Bill Text: TX SB1529 | 2019-2020 | 86th Legislature | Introduced
Bill Title: Relating to merger agreements among certain hospitals; imposing fees.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Introduced - Dead) 2019-04-04 - Left pending in committee [SB1529 Detail]
Download: Texas-2019-SB1529-Introduced.html
86R16271 JCG-F | ||
By: Perry | S.B. No. 1529 |
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relating to merger agreements among certain hospitals; imposing | ||
fees. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Subtitle F, Title 4, Health and Safety Code, is | ||
amended by adding Chapter 314A to read as follows: | ||
CHAPTER 314A. MERGER AGREEMENTS AMONG CERTAIN HOSPITALS | ||
SUBCHAPTER A. GENERAL PROVISIONS | ||
Sec. 314A.001. DEFINITIONS. In this chapter: | ||
(1) "Attorney general" means the attorney general of | ||
Texas or any assistant attorney general acting under the direction | ||
of the attorney general of Texas. | ||
(2) "Commission" means the Health and Human Services | ||
Commission. | ||
(3) "Executive commissioner" means the executive | ||
commissioner of the Health and Human Services Commission. | ||
(4) "Hospital" means a nonpublic general or special | ||
hospital licensed under Chapter 241 or a private mental hospital | ||
licensed under Chapter 577. | ||
(5) "Merger agreement" or "merger" means an agreement | ||
among two or more hospitals for the consolidation by merger or other | ||
acquisition or transfer of assets by which ownership or control | ||
over substantially all of the stock, assets, or activities of one or | ||
more previously licensed and operating hospitals is placed under | ||
the control of another licensed hospital or hospitals or another | ||
entity that controls the hospitals. | ||
Sec. 314A.002. APPLICABILITY. This chapter applies only to | ||
a merger agreement among hospitals located within a county that: | ||
(1) contains two or more hospitals; and | ||
(2) has a population of: | ||
(A) less than 100,000 and is not adjacent to a | ||
county with a population of 250,000 or more; or | ||
(B) more than 100,000 and less than 150,000 and | ||
is not adjacent to a county with a population of 100,000 or more. | ||
Sec. 314A.003. LEGISLATIVE FINDINGS AND PURPOSES; OTHER LAW | ||
NOT AFFECTED. (a) The legislature finds that: | ||
(1) a merger among hospitals may benefit the public by | ||
maintaining or improving: | ||
(A) the quality, efficiency, and accessibility | ||
of health care services offered to the public; and | ||
(B) the ability of hospital administrators to | ||
operate health care facilities and take measures to improve public | ||
health; and | ||
(2) a merger among hospitals may provide the benefits | ||
described by Subdivision (1) despite that it may be anticompetitive | ||
within the meaning and intent of state and federal antitrust laws. | ||
(b) The legislature believes it is in the state's best | ||
interest to supplant state and federal antitrust laws with a | ||
process for regulatory approval and active supervision by the | ||
commission as provided by this chapter. | ||
(c) Nothing in this chapter affects antitrust immunity that | ||
may be provided through another provision of state law. | ||
Sec. 314A.004. RULEMAKING. The executive commissioner | ||
shall adopt rules for the administration and implementation of this | ||
chapter by the commission. | ||
SUBCHAPTER B. CERTIFICATE OF PUBLIC ADVANTAGE | ||
Sec. 314A.051. REVIEW AND CERTIFICATION OF MERGER | ||
AGREEMENTS REQUIRED. (a) Two or more hospitals may negotiate and | ||
enter into a merger agreement, subject to approval by the | ||
commission as provided by this subchapter. | ||
(b) No merger agreement shall receive immunity under this | ||
chapter unless the commission issues a certificate of public | ||
advantage governing the merger agreement. | ||
Sec. 314A.052. APPLICATION. (a) One or more parties to a | ||
merger agreement may submit an application to the commission for a | ||
certificate of public advantage governing the merger agreement. | ||
The application must include a written copy of the merger agreement | ||
and describe the nature and scope of the merger. | ||
(b) If an applicant believes the documents or other | ||
information required to be submitted with an application under | ||
Subsection (a) contains proprietary information that is required to | ||
remain confidential, the applicant shall: | ||
