Not-for-Profit Hospitals: Conversion Issues Prompt Increased State
Oversight (Letter Report, 12/16/97, GAO/HEHS-98-24).

Pursuant to a congressional request, GAO reviewed the process that some
not-for-profit hospitals have used in converting to for-profit status,
focusing on: (1) the method used to value assets; (2) the process used
to solicit interest and obtain bids; (3) the terms negotiated as part of
the sales agreement, including provisions for continued charity care;
(4) the extent of community involvement in the process; (5) how the
proceeds from the sale were used to fulfill charitable missions; and (6)
the role state and federal governments play in regulating and monitoring
hospital conversions.

GAO noted that: (1) the process of converting from a not-for-profit
hospital to a for-profit hospital was similar among the transactions GAO
reviewed; (2) most transactions were carried out between boards and
executives of the selling hospitals and representatives of the
for-profit purchasers and not routinely subject to public disclosure;
(3) standard industry methodologies were used to estimate the value of
the 14 not-for-profit hospitals GAO reviewed; (4) 8 of the 14 hospitals
received multiple bids, and almost all of the hospitals reported
accepting a purchase price greater than the valuation estimate; (5) in
negotiating conversion terms, most hospitals included provisions for
continued charity care and services in the agreement; (6) the for-profit
hospital or joint venture boards resulting from the conversions are
responsible for monitoring compliance with these agreements and ensuring
that they are enforced; (7) except for members of the boards of
directors, community involvement in conversion decisions was limited;
(8) net proceeds reported from the conversions totalled about $950
million; (9) of the 14 transactions, 12 directed net proceeds to
charitable foundations; (10) in most states, attorneys general have
authority to monitor and oversee hospital conversions through common law
and not-for-profit corporation law; (11) for nine of the conversions
reviewed, five state attorneys general exercised their authority to
review the conversion process; (12) states are beginning to increase the
authority of attorneys general through specific conversion legislation,
allowing a state official to review the terms of the deal and the
direction of the charitable proceeds; (13) the federal government's role
in monitoring hospital conversions is carried out mostly by the Internal
Revenue Service (IRS) and the Federal Trade Commission (FTC) which
oversee tax and antitrust issues; (14) IRS officials stated that the
operation of the joint venture may result in more than incidental
benefit to the for-profit partner, thereby creating a basis for denying
or revoking the tax status of the charitable entity; (15) another issue
related to joint ventures involves the participation of individuals on
both not-for-profit and for-profit boards, creating a potential conflict
of interest; and (16) FTC officials reported that antitrust issues
related to hospital conversions do not differ from other mergers and
acquisitions, and the agency's involvement has generally been limited to
a routine oversight role.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-98-24
     TITLE:  Not-for-Profit Hospitals: Conversion Issues Prompt 
             Increased State Oversight
      DATE:  12/16/97
   SUBJECT:  Corporations
             Hospital administration
             Non-profit organizations
             Antitrust law
             Charitable organizations
             Sales contracts
             Tax exempt organizations
             Health care services

             
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Cover
================================================================ COVER


Report to Congressional Requesters

December 1997

NOT-FOR-PROFIT HOSPITALS -
CONVERSION ISSUES PROMPT INCREASED
STATE OVERSIGHT

GAO/HEHS-98-24

Not-for-Profit Hospital Conversions

(108295)


Abbreviations
=============================================================== ABBREV

  CEO - chief executive officer
  EBITDA - earnings before interest, taxes, depreciation, and
     amortization
  FTC - Federal Trade Commission
  IRS - Internal Revenue Service
  JOA - joint operating agreement
  NAAG - National Association of Attorneys General
  PROPAC - Prospective Payment Assessment Commission
  RFP - request for proposals

Letter
=============================================================== LETTER


B-275380

December 16, 1997

The Honorable Pete Stark
Ranking Minority Member
Subcommittee on Health
Committee on Ways and Means
House of Representatives

The Honorable William J.  Coyne
Ranking Minority Member
Subcommittee on Oversight
Committee on Ways and Means
House of Representatives

Growing competition, spurred by the growth of managed care, and the
need for capital investment are driving not-for-profit hospitals to
sell to or establish joint ventures with for-profit companies. 
Between 1990 and 1996, national surveys estimated that 192 of the
more than 5,000 not-for-profit hospitals in the United States
converted to for-profit status.  In 1996 alone, more than 60
not-for-profit hospitals converted to for-profit status. 
Not-for-profit hospitals have traditionally provided charitable
community services, including uncompensated care for the uninsured
and underinsured.  In exchange for providing these community
benefits, most not-for-profit hospitals have received financial
benefits, such as exemption from federal, state, and local taxes and
access to tax-exempt bond financing.  In general, not-for-profit
hospitals are viewed as charitable assets that belong to the
community.  Consistent with this perception, the proceeds from
hospital conversions are generally directed to not-for-profit
foundations or other charitable entities.  Concerns have been raised
about the potential loss of community benefits resulting from
conversions as well as charitable entities' use of conversion
proceeds for nonhealth-related activities.  Issues have also been
raised regarding public disclosure, including the extent of community
involvement in the conversion transactions. 

In response to these concerns, you asked that we review the process
that some not-for-profit hospitals have used in converting to
for-profit status.  Specifically, we determined for selected
conversions (1) the method used to value assets; (2) the process used
to solicit interest and obtain bids; (3) some of the terms negotiated
as part of the sales agreement, including provisions for continued
charity care; (4) the extent of community involvement in the process;
and (5) how the proceeds from some of the sales were used to fulfill
charitable missions.  We also determined the role state and federal
governments play in regulating and monitoring hospital conversions. 

To identify recent conversions, we obtained a list of not-for-profit
hospital conversions that occurred after 1990 from three major
investor-owned corporations:  Columbia/HCA Healthcare Corporation,\1
Quorum Health Group, and Tenet Healthcare Corporation.  We selected
six states and 14 sites in order to include the following:  asset
sales and joint venture transactions; states and sites with multiple
conversions, conversions involving multiple investor-owned companies,
or both; and transactions in which the proceeds were directed to
foundations (see table 1).  As part of our site visits, we
interviewed hospital officials, attorneys who represented the
not-for-profit hospitals, not-for-profit hospital board members,
foundation presidents and board members, outside consultants hired to
advise the not-for-profit hospitals, and attorneys in the state
attorneys general offices.  We also held discussions with officials
of the Internal Revenue Service (IRS), Department of the Treasury,
Federal Trade Commission (FTC), and Department of Justice; health
care associations; interest groups; and investor-owned companies.  In
addition, for some of the conversions, we obtained and reviewed
documents related to the transaction. 

Further, for some of the conversions, we were not provided
documentary evidence to support information we received through
discussions with officials involved in or knowledgeable about the
transactions.  For example, although we requested purchase or
partnership agreements, valuation estimates, and support for the
amount of proceeds that resulted from the conversion, in most cases,
neither the not-for-profit nor the for-profit parties involved in the
conversion would provide a copy of their complete contractual
agreement or documents to support valuation estimates or proceeds. 
Officials said that they could not provide documentation because of
confidentiality agreements.  However, we did obtain other
documentation, including selected segments of contractual agreements
to support terms negotiated, as well as other forms of documentation
on purchase price for most of the transactions we reviewed. 

In our review of the conversion process, we also determined what
processes were used to value hospitals' assets and derive a final
selling price.  We did not determine whether the hospitals were sold
at fair market value.  (See app.  I for a detailed description of our
objectives, scope, and methodology.) Our work was performed between
October 1996 and November 1997 in accordance with generally accepted
government auditing standards, except where noted above. 



                          Table 1
          
                       Sites Visited

Not-for-profit      For-profit      Conversion
hospital            company         type              Year
------------------  --------------  --------------  ------
Alabama
----------------------------------------------------------
Baptist Memorial    Quorum Health   Asset sale        1993
Hospital            Group

Jacksonville        Quorum Health   Asset sale        1996
Hospital (city-     Group
owned)

Lloyd Noland        Tenet           Asset sale        1996
Hospital            Healthcare
                    Corporation


California
----------------------------------------------------------
Good Samaritan      Columbia/HCA    Asset sale        1996
Health System       Healthcare
                    Corporation


Louisiana
----------------------------------------------------------
Mercy Baptist       Tenet           Asset sale        1995
Medical Center      Healthcare
                    Corporation

Tulane University   Columbia/HCA    Joint venture     1995
Hospital            Healthcare
                    Corporation


South Carolina
----------------------------------------------------------
Mary Black          Quorum Health   Asset sale        1996
Memorial Hospital   Group

Carolinas Hospital  Quorum Health   Asset sale        1995
System              Group

Hilton Head         Tenet           Joint venture     1994
Hospital            Healthcare
                    Corporation


Tennessee
----------------------------------------------------------
Goodlark Regional   Columbia/HCA    Asset sale        1995
Medical Center      Healthcare
                    Corporation

St. Francis         Tenet           Asset sale        1994
Hospital            Healthcare
                    Corporation


Virginia
----------------------------------------------------------
The Arlington       Columbia/HCA    Joint venture     1996
Hospital            Healthcare
                    Corporation

John Randolph       Columbia/HCA    Asset sale        1995
Medical Center      Healthcare
(public)            Corporation

The Retreat         Columbia/HCA    Asset sale        1995
Hospital            Healthcare
                    Corporation
----------------------------------------------------------
Note:  Most of the information received from the investor-owned
companies reflected conversions that occurred after 1993. 


--------------------
\1 In Feb.  1994, Columbia merged with HCA to form Columbia/HCA
Healthcare Corporation.  The list of not-for-profit conversions we
received from Columbia/HCA contains conversions for the merged
entity. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The process of converting from a not-for-profit hospital to a
for-profit hospital was similar among the transactions we reviewed. 
Most of the transactions were carried out between boards and
executives of the selling hospitals and representatives of the
for-profit purchasers and not routinely subject to public disclosure. 
A growing number of states are recognizing the public interest at
stake and becoming more involved in overseeing the conversion process
and reviewing terms of the conversion transactions. 

Standard industry methodologies were used to estimate the value of
the 14 not-for-profit hospitals we reviewed.  These methodologies for
valuing not-for-profit hospitals involve multiplying the hospitals'
adjusted earnings by a variable, which in recent years has commonly
been six, while also taking into account the value of comparable
entities.  In addition to obtaining valuation estimates, eight of the
hospitals received multiple bids, and six accepted the highest bid. 
Reported purchase prices that the selling not-for-profit hospitals
agreed to ranged from $16 million to $212 million.  We did not
determine the hospitals' fair market value.  In negotiating the terms
of the conversion, most hospitals reported including provisions for
continued charity care and services in the agreement.  The for-profit
hospital or joint venture boards that resulted from the conversions
are typically responsible for monitoring compliance with these
agreements and ensuring that they are enforced.  Except for members
of the boards of directors, community involvement in conversion
decisions was limited, with broader community involvement in only 5
of the 14 transactions. 

Net proceeds reported from the conversions we reviewed totaled about
$930 million.  Of the 14 transactions we reviewed, 12 directed net
proceeds to charitable foundations.  Most of the foundations had
broadly defined missions that primarily focused on health and
wellness.  At the time of our review, eight foundations had started
awarding grants, including awards for disease prevention,
cardiopulmonary resuscitation and first aid training, and long-term
care.  One foundation is not issuing grants but has used the proceeds
to support an aerospace program; construction of an arts, education,
and technology center; and other projects.  The activities of the
other two entities that received conversion proceeds, a university
and a city, were directed to education, working capital needs, and
the construction of facilities.  Community input on the use of
conversion proceeds was obtained through public forums and needs
assessments in 6 of the 14 conversions. 

In most states, attorneys general have authority to monitor and
oversee hospital conversions through common law and not-for-profit
corporation law.  For nine of the conversions we reviewed, state
attorneys general in five states (Alabama, California, South
Carolina, Tennessee, and Virginia) exercised their authority to
review the conversion process.  Such a review can explore issues of
valuation, conflicts of interest, and use of charitable proceeds.  In
one of these reviews, the attorney general ruled against a proposed
use of charitable proceeds that would have benefited the new
for-profit hospital.  States are beginning to increase the authority
of attorneys general through specific conversion legislation. 
However, at the time of conversion of the hospitals we reviewed, none
of the six states had specific conversion legislation.  As of August
1997, a total of 24 states (including 3 states in our
review--California, Louisiana, and Virginia) and the District of
Columbia had enacted legislation to address some conversion concerns,
usually including public disclosure and community benefit.  Some
legislation allows a state official to review the terms of the deal
and the direction of the charitable proceeds.  In addition, a model
act has been developed by two groups, Community Catalyst and
Consumers Union, to assist states in formulating specific
legislation.  The act includes model provisions related to fair
market value, conflicts of interest, community involvement, and use
of proceeds to meet health care needs. 

