Purpose/Rationale of the Law

According to Seto, Collins and Weiskopf (2000), health care conversion law is making a tidal wave of restructuring activity with massive consequences for health care in communities.

Even as conversion can happen by way of various mergers, it normally concerns the transfer of assets sale or sale from nonprofit providers such as insurance providers, HMOs, and hospitals to for-profit entities.

This means that assets previously owned by the nonprofit providers should be assessed and directed to other organizations like new foundations.

Seto, Collins and Weiskopf (2000) said health care conversion happens for various purposes or reasons, as well as an advocacy for greater internal competence and effectiveness in the health care marketplace and the supposed necessity to increase capital by means of equity markets.

They also added that the necessity to legalize the conversion or sale of nonprofit health care organizations is practically generally recognized, provoked mainly by concern of losing community charitable resources. Hence, without thorough supervision, the assets or resources of nonprofit providers might be underrated and by this means lost to the community.

Last April 2005, Governor Brian Schweitzer of Montana signed into law SB 317, which legalizes the conversion of nonprofit health insurers into for-profit businesses (Benbow, 2005). The law was passed by a vast majority in both houses of the Montana Legislature.  The said law was acclaimed and recognized by consumer advocates as a model for other states to imitate.

SB 317 safeguards consumers by means of setting up transparent and understandable objectives for regulators and unambiguous rules for nonprofit health organizations preparing to convert to become for-profit corporations (Benbow, 2005).  This law in Montana is considered to be the strongest in the country since it is beneficial for consumers and advantageous for business.

Effect on the day-to-day operations within health care organizations

Health care conversion affects everybody, eventually, as it influences the health care existing in communities (to Seto, Collins and Weiskopf (2000). Due to the fact that in several communities, nonprofit insurers and hospitals offer the lone access to health care for the helpless populations, they are specifically in danger of being affected negatively.

Moreover, a health care conversion might signify suspended services, hospital closures, cuts in staffing, or longer travel times.

Simultaneously, health care conversions might likewise set up new prospective and opportunities for philanthropy and for the public.  If the assets at risk in health care conversions are safeguarded and devoted to charitable health care, they could offer a lifeline for populations at risk who increasingly cope with impediments to health (Seto, Collins and Weiskopf, 2000).

Arguments For and Against the Law

Seto, Collins, and Weskopf (2000) contend that health care conversion has established a new health care landscape in the country. They said that what was previously a system made up more or less solely of nonprofit providers and institutions has turned out to be increasingly for-profit.

These authors asserted that aggressive rivalry by those for-profit providers together with industry-wide demands to decrease costs is creating chaos on local delivery systems and wearing away conventional roads to health care access for those people covered by Medicaid low-income individuals, and the uninsured people.

The advent of this health care conversion law has emphasized the frailty or vulnerability of the health care system and raised doubts and speculations regarding health care institutions’ lack of public responsibility or accountability.

Meanwhile, Seto, Collins, and Weskopf (2000) also said that the process of health care conversion has produced new prospects for communities, for consumers, and consumer advocates to participate in public debate in a quickly changing field, influence public health policy, and have a say in the distribution of community resources.

Furthermore, health care conversions have caused the establishment of conversion foundations, redistributing or diverting billions of dollars in the nonprofit sector. Seto, Collins, and Weiskopf (2000) contend that laws must both conserve and maintain charitable assets and safeguard the health care that is offered in communities. Hence, these authors appeal to the health care industry, state regulators, nonprofits, and consumers and to look after and preserve community resources.

Potential Ramifications if the Law is not Followed

In terms of performance, Bernholz (1998) asserts that in a field with no clear and transparent benchmarks, no general standards for gauging success, and none of the customary methods for the public to reply to poor performance, foundations will have no way of measuring performance.

Moreover, community health advocates demand outcome measures for foundations even as the foundations have a tendency to make a case for process measures.

Bernholz (1998) said that the matter of governance is vital for conversion foundations since the composition of the foundations’ boards counted most in both creating the organizations and in later evaluations of their performance. Lastly, Bernholz (1998) claimed that the board’s capability to formulate and execute viable and clear and strategies made a big a difference.


Benbow, S. (April 8, 2005).  Montana Governor Signs Comprehensive Health Care Conversion Legislation.  Consumers Union.

Bernholz, L.  (November 1998). Health Care Conversions and Philanthropy: Important Issues for Practice and Research.  California Forum on Health Care Conversions and Philanthropy

Seto, N., K. Collins, and B. Weiskopf.  (March 2000).  Protecting Health, Preserving Assets: A Comprehensive Study of Laws Governing Conversions, Mergers and Acquisitions Among Health Care Entities.  Nonprofit Sector Research Fund, The Aspen Institute.