalfacilities, so long as the municipality, hospital authority, or other entitycontinues to maintain its primary community general hospital facilities asrequired by subsection (a) of this section.

(f)         A municipality or hospital authority may permit or consentto the pledge of hospital land or leasehold estates in hospital land tofacilitate the development, construction, and operation of medical officebuildings and other health care or hospital facilities. A municipality orhospital authority also may, as lessee, enter into master leases or agreementsto fund for temporary vacancies relating to hospital land or hospitalfacilities for use in the provision of health care.

(g)        Neither G.S. 153A‑176 nor Article 12 of Chapter 160Aof the General Statutes shall apply to leases, subleases, sales, or conveyancesunder this Chapter. (1983 (Reg. Sess., 1984),c. 1066, s. 1; 1997‑233, s. 2; 1997‑443, s. 11A.118(a); 2000‑140,s. 93.1(a); 2001‑424, s. 12.2(b).)