Texas 2019 - 86th Regular

Texas House Bill HB3301 Compare Versions

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1-H.B. No. 3301
1+By: Darby, Lambert, Clardy H.B. No. 3301
2+ (Senate Sponsor - Perry, Nichols)
3+ (In the Senate - Received from the House May 9, 2019;
4+ May 10, 2019, read first time and referred to Committee on Business &
5+ Commerce; May 17, 2019, reported adversely, with favorable
6+ Committee Substitute by the following vote: Yeas 7, Nays 0;
7+ May 17, 2019, sent to printer.)
8+Click here to see the committee vote
9+ COMMITTEE SUBSTITUTE FOR H.B. No. 3301 By: Nichols
210
311
12+ A BILL TO BE ENTITLED
413 AN ACT
514 relating to merger agreements among certain hospitals; authorizing
615 fees.
716 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
817 SECTION 1. Subtitle F, Title 4, Health and Safety Code, is
918 amended by adding Chapter 314A to read as follows:
1019 CHAPTER 314A. MERGER AGREEMENTS AMONG CERTAIN HOSPITALS
1120 SUBCHAPTER A. GENERAL PROVISIONS
1221 Sec. 314A.001. DEFINITIONS. In this chapter:
1322 (1) "Attorney general" means the attorney general of
1423 Texas or any assistant attorney general acting under the direction
1524 of the attorney general of Texas.
1625 (2) "Designated agency" means the state agency
1726 designated by the governor under Section 314A.004.
1827 (3) "Hospital" means a nonpublic general hospital that
1928 is licensed under Chapter 241 and is not maintained or operated by a
2029 political subdivision of this state.
2130 (4) "Merger agreement" or "merger" means an agreement
2231 among two or more hospitals for the consolidation by merger or other
2332 acquisition or transfer of assets by which ownership or control
2433 over substantially all of the stock, assets, or activities of one or
2534 more previously licensed and operating hospitals is placed under
2635 the control of another licensed hospital or hospitals or another
2736 entity that controls the hospitals.
2837 (5) "State agency" means a department, commission,
2938 board, office, or other agency in the executive branch of state
3039 government that is created by the constitution or a statute of this
3140 state.
3241 Sec. 314A.002. APPLICABILITY. This chapter applies only to
3342 a merger agreement among hospitals each of which is located within a
3443 county that:
3544 (1) contains two or more hospitals; and
3645 (2) has a population of:
3746 (A) less than 100,000 and is not adjacent to a
3847 county with a population of 250,000 or more; or
3948 (B) more than 100,000 and less than 150,000 and
4049 is not adjacent to a county with a population of 100,000 or more.
4150 Sec. 314A.003. LEGISLATIVE FINDINGS AND PURPOSES; GRANT OF
4251 ANTITRUST IMMUNITY. (a) The legislature finds that:
4352 (1) a merger among hospitals may benefit the public by
4453 maintaining or improving the quality, efficiency, and
4554 accessibility of health care services offered to the public; and
4655 (2) the benefits described by Subdivision (1)
4756 resulting from the merger may outweigh any anticompetitive effects
4857 of joining together competitors to address unique challenges in
4958 providing health care services in rural areas.
5059 (b) The legislature believes it is in the state's best
5160 interest to supplant state and federal antitrust laws with a
5261 process for regulatory approval and active supervision by the
5362 designated agency as provided by this chapter. It is the intent of
5463 the legislature that this chapter immunize from all federal and
5564 state antitrust laws the execution of merger agreements approved
5665 under this chapter and post-merger activities supervised under this
5766 chapter.
5867 (c) Nothing in this chapter affects antitrust immunity that
5968 may be provided through another provision of state law.
6069 Sec. 314A.004. DESIGNATION OF SUPERVISING STATE AGENCY.
6170 (a) The governor shall designate an appropriate state agency,
6271 other than the office of the attorney general, to:
6372 (1) review and approve or deny applications submitted
6473 under this chapter for certificates of public advantage; and
6574 (2) supervise as provided by Subchapter C the
6675 activities for which a certificate of public advantage is issued.
6776 (b) After the governor designates a state agency under
6877 Subsection (a), the governor may designate another appropriate
6978 state agency under that subsection at any time.
