Texas 2019 - 86th Regular

Texas Senate Bill SB1529 Compare Versions

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1	1	86R16271 JCG-F
2	2	By: Perry S.B. No. 1529
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to merger agreements among certain hospitals; imposing
8	8	fees.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Subtitle F, Title 4, Health and Safety Code, is
11	11	amended by adding Chapter 314A to read as follows:
12	12	CHAPTER 314A. MERGER AGREEMENTS AMONG CERTAIN HOSPITALS
13	13	SUBCHAPTER A. GENERAL PROVISIONS
14	14	Sec. 314A.001. DEFINITIONS. In this chapter:
15	15	(1) "Attorney general" means the attorney general of
16	16	Texas or any assistant attorney general acting under the direction
17	17	of the attorney general of Texas.
18	18	(2) "Commission" means the Health and Human Services
19	19	Commission.
20	20	(3) "Executive commissioner" means the executive
21	21	commissioner of the Health and Human Services Commission.
22	22	(4) "Hospital" means a nonpublic general or special
23	23	hospital licensed under Chapter 241 or a private mental hospital
24	24	licensed under Chapter 577.
25	25	(5) "Merger agreement" or "merger" means an agreement
26	26	among two or more hospitals for the consolidation by merger or other
27	27	acquisition or transfer of assets by which ownership or control
28	28	over substantially all of the stock, assets, or activities of one or
29	29	more previously licensed and operating hospitals is placed under
30	30	the control of another licensed hospital or hospitals or another
31	31	entity that controls the hospitals.
32	32	Sec. 314A.002. APPLICABILITY. This chapter applies only to
33	33	a merger agreement among hospitals located within a county that:
34	34	(1) contains two or more hospitals; and
35	35	(2) has a population of:
36	36	(A) less than 100,000 and is not adjacent to a
37	37	county with a population of 250,000 or more; or
38	38	(B) more than 100,000 and less than 150,000 and
39	39	is not adjacent to a county with a population of 100,000 or more.
40	40	Sec. 314A.003. LEGISLATIVE FINDINGS AND PURPOSES; OTHER LAW
41	41	NOT AFFECTED. (a) The legislature finds that:
42	42	(1) a merger among hospitals may benefit the public by
43	43	maintaining or improving:
44	44	(A) the quality, efficiency, and accessibility
45	45	of health care services offered to the public; and
46	46	(B) the ability of hospital administrators to
47	47	operate health care facilities and take measures to improve public
48	48	health; and
49	49	(2) a merger among hospitals may provide the benefits
50	50	described by Subdivision (1) despite that it may be anticompetitive
51	51	within the meaning and intent of state and federal antitrust laws.
52	52	(b) The legislature believes it is in the state's best
53	53	interest to supplant state and federal antitrust laws with a
54	54	process for regulatory approval and active supervision by the
55	55	commission as provided by this chapter.
56	56	(c) Nothing in this chapter affects antitrust immunity that
57	57	may be provided through another provision of state law.
58	58	Sec. 314A.004. RULEMAKING. The executive commissioner
59	59	shall adopt rules for the administration and implementation of this
60	60	chapter by the commission.
61	61	SUBCHAPTER B. CERTIFICATE OF PUBLIC ADVANTAGE
62	62	Sec. 314A.051. REVIEW AND CERTIFICATION OF MERGER
63	63	AGREEMENTS REQUIRED. (a) Two or more hospitals may negotiate and
64	64	enter into a merger agreement, subject to approval by the
65	65	commission as provided by this subchapter.
66	66	(b) No merger agreement shall receive immunity under this
67	67	chapter unless the commission issues a certificate of public
68	68	advantage governing the merger agreement.
69	69	Sec. 314A.052. APPLICATION. (a) One or more parties to a
70	70	merger agreement may submit an application to the commission for a
71	71	certificate of public advantage governing the merger agreement.
72	72	The application must include a written copy of the merger agreement
73	73	and describe the nature and scope of the merger.
