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Texas House Bill HB4408

Texas 2025 - 89th Regular

Texas House Bill HB4408 Compare Versions

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11 89R8830 LRM-F
22 By: Dean H.B. No. 4408
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77 A BILL TO BE ENTITLED
88 AN ACT
99 relating to required reporting of information on the ownership and
1010 control of certain health care entities; providing a civil penalty;
1111 authorizing a fee.
1212 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1313 SECTION 1. Subtitle I, Title 4, Government Code, as
1414 effective April 1, 2025, is amended by adding Chapter 550A to read
1515 as follows:
1616 CHAPTER 550A. REQUIRED REPORTING ON OWNERSHIP AND CONTROL OF
1717 HEALTH CARE ENTITIES
1818 SUBCHAPTER A. GENERAL PROVISIONS
1919 Sec. 550A.0001. DEFINITIONS. In this chapter:
2020 (1) "Health care entity" means a health care provider,
2121 health care facility, provider organization, pharmacy benefit
2222 manager, or health carrier that offers a health benefit plan in this
2323 state.
2424 (2) "Health care facility" means a facility licensed
2525 to provide health care services, including:
2626 (A) a hospital or other inpatient facility for
2727 providing health care services;
2828 (B) a health system consisting of jointly owned
2929 or managed health care entities;
3030 (C) a skilled nursing facility licensed under
3131 Chapter 242, Health and Safety Code;
3232 (D) an ambulatory surgical center licensed under
3333 Chapter 243, Health and Safety Code;
3434 (E) a freestanding emergency medical care
3535 facility licensed under Chapter 254, Health and Safety Code;
3636 (F) a general residential operation licensed
3737 under Chapter 42, Human Resources Code, that provides treatment
3838 services;
3939 (G) a diagnostic, laboratory, or imaging center;
4040 (H) an outpatient clinic licensed in this state
4141 to provide health care services; or
4242 (I) a rehabilitation center or other therapeutic
4343 center licensed in this state to provide health care services.
4444 (3) "Health care provider" means an individual
4545 qualified or licensed to perform or provide health care services in
4646 this state.
4747 (4) "Health care services" means:
4848 (A) services provided for the care, prevention,
4949 diagnosis, treatment, cure, or relief of a medical, dental, or
5050 behavioral health condition, including:
5151 (i) inpatient, outpatient, habilitative,
5252 rehabilitative, dental, palliative, therapeutic, supportive, home
5353 health, or behavioral services provided by a health care entity;
5454 (ii) retail and specialty pharmacy
5555 services, including drugs, devices, and medical supplies provided
5656 by a pharmacy; and
5757 (iii) performance of functions to refer,
5858 arrange, or coordinate health care services;
5959 (B) equipment used to provide services described
6060 by Paragraph (A), including durable medical equipment and
6161 diagnostic, infusion, and surgical devices; and
6262 (C) technology associated with the provision of
6363 services and equipment described by Paragraphs (A) and (B),
6464 including telehealth services, telemedicine medical services,
6565 electronic health records, software, claims processors, and
6666 utilization systems.
6767 (5) "Health carrier" has the meaning assigned by
6868 Section 1507.002, Insurance Code.
6969 (6) "Management services organization" means an
7070 organization or entity that contracts with a health care provider
7171 or provider organization to perform management or administrative
7272 services relating to, supporting, or facilitating the provision of
7373 health care services.
7474 (7) "Material change transaction" means a transaction
7575 that entails a material change to ownership, operations, or
7676 governance structure involving health plans, health insurers,
7777 hospitals or hospital systems, physician organizations, health
7878 care providers, health care facilities, pharmacy benefit managers,
7979 and other health care entities.
8080 (8) "Pharmacy benefit manager" has the meaning
8181 assigned by Section 4151.151, Insurance Code.
8282 (9) "Provider organization" means an incorporated or
8383 unincorporated corporation, partnership, business trust,
8484 association, or organized group of persons that is in the business
8585 of health care service delivery or management and that represents
8686 at least one health care provider in contracting with a health
8787 carrier for the payment of health care services. The term includes
8888 a physician organization, physician-hospital organization,
8989 independent practice association, provider network, accountable
9090 care organization, management services organization, or other
9191 organization that contracts with a health carrier for the payment
9292 of health care services.
9393 Sec. 550A.0002. APPLICABILITY OF CHAPTER TO MATERIAL CHANGE
9494 TRANSACTIONS; EXCEPTIONS. (a) This chapter applies to a material
9595 change transaction, whether occurring as a single transaction or a
9696 series of related transactions within a consecutive five-year
9797 period, involving a health care entity in this state that has:
9898 (1) a total of assets and annual revenue, including
9999 in-state and out-of-state assets and revenue, in an amount equal to
100100 at least $10 million; or
101101 (2) for a new health care entity, anticipated annual
102102 revenue in an amount equal to at least $10 million, including
103103 in-state and out-of-state revenue.
