89R8830 LRM-F
By: Dean H.B. No. 4408
A BILL TO BE ENTITLED
AN ACT
relating to required reporting of information on the ownership and
control of certain health care entities; providing a civil penalty;
authorizing a fee.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle I, Title 4, Government Code, as
effective April 1, 2025, is amended by adding Chapter 550A to read
as follows:
CHAPTER 550A. REQUIRED REPORTING ON OWNERSHIP AND CONTROL OF
HEALTH CARE ENTITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 550A.0001. DEFINITIONS. In this chapter:
(1) "Health care entity" means a health care provider,
health care facility, provider organization, pharmacy benefit
manager, or health carrier that offers a health benefit plan in this
state.
(2) "Health care facility" means a facility licensed
to provide health care services, including:
(A) a hospital or other inpatient facility for
providing health care services;
(B) a health system consisting of jointly owned
or managed health care entities;
(C) a skilled nursing facility licensed under
Chapter 242, Health and Safety Code;
(D) an ambulatory surgical center licensed under
Chapter 243, Health and Safety Code;
(E) a freestanding emergency medical care
facility licensed under Chapter 254, Health and Safety Code;
(F) a general residential operation licensed
under Chapter 42, Human Resources Code, that provides treatment
services;
(G) a diagnostic, laboratory, or imaging center;
(H) an outpatient clinic licensed in this state
to provide health care services; or
(I) a rehabilitation center or other therapeutic
center licensed in this state to provide health care services.
(3) "Health care provider" means an individual
qualified or licensed to perform or provide health care services in
this state.
(4) "Health care services" means:
(A) services provided for the care, prevention,
diagnosis, treatment, cure, or relief of a medical, dental, or
behavioral health condition, including:
(i) inpatient, outpatient, habilitative,
rehabilitative, dental, palliative, therapeutic, supportive, home
health, or behavioral services provided by a health care entity;
(ii) retail and specialty pharmacy
services, including drugs, devices, and medical supplies provided
by a pharmacy; and
(iii) performance of functions to refer,
arrange, or coordinate health care services;
(B) equipment used to provide services described
by Paragraph (A), including durable medical equipment and
diagnostic, infusion, and surgical devices; and
(C) technology associated with the provision of
services and equipment described by Paragraphs (A) and (B),
including telehealth services, telemedicine medical services,
electronic health records, software, claims processors, and
utilization systems.
(5) "Health carrier" has the meaning assigned by
Section 1507.002, Insurance Code.
(6) "Management services organization" means an
organization or entity that contracts with a health care provider
or provider organization to perform management or administrative
services relating to, supporting, or facilitating the provision of
health care services.
(7) "Material change transaction" means a transaction
that entails a material change to ownership, operations, or
governance structure involving health plans, health insurers,
hospitals or hospital systems, physician organizations, health
care providers, health care facilities, pharmacy benefit managers,
and other health care entities.
(8) "Pharmacy benefit manager" has the meaning
assigned by Section 4151.151, Insurance Code.
(9) "Provider organization" means an incorporated or
unincorporated corporation, partnership, business trust,
association, or organized group of persons that is in the business
of health care service delivery or management and that represents
at least one health care provider in contracting with a health
carrier for the payment of health care services. The term includes
a physician organization, physician-hospital organization,
independent practice association, provider network, accountable
care organization, management services organization, or other
organization that contracts with a health carrier for the payment
of health care services.
Sec. 550A.0002. APPLICABILITY OF CHAPTER TO MATERIAL CHANGE
TRANSACTIONS; EXCEPTIONS. (a) This chapter applies to a material
change transaction, whether occurring as a single transaction or a
series of related transactions within a consecutive five-year
period, involving a health care entity in this state that has:
(1) a total of assets and annual revenue, including
in-state and out-of-state assets and revenue, in an amount equal to
at least $10 million; or
(2) for a new health care entity, anticipated annual
revenue in an amount equal to at least $10 million, including
in-state and out-of-state revenue.
