2012 New York Consolidated Laws
PBH - Public Health
Article 28 - (2800 - 2823) 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  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
  and  limited liability companies formed under the laws of New York whose
  stockholders or members, as applicable, are not natural persons if  such
  corporations   and   limited   liability  companies  and  its  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  and  limited  liability companies or their stockholders or
  members, as  applicable,  and  provide  for  public  health  and  health
  planning  council  approval  of  any  change  in  controlling interests,
  principal stockholders, principal members, 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,  managers
  and  officers  of the operator and its principal stockholders, principal
  members, 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.