There is a newer version of the New York Consolidated Laws
2010 New York Code
PBH - Public Health
Article 28 - (2800 - 2822) HOSPITALS
2801-A - Establishment or incorporation of hospitals.
* § 2801-a. Establishment or incorporation of hospitals. 1. No
hospital, as defined in this article, shall be established except with
the written approval of the public health council. No certificate of
incorporation of a business membership or not-for-profit corporation
shall hereafter be filed which includes among its corporate purposes or
powers the establishment or operation of any hospital, as defined in
this article, or the solicitation of contributions for any such purpose,
or two or more of such purposes, except with the written approval of the
public health council, and when otherwise required by law of a justice
of the supreme court, endorsed on or annexed to the certificate of
incorporation. No articles of organization of a limited liability
company established pursuant to the New York limited liability company
law which includes among its powers or purposes the establishment or
operation of any hospital as defined in this article, shall be filed
with the department of state except upon the approval of the public
health council.
2. With respect to the incorporation or establishment of any hospital,
as defined in this article, the public health council shall give written
approval after all of the following requirements have been met. An
application for approval of the proposed certificate of incorporation,
articles of organization or establishment shall be filed with the public
health council together with such other forms and information as shall
be prescribed by, or acceptable to, the public health council.
Thereafter, the public health council shall forward a copy of the
proposed certificate or application for establishment, and accompanying
documents, to the state hospital review and planning council and the
health systems agency having geographical jurisdiction of the area where
the proposed institution is to be located. The public health council
shall act upon such application after the state council and the health
systems agency have had a reasonable time to submit their
recommendations. At the time members of the public health council are
notified that an application is scheduled for consideration, the
applicant and the health systems agency shall be so notified in writing.
The public health council shall afford the applicant an opportunity to
present information in person concerning the application to a committee
designated by the council. The public health council shall not take any
action contrary to the advice of either the state council or the health
systems agency until it affords to either an opportunity to request a
public hearing and, if so requested, a public hearing shall be held. If
the public health council proposes to disapprove the application it
shall afford the applicant an opportunity to request a public hearing.
The public health council may hold a public hearing on the application
on its own motion. Any public hearing held pursuant to this subdivision
may be conducted by the public health council, or by any individual
designated by the public health council. Beginning on January first,
nineteen hundred ninety-four, and each year thereafter, a complete
application received between January first and June thirtieth of each
year shall be reviewed by the appropriate health systems agency and the
department and presented to the state hospital review and planning
council for its consideration prior to June thirtieth of the following
year and a complete application received between July first and December
thirty-first of each year shall be reviewed by the appropriate health
systems agency and the department presented to the state hospital review
and planning council for consideration prior to December thirty-first of
the following year.
2-a. (a) Notwithstanding any provision of law to the contrary, the
commissioner is authorized to approve a certificate of incorporation or
articles of organization for establishment of a hospital, provided that:
(i) the certificate of incorporation or articles of organization
reflects solely a change in the form of the business organization of an
existing entity which had been approved by the public health council;
and (ii) every incorporator, stockholder, member, director and sponsor
of the new entity shall have been an owner, partner, incorporator,
stockholder, member, director or sponsor of the existing entity; and
(iii) the distribution of ownership, interests and voting rights in the
new entity shall be the same as in the existing entity; and (iv) there
shall be no change in the operator of a hospital other than the form of
its business organization, as a result of the approval of such
certificate of incorporation or articles of organization. Any approval
by the public health council of a person as an owner, incorporator,
stockholder, member, director or sponsor in the existing entity shall be
deemed to be approval for the same degree of participation in the new
entity. If the proposal is acceptable to the commissioner an amended
operating certificate shall be issued. In the event the commissioner
determines that the proposed transfer is not approvable the application
shall be referred to the public health council for its review and
action. If the public health council proposes to disapprove the
application, it shall afford the applicant an opportunity to request a
public hearing and, if so requested, a public hearing shall be held. Any
public hearing held pursuant to this subdivision may be conducted by the
public health council, or by any individual designated by the public
health council.
3. The public health council shall not approve a certificate of
incorporation, articles of organization or application for establishment
unless it is satisfied, insofar as applicable, as to (a) the public need
for the existence of the institution at the time and place and under the
circumstances proposed, provided, however, that in the case of an
institution proposed to be established or operated by an organization
defined in subdivision one of section one hundred seventy-two-a of the
executive law, the needs of the members of the religious denomination
concerned, for care or treatment in accordance with their religious or
ethical convictions, shall be deemed to be public need; (b) the
character, competence, and standing in the community, of the proposed
incorporators, directors, sponsors, stockholders, members or operators;
with respect to any proposed incorporator, director, sponsor,
stockholder, member or operator who is already or within the past ten
years has been an incorporator, director, sponsor, member, principal
stockholder, principal member, or operator of any hospital, private
proprietary home for adults, residence for adults, or non-profit home
for the aged or blind which has been issued an operating certificate by
the state department of social services, or a halfway house, hostel or
other residential facility or institution for the care, custody or
treatment of the mentally disabled which is subject to approval by the
department of mental hygiene, no approval shall be granted unless the
public health council, having afforded an adequate opportunity to
members of health systems agencies having geographical jurisdiction of
the area where the institution is to be located to be heard, shall
affirmatively find by substantial evidence as to each such incorporator,
director, sponsor, principal stockholder or operator that a
substantially consistent high level of care is being or was being
rendered in each such hospital, home, residence, halfway house, hostel,
or other residential facility or institution with which such person is
or was affiliated; for the purposes of this paragraph, the public health
council shall adopt rules and regulations, subject to the approval of
the commissioner, to establish the criteria to be used to determine
whether a substantially consistent high level of care has been rendered,
provided, however, that there shall not be a finding that a
substantially consistent high level of care has been rendered where
there have been violations of the state hospital code, or other
applicable rules and regulations, that (i) threatened to directly affect
the health, safety or welfare of any patient or resident, and (ii) were
recurrent or were not promptly corrected; (c) the financial resources of
the proposed institution and its sources of future revenues; and (d)
such other matters as it shall deem pertinent.
