86R16271 JCG-F
By: Perry S.B. No. 1529
A BILL TO BE ENTITLED
AN ACT
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.