The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 5510

June 28, 1979

MICHIGAN STATE HOSPITAL FINANCE AUTHORITY:

Loans to hospitals

HEALTH MAINTENANCE ORGANIZATION:

Authority to borrow money from State Hospital Finance Authority

A Health Maintenance Organization is not eligible to obtain a loan from the Michigan State Hospital Finance Authority.

Honorable Lynn Jondahl

State House of Representatives

The Capitol

Lansing, Michigan

You have requested my opinion on the following question:

Whether a health maintenance organization is eligible to obtain a loan from the Michigan State Hospital Finance Authority.

1969 PA 38, as last amended by 1978 PA 277; MCLA 331.31 et seq; MSA 14.1220(1) et seq; Sec. 11, creates the State Hospital Finance Authority and empowers it pursuant to 1969 PA 38, supra, Sec. 13 'to lend money to hospitals for the acquisition, construction, improvement or alteration of hospital facilities.' In addition, the Authority is authorized 'to loan money to hospitals for the purpose of refunding outstanding obligations issued by hospitals for the acquisition or alteration of hospital facilities after August 1, 1969. 1969 PA 38, supra, Sec. 12(d).

The purpose for the enactment of 1969 PA 38, supra, is not open to question inasmuch as the Legislature has in section 2 declared the legislative purposes for its enactment:

'It is declared that, for the benefit of the people of the state and the improvement of their health, welfare, and living conditions, it is essential that hospitals within the state be provided with appropriate means at reasonable cost to maintain, expand, enlarge, and establish health care, hospitals, and other related facilities; that hospitals be provided with the ability to refinance indebtedness; and that authorities created or incorporated under this act be provided with the ability to refund or to refund in advance obligations of 1 or more of those authorities. This act shall provide a method to enable hospitals in the state to provide or maintain at reasonable cost pursuant to reasonable terms the facilities, structures and services needed to accomplish the purposes of this act, all to the public benefit and good, to the extent and manner provided in this act.'

In 1969 PA 38, supra, Sec. 3(e) and (f), the Legislature has defined the terms 'hospital' and 'hospital facilities', as used in the Act as follows:

'(e) 'Hospital' means a nonpublic corporation, association, institution, or establishment located within the state for the care of the sick or wounded or of those who require medical treatment, operated without profit to an individual corporation or association. It includes nonprofit corporations or other organizations engaged solely in some phase of hospital activity or in providing a supporting service to hospitals or public corporation which operate or own hospital facilities. (Emphasis supplied.)

'(f) 'Hospital facilities' means a building or structure suitable and intended for, or incidental or ancillary to, use by a hospital and includes outpatient clinics, laboratories, laundries, nurses, doctors' or interns' residences, administration buildings, facilities for research directly involved with hospital care, maintenance, storage or utility facilities, parking lots, and garages and all necessary, useful, or related equipment, furnishings, and appurtenances and all lands necessary or convenient as a site for the foregoing. Hospital facilities include an office facility not less than 80% of which is intended for lease to direct providers of health care, and which has been determined by the department of public health to meet a demonstrated need and to be geographically or functionally related to 1 or more other hospital facilities, if the authority which is issuing the bonds determines the financing of the office facility is necessary to accomplish the purposes and objectives of this act.' (Emphasis supplied.)

These subsections of 1969 PA 38, Sec. 3, supra, were last amended by the Legislature through 1978 PA 277. It should be noted that the Legislature made deletions from subsection (e), not pertinent hereto, and added the last sentence to subsection (f). In addition, the Legislature added subsection (i) to 1969 PA 38, Sec. 3, supra, to define the term 'a direct provider of health care' as used in the Act to mean:

'. . . a person or organization whose primary current activity is the provision of health care to individuals, and includes a licensed or certified physician, dentist, nurse, podiatrist, physician's assistant, or an organization comprised of these health professionals or employing these health professionals.'

