Morris Manning & Martin, LLP

Hospital Acquisition Act Inapplicable to Sale of Closed Facility

10.05.2021

Under the Hospital Acquisition Act (HAA), the sale of a non-profit “hospital” must be subjected to review by the Georgia Attorney General (AG) before the transaction is consummated, else the sale is null and void. However, the Georgia Court of Appeals ruled that a non-profit facility that ceases operations and surrenders its permit is no longer a “hospital” under the HAA. Recently, the Georgia Supreme Court declined to hear the case, leaving the Court of Appeals’ order in effect.

In Cobb Hosp., Inc. v. Emory-Adventist, Inc., 357 Ga. App. 617 (2020), the Court of Appeals considered the sale of a former non-profit hospital. Emory-Adventist Hospital (EAH) was a non-profit facility operating in Smyrna, Georgia, since the 1970s. But, in 2014, due to declining revenues, EAH ceased operations and returned its permit to the Department of Community Health (DCH). In April 2015, Emory University (Emory) purchased EAH’s real property, but it did not submit that acquisition to the AG for HAA review.

WellStar operates healthcare facilities in Cobb County, Georgia, and it took issue with Emory’s acquisition. WellStar filed suit in the Superior Court of Cobb County seeking a declaratory judgment that Emory’s acquisition should have been submitted for HAA review and that because it was not, it was null and void.

The trial court granted summary judgment to Emory, and the Court of Appeals affirmed. It noted that the HAA defines a “hospital” as “any institution classified and having a permit as a hospital from DCH….”, and, under related statutes, “a ‘hospital’ is an institution which is primarily engaged in providing to inpatients, by or under the supervision of physicians, diagnostic services and therapeutic services for medical diagnosis, treatment, and care of injured, disabled, or sick persons or rehabilitation services for the rehabilitation of injured, disabled, or sick persons.”

Under these statutes, the Court of Appeals held that Emory did not acquire a “hospital” because at the time of the acquisition, EAH was not operating and it did not have a permit. “[T]he combination of Emory-Adventist's surrender of its permit, and the closure of its facility supports the trial court's conclusion. While we agree with WellStar that such closures could be utilized in order to evade the notification and public hearing required under the HAA, the text of the statutes and regulations defining hospitals is clear, and the trial court did not err by… dismissing the case.”

WellStar petitioned the Georgia Supreme Court to review the Court of Appeals’ order, but the Georgia Supreme Court declined to take the case.

Emory was represented in Cobb Hosp. by Robert Threlkeld, Elliott Coward, and Ryan Burke. If you have questions about the Hospital Acquisition Act or other matters, please reach out to them or a member of the MMM Healthcare Group.

References:
O.C.G.A. §§ 31-7-401, 412(a)
Cobb Hosp., Inc. v. Emory-Adventist, Inc., 357 Ga. App. 617 (2020)