USA Statutes : arizona
Title : Counties
Chapter : COMMUNITY HEALTH SYSTEM
In this chapter, unless the context otherwise requires:
1. "Adult day health services" has the same meaning prescribed in section 36-401.
2. "Adult foster care services" has the same meaning prescribed in section 36-401.
3. "Ambulance" has the same meaning prescribed in section 36-2201.
4. "Board of directors" or "board" means the board of directors of a nonprofit
corporation that operates a community health system pursuant to this chapter.
5. "Board of supervisors" means the board of supervisors of the sponsoring county.
6. "Bonds" means any bonds, refunding bonds, notes or other debt instrument issued
by a nonprofit corporation under this chapter.
7. "Community health system" means the health system maintained, owned or operated
by a nonprofit corporation after the transfer date under this chapter.
8. "County health system" means the health system maintained, owned or operated by
the sponsoring county immediately before the transfer date.
9. "Emergency medical services" has the same meaning prescribed in section 36-2201.
10. "Health care institution" has the same meaning prescribed in section 36-401.
11. "Health-related services" has the same meaning prescribed in section 36-401.
12. "Health screening services" has the same meaning prescribed in section 36-401.
13. "Health system" means any health care institution and all related real and
personal property including, without limitation, all clinics, rehabilitation centers,
therapy facilities, outpatient clinics, nursing homes, blood banks, ambulance facilities,
extended care facilities, dispensaries, pharmacies, parking facilities, laundry
facilities, dormitories, offices and administration buildings, cafeterias and food
service facilities, research, laboratory and diagnostic facilities, libraries,
information systems and data bases, ambulances, stretcher vans and other medical
transportation equipment, education facilities, school-based clinics, equipment, tools,
machinery, accounts receivable and other intangible assets, health maintenance
organizations, health care services organizations and health insurance plans, including
all related reserves, deposits, prepayments, risk pools and similar assets of these
organizations and plans, graduate medical and other health care professional educational
programs, public health education programs and business operations, in each case
maintained, owned or operated for the payment and delivery of medical services, nursing
services, home health services, home delivery services, emergency medical services,
behavioral health services, long-term care services, health-related services and health
screening services, adult day health services, adult foster care services, hospice
services, personal care services, respite care services, supervisory care services and
medical equipment services.
14. "Health system assets" means all real, personal, tangible and intangible
property and rights in property that are used by or accruing to the county health system.
15. "Health system liabilities" means all contingent and accrued debts and other
obligations arising out of the maintenance, ownership or operation of the county health
16. "Hospice services" has the same meaning prescribed in section 36-401.
17. "Internal revenue code" has the same meaning prescribed in section 42-1001.
18. "Lease agreement" means any agreement providing for the lease and conveyance, if
any, of health system assets to a nonprofit corporation under this chapter. A lease
agreement may be made a part of an operating agreement.
19. "Medical services" has the same meaning prescribed in section 36-401.
20. "Nonprofit corporation" or "corporation" means a nonprofit corporation that is
organized under title 10 and that is qualified or will qualify under section 501(c)(3) of
the internal revenue code.
21. "Nursing services" has the same meaning prescribed in section 36-401.
22. "Operating agreement" or "agreement" means an agreement between the sponsoring
county and a nonprofit corporation under this chapter for the corporation to assume the
health care responsibilities previously performed by the county, including all
arrangements and understandings, including a lease agreement, between the county and
23. "Personal care services" has the same meaning prescribed in section 36-401.
24. "Respite care services" has the same meaning prescribed in section 36-401.
25. "Sponsoring county" means a county that enters into an operating agreement under
26. "Supervisory care services" has the same meaning prescribed in section 36-401.
27. "Transfer date" means a date, agreed to by the sponsoring county and a nonprofit
corporation, for the lease of any health system assets and the assumption of all or part
of the health system liabilities by the corporation.