The federal government's role in monitoring hospital conversions is
carried out mostly by the IRS, FTC, and the Department of Justice,
which oversee tax and antitrust issues, respectively.  The IRS has
raised questions about the tax implications of not-for-profit and
for-profit joint venture arrangements--for example, whether the
not-for-profit partner will retain its tax-exempt status.  IRS
officials stated that the operation of the joint venture may result
in more than incidental benefit to the for-profit partner, thereby
creating a basis for denying or revoking the tax status of the
charitable entity.  The IRS and the Department of the Treasury expect
to issue joint venture guidance in December 1997 that may address
some of these questions.  Another issue related to joint ventures
involves the participation of individuals on both not-for-profit and
for-profit boards.  This participation creates a potential conflict
of interest because the not-for-profit has a stake in maintaining the
for-profit's interests.  Dual board membership occurred in the three
joint ventures we reviewed.  FTC officials reported that the
antitrust issues related to hospital conversions do not differ from
those presented by other mergers and acquisitions, and the agency's
involvement in hospital conversions has generally been limited to its
routine oversight role.  Since 1993, FTC has brought three antitrust
enforcement actions related to not-for-profit hospital conversions;
one of these actions involved one of the conversions we reviewed. 


   BACKGROUND
------------------------------------------------------------ Letter :2

A not-for-profit hospital conversion is a transaction that results in
the shift of all or a substantial portion of the assets of a
not-for-profit hospital to for-profit use.\2 Most hospital
conversions have been structured as asset sales; however, recently
some hospitals have, for example, entered into joint venture
arrangements.  In an asset sale, a not-for-profit hospital sells its
physical assets, name, and accounts to a for-profit purchaser in
exchange for cash, stock, notes, or other property.  In a joint
venture, a not-for-profit hospital contributes its assets to a
for-profit partnership in exchange for cash and an ownership interest
in the new venture.  For example, in an 80/20 joint venture, the
not-for-profit entity receives cash equal to 80 percent of the value
of the hospital's assets and a 20-percent ownership interest in the
for-profit venture.  Other methods of conversion include lease
arrangements and corporate restructurings.  Federal and most state
laws require that proceeds from the sale of charitable assets
continue to be used for charitable purposes.  These proceeds are
generally directed to a not-for-profit foundation or other charitable
entity. 

Market and institutional factors, such as the growth of managed care
and the need for capital, are often cited as primary reasons for
conversions.  To be successful in a managed care environment,
not-for-profit hospitals must be in a competitive position.  This
position can be achieved by building networks that guarantee patient
flow and increase bargaining power with managed care plans and
physician groups.  Access to capital is particularly important in a
managed care environment, in which substantial investments may be
necessary for information systems, network development, and expanding
market share. 

Columbia/HCA Healthcare Corporation, Tenet Healthcare Corporation,
and Quorum Health Group are major players in the hospital acquisition
market.  Columbia/HCA is one of the largest health care services
companies in the United States.  As of February 1996, Columbia
operated 343 hospitals, 135 outpatient surgery centers, 200 home
health agencies, and extensive outpatient and ancillary services in
38 states, the United Kingdom, and Switzerland.  Columbia reported 50
not-for-profit hospital acquisitions, joint ventures, and lease
arrangements between 1994 and 1996.  Until recently, Tenet, a
nationwide provider of health care services, owned and operated 76
general hospitals and related businesses in 13 states.  On January
30, 1997, Tenet acquired OrNda HealthCorp, one of the nation's
largest investor-owned hospital management companies, with 49
hospitals in 15 states.  Through this transaction, Tenet now owns,
leases, or operates 130 hospitals in 22 states.  Tenet reported nine
not-for-profit hospital acquisitions and one joint venture since
1990.\3 Quorum owns and operates acute-care hospitals and local and
regional health care systems in 43 states and the District of
Columbia.  As of June 1996, Quorum owned 14 acute-care hospitals and
had management contracts with 253 hospitals and consulting contracts
with another 161 hospitals.  Quorum reported 12 not-for-profit
hospital acquisitions and leases since 1990. 


--------------------
\2 Not-for-profit hospitals are generally created under state
not-for-profit corporation laws.  A not-for-profit entity can apply
to the IRS for federal tax-exempt status.  Throughout the report, the
term "not-for-profit" is used to describe entities that qualify for
federal tax exemption. 

\3 This does not include hospital acquisitions and joint ventures
acquired as part of Tenet's recent merger with OrNda. 


   STANDARD METHODS WERE
   CONSISTENTLY USED TO VALUE
   HOSPITALS' ASSETS, BUT OTHER
   KEY ELEMENTS OF THE CONVERSION
   PROCESS VARIED
------------------------------------------------------------ Letter :3

The hospitals we reviewed followed the same basic process in
converting from not-for-profit to for-profit status:  They valued the
hospital's assets; sought out a buyer or partner, generally through a
competitive process; and negotiated the terms of the final agreement. 
The methods used to determine the hospitals' value were commonly used
approaches, according to industry experts.  A key component
considered in estimating the value of the hospitals we reviewed was
their most recent earnings.  The valuation estimate is a benchmark
that hospital officials can use in considering bids from potential
buyers or partners.  The IRS and others suggest that hospitals
solicit competing bids through a request for proposals (RFP) in order
to increase the likelihood that fair market value is realized.  While
few hospitals followed such a formal competitive bidding process,
officials at most hospitals said that they received multiple bids and
accepted the highest bid offered.  Once a bid is accepted, the terms
of the purchase or partnership agreement are negotiated and formally
agreed to by both parties.  Participants in the conversion
transactions we reviewed told us that items negotiated included the
final purchase price and continued charity care and hospital
services. 

During the conversion process, the communities that the
not-for-profit hospitals served generally were not informed about or
involved in the various phases of the transaction.  However, the
not-for-profit hospitals' boards of directors, who viewed themselves
as representatives of the community, reported having responsibility
for managing the conversion process and having a fiduciary duty to
ensure that the conversion was in the best interests of the
organization.  The for-profit hospital boards of directors, which
usually included former not-for-profit board members, generally
monitor and oversee compliance with the purchase agreement. 


      THREE STANDARD APPROACHES
      WERE PRIMARILY USED TO VALUE
      HOSPITALS
---------------------------------------------------------- Letter :3.1

The IRS and valuation consultants cite the income, market, and cost
approaches as generally accepted methods for valuing hospital assets
(see table 2).  One or more of these approaches were used to arrive
at a minimum dollar value.  This estimated value of a hospital is not
intended to represent its fair market value.  Instead, in many cases,
it represents a benchmark for the not-for-profit hospital to use in
negotiating a purchase price.  The income and market approaches,
which were the approaches most commonly used in the transactions we
reviewed, multiply a hospital's adjusted earnings by a variable--or
multiple--to calculate the hospital's value.  The multiple depends on
the weight given to certain tangible and intangible factors, which
can include a hospital's debt and competitive position.  For example,
lower multiples reflect hospitals that are considered a greater
financial risk.  Multiples that ranged from 5 to 10 were applied by
investment bankers to value six of the not-for-profit hospitals we
reviewed.  In recent years, investment bankers have commonly applied
a multiple of six to value independent not-for-profit hospitals. 
Experts and representatives from organizations who are knowledgeable
about hospital finance, such as the Prospective Payment Assessment
Commission (PROPAC), suggest that not-for-profit multiples be
carefully monitored to ensure that the not-for-profit hospitals are
valued appropriately. 



                                Table 2
                
                        Asset Valuation Methods

Methodology   Description
------------  --------------------------------------------------------
Income        The income method focuses on incorporating the specific
              operating characteristics of the seller's business into
              a cash flow analysis. Discounted cash flow and earnings
              analyses are often used. A discounted cash flow analysis
              involves making projections and forecasts of future cash
              flows and discounting them to the present. An earnings
              analysis involves calculating the hospital's earnings
              before interest, taxes, depreciation, and amortization
              (EBITDA) for the past 12 months and multiplying the
              EBITDA by a factor to calculate the value of the
              hospital. EBITDA multiples reportedly range from a lower
              level of four to about seven. Financially riskier
              hospitals tend to have lower multiples. Factors that
              determine the multiple used include the hospital's
              prospects related to managed care, reputation, debt, and
              future capital needs.

Market        The market method measures value in two ways: comparable
              companies analysis and precedent transaction analysis. A
              comparable company analysis relies on EBITDA multiples
              derived from publicly traded hospital companies. A
              precedent transaction analysis uses EBITDA multiples
              derived from prices paid in recent acquisitions of
              comparable entities. Projections and estimates are
              developed to determine appropriate adjustments for
              comparability.

Cost          The cost method measures value by first determining the
              cost to replace or reproduce an asset, less an allowance
              for physical deterioration or obsolescence. From this
              amount, the book value of liabilities is subtracted to
              arrive at a value for the hospital's assets. This
              analysis assesses working capital, real estate, and
              equipment, as well as permits, licenses, and managed
              care contracts.
----------------------------------------------------------------------
Each of the 14 hospitals we reviewed had obtained either an
independent valuation (or conducted its own valuation of the
hospital) or a fairness opinion, which is a documented analysis and
confirmation by a reviewer that the valuation process resulted in a
fair estimate from a financial point of view.  In obtaining their
valuation, 13 hospitals hired outside consultants, whereas 1 relied
on in-house expertise.  The one hospital that relied on in-house
expertise for valuation, Lloyd Noland, hired experts to render a
fairness opinion.  Five hospitals--Arlington, Goodlark Regional
Medical Center, Good Samaritan Health System, Tulane, and St. 
Francis--obtained both a valuation analysis and a fairness opinion
from an outside consultant.  For the conversions we reviewed,
officials with Columbia/HCA, Quorum, and Tenet told us that they did
not retain the same consultants that the not-for-profit hospitals did
for valuation purposes.  However, a Quorum official reported using
Valuation Counselors Group, the consultant retained by the Carolinas
Hospital System, for asset allocation purposes related to that
hospital following completion of the deal.  In addition, all three
for-profit companies reported using some of the same consultants for
business transactions and services unrelated to the conversions in
our review.  (Table 3 lists the hospitals that hired consultants by
the type of service rendered.)



                                Table 3
                
                 Valuation Services Provided by Outside
                              Consultants

Consultant                    Hospital
----------------------------  ----------------------------------------
Valuation analysis
----------------------------------------------------------------------
American Appraisal            Mercy Baptist Medical Center\a

Cain Brothers                 St. Francis Hospital

Coopers & Lybrand             Jacksonville Hospital

Ernst & Young                 Baptist Memorial Hospital\b
                              Hilton Head Hospital
                              The Retreat Hospital

First Boston                  Mercy Baptist Medical Center\a

Manufacturers' Appraisal      Tulane University Hospital
Company

KPMG Peat Marwick             John Randolph Medical Center
                              Mary Black Memorial Hospital

Shattuck Hammond              The Arlington Hospital
                              Good Samaritan Health System

Valuation Counselors Group,   Baptist Memorial Hospital\b
Inc.                          Carolinas Hospital System

Walsh & Connor                Goodlark Regional Medical Center


Fairness opinion
----------------------------------------------------------------------
J.C. Bradford                 Goodlark Regional Medical Center

Cain Brothers                 St. Francis Hospital\c
                              Tulane University Hospital

Coopers & Lybrand             Lloyd Noland Hospital

Shattuck Hammond              The Arlington Hospital
                              Good Samaritan Health System
----------------------------------------------------------------------
\a Mercy Baptist obtained valuation analyses from two independent
companies:  American Appraisal and First Boston. 

\b Baptist Memorial obtained valuation analyses from two independent
companies:  Ernst & Young and Valuation Counselors Group, Inc. 

\c As part of the Tennessee attorney general's review, a second
fairness opinion was obtained from Mercer Capital. 

Eight hospitals disclosed the valuation estimates they received;
however, only four provided documentation to support the information. 
Mary Black and Retreat reported in their IRS revenue rulings that
they received valuation estimates of $56 million and $14 million,
respectively.  Carolinas' valuation report provided an estimated
range of $55 million to $60 million, and Good Samaritan's valuation
report estimated the hospital's value at $140 million to $160
million.  (See table 4.) The remaining six hospitals would not
disclose their valuation estimates.  The valuation estimates
generally represent a benchmark for the not-for-profit hospital to
use in negotiating a purchase price. 



