Bill Text: TX HB3301 | 2019-2020 | 86th Legislature | Enrolled
Bill Title: Relating to merger agreements among certain hospitals; authorizing fees.
Spectrum: Partisan Bill (Republican 5-0)
Status: (Passed) 2019-06-14 - Effective on 9/1/19 [HB3301 Detail]
Download: Texas-2019-HB3301-Enrolled.html
H.B. No. 3301 |
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relating to merger agreements among certain hospitals; authorizing | ||
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) "Designated agency" means the state agency | ||
designated by the governor under Section 314A.004. | ||
(3) "Hospital" means a nonpublic general hospital that | ||
is licensed under Chapter 241 and is not maintained or operated by a | ||
political subdivision of this state. | ||
(4) "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. | ||
(5) "State agency" means a department, commission, | ||
board, office, or other agency in the executive branch of state | ||
government that is created by the constitution or a statute of this | ||
state. | ||
Sec. 314A.002. APPLICABILITY. This chapter applies only to | ||
a merger agreement among hospitals each of which is 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; GRANT OF | ||
ANTITRUST IMMUNITY. (a) The legislature finds that: | ||
(1) a merger among hospitals may benefit the public by | ||
maintaining or improving the quality, efficiency, and | ||
accessibility of health care services offered to the public; and | ||
(2) the benefits described by Subdivision (1) | ||
resulting from the merger may outweigh any anticompetitive effects | ||
of joining together competitors to address unique challenges in | ||
providing health care services in rural areas. | ||
(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 | ||
designated agency as provided by this chapter. It is the intent of | ||
the legislature that this chapter immunize from all federal and | ||
state antitrust laws the execution of merger agreements approved | ||
under this chapter and post-merger activities supervised under this | ||
chapter. | ||
(c) Nothing in this chapter affects antitrust immunity that | ||
may be provided through another provision of state law. | ||
Sec. 314A.004. DESIGNATION OF SUPERVISING STATE AGENCY. | ||
(a) The governor shall designate an appropriate state agency, | ||
other than the office of the attorney general, to: | ||
(1) review and approve or deny applications submitted | ||
under this chapter for certificates of public advantage; and | ||
(2) supervise as provided by Subchapter C the | ||
activities for which a certificate of public advantage is issued. | ||
(b) After the governor designates a state agency under | ||
Subsection (a), the governor may designate another appropriate | ||
state agency under that subsection at any time. | ||
(c) A change in the designation of a state agency made under | ||
this section does not affect the validity of any action taken under | ||
this chapter by a predecessor designated agency. | ||
Sec. 314A.005. RULEMAKING. The designated agency shall | ||
adopt rules for the administration and implementation of this | ||
chapter. | ||
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 | ||
designated agency as provided by this subchapter. | ||
(b) No merger agreement shall receive immunity under this | ||
chapter unless the designated agency 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 designated agency | ||
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 designated agency'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 designated agency at the same time. | ||
Sec. 314A.053. APPLICATION FEE. (a) The designated agency | ||
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 designated agency | ||
and attorney general in reviewing and approving or denying | ||
applications under this subchapter. | ||
(b) Fees collected under this section may be appropriated to | ||
the designated agency for purposes of covering costs relating to | ||
the implementation and administration of this chapter, including | ||
the supervision of hospitals under this chapter. | ||
Sec. 314A.054. REVIEW OF APPLICATION BY DESIGNATED AGENCY; | ||
GRANT OR DENIAL OF APPLICATION. (a) The designated agency shall | ||
review an application for a certificate of public advantage in | ||
accordance with the standard prescribed by Section 314A.056(a)(1). | ||
(b) The designated agency shall grant or deny the | ||
application not later than the 120th day after the date of the | ||
filing of the application. The designated agency'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 designated agency whether: | ||
(1) the proposed merger agreement would likely benefit | ||
the public by maintaining or improving the quality, efficiency, and | ||
accessibility of health care services offered to the public; and | ||
(2) the likely benefits resulting from the proposed | ||
merger agreement outweigh any disadvantages attributable to a | ||
reduction in competition that may result from the proposed merger. | ||
(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 designated agency 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 designated agency, 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: | ||
(1) the designated agency determines under the | ||
totality of the circumstances that: | ||