11-1402 Operating agreement
A. The board of supervisors of a county with a population of more than one million
five hundred thousand persons according to the most recent United States decennial census
may enter into an operating agreement as provided by this chapter with a nonprofit
corporation for purposes of:
1. Acting as a provider of health care services for compensation.
2. To assume the responsibility for managing, maintaining and operating a community
health system, including health system assets that are transferred to the corporation
pursuant to a lease agreement.
B. The board of supervisors may enter into an operating agreement with only one
nonprofit corporation for operation in the sponsoring county at any time.
11-1403 Request for expressions of interest
A. Before entering into an operating agreement, the board of supervisors shall
publish, four times in a newspaper of general circulation in the county, a request for
expressions of interest from existing nonprofit corporations and others. The request
shall include the date on which expressions of interest must be submitted to the board.
B. Expressions of interest shall contain the names of parties that wish to enter
into the operating agreement and a statement of their ability to comply with the
requirements of this chapter.
11-1404 Evaluation of expressions of interest
A. The board of supervisors shall evaluate expressions of interest that are
received and may award the operating agreement to a nonprofit corporation that is best
qualified to perform the requirements of this chapter, except that the board of
supervisors may agree to waive any organizational requirements prescribed by section
11-1405 for an existing nonprofit corporation that is otherwise qualified and that agrees
to perform under and comply with the remaining provisions of this chapter.
B. If no qualified existing nonprofit corporation expresses an interest in entering
into an operating agreement under this chapter, the board of supervisors may enter into
an operating agreement under this chapter with a newly formed nonprofit corporation.
11-1405 Corporate board of directors; membership; terms of office of initial members
A. Unless this requirement is waived under section 11-1404, subsection A, the
nonprofit corporation with which the board of supervisors enters into an operating
agreement shall be governed by a board of directors consisting of eleven voting members
1. The chief executive officer of the corporation.
2. The chief of the medical staff of a hospital in the community health system. If
there is more than one chief of staff, the remaining directors shall appoint one to serve
on the board of directors. If there is no chief of staff, the board shall appoint a
physician who is licensed under title 32, chapter 13 or 17 to practice in this state.
3. At least one attorney who is licensed to practice law in this state.
4. At least one physician who is licensed under title 32, chapter 13 or 17 to
practice in this state but who does not practice within the community health system.
5. At least one registered professional nurse who is licensed under title 32,
chapter 15 to practice in this state but who does not practice within the community
6. At least one member who has experience in financial management.
B. Except in the case of an existing corporate board of directors, the county board
of supervisors shall approve the members of the initial board of directors. Except for
the chief executive officer of the corporation, the initial directors' terms shall be
determined by lot to terms of office of two, four and six years.
11-1406 Conflicts of interest
Section 38-511 does not apply to this chapter, the nonprofit corporation or an
operating agreement entered into under this chapter unless a person who was directly
responsible for reaching a settlement of terms or making a recommendation for action to
the board of supervisors with respect to the agreement, or who was a member of the board
of supervisors at the time of any action by the board of supervisors to approve the
establishment of the nonprofit corporation or enter into or modify the operating
agreement, is an employee or agent of the nonprofit corporation in any capacity or a
consultant to the corporation with respect to the subject matter of the operating
11-1407 Corporate powers, immunities and limitations
A nonprofit corporation that is organized as provided by this article and that
enters into an operating agreement with a sponsoring county:
1. Is considered to:
(a) Exercise its powers for the benefit of the people, to improve their health and
welfare and to increase their prosperity.
(b) Engage in a purpose that is essential to public health care.
(c) Have all powers of a nonprofit corporation under title 10.
2. Is entitled to the exemptions and immunities provided by law to similar
corporations that are organized for similar purposes including exemptions from taxation
of its property and bonds.
3. Possesses and may exercise those powers that are delegated to the corporation by
the board of supervisors and that are necessary to satisfy the requirements of section
103 of the internal revenue code as stated in the terms, conditions, restrictions and
agreements of the operating agreement. These powers are in addition to the powers that
are granted to nonprofit corporations by title 10.