(b) This chapter applies to the following material change
transactions:
(1) a corporate merger that includes one or more
health care entities;
(2) an acquisition of one or more health care
entities, including insolvent health care entities;
(3) a contract resulting in a health care entity's
change of control;
(4) the formation of a partnership, joint venture,
accountable care organization, parent organization, or management
services organization for the purpose of administering contracts
with health carriers, third-party administrators, pharmacy benefit
managers, or health care providers;
(5) the sale, purchase, lease, affiliation, or
transfer of control of a health care entity's board of directors or
governing body;
(6) a real estate sale or lease agreement involving a
material amount of health care entity assets; or
(7) as determined by rules adopted by the secretary of
state:
(A) the closure of a health care facility;
(B) the significant reduction or discontinuation
of any essential health care service provided by a provider
organization or health care facility; or
(C) any clinical or contractual affiliations
that would eliminate or significantly reduce essential health care
services.
(c) This chapter does not apply to the following:
(1) a clinical affiliation of health care entities
formed solely to collaborate on clinical trials;
(2) a graduate medical education program;
(3) an offer of employment to, or the hiring of, not
more than one physician; or
(4) a transaction, including a corporate
restructuring, in which a health care entity directly, or
indirectly through one or more intermediaries, currently controls,
is controlled by, or is under common control with, all other parties
to the transaction.
Sec. 550A.0003. CONTROL; CHANGE OF CONTROL. (a) A person
is considered to have control of a health care entity if the person,
directly or indirectly, through ownership, contractual agreement,
or otherwise, has the ability to:
(1) vote more than 10 percent of any class of voting
shares of the health care entity; or
(2) direct the actions or policies of the health care
entity.
(b) A change of control of a health care entity requires a
contract or arrangement in which another person acquires direct or
indirect control over the operations of a health care entity wholly
or in substantial part.
SUBCHAPTER B. TRANSPARENCY REPORTING IN OWNERSHIP AND
CONTROL OF HEALTH CARE ENTITIES
Sec. 550A.0101. REQUIRED INFORMATION REGARDING OWNERSHIP
AND CONTROL OF HEALTH CARE ENTITIES. Except as provided by Section
550A.0102, each health care entity shall report to the secretary of
state annually and on the execution of a material change
transaction, in the form and manner the secretary of state
requires, the following information:
(1) the legal name of the health care entity;
(2) the business address of the health care entity;
(3) the locations of the health care entity's
operations;
(4) the applicable business identification numbers of
the health care entity, including:
(A) the taxpayer identification number;
(B) the national provider identifier number;
(C) the employer identification number;
(D) the Centers for Medicare and Medicaid
Services certification number;
(E) the national association of insurance
commissioners identification number;
(F) a personal identification number associated
with a license issued by the Texas Department of Insurance; and
(G) the pharmacy benefit manager identification
number associated with a license or registration of the pharmacy
benefit manager in this state;
(5) the name and contact information of a
representative of the health care entity;
(6) the name, business address, and business
identification numbers described by Subdivision (4) for each person
that, with respect to the relevant health care entity:
(A) has an ownership or investment interest;
(B) has a controlling interest;
(C) is a management services organization; or
(D) is a significant equity investor, including:
(i) a private equity fund or other investor
with direct or indirect ownership of a health care entity or
provider;
(ii) an investor with direct or indirect
possession of equity totaling more than 10 percent of a provider's
organization; or
(iii) a private equity fund or investor
that operates a health care entity under a lease, management, or
operating agreement;
(7) a current organizational chart showing the
business structure of the health care entity, including:
(A) any person described by Subdivision (6);
(B) each affiliate of the health care entity; and
(C) each subsidiary of the health care entity;
(8) for a health care entity that is a provider
organization or a health care facility the following information
regarding each health care provider affiliated with the provider
organization or health care facility:
(A) the name, license type, specialty, national
provider identifier number, and other applicable identification
numbers described by Subdivision (4) applicable to the health care
provider;
(B) the address of the health care provider's
principal practice location; and
(C) whether the health care provider is employed
or contracted by the health care entity;
(9) the name and address of each affiliated health
care facility by license number, license type, and capacity in each
major health care service area; and
(10) comprehensive financial reports of the health
care entity and any affiliate, including audited financial
statements, cost reports, annual costs, annual receipts, realized
capital gains and losses, accumulated surplus, and accumulated
reserves.
Sec. 550A.0102. EXCEPTIONS. (a) Subject to Subsection (b),
a health care entity is exempt from the reporting requirements
under Section 550A.0101 if the health care entity:
(1) is an independent provider organization that is
not under the ownership or control of another entity; and
(2) consists of not more than three physicians.
