Bill Summary for S 743 (2023-2024)

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Summary date: 

Apr 10 2023

Bill Information:

View NCGA Bill Details2023-2024 Session
Senate Bill 743 (Public) Filed Thursday, April 6, 2023
Intro. by Hise, Krawiec.

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Bill summary

Repeals GS 116-37 (establishing UNC Health Care System) and GS 116-37.2 (regulation of UNC Hospitals at Chapel Hill funds).  

Enacts new Article 37 to GS Chapter 116, pertaining to the UNC Health Care System (System), which replaces GS 116-37 and GS 116-37.1, as follows.

Defines UNC Health Care System or System as UNC Hospitals at Chapel Hill and the clinical patient care programs established or maintained by the School of Medicine of UNC Chapel Hill.  Also defines Board or Board of Directors, chief executive officer, component unit, and system affiliate.

Enacts new GS 116-350.5 pertaining to the System. Provides for a 24-member Board of Directors (Board), with same composition as set forth in repealed GS 116-37. Eight members are ex officio members  and certain administrators of either the UNC System, UNC Chapel Hill, UNC Faculty Physicians, or the UNC School of Medicine; sixteen members at large must be from the business and professional public at large who have special competence in business management, hospital administration, health care delivery, or medical practice or who otherwise have demonstrated dedication to the improvement of health care in North Carolina, and who are neither members of the Board of Governors, members of the board of trustees of a constituent institution of The University of North Carolina, nor officers or employees of the State. Sixteen members are appointed for four-year terms, commencing on November 1 of the year of the appointment with 12 members appointed by the Board of Governors in consultation with the UNC President and the other four appointed by the Board. Specifies that no member may be appointed to more than two terms in succession. Retains GS 116-37 provisions pertaining to vacancies, finality of matters within the Board’s jurisdiction, election of a chair for a two-year term, and limits on the term of the chair.

Retains provisions from GS 116-37 pertaining to the establishment of the System and the transfer of rights from the Board of the UNC Hospitals at Chapel Hill to the Board. Authorizes the Board to govern and administer the entities that currently comprise the System along with other entities and functions as (1) the General Assembly may assign to the System or (2) the Board may decide, within the limitations of its statutory powers and duties, to establish, administer, or acquire for the purpose of rendering services signed to promote the health and wellbeing of the citizens of the State. 

Enacts GS 116-350.15, setting forth the powers and duties of the Board as follows:

  • Retains provision from GS 116-37 authorizing any component unit of the System to contract in its individual capacity, subject to such policies and procedures as the Board may direct.
  • Enter into formal agreements with constituent institutions of The University of North Carolina (under GS 116-37, just UNC Chapel Hill) with respect to the provision of clinical experience for students and for the provision of maintenance and supporting services.
  • Lists the following 11 non-exhaustive list of general powers and duties under which the Board is authorized to exercise such authority and responsibility and adopt such policies, rules, and regulations as it deems necessary or convenient, not inconsistent with the provisions of Article 37, to carry out the patient care, education, research, and public service mission of the System, including, but not limited to, authority to do the following: (1) construct, plan, create, equip, operate, and maintain health care facilities and ancillary enterprises; (2) collect, manage, and control all receipts generated through its clinical operations and other activities; (3) issue bonds and notes as provided in new GS 116-350.55; (4) acquire and dispose of real or personal property, including existing public or private hospital and health care facilities, by purchase, grant, gift, devise, lease, or otherwise; (5) enter into partnerships, affiliations, and other combinations or arrangements with other hospitals or health care entities, as it deems appropriate, including arrangements for management services, to achieve its missions of patient care, education, research, and public service; (6) contract with or enter into any arrangement, including through interlocal cooperation agreements under Part 1 of Article 20 of GS Chapter 160A, with other public hospitals of this or other states, federal or  public agencies, or with any person, private organization, or nonprofit corporation for the provision of health care; (7) insure property or operations of the System against risks as the Board may deem advisable; (8) except as provided in new GS 116-350.40, invest any funds held in reserves or sinking funds, or any funds generated from operations, in property or securities in which trustees, executors, or others acting in a fiduciary capacity may legally invest funds under their control; (9) exercise the following powers conferred upon municipal hospitals and hospital authorities under Article 2 of GS Chapter 131E: (i) the power to enter into agreements with other hospital entities subject to Article 2 of GS Chapter 131E to jointly exercise the powers, privileges, and authorities granted by Article 2 of GS Chapter 131E; (ii) the power to lease any hospital facility, or any part of a hospital facility, to a nonprofit corporation, provided that the terms and conditions of such lease are consistent with the public purposes described in GS 131E-12 (pertaining to municipal hospitals); (iii) the power to acquire an ownership interest, in whole or in part, in a nonprofit or for-profit managed care company, as provided in GS 131E-7.1; (iv) all powers set forth in GS 131E-23 (pertaining to powers of a hospital authority) not otherwise addressed by this Part; (10) exercise any or all powers conferred upon the Board, either generally or with respect to any specific health care facility or other operations, through or by designated agents, including private corporations, nonprofit corporations, or limited liability companies formed under the laws of the State; and (11) have the powers of a body corporate and politic, including the power to sue and be sued, to make contracts, and to adopt and use a common seal and alter the same as may be deemed expedient.