7079 (c) A change in the designation of a state agency made under
7180 this section does not affect the validity of any action taken under
7281 this chapter by a predecessor designated agency.
7382 Sec. 314A.005. RULEMAKING. The designated agency shall
7483 adopt rules for the administration and implementation of this
7584 chapter.
7685 SUBCHAPTER B. CERTIFICATE OF PUBLIC ADVANTAGE
7786 Sec. 314A.051. REVIEW AND CERTIFICATION OF MERGER
7887 AGREEMENTS REQUIRED. (a) Two or more hospitals may negotiate and
7988 enter into a merger agreement, subject to approval by the
8089 designated agency as provided by this subchapter.
8190 (b) No merger agreement shall receive immunity under this
8291 chapter unless the designated agency issues a certificate of public
8392 advantage governing the merger agreement.
8493 Sec. 314A.052. APPLICATION. (a) One or more parties to a
8594 merger agreement may submit an application to the designated agency
8695 for a certificate of public advantage governing the merger
8796 agreement. The application must include a written copy of the
8897 merger agreement and describe the nature and scope of the merger.
8998 (b) If an applicant believes the documents or other
9099 information required to be submitted with an application under
91100 Subsection (a) contains proprietary information that is required to
92101 remain confidential, the applicant shall:
93102 (1) clearly identify the information; and
94103 (2) submit duplicate applications, one application
95104 that has complete information for the designated agency's use and
96105 one redacted application that will be made available for public
97106 release.
98107 (c) A copy of the application and copies of all additional
99108 related materials must be submitted to the attorney general and to
100109 the designated agency at the same time.
101110 Sec. 314A.053. APPLICATION FEE. (a) The designated agency
102111 may assess a fee for filing an application under Section 314A.052 in
103112 an amount not to exceed $75,000. The amount of the fee must be
104113 sufficient to cover the reasonable costs of the designated agency
105114 and attorney general in reviewing and approving or denying
106115 applications under this subchapter.
107116 (b) Fees collected under this section may be appropriated to
108117 the designated agency for purposes of covering costs relating to
109118 the implementation and administration of this chapter, including
110119 the supervision of hospitals under this chapter.
111120 Sec. 314A.054. REVIEW OF APPLICATION BY DESIGNATED AGENCY;
112121 GRANT OR DENIAL OF APPLICATION. (a) The designated agency shall
113122 review an application for a certificate of public advantage in
114123 accordance with the standard prescribed by Section 314A.056(a)(1).
115124 (b) The designated agency shall grant or deny the
116125 application not later than the 120th day after the date of the
117126 filing of the application. The designated agency's decision must:
118127 (1) be in writing;
119128 (2) specify the basis for the decision; and
120129 (3) provide a copy of the decision to the applicants on
121130 the date of the decision.
122131 Sec. 314A.055. REVIEW OF APPLICATION BY ATTORNEY GENERAL.
123132 (a) The attorney general shall review an application for a
124133 certificate of public advantage and all supporting documents and
125134 information provided by the applicants. On completion of the
126135 review and subject to Subsection (b), the attorney general shall
127136 advise the designated agency whether:
128137 (1) the proposed merger agreement would likely benefit
129138 the public by maintaining or improving the quality, efficiency, and
130139 accessibility of health care services offered to the public; and
131140 (2) the likely benefits resulting from the proposed
132141 merger agreement outweigh any disadvantages attributable to a
133142 reduction in competition that may result from the proposed merger.
134143 (b) The attorney general shall review an application for a
135144 certificate of public advantage as soon as practicable, taking into
136145 consideration the deadline prescribed by Section 314A.054.
137146 (c) If the attorney general advises the designated agency to
138147 deny an application, the attorney general shall state the basis and
139148 reasons for the recommended denial.