                          Table 4
          
               Hospitals' Valuation Estimates

                                    Valuation estimate (in
Hospital                                         millions)
----------------------------  ----------------------------
Carolinas Hospital System                           $55-60
Good Samaritan Health System                       140-160
Hilton Head Hospital                                 19-30
John Randolph Medical Center                            37
Mary Black Memorial Hospital                            56
Mercy Baptist Medical Center                       188-267
The Retreat Hospital                                    14
Tulane University Hospital                         120-135
----------------------------------------------------------

      MOST HOSPITALS RECEIVED
      MULTIPLE BIDS FROM POTENTIAL
      BUYERS OR PARTNERS
---------------------------------------------------------- Letter :3.2

According to officials involved in the conversion transactions, most
of the not-for-profit hospitals in our review received more than one
bid from potential buyers or partners (see table 5).  The process
used to solicit offers varied among the hospitals.  According to the
IRS, sellers can more accurately determine the fair market value of
their hospitals by soliciting competitive bids through an RFP, which
opens bidding to the public.  Of the 14 hospitals in our review, 4
used an RFP process; 9 said that they considered several
not-for-profit and for-profit entities as potential buyers/partners
before focusing on one or more from which to solicit a bid(s); and 1,
Jacksonville, only considered one buyer, Quorum, which was selected
because of its previous experience--an 8-year management contract
with Jacksonville Hospital.  Of the 14 hospitals, 7 received more
than one bid. 



                                Table 5
                
                   Hospitals That Reported Receiving
                 Multiple Bids and Those That Reported
                         Receiving a Single Bid

                                                Multiple
Hospital                                        bids        One bid
----------------------------------------------  ----------  ----------
The Arlington Hospital                                      X

Baptist Memorial Hospital                                   X

Carolinas Hospital System                       X

Goodlark Regional Medical Center                X

Good Samaritan Health System                    X (RFP)

Hilton Health Hospital                          X (RFP)

Jacksonville Hospital                                       X

John Randolph Medical Center                                X

Lloyd Noland Hospital                                       X

Mary Black Memorial Hospital                    X

Mercy Baptist Medical Center                    X (RFP)

The Retreat Hospital                            X (RFP)

St. Francis Hospital                                        X

Tulane University Hospital                                  X
----------------------------------------------------------------------
Although most of the hospitals we reviewed received multiple bids,
not all reported accepting the highest offer.  Some officials told us
that the bid amount is only one of several factors considered by the
not-for-profit hospitals in selecting a buyer or partner.  The
Retreat Hospital, for example, accepted a bid from Columbia/HCA that
was $3 million lower than the highest bid it received because the
higher bidder did not appear to bring any complementary strengths,
such as access to third-party payer contracts and economies of scale
in operations, to counter Retreat's weaknesses.  Hilton Head accepted
a lower bid from Tenet because of the for-profit's financial
stability, access to tertiary care, philosophy regarding patient care
and employees, and other health care relationships.  Hospital
officials told us that, in addition to bids, they also considered
such factors as the bidding entity's managed care network, presence
in the community, corporate culture, reputation for providing quality
care, and access to capital, which was reported to be a major factor
in the not-for-profit hospitals' decision to accept an offer from a
for-profit company. 


      HOSPITAL OFFICIALS AGREED ON
      A NEGOTIATED PURCHASE PRICE
---------------------------------------------------------- Letter :3.3

Officials from many of the hospitals in our review said that their
negotiations with purchasers resulted in a mutually agreed upon
purchase price.  Officials of some of the hospitals we reviewed
stated that they negotiated a purchase price for their hospitals that
allowed them to pay off their debts and direct money to communities
for charitable purposes.  According to hospital officials and
for-profit purchasers, purchase prices for the hospitals we reviewed
ranged from about $16 million to $212 million; most were less than
$100 million.  (See table 6 for hospitals' purchase prices.) The
Tulane University and Hilton Head joint ventures resulted in the
not-for-profit entities' receiving a percentage of the purchase price
in addition to their respective shares of the joint venture. 
Officials associated with the Arlington joint venture stated that a
purchase price was not negotiated because Columbia/HCA contributed
three hospitals to the transaction in lieu of cash.  Only two of the
three purchasers, Quorum and Tenet, provided purchase price
information.  Purchase prices for the remaining Columbia/HCA
transactions were provided by hospital officials.  In commenting on a
draft of this report, two reviewers raised concerns about conclusions
that might be drawn from comparing valuation estimates and purchase
prices.  Because valuation estimates may or may not reflect a
hospital's fair market value, it could be misleading to compare
valuation estimates with purchase price for determining whether the
purchaser or partner over- or underpaid for the selling hospital. 



                                Table 6
                
                       Hospitals' Purchase Prices

                                                        Purchase price
                                                                   (in
Hospital/purchaser (number of beds)                        millions)\a
------------------------------------------------------  --------------
The Arlington Hospital/Columbia/HCA (350 beds)                      \b
Baptist Memorial Hospital/Quorum (346 beds)                 $56.6 plus
                                                         $300,000/year
                                                          for 15 years
Carolinas Hospital System/Quorum (424 beds)                       77.5
Goodlark Regional Medical Center/Columbia/HCA (205               103.0
 beds)
Good Samaritan Health System/Columbia/HCA (1,155 beds)           176.5
Hilton Head Hospital/Tenet (68 beds)                            31.3\c
Jacksonville Hospital/Quorum (90 beds)                            16.3
John Randolph Medical Center/Columbia/HCA (271 beds)              53.0
Lloyd Noland Hospital/Tenet (319 beds)                            47.6
Mary Black Memorial Hospital/Quorum (226 beds)                    61.4
Mercy Baptist Medical Center/Tenet (798 beds)                    212.3
The Retreat Hospital/Columbia/HCA (227 beds)                      17.0
St. Francis Hospital/Tenet (697 beds)                            103.0
Tulane University Hospital/Columbia/HCA (294 beds)             165.0\d
----------------------------------------------------------------------
\a Quorum and Tenet provided purchase price information; Columbia/HCA
did not, and therefore we relied on information provided by hospital
officials. 

\b In the Arlington joint venture arrangement, a purchase price was
not negotiated.  The parties to the transaction determined the
relative value of the four health care facilities contributed to the
joint venture.  The value of Arlington Hospital was greater than the
combined value of the three Columbia/HCA-owned hospitals contributed
to the joint venture.  As a result, Arlington received an
equalization payment of $8 million.  Hospital officials would not
disclose the value of the three Columbia/HCA hospitals contributed to
the joint venture. 

\c Hilton Head Hospital was sold to the joint venture for $31
million, 20 percent of which the not-for-profit entity invested in
the joint venture, with the result that the not-for-profit initially
received about $25 million. 

\d Tulane University Hospital was sold to the joint venture for $165
million, 20 percent of which the University invested in the joint
venture, with the result that the not-for-profit ultimately received
$132 million. 


      NEGOTIATED TERMS OF THE
      HOSPITAL SALE OFTEN INCLUDED
      CHARITY CARE AND SERVICE
      PROVISIONS
---------------------------------------------------------- Letter :3.4

Most of the not-for-profit hospitals that converted to for-profit
status that we reviewed negotiated terms in their purchase agreements
with the intent of preserving charity care for the community and
securing protections for the hospitals and their staffs.  All except
two of the hospitals (Baptist Memorial and Retreat) negotiated such
contract provisions with their buyers/partners.  The types of
provisions the 12 hospitals negotiated as part of their purchase
agreements included continuing a certain level and duration of
charity care and hospital services; retaining employees and certain
management positions; and retaining the option to buy back the
hospital if the purchaser decided to sell, close, or substantially
change the focus of the hospital.  Many of the negotiated provisions
had time limits--some, a minimum of 3 years; others had no time
periods attached.  We were provided documentary evidence of the
negotiated terms of the agreements for ten of the hospitals.\4 See
table 7 for examples of charity care and service provisions that were
agreed to. 



                                Table 7
                
                 Examples of Charity Care and Hospital
                    Service Terms Hospital Officials
                Reported Negotiating as Part of Purchase
                               Agreements

Hospital          Terms
----------------  ----------------------------------------------------
Charity care
----------------------------------------------------------------------
Goodlark          Columbia/HCA agreed to provide indigent care
Regional Medical  consistent with policies of the previous not-for-
Center            profit hospital.

Good Samaritan    Columbia/HCA agreed to provide indigent care
Health System     consistent with policies of the previous not-for-
                  profit hospital.

Hilton Head       Tenet agreed to continue charity care consistent
Hospital          with the policy of the previous not-for-profit
                  hospital.

Jacksonville      Quorum agreed to the same level of charity care as
Hospital          provided by the previous not-for-profit hospital.

Lloyd Noland      Tenet agreed to maintain the same level of charity
Hospital          care as provided by the previous not-for-profit
                  hospital.

Mary Black        Quorum agreed to maintain charity care levels for 5
Memorial          years.
Hospital

Tulane            Columbia/HCA agreed to maintain about the same level
University        of uncompensated care as provided by the previous
Hospital          not-for-profit hospital.


Hospital services
----------------------------------------------------------------------
Good Samaritan    Columbia/HCA agreed to maintain graduate medical
Health System     education programs for 3 years.

Hilton Head       Tenet agreed to provide for the continuous operation
Hospital          of the hospital as an acute-care facility containing
                  a 24-hour emergency room.

Jacksonville      Quorum agreed to continue the present level of
Hospital          health care services for at least 5 years.

Lloyd Noland      Tenet agreed to maintain the same clinical services
Hospital          as the previous not-for-profit hospital for 3 years.

Mary Black        Quorum agreed to provide acute-care services for at
Memorial          least 8 years.
Hospital

St. Francis       Tenet agreed to maintain the hospital's emergency
Hospital          room.

Tulane            Columbia/HCA agreed to maintain graduate medical
University        education programs for as long as Tulane University
Hospital          maintains medical students and residency programs.
----------------------------------------------------------------------
The not-for-profit and for-profit parties to the purchase agreements
are relying on the new for-profit hospital boards of directors to
monitor compliance and ensure that the terms of the agreements are
enforced.\5 Although the for-profit entities and board members are
responsible for fulfilling the terms of the agreements, for-profit
boards are also responsible for the interests of stockholders and the
profitability of the hospital.  Therefore, the board might choose to
make cost-cutting decisions that, for example, reduce service levels
and charity care in the community.  Some states are beginning to
address the potential for noncompliance by granting third-party
oversight and enforcement authority over negotiated terms of
not-for-profit conversion transactions to state attorneys general and
health insurance commissioners.  For example, a Nebraska statute
provides that if the Department of Health receives information and
can verify that the new for-profit is not fulfilling its commitments
to the community, it can revoke the for-profit's license. 


--------------------
\4 As documentary evidence of the negotiated terms, we were provided
complete purchase agreements for two of the transactions and selected
sections of purchase agreements and other documentary evidence for
the remaining eight transactions. 

\5 Good Samaritan Charitable Trust officials reported having
responsibility for monitoring compliance with the terms of the
purchase agreement. 


      COMMUNITIES WERE GENERALLY
      NOT INFORMED ABOUT
      CONVERSIONS
---------------------------------------------------------- Letter :3.5

Federal and state laws in most states generally have not required
that the community be informed about the conversions through
mechanisms such as public hearings and disclosure of transaction
documents.  For the conversions we reviewed, hospital boards of
directors viewed themselves as representing the community through
their fiduciary responsibility to protect the not-for-profits'
assets.  However, the community at large was often unaware of the
pending sale and uninformed of the sale price or the structure of the
transaction.  Nine of the 14 hospitals we reviewed did not involve
the public through hearings and open forums before the conversion. 
While they did not seek community approval of the conversion or the
partnership decision, five of the hospitals we reviewed informed the
public of the conversion through public meetings and community
forums.  John Randolph and Lloyd Noland officials reported briefing
community and civic organizations about the sale of the hospitals. 
Arlington officials reported holding 30 to 35 meetings regarding the
conversion, including public meetings, briefings for the Arlington
County Board, and meetings with civic organizations.  Discussions
surrounding the sale of the Jacksonville Hospital were open to the
public through city council meetings.  Hilton Head Hospital officials
reported holding public forums to educate the community about the
partnership decision and partnership options. 

In commenting on a draft of this report, two external reviewers
raised concerns about full public disclosure and community
involvement in the sales transactions.  Specifically, they said
public participation in the sales transactions could be detrimental
to the value of the selling hospital or result in the disclosure of
trade secrets.  One of the reviewers stated that oversight by a state
attorney general's office, including an independent valuation, is a
more effective, realistic, and preferable approach. 


