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House of Representatives
Session of 2013 - 2014 Regular Session

MEMORANDUM

Posted:	June 6, 2013 03:45 PM
From:	Representative Thomas H. Killion
To:	All House members
Subject:	HMO Business Organizational Structure

I plan to introduce two pieces of legislation to allow more flexibility to HMO's business organizational structure. Under current Pennsylvania law, HMO's are prohibited from operating as limited liability companies (LLC's). This prohibition limits certain business opportunities for non-profit HMO's that have both for-profit and non-profit hospital owners. This is the case because if the business is sold, the for-profit owners would not be able to receive their full share of the net proceeds under Pennsylvania law applicable to all non-profit corporations. The solution to this problem is to permit an HMO that is organized by one or more corporations to operate as an LLC. This legislative change would permit the non-profit hospitals and the for-profit hospitals to invest in the LLC that would operate as an HMO in Pennsylvania, and receive their full share of the net proceeds of a sale of a business. This change will facilitate for-profit ownership and investment in HMO's in Pennsylvania. The tax revenue impact of this targeted legislative change would be neutral, and possibly tax revenue enhancing. The Department has no objection to this legislation. Please consider co-sponsoring these two pieces of legislation. Contact Alison at ahagler@pahousegop.com if you have any questions.

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Document #1

Description:

1) Amending the act of December 29, 1972 (P.L.1701, No. 364), known as the Health Maintenance Organization Act, further providing for purpose, for definitions, for required services, for board of directors, for contracts with practitioners, hospitals and insurance companies, for right to serve or benefits when outside the state, for supervision and for reports and examinations; and providing for applicability to limited liability companies.

Document #2

Description:	2) Amending Title 15 (Corporations and Unincorporated Associations) of the Pennsylvania Consolidated Statutes, further providing for purposes of limited liability companies.