140149 Sec. 314A.056. ISSUANCE OF CERTIFICATE OF PUBLIC ADVANTAGE.
141150 (a) The designated agency, after reviewing the application and
142151 consulting with the attorney general in accordance with Section
143152 314A.055, shall issue a certificate of public advantage for a
144153 merger agreement if:
145154 (1) the designated agency determines under the
146155 totality of the circumstances that:
147156 (A) the proposed merger would likely benefit the
148157 public by maintaining or improving the quality, efficiency, and
149158 accessibility of health care services offered to the public; and
150159 (B) the likely benefits resulting from the
151160 proposed merger agreement described by Paragraph (A) outweigh any
152161 disadvantages attributable to a reduction in competition that may
153162 result from the proposed merger; and
154163 (2) the application:
155164 (A) provides specific evidence showing that the
156165 proposed merger would likely benefit the public as described by
157166 Subdivision (1)(A);
158167 (B) explains in detail how the likely benefits
159168 resulting from the proposed merger agreement outweigh any
160169 disadvantages attributable to a reduction in competition as
161170 described by Subdivision (1)(B); and
162171 (C) sufficiently addresses the factors listed in
163172 Subsection (b) and any other factor the designated agency may
164173 require based on the circumstances specific to the application.
165174 (b) In making the determination under Subsection (a)(1),
166175 the designated agency shall consider the effect of the merger
167176 agreement on the following nonexclusive list of factors:
168177 (1) the quality and price of hospital and health care
169178 services provided to citizens of this state;
170179 (2) the preservation of sufficient hospitals within a
171180 geographic area to ensure public access to acute care;
172181 (3) the cost efficiency of services, resources, and
173182 equipment provided or used by the hospitals that are a party to the
174183 merger agreement;
175184 (4) the ability of health care payors to negotiate
176185 payment and service arrangements with hospitals proposed to be
177186 merged under the agreement; and
178187 (5) the extent of any reduction in competition among
179188 physicians, allied health professionals, other health care
180189 providers, or other persons providing goods or services to, or in
181190 competition with, hospitals.
182191 (c) The designated agency may include terms or conditions of
183192 compliance in connection with a certificate of public advantage
184193 issued under this subchapter if necessary to ensure that the
185194 proposed merger likely benefits the public as specified in
186195 Subsection (a)(1).
187196 Sec. 314A.057. RECORDS. The designated agency shall
188197 maintain records of all merger agreements the designated agency has
189198 approved under this chapter, including any terms or conditions of
190199 issuing a certificate of public advantage that are imposed by the
191200 designated agency.
192201 Sec. 314A.058. TERMINATION OF CERTIFICATE OF PUBLIC
193202 ADVANTAGE BY HOSPITAL. A hospital resulting from a merger
194203 agreement approved under this chapter may voluntarily terminate its
195204 certificate of public advantage by giving the designated agency
196205 notice at least 30 days before the date of the termination.
197206 Sec. 314A.059. ANNUAL REVIEW OF CERTIFICATE. (a) The
198207 designated agency shall annually review an approved certificate of
199208 public advantage.
200209 (b) The attorney general may annually review an approved
201210 certificate of public advantage.
202211 (c) The designated agency may not complete its annual review
203212 of an approved certificate of public advantage under this section
204213 until:
205214 (1) the attorney general informs the designated agency
206215 whether the attorney general intends to conduct any review of the
207216 certificate of public advantage as authorized under this section;
208217 and
209218 (2) if the attorney general informs the designated
210219 agency of the attorney general's intent to conduct a review of an
211220 entity's approved certificate of public advantage, the attorney
212221 general has had the opportunity to conduct the review.
213222 SUBCHAPTER C. SUPERVISION OF MERGED HOSPITALS UNDER APPROVED
214223 MERGER AGREEMENT
215224 Sec. 314A.101. SUPERVISION OF MERGED HOSPITALS. The
216225 designated agency shall supervise in the manner provided by this
217226 subchapter each hospital operating under a certificate of public
218227 advantage issued under this chapter to ensure that the immunized
219228 conduct of a merged entity furthers the purposes of this chapter.
220229 Sec. 314A.102. RATE REVIEW. (a) A change in rates for
221230 hospital services by a hospital operating under a certificate of
222231 public advantage issued under this chapter may not take effect
223232 without prior approval of the designated agency as provided by this
224233 section.