Specifies that notwithstanding the powers and duties provided above, the Board cannot relinquish to another entity more than 50% control of either the UNC Hospitals or the System.

Requires the CEO and President of UNC to jointly submit an annual report to the specified NCGA Committee and the UNC Board of Governors on the operations and financial affairs of the System, including actions taken by the Board under its power to manage System finances, by December 31 of each year.

Sets forth the process of selecting a CEO (the executive and administrative head of the System). Specifies that the CEO has complete executive and administrative authority to formulate proposals for, recommend the adoption of, and implement policies governing the programs and activities of the System, subject to all requirements of the Board. Further specifies that same individual, when serving as Vice-Chancellor for Medical Affairs, will have all authorities, rights, and responsibilities of a vice-chancellor of UNC Chapel Hill. Provides for an election of an executive and administrative head of the UNC Hospitals at Chapel Hill, the President of UNC Hospitals at Chapel Hill. Provides for the election of further administrative staff as may be necessary to assist in fulfilling the duties of the CEO, and all of whom will serve at the pleasure of the CEO.

Enacts new GS 116-350.30, authorizing the System to employ a workforce to conduct its operations. Specifies that employees who are employed directly by the System, and not by a System affiliate, are State employees whose terms and conditions of employment, including benefit plans and programs, are determined by the Board. Only Articles 5 (political activity), 6 (EEO and compensation opportunities), 7 (privacy of State employee personnel records), and 14 (whistleblower protection) of GS Chapter 126, the State Human Resources Act, apply to these State employees. Permits the Board to allow the System to employ the faculty and staff of the UNC School of Medicine as well as other health affairs schools and components of UNC Chapel Hill, provided that any employees who are faculty members must remain subject to the faculty policies of UNC Chapel Hill, as established or adopted pursuant to delegation from the Board of Governors of The University of North Carolina. Specifies that a State employee employed by the System immediately prior to July 1, 2023, has the right to (1) continued State employment if the employee remains in the employee's current role or position, unless terminated in accordance with the terms of employment that existed immediately prior to July 1, 2023, subject to all relevant provisions of State and federal law and (2) continued participation in the State Teachers' and State Employees' Retirement System (TSERS) if the employee was enrolled in TSERS immediately prior to July 1, 2023, and maintains State employee status. Specifies that a State employee who achieved career State employee status by October 31, 1998, will remain subject to the rules regarding discipline or discharge that were effective on October 31, 1998, and not be subject to the rules regarding discipline or discharge adopted after that date.

Enacts GS 116-350.35, pertaining to System finances. Specifies that the System, UNC Hospitals, and designated components of UNC are not subject to the provisions of the State Budget Act, except for General Fund appropriations, nor are these entities otherwise subject to the authority of the State Controller. Instead, they are subject to the authority of the State Auditor. Sets forth rules related to budgeting. Allows for the CEO or designee to spend funds on behalf of a patient when they determine this would result in a financial benefit to the System, and is limited to: (1) situations in which a patient is financially unable to afford an ambulance or other transportation for discharge, (2) when a patient is unable to afford placement in an after-care facility, (3) to assure availability of a bed in an after-care facility after discharge from the hospitals, (4) to secure equipment or other medically appropriate services for the patient after discharge, or (5) when the patient is unable to pay health insurance premiums. Requires any payments made on behalf of a patient to be evaluated monthly. Requires any State agencies receiving back pay for anticipating health care benefits for a patient who received the financial assistance described above to withhold from that backpay an amount equal to the sum advanced by the System if the agency has received notice from the System of the advancement prior to disbursement. 