104104 (b) This chapter applies to the following material change
105105 transactions:
106106 (1) a corporate merger that includes one or more
107107 health care entities;
108108 (2) an acquisition of one or more health care
109109 entities, including insolvent health care entities;
110110 (3) a contract resulting in a health care entity's
111111 change of control;
112112 (4) the formation of a partnership, joint venture,
113113 accountable care organization, parent organization, or management
114114 services organization for the purpose of administering contracts
115115 with health carriers, third-party administrators, pharmacy benefit
116116 managers, or health care providers;
117117 (5) the sale, purchase, lease, affiliation, or
118118 transfer of control of a health care entity's board of directors or
119119 governing body;
120120 (6) a real estate sale or lease agreement involving a
121121 material amount of health care entity assets; or
122122 (7) as determined by rules adopted by the secretary of
123123 state:
124124 (A) the closure of a health care facility;
125125 (B) the significant reduction or discontinuation
126126 of any essential health care service provided by a provider
127127 organization or health care facility; or
128128 (C) any clinical or contractual affiliations
129129 that would eliminate or significantly reduce essential health care
130130 services.
131131 (c) This chapter does not apply to the following:
132132 (1) a clinical affiliation of health care entities
133133 formed solely to collaborate on clinical trials;
134134 (2) a graduate medical education program;
135135 (3) an offer of employment to, or the hiring of, not
136136 more than one physician; or
137137 (4) a transaction, including a corporate
138138 restructuring, in which a health care entity directly, or
139139 indirectly through one or more intermediaries, currently controls,
140140 is controlled by, or is under common control with, all other parties
141141 to the transaction.
142142 Sec. 550A.0003. CONTROL; CHANGE OF CONTROL. (a) A person
143143 is considered to have control of a health care entity if the person,
144144 directly or indirectly, through ownership, contractual agreement,
145145 or otherwise, has the ability to:
146146 (1) vote more than 10 percent of any class of voting
147147 shares of the health care entity; or
148148 (2) direct the actions or policies of the health care
149149 entity.
150150 (b) A change of control of a health care entity requires a
151151 contract or arrangement in which another person acquires direct or
152152 indirect control over the operations of a health care entity wholly
153153 or in substantial part.
154154 SUBCHAPTER B. TRANSPARENCY REPORTING IN OWNERSHIP AND
155155 CONTROL OF HEALTH CARE ENTITIES
156156 Sec. 550A.0101. REQUIRED INFORMATION REGARDING OWNERSHIP
157157 AND CONTROL OF HEALTH CARE ENTITIES. Except as provided by Section
158158 550A.0102, each health care entity shall report to the secretary of
159159 state annually and on the execution of a material change
160160 transaction, in the form and manner the secretary of state
161161 requires, the following information:
162162 (1) the legal name of the health care entity;
163163 (2) the business address of the health care entity;
164164 (3) the locations of the health care entity's
165165 operations;
166166 (4) the applicable business identification numbers of
167167 the health care entity, including:
168168 (A) the taxpayer identification number;
169169 (B) the national provider identifier number;
170170 (C) the employer identification number;
171171 (D) the Centers for Medicare and Medicaid
172172 Services certification number;
173173 (E) the national association of insurance
174174 commissioners identification number;
175175 (F) a personal identification number associated
176176 with a license issued by the Texas Department of Insurance; and
177177 (G) the pharmacy benefit manager identification
178178 number associated with a license or registration of the pharmacy
179179 benefit manager in this state;
180180 (5) the name and contact information of a
181181 representative of the health care entity;
182182 (6) the name, business address, and business
183183 identification numbers described by Subdivision (4) for each person
184184 that, with respect to the relevant health care entity:
185185 (A) has an ownership or investment interest;
186186 (B) has a controlling interest;
187187 (C) is a management services organization; or
188188 (D) is a significant equity investor, including:
189189 (i) a private equity fund or other investor
190190 with direct or indirect ownership of a health care entity or
191191 provider;
192192 (ii) an investor with direct or indirect
193193 possession of equity totaling more than 10 percent of a provider's
194194 organization; or
195195 (iii) a private equity fund or investor
196196 that operates a health care entity under a lease, management, or
197197 operating agreement;
198198 (7) a current organizational chart showing the
199199 business structure of the health care entity, including:
200200 (A) any person described by Subdivision (6);
201201 (B) each affiliate of the health care entity; and
202202 (C) each subsidiary of the health care entity;
203203 (8) for a health care entity that is a provider
204204 organization or a health care facility the following information
205205 regarding each health care provider affiliated with the provider
206206 organization or health care facility:
207207 (A) the name, license type, specialty, national
208208 provider identifier number, and other applicable identification
209209 numbers described by Subdivision (4) applicable to the health care
210210 provider;
211211 (B) the address of the health care provider's
212212 principal practice location; and
213213 (C) whether the health care provider is employed
214214 or contracted by the health care entity;
215215 (9) the name and address of each affiliated health
216216 care facility by license number, license type, and capacity in each
217217 major health care service area; and
218218 (10) comprehensive financial reports of the health
219219 care entity and any affiliate, including audited financial
220220 statements, cost reports, annual costs, annual receipts, realized
221221 capital gains and losses, accumulated surplus, and accumulated
222222 reserves.