   CONVERSION PROCEEDS GENERALLY
   SUPPORT HEALTH AND WELLNESS AS
   WELL AS OTHER COMMUNITY
   ACTIVITIES
------------------------------------------------------------ Letter :4

Because federal and state laws require that net proceeds from
not-for-profit conversions be directed toward a charitable purpose,
charitable institutions often receive substantial resources as a
result of conversions.  In most of the conversions we reviewed, the
proceeds were directed to foundations, but a university and a city
also received proceeds.  Most of the foundations had missions and
activities that focused primarily on the broad area of health and
wellness.  Other foundations focused more directly on such areas as
the arts, education, and religion, in some cases also supporting
community health programs and activities.  Community participation in
determining the use of sale proceeds was solicited in about half the
cases we reviewed. 


      CONVERSIONS OFTEN PROVIDED
      MILLIONS TO FOUNDATIONS AND
      OTHER ENTITIES FOR
      CHARITABLE PURPOSES
---------------------------------------------------------- Letter :4.1

IRS guidance and some state statutes generally require that proceeds
resulting from the conversion of not-for-profit entities be used for
charitable purposes.  The charitable entities that receive proceeds
from not-for-profit hospital conversions use the funds to support
various projects and activities.  The use of charitable assets is
typically defined by the mission the foundation adopts.  The missions
of most of the foundations we reviewed focused on health and
wellness, which sometimes included a focus on education, public
safety, arts, and religion.  Some state regulators argue that a
foundation's mission and the efforts it supports should be closely
related to the original mission of the not-for-profit hospital.\6
However, decisions have been made to use hospital conversion proceeds
to fund nonhealth-related projects, such as building a school and
financing an arts, education, and technology center. 

Conversions of not-for-profit hospitals have resulted in
multimillion-dollar endowments to charitable institutions.  Although
most recipients of these funds are foundations, millions of dollars
have also been directed to other entities.  For the conversions we
reviewed, hospital and foundation officials reported proceeds that
ranged from $13 million to $130 million.\7 In addition to the funds
transferred from the for-profit entity, these proceeds may also
include previous hospital foundation endowments, hospital reserves,
and other not-for-profit assets.  For example, in addition to the $8
million received from the conversion transaction, the Arlington
Health Foundation also received other monies transferred from the
hospital and the previous hospital foundation, which resulted in
proceeds totaling $130 million.  Of the 14 conversions in our review,
12 directed proceeds to foundations.\8 Moreover, in addition to
transferring proceeds to a foundation (Baptist Community Ministries),
Mercy Baptist Medical Center directed a portion of the proceeds to
the other original sponsor of the medical center, the Sisters of
Mercy Health System of St.  Louis, which reinvested the proceeds in
other community hospitals.  The proceeds from the remaining two
conversions were directed to Tulane University and the City of
Jacksonville, Ala.  The total amount generated from the conversions
we reviewed was $931 million.  (See table 8 for the amounts reported
as forwarded to individual charitable entities.)



                          Table 8
          
           Entities to Which Conversion Proceeds
                       Were Directed

                                                  Reported
                                                  proceeds
                                                       (in
Not-for-profit                                  millions)\
hospital                Resulting entity                 a
----------------------  ----------------------  ----------
Alabama
----------------------------------------------------------
Baptist Memorial        Etowah Baptist                 Not
 Hospital                Association              reported
Jacksonville Hospital   City of Jacksonville,          $15
                         Ala.
Lloyd Noland Hospital   The Lloyd Noland                50
                         Foundation

California
----------------------------------------------------------
Good Samaritan Health   Good Samaritan                  72
 System                  Charitable Trust

Louisiana
----------------------------------------------------------
Mercy Baptist Medical   Baptist Community              112
 Center\b                Ministries
Mercy Baptist Medical   Sisters of Mercy                59
 Center\b                Health System
Tulane University       Tulane University\c            100
 Hospital

South Carolina
----------------------------------------------------------
Carolinas Hospital      Drs. Bruce and Lee              90
 System                  Foundation
Hilton Head Hospital    Hilton Head Island              13
                         Foundation\c
Mary Black Memorial     Mary Black Foundation           62
 Hospital
Tennessee
Goodlark Regional       The Jackson Foundation          75
 Medical Center
St. Francis Hospital    The Assisi Foundation          103
                         of Memphis, Inc.

Virginia
----------------------------------------------------------
The Arlington Hospital  Arlington Health               130
                         Foundation\c
John Randolph Medical   John Randolph                   25
 Center (public)         Foundation
The Retreat Hospital    Annabella R. Jenkins            25
                         Foundation\d
==========================================================
Total                                                 $931
----------------------------------------------------------
Note:  For 5 of the 14 conversions, hospital and foundation officials
provided supporting documentation for the amount of proceeds
available for charitable use. 

\a In some cases, the proceeds may be lower than the purchase prices
listed in table 6 because the proceeds represent approximate amounts
reported for charitable use after defeasement of debt and payment of
other liabilities.  In addition to the funds transferred from the
for-profit entity, these amounts may also include not-for-profit
hospitals' accumulated reserves and working capital, other
not-for-profit assets, and previous hospital foundation endowments. 
As a result, in some cases, the reported proceeds were greater than
the purchase prices. 

\b Mercy Baptist Medical Center directed 65 percent of the proceeds
to one foundation, Baptist Community Ministries, and 35 percent to
the not-for-profit Sisters of Mercy Health System. 

\c For the Tulane and Arlington joint ventures, the total amount that
Tulane University and the Arlington Health Foundation receive depends
on the ventures' future success.  For the Hilton Head Hospital joint
venture, as of May 1997, Hilton Head Island Foundation officials
reported having divested the Foundation's 20-percent interest in the
joint venture arrangement, in part, because the Foundation was unable
to obtain a distribution of earned profits. 

\d The Annabella R.  Jenkins Foundation did not receive any proceeds
from the sale of The Retreat Hospital.  The $25 million represents
the Foundation's endowment as of Jan.  1997 and includes money
transferred from the previous not-for-profit hospital. 

The foundations that resulted from the sale of not-for-profit
hospitals that we reviewed used conversion proceeds to support a
variety of projects, many of them health related.  These foundations
do not provide direct health care services; instead most issue grants
to existing community organizations that support a range of health-
and nonhealth-related activities.  Grants have been awarded by 8 of
the 12 foundations we reviewed.  These grants have supported a
variety of health-related activities, including disease prevention,
purchase of medical equipment, and CPR and first-aid training. 
Grants have also been awarded to support education programs, such as
a tutoring program, an adult caregiver training program, and a summer
remediation program.  Other grants supported arts, public safety, and
community development.  At the time of our review, three foundations
(the Arlington Health Foundation, the Good Samaritan Charitable
Trust, and the Lloyd Noland Foundation) had not yet awarded grants.\9
One foundation, The Jackson Foundation, is not currently issuing
grants but has used the proceeds for projects such as an aerospace
program and building an arts, education, and technology center that
supports programs in math and science.  (See app.  II for a summary
of each foundation's mission and grant award activity.)

For 2 of the 14 conversions we reviewed, proceeds were not directed
to a foundation.  The City of Jacksonville and Tulane University
received conversion proceeds totaling approximately $115 million. 
The City of Jacksonville reported using the proceeds to build a new
high school and make capital improvements at city facilities.  Tulane
University reported using the proceeds, in part, for working capital,
an addition to its endowment, and capital to fund the development of
new programs at the medical school. 


--------------------
\6 At least one state, Nebraska, has enacted legislation that
expressly requires not-for-profit hospital conversion proceeds to be
used to provide charitable health care. 

\7 For 5 of the 14 conversions, supporting documentation was provided
for the amount of proceeds directed to a charitable entity: 
Carolinas, Goodlark, Good Samaritan, Hilton Head, and Mercy Baptist. 

\8 The conversion involving The Retreat Hospital did not realize any
proceeds after the hospital's debt was paid.  The amount transferred
to the new foundation was the amount held in the former hospital
foundation.  One hospital, Baptist Memorial, did not disclose the
amount of net proceeds from the conversion. 

\9 In the case of the Good Samaritan Charitable Trust, the foundation
agreed not to distribute any proceeds to new projects or grants until
after the attorney general's review was completed.  However, it has
funded several preexisting community health programs since the sale. 


      SOME COMMUNITIES WERE
      INVOLVED IN DETERMINING USE
      OF CHARITABLE PROCEEDS
---------------------------------------------------------- Letter :4.2

As the beneficiary of the proceeds, the community is often more
involved in determining the future uses of charitable proceeds than
in providing input during the earlier stage of structuring the
transaction.  Community participation regarding the charitable
proceeds can include providing input concerning the structure,
purpose, governance, and activities of the entity that receives the
proceeds.  Eight of the entities in our review that received these
proceeds sought no community involvement.  The remaining six
foundations obtained community input regarding community needs and
use of charitable proceeds through community needs assessments;
meetings with community groups, organizations, and agencies; or both. 
Three of these (the Arlington Health Foundation, the Mary Black
Foundation, and the John Randolph Foundation) conducted community
needs assessments or relied on assessments already conducted.\10 The
remaining three foundations (the Good Samaritan Charitable Trust,
Baptist Community Ministries, and The Jackson Foundation) sought
broad community input through public forums and discussions before
determining the foundations' program agenda.  Baptist Community
Ministries, the Good Samaritan Charitable Trust, and the Mary Black
Foundation held public forums or discussions with community leaders,
as well as relied on community needs assessments.  In addition, the
Good Samaritan Charitable Trust formed a community task force to
study and recommend how the funds could best serve the health needs
of the community. 


--------------------
\10 The Mary Black Foundation's community health assessment is not
expected to be concluded until the end of 1997. 


   STATE OVERSIGHT IS INCREASING
   IN RESPONSE TO CONVERSION
   ACTIVITY
------------------------------------------------------------ Letter :5

Controversy and concerns about the loss of community health services
and the transfer of community assets in not-for-profit conversions
have prompted some states to take an active oversight role in
protecting the community's charitable interests.  In most states, the
attorney general has the authority to monitor conversions to protect
the community's charitable interests but not all attorneys general
exercise this authority.  Several groups have developed guidance,
including a model act, to help attorneys general both develop
legislation governing hospital conversions and review proposed
not-for-profit conversion transactions.  Twenty-four states and the
District of Columbia have enacted laws, most in recent years,
affecting not-for-profit conversions.  These laws contain provisions
that include requiring attorney general approval, advance
notification, and community involvement.  At the time of the
conversions of the 14 hospitals in our review, none of the states in
which they were located had enacted laws specifically addressing
not-for-profit hospital conversions.  However, state attorneys
general in five of these states did exercise authority granted under
state not-for-profit corporation law or common law to review selected
conversions. 


      SOME ATTORNEYS GENERAL HAVE
      EXERCISED THEIR AUTHORITY TO
      OVERSEE CONVERSIONS
---------------------------------------------------------- Letter :5.1

State attorneys general generally have authority to review
not-for-profit conversions and, where appropriate, to enforce state
requirements that protect charitable benefits.  Attorneys general in
four states in our review (Alabama, California, South Carolina, and
Tennessee) reported that authority to oversee and monitor hospital
conversions is granted through state provisions related to
not-for-profit corporations.  The Virginia attorney general's
authority is founded primarily in common law, from which the doctrine
of cy pres is derived.  (In this context, the cy pres doctrine
provides that when the original purpose of a charitable trust becomes
impossible to carry out, another approach may be taken if it is
judged to be similar in intent to the original purpose.) In
Louisiana, until recently, the attorney general had no authority to
oversee hospital conversion activity.\11 (See table 9 for a
description of state authorities to oversee hospital conversions.)



                                Table 9
                
                Attorney General Authorities to Oversee
                              Transactions

Authority         Description
----------------  ----------------------------------------------------
Not-for-profit    Not-for-profit hospitals are generally established
corporation code  under a state's not-for-profit corporation code,
                  which details how not-for-profit corporations are to
                  be established and operated within the state. These
                  laws typically include, for example, restrictions on
                  conflicts of interest and guidance regarding
                  amending corporation bylaws and how to dispose of
                  assets should the corporation be dissolved. The
                  assets of the not-for-profit corporation are often
                  viewed as held in public trust in exchange for the
                  corporation's receiving the benefits of not-for-
                  profit status. That is, the assets of the
                  corporation are considered dedicated in perpetuity
                  to the charitable purposes set out in the
                  corporation's articles of incorporation. In
                  addition, not-for-profit corporations are limited in
                  their ability to engage in profit-making activity.
                  For example, not-for-profit corporations cannot
                  distribute their profits to those who own or control
                  them. Essentially, in most states, not-for-profit
                  corporations and their assets have been viewed as
                  charitable trusts.