74	74	(b) If an applicant believes the documents or other
75	75	information required to be submitted with an application under
76	76	Subsection (a) contains proprietary information that is required to
77	77	remain confidential, the applicant shall:
78	78	(1) clearly identify the information; and
79	79	(2) submit duplicate applications, one application
80	80	that has complete information for the commission's use and one
81	81	redacted application that will be made available for public
82	82	release.
83	83	(c) A copy of the application and copies of all additional
84	84	related materials must be submitted to the attorney general and to
85	85	the commission at the same time.
86	86	Sec. 314A.053. APPLICATION FEE. The commission may assess
87	87	a fee for filing an application under Section 314A.052 in an amount
88	88	not to exceed $75,000. The amount of the fee must be sufficient to
89	89	cover the reasonable costs of the commission and attorney general
90	90	in reviewing and approving or denying applications under this
91	91	subchapter.
92	92	Sec. 314A.054. REVIEW OF APPLICATION BY COMMISSION; GRANT
93	93	OR DENIAL OF APPLICATION. (a) The commission shall review an
94	94	application for a certificate of public advantage in accordance
95	95	with the standard prescribed by Section 314A.056(a).
96	96	(b) The commission shall grant or deny the application not
97	97	later than the 120th day after the date of the filing of the
98	98	application. The commission's decision must:
99	99	(1) be in writing;
100	100	(2) specify the basis for the decision; and
101	101	(3) provide a copy of the decision to the applicants on
102	102	the date of the decision.
103	103	Sec. 314A.055. REVIEW OF APPLICATION BY ATTORNEY GENERAL.
104	104	(a) The attorney general shall review an application for a
105	105	certificate of public advantage and all supporting documents and
106	106	information provided by the applicants. On completion of the
107	107	review and subject to Subsection (b), the attorney general shall
108	108	advise the commission whether the proposed merger agreement would
109	109	likely benefit the public and meet the standard prescribed by
110	110	Section 314A.056(a).
111	111	(b) The attorney general shall review an application for a
112	112	certificate of public advantage as soon as practicable, taking into
113	113	consideration the deadline prescribed by Section 314A.054.
114	114	(c) If the attorney general advises the commission to deny
115	115	an application, the attorney general shall state the basis and
116	116	reasons for the recommended denial.
117	117	Sec. 314A.056. ISSUANCE OF CERTIFICATE OF PUBLIC ADVANTAGE.
118	118	(a) The commission, after reviewing the application and consulting
119	119	with the attorney general in accordance with Section 314A.055,
120	120	shall issue a certificate of public advantage for a merger
121	121	agreement if the commission determines under the totality of the
122	122	circumstances that:
123	123	(1) the proposed merger would likely benefit the
124	124	public by maintaining or improving:
125	125	(A) the quality, efficiency, and accessibility
126	126	of health care services offered to the public; and
127	127	(B) the ability of hospital administrators to
128	128	operate health care facilities and take measures to improve public
129	129	health; and
130	130	(2) the likely benefits resulting from the proposed
131	131	merger agreement described by Subdivision (1) outweigh any
132	132	disadvantages attributable to a reduction in competition that may
133	133	result from the proposed merger.
134	134	(b) In making the determination under Subsection (a), the
135	135	commission shall consider the effect of the merger agreement on the
136	136	following nonexclusive list of factors:
137	137	(1) the quality and price of hospital and health care
138	138	services provided to citizens of this state;
139	139	(2) the preservation of sufficient hospitals within a
140	140	geographic area to ensure public access to acute care;
141	141	(3) the cost efficiency of services, resources, and
142	142	equipment provided or used by the hospitals that are a party to the
143	143	merger agreement;
144	144	(4) the ability of health care payors to negotiate
145	145	payment and service arrangements with hospitals proposed to be
146	146	merged under the agreement; and
147	147	(5) the extent of any reduction in competition among
148	148	physicians, allied health professionals, other health care
149	149	providers, or other persons providing goods or services to, or in
150	150	competition with, hospitals.
151	151	(c) The commission may include terms or conditions of
152	152	compliance in connection with a certificate of public advantage
153	153	issued under this subchapter if necessary to ensure that the
154	154	proposed merger likely benefits the public as specified in
155	155	Subsections (a)(1) and (2).