3-a. Notwithstanding any other provisions of this chapter, the public
health council is hereby empowered to approve the establishment, for
demonstration purposes, of not more than one existing hospital within
the geographical jurisdiction of each health systems agency established
under the provisions of subdivision (c) of section twenty-nine hundred
four of this chapter. The purposes of such hospitals shall be to offer
and provide nursing home services, board and lodging to persons
requiring such services within one hospital. The public health council
may approve the establishment of such hospitals without regard to the
requirement of public need as set forth in subdivision three of this
section.
4. (a) Any change in the person who is the operator of a hospital
shall be approved by the public health council in accordance with the
provisions of subdivisions two and three of this section.
Notwithstanding any inconsistent provision of this paragraph, any change
by a natural person who is the operator of a hospital seeking to
transfer part of his or her interest in such hospital to another person
or persons so as to create a partnership shall be approved in accordance
with the provisions of paragraph (b) of this subdivision.
(b) (i) Any transfer, assignment or other disposition of ten percent
or more of an interest or voting rights in a partnership or limited
liability company, which is the operator of a hospital to a new partner
or member, shall be approved by the public health council in accordance
with the provisions of subdivisions two and three of this section,
except that: (A) any such change shall be subject to the approval by the
public health council in accordance with paragraph (b) of subdivision
three of this section only with respect to the new partner or member,
and any remaining partners or members who have not been previously
approved for that facility in accordance with such paragraph, and (B)
such change shall not be subject to paragraph (a) of subdivision three
of this section.
(ii) With respect to a transfer, assignment or disposition involving
less than ten percent of an interest or voting rights in such
partnership or limited liability company to a new partner or member, no
prior approval of the public health council shall be required. However,
no such transaction shall be effective unless at least ninety days prior
to the intended effective date thereof, the partnership or limited
liability company fully completes and files with the public health
council notice on a form, to be developed by the public health council,
which shall disclose such information as may reasonably be necessary for
the public health council to determine whether it should bar the
transaction for any of the reasons set forth in item (A), (B), (C) or
(D) below. Within ninety days from the date of receipt of such notice,
the public health council may bar any transaction under this
subparagraph: (A) if the equity position of the partnership or limited
liability company, determined in accordance with generally accepted
accounting principles, would be reduced as a result of the transfer,
assignment or disposition; (B) if the transaction would result in the
ownership of a partnership or membership interest by any persons who
have been convicted of a felony described in subdivision five of section
twenty-eight hundred six of this article; (C) if there are reasonable
grounds to believe that the proposed transaction does not satisfy the
character and competence criteria set forth in subdivision three of this
section; or (D) if the transaction, together with all transactions under
this subparagraph for the partnership, or successor, during any five
year period would, in the aggregate, involve twenty-five percent or more
of the interest in the partnership. The public health council shall
state specific reasons for barring any transaction under this
subparagraph and shall so notify each party to the proposed transaction.
(iii) With respect to a transfer, assignment or disposition of an
interest or voting rights in such partnership or limited liability
company to any remaining partner or member, which transaction involves
the withdrawal of the transferor from the partnership or limited
liability company, no prior approval of the public health council shall
be required. However, no such transaction shall be effective unless at
least ninety days prior to the intended effective date thereof, the
partnership or limited liability company fully completes and files with
the public health council notice on a form, to be developed by the
public health council, which shall disclose such information as may
reasonably be necessary for the public health council to determine
whether it should bar the transaction for the reason set forth below.
Within ninety days from the date of receipt of such notice, the public
health council may bar any transaction under this subparagraph if the
equity position of the partnership or limited liability company,
determined in accordance with generally accepted accounting principles,
would be reduced as a result of the transfer, assignment or disposition.
The public health council shall state specific reasons for barring any
transaction under this subparagraph and shall so notify each party to
the proposed transaction.
(c) Any transfer, assignment or other disposition of ten percent or
more of the stock or voting rights thereunder of a corporation which is
the operator of a hospital or which is a member of a limited liability
company which is the operator of a hospital to a new stockholder, or any
transfer, assignment or other disposition of the stock or voting rights
thereunder of such a corporation which results in the ownership or
control of more than ten percent of the stock or voting rights
thereunder of such corporation by any person not previously approved by
the public health council for that corporation shall be subject to
approval by the public health council in accordance with the provisions
of subdivisions two and three of this section and rules and regulations
pursuant thereto; except that: any such transaction shall be subject to
the approval by the public health council in accordance with paragraph
(b) of subdivision three of this section only with respect to a new
stockholder or a new principal stockholder; and shall not be subject to
paragraph (a) of subdivision three of this section. In the absence of
such approval, the operating certificate of such hospital shall be
subject to revocation or suspension. No prior approval of the public
health council shall be required with respect to a transfer, assignment
or disposition of ten percent or more of the stock or voting rights
thereunder of a corporation which is the operator of a hospital or which
is a member of a limited liability company which is the owner of a
hospital to any person previously approved by the public health council
for that corporation. However, no such transaction shall be effective
unless at least ninety days prior to the intended effective date
thereof, the stockholder completes and files with the public health
council notice on forms to be developed by the public health council,
which shall disclose such information as may reasonably be necessary for
the public health council to determine whether it should bar the
transaction. Such transaction will be final as of the intended effective
date unless, prior thereto, the public health council shall state
specific reasons for barring such transactions under this paragraph and
shall notify each party to the proposed transaction. Nothing in this
paragraph shall be construed as permitting a person not previously
approved by the public health council for that corporation to become the
owner of ten percent or more of the stock of a corporation which is the
operator of a hospital or which is a member of a limited liability
company which is the owner of a hospital without first obtaining the
approval of the public health council.
(d) No hospital shall be approved for establishment which would be
operated by a limited partnership, or by a partnership any of the
members of which are not natural persons.
(e) No hospital shall be approved for establishment which would be
operated by a corporation any of the stock of which is owned by another
corporation or a limited liability company if any of its corporate
members' stock is owned by another corporation.
(f) No corporation shall be a member of a limited liability company
authorized to operate a hospital unless its proposed incorporators,
directors, stockholders or principal stockholders shall have been
approved in accordance with the provisions of subdivision three of this
section applicable to the approval of the proposed incorporators,
directors or stockholders of any other corporation requiring approval
for establishment.