(A) the proposed merger would likely benefit the | ||
public by maintaining or improving the quality, efficiency, and | ||
accessibility of health care services offered to the public; and | ||
(B) the likely benefits resulting from the | ||
proposed merger agreement described by Paragraph (A) outweigh any | ||
disadvantages attributable to a reduction in competition that may | ||
result from the proposed merger; and | ||
(2) the application: | ||
(A) provides specific evidence showing that the | ||
proposed merger would likely benefit the public as described by | ||
Subdivision (1)(A); | ||
(B) explains in detail how the likely benefits | ||
resulting from the proposed merger agreement outweigh any | ||
disadvantages attributable to a reduction in competition as | ||
described by Subdivision (1)(B); and | ||
(C) sufficiently addresses the factors listed in | ||
Subsection (b) and any other factor the designated agency may | ||
require based on the circumstances specific to the application. | ||
(b) In making the determination under Subsection (a)(1), | ||
the designated agency 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 designated agency 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 | ||
Subsection (a)(1). | ||
Sec. 314A.057. RECORDS. The designated agency shall | ||
maintain records of all merger agreements the designated agency has | ||
approved under this chapter, including any terms or conditions of | ||
issuing a certificate of public advantage that are imposed by the | ||
designated agency. | ||
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 designated agency | ||
notice at least 30 days before the date of the termination. | ||
Sec. 314A.059. ANNUAL REVIEW OF CERTIFICATE. (a) The | ||
designated agency shall annually review an approved certificate of | ||
public advantage. | ||
(b) The attorney general may annually review an approved | ||
certificate of public advantage. | ||
(c) The designated agency may not complete its annual review | ||
of an approved certificate of public advantage under this section | ||
until: | ||
(1) the attorney general informs the designated agency | ||
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 designated | ||
agency 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 | ||
designated agency 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) A change 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 designated agency as provided by this | ||
section. | ||
(b) At least 90 days before the implementation of any | ||
proposed change 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 designated agency: | ||
(1) any proposed change in rates for inpatient and | ||
outpatient hospital services; | ||
(2) if applicable, any change in reimbursement rates | ||
under a reimbursement agreement with a third party payor; | ||
(3) for an agreement with a third party payor, other | ||
than an agreement described by Subdivision (4) or in which rates are | ||
set under the Medicare or Medicaid program, information showing: | ||
(A) that the hospital and the third party payor | ||
have agreed to the proposed rates; | ||
(B) whether the proposed rates are less than the | ||
corresponding amounts in the producer price index published by the | ||
Bureau of Labor Statistics of the United States Department of Labor | ||
relating to the hospital services for which the rates are proposed | ||
or a comparable price index chosen by the designated agency if the | ||
producer price index described by this paragraph is abolished; and | ||
(C) if the proposed rates are above the | ||
corresponding amounts in the producer price index as described by | ||
Paragraph (B), a justification for proposing rates above the | ||
corresponding amounts in the producer price index; | ||
(4) to the extent allowed by federal law, for an | ||
agreement with a managed care organization that provides or | ||
arranges for the provision of health care services under the | ||
Medicare or Medicaid program, information showing: | ||
(A) whether the proposed rates are different from | ||
rates under an agreement that was in effect before the date the | ||
applicable merger agreement took effect; | ||
(B) whether the proposed rates are different from | ||
the rates most recently approved by the designated agency for the | ||
applicable hospital, if the designated agency has previously | ||
approved rates for the applicable hospital following the issuance | ||
of the certificate of public advantage under this chapter that | ||
governs the hospital; and | ||
(C) if the proposed rates exceed rates described | ||
by Paragraph (A) or (B), a justification for proposing rates in | ||
excess of those rates; and | ||
(5) any information concerning costs, patient volume, | ||
acuity, payor mix, and other information requested by the | ||
designated agency. | ||
(c) After reviewing the proposed change in rates submitted | ||
under Subsection (b), the designated agency shall approve or deny | ||
the proposed rate change. The designated agency shall approve the | ||
proposed rate change if the designated agency determines that: | ||
(1) the proposed rate change likely benefits the | ||
public by maintaining or improving the quality, efficiency, and | ||
accessibility of health care services offered to the public; and | ||