223223 Sec. 550A.0102. EXCEPTIONS. (a) Subject to Subsection (b),
224224 a health care entity is exempt from the reporting requirements
225225 under Section 550A.0101 if the health care entity:
226226 (1) is an independent provider organization that is
227227 not under the ownership or control of another entity; and
228228 (2) consists of not more than three physicians.
229229 (b) A health care entity that is exempt under Subsection (a)
230230 and that undergoes a material change transaction is subject to the
231231 reporting requirements under Section 550A.0101 on the completion of
232232 the material change transaction.
233233 (c) A health care provider or provider organization that is
234234 owned or controlled by another health care entity is exempt from the
235235 reporting requirements under Section 550A.0101 if:
236236 (1) the controlling health care entity reports all the
237237 information required under Section 550A.0101 on behalf of the
238238 health care provider or provider organization; and
239239 (2) the health care provider or provider organization
240240 is shown in the organizational chart submitted under Section
241241 550A.0101(7).
242242 (d) A health care facility is not exempt under Subsection
243243 (c).
244244 Sec. 550A.0103. SHARING OF OWNERSHIP INFORMATION TO IMPROVE
245245 TRANSPARENCY. (a) Information described by this section is
246246 subject to disclosure under Chapter 552 and may not be considered
247247 confidential, proprietary, or a trade secret, except that an
248248 individual health care provider's taxpayer identification number
249249 that is also the provider's social security number is confidential.
250250 (b) Not later than July 1 of each year, the secretary of
251251 state shall post on the secretary of state's publicly accessible
252252 Internet website a report that includes the following information
253253 for the preceding year:
254254 (1) the number of health care entities reporting for
255255 that year, disaggregated by the business structure of each
256256 specified health care entity;
257257 (2) the names, addresses, and business structure of
258258 any entity with an ownership or controlling interest in each health
259259 care entity;
260260 (3) any change in ownership or control for each health
261261 care entity;
262262 (4) any change in the tax identification number of a
263263 health care entity;
264264 (5) as applicable, the name, address, tax
265265 identification number, and business structure of other affiliates
266266 under common control, subsidiaries, and management services
267267 entities of the health care entity, including the business type and
268268 the tax identification number of each entity; and
269269 (6) an analysis of trends in horizontal and vertical
270270 consolidation, disaggregated by business structure and provider
271271 type.
272272 (c) The secretary of state may share information reported to
273273 the secretary of state under this subchapter with the attorney
274274 general, state agencies, and state officials to reduce or avoid
275275 duplication in reporting requirements or to facilitate oversight or
276276 enforcement. A tax identification number that is an individual's
277277 social security number and is shared with the attorney general, a
278278 state agency, or a state official under this subchapter is
279279 confidential. The secretary of state may, in consultation with the
280280 relevant state agencies, merge similar reporting requirements as
281281 appropriate.
282282 Sec. 550A.0104. AUDIT AND INSPECTION. (a) The secretary of
283283 state may audit and inspect the records of a health care entity:
284284 (1) that has failed to submit complete information
285285 required under this subchapter; or
286286 (2) for which the secretary of state has reason to
287287 question the accuracy or completeness of the information submitted
288288 by the entity under this subchapter.
289289 (b) The secretary of state shall conduct random annual
290290 audits of health care entities to verify compliance with, accuracy
291291 of, and completeness of the reported information under this
292292 subchapter.
293293 Sec. 550A.0105. CIVIL PENALTY. (a) A health care entity
294294 that fails to provide a complete report under Section 550A.0101, or
295295 submits a report containing false information, is liable to this
296296 state for a civil penalty. The amount of the civil penalty assessed
297297 under this section may not exceed:
298298 (1) $50,000 for each violation for a health care
299299 entity consisting of independent health care providers or provider
300300 organizations without any third-party ownership or control
301301 entities, with not more than 10 physicians, and with not more than
302302 $10 million in annual revenue; and
303303 (2) $500,000 for each violation for a health care
304304 entity not described by Subdivision (1).
305305 (b) The attorney general may bring an action to:
306306 (1) recover the civil penalty imposed under this
307307 section; or
308308 (2) restrain or enjoin the person from violating this
309309 chapter.
310310 (c) The attorney general may recover reasonable attorney's
311311 fees and other reasonable expenses incurred in investigating and
312312 bringing an action under this section.
313313 (d) The attorney general shall deposit a civil penalty
314314 collected under this section in the state treasury to the credit of
315315 the general revenue fund.
316316 Sec. 550A.0106. RULES; FEES. (a) The secretary of state
317317 shall adopt rules as necessary to implement this chapter, including
318318 rules identifying essential health care services and establishing
319319 standards for determining the factors constituting a significant
320320 reduction of those services for purposes of determining a material
321321 change transaction under this chapter.
322322 (b) The secretary of state may assess an administrative fee
323323 on a health care entity in an amount sufficient to cover the costs
324324 of overseeing and implementing this chapter.
325325 SECTION 2. The secretary of state shall begin posting the
326326 annual report on the secretary of state's website, as required
327327 under Section 550A.0103, Government Code, as added by this Act, on
328328 July 1, 2026.
329329 SECTION 3. This Act takes effect September 1, 2025.