(1) clearly identify the information; and | ||
(2) submit duplicate applications, one application | ||
that has complete information for the commission's use and one | ||
redacted application that will be made available for public | ||
release. | ||
(c) A copy of the application and copies of all additional | ||
related materials must be submitted to the attorney general and to | ||
the commission at the same time. | ||
Sec. 314A.053. APPLICATION FEE. The commission may assess | ||
a fee for filing an application under Section 314A.052 in an amount | ||
not to exceed $75,000. The amount of the fee must be sufficient to | ||
cover the reasonable costs of the commission and attorney general | ||
in reviewing and approving or denying applications under this | ||
subchapter. | ||
Sec. 314A.054. REVIEW OF APPLICATION BY COMMISSION; GRANT | ||
OR DENIAL OF APPLICATION. (a) The commission shall review an | ||
application for a certificate of public advantage in accordance | ||
with the standard prescribed by Section 314A.056(a). | ||
(b) The commission shall grant or deny the application not | ||
later than the 120th day after the date of the filing of the | ||
application. The commission's decision must: | ||
(1) be in writing; | ||
(2) specify the basis for the decision; and | ||
(3) provide a copy of the decision to the applicants on | ||
the date of the decision. | ||
Sec. 314A.055. REVIEW OF APPLICATION BY ATTORNEY GENERAL. | ||
(a) The attorney general shall review an application for a | ||
certificate of public advantage and all supporting documents and | ||
information provided by the applicants. On completion of the | ||
review and subject to Subsection (b), the attorney general shall | ||
advise the commission whether the proposed merger agreement would | ||
likely benefit the public and meet the standard prescribed by | ||
Section 314A.056(a). | ||
(b) The attorney general shall review an application for a | ||
certificate of public advantage as soon as practicable, taking into | ||
consideration the deadline prescribed by Section 314A.054. | ||
(c) If the attorney general advises the commission to deny | ||
an application, the attorney general shall state the basis and | ||
reasons for the recommended denial. | ||
Sec. 314A.056. ISSUANCE OF CERTIFICATE OF PUBLIC ADVANTAGE. | ||
(a) The commission, after reviewing the application and consulting | ||
with the attorney general in accordance with Section 314A.055, | ||
shall issue a certificate of public advantage for a merger | ||
agreement if the commission determines under the totality of the | ||
circumstances that: | ||
(1) the proposed merger would likely benefit the | ||
public by maintaining or improving: | ||
(A) the quality, efficiency, and accessibility | ||
of health care services offered to the public; and | ||
(B) the ability of hospital administrators to | ||
operate health care facilities and take measures to improve public | ||
health; and | ||
(2) the likely benefits resulting from the proposed | ||
merger agreement described by Subdivision (1) outweigh any | ||
disadvantages attributable to a reduction in competition that may | ||
result from the proposed merger. | ||
(b) In making the determination under Subsection (a), the | ||
commission shall consider the effect of the merger agreement on the | ||
following nonexclusive list of factors: | ||
(1) the quality and price of hospital and health care | ||
services provided to citizens of this state; | ||
(2) the preservation of sufficient hospitals within a | ||
geographic area to ensure public access to acute care; | ||
(3) the cost efficiency of services, resources, and | ||
equipment provided or used by the hospitals that are a party to the | ||
merger agreement; | ||
(4) the ability of health care payors to negotiate | ||
payment and service arrangements with hospitals proposed to be | ||
merged under the agreement; and | ||
(5) the extent of any reduction in competition among | ||
physicians, allied health professionals, other health care | ||
providers, or other persons providing goods or services to, or in | ||
competition with, hospitals. | ||
(c) The commission may include terms or conditions of | ||
compliance in connection with a certificate of public advantage | ||
issued under this subchapter if necessary to ensure that the | ||
proposed merger likely benefits the public as specified in | ||
Subsections (a)(1) and (2). | ||
Sec. 314A.057. RECORDS. The commission shall maintain | ||