(2) the proposed rate does not inappropriately exceed | ||
competitive rates for comparable services in the hospital's market | ||
area. | ||
(d) If the designated agency determines that the proposed | ||
rate change does not satisfy Subsection (c)(1) or (2), the | ||
designated agency shall deny or modify the proposed rate change. | ||
(e) The designated agency shall notify the hospital in | ||
writing of the agency's decision to approve, deny, or modify the | ||
proposed rate change not later than the 30th day before the | ||
implementation date of the proposed change. | ||
Sec. 314A.103. ANNUAL REPORT. Each hospital operating | ||
under a certificate of public advantage shall submit an annual | ||
report to the designated agency. 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 | ||
designated agency 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 | ||
(5) any other information required by the designated | ||
agency 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 designated | ||
agency 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 designated agency determines that an | ||
activity of the hospital: | ||
(1) does not benefit the public as described by | ||
Section 314A.056(a)(1)(A); or | ||
(2) no longer meets the standard prescribed by Section | ||
314A.056(a)(1). | ||
(b) The corrective action plan must include each provision | ||
required by the designated agency and must be submitted at the | ||
agency's direction. | ||
Sec. 314A.105. SUPERVISION FEE. (a) The designated agency | ||
may assess an annual supervision fee in an amount that is at least | ||
$75,000 but not more than $200,000 against each hospital operating | ||
under a certificate of public advantage under this chapter. The | ||
amount of the fee imposed on hospitals under this subsection must be | ||
based on the assessment by the designated agency of the amount | ||
needed to cover the reasonable costs incurred by the designated | ||
agency in supervising hospitals under this subchapter and in | ||
implementing and administering this chapter. | ||
(b) Fees collected under this section may be appropriated to | ||
the designated agency for purposes of covering costs relating to | ||
the implementation and administration of this chapter, including | ||
the supervision of hospitals under this chapter. | ||
SUBCHAPTER D. ENFORCEMENT AUTHORITY BY DESIGNATED AGENCY | ||
Sec. 314A.151. INVESTIGATION; REVOCATION OF CERTIFICATE. | ||
With respect to each hospital resulting from a merger agreement for | ||
which the designated agency 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)(1) and the purposes of this | ||
chapter, the designated agency 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 designated agency | ||
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 designated agency'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 DESIGNATED AGENCY ACTION. | ||
(a) A person aggrieved by a decision of the designated agency 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 designated agency to revoke a certificate of public | ||
advantage stays enforcement of the agency's decision. | ||
(c) Not later than the 45th day after the date a person files | ||
a petition for judicial review under this section, the designated | ||
agency shall submit to the district court the original copy or a | ||
certified copy of the entirety of the agency'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 | ||
agency'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 | ||
designated agency 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 agency'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 designated agency 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 designated agency shall add the court's decision to the agency'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 designated agency makes a | ||
determination on the application, or in connection with the | ||
agency'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)(1). | ||
(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)(1)(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 designated agency's certification was obtained as a result | ||
of material misrepresentation to the designated agency 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. As soon as practicable after the effective date | ||
of this Act, the governor shall designate a state agency under | ||
Section 314A.004, Health and Safety Code, as added by this Act. | ||
SECTION 3. This Act takes effect September 1, 2019. | ||
______________________________ | ______________________________ | |
President of the Senate | Speaker of the House | |
I certify that H.B. No. 3301 was passed by the House on May 9, | ||
2019, by the following vote: Yeas 133, Nays 4, 2 present, not | ||
voting; and that the House concurred in Senate amendments to H.B. | ||
No. 3301 on May 24, 2019, by the following vote: Yeas 134, Nays 6, | ||
2 present, not voting. | ||
______________________________ | ||
Chief Clerk of the House | ||
I certify that H.B. No. 3301 was passed by the Senate, with | ||
amendments, on May 21, 2019, by the following vote: Yeas 31, Nays | ||
0. | ||
______________________________ | ||
Secretary of the Senate | ||
APPROVED: __________________ | ||
Date | ||
__________________ | ||
Governor |