225234 (b) At least 90 days before the implementation of any
226235 proposed change in rates for inpatient or outpatient hospital
227236 services and, if applicable, at least 60 days before the execution
228237 of a reimbursement agreement with a third party payor, a hospital
229238 operating under a certificate of public advantage shall submit to
230239 the designated agency:
231240 (1) any proposed change in rates for inpatient and
232241 outpatient hospital services;
233242 (2) if applicable, any change in reimbursement rates
234243 under a reimbursement agreement with a third party payor;
235244 (3) for an agreement with a third party payor, other
236245 than an agreement described by Subdivision (4) or in which rates are
237246 set under the Medicare or Medicaid program, information showing:
238247 (A) that the hospital and the third party payor
239248 have agreed to the proposed rates;
240249 (B) whether the proposed rates are less than the
241250 corresponding amounts in the producer price index published by the
242251 Bureau of Labor Statistics of the United States Department of Labor
243252 relating to the hospital services for which the rates are proposed
244253 or a comparable price index chosen by the designated agency if the
245254 producer price index described by this paragraph is abolished; and
246255 (C) if the proposed rates are above the
247256 corresponding amounts in the producer price index as described by
248257 Paragraph (B), a justification for proposing rates above the
249258 corresponding amounts in the producer price index;
250259 (4) to the extent allowed by federal law, for an
251260 agreement with a managed care organization that provides or
252261 arranges for the provision of health care services under the
253262 Medicare or Medicaid program, information showing:
254263 (A) whether the proposed rates are different from
255264 rates under an agreement that was in effect before the date the
256265 applicable merger agreement took effect;
257266 (B) whether the proposed rates are different from
258267 the rates most recently approved by the designated agency for the
259268 applicable hospital, if the designated agency has previously
260269 approved rates for the applicable hospital following the issuance
261270 of the certificate of public advantage under this chapter that
262271 governs the hospital; and
263272 (C) if the proposed rates exceed rates described
264273 by Paragraph (A) or (B), a justification for proposing rates in
265274 excess of those rates; and
266275 (5) any information concerning costs, patient volume,
267276 acuity, payor mix, and other information requested by the
268277 designated agency.
269278 (c) After reviewing the proposed change in rates submitted
270279 under Subsection (b), the designated agency shall approve or deny
271280 the proposed rate change. The designated agency shall approve the
272281 proposed rate change if the designated agency determines that:
273282 (1) the proposed rate change likely benefits the
274283 public by maintaining or improving the quality, efficiency, and
275284 accessibility of health care services offered to the public; and
276285 (2) the proposed rate does not inappropriately exceed
277286 competitive rates for comparable services in the hospital's market
278287 area.
279288 (d) If the designated agency determines that the proposed
280289 rate change does not satisfy Subsection (c)(1) or (2), the
281290 designated agency shall deny or modify the proposed rate change.
282291 (e) The designated agency shall notify the hospital in
283292 writing of the agency's decision to approve, deny, or modify the
284293 proposed rate change not later than the 30th day before the
285294 implementation date of the proposed change.
286295 Sec. 314A.103. ANNUAL REPORT. Each hospital operating
287296 under a certificate of public advantage shall submit an annual
288297 report to the designated agency. The report must include:
289298 (1) information about the extent of the benefits
290299 attributable to the issuance of the certificate of public
291300 advantage;
292301 (2) if applicable, information about the hospital's
293302 actions taken:
294303 (A) in furtherance of any commitments made by the
295304 parties to the merger; or
296305 (B) to comply with terms imposed by the
297306 designated agency as a condition for approval of the merger
298307 agreement;
299308 (3) a description of the activities conducted by the
300309 hospital under the merger agreement;
301310 (4) information relating to the price, cost, and
302311 quality of and access to health care for the population served by
303312 the hospital; and
304313 (5) any other information required by the designated
305314 agency to ensure compliance with this chapter, including
306315 information relating to compliance with any terms or conditions for
307316 issuance of the certificate of public advantage.
308317 Sec. 314A.104. CORRECTIVE ACTION PLAN. (a) The designated
309318 agency shall require a hospital operating under a certificate of
310319 public advantage to adopt a plan to correct a deficiency in the
311320 hospital's activities if the designated agency determines that an
312321 activity of the hospital:
313322 (1) does not benefit the public as described by
314323 Section 314A.056(a)(1)(A); or
315324 (2) no longer meets the standard prescribed by Section
316325 314A.056(a)(1).
