RI 2026 H8364: Health and Safety - The Hospital Conversions Act

Plain-English Summary

This bill allows the Rhode Island Superior Court to take control of and sell the assets of a hospital and its related businesses. This can happen if the state's Attorney General or Department of Health proves the hospital is mismanaged, financially failing, acting illegally, or operating in a way that harms patient health and safety. The court can appoint a receiver to manage the hospital's operations, protect its assets, and ensure patients continue to receive care while the legal process and any potential sale or closure take place.

For younger readers

This bill creates a rule for what happens when a hospital is running out of money, breaking the rules, or not keeping patients safe. If this happens, a judge can put a special person in charge, called a "receiver." This person’s job is to take over the hospital, make sure the money is handled right, and keep the hospital running safely so sick people can still get the help they need. The receiver can also help sell the hospital's stuff to pay off the money the hospital owes to others.

Who & Where It Applies

Impacted groups

Hospital owners and affiliatesHospital patientsHealthcare workersHospital creditorsHospital shareholders

Impacted communities

All

Constitutional & Fiscal Check

The bill grants the state authority to place private hospitals into receivership and liquidate assets, raising potential Fifth Amendment Takings Clause and Due Process concerns. However, because the process requires a Superior Court action, evidence of insolvency or mismanagement, formal hearings, and court oversight, due process is largely satisfied.

Estimated cost

None

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Protects patient safety and community healthcare access when corporate hospital owners mismanage facilities or put profits over people.
Provides a strong legal mechanism to hold corporate hospital directors accountable for illegal, oppressive, or fraudulent behavior.
Prioritizes the public's need for stable, continuous healthcare services by allowing a receiver to step in and keep the hospital running during financial distress.
Could lead to the permanent liquidation and closure of hospitals in underserved, low-income areas if a suitable buyer cannot be found.
Liquidating a hospital's assets to pay off corporate creditors might prioritize wealthy debt holders over the long-term healthcare needs of the community.
May result in significant job losses, wage disruptions, or broken union contracts for healthcare workers and support staff during the liquidation process.

For Conservatives

Ensures that creditors and businesses owed money by failing hospitals have a clear, court-ordered process to recoup their financial losses.
Allows the free market to function by liquidating insolvent, poorly managed hospital businesses rather than bailing them out with taxpayer money.
Empowers the judicial system to remove corrupt corporate directors who mismanage private assets and violate their fiduciary duties.
Grants the government sweeping power to seize control of private businesses and force the liquidation of their assets.
Interferes with corporate freedom by allowing the state to dictate how a private hospital operates and manages its finances.
Could be weaponized by state officials to target and take over specific healthcare facilities under vague, subjective claims of "mismanagement."

Votes

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Full Bill Text

Changes to existing Rhode Island law · 67 additions

It is enacted by the General Assembly as follows:

SECTION 1. Chapter 23-17.14 of the General Laws entitled "The Hospital Conversions Act" is hereby amended by adding thereto the following section: 23-17.14-37. Hospital receivership.

(a) The superior court shall have the power to liquidate the assets and businesses of a hospital, defined as the legal entity licensed as a hospital under the laws of Rhode Island, pursuant to chapter 17 of this title, and any affiliates of the hospital that support the provision of care by that hospital (collectively “the hospital”), in an action by the attorney general or the department of health under this section when it is established that:

(1) The hospital’s corporate assets are being misapplied or are in danger of being wasted or lost;

(2) The hospital is being mismanaged, is in severe financial distress, or is insolvent;

(3) The acts of the directors or those in control of the hospital are illegal, oppressive, or fraudulent; or

(4) The hospital is being operated in a manner which will have a detrimental impact on the health, safety, or well-being of patients or their medical care.

(b) It is not necessary to make shareholders, members, or other types of equity holders parties to an action or proceeding under this section unless relief is sought against them personally.

(1) The court has general equity jurisdiction and power to:

(i) Issue any orders, injunctions, and decrees that justice and equity require;

(ii) Appoint a receiver or receiver pendente lite, with any powers and duties that the court, from time to time directs, including any or all powers available to a receiver under common law, the laws of this state, or the rules of its courts regarding receivership, as the court deems necessary and appropriate;

(iii) Take any other proceedings that are requisite to preserve the corporate assets wherever situated, and to preserve health care resources and maintain patient safety and access to health care services, to carry on the business of the hospital until a full hearing can be had; and

(iv) Take any other proceedings that are requisite to preserve the corporate assets wherever situated, and to preserve health care resources and maintain patient safety and access to health care services, during the pendency of the receivership.

(2) The provisions of this section supplement, and in no way displace or limit, the general equitable powers of the court.

(3) After a hearing had upon any notice that the court directs to be given to all parties to the proceedings and to any other parties in interest designated by the court, the court may appoint a receiver with authority to take charge of any of the hospital’s estate and effects of which he or she has been appointed receiver and to collect the assets of the hospital, including all amounts owing to the hospital whether by shareholders on account of any unpaid portion of the consideration for the issuance of shares or otherwise.

(4) The hearing date for the appointment of a permanent receiver is not to be more than twenty-one (21) days after commencement of the action, unless the hearing date is extended by the court for good cause shown.

(5) The receiver has authority subject to court order, to sue and defend in all courts in his or her own name as receiver of the hospital, or in its name, to intervene in any action or proceeding relating to its assets or business, to compromise any dispute or controversy, to preserve the assets of the hospital, to carry on its business, to sell, convey, and dispose of all or any part of the assets of the hospital wherever situated, either at public or private sale, to redeem any mortgages, security interests, pledges, or liens of or upon any of its assets, and generally to do all other acts which might be done by the hospital or that is necessary for the administration of his or her trust according to the course of equity. The assets of the hospital or the proceeds resulting from a sale, conveyance, or other disposition of the assets will be applied to the expenses of any liquidation and to the payment of the liabilities and obligations of the hospital, and any remaining assets or proceeds will distributed under the direction of the court among its shareholders according to their respective rights and interests. The order appointing the receiver sets forth their powers and duties. The powers and duties may be increased or diminished at any time during the proceeding.

(6) The court has power to allow from time to time as expenses of the receivership compensation to the receiver and to attorneys in the proceeding, and to direct the payment of the compensation out of the assets of the hospital or the proceeds of any sale or disposition of the assets.

(7) The court appointing the receiver has exclusive jurisdiction of the hospital and its property, wherever situated, and of all questions arising in the proceedings concerning the property.

(8) A receiver shall in all cases give any bond that the court directs with any sureties that the court requires.

(9) In any proceedings to liquidate the assets and business of a hospital, the court may require all creditors of the hospital to file with the receiver, in any form that the court prescribes, proofs under oath of their respective claims. If the court requires the filing of claims, it shall fix a date, which is not to be less than four (4) months from the date of the order, as the last day for the filing of claims, and shall prescribe the notice that is to be given to creditors and claimants of the fixed date. Prior to the fixed date, the court may extend the time for the filing of claims. Creditors and claimants failing to file proofs of claim on or before the fixed date may be barred, by court order, from participating in the distribution of the assets of the hospital.

SECTION 2. This act shall take effect upon passage.