Protecting the public interest: the role of the state attorney general in regulating hospital conversions.

Increasingly, nonprofit hospital have been responding to market pressures by giving up their tax exemption and selling hospital assets to for-profit corporations. In 1995 alone, fifty-nine nonprofit hospital completed full-asset sales or joint ventures. Hospital managers and board members should understand the legal and regulatory environment surrounding hospital conversions. State attorneys general are taking a more active regulatory role. This discussion describes the application of laws governing charitable trusts and nonprofit corporations to hospital conversions, as well as the central role of the attorney general in the enforcement of such laws. The 1996 Michigan circuit court ruling in Kelley v. MAHSI provides an insightful case study, illustrating a strict application of the law to a joint-venture hospital conversion. The implications of this case will be discussed along with the larger implications of more aggressive state regulation of hospital conversions.