156	156	Sec. 314A.057. RECORDS. The commission shall maintain
157	157	records of all merger agreements the commission has approved under
158	158	this chapter, including any terms or conditions of issuing a
159	159	certificate of public advantage that are imposed by the commission.
160	160	Sec. 314A.058. TERMINATION OF CERTIFICATE OF PUBLIC
161	161	ADVANTAGE BY HOSPITAL. A hospital resulting from a merger
162	162	agreement approved under this chapter may voluntarily terminate its
163	163	certificate of public advantage by giving the commission notice at
164	164	least 30 days before the date of the termination.
165	165	Sec. 314A.059. ANNUAL REVIEW OF CERTIFICATE. (a) The
166	166	commission shall annually review an approved certificate of public
167	167	advantage.
168	168	(b) The attorney general may annually review an approved
169	169	certificate of public advantage.
170	170	(c) The commission may not complete its annual review of an
171	171	approved certificate of public advantage under this section until:
172	172	(1) the attorney general informs the commission
173	173	whether the attorney general intends to conduct any review of the
174	174	certificate of public advantage as authorized under this section;
175	175	and
176	176	(2) if the attorney general informs the commission of
177	177	the attorney general's intent to conduct a review of an entity's
178	178	approved certificate of public advantage, the attorney general has
179	179	had the opportunity to conduct the review.
180	180	SUBCHAPTER C. SUPERVISION OF MERGED HOSPITALS UNDER APPROVED
181	181	MERGER AGREEMENT
182	182	Sec. 314A.101. SUPERVISION OF MERGED HOSPITALS. The
183	183	commission shall supervise in the manner provided by this
184	184	subchapter each hospital operating under a certificate of public
185	185	advantage issued under this chapter to ensure that the immunized
186	186	conduct of a merged entity furthers the purposes of this chapter.
187	187	Sec. 314A.102. RATE REVIEW. (a) An increase in rates for
188	188	hospital services by a hospital operating under a certificate of
189	189	public advantage issued under this chapter may not take effect
190	190	without prior approval of the commission as provided by this
191	191	section.
192	192	(b) At least 90 days before the implementation of any
193	193	proposed increase in rates for inpatient or outpatient hospital
194	194	services and, if applicable, at least 60 days before the execution
195	195	of a reimbursement agreement with a third party payor, a hospital
196	196	operating under a certificate of public advantage shall submit to
197	197	the commission:
198	198	(1) any proposed increase in rates for inpatient and
199	199	outpatient hospital services;
200	200	(2) if applicable, any increase in reimbursement rates
201	201	under a reimbursement agreement with a third party payor; and
202	202	(3) any information concerning costs, patient volume,
203	203	acuity, payor mix, and other information requested by the
204	204	commission.
205	205	(c) After reviewing the proposed increase in rates
206	206	submitted under Subsection (b), the commission shall approve or
207	207	deny the proposed rate increase. The commission shall approve the
208	208	proposed rate increase if the commission determines that:
209	209	(1) the proposed rate increase likely benefits the
210	210	public by maintaining or improving:
211	211	(A) the quality, efficiency, and accessibility
212	212	of health care services offered to the public; and
213	213	(B) the ability of hospital administrators to
214	214	operate health care facilities and take measures to improve public
215	215	health; and
216	216	(2) the proposed rate does not inappropriately exceed
217	217	competitive rates for comparable services in the hospital's market
218	218	area.
219	219	(d) If the commission determines that the proposed rate
220	220	inappropriately exceeds competitive rates for comparable services
221	221	in the hospital's market area, and that the proposed rate is
222	222	inconsistent with the standard prescribed by Section 314A.056(a),
223	223	the commission shall deny or modify the proposed rate increase.
224	224	(e) The commission shall notify the hospital in writing of
225	225	the commission's decision to approve, deny, or modify the proposed
226	226	rate increase not later than the 30th day before the implementation
227	227	date of the proposed increase.
