House Passes Bill Allowing LLCs to Buy and Sell Hospital Beds

By Brandon Moseley

Alabama Political Reporter

On Tuesday, the Alabama House of Representatives passed House Bill 174. HB 174 was sponsored by Alabama State Representative Jim McClendon (R) from Springville and concerns healthcare facilities. Alabama is a Certificate of Need state, meaning that to operate a hospital or other medical facility in the state of Alabama you have to apply for and receive a Certificate of Need (CON) from the state Certificate of Need Board.

HB 174 became necessary after the Alabama Court of Civil Appeals ruled that a certificate of need (CON) can not be issued to or transferred to a Limited Liability Company (LLC) or similar business entity because there is no such provision in Alabama law.

Rep. McClendon said that the law establishing the CON system and how CONs are transferred was passed in 1979 and did not envision LLCs because they weren't around then. Since then most healthcare facilitys have moved to the LLC form of ownership.

Because many CONs have changed hands or been awarded in the years since 1979, McClendon said that his bill would be retroactive to 1979 because otherwise CON transfers to LLCs would be illegal under this ruling.

McClendon said that the court has since withdrawn that ruling but the problem remains.

Rep. Mary Moore (D) from Birmingham asked if this if Jefferson County could sell the beds freed up by the closing of Cooper Green.

Rep. McClendon said yes they can and that they could also transfer those CON beds to the Jefferson County owned nursing home.

McClendon said that this bill will not change anything that has transpired with Cooper Green Hospital in Birmingham.

Specifically, “This bill would specify that the transfer of a certificate of need by lease issued to a limited liability company or other legal entity by lease, sale, or other transaction involving an existing health care facility, health maintenance organization, or institutional health service does not require a new or additional CON. The bill would apply retroactively when an amendment to the CON law was enacted which had previously been interpreted as authorizing the transfers without a new CON.”

The bill defined Health Care Facilities as, “General and specialized hospitals, including tuberculosis, psychiatric, long-term care, and other types of hospitals, and related facilities such as, laboratories, out-patient clinics, and central service facilities operated in connection with hospitals; skilled nursing facilities; intermediate care facilities; skilled or intermediate care units operated in veterans' nursing homes and veterans' homes, owned or operated by the State Department of Veterans' Affairs, as these terms are described in Chapter 5A (commencing with Section 31-5A-1) of Title 31, rehabilitation centers; public health centers; facilities for surgical treatment of patients not requiring hospitalization; kidney disease treatment centers, including free-standing dialysis units; community mental health centers and related facilities; alcohol and drug abuse facilities; facilities for the developmentally disabled; hospice service providers; and home health agencies and health maintenance organizations.” The bill does not apply to doctors or dentists offices.

HB 174 passed in the House 90 to 0