(g) A natural person appointed as trustee of an express testamentary
trust, created by a deceased sole proprietor, partner or shareholder in
the operation of a hospital for the benefit of a person of less than
twenty-five years of age, may, as the trustee, apply pursuant to
subdivision two of this section for approval to operate or participate
in the operation of a facility or interest therein which is included in
the corpus of such trust until such time as all beneficiaries attain the
age of twenty-five, unless the trust instrument provides for earlier
termination, or such beneficiaries receive establishment approval in
their own right, or until a transfer of the trust corpus is approved by
the public health council in accordance with this subdivision and
subdivisions two and three of this section, whichever first occurs. The
public health council shall not approve any such application unless it
is satisfied as to:
(i) the character, competence and standing in the community of each
proposed trustee operator pursuant to the provisions of paragraph (b) of
subdivision three of this section; and
(ii) the ability of the trustee under the terms of the trust
instrument to operate or participate in the operation of the hospital in
a manner consistent with this chapter and regulations promulgated
pursuant thereto.
(h) A natural person appointed conservator pursuant to article
eighty-one of the mental hygiene law, or a natural person appointed
committee of the property of an incompetent pursuant to article
eighty-one of the mental hygiene law or a sole proprietor, partner or
shareholder of a hospital, may apply pursuant to subdivision two of this
section for approval to operate a hospital owned by the conservatee or
incompetent for a period not exceeding two years or until a transfer of
the hospital is approved by the public health council in accordance with
subdivisions two and three of this section, whichever occurs first. The
public health council shall not approve any such application unless it
is satisfied as to:
(i) the character, competence and standing in the community of the
proposed conservator operator or committee operator pursuant to the
provisions of paragraph (b) of subdivision three of this section; and
(ii) the ability of the conservator or committee under the terms of
the court order to operate the hospital in a manner consistent with this
chapter and regulations promulgated pursuant thereto.
5. Except as otherwise hereinafter provided, no county, city, town,
village or other governmental subdivision shall establish or create any
agency concerned with the establishment of any hospital as defined in
this article without securing the written approval of the public health
council in accordance with the requirements and procedures of
subdivisions two and three of this section with respect to certificates
of incorporation, articles of organization and establishment, except
that the requirements relating to the proposed incorporators, directors
and sponsors shall not apply. The preceding shall not apply to the
establishment of state hospitals by the state of New York or to the
establishment of municipal hospitals by the city of New York.
6. No corporation having power to solicit contributions for charitable
purposes shall be deemed to have authority to solicit contributions for
any purpose for which the approval of the public health council is
required, unless the certificate of incorporation specifically makes
provision therefor, and the written approval of the public health
council is endorsed on or annexed to such certificate.
7. Where such approval has not been obtained the public health council
may institute and maintain an action in the supreme court through the
attorney general to procure a judgment dissolving and vacating or
annulling the certificate of incorporation of
(a) any such corporation, or
(b) any corporation hereafter incorporated, the name, purposes,
objects or the activities of which in any manner may lead to the belief
that the corporation possesses or may exercise any of such purposes.
8. No corporation heretofore formed, having among its powers the power
to solicit contributions for charitable purposes, may solicit or
continue to solicit contributions for a purpose for which the approval
of the public health council is required without the written approval of
the public health council, except a corporation which, prior to June
first, nineteen hundred seventy, had received the approval of the state
board of social welfare of a certificate of incorporation containing
such power. If such approval is not obtained and the corporation
continues to solicit or to receive contributions for such purpose or
advertises that it has obtained such approval, the public health council
may institute and maintain an action in the supreme court through the
attorney general to procure a judgment dissolving and vacating or
annulling the certificate of incorporation of any such corporation.
9. Only a natural person, a partnership or limited liability company
may hereafter undertake to engage in the business of operating or
conducting a hospital, as defined in this article, for profit, except
that: (a) a person, partnership or corporation which owned and was
operating a hospital on April fourth, nineteen hundred fifty-six, may
continue to own and operate such hospital; (b) a business corporation
may, with the approval of the public health council, and in accordance
with the provisions of subdivisions two and three of this section,
undertake to engage in the business of operating or conducting a
hospital, as defined in this article for profit, provided that such
corporation shall not discriminate because of race, color, creed,
national origin or sponsor in admission or retention of patients; (c) a
business corporation owning and operating a nursing home on May
twenty-second, nineteen hundred sixty-nine, in accordance with
applicable provisions of law, may continue to own and operate such
nursing home; (d) a person who, or a partnership which, is operating a
private proprietary nursing home in accordance with applicable
provisions of law may, with the approval of the public health council,
and in accordance with the provisions of subdivision three of this
section and any rules and regulations thereunder form a business
corporation to engage in the business of operating or conducting such
nursing home, provided, however, that such corporation shall not
discriminate because of race, color, creed, national origin or sponsor
in admission or retention of patients; (e) a business corporation
operating a nursing home, which corporation was formed with the approval
of the state board of social welfare, may continue to own and operate
such nursing home.
10. (a) The public health council, by a majority vote of its members,
shall adopt and amend rules and regulations, to effectuate the
provisions and purposes of this section, and to provide for the
revocation, limitation or annulment of approvals of establishment.
(b) (i) No approval of establishment shall be revoked, limited or
annulled without first offering the person who received such approval
the opportunity of requesting a public hearing. (ii) The commissioner,
at the request of the public health council, shall fix a time and place
for any such hearing requested. (iii) Notice of the time and place of
the hearing shall be served in person or mailed by registered mail to
the person who has received establishment approval at least twenty-one
days before the date fixed for the hearing. (iv) Such person shall file
with the department, not less than eight days prior to the hearing, a
written answer. (v) All orders or determinations hereunder shall be
subject to review as provided in article seventy-eight of the civil
practice law and rules. Application for such review must be made within
sixty days after service in person or by registered mail of a copy of
such order or determination.
11. Any person filing a proposed certificate of incorporation,
articles of organization or an application for establishment of a
residential health care facility for approval of the public health
council shall file with the commissioner such information on the
ownership of the property interests in such facility as shall be
prescribed by regulation, including the following:
(a) The name and address and a description of the interest held by
each of the following persons:
(i) any person, who directly or indirectly, beneficially owns any
interest in the land on which the facility is located;
(ii) any person who, directly or indirectly, beneficially owns any
interest in the building in which the facility is located;
(iii) any person who, directly or indirectly, beneficially owns any
interest in any mortgage, note, deed of trust or other obligation
secured in whole or in part by the land on which or building in which
the facility is located; and
(iv) any person who, directly or indirectly, has any interest as
lessor or lessee in any lease or sub-lease of the land on which or the
building in which the facility is located.
