Bill Text: CA SB538 | 2017-2018 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Hospital contracts.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Engrossed - Dead) 2018-06-26 - June 26 hearing postponed by committee. [SB538 Detail]

Download: California-2017-SB538-Amended.html

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Amended  IN  Senate  March 23, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill

No. 538

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Introduced by Senator Monning

February 16, 2017

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An act to amend Section 1367 of add Section 513 to the Business and Professions Code, and to add Section 1367.32 to the Health and Safety Code, relating to health care service plans. hospital contracts.

LEGISLATIVE COUNSEL'S DIGEST

SB 538, as amended, Monning. Health care service plans. Hospital contracts.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law requires health care service plans to meet certain requirements, including, but not limited to, having the organizational and administrative capacity to provide services to subscribers and enrollees and providing basic health care services, as defined, to those subscribers and enrollees, and having facilities licensed, as specified. Existing law, the Health Care Providers’ Bill of Rights, prescribes restrictions on the types of contractual provisions that may be included in agreements between health care service plans and health care providers and agreements between health insurers and health care providers.

This bill would prohibit contracts between hospitals and contracting agents or health care service plans from containing certain provisions, including, but not limited to, setting payment rates or other terms for nonparticipating affiliates of the hospital, requiring the contracting agent or plan to keep the contract’s payment rates secret from any payor, as defined, that is or may become financially responsible for the payment, and requiring the contracting agent or plan to submit to arbitration, or any other alternative dispute resolution program, any claims or causes of action that arise under state or federal antitrust laws after those claims or causes of action arise, except as provided. The bill would make any prohibited contract provision void and unenforceable. The bill would define “contracting agent” for those purposes. The bill would provide that its provisions are severable.

Because a willful violation of the provisions relating to health care service plans is a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

This bill would make technical, nonsubstantive changes to those provisions.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NOYES  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 Section 513 is added to the Business and Professions Code, to read:

513.

 (a) A contract between a hospital or any affiliate of a hospital and a contracting agent shall not, directly or indirectly, do any of the following:

(1) Set payment rates or other terms for nonparticipating affiliates of the hospital.

(2) Require the contracting agent to contract with any one or more of the hospital’s affiliates. This section does not prohibit a contract from requiring that the contracting agent contract with the medical group with which the hospital’s medical staff is affiliated.

(3) Require payors to certify, attest, or otherwise confirm in writing that the payor is bound by the terms of the contract between the hospital and the contracting agent.

(4) Require the contracting agent, as a condition to entering into the contract with the hospital or continuing the contract on its then current terms, to submit to arbitration, or any other alternative dispute resolution program, any claims or causes of action that arise under state or federal antitrust laws. This paragraph does not prohibit a hospital or any affiliate of a hospital and a contracting agent from entering into a consensual agreement to submit those claims or causes of action to arbitration or any other alternative dispute resolution program, other than as a condition to entering into the contract or continuing the contract on its then current terms.

(5) Require the contracting agent to provide coverage to beneficiaries for services rendered by the hospital and any of its affiliates at the same level of copayment, coinsurance, deductible, or any similar cost-sharing provision, for services rendered by other in-network hospitals and any of their affiliates.

(6) Require the contracting agent to keep the contract’s payment rates secret from any existing or potential payor that is or may become financially responsible for the payments. This paragraph does not prohibit a requirement that any communication of the contract’s payment rates to an existing or potential payor be subject to a reasonable nondisclosure agreement.

(b) Any contract provision that violates subdivision (a) is void and unenforceable.

(c) For the purposes of this section, the following terms have the following meanings:

(1) “Affiliate” means, with respect to any person, any other person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, that person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, membership rights, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.

(2) “Contracting agent” has the same meaning as set forth in Section 511.1.

(3) “Hospital” means any general acute care hospital, acute psychiatric hospital, or special hospital, as defined in Section 1250 of the Health and Safety Code.

(4) “Nonparticipating” means that with respect to the services rendered, the hospital or its affiliate is out of network according to the applicable health care service plan contract or health care welfare benefit plan.

(5) “Payor” means a person who is financially responsible, in whole or in part, for paying or reimbursing the cost of health care services received by beneficiaries of a health care welfare benefit plan sponsored or arranged by that person. This definition includes, but is not limited to, the health care welfare benefit plan itself.

SEC. 2.

 Section 1367.32 is added to the Health and Safety Code, to read:

1367.32.

 (a) A contract between a hospital or any affiliate of a hospital and a health care service plan shall not, directly or indirectly, do any of the following:

(1) Set payment rates or other terms for nonparticipating affiliates of the hospital.

(2) Require the health care service plan to contract with any one or more of the hospital’s affiliates. This section does not prohibit a contract from requiring that the health care service plan contract with the medical group with which the hospital’s medical staff is affiliated.

(3) Require payors to certify, attest, or otherwise confirm in writing that the payor is bound by the terms of the contract between the hospital and the health care service plan.

(4) Require the health care service plan, as a condition to entering into the contract with the hospital or continuing the contract on its then current terms, to submit to arbitration, or any other alternative dispute resolution program, any claims or causes of action that arise under state or federal antitrust laws. This paragraph does not prohibit a hospital or any affiliate of a hospital and a health care service plan from entering into a consensual agreement to submit those claims or causes of action to arbitration or any other dispute resolution program, other than as a condition to entering into the contract or continuing the contract on its then current terms.

