This subchapter may be cited as “The Not-for-profit Healthcare Conversion Act.”

74 Del. Laws, c. 298, §  2;  77 Del. Laws, c. 282, §  2; 

As used in this subchapter:

(1) “Acute care hospital” means a “hospital” as defined in § 1001 of Title 16, excluding any facility that exclusively provides psychiatric services, rehabilitative services, or long-term care services.

(2) “Not-for-profit healthcare conversion transaction” includes any of the following, whether undertaken directly or indirectly through 1 or more affiliates:

a. The sale, transfer, lease, exchange, optioning, conveyance, affiliation, merger, joint venture, or other disposition of a material amount of the assets or operations of a not-for-profit healthcare entity, made other than in the normal course of business, to an entity or person other than a charity or not-for-profit entity;

b. The transfer of control or governance of a material amount of the assets or operations of a not-for-profit healthcare entity to an entity or person other than a charity or not-for-profit entity;

c. A substantial change or amendment to a certificate of incorporation which materially affects a not-for-profit healthcare entity’s charitable or public benefit intent, or the disposition of reserves or control of a not-for-profit healthcare entity to an entity or a person other than a charity or not-for-profit entity;

d. A change in the composition of the Board of Directors such that, upon the effective date of such change, a majority of directors of the not-for-profit healthcare entity are affiliated with (or have been elected by directors a majority of whom were or are affiliated with) any single entity or person other than a charity or not-for-profit entity. For purposes of this paragraph (2)d, a director shall be deemed to be affiliated with such entity or person if such director:

1. Receives or has received, directly or indirectly, compensation, including income, in any form from such person or entity (or parent, subsidiary or affiliate of such entity);

2. Serves or has served as a director, officer, employee, partner, member or agent of such entity (or of a parent, subsidiary or affiliate of such entity);

3. Is a close family member of such person or is a close family member of any person who serves as an officer or director of such entity (or parent, subsidiary or affiliate of such entity); or

4. Is, directly or indirectly, controlled by such person or entity.

e. With respect to a nonprofit acute care hospital, the sale, transfer, conveyance, or granting of a leasehold or other arrangement that transfers possession or operational control of primary facility real estate to an entity or person other than a charity or not-for-profit entity.

(3) “Not-for-profit healthcare entity” includes a not-for-profit hospital, including a corporation or a hospital created under a trust or will, a not for profit healthcare service provider, a not-for-profit nursing home or long term care facility, a not-for profit healthcare insurer, a mutual corporation holding assets in charitable trust for the public benefit, an entity maintaining plans to provide healthcare services or indemnity thereof, and an entity, other than a for-profit entity, affiliated with any of these through ownership, governance, or membership, such as a holding company or subsidiary.

(4) “Not-for-profit healthcare insurer” includes a not-for-profit provider of healthcare insurance, including service associations, health service corporations, and physician service organizations or their affiliates.

(5) “Person” means an individual, partnership, trust, estate, corporation, association, organization, joint venture, joint stock company, limited liability company, or other legal or commercial entity.

(6) “Primary facility real estate” means the land and buildings in which a nonprofit acute care hospital’s licensed inpatient and emergency services are located.

(7) “Public benefit asset” means, as to a not-for-profit healthcare entity that is seeking to engage in a not-for-profit healthcare conversion transaction, that part of the fair market value of the converting entity impressed with a public trust for the public benefit as initially determined by the Attorney General and subject to the approval of the Court of Chancery.

74 Del. Laws, c. 298, §  2;  77 Del. Laws, c. 282, §  2;  78 Del. Laws, c. 109, §  1;  85 Del. Laws, c. 350, § 1; 

A not-for-profit health-care entity seeking to engage in a not-for-profit healthcare conversion transaction is required to provide written notice of its intent to enter into the transaction to the Attorney General of this State at least 180 days prior to the closing date of the proposed transaction. In the case of any notice required under this section that involves an acute care hospital, the not-for-profit health-care entity is required to simultaneously provide a copy of such notice to the Governor and to the Secretary of the Department of Health and Social Services.