Enacts GS 116-350.40, pertaining to regulation of UNC Hospitals Funds, as follows. Defines funds. Specifies that the Board is responsible for the custody and management of the funds of UNC Hospitals. Requires Board to adopt uniform policies and procedures applicable to the deposit, investment, and administration of these funds, which will assure that the receipt and expenditure of such funds is properly authorized and that the funds are appropriately accounted for. Allows designation of authority through the CEO to the President of UNC Hospitals when such delegation is necessary or prudent to enable UNC Hospitals to function in an expeditious manner.

Specifies that funds and investment earnings thereon are available for expenditure by the UNC Hospitals and are hereby appropriated by the General Assembly. Specifies that funds under this statute are subject to the oversight of the State Auditor and are not subject to the provisions of the State Budget Act, except for operating and capital funds appropriated from the General Fund. Requires the UNC Hospitals to submit such reports or other information concerning its fund accounts under this section as may be required by the Board. Specifies that funds, or the investment income therefrom, cannot take the place of State appropriations or any part thereof, but any portion of these funds available for general institutional purposes will be used to supplement State appropriations to the end that the UNC Hospitals may improve and increase their functions, may enlarge their areas of service, and may become more useful to a greater number of people. Permits the Board to deposit or invest the funds under this section in interest-bearing accounts and other investments in the exercise of its sound discretion, without regard to any statute or rule of law relating to the investment of funds by fiduciaries.

Enacts GS 116-350.45, which requires the Board to establish policies and regulations governing the System’s purchasing requirements, to include requests for proposals, competitive bidding or purchasing by means other than competitive bidding, contract negotiations, and contract awards for purchasing supplies, materials, equipment, and services necessary and appropriate to fulfill the clinical, educational, research, and community service missions of the System. Specifies a review process of Board-approved policies and regulations by the Division of Purchase and Contract. Enacts GS 116-350.50 pertaining to acquisition and disposal, design and construction, and plan review/code enforcement of real property. Enacts GS 116-350.55, authorizing the System to issue bonds and notes on behalf of itself or any component units or System affiliates in the same manner and for the same purpose as the UNC Board of Governors and with the same powers. Specifies that in issuing bonds or notes, the following additional provisions apply: (1) institutions within the meaning of GS 116D-22 (special bond obligations for improvements to UNC facilities) will include the System and any component unit or System affiliate; (2) the approval of the Director of the Budget will not apply to bonds or notes issued by the System pursuant to this section and Article 3 of GS Chapter 116D (pertaining to higher education bonds); (3) special obligation bond projects may be undertaken, special obligation bonds may be issued, and other powers vested in the Board under this section may be exercised by the Board without obtaining the consent of any department, division, commission, board, bureau, or agency of the State and without any other proceedings or the happening of any other conditions or things other than those proceedings, conditions, or things which are specifically required by GS 116-350.40 and Article 3 of GS Chapter 116D (pertaining to special obligation bonds for improvements to UNC facilities); and (4) that nothing herein will limit or restrict the right of the System to obtain a loan  from a financial institution, provided that the System may not pledge real  property owned by the State of North Carolina as collateral.

Enacts GS 116-350.60 permitting the System to merge with a domestic nonprofit corporation so long as it does so in line with State law pertaining to merger with an unincorporated entity (GS 55A-11-09). Specifies that the System or UNC Hospitals is the surviving entity of any merger. Sets forth specifications pertaining to the plan of merger.

Enacts GS 116-350.65 listing certain records that are not public records under State public records law, including those related to patient care and services, strategic planning or initiative, and consultations with the specified NCGA committee. Enacts GS 116-350.70, allowing cooperative agreements and setting forth immunity provisions pertaining to Board contracts with outside entities for the provision of health care.