11-1408 Other powers
This chapter does not restrict, limit or preclude the nonprofit corporation from
exercising any rights or powers or performing any duties provided or prescribed by any
other law of this state. This chapter provides a complete, additional and alternative
method for doing the things that it authorizes and is supplemental and additional to
powers conferred by other laws.
11-1409 County responsibility for indigent sick
This chapter does not relieve a county of its statutory residual responsibility
relating to the indigent sick pursuant to section 11-291.
11-1431 Purposes of the nonprofit corporation
The board of supervisors may enter into an operating agreement only with a nonprofit
corporation with articles of incorporation or bylaws that provide that the primary
purposes of the corporation under this chapter are to:
1. Provide quality, cost-effective health care services for individuals, families
and communities residing, employed or located, as applicable, in the sponsoring county
2. Act as a provider of health care services for compensation.
3. Assume the responsibility for managing, maintaining and operating health system
assets that are transferred to the corporation pursuant to a lease agreement.
4. Provide health care to the public.
5. Promote public health.
6. Support and facilitate medical and public health research and clinical education
for health care professionals.
11-1432 Lease of health system assets to nonprofit corporation
A. As part of the operating agreement, the board of supervisors of the sponsoring
county may agree to lease health system assets to the nonprofit corporation for purposes
prescribed in section 11-1402.
B. If the board of supervisors leases the health system assets to the corporation,
the board of supervisors may convey, sell or otherwise transfer title to any of those
health system assets, including personal property and improvements to real property,
1. The sponsoring county shall retain title to any fee interest in the land
underlying any conveyed improvements.
2. The lease agreement, including any amendments, renewals or extensions of the
lease agreement, remains binding and effective according to its terms regardless of
ownership of any health system assets.
C. If, under the lease agreement, any of the health system assets or operations are
conveyed to the nonprofit corporation, they are presumed to have been conveyed for their
current fair market value.
11-1433 Power to acquire and operate community health system
A. The nonprofit corporation may acquire, by purchase, lease or otherwise, and
operate the community health system, other health care institutions and real and personal
property, both in and outside the sponsoring county.
B. Acquiring or operating other health care institutions and real and personal
property does not affect the powers, rights, privileges or immunities conferred on the
nonprofit corporation by an operating agreement entered into under this chapter.
11-1434 Operating agreement; required provisions
A. An operating agreement under this chapter shall include the following
1. The nonprofit corporation's assumption of responsibility for managing,
maintaining and operating the health system assets that are leased or transferred
pursuant to the lease agreement.
2. The nonprofit corporation's assumption, beginning on the transfer date, of
responsibility for, and responsibility to defend, indemnify and hold the sponsoring
county harmless with respect to, all or some liabilities relating to the health system
assets that are leased or transferred to the corporation as stated in the lease
agreement. This assumption may include liabilities accruing before, on or after the
3. An agreement by the nonprofit corporation to continue to provide health care to
the public, including indigent persons, as one of its primary missions.
4. The nonprofit corporation's undertaking, covenants and indemnification to the
sponsoring county against all actions, activities and consequences that may arise out of
or relate to any actions taken by the nonprofit corporation pursuant to the lease
B. An operating agreement under this chapter may include provisions requiring the
nonprofit corporation to:
1. Obtain the approval of the board of supervisors of any business transaction by
the corporation that may materially and adversely affect the sponsoring county's
interests. The agreement shall specify with particularity the type and nature of the
transactions that require prior approval of the board of supervisors.
2. Notify the board of supervisors before amending all or part of the corporation's
articles of incorporation or bylaws. The articles of incorporation and bylaws may not be
amended to remove the requirement prescribed by subsection A, paragraph 3 of this
3. Pay all or part of the costs of the board of supervisors that are related to the
conveyance and transition of the county health system to the nonprofit corporation.
4. Provide or continue to provide services and programs to the communities and
populations served by the county health system.
C. The sponsoring county and nonprofit corporation may also agree in writing to:
1. Any other arrangements, including indemnifications, that they consider
appropriate and prudent with respect to the transition of county health system operations
to the corporation.