74 Del. Laws, c. 298, §  2;  77 Del. Laws, c. 282, §  2;  81 Del. Laws, c. 412, § 1;  85 Del. Laws, c. 350, § 2; 

A not-for-profit health-care entity seeking to engage in a not-for-profit healthcare conversion transaction is required to provide written notice of its intent to enter into the transaction to the Attorney General of this State at least 180 days prior to the closing date of the proposed transaction.

74 Del. Laws, c. 298, §  2;  77 Del. Laws, c. 282, §  2;  81 Del. Laws, c. 412, § 1;  85 Del. Laws, c. 350, § 2;  85 Del. Laws, c. 350, § 5; 

(a) For proceeds or reserves of not-for-profit healthcare conversion transactions that constitute public benefit assets, there shall be created a new tax-exempt public benefit or charitable organization or foundation pursuant to 26 U.S.C. § 501(c)(3) or (c)(4) of the Federal Internal Revenue Code [26 U.S.C. § 501(c)(3) or (c)(4)] into which the proceeds or reserves shall be ultimately deposited. Whether or not the public benefit or charitable organization is classified as a private foundation under § 509 of the Internal Revenue Code [26 U.S.C. § 509], it shall be subject to the restrictions and limitations that apply to private foundations found in § 4941 through 4945 of the Internal Revenue Code [26 U.S.C. §§ 4941 through 4945].

(b) The mission of the public benefit or charitable organization or foundation receiving the public benefit assets shall be serving the State’s unmet health needs, particularly with regard to medically uninsured and underserved populations.

(c) The board of directors of the foundation shall consist of 9 to 15 members who shall be broadly representative of the community’s diversity and shall include persons with knowledge, expertise and skills in investment and asset management, healthcare finance, not-for-profit administration, delivery of healthcare services, and of health care consumer issues. Each member of the board of directors shall be appointed by the Governor, by and with the consent of the Senate, from a list of qualified persons who have been nominated by the Community Advisory Committee established in subsection (d) of this section, below. The directors shall elect a chairperson. The directors shall have the authority to adopt bylaws for the foundation in consultation with the Community Advisory Committee. After the directors have finalized the formation of the foundation and the adoption of bylaws, the State shall transfer the public benefit assets to the foundation.

(d) A Community Advisory Committee shall be formed to nominate candidates for the foundation’s board of directors. The initial Community Advisory Committee shall be comprised of 9 members, 1 selected by each of the following organizations: the Delaware State Chamber of Commerce, the Medical Society of Delaware, the Delaware Community Foundation, the Delaware Nurses’ Association, the Delaware AFL-CIO, the Delaware Healthcare Association, the United Way of Delaware, the Delaware State Senate, whose member shall be selected by the President Pro Tem of the Senate, and the Delaware House of Representatives, whose member shall be selected by the Speaker of the House. The Advisory Committee shall elect a chairperson. Members of the Community Advisory Committee shall be appointed within 60 days after the State receives public benefits assets from any not-for-profit health care conversion transaction. The foundation may expand the Community Advisory Committee and provide for additional appointments through its bylaws. The Community Advisory Committee’s criteria for nominating board members shall ensure an open recruitment process for the directors. The Community Advisory committee shall nominate at least 30 residents of Delaware for the initial board of directors. At no time shall the Community Advisory Committee nominate 1 of its own members for appointment to the board of directors of the foundation. In addition to nominating persons for consideration of appointment, the Community Advisory Committee shall also work with the foundation’s board of directors to develop and improve the foundation’s mission, certificate of incorporation and by-laws, and shall provide ongoing guidance to the board concerning community needs and other issues relating to the activities of the foundation.

(e) The State Treasurer shall open and maintain an escrow account for the benefit of the foundation for the receipt of any public benefit assets. During the interim time period from when the State receives public benefit assets until they are transferred to the foundation, the State Treasurer shall invest any funds that are part of the public benefit amount in a manner that will protect the principal balance of the public benefit assets.

(f) The certificate of incorporation of the foundation shall provide that the directors shall be appointed to the board for a term of 3 years except as provided herein. The term for each board position shall be staggered by thirds so that the first term for a board position may be 1, 2 or 3 years and shall be determined by lot. No individual may serve more than 2 terms consecutively, except for the initial members whose terms are 1 or 2 years who may serve 3 consecutive terms. Notwithstanding any other law to the contrary, directors of the foundation shall be prohibited from holding over their term once expired even if their successors have not been duly elected and qualified. The directors shall receive no compensation for their service on the board of the foundation other than reimbursement for reasonable expenses related to their service. No elected official may serve as a director of the foundation.