(b) If any person named in response to paragraph (a) of this
subdivision is a partnership or limited liability company, then the name
and address of each partner or member.
(c) If any person named in response to paragraph (a) of this
subdivision is a corporation, other than a corporation whose shares are
traded on a national securities exchange or are regularly quoted in an
over-the-counter market or which is a commercial bank, savings bank or
savings and loan association, then the name and address of each officer,
director, stockholder and, if known, each principal stockholder and
controlling person of such corporation.
(d) If any corporation named in response to paragraph (a) of this
subdivision is a corporation whose shares are traded on a national
securities exchange or are regularly quoted in an over-the-counter
market or which is a commercial bank, savings bank or savings and loan
association, then the name and address of the principal executive
officers and each director and, if known, each principal stockholder of
such corporation.
12. The following definitions shall be applicable to this section:
(a) "Controlling person" of any corporation, partnership, limited
liability company or other entity means any person who by reason of a
direct or indirect ownership interest (whether of record or beneficial)
has the ability, acting either alone or in concert with others with
ownership or membership interests, to direct or cause the direction of
the management or policies of said corporation, partnership, limited
liability company or other entity. Neither the commissioner nor any
employee of the department nor any member of a local legislative body of
a county or municipality, nor any county or municipal official except
when acting as the administrator of a residential health care facility,
shall, by reason of his or her official position, be deemed a
controlling person of any corporation, partnership, limited liability
company or other entity, nor shall any person who serves as an officer,
administrator or other employee of any corporation, partnership, limited
liability company or other entity or as a member of a board of directors
or trustees of any corporation be deemed to be a controlling person of
such corporation, partnership, limited liability company or other entity
as a result of such position or his or her official actions in such
position.
(b) "Principal stockholder" of a corporation means any person who
beneficially owns, holds or has the power to vote, ten percent or more
of any class of securities issued by said corporation.
(c) "Principal member" of a limited liability company means any person
who beneficially owns, holds or has the power to vote, ten percent or
more interest determined by such member's share in the current profits
of the limited liability company.
13. Any person who operates a hospital without the written approval of
the public health council shall be liable to the people of the state for
a civil penalty not to exceed ten thousand dollars for every such
violation.
14. (a) The public health council may approve the establishment of
not-for-profit rural health networks as defined in article twenty-nine-A
of this chapter, pursuant to the provisions of subdivisions two and
three of this section, except that the public health council shall not
consider the public need for and financial resources and sources of
future revenues of such networks which do not seek approval to operate a
hospital. In addition to character and competence, the public health
council may take into consideration available network plans.
(b) The board of directors or trustees of a not-for-profit rural
health network shall be comprised of a representative or representatives
of participating providers and members of the general public residing in
the area served by such network.
15. (a) Diagnostic or treatment centers established exclusively to
provide end stage renal disease services may be operated by corporations
formed under the laws of New York whose stockholders or members, as
applicable, are not natural persons if such corporations and their
principal stockholders and members, as applicable, and controlling
persons comply with all applicable requirements of this section and
demonstrate, to the satisfaction of the public health council,
sufficient experience and expertise in delivering high quality end stage
renal disease care. For purposes of this subdivision, the public health
council shall adopt and amend rules and regulations, notwithstanding any
inconsistent provision of this section, to address any matter it deems
pertinent to the establishment and operation of diagnostic or treatment
centers pursuant to this subdivision; provided that such rules and
regulations shall include, but not be limited to provisions governing or
relating to: (i) any direct or indirect changes or transfers of
ownership interests or voting rights in such corporations or their
stockholders or members, as applicable, and provide for public health
council approval of any change in controlling interests, principal
stockholders, controlling persons, parent company or sponsors; (ii)
oversight of the operator and its stockholders or members, as
applicable, including local governance of the diagnostic or treatment
centers; and (iii) relating to the character and competence and
qualifications of, and changes relating to, the directors and officers
of the operator and its principal stockholders, controlling persons,
parent company or sponsors.
(b) The following provisions of this section shall not apply to
diagnostic or treatment centers operated pursuant to this subdivision:
(i) paragraph (b) of subdivision three of this section, relating to
stockholders and members; (ii) paragraph (c) of subdivision four of this
section, relating to the disposition of stock or voting rights; and
(iii) paragraph (e) of subdivision four of this section, relating to the
ownership of stock or membership.
16. (a) The commissioner shall charge to applicants for the
establishment of hospitals the following application fee:
(i) For general hospitals: $3,000
(ii) For nursing homes: $3,000
(iii) For safety net diagnostic and treatment centers
as defined in paragraph (c) of this subdivision: $1,000
(iv) For all other diagnostic and treatment centers: $2,000
(b) An applicant for both establishment and construction of a hospital
shall not be subject to this subdivision and shall be subject to fees
and charges as set forth in section twenty-eight hundred two of this
article.
(c) The commissioner may designate a diagnostic and treatment center
or proposed diagnostic and treatment center as a "safety net diagnostic
and treatment center" if it is operated or proposes to be operated by a
not-for-profit corporation or local health department; participates or
intends to participate in the medical assistance program; demonstrates
or projects that a significant percentage of its visits, as determined
by the commissioner, were by uninsured individuals; and principally
provides primary care services as defined by the commissioner.
(d) The fees and charges paid by an applicant pursuant to this
subdivision for any application for establishment of a hospital approved
in accordance with this section shall be deemed allowable capital costs
in the determination of reimbursement rates established pursuant to this
article. The cost of such fees and charges shall not be subject to
reimbursement ceiling or other penalties used by the commissioner for
the purpose of establishing reimbursement rates pursuant to this
article. All fees pursuant to this section shall be payable to the
department of health for deposit into the special revenue funds - other,
miscellaneous special revenue fund - 339, certificate of need account.
* NB Effective until December 1, 2010
* § 2801-a. Establishment or incorporation of hospitals. 1. No
hospital, as defined in this article, shall be established except with
the written approval of the public health and health planning council.