records of all merger agreements the commission has approved under | ||
this chapter, including any terms or conditions of issuing a | ||
certificate of public advantage that are imposed by the commission. | ||
Sec. 314A.058. TERMINATION OF CERTIFICATE OF PUBLIC | ||
ADVANTAGE BY HOSPITAL. A hospital resulting from a merger | ||
agreement approved under this chapter may voluntarily terminate its | ||
certificate of public advantage by giving the commission notice at | ||
least 30 days before the date of the termination. | ||
Sec. 314A.059. ANNUAL REVIEW OF CERTIFICATE. (a) The | ||
commission shall annually review an approved certificate of public | ||
advantage. | ||
(b) The attorney general may annually review an approved | ||
certificate of public advantage. | ||
(c) The commission may not complete its annual review of an | ||
approved certificate of public advantage under this section until: | ||
(1) the attorney general informs the commission | ||
whether the attorney general intends to conduct any review of the | ||
certificate of public advantage as authorized under this section; | ||
and | ||
(2) if the attorney general informs the commission of | ||
the attorney general's intent to conduct a review of an entity's | ||
approved certificate of public advantage, the attorney general has | ||
had the opportunity to conduct the review. | ||
SUBCHAPTER C. SUPERVISION OF MERGED HOSPITALS UNDER APPROVED | ||
MERGER AGREEMENT | ||
Sec. 314A.101. SUPERVISION OF MERGED HOSPITALS. The | ||
commission shall supervise in the manner provided by this | ||
subchapter each hospital operating under a certificate of public | ||
advantage issued under this chapter to ensure that the immunized | ||
conduct of a merged entity furthers the purposes of this chapter. | ||
Sec. 314A.102. RATE REVIEW. (a) An increase in rates for | ||
hospital services by a hospital operating under a certificate of | ||
public advantage issued under this chapter may not take effect | ||
without prior approval of the commission as provided by this | ||
section. | ||
(b) At least 90 days before the implementation of any | ||
proposed increase in rates for inpatient or outpatient hospital | ||
services and, if applicable, at least 60 days before the execution | ||
of a reimbursement agreement with a third party payor, a hospital | ||
operating under a certificate of public advantage shall submit to | ||
the commission: | ||
(1) any proposed increase in rates for inpatient and | ||
outpatient hospital services; | ||
(2) if applicable, any increase in reimbursement rates | ||
under a reimbursement agreement with a third party payor; and | ||
(3) any information concerning costs, patient volume, | ||
acuity, payor mix, and other information requested by the | ||
commission. | ||
(c) After reviewing the proposed increase in rates | ||
submitted under Subsection (b), the commission shall approve or | ||
deny the proposed rate increase. The commission shall approve the | ||
proposed rate increase if the commission determines that: | ||
(1) the proposed rate increase likely benefits the | ||
public by maintaining or improving: | ||
(A) the quality, efficiency, and accessibility | ||
of health care services offered to the public; and | ||
(B) the ability of hospital administrators to | ||
operate health care facilities and take measures to improve public | ||
health; and | ||
(2) the proposed rate does not inappropriately exceed | ||
competitive rates for comparable services in the hospital's market | ||
area. | ||
(d) If the commission determines that the proposed rate | ||
inappropriately exceeds competitive rates for comparable services | ||
in the hospital's market area, and that the proposed rate is | ||
inconsistent with the standard prescribed by Section 314A.056(a), | ||
the commission shall deny or modify the proposed rate increase. | ||
(e) The commission shall notify the hospital in writing of | ||
the commission's decision to approve, deny, or modify the proposed | ||
rate increase not later than the 30th day before the implementation | ||
date of the proposed increase. | ||
Sec. 314A.103. ANNUAL REPORT. Each hospital operating | ||
under a certificate of public advantage shall submit an annual | ||
report to the commission. The report must include: | ||
(1) information about the extent of the benefits | ||
attributable to the issuance of the certificate of public | ||
advantage; | ||