2. Any other provision that is not inconsistent with this chapter or the operating
agreement, including contracts for the provision by the sponsoring county or the
nonprofit corporation of goods, services and facilities in support of the community
D. Notwithstanding any other law, at its discretion the sponsoring county may agree
to provide grants to the nonprofit corporation.
E. Section 42-17106 does not apply to any promise, undertaking, covenant or
agreement that is contained in the operating agreement and that commits a sponsoring
county to compensate the nonprofit corporation for performing the county's primary
function of providing health care services to the indigent. Any such promise,
undertaking, covenant or agreement is a lawful long-term contract for all purposes of the
constitution and laws of this state.
11-1435 Power to perform operating agreement
A. The board of directors of the nonprofit corporation has all of the powers that
are necessary to perform or comply with the obligations of the board of supervisors or
the sponsoring county under an operating agreement under this chapter.
B. The operating agreement, and all amendments, renewals or extensions, are exempt
from the requirements of section 11-251, paragraphs 9, 18 and 58 and sections 11-256,
11-256.01, 11-256.03 and 11-291.
C. For the purposes of any covenant, condition or restriction that may apply to any
real property or health system assets that are leased or transferred to a nonprofit
corporation under a lease agreement, the real property and health system assets:
1. Shall be used in a manner that is consistent and complies with the applicable
covenants, conditions and restrictions.
2. Are presumed to be used for county hospital purposes consistent with deed
restrictions attached to the land that was conveyed to the county.
11-1436 Renegotiation of agreements on change in county's health care duties
A. The operating agreement shall provide that:
1. If the state or federal government amends, modifies, alters or changes the law
to reduce the county's financial or programmatic responsibility for health care for the
indigent sick of the county, any agreement for compensation or reimbursement between the
sponsoring county and the nonprofit corporation is voidable within sixty days after the
effective date of the change.
2. During the sixty day period:
(a) The corporation and the sponsoring county shall renegotiate the financial or
programmatic terms, or both, of the operating agreement to prevent the corporation from
retaining or being compensated in amounts that are greater than fair compensation for its
duties and obligations under the agreement in light of the changes in the state or
(b) The sponsoring county has the right to recoup from the corporation any monies
paid that are not consistent with the corporation's receipt of fair compensation in light
of the changes in the state or federal law.
3. If the nonprofit corporation and the sponsoring county are unable to complete
the required renegotiations within the sixty day period, the corporation shall:
(a) Continue to provide the services and obligations required of it by the terms of
the applicable agreement.
(b) Pay to the sponsoring county a penalty in an amount that was previously
negotiated between the parties and that is contained in the agreement. The penalty plus
interest are the sole obligations of the nonprofit corporation and shall continue to
accrue and be paid by the corporation until the renegotiation of the compensation
provisions of the agreement are finalized.
B. The agreement may contain provisions permitting arbitration of any dispute if
the parties do not complete the renegotiation within the sixty day period.
11-1437 Transfer of county employees
A. The operating agreement:
1. Shall include provisions to ensure that all employees of the county health
system are considered for employment by the nonprofit corporation.
2. May include provisions with respect to the transfer of county health system
employees, including appropriate arrangements for hiring preferences, employee seniority,
rates of pay, benefits, accrued leave and retirement benefits and for financial
adjustments and settlements.
B. The nonprofit corporation shall allow employees chosen to perform services under
the operating agreement who have ten or more years of credited service with the county
health system as of the transfer date and employees who are within four years of becoming
eligible for retirement benefits under the ARIZONA state retirement system as of the
transfer date to remain at their option as employees of the sponsoring county on loan to
the corporation for purposes of membership in the ARIZONA state retirement system for up
to four years. The corporation shall pay all costs incurred by the county to implement
this subsection. The sponsoring county may pay any amounts received from the corporation
under this subsection to the ARIZONA state retirement system regardless of whether the
county budgeted the expenditure pursuant to section title 42, chapter 17, article 3. All
amounts received by the county from the corporation under this subsection are considered
to be held by the county as a custodian pursuant to article IX, section 20, subsection
(3), paragraph (d), subdivision (iii), Constitution of ARIZONA.