(g) The not-for-profit public benefit or charitable organization or foundation receiving the public benefit assets, its directors, officers, and management shall be and remain independent of the for-profit company or mutual corporation and its affiliates. No person who is an officer, director, or member of management of the not-for-profit corporation submitting the plan for the proposed healthcare conversion transaction, at the time the plan is submitted, or at the time of the agreement or transaction, or thereafter, shall be qualified to be an officer, director or member of management of the not-for-profit public benefit or charitable organization or foundation receiving the charitable assets.

(h) The not-for-profit public benefit or charitable organization or foundation receiving the public benefit assets shall establish formal mechanisms to avoid conflicts of interest and to prohibit grants benefiting the for-profit corporation, the board of directors and management of the for-profit corporation.

(i) The foundation shall have the power to enter into any contract, acquire, lease, sell, hold or dispose of any assets in accordance with the purposes of this subchapter; to employ, retain or enter into contracts with persons in connection with the management and operation of the foundation; to bring or defend, pay, collect, compromise or arbitrate any legal action by or against the foundation; to deposit withdraw, invest, pay, retain and distribute the foundation’s funds in accordance with this subchapter; to purchase, hold, sell, lease, exchange, receive or otherwise acquire or dispose of securities in the name of the foundation; to open, maintain and close bank accounts, and draw checks or other orders for the payment of moneys; and to authorize any officer, director employee or other agent of the foundation to act for and on behalf of the foundation in all matters incidental to the forgoing.

(j) The charitable organization or foundation receiving the public benefit assets shall provide the Attorney General, the Governor, and the General Assembly with an annual report of its charitable activities related to its use of the public benefit assets received. The annual report shall be a public document.

(k) Nothing in this subchapter shall be construed to limit the common law authority of the Attorney General to protect the charitable trusts and assets held for the public benefit in this State. Nothing in this subchapter shall be construed as a replacement for any other civil or criminal actions, which the Attorney General may take either under the common law or statutory law, seeking injunctive relief, or other available remedies.

(l) Nothing in this subchapter shall be construed to supersede, restrict or otherwise limit the powers, duties, and authority of the Insurance Commissioner pursuant to Title 18, or any other provisions relating to the regulation of insurers, hospitals, or other health care corporations.

74 Del. Laws, c. 298, §  2;  77 Del. Laws, c. 282, §  2; 

(a) For purposes of this section, a “change of control transaction” means to acquire, directly, indirectly, or acting through 1 or more affiliates, the power to direct the management, policies, or clinical practices of a nonprofit acute care hospital, whether through ownership of voting securities, by effecting a change in the composition of the board of directors, by contract or otherwise.

(b) A person, other than a charity or not-for-profit entity, may not enter into a change of control transaction or a not-for-profit healthcare conversion transaction involving a nonprofit acute care hospital. A transaction that violates this subsection is void and of no legal effect.

(c) A change of control transaction is presumed if any of the following apply to a person or entity, directly, indirectly, or acting through 1 or more affiliates:

(1) The person or entity owns, controls, or holds with the power to vote, or holds proxies representing 25% or more of any class of voting securities or membership interests in the hospital or in any entity through which the hospital’s licensed inpatient or emergency services are conducted.

(2) The person or entity has the contractual or governance right to appoint, remove, or approve 1 or more members of the hospital’s board of directors or governing body, or 1 or more officers with executive authority over hospital operations, finances, or clinical services.

(3) The person or entity has the contractual right to withhold consent or exercise a veto over material operational, financial, or strategic decisions of the hospital, including changes in service lines, capital expenditures, or executive compensation.

(d) This section applies to a transaction that has not closed before July 20, 2026. A transaction is closed when it is fully executed and effective.

(e) The Attorney General may seek injunctive relief and pursue any other remedy available under this subchapter or at common law to enforce this section. Any remedy available under this section is cumulative with, and not in substitution for, any other remedy available under this subchapter or any other provision of law.

(f) The expiration of this section does not limit any enforcement action commenced prior to the expiration.

85 Del. Laws, c. 350, § 3;