228	228	Sec. 314A.103. ANNUAL REPORT. Each hospital operating
229	229	under a certificate of public advantage shall submit an annual
230	230	report to the commission. The report must include:
231	231	(1) information about the extent of the benefits
232	232	attributable to the issuance of the certificate of public
233	233	advantage;
234	234	(2) if applicable, information about the hospital's
235	235	actions taken:
236	236	(A) in furtherance of any commitments made by the
237	237	parties to the merger; or
238	238	(B) to comply with terms imposed by the
239	239	commission as a condition for approval of the merger agreement;
240	240	(3) a description of the activities conducted by the
241	241	hospital under the merger agreement;
242	242	(4) information relating to the price, cost, and
243	243	quality of and access to health care for the population served by
244	244	the hospital and the health improvements of that population; and
245	245	(5) any other information required by the commission
246	246	to ensure compliance with this chapter, including information
247	247	relating to compliance with any terms or conditions for issuance of
248	248	the certificate of public advantage.
249	249	Sec. 314A.104. CORRECTIVE ACTION PLAN. (a) The commission
250	250	shall require a hospital operating under a certificate of public
251	251	advantage to adopt a plan to correct a deficiency in the hospital's
252	252	activities if the commission determines that an activity of the
253	253	hospital does not benefit the public as described by Section
254	254	314A.056(a) and no longer meets the standard prescribed by that
255	255	subsection.
256	256	(b) The corrective action plan must include each provision
257	257	required by the commission and must be submitted at the
258	258	commission's direction.
259	259	Sec. 314A.105. SUPERVISION FEE. The commission may assess
260	260	an annual supervision fee in an amount not to exceed $75,000 against
261	261	each hospital operating under a certificate of public advantage
262	262	under this chapter. The amount of the fee must be sufficient to
263	263	cover the reasonable costs incurred by the commission in
264	264	supervising hospitals under this subchapter and in implementing and
265	265	administering this chapter.
266	266	SUBCHAPTER D. ENFORCEMENT AUTHORITY BY COMMISSION
267	267	Sec. 314A.151. INVESTIGATION; REVOCATION OF CERTIFICATE.
268	268	With respect to each hospital resulting from a merger agreement for
269	269	which the commission issued a certificate of public advantage under
270	270	this chapter, and to ensure that the hospital's activities continue
271	271	to benefit the public under the standard prescribed by Section
272	272	314A.056(a) and the purposes of this chapter, the executive
273	273	commissioner may:
274	274	(1) investigate the hospital's activities; and
275	275	(2) require the hospital to perform a certain action
276	276	or refrain from a certain action or revoke the hospital's
277	277	certificate of public advantage, if the commission determines that:
278	278	(A) the hospital is not complying with this
279	279	chapter or a term or condition of compliance with the certificate of
280	280	public advantage governing the hospital's immunized activities;
281	281	(B) the commission's approval and issuance of the
282	282	certificate of public advantage was obtained as a result of
283	283	material misrepresentation;
284	284	(C) the hospital has failed to pay any fee
285	285	required under this chapter; or
286	286	(D) the benefits resulting from the approved
287	287	merger no longer outweigh the disadvantages attributable to the
288	288	reduction in competition resulting from the approved merger.
289	289	Sec. 314A.152. JUDICIAL REVIEW OF COMMISSION ACTION. (a) A
290	290	person aggrieved by a decision of the commission in granting,
291	291	denying, or refusing to act on an application for a certificate of
292	292	public advantage submitted under Subchapter B or revoking a
293	293	certificate of public advantage issued under this chapter may
294	294	appeal the final order by filing a petition for judicial review in a
295	295	district court of Travis County.
296	296	(b) The filing of a petition for judicial review of a
297	297	decision by the commission to revoke a certificate of public
298	298	advantage stays enforcement of the commission's decision.
299	299	(c) Not later than the 45th day after the date a person files
300	300	a petition for judicial review under this section, the commission
301	301	shall submit to the district court the original copy or a certified
302	302	copy of the entirety of the commission's record regarding the
303	303	decision under review. By stipulation of all parties, the record
304	304	may be shortened. The district court may require or permit later
305	305	corrections or additions to the record. The district court may
306	306	extend the period prescribed by this subsection for submitting the
307	307	commission's record to the court.
308	308	(d) The district court shall conduct the review sitting
309	309	without a jury.