(2) if applicable, information about the hospital's | ||
actions taken: | ||
(A) in furtherance of any commitments made by the | ||
parties to the merger; or | ||
(B) to comply with terms imposed by the | ||
commission as a condition for approval of the merger agreement; | ||
(3) a description of the activities conducted by the | ||
hospital under the merger agreement; | ||
(4) information relating to the price, cost, and | ||
quality of and access to health care for the population served by | ||
the hospital and the health improvements of that population; and | ||
(5) any other information required by the commission | ||
to ensure compliance with this chapter, including information | ||
relating to compliance with any terms or conditions for issuance of | ||
the certificate of public advantage. | ||
Sec. 314A.104. CORRECTIVE ACTION PLAN. (a) The commission | ||
shall require a hospital operating under a certificate of public | ||
advantage to adopt a plan to correct a deficiency in the hospital's | ||
activities if the commission determines that an activity of the | ||
hospital does not benefit the public as described by Section | ||
314A.056(a) and no longer meets the standard prescribed by that | ||
subsection. | ||
(b) The corrective action plan must include each provision | ||
required by the commission and must be submitted at the | ||
commission's direction. | ||
Sec. 314A.105. SUPERVISION FEE. The commission may assess | ||
an annual supervision fee in an amount not to exceed $75,000 against | ||
each hospital operating under a certificate of public advantage | ||
under this chapter. The amount of the fee must be sufficient to | ||
cover the reasonable costs incurred by the commission in | ||
supervising hospitals under this subchapter and in implementing and | ||
administering this chapter. | ||
SUBCHAPTER D. ENFORCEMENT AUTHORITY BY COMMISSION | ||
Sec. 314A.151. INVESTIGATION; REVOCATION OF CERTIFICATE. | ||
With respect to each hospital resulting from a merger agreement for | ||
which the commission issued a certificate of public advantage under | ||
this chapter, and to ensure that the hospital's activities continue | ||
to benefit the public under the standard prescribed by Section | ||
314A.056(a) and the purposes of this chapter, the executive | ||
commissioner may: | ||
(1) investigate the hospital's activities; and | ||
(2) require the hospital to perform a certain action | ||
or refrain from a certain action or revoke the hospital's | ||
certificate of public advantage, if the commission determines that: | ||
(A) the hospital is not complying with this | ||
chapter or a term or condition of compliance with the certificate of | ||
public advantage governing the hospital's immunized activities; | ||
(B) the commission's approval and issuance of the | ||
certificate of public advantage was obtained as a result of | ||
material misrepresentation; | ||
(C) the hospital has failed to pay any fee | ||
required under this chapter; or | ||
(D) the benefits resulting from the approved | ||
merger no longer outweigh the disadvantages attributable to the | ||
reduction in competition resulting from the approved merger. | ||
Sec. 314A.152. JUDICIAL REVIEW OF COMMISSION ACTION. (a) A | ||
person aggrieved by a decision of the commission in granting, | ||
denying, or refusing to act on an application for a certificate of | ||
public advantage submitted under Subchapter B or revoking a | ||
certificate of public advantage issued under this chapter may | ||
appeal the final order by filing a petition for judicial review in a | ||
district court of Travis County. | ||
(b) The filing of a petition for judicial review of a | ||
decision by the commission to revoke a certificate of public | ||
advantage stays enforcement of the commission's decision. | ||
(c) Not later than the 45th day after the date a person files | ||
a petition for judicial review under this section, the commission | ||
shall submit to the district court the original copy or a certified | ||
copy of the entirety of the commission's record regarding the | ||
decision under review. By stipulation of all parties, the record | ||
may be shortened. The district court may require or permit later | ||
corrections or additions to the record. The district court may | ||
extend the period prescribed by this subsection for submitting the | ||
commission's record to the court. | ||
(d) The district court shall conduct the review sitting | ||
