Addresses the placement of state hospitals under the licensing authority of the department of health.

Requires the department of health, in order to improve its licensing and quality experience, to: (1) Enter into a partnership with the national institutes of standards and technology, United States department of commerce, to coordinate and schedule excellence assessments of the department's operations; and

(2) Transmit completed excellence assessments and feedback reports to pertinent legislative committees and the office of the governor.

Requires a state hospital to maintain a coordinated quality improvement program for the improvement of the quality of health care services rendered to patients and the identification and prevention of medical malpractice.

Authorizes the medical quality assurance commission or the board of osteopathic medicine and surgery to review and audit the records of a quality improvement committee's decisions in which a physician's privileges are terminated or restricted.