PRINTER'S NO. 1864
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
1275
Session of
2022
INTRODUCED BY CAPPELLETTI, KANE, KEARNEY, A. WILLIAMS, SAVAL,
MUTH, COSTA, FONTANA AND COLLETT, JULY 18, 2022
REFERRED TO FINANCE, JULY 18, 2022
AN ACT
Providing for limitations on capital distributions after certain
acquisitions of target firm health systems.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Moratorium on
Health System Dividends Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Capital distribution." A payment made, liability incurred
or other consideration given by a target firm health system to
an individual for the purchase, acquisition, redemption,
repurchase, payment or retirement of any capital stock or other
equity interest of the target firm health system or as a
dividend, return of capital or other distribution in respect of
the target firm health system's capital stock or other equity
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interest.
"Controlling interest." As defined in 4 Pa.C.S. § 1103
(relating to definitions).
"Debtor." As defined in 13 Pa.C.S. § 9102 (relating to
definitions and index of definitions).
"Mass layoff." As defined in section 2(a) of the Worker
Adjustment and Retraining Notification Act (Public Law 100-379,
29 U.S.C. § 2101(a)(3)).
"Private fund." A corporation that:
(1) is an investment company as defined in section 3 of
the Investment Company Act of 1940 (54 Stat. 789, 15 U.S.C. §
80a-3);
(2) is not a venture capital fund as defined in 17 CFR
275.203(l)-1 (relating to venture capital fund defined); and
(3) is not an institution selected under section 107 of
the Community Development Banking and Financial Institutions
Act of 1994 (Public Law 103-325, 108 Stat. 2163).
"Target firm health system." A for-profit hospital, hospice
or nursing home located in this Commonwealth that is bought by a
private fund.
Section 3. Limitations.
(a) General rule.--A target firm health system may not,
either directly or indirectly, during the two-year period
beginning on the closing date of a transaction that results in a
private fund acquiring a controlling interest in the target firm
health system:
(1) make a capital distribution or similarly reduce the
equity capital of the target firm;
(2) incur an obligation that commits the target firm to
making a capital distribution or a similar reduction of the
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equity capital of the target firm after the end of the two-
year period; or
(3) order a plant closing or mass layoff.
(b) Void transfer.--A transfer made, obligation incurred or
order issued by a target firm health system in violation of
subsection (a) shall be void.
(c) Joint and several liability for aiders and abettors.--A
controlling private fund, holder of an active interest in a
controlling private fund or affiliate of a target firm health
system that aids, abets, facilitates, supports or instructs a
target firm health system's violation of subsection (a) shall be
jointly and severally liable under this subsection for a
transfer made or obligation incurred, including for reasonable
attorney fees and costs awarded to a plaintiff under subsection
(d)(2).
(d) Cause of action.--
(1) An employee, creditor, debtor or representative of
an employee, creditor or debtor of a target firm health
system may bring an action against the direct or indirect
transferee, obligee or beneficiary of the transfer or
obligation to void the transfer, obligation or order and
recover any transferred property of the target firm health
system.
(2) In a successful action to void or recover a transfer
under paragraph (1), the court shall award the plaintiff
reasonable attorney fees and costs.
Section 4. Effective date.
This act shall take effect in 60 days.
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