310	310	(e) The district court may reverse a decision by the
311	311	commission regarding revocation of a certificate of public
312	312	advantage if the court finds that the decision is:
313	313	(1) in violation of a constitutional or statutory
314	314	provision;
315	315	(2) in excess of the commission's statutory authority;
316	316	(3) made through unlawful procedure;
317	317	(4) arbitrary or capricious or characterized by abuse
318	318	of discretion or clearly unwarranted exercise of discretion; or
319	319	(5) unsupported by substantial and material evidence
320	320	in light of the record as a whole.
321	321	(f) Under Subsection (e)(5), in determining the
322	322	substantiality of the evidence, the district court:
323	323	(1) shall consider other evidence that detracts from
324	324	the substantiality; and
325	325	(2) may not substitute its judgment for the judgment
326	326	of the commission on the weight of the evidence as to a question of
327	327	fact.
328	328	(g) The district court shall issue a written decision
329	329	setting forth the court's findings of fact and conclusions of law.
330	330	The commission shall add the court's decision to the commission's
331	331	record.
332	332	SUBCHAPTER E. ATTORNEY GENERAL INVESTIGATION AND ENFORCEMENT
333	333	AUTHORITY
334	334	Sec. 314A.201. CIVIL INVESTIGATIVE DEMAND. (a) The
335	335	attorney general, at any time after an application is filed under
336	336	Section 314A.052 and before the commission makes a determination on
337	337	the application, or in connection with the commission's annual
338	338	review of a certificate of public advantage under Section 314A.059,
339	339	may require by civil investigative demand the attendance and
340	340	testimony of witnesses and the production of documents in Travis
341	341	County or the county in which the applicants are located for the
342	342	purpose of investigating whether the merger agreement satisfies or,
343	343	after issuance of the certificate of public advantage, continues to
344	344	satisfy the standard prescribed by Section 314A.056(a).
345	345	(b) All nonpublic documents produced for and testimony
346	346	given to the attorney general under Subsection (a) are subject to
347	347	the prohibitions on disclosure and use under Section 15.10(i),
348	348	Business & Commerce Code.
349	349	(c) The attorney general may seek an order from the district
350	350	court compelling compliance with a civil investigative demand
351	351	issued under this section.
352	352	Sec. 314A.202. ACTION TO REVOKE CERTIFICATE OF PUBLIC
353	353	ADVANTAGE FOLLOWING CHANGED CIRCUMSTANCES. (a) If, following an
354	354	annual review of a certificate of public advantage, the attorney
355	355	general determines that as a result of changed circumstances the
356	356	benefits resulting from a certified merger agreement as described
357	357	by Section 314A.056(a) no longer outweigh any disadvantages
358	358	attributable to a reduction in competition resulting from the
359	359	merger agreement, the attorney general may bring an action in a
360	360	district court in Travis County seeking to revoke the certificate
361	361	of public advantage in accordance with the procedures prescribed by
362	362	this section.
363	363	(b) Except as provided by Subsection (c), in an action
364	364	brought under this section, the attorney general has the burden of
365	365	establishing by clear and convincing evidence that as a result of
366	366	changed circumstances the benefits resulting from the certified
367	367	merger agreement and the unavoidable costs of revoking the
368	368	certificate of public advantage are outweighed by disadvantages
369	369	attributable to a reduction in competition resulting from the
370	370	merger agreement.
371	371	(c) In any action brought under this section, if the
372	372	attorney general first establishes by clear and convincing evidence
373	373	that the commission's certification was obtained as a result of
374	374	material misrepresentation to the commission or the attorney
375	375	general or as the result of coercion, threats, or intimidation
376	376	directed toward any party to the merger agreement, then the parties
377	377	to the merger agreement bear the burden of establishing by clear and
378	378	convincing evidence that despite changed circumstances the
379	379	benefits resulting from the certified merger agreement and the
380	380	unavoidable costs of revoking the certificate of public advantage
381	381	are not outweighed by disadvantages attributable to a reduction in
382	382	competition resulting from the merger agreement.
383	383	SECTION 2. This Act takes effect September 1, 2019.