S 3244Medical Services

Health and Safety - The Hospital Conversions Act

This bill allows the state to place failing, mismanaged, or unsafe hospitals into court-ordered receivership to manage their operations.

Held for study

Population
Affected

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Introduced May 1, 2026Committee Senate Judiciary

Plain-English Summary

This bill allows the Rhode Island Attorney General or the Department of Health to ask the superior court to place a hospital into receivership. If approved, the court appoints a receiver to take control of the hospital's assets and business operations. This can happen if the hospital is mismanaged, in severe financial distress, insolvent, wasting assets, acting illegally or fraudulently, or operating in a way that harms the health, safety, or care of its patients. The receiver has the power to manage the hospital, sell assets, and pay off debts under the court's direction.

For younger readers

Sometimes, a hospital might run out of money, be managed very badly, or become unsafe for patients. If that happens, this bill allows the state government to step in and ask a judge for help. The judge can appoint a special helper called a "receiver." The receiver takes over the hospital to fix the problems, pay the bills, and make sure patients stay safe. They can run the hospital, sell its things if needed, and make important decisions until everything is sorted out.

Who & Where It Applies

Impacted groups

HospitalsHospital patientsHospital executives and boardsHealthcare workersHospital creditors

Impacted communities

All

Constitutional & Fiscal Check

There is a potential risk regarding due process and unconstitutional seizure of property. The bill allows the state to seize control of a private hospital's assets and operations, potentially before a full hearing is held (appointing a receiver pendente lite). If the criteria for "mismanagement" or "detrimental impact" are overly vague, it could invite challenges that the state is violating the Fifth and Fourteenth Amendments by taking private property without sufficient due process or just compensation.

Estimated cost

None

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Protects community health and access to medical care by preventing the sudden closure of hospitals that serve vulnerable populations.
Provides a mechanism to hold corrupt or negligent hospital executives accountable for mismanagement, fraud, or unsafe practices.
Prioritizes patient safety and well-being over corporate profits by allowing the state to intervene when hospital operations become detrimental to patient care.
May lead to the liquidation and sale of public or non-profit hospital assets to private, for-profit healthcare corporations during the receivership process.
Could result in job losses, wage cuts, or reduced benefits for hospital workers and union staff if the receiver decides to slash costs to pay off debts.
Does not guarantee long-term state funding or public ownership to save failing hospitals, leaving their ultimate fate up to market forces and court decisions.

For Conservatives

Ensures that failing hospitals pay their debts and obligations to creditors through an orderly liquidation process rather than relying on taxpayer bailouts.
Protects property rights by establishing a clear legal framework and timeline for creditors to file claims and recover owed funds from insolvent hospitals.
Allows for the privatization or sale of poorly managed hospital assets to more efficient, private operators who can run the facilities effectively.
Expands government overreach by giving the state the power to seize control of private hospital operations and assets through court orders.
Interferes with the free market by allowing a court-appointed receiver to dictate business decisions, overriding the authority of private boards and shareholders.
Could be weaponized by state officials to target specific healthcare facilities or executives under broad claims of "mismanagement" or "detrimental impact."

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.