By: Villarreal H.B. No. 1689
A BILL TO BE ENTITLED
AN ACT
relating to pay-for-performance contracts for certain Health and
Human Services Enterprise programs and services.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 397, Finance Code, is amended by adding
Subchapter I to read as follows:
SUBCHAPTER I. PAY-FOR-PERFORMANCE CONTRACTS FOR CERTAIN
DEPARTMENT PROGRAMS AND SERVICES
Sec. 397.001. DEFINITIONS. In this subchapter:
(1) "Advisory committee" means the advisory committee
on pay-for-performance contracts established under Section
397.003.
Sec. 397.002. PAY-FOR-PERFORMANCE CONTRACT PROGRAM. The
board shall develop and implement programs to assess the
feasibility, desirability, and cost-effectiveness of entering into
contracts:
(1) to operate programs or provide services that are:
(A) aimed at improving health statuses and
outcomes;
(B) designed for the primary purpose of
preventing health ailments; and
(C) selected by the board for inclusion in the
program; and
(2) under which payments may be made only if:
(A) the contractor meets or exceeds specified
performance requirements; and
(B) the state realizes a positive return on
investment.
Sec. 397.003. ADVISORY COMMITTEE. (a) The advisory
committee on pay-for-performance contracts is established for the
primary purpose of advising the board regarding the
pay-for-performance contract program.
(b) The advisory committee consists of the following
members:
(1) the executive commissioner of the Health and Human
Services Commission, or the executive commissioner's designee;
(2) the executive director of the Texas Public Finance
Authority, or the executive director's designee;
(3) the comptroller, or the comptroller's designee;
(4) a representative of a nonprofit organization that
has participated in a pay-for-performance contract program or
similar program, appointed by the board; and
(5) any other person the board determines would be of
assistance in developing and implementing the program, appointed by
the board.
(c) Members of the advisory committee appointed under
Subsections (b)(4) and (5) serve at the will of the board.
(d) The advisory committee shall:
(1) advise the board with respect to:
(A) criteria to be used for selecting the
programs and services to be included in the program;
(B) performance requirements applicable to
contractors under the program and desired outcomes for persons
served by each selected program or service;
(C) criteria to be used in evaluating whether a
contractor has met the performance requirements identified under
Paragraph (B); and
(D) establishing or revising the methodology for
computing the state's return on investment; and
(2) provide any other advice or information relating
to the program that the board requests.
(3) select a third party entity to verify whether the
state has realized a positive return on investment from the
contracts authorized in Section 397.004 and issue bonds pursuant to
Section 397.005.
(e) Members of the advisory committee are not entitled to
compensation but are entitled to reimbursement for actual and
necessary expenses incurred in performing their official duties as
advisory committee members.
(f) Chapter 2110 applies to the advisory committee, except
for Section 2110.008.
Sec. 397.004. CONTRACTS AUTHORIZED. (a) The board may enter
into a contract for the operation of a program or performance of a
service that the board selects to be included in the program. Before
the board enters into a contract under this section, after
considering information provided by the proposed contractor and
other information available to the board, the board must determine
that it is likely that having the program operated or services
performed under the contract will result in a positive return on
investment for the state in accordance with the methodology
established under Section 397.007.
(b) The contract must specify:
(1) the program to be operated or service to be
performed by the contractor;
(2) the period during which the contractor is to
operate the program or perform the service under the contract;
(3) a condition that certain performance requirements
must be met before any payment under the contract may be made
together with a description of:
(A) the performance requirements; and
(B) the criteria the board will use to evaluate
whether the contractor has met the performance requirements; and
(4) a condition that this state must realize a
positive return on investment from the contract before any payment
under the contract may be made together with a description of the
methodology to be used to determine the state's return on
investment.
Sec. 397.005. ISSUANCE OF GENERAL OBLIGATION BONDS FOR
PAY-FOR-PERFORMANCE CONTRACTS. (a) A third party entity shall issue
and sell general obligation bonds of the state under the authority
of the comptroller in a total amount sufficient to provide money for
payments anticipated to be due under contracts entered into under
this subchapter.
(b) The third party entity shall remit to the comptroller
the bond proceeds for deposit to the credit of the special fund
created as required by Section 49-q(b), Article III, Texas
Constitution. The proceeds may be appropriated only:
(1) to the Health and Human Services Enterprise to
make payments under contracts entered into under this subchapter;
or
(2) to the authority to pay the principal of or
interest on the bonds.
Sec. 397.006. CONTRACT PAYMENTS. Using money appropriated
to the Texas Health and Human Services Enterprise from the special
fund established under Section 49-q, Article III, Texas
Constitution, the board shall make payments under contracts entered
into under this subchapter, provided that:
(1) the contractor has met the performance
requirements specified in the contract;
(2) the state's return on investment under the
contract is positive; and
(3) all other contract terms have been satisfied.
Sec. 397.007. RETURN ON INVESTMENT COMPUTATION. (a) The
third party entity shall establish a methodology for computing the
state's return on investment to determine whether that return is
positive for purposes of making contract payments in accordance
with Section 397.006. The methodology must:
(1) define a positive return on investment for the
state as increases in state revenue, costs avoided by the state, or
a combination of increased revenue and avoided costs in a total
amount that equals or exceeds the state's financing and
administration costs associated with a contract; and
(2) include considerations of the following:
(A) state tax revenue and any other state revenue
collected during the state fiscal year after the state fiscal year
during which the contract was entered into that would not have been
collected if the contract had not been entered into;
(B) costs avoided by the state by operating the
program or providing the services through the contract; and
(C) costs of debt service on bonds issued under
this subchapter to provide money for payments due under the
contract.
(b) The comptroller shall assist the board in collecting
information useful for purposes of determining the state's return
on investment under a contract.
Sec. 397.008. REPORT. (a) On or before December 15 of each
year following the year in which the program is implemented, the
department shall submit to the governor and the standing committees
of the legislature with primary jurisdiction over Health and Human
Services Enterprise a report regarding the operation of the
program. The report must:
(1) explain the criteria the board uses for selecting
the programs and services to be included in the program;
(2) explain the performance requirements applicable
to contractors under the program and desired outcomes for persons
served by each selected program or service;
(3) explain the criteria the board uses to evaluate
whether a contractor has met the performance requirements described
by Subdivision (2);
(4) identify the net benefits to the state of the
program;
(5) explain the methodology the board uses to
determine the state's return on investment before program contract
payments are made and the period during which those payments may be
made;
(6) include a comparison of the costs to the state of
providing programs and services under contracts entered into under
this subchapter and the costs to the state of directly providing
those programs and services for a comparable period;
(7) include a summary of the amounts and terms of the
bonds issued under Section 49-q, Article III, Texas Constitution;
and
(8) include a recommendation regarding continuation
or expansion of the program.
(b) The third party entity shall provide to the department
information necessary for the department to provide the summary
required by Subsection (a)(7).
SECTION 2. This Act takes effect January 1, 2014, but only
if the constitutional amendment proposed by the 83rd Legislature,
Regular Session, 2013, providing for the issuance of general
obligation bonds to finance pay-for-performance contracts for
certain programs and services for certain offenders is approved by
the voters. If that amendment is not approved by the voters, this
Act has no effect.