N.J. Admin. Code § 8:33-3.3

Current through Register Vol. 56, No. 9, May 6, 2024

Section 8:33-3.3 - Transfer of a health care service/facility

(a) A certificate of need is required for a transfer of ownership of the following:

1. An entire general hospital. Applications for such shall follow the full review process set forth at 8:33-4.1(a), and shall be accepted on the first business day of any month; and

2. A transfer that will result in a new Medicare provider number for the hospitals involved in the transfer. Applications for such shall follow the full review process set forth at 8:33-4.1(a).

(b) A certificate of need is not required for transfer of ownership of all other operating health care facilities, beds, services or equipment not specified in (a) above. Where a certificate of need is not required pursuant to this section, application for a license on forms prescribed by the Department shall be filed with the Department's Office of Certificate of Need and Healthcare Facility Licensure, in accordance with this chapter and the Department's licensing rules.

(c) If a transfer of ownership occurs without a required certificate of need, then a daily penalty as established in the service-specific licensing rules promulgated by the Department may be assessed on the "new" owner and/or operator from the date of the unapproved transfer to the date the Department grants formal ownership approval to the "new" owner and/or operator.

(d) In the review of a transfer of ownership application, the prospective owner(s)/operator(s) shall be evaluated by the Department on the basis of character and competence and track record with regard to past and current compliance with state licensure, applicable Federal and certificate of need requirements, as specified in 8:33-4.9 and 4.10.

(e) A prospective owner approved for any transfer of ownership shall be subject to the same Department certificate of need, licensure, and reimbursement requirements as the current owner, including continuing compliance with any applicable certificate of need conditions, except that the Commissioner may amend the requirements to relate to changes in the health care system.

(f) These rules apply to ownership by any individual, partnership, limited liability partnership, corporation, limited liability corporation, or other entity in any entity which is the licensed operator of a facility or which owns the facility's real property. Except as otherwise provided in (h) below, a transfer of ownership which requires a certificate of need is defined as an acquisition or transfer which will increase or establish an ownership interest in a health care facility, as defined in 8:33-1.3, through purchase, lease, purchase or lease option, gift, donation, exchange, or by any other means. Types of ownership interests to which these rules apply include, but are not limited to, the following:

1. Shares of stock or any other type of security in a private business corporation;

2. Partnership interests in a general or limited partnership;

3. Ownership of a proprietorship or any other entity which operates a health care facility; and

4. Holding title to real property which is used to operate health care facility, or having a leasehold interest in such real property.

(g) Applications for transfer of ownership shall specify each and every principal in the entity which is the prospective owner and shall account for 100 percent of the ownership of the facility, except that if the ownership and operation is a publicly held corporation, each and every principal who has a 10 percent or greater interest in the corporation shall be identified by name, home address and percentage of interest.

(h) The following types of changes by operating health care facilities shall not require certificate of need approval by the Department as transfers of ownership, but shall require prior written notice to the Certificate of Need and Acute Care Licensure Program or Long Term Care Licensing and Certification Program, as applicable, of any such sale and identification of ownership changes:

1. The purchase or sale of less than 10 percent of the outstanding stock (preferred or common) in a business corporation, except that any purchase of stock which results in an individual holding 10 percent or more of the corporation's outstanding stock when the individual previously held less than 10 percent of the stock shall require certificate of need approval;

2. The purchase or sale of limited partnership interests in a limited partnership, where a written limited partnership agreement prohibiting participation in management of the partnership by limited partners has been submitted to the Department. This exception shall not apply to general or managing partners or to any partner who participates in management;

3. A change in the membership of a nonprofit corporation, where the members are individuals or nonprofit corporations, and there is no purchase or sale of assets. In cases involving general hospitals, the facility shall provide notification documenting, to the satisfaction of the Commissioner, that the membership change does not diminish access to previously provided community services, including, but not limited to, women's reproductive health services. If the Commissioner determines that there will be decreased access to existing community services, a facility shall be required to file a certificate of need application. The application shall be subject to the expedited review process, as set forth at 8:33-5.2(c);

4. A change in ownership which does not involve acquisition of an ownership interest by a new principal; that is, the change involves only the percentage owned by the principals in the entity which is the licensed operator of the facility or involves withdrawal of one or more principals from ownership in the facility;