Enacts GS 116-350.100, authorizing the Board to secure insurance or provide self-insurance through the purchase of contracts of insurance or the creation of self-insurance trusts, or through combination of such insurance and self-insurance, to provide the System, UNC Hospitals, System affiliates, and individual health care practitioners with coverage against claims of personal or entity tort liability based on conduct within the course and scope of health care functions undertaken by such entities or individuals as employees, agents, or officers  of (1) the System, (2) the University of North Carolina Hospitals at Chapel Hill, or (3) any health care institution, agency, or entity which has an affiliation agreement with the System or with the UNC Hospitals at Chapel Hill. Provides that the funds may be used to pay any expenses, including damages ordered to be paid, which may be incurred by the System or the UNC Hospitals at Chapel Hill with respect to any tort claim, based on alleged negligent acts in the provision of health care services, which may be prosecuted under the provisions of Article 31 of GS Chapter 143 (State Tort Claims Act). Specifies that the coverage to be provided, through insurance or self-insurance or a combination thereof, may include provision for the payment of expenses of litigation, the payment of civil judgments in courts of competent jurisdiction, and the payment of settlement amounts in covered actions, suits, or claims.  Enacts GS 116-350.105, pertaining to the establishment and administration of self-insurance trust funds. Specifies any self-insurance trust fund is not subject to regulation by the Commissioner of Insurance. Authorizes the Board to accept gifts, donations, appropriations, and other transfers of funds for a self-insurance trust and to deposit those transfers in the insurance trust accounts. Requires administrative expenses to be paid from those accounts. Allows Board to adopt relevant rules. Allows for Board to create 13-member UNC Health Liability Insurance Trust Found Council, to be responsible for the administration of the self-insured liability insurance program and insurance trust accounts. Specifies membership and appointment authority. Sets forth rules pertaining to defense by the Attorney General’s office and deems that the coverage provided under any self-insured program is commercial liability insurance coverage within the meaning of GS 143-300.6 (pertaining to payment of judgments, compromise, and settlement of claims).  

Enacts GS 116-350.110 (pertaining to funding of self-insurance programs) setting forth requirements for initial contributions and subsequent contributions, payment of claims, and security of funds borrowed by the Board to replenish the trust fund, and specifying that any debt or obligation pertaining to a self-insurance trust is not a debt or obligation of the State. Enacts GS 350-116.115, which permits funds to be terminated and for net proceeds to be reimbursed to the System.

Clarifies that Article 37 is not intended to waive State sovereign immunity. Specifies that records pertaining to the liability insurance program are not public records under State public records law.

Makes conforming changes to GS 66-58 (pertaining to sale of merchandise or services by governmental units), GS 116-30.3A (pertaining to availability of excess receipts within the UNC system), GS 116-187 (revenue bonds by UNC board of trustees), GS 116-189 (definitions pertaining to UNC revenue bonds), GS 116-219 (authorization for UNC Board of Governors [BOG] to provide self-insurance or secure insurance), GS 116-220 (pertaining to BOG’s authority to adopt rules pertaining to insurance), GS 116D-1 and GS 116D-22 (both pertaining to higher education bonds), GS 126-5 and GS 131E-13 (pertaining to lease or sale of hospital facilities to or from for-profit or nonprofit corporations or other business entities by municipalities and hospital authorities), GS 135-1 (TSERS definitions), GS 135-5.1 (optional retirement program for UNC), GS 153-48.1 (definitions of State health plan), GS 135-48.40(b) (partially contributory coverage under State health plan), GS 143-56 (exempting certain purchases from the provisions of State purchases and contracts law), GS 143-596 (pertaining to smoking in public places), GS 143C-1-3 (general provisions of the State budget act), GS 143C-8-7 (pertaining to when a state agency can begin a capital improvement project), GS 143C-8-8 (pertaining to when a State agency may increase the cost of a capital improvement project), GS 146-22 (pertaining to acquisitions required to be made by the Department of Administration), GS 147-69.2 (pertaining to investments authorized for special funds held by the State treasurer).

Enacts GS 135-5.5 (TSERS), pertaining to employees of the System. Specifies that all employees of the System who are (1) employed before July 1, 2023, and (2) are members of either TSERS or the Optional Retirement Program before July 1, 2023, will retain membership in TSERS or the Optional Retirement Program unless the member makes a one-time, irrevocable election to cease membership in TSERS or the Optional Retirement Program in favor of a similar benefit offered by the System. Specifies that for employees hired on or after July 1, 2023, who are not eligible for membership in TSERS must be offered any of the following by the System: membership in the Optional Retirement Program, enrollment in a benefit like the Optional Retirement Program, or a choice between the two.  Specifies that if an employee ceases to be employed by the System on or after July 1, 2023, and is later rehired, then that person will be treated as a new employee. Requires the System to continue to report the payroll of employees employed as of June 30, 2023, and continue to remit the employee and employer contributions for all employees retaining membership in TSERS or the Optional Retirement Program until none exist.

Effective July 1, 2023.