Cy pres           The doctrine of cy pres applies to charitable
                  trusts. Under cy pres, should it become impossible
                  to use the assets of a charitable trust as
                  originally provided when the trust was established,
                  a judicial hearing is necessary to determine what
                  should be done with the assets. At the hearing, the
                  trustees must convince the judge that the original
                  purpose is no longer workable and identify another
                  more practical purpose that is as near as possible
                  to what was originally intended. Some interpret this
                  requirement to mean that the trustees of a not-for-
                  profit charitable corporation must obtain court
                  approval for a conversion.

State             State statute can give the attorney general or other
legislation       state official specific authority to review a
                  conversion transaction. Such a review may include a
                  review of the disposition and use of charitable
                  proceeds. Some statutes require the converting
                  hospital to obtain the consent of the reviewing
                  official before the transfer of assets.
----------------------------------------------------------------------
State attorneys general reviewed about half of the conversion
transactions in our review through authority granted under state
not-for-profit corporation laws.  These laws, which require that the
not-for-profit entity give notice of its sale to the attorney
general's office, were the basis for reviews of the transactions
involving the Lloyd Noland Hospital (Ala.), the Good Samaritan Health
System (Calif.),\12 Mary Black Memorial Hospital and the Carolinas
Hospital System (S.C.), and the St.  Francis Hospital and the
Goodlark Regional Medical Center (Tenn.).  These laws may also give
the attorney general authority to review the disposition of assets,
which could include determining whether fair market value is
obtained, charitable proceeds are appropriately directed, and
conflicts of interest exist.  For example, in the Good Samaritan
conversion, the attorney general reviewed the entire transaction,
including valuation, inurement issues, and consistency of the sale
with the purposes of the trust.  The attorney general concluded that
Good Samaritan's administrators and board acted in good faith, in
that the institution's sale price reflected fair market value and all
related business decisions had been made with due diligence.  The
attorney general, in negotiations with Good Samaritan, reached a
compromise agreement on how the proceeds would be used.  The
agreement directs proceeds to fund hospital and medical care for the
medically indigent in Santa Clara County and to fund preexisting
community health programs historically supported by Good Samaritan. 
For the Goodlark conversion, the attorney general ruled against a
proposed use of the charitable proceeds by The Jackson Foundation. 
Specifically, the foundation had agreed to purchase a nuclear lab for
the new Columbia-owned for-profit hospital.  The attorney general
prohibited this purchase, ruling that a conflict of interest was
present. 

The common law doctrine of cy pres allows some attorneys general to
bring suit if, in a conversion, the not-for-profit assets are found
to be directed inappropriately.  The Virginia attorney general has
authority to review conversion transactions through common law. 
Officials in the Virginia attorney general's office reported
exercising this authority to review the three Virginia hospital
conversions in our study (Arlington, Retreat, and John Randolph).\13

However, these officials would not disclose specifically what was
reviewed and the results of their reviews. 


--------------------
\11 As of Aug.  1997, Louisiana had enacted specific legislation
governing hospital conversions (see app.  III). 

\12 California's not-for-profit corporation law was amended in 1996
to include specific requirements for the conversion of health care
facilities.  The law took effect in Jan.  1997. 

\13 As of Aug.  1997, Virginia had enacted specific legislation
governing hospital conversions (see app.  III). 


      MODEL PROVISIONS FOR STATE
      OVERSIGHT OF CONVERSIONS
      HAVE BEEN DEVELOPED
---------------------------------------------------------- Letter :5.2

Several organizations have prepared guidance to assist states in
oversight of conversion activity.  In 1997, the National Association
of Attorneys General (NAAG) adopted a resolution containing six
specific guidelines for the conversion process.  The Community
Catalyst and Consumers Union developed a model act with more specific
provisions relating to conversions.  These sets of guidance are
complementary and provide a framework for state attorneys general who
will be reviewing conversion transactions.  (See table 10 for a
comparison of NAAG resolution and model act features.)



                          Table 10
          
          Features of the NAAG Resolution and the
                         Model Act

NAAG resolution               Model act
----------------------------  ----------------------------
State attorney general        State attorney general must
should receive advance        receive notice 90 days
written notice of             before the transaction is to
conversions.                  take place.

The public should receive     The attorney general must
advance notice, including     provide the public with
the names and addresses of    access to all records
the parties and the terms of  related to the transaction
the proposed conversion.      at no cost. The attorney
                              general must also hold at
                              least one public meeting no
                              later than 45 days after
                              receiving notice regarding
                              the proposed transaction and
                              publish advance notice of
                              the meeting in local
                              newspapers.

A valuation of the            The attorney general must
charitable assets should be   find that the nonprofit
prepared by an independent    corporation used due
expert.                       diligence in arranging the
                              transaction.

Directors and others          The attorney general must
involved in the transaction   find that the transaction
should not receive excessive  will not result in any
compensation.                 financial advantage to
                              private people or entities,
                              any nonprofit organizations
                              receiving charitable assets
                              and the for-profit entity
                              involved are totally
                              independent of each other,
                              and the nonprofit
                              corporation receiving the
                              charitable assets has
                              mechanisms in place to avoid
                              conflicts of interest.

The use of proceeds should    The attorney general must
be consistent with the        find that the transaction is
charitable purpose for which  fair and reasonable to
the assets are held by the    affected parties, the
nonprofit health care entity  transaction is in the public
and not benefit the for-      interest, a charitable trust
profit purchaser.             is set aside equal to the
                              fair market value of the
                              nonprofit corporation, and
                              trust distributions are
                              dedicated to existing or new
                              tax-exempt organizations.

The attorney general should   The attorney general may
be able to recover the costs  charge an entity involved in
of reviewing and evaluating   the conversion for the costs
the proposed transaction      of providing the public with
from the parties involved.    notice and reasonable access
                              to records relating to the
                              conversion.

\a                            The attorney general must
                              find that the transaction
                              will not adversely affect
                              the availability of health
                              care and that the charitable
                              corporation receiving trust
                              assets will be dedicated to
                              serving the state's unmet
                              health care needs.

\a                            The attorney general must
                              find that the charitable
                              corporation receiving the
                              assets will agree to file
                              annual reports, which will
                              be made public, regarding
                              its grant-making and other
                              charitable activities that
                              involve the use of
                              charitable assets received.

\a                            The attorney general has the
                              power to subpoena additional
                              information or witnesses to
                              help decide whether to
                              permit the transaction to go
                              forward.

\a                            The nonprofit corporation
                              generally must be notified
                              in writing of the attorney
                              general's decision within 90
                              days of the attorney
                              general's having received
                              the initial notice regarding
                              the proposed transaction.
----------------------------------------------------------
\a The NAAG resolution contained no complementary provision. 

In response to the increasing number of not-for-profit hospital
conversions and public concern regarding the fairness of the
transactions and the potential loss of community benefits, states
have enacted legislation affecting conversions.  According to the
National Council of State Legislatures, 24 states and the District of
Columbia have enacted such legislation.  These laws often include
features similar to those of the NAAG resolution and the model act. 
Although the features of each state's legislation vary, most
legislation contains specific provisions that require advance notice,
state official review and approval, and public disclosure/hearing. 
(See table 11 for a list of states with laws affecting conversions,
and key provisions, and see app.  III for a brief summary of relevant
state law.) Several other states are also considering similar
conversion legislation. 



                                Table 11
                
                States With Laws Affecting Conversions,
                           and Key Provisions

                                       Provisions
                  ----------------------------------------------------
                                    State official    Public
                                    review and        disclosure/
State             Advance notice    approval          hearing
----------------  ----------------  ----------------  ----------------
Ariz.             X                                   X

Calif.            X                 X                 X

Colo.             X                 X                 X

Conn.             X                 X                 X

D.C.              X                 X                 X

Fla.                                                  X

Ga.               X                 X                 X

Ill.              X                                   X

Ind.              X                                   X

Kans.             X                 X                 X

La.               X                 X                 X

Maine                               X

Nebr.             X                 X                 X

N.H.              X                 X                 X

N.J.              X                 X                 X

N.C.                                                  X

N. Dak.                             X

Ohio              X                 X                 X

Oreg.             X                 X                 X

R.I.              X                 X                 X

S. Dak.           \a                \a                \a

Tex.                                X

Vt.               X                 X                 X

Va.               X                 X                 X

Wash.             X                 X                 X
----------------------------------------------------------------------
Note:  For pertinent details regarding the scope and applicability of
these laws, see app.  III. 

\a The law affecting conversions in South Dakota contains none of
these three key provisions. 

The American Hospital Association has also adopted guidelines to help
hospital officials deal with the wide range of public accountability
questions that surround changes of ownership or control.  These
guidelines are applicable to not-for-profit hospital conversions as
well as transactions between not-for-profit hospitals and are
intended to be considered before changes of ownership or control. 
According to the American Hospital Association, hospital officials
should (1) ensure that they have devised a plan for providing charity
care and other essential community services, (2) obtain a valuation
of charitable assets by an independent party, (3) ensure that the
resulting charitable entity continues to serve the appropriate health
needs of the community, (4) disclose publicly the terms of the
agreement and provide an opportunity for public comment, and (5)
inform the appropriate state official of the terms of the conversion. 


   FEDERAL AGENCIES PLAY A ROLE IN
   OVERSEEING HOSPITAL CONVERSIONS
------------------------------------------------------------ Letter :6

Three federal agencies, the IRS, FTC, and Department of Justice, play
limited but key oversight roles in hospital conversions.  The IRS is
responsible for enforcing the federal tax laws that apply to the
status and operation of tax-exempt organizations, including
not-for-profit hospitals and foundations.  Hospital conversions
involving joint venture arrangements, in which ownership interests
and income are shared between not-for-profit and for-profit entities,
raise both tax-exempt status and conflict-of-interest questions.  The
IRS believes it needs to develop specific guidance addressing joint
venture arrangements.  FTC and the Department of Justice, as part of
their broad mission to enforce federal antitrust laws, investigate
and challenge potentially anticompetitive hospital mergers and
acquisitions, as necessary.  FTC and Justice do not view hospital
conversions as posing unusual antitrust issues. 


      IRS OVERSEES TAX-EXEMPT
      STATUS ISSUES IN CONVERSIONS
---------------------------------------------------------- Letter :6.1

The IRS Exempt Organizations Division is responsible for reviewing
and approving applications for recognition of tax-exempt status;
issuing revenue rulings, guidance, and other interpretations of
tax-exemption law; and performing audits to ensure that tax-exempt
organizations are operated for tax-exempt purposes.  Revenue rulings
are often used as precedents to ensure uniform handling of a tax
issue.  Of the 14 not-for-profit hospital conversions we reviewed, at
least four hospitals (Retreat, Mercy Baptist, Mary Black, and St. 
Francis) received private letter rulings from the IRS.  According to
Division officials, the conversion of not-for-profit hospitals does
not appear to pose pressing or widespread tax-related issues that
require special attention.  The IRS has attempted to position itself
to react quickly to any unexpected activities and believes it
maintains sufficient information to pinpoint areas warranting
attention.  Moreover, IRS officials told us that states are generally
in the best position to act on hospital conversions that are
problematic, unless it appears that federal law has been violated. 


      JOINT VENTURE ARRANGEMENTS
      RAISE TAX AND
      CONFLICT-OF-INTEREST
      QUESTIONS
---------------------------------------------------------- Letter :6.2

Joint ventures between not-for-profit hospitals and for-profit
entities can raise questions about whether the not-for-profit will
retain its tax-exempt status and whether income distributed to the
not-for-profit partner will be subject to tax.  Because of the shared
ownership structure in a not-for-profit and for-profit joint venture,
the opportunity exists for charitable assets to be used for private
benefit.\14 The IRS' position is that, to maintain its tax-exempt
status, a not-for-profit's participation in a joint venture must
advance the not-for-profit's charitable purposes and not result in
more than incidental private benefit.  According to IRS officials, if
the not-for-profit does not exercise control over the day-to-day
activities of the joint venture, it cannot ensure that the assets
contributed by the not-for-profit will not be used for the private
benefit of the for-profit organization.  If these assets benefit the
for-profit organization, the tax-exempt status of the not-for-profit
partner may be revoked.  According to IRS officials, if the majority
of the not-for-profit organization's efforts are directed toward
exempt activities, the organization will generally retain exempt
status.  In such a case, however, the income earned by the
not-for-profit organization from the joint venture may be subject to
income tax under unrelated business income tax rules.  At the time of
our review, the IRS had not published a position or issued guidance
on joint venture arrangements.  IRS and the Department of the
Treasury are drafting a revenue ruling to provide guidance on the
treatment of joint venture transactions under the federal tax rules. 
The IRS expects to issue this ruling by the end of 1997.  This ruling
may significantly affect the tax-exempt status of and income earned
by the not-for-profit organization participating in the joint
venture. 