317326 (b) The corrective action plan must include each provision
318327 required by the designated agency and must be submitted at the
319328 agency's direction.
320329 Sec. 314A.105. SUPERVISION FEE. (a) The designated agency
321330 may assess an annual supervision fee in an amount that is at least
322331 $75,000 but not more than $200,000 against each hospital operating
323332 under a certificate of public advantage under this chapter. The
324333 amount of the fee imposed on hospitals under this subsection must be
325334 based on the assessment by the designated agency of the amount
326335 needed to cover the reasonable costs incurred by the designated
327336 agency in supervising hospitals under this subchapter and in
328337 implementing and administering this chapter.
329338 (b) Fees collected under this section may be appropriated to
330339 the designated agency for purposes of covering costs relating to
331340 the implementation and administration of this chapter, including
332341 the supervision of hospitals under this chapter.
333342 SUBCHAPTER D. ENFORCEMENT AUTHORITY BY DESIGNATED AGENCY
334343 Sec. 314A.151. INVESTIGATION; REVOCATION OF CERTIFICATE.
335344 With respect to each hospital resulting from a merger agreement for
336345 which the designated agency issued a certificate of public
337346 advantage under this chapter, and to ensure that the hospital's
338347 activities continue to benefit the public under the standard
339348 prescribed by Section 314A.056(a)(1) and the purposes of this
340349 chapter, the designated agency may:
341350 (1) investigate the hospital's activities; and
342351 (2) require the hospital to perform a certain action
343352 or refrain from a certain action or revoke the hospital's
344353 certificate of public advantage, if the designated agency
345354 determines that:
346355 (A) the hospital is not complying with this
347356 chapter or a term or condition of compliance with the certificate of
348357 public advantage governing the hospital's immunized activities;
349358 (B) the designated agency's approval and
350359 issuance of the certificate of public advantage was obtained as a
351360 result of material misrepresentation;
352361 (C) the hospital has failed to pay any fee
353362 required under this chapter; or
354363 (D) the benefits resulting from the approved
355364 merger no longer outweigh the disadvantages attributable to the
356365 reduction in competition resulting from the approved merger.
357366 Sec. 314A.152. JUDICIAL REVIEW OF DESIGNATED AGENCY ACTION.
358367 (a) A person aggrieved by a decision of the designated agency in
359368 granting, denying, or refusing to act on an application for a
360369 certificate of public advantage submitted under Subchapter B or
361370 revoking a certificate of public advantage issued under this
362371 chapter may appeal the final order by filing a petition for judicial
363372 review in a district court of Travis County.
364373 (b) The filing of a petition for judicial review of a
365374 decision by the designated agency to revoke a certificate of public
366375 advantage stays enforcement of the agency's decision.
367376 (c) Not later than the 45th day after the date a person files
368377 a petition for judicial review under this section, the designated
369378 agency shall submit to the district court the original copy or a
370379 certified copy of the entirety of the agency's record regarding the
371380 decision under review. By stipulation of all parties, the record
372381 may be shortened. The district court may require or permit later
373382 corrections or additions to the record. The district court may
374383 extend the period prescribed by this subsection for submitting the
375384 agency's record to the court.
376385 (d) The district court shall conduct the review sitting
377386 without a jury.
378387 (e) The district court may reverse a decision by the
379388 designated agency regarding revocation of a certificate of public
380389 advantage if the court finds that the decision is:
381390 (1) in violation of a constitutional or statutory
382391 provision;
383392 (2) in excess of the agency's statutory authority;
384393 (3) made through unlawful procedure;
385394 (4) arbitrary or capricious or characterized by abuse
386395 of discretion or clearly unwarranted exercise of discretion; or
387396 (5) unsupported by substantial and material evidence
388397 in light of the record as a whole.
389398 (f) Under Subsection (e)(5), in determining the
390399 substantiality of the evidence, the district court:
391400 (1) shall consider other evidence that detracts from
392401 the substantiality; and
393402 (2) may not substitute its judgment for the judgment
394403 of the designated agency on the weight of the evidence as to a
395404 question of fact.