No certificate of incorporation of a business membership or
not-for-profit corporation shall hereafter be filed which includes among
its corporate purposes or powers the establishment or operation of any
hospital, as defined in this article, or the solicitation of
contributions for any such purpose, or two or more of such purposes,
except with the written approval of the public health and health
planning council, and when otherwise required by law of a justice of the
supreme court, endorsed on or annexed to the certificate of
incorporation. No articles of organization of a limited liability
company established pursuant to the New York limited liability company
law which includes among its powers or purposes the establishment or
operation of any hospital as defined in this article, shall be filed
with the department of state except upon the approval of the public
health and health planning council.
2. With respect to the incorporation or establishment of any hospital,
as defined in this article, the public health and health planning
council shall give written approval after all of the following
requirements have been met. An application for approval of the proposed
certificate of incorporation, articles of organization or establishment
shall be filed with the public health and health planning council
together with such other forms and information as shall be prescribed
by, or acceptable to, the public health and health planning council.
Thereafter, the public health and health planning council shall forward
a copy of the proposed certificate or application for establishment, and
accompanying documents, to the health systems agency, if any, having
geographical jurisdiction of the area where the proposed institution is
to be located. The public health and health planning council shall act
upon such application after the health systems agency has had a
reasonable time to submit their recommendations. At the time members of
the public health and health planning council are notified that an
application is scheduled for consideration, the applicant and the health
systems agency shall be so notified in writing. The public health and
health planning council shall afford the applicant an opportunity to
present information in person concerning the application to a committee
designated by the council. The public health and health planning council
shall not take any action contrary to the advice of the health systems
agency until it affords to the health systems agency an opportunity to
request a public hearing and, if so requested, a public hearing shall be
held. If the public health and health planning council proposes to
disapprove the application it shall afford the applicant an opportunity
to request a public hearing. The public health and health planning
council may hold a public hearing on the application on its own motion.
Any public hearing held pursuant to this subdivision may be conducted by
the public health and health planning council, or by any individual
designated by the public health and health planning council. Beginning
on January first, nineteen hundred ninety-four, and each year
thereafter, a complete application received between January first and
June thirtieth of each year shall be reviewed by the appropriate health
systems agency and the department and presented to the public health and
health planning council for its consideration prior to June thirtieth of
the following year and a complete application received between July
first and December thirty-first of each year shall be reviewed by the
appropriate health systems agency and the department presented to the
public health and health planning council for consideration prior to
December thirty-first of the following year.
2-a. (a) Notwithstanding any provision of law to the contrary, the
commissioner is authorized to approve a certificate of incorporation or
articles of organization for establishment of a hospital, provided that:
(i) the certificate of incorporation or articles of organization
reflects solely a change in the form of the business organization of an
existing entity which had been approved by the public health and health
planning council or its predecessor; and (ii) every incorporator,
stockholder, member, director and sponsor of the new entity shall have
been an owner, partner, incorporator, stockholder, member, director or
sponsor of the existing entity; and (iii) the distribution of ownership,
interests and voting rights in the new entity shall be the same as in
the existing entity; and (iv) there shall be no change in the operator
of a hospital other than the form of its business organization, as a
result of the approval of such certificate of incorporation or articles
of organization. Any approval by the public health and health planning
council of a person as an owner, incorporator, stockholder, member,
director or sponsor in the existing entity shall be deemed to be
approval for the same degree of participation in the new entity. If the
proposal is acceptable to the commissioner an amended operating
certificate shall be issued. In the event the commissioner determines
that the proposed transfer is not approvable the application shall be
referred to the public health and health planning council for its review
and action. If the public health and health planning council proposes to
disapprove the application, it shall afford the applicant an opportunity
to request a public hearing and, if so requested, a public hearing shall
be held. Any public hearing held pursuant to this subdivision may be
conducted by the public health and health planning council, or by any
individual designated by the public health and health planning council.
3. The public health and health planning council shall not approve a
certificate of incorporation, articles of organization or application
for establishment unless it is satisfied, insofar as applicable, as to
(a) the public need for the existence of the institution at the time and
place and under the circumstances proposed, provided, however, that in
the case of an institution proposed to be established or operated by an
organization defined in subdivision one of section one hundred
seventy-two-a of the executive law, the needs of the members of the
religious denomination concerned, for care or treatment in accordance
with their religious or ethical convictions, shall be deemed to be
public need; (b) the character, competence, and standing in the
community, of the proposed incorporators, directors, sponsors,
stockholders, members or operators; with respect to any proposed
incorporator, director, sponsor, stockholder, member or operator who is
already or within the past ten years has been an incorporator, director,
sponsor, member, principal stockholder, principal member, or operator of
any hospital, private proprietary home for adults, residence for adults,
or non-profit home for the aged or blind which has been issued an
operating certificate by the state department of social services, or a
halfway house, hostel or other residential facility or institution for
the care, custody or treatment of the mentally disabled which is subject
to approval by the department of mental hygiene, no approval shall be
granted unless the public health and health planning council, having
afforded an adequate opportunity to members of health systems agencies,
if any, having geographical jurisdiction of the area where the
institution is to be located to be heard, shall affirmatively find by
substantial evidence as to each such incorporator, director, sponsor,
principal stockholder or operator that a substantially consistent high
level of care is being or was being rendered in each such hospital,
home, residence, halfway house, hostel, or other residential facility or
institution with which such person is or was affiliated; for the
purposes of this paragraph, the public health and health planning
council shall adopt rules and regulations, subject to the approval of
the commissioner, to establish the criteria to be used to determine
whether a substantially consistent high level of care has been rendered,
provided, however, that there shall not be a finding that a
substantially consistent high level of care has been rendered where
there have been violations of the state hospital code, or other
applicable rules and regulations, that (i) threatened to directly affect
the health, safety or welfare of any patient or resident, and (ii) were
recurrent or were not promptly corrected; (c) the financial resources of
the proposed institution and its sources of future revenues; and (d)
such other matters as it shall deem pertinent.
3-a. Notwithstanding any other provisions of this chapter, the public
health council is hereby empowered to approve the establishment, for
demonstration purposes, of not more than one existing hospital within
the geographical jurisdiction of each health systems agency established
under the provisions of subdivision (c) of section twenty-nine hundred
four of this chapter. The purposes of such hospitals shall be to offer
and provide nursing home services, board and lodging to persons
requiring such services within one hospital. The public health council
may approve the establishment of such hospitals without regard to the
requirement of public need as set forth in subdivision three of this
section.