Another issue surrounding joint ventures involves the potential for
conflict of interest when the same people serve on both the
not-for-profit foundation board and the for-profit hospital board
after a conversion.  The potential for conflict of interest is
particularly apparent in joint venture arrangements because the
foundation board members have a stake in maintaining the for-profit's
interests.  For all three joint ventures we reviewed, the charitable
foundation board members also participated on the for-profit joint
venture board.  However, foundation officials stated that the
foundations had not awarded any grants in support of the new
for-profit hospitals, which is one example of maintaining the
for-profit's interest. 

Joint operating agreements (JOA) raise similar private benefit and
conflict-of-interest issues.  In a JOA, two or more hospitals or
health care entities operate jointly but retain their separate
boards, ownership status, and ownership of assets.  The profits and
losses from JOA activities, however, are shared.  Most JOAs have been
among not-for-profit entities.  However, a JOA can also occur between
a not-for-profit hospital and a for-profit entity, an arrangement
that is similar to a joint venture.  None of the rulings on JOAs has
yet involved for-profit participants.  Recently, however, a hospital
in Jacksonville, Fla., and Columbia/HCA entered into a JOA.  The full
implementation of the agreement is awaiting an IRS private letter
ruling on the tax effects of the operating agreement.  While JOAs
raise some of the same concerns as joint ventures, the forthcoming
IRS and Treasury guidance on joint ventures may not address the
specific concerns raised in the context of JOAs. 


--------------------
\14 Charitable hospitals are exempt from federal income tax under
section 501(c)(3) of the Internal Revenue Code of 1986.  Therefore,
they must operate exclusively for charitable purposes and not for the
benefit of private interests, such as designated individuals,
shareholders of the organization, or third parties. 


      FTC AND JUSTICE CONDUCT
      ROUTINE OVERSIGHT OF
      CONVERSION ANTITRUST ISSUES
---------------------------------------------------------- Letter :6.3

FTC and Justice share responsibility for enforcing the federal
antitrust laws; however, according to officials of these agencies,
hospital conversions do not raise any special issues under the
antitrust laws.\15 In carrying out their oversight roles, FTC and
Justice investigate and challenge, where appropriate, potentially
anticompetitive hospital mergers and acquisitions.  According to FTC
officials, antitrust issues presented by not-for-profit conversions
do not differ from those presented by mergers and acquisitions
between not-for-profit entities, and most hospital mergers do not
violate the laws enforced by FTC and Justice.  FTC and Justice
receive advance notice of many transactions under the premerger
notification requirements of Hart-Scott-Rodino.\16 However, according
to FTC officials, this filing requirement does not apply to some
types of mergers and acquisitions (such as those involving public
entities) and to certain joint ventures. 

FTC has investigated ten of the many proposed acquisitions of
not-for-profit hospitals by for-profit firms and, in three of these
cases, blocked a merger or obtained divestiture as a condition for
allowing the transaction to proceed.  For example, in 1995 FTC
alleged that the proposed acquisition by Columbia/HCA of John
Randolph Medical Center, one of the conversions we reviewed, would
endanger competition for psychiatric hospital care because it would
bring under common ownership John Randolph's psychiatric unit and a
competing Columbia/HCA psychiatric hospital in nearby Petersburg, Va. 
In its order, FTC permitted Columbia/HCA to acquire John Randolph
Medical Center on the condition that it later divest itself of its
psychiatric hospital in Petersburg. 


--------------------
\15 FTC enforces the Federal Trade Commission Act, sec.  5 of which
prohibits unfair methods of competition.  Justice has responsibility
for enforcing the Sherman Act, sec.  1 of which prohibits all
conspiracies or agreements that restrain trade.  FTC and Justice both
have jurisdiction under the Clayton Act, sec.  7 of which prohibits
all mergers and acquisitions of stock or assets that may
substantially lessen competition or tend to create a monopoly. 

\16 The Hart-Scott-Rodino filing requirement covers agreements in
which the acquiring hospital has net sales or total assets of at
least $100 million and the hospital being acquired has assets of at
least $10 million. 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

Concerns about the conversion of not-for-profit hospitals and the
transfer of millions of dollars in charitable assets still exist,
because they are carried out essentially privately between boards of
the selling hospitals and management of the purchasing for-profit
companies.  These conversions are not routinely subject to any
disclosure requirements, which leaves little opportunity for
community involvement outside of the community members who serve on
the not-for-profit hospitals' boards.  A growing number of states are
recognizing that the public interest is at stake and, as a result,
are becoming more involved in overseeing the conversion process and
monitoring the terms of such transactions.  This increased state
oversight may address some questions and concerns related to
obtaining fair value for charitable assets, obtaining public
disclosure and community input, and ensuring that the proceeds of the
transaction are used for appropriate charitable purposes. 


   AGENCY AND OTHER COMMENTS
------------------------------------------------------------ Letter :8

We provided copies of our draft report to the IRS and several experts
on hospital conversion issues for review.  IRS officials responded
that the report generally reflects the agency's position.  They
noted, however, that they have not fully resolved the issues
surrounding joint ventures, and we modified the language in our
report accordingly.  The expert reviewers suggested that we clarify
other issues in our report, and we incorporated revisions where
appropriate.  We also asked 21 officials, including hospital
administrators, foundation executives and board members, and
attorneys who represented the not-for-profits in the transactions, to
validate the information included in the report.  These officials
generally agreed with the draft report.  Some officials provided
technical comments, which we incorporated where appropriate. 

Subsequently, we were asked to provide a draft of our report to
Volunteer Trustees of Not-for-Profit Hospitals, a public interest
group, for review.  We also provided a copy to the Federation of
American Health Systems, which represents for-profit hospitals and
health care facilities.  One issue of major concern to Volunteer
Trustees was that we had not obtained documented evidence of sale
information.  In response to this comment, we revised our draft to
indicate those instances where we had documented evidence, including
purchase or partnership agreements, IRS revenue rulings, valuation
reports, and fairness opinions, to support the testimonial
information provided in our report.  In those cases where we were not
given documentary evidence because of the proprietary nature of the
information and confidentiality agreements, we had to rely solely on
information provided in interviews.  Where appropriate, we clarified
the sources used to support information in our report. 

We are sending copies of this report to the Secretary of Health and
Human Services, the Commissioner of Internal Revenue, state attorneys
general, appropriate congressional committees, and other interested
parties.  We will make copies available to others upon request. 

Please contact me at (202) 512-7119 or James O.  McClyde, Assistant
Director, at (202) 512-7152 if you or your staff have any questions. 
Other GAO contacts and contributors to this report are listed in
appendix IV. 

Bernice Steinhardt
Director, Health Services Quality
 and Public Health Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

In response to concerns surrounding not-for-profit hospital
conversions, we were asked to determine for these conversions the
methods used to value assets, to what extent funds from the sale of
hospital assets are directed to foundations, to what extent the
proceeds from hospital conversions are fulfilling their charitable
missions, and what role federal and state governments play in the
conversion of hospitals from not-for-profit to for-profit status.  As
part of our review of the conversion process, we also reviewed the
processes used for soliciting interest and receiving bids; the terms
negotiated as part of the sales agreement, including provisions for
charity care; and the extent of community involvement. 

To accomplish these objectives, we worked with three major
investor-owned hospital corporations--Columbia/HCA Healthcare
Corporation, Quorum Health Group, and Tenet Healthcare
Corporation--to develop a list of not-for-profit hospital conversions
occurring after 1990.\17 We used this list to judgmentally select six
states and 14 sites.  We chose these states--Alabama, California,
Louisiana, South Carolina, Tennessee, and Virginia--and sites because
they had one or more of the following characteristics:  asset sales
and joint venture transactions; multiple conversions, conversions
involving multiple investor-owned companies, or both; and
transactions in which the proceeds were directed to foundations.  Our
review focused on reviewing the conversion processes used by the
hospitals selected for site visits, and therefore the results cannot
be generalized nationally, to a particular state, or to a particular
investor-owned company. 

To determine the methods used to value assets, the processes used for
soliciting interest and receiving bids, the terms negotiated as part
of the sales agreement, and the extent of community involvement in
the conversion process, we interviewed for-profit hospital chief
executive officers (CEO); attorneys who represented the
not-for-profit hospitals in the conversion transactions; and other
hospital, university, city, and foundation officials with knowledge
of the not-for-profit hospital conversion process.  We also
interviewed officials at accounting firms, consulting firms, and
valuation companies to determine their overall involvement in the
conversion process and, specifically, the process(es) and method(s)
used for valuing the hospital assets.  From some hospitals, we
collected documentation on the valuation estimate or range, purchase
price, and purchase agreement; officials at other hospitals stated
that because of confidentiality agreements they could not provide
such documentation.  We also reviewed Internal Revenue Service (IRS)
guidance governing the valuation of assets and receiving fair market
value.  Our review did not include an analysis of whether each
hospital received fair market value from the sale. 

To determine the amount of conversion proceeds directed to a
charitable entity and how the proceeds from the sale were used to
fulfill a charitable mission, we interviewed officials from the
charitable entity that received the conversion proceeds (that is,
university officials, foundation board members and presidents, and
city officials) and reviewed supportive documentation where
available.  We also reviewed and analyzed foundation mission and
purpose statements, grant award criteria, and board composition.  For
those foundations that had initiated a grants cycle, we reviewed
documentation provided on the grants awarded:  recipients, award
amounts, and proposed uses. 

To determine the role the federal government plays in the conversion
process, we held discussions with officials at the IRS, Department of
the Treasury, Federal Trade Commission (FTC), and Department of
Justice.  In addition, we reviewed and analyzed applicable federal
laws and regulations governing not-for-profit organizations and use
of charitable proceeds.  We also reviewed selected IRS revenue
rulings, hospital and foundation tax return filings, and FTC
Hart-Scott-Rodino antitrust filings.  In some cases, hospital
officials did not provide documentation of the hospitals' filings
with the IRS and FTC. 

To determine the role that state governments play in the conversion
process, for each state reviewed, we conducted interviews with
representatives in the attorney general's office and reviewed and
analyzed copies of relevant state legislation.  We also coordinated
with Consumer Catalyst in Boston and an attorney with The Harrison
Institute for Public Law, Georgetown University Law Center, to
develop a list and description of enacted and pending state
legislation governing hospital conversions. 

To verify our information, we asked individuals involved in or
knowledgeable about the not-for-profit hospital conversions in our
study to review our draft report.  We also provided copies of our
draft report for review to the IRS, three experts on hospital
conversion issues, and both a not-for-profit and a for-profit
interest group.  We incorporated comments where appropriate


--------------------
\17 In Feb.  1994, Columbia merged with HCA to form Columbia/HCA
Healthcare Corporation.  The list of not-for-profit conversions we
received from Columbia/HCA contains conversions for the merged
entity. 


FOUNDATIONS' MISSION STATEMENTS
AND EXAMPLES OF GRANTS ISSUED
========================================================== Appendix II

                                               Year, number of
                                               grants, and total
Foundation             Mission statement       amount              Purpose of grant
---------------------  ----------------------  ------------------  ----------------------
Annabella R. Jenkins   "[S]upport quality      1996 -29 grants -   --Provide summer
Foundation             health care and         $706,774            "camperships" for
                       effective health care                       disadvantaged and
                       programs in the                             chronically ill
                       greater Richmond                            children
                       area."                                      --Provide adult day
                                                                   care services
                                                                   --Fund a community
                                                                   program that provides
                                                                   medication to those
                                                                   who cannot afford to
                                                                   purchase it
                                                                   --Fund a vision
                                                                   screening project for
                                                                   at-risk children
                                                                   --Purchase medical
                                                                   equipment for children
                                                                   of indigent families
                                                                   --Support a program to
                                                                   increase the new blood
                                                                   donor retention rate

Arlington Health       "Its mission is to      \a                  \a
Foundation             establish, promote and
                       support programs to
                       improve the health and
                       well-being of the
                       people of Arlington
                       and surrounding
                       Northern Virginia
                       communities."