5. The death of a principal in a health care facility, which shall be reported to the Department's Certificate of Need and Acute Care Licensure Program or Long-Term Care Licensing and Certification Program, as applicable, together with the identity of the heir(s) to the ownership interest of the deceased principal. If the heir(s) intends to retain the ownership interest, the heir(s) shall be subject to investigation of licensure track record. Otherwise, the Department may accept an application to transfer the heir's ownership interest. Any other transfer of ownership which occurs by operation of law shall be reported in the same manner; and

6. A transfer, which involves a change in the controlling legal entity, but not in individuals with ownership interests, including, but not limited to:

i. A change in the type of organizational entity owning the facility only, with no change in the principals with ownership interests (for example, a change from a corporation to a partnership or vice versa);

ii. The merger or consolidation of a corporation with or into its wholly-owned subsidiary;

iii. The merger or consolidation of a corporation with or into a corporation with identical common ownership;

iv. A transfer of assets to an entity with identical common ownership;

v. A transfer of assets to a wholly-owned subsidiary corporation;

vi. A transfer of assets from a wholly-owned subsidiary corporation to its parent;

vii. A transfer of stock to a wholly-owned subsidiary; or

viii. A transfer of stock to an entity with identical common ownership.

(i) Any person or entity which loans money for the construction of, capital improvements to, or operation of a health care facility may hold as security therefore such liens, mortgages, pledges, and other encumbrances on the assets, real property, or stock or other ownership interests in the health care facility as provided in any loan or security agreement with the borrower and to the fullest extent permitted by law. If a lender acquires an interest in all of the assets or ownership of a health care facility upon foreclosure of any such security interest upon default, such lender shall promptly make application for a certificate of need in accordance with this subchapter and shall be permitted to operate the facility pending review and approval of said application provided that such lender shall demonstrate to the satisfaction of the Department that the health, safety and welfare of the patients will be maintained in the interim.

(j) Except as otherwise provided in (k) below, the transfer of unimplemented certificates of need is prohibited. Proceeding with any such transfer shall nullify the certificate of need and preclude licensure as a health care facility.

(k) At the discretion of the Department, an exception to the prohibition, at (j) above, on the sale of certificates of need prior to licensure may be permitted and the certificate of need process for transfer of ownership may be allowed to proceed on an unimplemented certificate of need if the types of changes set forth at (h)1 through 6 above apply. Applicants for transfers of unimplemented certificates of need shall demonstrate in the application that the transfer will not adversely affect the financial feasibility of the project.

(l) If a lender or creditor acquires an ownership interest in the physical assets of an unimplemented certificate of need project through foreclosure on a mortgage, lien, or other security interest, the certificate of need may be automatically nullified, based on the provisions of this chapter, except that the Commissioner may consider the transfer of the certificate of need to the new owner of the site where the certificate of need approved project has been substantially completed as determined by the Commissioner, and where the Commissioner finds that the completion of the project would be in the best interest of the population to be served and the entity acquiring ownership interest complies with track record requirements set forth at 8:33-4.10(d).

(m) If the facility being transferred has any partially implemented or unimplemented certificate of need approvals, an application for a license to own and/or operate the facility by the new owner will not be accepted by the Licensing Program unless the current owner/operator surrenders to the Department the unimplemented certificate of need approvals. The Commissioner may waive this requirement, based on a determination that the project has been substantially completed and that completion of the project is in the public interest, consistent with the principles set forth at 8:33-1.2.

N.J. Admin. Code § 8:33-3.3

Amended by R.1993 d.442, effective 9/7/1993.
See: 25 N.J.R. 2171(a), 25 N.J.R. 4129(a).
Amended by R.1996 d.101, effective 2/20/1996.
See: 27 N.J.R. 4179(a), 28 N.J.R. 1228(a).
Amended by R.2002 d.243, effective 8/5/2002.
See: 34 N.J.R. 458(a), 34 N.J.R. 2814(a).
Rewrote the section.
Amended by R.2008 d.23, effective 1/22/2008.
See: 39 N.J.R. 2709(a), 40 N.J.R. 620(b).
In (b), substituted "Office of Certificate of Need and Healthcare Facility Licensure" for "Certificate of Need and Acute Care Licensure Program or Long Term Care Licensing and Certification Program, as applicable,".