4. (a) Any change in the person who is the operator of a hospital
shall be approved by the public health and health planning council in
accordance with the provisions of subdivisions two and three of this
section. Notwithstanding any inconsistent provision of this paragraph,
any change by a natural person who is the operator of a hospital seeking
to transfer part of his or her interest in such hospital to another
person or persons so as to create a partnership shall be approved in
accordance with the provisions of paragraph (b) of this subdivision.
(b) (i) Any transfer, assignment or other disposition of ten percent
or more of an interest or voting rights in a partnership or limited
liability company, which is the operator of a hospital to a new partner
or member, shall be approved by the public health and health planning
council, in accordance with the provisions of subdivisions two and three
of this section, except that: (A) any such change shall be subject to
the approval by the public health and health planning council in
accordance with paragraph (b) of subdivision three of this section only
with respect to the new partner or member, and any remaining partners or
members who have not been previously approved for that facility in
accordance with such paragraph, and (B) such change shall not be subject
to paragraph (a) of subdivision three of this section.
(ii) With respect to a transfer, assignment or disposition involving
less than ten percent of an interest or voting rights in such
partnership or limited liability company to a new partner or member, no
prior approval of the public health and health planning council shall be
required. However, no such transaction shall be effective unless at
least ninety days prior to the intended effective date thereof, the
partnership or limited liability company fully completes and files with
the public health and health planning council notice on a form, to be
developed by the public health and health planning council, which shall
disclose such information as may reasonably be necessary for the public
health and health planning council to determine whether it should bar
the transaction for any of the reasons set forth in item (A), (B), (C)
or (D) below. Within ninety days from the date of receipt of such
notice, the public health and health planning council may bar any
transaction under this subparagraph: (A) if the equity position of the
partnership or limited liability company, determined in accordance with
generally accepted accounting principles, would be reduced as a result
of the transfer, assignment or disposition; (B) if the transaction would
result in the ownership of a partnership or membership interest by any
persons who have been convicted of a felony described in subdivision
five of section twenty-eight hundred six of this article; (C) if there
are reasonable grounds to believe that the proposed transaction does not
satisfy the character and competence criteria set forth in subdivision
three of this section; or (D) if the transaction, together with all
transactions under this subparagraph for the partnership, or successor,
during any five year period would, in the aggregate, involve twenty-five
percent or more of the interest in the partnership. The public health
and health planning council shall state specific reasons for barring any
transaction under this subparagraph and shall so notify each party to
the proposed transaction.
(iii) With respect to a transfer, assignment or disposition of an
interest or voting rights in such partnership or limited liability
company to any remaining partner or member, which transaction involves
the withdrawal of the transferor from the partnership or limited
liability company, no prior approval of the public health and health
planning council shall be required. However, no such transaction shall
be effective unless at least ninety days prior to the intended effective
date thereof, the partnership or limited liability company fully
completes and files with the public health and health planning council
notice on a form, to be developed by the public health and health
planning council, which shall disclose such information as may
reasonably be necessary for the public health and health planning
council to determine whether it should bar the transaction for the
reason set forth below. Within ninety days from the date of receipt of
such notice, the public health and health planning council may bar any
transaction under this subparagraph if the equity position of the
partnership or limited liability company, determined in accordance with
generally accepted accounting principles, would be reduced as a result
of the transfer, assignment or disposition. The public health and health
planning council shall state specific reasons for barring any
transaction under this subparagraph and shall so notify each party to
the proposed transaction.
(c) Any transfer, assignment or other disposition of ten percent or
more of the stock or voting rights thereunder of a corporation which is
the operator of a hospital or which is a member of a limited liability
company which is the operator of a hospital to a new stockholder, or any
transfer, assignment or other disposition of the stock or voting rights
thereunder of such a corporation which results in the ownership or
control of more than ten percent of the stock or voting rights
thereunder of such corporation by any person not previously approved by
the public health and health planning council, or its predecessor, for
that corporation shall be subject to approval by the public health and
health planning council, in accordance with the provisions of
subdivisions two and three of this section and rules and regulations
pursuant thereto; except that: any such transaction shall be subject to
the approval by the public health and health planning council in
accordance with paragraph (b) of subdivision three of this section only
with respect to a new stockholder or a new principal stockholder; and
shall not be subject to paragraph (a) of subdivision three of this
section. In the absence of such approval, the operating certificate of
such hospital shall be subject to revocation or suspension. No prior
approval of the public health and health planning council shall be
required with respect to a transfer, assignment or disposition of ten
percent or more of the stock or voting rights thereunder of a
corporation which is the operator of a hospital or which is a member of
a limited liability company which is the owner of a hospital to any
person previously approved by the public health and health planning
council, or its predecessor, for that corporation. However, no such
transaction shall be effective unless at least ninety days prior to the
intended effective date thereof, the stockholder completes and files
with the public health and health planning council notice on forms to be
developed by the public health and health planning council, which shall
disclose such information as may reasonably be necessary for the public
health and health planning council to determine whether it should bar
the transaction. Such transaction will be final as of the intended
effective date unless, prior thereto, the public health and health
planning council shall state specific reasons for barring such
transactions under this paragraph and shall notify each party to the
proposed transaction. Nothing in this paragraph shall be construed as
permitting a person not previously approved by the public health and
health planning council for that corporation to become the owner of ten
percent or more of the stock of a corporation which is the operator of a
hospital or which is a member of a limited liability company which is
the owner of a hospital without first obtaining the approval of the
public health and health planning council.
(d) No hospital shall be approved for establishment which would be
operated by a limited partnership, or by a partnership any of the
members of which are not natural persons.
(e) No hospital shall be approved for establishment which would be
operated by a corporation any of the stock of which is owned by another
corporation or a limited liability company if any of its corporate
members' stock is owned by another corporation.
(f) No corporation shall be a member of a limited liability company
authorized to operate a hospital unless its proposed incorporators,
directors, stockholders or principal stockholders shall have been
approved in accordance with the provisions of subdivision three of this
section applicable to the approval of the proposed incorporators,
directors or stockholders of any other corporation requiring approval
for establishment.