The Assisi Foundation  "[F]ocuses on support   FY 1996 -83 grants  --Support research in
of Memphis             for innovative          -$5,306,593         the area of cell and
                       programs that address                       gene therapy
                       the needs of Mid-                           --Support patient care
                       South residents in the                      and medical research
                       categories of health                        programs
                       and human services,                         --Assist a
                       education, religion,                        university's science
                       and community                               and math programs
                       development."                               --Increase capacity to
                                                                   provide services in a
                                                                   child care center
                                                                   --Help pay for
                                                                   construction of a new
                                                                   animal hospital and
                                                                   quarantine space

Baptist Community      "[I]n keeping with our  Fall 1997 -40       --Expand an existing
Ministries             Baptist heritage,       grants -            adult caregiver
                       Baptist Community       $7,800,000          training program and
                       Ministries is                               dependent child day
                       committed to the                            care support service
                       development of a                            in a local housing
                       healthy community                           project
                       offering a wholesome                        --Expand childhood
                       quality of life to its                      immunization programs
                       residents and to                            in a local housing
                       improving the                               project
                       physical, mental and                        --Fund an antiviolence
                       spiritual health of                         program
                       the individuals we                          --Fund a street crime
                       serve."                                     call-in reward system

Drs. Bruce and Lee     "[T]o advance the       1996 -10 grants -   --Provide CPR and
Foundation             general welfare and     $200,000            first-aid training in
                       quality of all life in                      public schools
                       the Florence, South                         --Rehabilitate summer
                       Carolina area by                            camp facilities
                       providing economic                          --Purchase extraction
                       support to qualified                        equipment to rescue
                       programs and non-                           entrapped victims
                       profit organizations."                      --Purchase new
                                                                   therapeutic and
                                                                   testing equipment for
                                                                   speech and hearing
                                                                   disorders
                                                                   --Purchase biology lab
                                                                   equipment at a college

Etowah Baptist         "[T]he promotion of     Fall 1996-97\b      --Support church and
Association            fellowship among the                        missions development
                       individual churches,                        --Fund a Meals on
                       the extension of the                        Wheels Program
                       Kingdom of our Lord                         --Provide drug and
                       Jesus Christ by                             alcohol education in
                       evangelism and other                        schools
                       means; the                                  --Purchase a passenger
                       encouragement and                           van for transporting
                       enlistment of churches                      youth
                       in this Association to                      --Fund scholarships
                       promote missions,
                       education, and
                       benevolence . . . ."

Good Samaritan         [M]aximizes the health  \a                  \c
Charitable Trust       of the people of the
                       greater Santa Clara
                       Valley by expanding
                       access to health care
                       and promoting
                       education and
                       wellness."

Hilton Head Island     "Our mission is to be   7/95-6/96 -53       --Support need-based
Foundation             a growing community-    grants -$946,032    scholarships for
                       supported, [not-for-                        community area
                       profit] endowment of                        students
                       resources for the                           --Support the
                       betterment of our                           development of the
                       community."                                 infrastructure for an
                                                                   affordable housing
                                                                   project
                                                                   --Develop a program to
                                                                   assist patients
                                                                   suffering from
                                                                   diabetes
                                                                   --Support development
                                                                   of a youth symphony
                                                                   orchestra
                                                                   --Implement a new
                                                                   program providing
                                                                   educational support
                                                                   for disadvantaged
                                                                   youth

The Jackson            "[P]romotion and        \d                  \d
Foundation             development of
                       educational activities
                       supporting and
                       advancing the quality
                       of life within the
                       communities it
                       serves."

John Randolph          "The foundation is      1996 -18 grants -   Fund the following
Foundation             committed to            $250,000            agencies:
                       identifying and                             --Hopewell Historic
                       supporting innovative                       Society
                       and creative health                         --Virginia Blood
                       and quality of life                         Services
                       improvements in our                         --Crater Community
                       community."                                 Hospice
                                                                   --American Lung
                                                                   Association

The Lloyd Noland       Foundation officials    \a                  \a
Foundation             reported their plan is
                       to provide long-term
                       and acute health care
                       services to people in
                       Jefferson County.

Mary Black Foundation  "[T]o utilize its       7/96-2/97 -7        Fund the following
                       resources to benefit    grants -$64,938     programs:
                       and enhance the health                      --Spartanburg County
                       status and wellness of                      Health Assessment
                       citizens of                                 --Healthy Communities
                       Spartanburg County."                        Training Program
-----------------------------------------------------------------------------------------
\a As of Jan.  1997, this foundation had not yet awarded grants. 

\b Number of grants and total amount were not provided by foundation
officials. 

\c This foundation has not yet awarded grants, but it does fund and
operate several health-related programs, including nine School Health
Centers that provide free primary health care to low-income children. 

\d This foundation is not currently issuing grants but has used the
proceeds for an aerospace program; construction of an arts,
education, and technology center; and other projects. 


STATE LEGISLATION
========================================================= Appendix III


      ARIZONA
----------------------------------------------------- Appendix III:0.1

Not-for-profit health care entities must give detailed written
notice, made available to the public, to the attorney general and
other state officials 90 days before transferring or entering into a
joint venture involving all or substantially all of their assets. 
Within 30 days of the written notice, the parties must, in agreement
with state officials, plan a public hearing.  Notice of the hearing
must be published in the newspaper, and the hearing must be held
within 10 days of the last publication.  At the hearing, the parties
must submit written summary information addressing various factors
very similar to the deciding criteria in the model act.  The attorney
general may also present information at the public hearing.  A public
record of the hearing must be produced, and the parties must pay all
costs associated with the hearing. 


      CALIFORNIA
----------------------------------------------------- Appendix III:0.2

Not-for-profit health facilities must give written notice, which must
include information specified by the attorney general, and get
written consent from the attorney general to transfer, or transfer
control of, a material amount of assets.  The attorney general has 60
days from receiving the not-for-profit's notice to issue a decision
but may extend the period 45 days to obtain additional information. 
Before reaching a decision, the attorney general must conduct at
least one public hearing, which must be publicized in the newspaper
at least 14 days before the hearing.  The attorney general has
discretion in reaching a decision but must consider, at a minimum,
various factors very similar to the deciding criteria in the model
act.  The attorney general may obtain reimbursement for the costs
incurred in reviewing, evaluating, and reaching a decision.  In
addition, not-for-profit board members who negotiate a conversion are
prohibited from receiving any renumeration from the for-profit
entity. 


      COLORADO
----------------------------------------------------- Appendix III:0.3

Not-for-profit hospital, medical/surgical, and health service
corporations wishing to convert to stock insurance companies must
file a detailed conversion plan, which must be available to the
public and contain certain assurances, and apply for an amended
certificate.  The plan must provide, for example, that any officer,
director, or staff member of the preconversion corporation is
disqualified from serving as an officer, director, or staff member of
the postconversion corporation and that no one may own more than 10
percent of the combined voting power of the postconversion
corporation for at least 3 years.  Within 30 days of filing, the
corporation must begin publishing notice of the conversion for 3
consecutive weeks.  The commissioner of insurance must hold a hearing
before deciding to approve or disapprove the plan and publish the
decision within 60 days after the hearing.  The commissioner must
approve the plan if it meets all filing requirements; is fair,
reasonable, and not contrary to law or the interests of subscribers,
contract holders, or the public; and provides that the postconversion
corporation will meet the standards for stock insurance companies. 


      CONNECTICUT
----------------------------------------------------- Appendix III:0.4

A not-for-profit hospital may not enter into a conversion agreement
with a for-profit entity without providing detailed notice, subject
to public disclosure, to the attorney general and the commissioner of
health care access.  The commissioner must publish a summary of the
notice in the local newspaper, and hold a joint public hearing with
the attorney general.  The commissioner may not approve the
conversion unless the community is ensured access to affordable
health care; the purchaser has committed to providing health care to
the uninsured and underinsured; and, if applicable, safeguard
procedures are in place to avoid conflicts of interests.  The
attorney general must conduct a review and approve or disapprove the
conversion within 120 days of the original notice.  The conversion
may not be approved if it is contrary to state law or the hospital
failed to exercise due diligence, disclose conflicts of interest, or
establish a fair market price.  In addition, the conversion cannot be
approved if the fair market price has been manipulated to cause the
value of the assets to decrease; the financing will place the
hospital's assets at unreasonable risk; any management contract
contemplated is not for reasonable, fair value; or a sum equal to the
fair market value of the hospital's assets is not being transferred
for charitable health care purposes, support of health care in the
community, or a purpose consistent with the intent of any donors to
someone selected by the courts and not affiliated with the hospital. 


      DISTRICT OF COLUMBIA
----------------------------------------------------- Appendix III:0.5

A health care entity may not execute a conversion to a for-profit
entity without the approval of the corporation counsel.  The counsel
must publish a request to convert in local papers, may hold a public
hearing, and has 60 days to approve or disapprove the conversion. 
Approval may not be granted unless necessary steps have been taken to
safeguard the value of charitable assets, taking into consideration
numerous factors similar to those in the model act.  Corporation
counsel must ensure that assets are placed into an independently
controlled charitable trust and may charge the for-profit entity the
costs of investigating the conversion.  In addition, the converting
not-for-profit entity may be assessed a conversion fee equal to 10
percent of the property tax it would have paid during the past 5
years had it not been tax-exempt. 


      FLORIDA
----------------------------------------------------- Appendix III:0.6

Any county, district, or municipal hospital organized under state law
may be sold or leased to, or enter into management or operating
contracts with, any Florida corporation.  The hospital governing
board must find that the arrangements are in the best interests of
the public and state the basis of such finding.  The terms of any
such arrangements must be determined by the applicable county,
district, or municipal governing board, which must, if it elects to
lease or sell the hospital, publicly advertise the meeting where the
terms will be considered and an offer to accept proposals from all
interested and qualified purchasers.  Any sale must be for fair
market value, and any sale or lease must comply with all antitrust
laws.  If the hospital receives more than $100,000 annually from the
county, district, or municipality that owns it, the corporation must
be accountable to the government entity regarding how the funds are
expended.  This is done by making the funds subject to annual
appropriations or, where there is a contract to provide funds to the
hospital for more than 12 months, making it possible to modify the
contract with 12 months' notice. 


      GEORGIA
----------------------------------------------------- Appendix III:0.7

To convert, a not-for-profit hospital must provide the attorney
general with a detailed notice 90 days in advance, make the notice
available to the public, and pay a $50,000 fee.  Within 10 days of
receiving this notice, the attorney general must publicize the
proposal in the newspaper and invite comments.  Within 60 days of
receiving the notice, the attorney general must hold a public hearing
to ensure that the public's interest is protected.  Under the law,
that interest is not protected unless there has been adequate
disclosure that appropriate steps have been taken to ensure that the
transaction is authorized, the charitable assets safeguarded, and the
proceeds used for charitable purposes.  This disclosure must address
a long list of factors similar to those in the model act.  The
attorney general generally must issue his findings regarding
compliance with the law's requirements within 30 days of the hearing. 
In addition, no hospital owned by a hospital authority may be sold,
or leased unless a notice is provided and a local public hearing is
held 60 days prior to such transaction.  If such a hospital is
leased, the lease must provide that at least one member of the
hospital authority will serve as a full voting member of the lessee's
governing body and that the governing body will submit financial
statements annually to the governing authority of the county where
the hospital is located. 


      ILLINOIS
----------------------------------------------------- Appendix III:0.8

Provisions enacted in 1990 authorize county-operated hospitals to be
transferred, sold, or leased, by ordinance or resolution, to
responsible corporations or other entities.  A public hearing must be
held first with notice about the hearing published in the newspaper
at least 10 days before it is held.  If the hospital workforce is
unionized and the workforce will remain substantially the same, the
hospital must continue to recognize the union for collective
bargaining purposes if it timely asserts its representational
capacity. 


      INDIANA
----------------------------------------------------- Appendix III:0.9

After a public hearing (notice of which must appear in the newspaper
10 days in advance) and if the county and hospital governing board
agree, county-operated hospitals may be leased.  If a county and
hospital governing board agree that it would be in the county's best
interest, such a hospital may also be sold to a not-for-profit
hospital corporation to operate it, but if the corporation ceases
operation the hospital reverts back to the county. 


      KANSAS
---------------------------------------------------- Appendix III:0.10

No conversion of an insurer, including not-for-profit medical and
hospital service corporations, may take place unless certain
requirements are met.  These requirements include filing a detailed
statement about the transaction or merger and paying a $1,000 filing
fee to the commissioner of insurance.  If the commissioner approves,
and after a public hearing, the transaction or merger may take place. 
The commissioner may not approve if the insurer would no longer
satisfy licensing requirements, the financial condition of the
acquiring party would jeopardize or prejudice the interest of
policyholders, the plans are unfair and unreasonable to policyholders
and not in the public interest, or the characteristics of the
individuals involved are such that the merger would not be in the
interest of the policyholders or the public or it is likely to be
hazardous or prejudicial to the insurance-buying public. 