(b) A health care entity that is exempt under Subsection (a)
and that undergoes a material change transaction is subject to the
reporting requirements under Section 550A.0101 on the completion of
the material change transaction.
(c) A health care provider or provider organization that is
owned or controlled by another health care entity is exempt from the
reporting requirements under Section 550A.0101 if:
(1) the controlling health care entity reports all the
information required under Section 550A.0101 on behalf of the
health care provider or provider organization; and
(2) the health care provider or provider organization
is shown in the organizational chart submitted under Section
550A.0101(7).
(d) A health care facility is not exempt under Subsection
(c).
Sec. 550A.0103. SHARING OF OWNERSHIP INFORMATION TO IMPROVE
TRANSPARENCY. (a) Information described by this section is
subject to disclosure under Chapter 552 and may not be considered
confidential, proprietary, or a trade secret, except that an
individual health care provider's taxpayer identification number
that is also the provider's social security number is confidential.
(b) Not later than July 1 of each year, the secretary of
state shall post on the secretary of state's publicly accessible
Internet website a report that includes the following information
for the preceding year:
(1) the number of health care entities reporting for
that year, disaggregated by the business structure of each
specified health care entity;
(2) the names, addresses, and business structure of
any entity with an ownership or controlling interest in each health
care entity;
(3) any change in ownership or control for each health
care entity;
(4) any change in the tax identification number of a
health care entity;
(5) as applicable, the name, address, tax
identification number, and business structure of other affiliates
under common control, subsidiaries, and management services
entities of the health care entity, including the business type and
the tax identification number of each entity; and
(6) an analysis of trends in horizontal and vertical
consolidation, disaggregated by business structure and provider
type.
(c) The secretary of state may share information reported to
the secretary of state under this subchapter with the attorney
general, state agencies, and state officials to reduce or avoid
duplication in reporting requirements or to facilitate oversight or
enforcement. A tax identification number that is an individual's
social security number and is shared with the attorney general, a
state agency, or a state official under this subchapter is
confidential. The secretary of state may, in consultation with the
relevant state agencies, merge similar reporting requirements as
appropriate.
Sec. 550A.0104. AUDIT AND INSPECTION. (a) The secretary of
state may audit and inspect the records of a health care entity:
(1) that has failed to submit complete information
required under this subchapter; or
(2) for which the secretary of state has reason to
question the accuracy or completeness of the information submitted
by the entity under this subchapter.
(b) The secretary of state shall conduct random annual
audits of health care entities to verify compliance with, accuracy
of, and completeness of the reported information under this
subchapter.
Sec. 550A.0105. CIVIL PENALTY. (a) A health care entity
that fails to provide a complete report under Section 550A.0101, or
submits a report containing false information, is liable to this
state for a civil penalty. The amount of the civil penalty assessed
under this section may not exceed:
(1) $50,000 for each violation for a health care
entity consisting of independent health care providers or provider
organizations without any third-party ownership or control
entities, with not more than 10 physicians, and with not more than
$10 million in annual revenue; and
(2) $500,000 for each violation for a health care
entity not described by Subdivision (1).
(b) The attorney general may bring an action to:
(1) recover the civil penalty imposed under this
section; or
(2) restrain or enjoin the person from violating this
chapter.
(c) The attorney general may recover reasonable attorney's
fees and other reasonable expenses incurred in investigating and
bringing an action under this section.
(d) The attorney general shall deposit a civil penalty
collected under this section in the state treasury to the credit of
the general revenue fund.
Sec. 550A.0106. RULES; FEES. (a) The secretary of state
shall adopt rules as necessary to implement this chapter, including
rules identifying essential health care services and establishing
standards for determining the factors constituting a significant
reduction of those services for purposes of determining a material
change transaction under this chapter.
(b) The secretary of state may assess an administrative fee
on a health care entity in an amount sufficient to cover the costs
of overseeing and implementing this chapter.
SECTION 2. The secretary of state shall begin posting the
annual report on the secretary of state's website, as required
under Section 550A.0103, Government Code, as added by this Act, on
July 1, 2026.
SECTION 3. This Act takes effect September 1, 2025.