396405 (g) The district court shall issue a written decision
397406 setting forth the court's findings of fact and conclusions of law.
398407 The designated agency shall add the court's decision to the agency's
399408 record.
400409 SUBCHAPTER E. ATTORNEY GENERAL INVESTIGATION AND ENFORCEMENT
401410 AUTHORITY
402411 Sec. 314A.201. CIVIL INVESTIGATIVE DEMAND. (a) The
403412 attorney general, at any time after an application is filed under
404413 Section 314A.052 and before the designated agency makes a
405414 determination on the application, or in connection with the
406415 agency's annual review of a certificate of public advantage under
407416 Section 314A.059, may require by civil investigative demand the
408417 attendance and testimony of witnesses and the production of
409418 documents in Travis County or the county in which the applicants are
410419 located for the purpose of investigating whether the merger
411420 agreement satisfies or, after issuance of the certificate of public
412421 advantage, continues to satisfy the standard prescribed by Section
413422 314A.056(a)(1).
414423 (b) All nonpublic documents produced for and testimony
415424 given to the attorney general under Subsection (a) are subject to
416425 the prohibitions on disclosure and use under Section 15.10(i),
417426 Business & Commerce Code.
418427 (c) The attorney general may seek an order from the district
419428 court compelling compliance with a civil investigative demand
420429 issued under this section.
421430 Sec. 314A.202. ACTION TO REVOKE CERTIFICATE OF PUBLIC
422431 ADVANTAGE FOLLOWING CHANGED CIRCUMSTANCES. (a) If, following an
423432 annual review of a certificate of public advantage, the attorney
424433 general determines that as a result of changed circumstances the
425434 benefits resulting from a certified merger agreement as described
426435 by Section 314A.056(a)(1)(A) no longer outweigh any disadvantages
427436 attributable to a reduction in competition resulting from the
428437 merger agreement, the attorney general may bring an action in a
429438 district court in Travis County seeking to revoke the certificate
430439 of public advantage in accordance with the procedures prescribed by
431440 this section.
432441 (b) Except as provided by Subsection (c), in an action
433442 brought under this section, the attorney general has the burden of
434443 establishing by clear and convincing evidence that as a result of
435444 changed circumstances the benefits resulting from the certified
436445 merger agreement and the unavoidable costs of revoking the
437446 certificate of public advantage are outweighed by disadvantages
438447 attributable to a reduction in competition resulting from the
439448 merger agreement.
440449 (c) In any action brought under this section, if the
441450 attorney general first establishes by clear and convincing evidence
442451 that the designated agency's certification was obtained as a result
443452 of material misrepresentation to the designated agency or the
444453 attorney general or as the result of coercion, threats, or
445454 intimidation directed toward any party to the merger agreement,
446455 then the parties to the merger agreement bear the burden of
447456 establishing by clear and convincing evidence that despite changed
448457 circumstances the benefits resulting from the certified merger
449458 agreement and the unavoidable costs of revoking the certificate of
450459 public advantage are not outweighed by disadvantages attributable
451460 to a reduction in competition resulting from the merger agreement.
452461 SECTION 2. As soon as practicable after the effective date
453462 of this Act, the governor shall designate a state agency under
454463 Section 314A.004, Health and Safety Code, as added by this Act.
455464 SECTION 3. This Act takes effect September 1, 2019.
456- ______________________________ ______________________________
457- President of the Senate Speaker of the House
458- I certify that H.B. No. 3301 was passed by the House on May 9,
459- 2019, by the following vote: Yeas 133, Nays 4, 2 present, not
460- voting; and that the House concurred in Senate amendments to H.B.
461- No. 3301 on May 24, 2019, by the following vote: Yeas 134, Nays 6,
462- 2 present, not voting.
463- ______________________________
464- Chief Clerk of the House
465- I certify that H.B. No. 3301 was passed by the Senate, with
466- amendments, on May 21, 2019, by the following vote: Yeas 31, Nays
467- 0.
468- ______________________________
469- Secretary of the Senate
470- APPROVED: __________________
471- Date
472- __________________
473- Governor
465+ * * * * *