The action of the Legislature in amending 1969 PA 38, Sec. 3(e), supra, by means of 1978 PA 277 was, in part, in response to OAG 1975-1976, No 4923, p 288 (February 4, 1976), which held that a hospital authority may not authorize the expenditure of hospital finance bond proceeds to pay for the cost of office facilities to be used by doctors for the private practice of medicine. This opinion considered the meaning of the term 'hospital facilities' in applying the statutory principle of construction of ejusdem generis that general words or phrases used in a statute which precede or follow an enumeration of specific things are to be construed to refer to things of the same general character as those specified, citing People v Powell, 280 Mich 699; 274 NW 372(1937), and concluded that the Legislature did not intend to include an office building to be used by doctors for the private practice of medicine within the term 'hospital facilities' as used in 1969 PA 38, Sec. 3(e), supra.

The Legislature then broadened the meaning of the term 'hospital facilities' as used in 1969 PA 38, Sec. 3, supra, to include office buildings to be largely occupied by direct providers of health care, but has imposed certain conditions on the financing of such facility and has specified that not less than 80 percent of the office facility must be leased to such providers of health care which are defined to be individuals or organizations comprised of health professionals composed of licensed or certified physicians, dentists, nurses, podiatrists or physician's assistants.

Prior to amendment by the Legislature in 1978, 1969 PA 38, Sec. 3(e) and (f), supra, were considered in the context of a local authority owned but not operated hospital and construed by the Michigan Supreme Court in W. A. Foote Memorial Hospital, Inc v City of Jackson Hospital Authority, 390 Mich 193, 217; 211 NW 649 (1973), where the Court held that W. A. Foote Memorial Hospital, Inc., as the operator of the hospital, was a 'hospital' for the purposes of 1969 PA 38, supra.

The Authority makes loans to hospitals and may take as a security for the loan a mortgage of property of the hospital, including the hospital facility, as prescribed by 1969 PA 38, supra, Sec. 13. In order to provide sufficient funds to the Authority to make loans to hospitals, the Legislature has empowered the Authority to issue bonds and notes as provided in 1969 PA 38, supra, Sec. 14.

The issuance of bonds or notes to obtain funds to make loans to a hospital is conditioned upon certain certificate of need requirements. 1969 PA 38, supra, Sec. 47 sets forth the precedent requisites as follows:

'Before a state or local authority adopts a resolution authorizing the issuance of bonds or notes and as a condition precedent to the authority to issue the bonds or notes, a certificate of need shall be obtained pursuant to Act No. 256 of the Public Acts of 1972, as amended, being sections 331.451 to 331.462 of the Michigan Compiled Laws, or a determination shall be secured from the agency issuing the certificate of need that a certificate is not necessary for the project. This section shall not apply to refinancing of present indebtedness or to refunding or advance refunding of bonds or notes; provided, however, that prior to the issuance of bonds pursuant to section 14(2) of section 32 [footnote omitted], entirely for the purpose of refunding or advance refunding bonds of any authority created or incorporated under this act, and prior to the issuance of bonds pursuant to section 12(d) or sections 27(b) or 28 [footnote omitted], entirely for the purpose of refinancing indebtedness of a hospital, the authority issuing the bonds shall determine that the issuing of the bonds is not inconsistent with a hospital bed reduction plan, if such a plan has been developed and is applicable to the hospital facilities in connection with which the bonds are issued, which is part of the state medical facilities plan approved by the statewide health coordinating council, and the determination of the authority issuing the bonds shall be conclusive.' (Emphasis supplied.)

It should also be observed that by means of 1978 PA 277 the Legislature amended 1969 PA 38, Sec. 47, supra, to add language to the last sentence dealing with refunding and advance refunding, not an issue here.