(g) A natural person appointed as trustee of an express testamentary
trust, created by a deceased sole proprietor, partner or shareholder in
the operation of a hospital for the benefit of a person of less than
twenty-five years of age, may, as the trustee, apply pursuant to
subdivision two of this section for approval to operate or participate
in the operation of a facility or interest therein which is included in
the corpus of such trust until such time as all beneficiaries attain the
age of twenty-five, unless the trust instrument provides for earlier
termination, or such beneficiaries receive establishment approval in
their own right, or until a transfer of the trust corpus is approved by
the public health and health planning council, in accordance with this
subdivision and subdivisions two and three of this section, whichever
first occurs. The public health and health planning council shall not
approve any such application unless it is satisfied as to:
(i) the character, competence and standing in the community of each
proposed trustee operator pursuant to the provisions of paragraph (b) of
subdivision three of this section; and
(ii) the ability of the trustee under the terms of the trust
instrument to operate or participate in the operation of the hospital in
a manner consistent with this chapter and regulations promulgated
pursuant thereto.
(h) A natural person appointed conservator pursuant to article
eighty-one of the mental hygiene law, or a natural person appointed
committee of the property of an incompetent pursuant to article
eighty-one of the mental hygiene law or a sole proprietor, partner or
shareholder of a hospital, may apply pursuant to subdivision two of this
section for approval to operate a hospital owned by the conservatee or
incompetent for a period not exceeding two years or until a transfer of
the hospital is approved by the public health and health planning
council in accordance with subdivisions two and three of this section,
whichever occurs first. The public health and health planning council
shall not approve any such application unless it is satisfied as to:
(i) the character, competence and standing in the community of the
proposed conservator operator or committee operator pursuant to the
provisions of paragraph (b) of subdivision three of this section; and
(ii) the ability of the conservator or committee under the terms of
the court order to operate the hospital in a manner consistent with this
chapter and regulations promulgated pursuant thereto.
5. Except as otherwise hereinafter provided, no county, city, town,
village or other governmental subdivision shall establish or create any
agency concerned with the establishment of any hospital as defined in
this article without securing the written approval of the public health
and health planning council in accordance with the requirements and
procedures of subdivisions two and three of this section with respect to
certificates of incorporation, articles of organization and
establishment, except that the requirements relating to the proposed
incorporators, directors and sponsors shall not apply. The preceding
shall not apply to the establishment of state hospitals by the state of
New York or to the establishment of municipal hospitals by the city of
New York.
6. No corporation having power to solicit contributions for charitable
purposes shall be deemed to have authority to solicit contributions for
any purpose for which the approval of the public health and health
planning council is required, unless the certificate of incorporation
specifically makes provision therefor, and the written approval of the
public health and health planning council, or its predecessor is
endorsed on or annexed to such certificate.
7. Where such approval has not been obtained the public health and
health planning council may institute and maintain an action in the
supreme court through the attorney general to procure a judgment
dissolving and vacating or annulling the certificate of incorporation of
(a) any such corporation, or
(b) any corporation hereafter incorporated, the name, purposes,
objects or the activities of which in any manner may lead to the belief
that the corporation possesses or may exercise any of such purposes.
8. No corporation heretofore formed, having among its powers the power
to solicit contributions for charitable purposes, may solicit or
continue to solicit contributions for a purpose for which the approval
of the public health and health planning council is required without the
written approval of the public health and health planning council,
except: (a) a corporation which, prior to June first, nineteen hundred
seventy, had received the approval of the state board of social welfare
of a certificate of incorporation containing such power; or (b) a
corporation, which prior to December first, two thousand ten, had
received the approval of the public health council of a certificate of
incorporation containing such power. If such approval is not obtained
and the corporation continues to solicit or to receive contributions for
such purpose or advertises that it has obtained such approval, the
public health and health planning council may institute and maintain an
action in the supreme court through the attorney general to procure a
judgment dissolving and vacating or annulling the certificate of
incorporation of any such corporation.
9. Only a natural person, a partnership or limited liability company
may hereafter undertake to engage in the business of operating or
conducting a hospital, as defined in this article, for profit, except
that: (a) a person, partnership or corporation which owned and was
operating a hospital on April fourth, nineteen hundred fifty-six, may
continue to own and operate such hospital; (b) a business corporation
may, with the approval of the public health council, and in accordance
with the provisions of subdivisions two and three of this section,
undertake to engage in the business of operating or conducting a
hospital, as defined in this article for profit, provided that such
corporation shall not discriminate because of race, color, creed,
national origin or sponsor in admission or retention of patients; (c) a
business corporation owning and operating a nursing home on May
twenty-second, nineteen hundred sixty-nine, in accordance with
applicable provisions of law, may continue to own and operate such
nursing home; (d) a person who, or a partnership which, is operating a
private proprietary nursing home in accordance with applicable
provisions of law may, with the approval of the public health and health
planning council, and in accordance with the provisions of subdivision
three of this section and any rules and regulations thereunder form a
business corporation to engage in the business of operating or
conducting such nursing home, provided, however, that such corporation
shall not discriminate because of race, color, creed, national origin or
sponsor in admission or retention of patients; (e) a business
corporation operating a nursing home, which corporation was formed with
the approval of the state board of social welfare, may continue to own
and operate such nursing home.
10. (a) The public health and health planning council, by a majority
vote of its members, shall adopt and amend rules and regulations, to
effectuate the provisions and purposes of this section, and to provide
for the revocation, limitation or annulment of approvals of
establishment.
(b) (i) No approval of establishment shall be revoked, limited or
annulled without first offering the person who received such approval
the opportunity of requesting a public hearing. (ii) The commissioner,
at the request of the public health and health planning council, shall
fix a time and place for any such hearing requested. (iii) Notice of the
time and place of the hearing shall be served in person or mailed by
registered mail to the person who has received establishment approval at
least twenty-one days before the date fixed for the hearing. (iv) Such
person shall file with the department, not less than eight days prior to
the hearing, a written answer. (v) All orders or determinations
hereunder shall be subject to review as provided in article
seventy-eight of the civil practice law and rules. Application for such
review must be made within sixty days after service in person or by
registered mail of a copy of such order or determination.