C. This chapter shall not be construed to require the nonprofit corporation to
employ any employee of the county or the county health system.
11-1438 Existing construction contracts
The nonprofit corporation shall assume and agree to pay the sponsoring county the
amounts remaining to be paid on all uncompleted construction contracts entered into by
the county before the transfer date for constructing additions to or improvements or
modifications of the health system assets leased to the corporation under the lease
11-1439 Limitation of county liability
A. Debts and other liabilities of the nonprofit corporation are not liabilities or
responsibilities of the sponsoring county. Unless expressly authorized by this chapter:
1. Public monies of the county shall not be appropriated to pay the debts or
obligations of the corporation.
2. A garnishment, attachment or execution shall not be levied or issued against the
sponsoring county for the benefit of any creditor or judgment creditor of the nonprofit
corporation whether or not the corporation's obligation accrues by operation of law,
contract or tortious act by the corporation or its agents or employees.
B. The nonprofit corporation is not considered to be the alter ego of the
sponsoring county, except as specifically permitted by this chapter. A creditor or
judgment creditor of the corporation may not pierce the corporate veil of the corporation
to seek monetary damages from the sponsoring county.
11-1440 Corporate bonds
A. The nonprofit corporation may issue its corporate bonds in principal amounts as
the board of directors determines to be necessary to provide sufficient monies for
purposes of the community health system.
B. Bonds issued by the nonprofit corporation:
1. Are entitled to all of the immunities and exemptions afforded bonds of other
2. Are obligations of the nonprofit corporation, and are not in any manner
obligations of the sponsoring county or of this state.
3. Do not constitute a legal debt of the sponsoring county or of this state.
4. Are not enforceable against the sponsoring county or this state.
5. Are not enforceable against the county's interest in any health system assets
that are leased pursuant to section 11-1432. The county shall not subordinate its lessor
interest to any obligee of the nonprofit corporation.
6. Are payable only from the revenues or other assets of the nonprofit corporation
that is pledged and assigned to, or in trust for the benefit of, the holder or holders of
11-1441 Honoring outstanding debt obligations of sponsoring county
A. The operating agreement entered into pursuant to this chapter shall require the
nonprofit corporation to:
1. Honor all covenants and obligations made by the sponsoring county pursuant to
title 35, chapter 3, article 7 with respect to the county health system.
2. Assume and perform all covenants, conditions and requirements undertaken by the
sponsoring county pursuant to title 35, chapter 3, article 7 with respect to bonds issued
to provide monies for the county health system before the transfer date in which the
proceeds were used or intended to be used to finance parts of the county health system
covered by the operating agreement.
3. Comply with all covenants and conditions against private use, private security
interests and private loans contained in the operating agreement or in any proceeding
that pertains to issuing the bonds, notes or other obligations of the sponsoring county
issued to originally acquire, construct or purchase the health system assets.
B. Notwithstanding any law to the contrary or the articles of incorporation or
bylaws of the nonprofit corporation, any action taken by the corporation in violation of
those covenants and conditions described in this section is void.
11-1442 Annual audit and report
The operating agreement entered into pursuant to this chapter shall require:
1. The board of directors to cause an audit to be made of the funds, revenues and
expenditures of the nonprofit corporation. The audit shall be conducted within sixty
days after the close of the corporation's fiscal year.
2. The nonprofit corporation to prepare and publish an annual report within three
months after the end of the corporation's fiscal year containing a full and complete
account of its transactions and proceedings for the preceding year and other facts and
recommendations that are considered to be of public value. The annual report may also
include a copy of the audit under paragraph 1.
3. The corporation to provide copies of the annual report and audit to each member
of the sponsoring county's board of supervisors, to the auditor general and, on request,
to any member of the public.