      LOUISIANA
---------------------------------------------------- Appendix III:0.11

Health care facilities are expressly authorized to enter into
cooperative agreements or merge with other health care facilities. 
Such facilities may apply (for a fee) to the state Department of
Justice for a certificate of public advantage, which is intended to
immunize them from antitrust laws.  After a hearing, the Department
may issue the certificate if the transaction is likely to result in
lower health care costs or improved access to health care, or higher
quality health care without an undue increase in costs.  In addition,
at least 30 days before a conversion, a not-for profit hospital must
submit a detailed application to the attorney general, who must
publish a notice about it in the newspaper within 5 working days of
receiving it and who has 60 days to review it and approve or
disapprove it.  The attorney general must hold a public hearing and
approve the transaction unless he or she finds the transaction is not
in the public interest because appropriate steps have not been taken
to safeguard the value of charitable assets and ensure that proceeds
are used for appropriate health care purposes, taking into account a
range of criteria similar to those in the model act.  In order to
prevent the acquisition from going forward, the attorney general must
seek an injunction blocking the action. 


      MAINE
---------------------------------------------------- Appendix III:0.12

All nonprofit hospital and medical service organizations must file a
statement of ownership interests and charitable purposes with the
attorney general by the end of 1997, and it must be approved by the
courts.  All assets of such organizations are expressly held in
charitable trusts.  To engage in a conversion, a nonprofit hospital
and medical service organization generally must submit a charitable
trust plan to the attorney general that meets certain requirements
(related to, for example, meeting unmet health care needs), and the
plan must be approved by the courts. 


      NEBRASKA
---------------------------------------------------- Appendix III:0.13

No one may engage in the acquisition of a not-for-profit hospital
without submitting a detailed application, made available to the
public, to the Department of Health and the attorney general.  Within
5 days of receiving the application, the Department must publish a
notice about it in the newspaper.  Within 20 days of receiving the
application, the attorney general must decide whether to review it. 
The Department, and the attorney general if that office will conduct
a review, must hold a hearing within 30 days of receiving the
application.  The Department has 60 days from receipt of the
application to approve or disapprove the acquisition solely on the
basis of specific criteria in the law.  On the basis of whether the
acquisition is in the public interest, the attorney general also has
60 days to approve or disapprove the acquisition, or it is deemed
approved.  Acquisitions are not in the public interest unless
appropriate steps have been taken to safeguard charitable assets and
ensure that proceeds are used to provide charitable health care.  In
determining if the appropriate steps have been taken, the attorney
general must consider criteria similar to deciding criteria under the
model act. 


      NEW HAMPSHIRE
---------------------------------------------------- Appendix III:0.14

In addition to authorities retained by the attorney general and
commissioner of insurance, the director of charitable trusts must
approve any conversion involving a health care charitable trust.  The
governing body of any such trust must submit a detailed notice to the
director 120 days before the transaction and provide reasonable
public notice.  The director may hold a public hearing and must
ensure that the governing body of any such trust has acted in good
faith, fulfilled its fiduciary duties, and met numerous other
requirements similar to those in the model act.  The commissioner of
insurance may, however, waive these requirements if the transaction
is necessary to avoid the future impairment or insolvency of health
insurer or health maintenance organizations that are involved. 


      NEW JERSEY
---------------------------------------------------- Appendix III:0.15

For a health service corporation to convert to a domestic mutual
insurer, the governing board must adopt a resolution to convert that
includes a detailed plan for conversions by a two-thirds vote of all
directors.  The plan must be submitted to the commissioner of
insurance, and after 30 days' notice, a public hearing must be held. 
The commissioner must approve or disapprove the plan within 30 days
after the hearing. 


      NORTH CAROLINA
---------------------------------------------------- Appendix III:0.16

Municipalities and hospital authorities may lease, sell, or convey
any hospital facility to a for-profit corporation.  To do so, they
must first adopt a resolution of intent, request proposals, and hold
a public hearing.  Then they must hold another public hearing on the
proposals, which must be made available to the public before the
hearing.  Finally a proposal may be adopted only if it is determined
at another meeting to be in the public interest.  The corporation
must agree to provide the same or similar medical services and access
to them, and a report must be prepared annually to document
compliance.  The hospital reverts back to the municipality or
hospital authority if the corporation fails to comply.  A
municipality or hospital authority may also lease hospital land to,
or enter into a joint venture with, a for-profit corporation, so long
as the hospital facility is maintained as the corporation would have
been required to maintain it had the corporation bought it.  In
addition, a public hospital may acquire ownership interest in a
not-for-profit or for-profit managed care organization. 


      NORTH DAKOTA
---------------------------------------------------- Appendix III:0.17

Not-for-profit health service corporations may convert to
not-for-profit mutual insurance companies, by seeking approval from
the commissioner of insurance under the same procedures as required
for consolidation, but are not authorized to convert to for-profit
status.  The new not-for-profit mutual insurance company may continue
to provide health care and related service to members and subscribers
and make payments directly to hospitals and others rendering such
services.  The laws governing other mutual insurance companies
generally apply, but not-for-profit corporation laws apply to the
operation and control of a nonprofit mutual insurance company that
converted from a not-for-profit health service corporation.  If any
assets of the not-for-profit health service corporation were
considered to be in a charitable trust, conversion does not create a
breach of that trust nor provide grounds for disapproving the
conversion. 


      OHIO
---------------------------------------------------- Appendix III:0.18

A not-for-profit health care entity proposing a transaction must
provide a detailed notice, made available to the public, to the
attorney general.  Not more than 7 days after providing the notice,
the entity must publicize it in the newspaper.  The attorney general
has 60 days from the time the notice is submitted to approve or
disapprove the transaction but may, for good cause, extend the
deadline 90 days.  In deciding whether to approve or disapprove the
transaction, the attorney general must consider, for example, if it
will result in a breach of fiduciary duty, if the entity will receive
full and fair market value, if the proceeds will be used for the
entity's original purpose, and any other criteria considered
appropriate.  The attorney general may obtain reasonable
reimbursement from the entity for the cost of making the
determination.  If the attorney general approves the transaction, the
entity must hold a public hearing to receive comments on the proposed
use of the proceeds not later than 45 days after it receives notice
of the approval.  The proceeds must be dedicated and transferred to
one or more new or existing tax-exempt charitable organizations,
which may include a foundation if the attorney general finds that it
meets certain conditions. 


      OREGON
---------------------------------------------------- Appendix III:0.19

Any public benefit or religious corporation that operates a hospital
(unless the hospital is controlled by a political subdivision of the
state) must provide a detailed notice to and obtain approval from the
attorney general before converting the hospital to a noncharitable
entity, unless it has requested and received a waiver, the attorney
general has not responded to its request for a waiver within 45 days,
or the transaction is of a type the attorney general has by rule
excepted.  A mailing list must be maintained of members of the public
who have requested, and for a fee must be sent, copies of such
notices.  If requested, however, the attorney general may maintain
the confidentiality of submitted information deemed to be "trade
secrets" unless it is necessary to the determination of an issue to
be considered at a public hearing on the transaction.  Such a hearing
is required unless the attorney general waives the requirement. 
Notice must be sent to the people on the mailing list about the
hearing or waiver of the requirement to hold one.  If the attorney
general has received all the necessary information to make a
decision, on the basis of whether the conversion meets criteria
similar to those in the model act, the attorney general must approve
or disapprove the conversion within 60 days of receiving the original
notice about it.  Fees may be charged to the costs incurred in
reviewing and evaluating the transaction. 


      RHODE ISLAND
---------------------------------------------------- Appendix III:0.20

No conversion may take place without the approval of the attorney
general and the Department of Health.  Detailed applications must be
filed and the information in them is generally public.  Within 10
days of receiving the application, the attorney general publishes
notices about the conversion and a public hearing to consider it in
the paper.  The attorney general has 120 days after receiving the
application to approve or disapprove the conversion and forward it to
the Department of Health for review.  The attorney general may compel
parties to testify, and all costs of reports generated and experts
consulted may be charged to the transacting parties.  The attorney
general must consider a lengthy list of criteria, including criteria
similar to those in the model act, in determining whether to approve
the conversion.  Proceeds from the conversion must be transferred to
a charitable foundation, with a judge appointing the initial board of
directors.  Limits are imposed on the frequency with which a
for-profit corporation may acquire greater than a 20 percent interest
in a hospital. 


      SOUTH DAKOTA
---------------------------------------------------- Appendix III:0.21

Upon the sale, transfer, or merger of at least 30 percent of the
assets of a not-for-profit corporation, certain information must be
submitted within 60 days after the transaction to the secretary of
state on a form provided for that purpose.  The required information
includes information about the parties involved, the terms of the
transaction and dollar amounts involved in it, and an explanation of
how the transaction furthers the purpose of the not-for-profit
corporation. 


      TEXAS
---------------------------------------------------- Appendix III:0.22

Hospital boards may contract with other facilities to supply services
and for the sale or lease of hospital facilities only with the
approval of the commissioners' court.  Charity care and community
benefit requirements are set for hospitals.  A not-for-profit
hospital must submit to state officials an annual report that
includes its mission statement, information about the charity care
and community benefits it provides, and financial data.  In addition,
state officials must provide the attorney general and comptroller
with a list of hospitals that did not meet the charity care and
community benefit requirements each year.  A mutual insurance company
may convert to a stock insurance company, but it must first file
copies of documents relating to the conversion plan with the
commissioner of insurance, who has 60 days to approve or disapprove
the plan but can, on written notice, extend this time by 30 days. 
The commissioner may hold a public hearing on the plan, and eligible
members of the mutual insurance company must have an opportunity to
comment on it.  If approved by the commissioner, the plan becomes
effective only after the affirmative vote of eligible members. 


      VERMONT
---------------------------------------------------- Appendix III:0.23

No not-for-profit hospital service corporation or medical service
corporation may engage in a conversion involving more than 10 percent
of its assets without applying to and receiving approval from the
commissioner.  The commissioner must hold at least one public hearing
within 30 days of receiving an application and approve or disapprove
it within 30 days of the hearing.  In considering an application, the
commissioner must consider factors such as whether the transaction
will provide cost-effective, high-quality care. 


      VIRGINIA
---------------------------------------------------- Appendix III:0.24

Before the disposition of assets, a not-for-profit entity must
provide notice to the attorney general in order for the attorney
general to exercise common law and statutory authority over the
transaction.  The notice must be given at least 60 days before the
effective date of the proposed transaction in order for the attorney
general to exercise his common law and statutory authority over the
activities of the entity.  Within 10 days of receiving this notice,
the attorney general must publish information about the proposed
transaction in the newspaper.  In addition, with the approval of the
State Corporation Commission, a domestic mutual insurer may convert
to a domestic stock insurer.  After notice and an opportunity to be
heard are given to policyholders, the Commission must approve the
conversion if, among other things, it is fair and equitable to
policyholders. 


      WASHINGTON
---------------------------------------------------- Appendix III:0.25

A person may not engage in the acquisition of a not-for-profit
hospital without first submitting a detailed application, which is
considered a public record, and paying a fee to cover all the costs
of considering the application to the Department of Health.  The
Department must publish a notice regarding the application in the
newspaper, conduct one or more public hearings, and forward a copy to
the attorney general.  Generally within 45 days of the first public
hearing, the attorney general must issue an opinion on whether the
transaction meets requirements similar to those in the model act. 
The Department then has 30 days to approve or disapprove the
transaction, depending on whether it will detrimentally affect the
continued existence of accessible, affordable health care responsive
to the community.  This is determined on the basis of whether the
transaction meets certain minimum standards. 


GAO CONTACTS AND STAFF
ACKNOWLEDGMENTS
========================================================== Appendix IV

GAO CONTACTS

James O.  McClyde, Assistant Director, (202) 512-7152
Ann Calvaresi Barr, Project Manager, (202) 512-6986
Janina Johnson, Senior Evaluator, (202) 512-7139

STAFF ACKNOWLEDGMENTS

In addition to those named above, the following staff made important
contributions to this report:  Rachel DeMarcus, Assistant General
Counsel; Joseph E.  Jozefczyk, Assistant Director; Madeline
Chulumovich, Senior Evaluator; Rodney Hobbs, Senior Evaluator; Craig
Winslow, Senior Attorney; and Nancy Crothers, Communications Analyst. 


*** End of document. ***