11. Any person filing a proposed certificate of incorporation,
articles of organization or an application for establishment of a
residential health care facility for approval of the public health and
health planning council shall file with the commissioner such
information on the ownership of the property interests in such facility
as shall be prescribed by regulation, including the following:
(a) The name and address and a description of the interest held by
each of the following persons:
(i) any person, who directly or indirectly, beneficially owns any
interest in the land on which the facility is located;
(ii) any person who, directly or indirectly, beneficially owns any
interest in the building in which the facility is located;
(iii) any person who, directly or indirectly, beneficially owns any
interest in any mortgage, note, deed of trust or other obligation
secured in whole or in part by the land on which or building in which
the facility is located; and
(iv) any person who, directly or indirectly, has any interest as
lessor or lessee in any lease or sub-lease of the land on which or the
building in which the facility is located.
(b) If any person named in response to paragraph (a) of this
subdivision is a partnership or limited liability company, then the name
and address of each partner or member.
(c) If any person named in response to paragraph (a) of this
subdivision is a corporation, other than a corporation whose shares are
traded on a national securities exchange or are regularly quoted in an
over-the-counter market or which is a commercial bank, savings bank or
savings and loan association, then the name and address of each officer,
director, stockholder and, if known, each principal stockholder and
controlling person of such corporation.
(d) If any corporation named in response to paragraph (a) of this
subdivision is a corporation whose shares are traded on a national
securities exchange or are regularly quoted in an over-the-counter
market or which is a commercial bank, savings bank or savings and loan
association, then the name and address of the principal executive
officers and each director and, if known, each principal stockholder of
such corporation.
12. The following definitions shall be applicable to this section:
(a) "Controlling person" of any corporation, partnership, limited
liability company or other entity means any person who by reason of a
direct or indirect ownership interest (whether of record or beneficial)
has the ability, acting either alone or in concert with others with
ownership or membership interests, to direct or cause the direction of
the management or policies of said corporation, partnership, limited
liability company or other entity. Neither the commissioner nor any
employee of the department nor any member of a local legislative body of
a county or municipality, nor any county or municipal official except
when acting as the administrator of a residential health care facility,
shall, by reason of his or her official position, be deemed a
controlling person of any corporation, partnership, limited liability
company or other entity, nor shall any person who serves as an officer,
administrator or other employee of any corporation, partnership, limited
liability company or other entity or as a member of a board of directors
or trustees of any corporation be deemed to be a controlling person of
such corporation, partnership, limited liability company or other entity
as a result of such position or his or her official actions in such
position.
(b) "Principal stockholder" of a corporation means any person who
beneficially owns, holds or has the power to vote, ten percent or more
of any class of securities issued by said corporation.
(c) "Principal member" of a limited liability company means any person
who beneficially owns, holds or has the power to vote, ten percent or
more interest determined by such member's share in the current profits
of the limited liability company.
13. Any person who operates a hospital without the written approval of
the public health and health planning council shall be liable to the
people of the state for a civil penalty not to exceed ten thousand
dollars for every such violation.
14. (a) The public health and health planning council may approve the
establishment of not-for-profit rural health networks as defined in
article twenty-nine-A of this chapter, pursuant to the provisions of
subdivisions two and three of this section, except that the public
health and health planning council shall not consider the public need
for and financial resources and sources of future revenues of such
networks which do not seek approval to operate a hospital. In addition
to character and competence, the public health and health planning
council may take into consideration available network plans.
(b) The board of directors or trustees of a not-for-profit rural
health network shall be comprised of a representative or representatives
of participating providers and members of the general public residing in
the area served by such network.
15. (a) Diagnostic or treatment centers established exclusively to
provide end stage renal disease services may be operated by corporations
formed under the laws of New York whose stockholders or members, as
applicable, are not natural persons if such corporations and their
principal stockholders and members, as applicable, and controlling
persons comply with all applicable requirements of this section and
demonstrate, to the satisfaction of the public health and health
planning council, sufficient experience and expertise in delivering high
quality end stage renal disease care. For purposes of this subdivision,
the public health and health planning council shall adopt and amend
rules and regulations, notwithstanding any inconsistent provision of
this section, to address any matter it deems pertinent to the
establishment and operation of diagnostic or treatment centers pursuant
to this subdivision; provided that such rules and regulations shall
include, but not be limited to provisions governing or relating to: (i)
any direct or indirect changes or transfers of ownership interests or
voting rights in such corporations or their stockholders or members, as
applicable, and provide for public health council approval of any change
in controlling interests, principal stockholders, controlling persons,
parent company or sponsors; (ii) oversight of the operator and its
stockholders or members, as applicable, including local governance of
the diagnostic or treatment centers; and (iii) relating to the character
and competence and qualifications of, and changes relating to, the
directors and officers of the operator and its principal stockholders,
controlling persons, parent company or sponsors.
(b) The following provisions of this section shall not apply to
diagnostic or treatment centers operated pursuant to this subdivision:
(i) paragraph (b) of subdivision three of this section, relating to
stockholders and members; (ii) paragraph (c) of subdivision four of this
section, relating to the disposition of stock or voting rights; and
(iii) paragraph (e) of subdivision four of this section, relating to the
ownership of stock or membership.
16. (a) The commissioner shall charge to applicants for the
establishment of hospitals the following application fee:
(i) For general hospitals: $3,000
(ii) For nursing homes: $3,000
(iii) For safety net diagnostic and treatment centers
as defined in paragraph (c) of this subdivision: $1,000
(iv) For all other diagnostic and treatment centers: $2,000
(b) An applicant for both establishment and construction of a hospital
shall not be subject to this subdivision and shall be subject to fees
and charges as set forth in section twenty-eight hundred two of this
article.
(c) The commissioner may designate a diagnostic and treatment center
or proposed diagnostic and treatment center as a "safety net diagnostic
and treatment center" if it is operated or proposes to be operated by a
not-for-profit corporation or local health department; participates or
intends to participate in the medical assistance program; demonstrates
or projects that a significant percentage of its visits, as determined
by the commissioner, were by uninsured individuals; and principally
provides primary care services as defined by the commissioner.
(d) The fees and charges paid by an applicant pursuant to this
subdivision for any application for establishment of a hospital approved
in accordance with this section shall be deemed allowable capital costs
in the determination of reimbursement rates established pursuant to this
article. The cost of such fees and charges shall not be subject to
reimbursement ceiling or other penalties used by the commissioner for
the purpose of establishing reimbursement rates pursuant to this
article. All fees pursuant to this section shall be payable to the
department of health for deposit into the special revenue funds - other,
miscellaneous special revenue fund - 339, certificate of need account.
* NB Effective December 1, 2010
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