without a jury. | ||
(e) The district court may reverse a decision by the | ||
commission regarding revocation of a certificate of public | ||
advantage if the court finds that the decision is: | ||
(1) in violation of a constitutional or statutory | ||
provision; | ||
(2) in excess of the commission's statutory authority; | ||
(3) made through unlawful procedure; | ||
(4) arbitrary or capricious or characterized by abuse | ||
of discretion or clearly unwarranted exercise of discretion; or | ||
(5) unsupported by substantial and material evidence | ||
in light of the record as a whole. | ||
(f) Under Subsection (e)(5), in determining the | ||
substantiality of the evidence, the district court: | ||
(1) shall consider other evidence that detracts from | ||
the substantiality; and | ||
(2) may not substitute its judgment for the judgment | ||
of the commission on the weight of the evidence as to a question of | ||
fact. | ||
(g) The district court shall issue a written decision | ||
setting forth the court's findings of fact and conclusions of law. | ||
The commission shall add the court's decision to the commission's | ||
record. | ||
SUBCHAPTER E. ATTORNEY GENERAL INVESTIGATION AND ENFORCEMENT | ||
AUTHORITY | ||
Sec. 314A.201. CIVIL INVESTIGATIVE DEMAND. (a) The | ||
attorney general, at any time after an application is filed under | ||
Section 314A.052 and before the commission makes a determination on | ||
the application, or in connection with the commission's annual | ||
review of a certificate of public advantage under Section 314A.059, | ||
may require by civil investigative demand the attendance and | ||
testimony of witnesses and the production of documents in Travis | ||
County or the county in which the applicants are located for the | ||
purpose of investigating whether the merger agreement satisfies or, | ||
after issuance of the certificate of public advantage, continues to | ||
satisfy the standard prescribed by Section 314A.056(a). | ||
(b) All nonpublic documents produced for and testimony | ||
given to the attorney general under Subsection (a) are subject to | ||
the prohibitions on disclosure and use under Section 15.10(i), | ||
Business & Commerce Code. | ||
(c) The attorney general may seek an order from the district | ||
court compelling compliance with a civil investigative demand | ||
issued under this section. | ||
Sec. 314A.202. ACTION TO REVOKE CERTIFICATE OF PUBLIC | ||
ADVANTAGE FOLLOWING CHANGED CIRCUMSTANCES. (a) If, following an | ||
annual review of a certificate of public advantage, the attorney | ||
general determines that as a result of changed circumstances the | ||
benefits resulting from a certified merger agreement as described | ||
by Section 314A.056(a) no longer outweigh any disadvantages | ||
attributable to a reduction in competition resulting from the | ||
merger agreement, the attorney general may bring an action in a | ||
district court in Travis County seeking to revoke the certificate | ||
of public advantage in accordance with the procedures prescribed by | ||
this section. | ||
(b) Except as provided by Subsection (c), in an action | ||
brought under this section, the attorney general has the burden of | ||
establishing by clear and convincing evidence that as a result of | ||
changed circumstances the benefits resulting from the certified | ||
merger agreement and the unavoidable costs of revoking the | ||
certificate of public advantage are outweighed by disadvantages | ||
attributable to a reduction in competition resulting from the | ||
merger agreement. | ||
(c) In any action brought under this section, if the | ||
attorney general first establishes by clear and convincing evidence | ||
that the commission's certification was obtained as a result of | ||
material misrepresentation to the commission or the attorney | ||
general or as the result of coercion, threats, or intimidation | ||
directed toward any party to the merger agreement, then the parties | ||
to the merger agreement bear the burden of establishing by clear and | ||
convincing evidence that despite changed circumstances the | ||
benefits resulting from the certified merger agreement and the | ||
unavoidable costs of revoking the certificate of public advantage | ||
are not outweighed by disadvantages attributable to a reduction in | ||
competition resulting from the merger agreement. | ||
SECTION 2. This Act takes effect September 1, 2019. |