(5) Require the health care service plan to provide coverage to its enrollees for services rendered by the hospital and any of its affiliates at the same level of copayment, coinsurance, deductible, or any similar cost-sharing provision, as for services rendered by other in-network hospitals and any of their affiliates.

(6) Require the health care service plan to keep the contract’s payment rates secret from any exiting or potential payor that is or may become financially responsible for the payments. This paragraph does not prohibit a requirement that any communication of the contract’s payment rates to an existing or potential payor be subject to a reasonable nondisclosure agreement.

(b) Any contract provision that violates subdivision (a) is void and unenforceable.

(c) For the purposes of this section, the following terms have the following meanings:

(1) “Affiliate” means, with respect to any person, any other person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, that person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, membership rights, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.

(2) “Hospital” means any general acute care hospital, acute psychiatric hospital, or special hospital, as defined in Section 1250.

(3) “Nonparticipating” means that with respect to the services rendered, the hospital or affiliate is out of network according to the applicable health care service plan contract or health care welfare benefit plan.

(4) “Payor” means a person that is financially responsible, in whole or in part, for paying or reimbursing the cost of health care services received by beneficiaries of a health care welfare benefit plan sponsored or arranged by that person. This definition includes, but is not limited to, the health care welfare benefit plan itself.

SEC. 3.

 The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SEC. 4.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

SECTION 1.Section 1367 of the Health and Safety Code is amended to read:

1367.

A health care service plan and, if applicable, a specialized health care service plan shall meet all of the following requirements:

(a)Facilities located in this state including, but not limited to, clinics, hospitals, and skilled nursing facilities to be utilized by the plan shall be licensed by the State Department of Public Health, where licensure is required by law. Facilities not located in this state shall conform to all licensing and other requirements of the jurisdiction in which they are located.

(b)Personnel employed by or under contract to the plan shall be licensed or certified by their respective board or agency, where licensure or certification is required by law.

(c)Equipment required to be licensed or registered by law shall be so licensed or registered, and the operating personnel for that equipment shall be licensed or certified as required by law.

(d)The plan shall furnish services in a manner providing continuity of care and ready referral of patients to other providers at times as may be appropriate consistent with good professional practice.

(e)(1)All services shall be readily available at reasonable times to each enrollee consistent with good professional practice. To the extent feasible, the plan shall make all services readily accessible to all enrollees consistent with Section 1367.03.

(2)To the extent that telehealth services are appropriately provided through telehealth, as defined in subdivision (a) of Section 2290.5 of the Business and Professions Code, these services shall be considered in determining compliance with Section 1300.67.2 of Title 28 of the California Code of Regulations.

(3)The plan shall make all services accessible and appropriate consistent with Section 1367.04.

(f)The plan shall employ and utilize allied health manpower for the furnishing of services to the extent permitted by law and consistent with good medical practice.

(g)The plan shall have the organizational and administrative capacity to provide services to subscribers and enrollees. The plan shall be able to demonstrate to the department that medical decisions are rendered by qualified medical providers, unhindered by fiscal and administrative management.

(h)(1)Contracts with subscribers and enrollees, including group contracts, and contracts with providers, and other persons furnishing services, equipment, or facilities to or in connection with the plan, shall be fair, reasonable, and consistent with the objectives of this chapter. All contracts with providers shall contain provisions requiring a fast, fair, and cost-effective dispute resolution mechanism under which providers may submit disputes to the plan, and requiring the plan to inform its providers upon contracting with the plan, or upon change to these provisions, of the procedures for processing and resolving disputes, including the location and telephone number where information regarding disputes may be submitted.

(2)A health care service plan shall ensure that a dispute resolution mechanism is accessible to noncontracting providers for the purpose of resolving billing and claims disputes.

(3)On and after January 1, 2002, a health care service plan shall annually submit a report to the department regarding its dispute resolution mechanism. The report shall include information on the number of providers who utilized the dispute resolution mechanism and a summary of the disposition of those disputes.

(i)A health care service plan contract shall provide to subscribers and enrollees all of the basic health care services included in subdivision (b) of Section 1345, except that the director may, for good cause, by rule or order exempt a plan contract or any class of plan contracts from that requirement. The director shall by rule define the scope of each basic health care service that health care service plans are required to provide as a minimum for licensure under this chapter. This chapter does not prohibit a health care service plan from charging subscribers or enrollees a copayment or a deductible for a basic health care service consistent with Section 1367.006 or 1367.007, provided that the copayments, deductibles, or other cost sharing are reported to the director and set forth to the subscriber or enrollee pursuant to the disclosure provisions of Section 1363. This chapter does not prohibit a health care service plan from setting forth, by contract, limitations on maximum coverage of basic health care services, provided that the limitations are reported to, and held unobjectionable by, the director and set forth to the subscriber or enrollee pursuant to the disclosure provisions of Section 1363.

(j)A health care service plan shall not require registration under the federal Controlled Substances Act (21 U.S.C. Sec. 801 et seq.) as a condition for participation by an optometrist certified to use therapeutic pharmaceutical agents pursuant to Section 3041.3 of the Business and Professions Code.

This section shall not be construed to permit the director to establish the rates charged subscribers and enrollees for contractual health care services.

The director’s enforcement of Article 3.1 (commencing with Section 1357) does not establish the rates charged to subscribers and enrollees for contractual health care services.

The obligation of the plan to comply with this chapter shall not be waived when the plan delegates any services that it is required to perform to its medical groups, independent practice associations, or other contracting entities.