This statute refers to the certificate of need required by 1972 PA 256; MCLA 331.451 et seq; MSA 14.1179(51) et seq, for new construction, conversion of, additions to or modernization of health facilities from a State Health Facilities Commission established pursuant to 1972 PA 256, supra, Sec. 2. The title to 1972 PA 256, supra, states that it is an act to require certificates of need for new construction or conversion of, addition to or modernization of health facilities and to provide for the issuance of certificates of need. 1972 PA 256, Sec. 1(2) defines the term 'certificate of need' to mean a certificate attesting to need for new construction, or conversion of, addition to or modernization of a health facility. Most importantly, in 1972 PA 256, Sec. 1(h), the Legislature has defined the term 'health facility' to mean a hospital or any part thereof licensed by the Department of Public Health in accordance with 1968 PA 17; MCLA 331.411 et seq; MSA 14.1179(1) et seq.

The intent of the Legislature in enacting 1969 PA 38, supra, must be ascertained by reading all of the provisions of the statute. Smalley v Ashland Brown-Stone Co, 114 Mich 104; 72 NW 29 (1897). Liquor Control Commission v Fraternal Order of Eagles, Aerie No. 629, 286 Mich 32; 281 NW 427 (1938). From a reading of all of the cited statutory provisions, it must be concluded that the Legislature intended licensed private hospitals to be eligible for loans from the State Hospital Finance Authority for hospital facilities. The latter includes certain facilities incidental to and necessary for the efficient operation of licensed private hospitals, as well as the erection of an office building, 80 percent of whose space is to be leased to certain licensed or certificated health professionals, to meet a demonstrated need as determined by the Department of Public Health and to be geographically or functionally related to one or more hospital facilities, as enumerated in 1969 PA 38, Sec. 3(e)(f)(i), supra. Nonlicensed hospital entities are not eligible for such loans.

Although the Legislature had repealed 1972 PA 256, supra, by the more recently enacted Public Health Code, 1978 PA 368, art 19, Part 251, Sec. 25101; MCLA 333.25101; MSA 14.15(25101), the Public Health Code, 1978 PA 368, art 17, Part 221, Sec. 22101 et seq; MCLA 333.22101 et seq; MSA 14.15(22101) et seq, continues certificate of need requirements for hospitals licensed under 1978 PA 368, art 17, Part 215; MCLA 333.21501 et seq; MSA 14.15(21501). Thus, the requirements mandated by 1969 PA 38, Sec. 47, supra, are now obtained through the Department of Public Health or the Certificate of Need Board pursuant to 1978 PA 368, art 17, Part 221, Sec. 22101 et seq; MCLA 333.22101 et seq; MSA 14.15(22101) et seq.

Health maintenance organizations are provided for in the Public Health Code, 1978 PA 368, Part 210; MCLA 333.21001 et seq; MSA 14.15(21001) et seq. Before issuing any health maintenance contracts, the health maintenance organization must be licensed by the Department of Public Health in conjunction with the Insurance Bureau. 1978 PA 368, supra, Secs. 21011 and 21021. Upon obtaining a license, a health maintenance organization may enter into health maintenance contracts and may contract with or directly engage health professionals and affiliated providers to render the services the organization has agreed to provide under the terms of its health maintenance contracts. 1978 PA 368, supra, Sec. 21053. The Legislature has defined the term 'affiliated providers' in 1978 PA 368, supra, Sec. 21002, to include 'a licensed hospital'. By thus empowering the health maintenance organization to contract with a licensed hospital to provide services under the terms of its health maintenance contracts and in the absence of an express grant of authority to operate a hospital to care for the sick or wounded, it is untenable to argue that the Legislature, by implication, was designating a health maintenance organization to be a hospital or to operate a hospital facility as defined in 1969 PA 38, Sec. 3(f), supra.

In addition, if a health maintenance organization is to be considered a hospital or a hospital facility under 1969 PA 38, Sec. 3, supra, the Legislature must amend the statute to include a health maintenance organization as an eligible entity for loans thereunder.

Therefore, it is my opinion that a health maintenance organization is not eligible to obtain a loan from the Michigan State Hospital Finance Authority pursuant to 1969 PA 38, supra.

Frank J. Kelley

Attorney General