N.Y. Comp. Codes R. & Regs. Tit. 10 § 400.19 - Withdrawal of equity or assets
(a)
Definitions.
For purposes of this section, the following terms shall have the following meanings:
(1) The
term equity means:
(i) any
right or claim to assets;
(ii) any
interest in property or in a business, subject to claims of creditors;
(iii) the difference between assets and
liabilities;
(iv) net
worth.
(2) The term
asset means any owned physical object or any right having
economic value to its owner or any item or source of wealth expressed, for
accounting purposes, in terms of its cost, depreciated cost determined in
accordance with the applicable provisions of Part 86 of this Title, or fair
market value at date of donation.
(3)
The term withdrawal shall include, but not be limited to, the
following examples:
(i) any transfer of a
facility's cash or other assets directly or indirectly to or for the benefit of
its operator;
(ii) expenditures of
the facility's assets or equity for personal items not recognized as reimbursable
under the state's medical assistance program;
(iii) any liability incurred within any period
of time required for financial reporting in accordance with Part 86 of this Title
by a facility or its operator by reason of a mortgage, lease, borrowing or other
transaction relating to such a facility that exceeds, in the aggregate,
$50,000;
(iv) any non-arm's length or
related party loans made by the facility or its operator, including loans to any
individual, corporation, partnership, or other organization related to the
facility within the meaning of "related organization" , as that term is defined
in section
451.229 of
this Title;
(v) payment to the
operator or owner of a salary in excess of the maximum amount allowed for
reimbursement purposes by the Department of Health.
(b)
(1) No medical facility operated for profit, or
operator of such facility, may withdraw said facility's equity or assets, without
the prior approval of the commissioner, if such a withdrawal would create or
increase a negative net worth position for the facility or occur when the
facility is in a negative net worth position.
(2) A withdrawal shall be considered to have
taken place if it has occurred during any period of time required for financial
reporting in accordance with Part 86 of this Title.
(3) Negative net worth shall be calculated
without regard to any surplus created by revaluation of assets, or to receivables
resulting from non-arm's length or related party loans.
(4) When calculating net worth under this
section, only the equity or assets of the facility shall be considered, and not
any other property owned by the facility's operator, nor any other business
entities related to the facility. Appeals and audits made pursuant to Part 86 of
this Title and Title 18 (Social Services) NYCRR, respectively, shall not be
considered for purposes of calculating net worth unless finally
determined.
(5) In any administrative
hearing brought pursuant to section
2808(5) of the Public Health
Law, this section and Part 51 of this Title it shall be prima facie evidence of a
withdrawal of equity or assets in violation of section
2808(5) of the Public Health
Law and this section if, at the close of the period of time required for
financial reporting in accordance with Part 86 of this Title, a facility is in a
negative equity or net worth position and the operator has withdrawn equity or
assets from the facility during the period of time covered by the financial
report.
(c)
(1) An application for approval shall be
submitted on forms provided by the Department of Health at least 60 days prior to
the proposed withdrawal and shall specify the necessity, purpose, and impact on
patient care of the withdrawal and the details concerning such withdrawal
including, but not limited to, the principal amount, interest rate, repayment
terms, conditions of default, remedies upon default and obligee of any
transaction to be consummated in a proposed withdrawal, unless such items are
inapplicable. The application shall contain a current interim balance sheet and a
description of the facility's cash position, including as cash such cash
equivalents as certificates of deposit and treasury bills. Requests shall be made
by certified or registered mail. Nothing herein shall be construed to prohibit
the commissioner from considering applications submitted less than 60 days prior
to the proposed withdrawal in an emergency situation that directly affects the
health, safety or welfare of patients.
(2) The commissioner or his designee shall
approve or disapprove a request for withdrawal of equity or assets within 60 days
of the date of receipt of such a request. Any request not approved or disapproved
within 60 days shall be considered approved.
(3) In reviewing an application for withdrawal,
the commissioner shall consider:
(i) the
necessity for the withdrawal;
(ii)
whether such withdrawal would impair the facility's ability to render quality
care;
(iii) any expense which such
withdrawal would generate; and
(iv)
the financial condition of the facility in general.
(d) If an analysis of a facility's
financial reports indicates the violation of the provisions of this section, the
commissioner may review all documents which may indicate a withdrawal of equity
has occurred and the facility shall produce all data necessary for the completion
of such review.
(e) In addition to
any other remedy or penalty available, and after the operator has been granted
the opportunity for an administrative hearing, the commissioner may require
replacement of the withdrawn equity or assets and may impose a penalty for
violation of this regulation in an amount not to exceed ten percent of any amount
withdrawn without prior approval.
Notes
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