1-1 By: Wolens (Senate Sponsor - Sibley) H.B. No. 1884
1-2 (In the Senate - Received from the House May 12, 1993;
1-3 May 13, 1993, read first time and referred to Committee on Health
1-4 and Human Services; May 23, 1993, reported favorably by the
1-5 following vote: Yeas 8, Nays 0; May 23, 1993, sent to printer.)
1-6 COMMITTEE VOTE
1-7 Yea Nay PNV Absent
1-8 Zaffirini x
1-9 Ellis x
1-10 Madla x
1-11 Moncrief x
1-12 Nelson x
1-13 Patterson x
1-14 Shelley x
1-15 Truan x
1-16 Wentworth x
1-17 A BILL TO BE ENTITLED
1-18 AN ACT
1-19 relating to cooperative agreements among hospitals.
1-20 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-21 SECTION 1. Subtitle F, Title 4, Health and Safety Code, is
1-22 amended by adding Chapter 313 to read as follows:
1-23 CHAPTER 313. COOPERATIVE AGREEMENTS AMONG HOSPITALS
1-24 Sec. 313.001. DEFINITIONS. In this chapter:
1-25 (1) "Attorney general" means the attorney general of
1-26 Texas or any assistant attorney general acting under the direction
1-27 of the attorney general of Texas.
1-28 (2) "Cooperative agreement" means an agreement among
1-29 two or more hospitals for the allocation or sharing of health care
1-30 equipment, facilities, personnel, or services.
1-31 (3) "Department" means the Texas Department of Health.
1-32 (4) "Hospital" means a general or special hospital
1-33 licensed under Chapter 241 or a private mental hospital licensed
1-34 under Chapter 577.
1-35 Sec. 313.002. REVIEW AND CERTIFICATION OF COOPERATIVE
1-36 AGREEMENTS. (a) A hospital may negotiate and enter into
1-37 cooperative agreements with other hospitals in the state if the
1-38 likely benefits resulting from the agreement outweigh any
1-39 disadvantages attributable to a reduction in competition that may
1-40 result from the agreements. Acting through their boards of
1-41 directors, a group of hospitals may conduct discussions or
1-42 negotiations concerning cooperative agreements, provided that the
1-43 discussions or negotiations do not involve price fixing or
1-44 predatory pricing.
1-45 (b) Parties to a cooperative agreement may apply to the
1-46 department for a certification of public advantage governing the
1-47 cooperative agreement. The application must include a written copy
1-48 of the cooperative agreement and describe the nature and scope of
1-49 the cooperation in the agreement and any consideration passing to
1-50 any party under the agreement. A copy of the application and
1-51 copies of all additional related materials must be submitted to the
1-52 attorney general and to the department at the same time. The
1-53 department shall charge an application fee in an amount not to
1-54 exceed $10,000 per application.
1-55 (c) The department shall review the application in
1-56 accordance with the standards set forth in Subsections (e) and (f)
1-57 and shall, if requested, hold a public hearing in accordance with
1-58 rules adopted by the department. The department shall grant or
1-59 deny the application within 120 days of the date of filing of the
1-60 application and that decision must be in writing and set forth the
1-61 basis for the decision. The department shall furnish a copy of
1-62 the decision to the applicants, the attorney general, and any
1-63 intervenor within 10 days of its issuance.
1-64 (d) The department shall issue a certificate of public
1-65 advantage for a cooperative agreement if it determines that the
1-66 applicants have demonstrated by clear and convincing evidence that
1-67 the likely benefits resulting from the agreement outweigh any
1-68 disadvantages attributable to a reduction in competition that may
2-1 result from the agreement.
2-2 (e) In evaluating the potential benefits of a cooperative
2-3 agreement, the department shall consider whether one or more of the
2-4 following benefits may result from the cooperative agreement:
2-5 (1) enhancement of the quality of hospital and
2-6 hospital-related care provided to Texas citizens;
2-7 (2) preservation of hospital facilities in
2-8 geographical proximity to the communities traditionally served by
2-9 those facilities;
2-10 (3) gains in the cost efficiency of services provided
2-11 by the hospitals involved;
2-12 (4) improvements in the utilization of hospital
2-13 resources and equipment; and
2-14 (5) avoidance of duplication of hospital resources.
2-15 (f) The department's evaluation of any disadvantages
2-16 attributable to any reduction in competition likely to result from
2-17 the agreement may include, but need not be limited to, the
2-18 following factors:
2-19 (1) the extent of any likely adverse impact on the
2-20 ability of health maintenance organizations, preferred provider
2-21 organizations, or other health care payors to negotiate optimal
2-22 payment and service arrangements with hospitals, physicians, allied
2-23 health care professionals, or other health care providers;
2-24 (2) the extent of any reduction in competition among
2-25 physicians, allied health professionals, other health care
2-26 providers, or other persons furnishing goods or services to, or in
2-27 competition with, hospitals;
2-28 (3) the extent of any adverse impact on patients in
2-29 the quality, availability, and price of health care services; and
2-30 (4) the availability of arrangements that are less
2-31 restrictive to competition and achieve similar benefits.
2-32 (g) The department shall consult with the attorney general
2-33 regarding any potential reduction in competition that may result
2-34 from a cooperative agreement. The attorney general shall review
2-35 the application and all supporting documents provided by the
2-36 applicants, any documents or other information provided by any
2-37 intervenors, and any documents or testimony provided at a public
2-38 hearing, if any, on the application and shall advise the department
2-39 whether the proposed cooperative agreement would have inappropriate
2-40 impact on competition. If the attorney general advises the
2-41 department to deny an application, the attorney general shall state
2-42 the basis and reasons for the recommended denial.
2-43 Sec. 313.003. ATTORNEY GENERAL AUTHORITY. (a) The attorney
2-44 general, at any time after an application is filed under Section
2-45 313.002(b), may require by civil investigative demand the
2-46 attendance and testimony of witnesses and the production of
2-47 documents in Travis County or the county in which the applicants
2-48 are located for the purpose of investigating whether the
2-49 cooperative agreement satisfies the standards set forth in Section
2-50 313.002. All nonpublic documents produced and testimony given to
2-51 the attorney general are subject to the prohibitions on disclosure
2-52 and use of Section 15.10(i), Business & Commerce Code. The
2-53 attorney general may seek an order from the district court
2-54 compelling compliance with a civil investigative demand issued
2-55 under this section.
2-56 (b) The attorney general may seek to enjoin the operation of
2-57 a cooperative agreement for which an application for certificate of
2-58 public advantage has been filed by filing suit against the parties
2-59 to the cooperative agreement in district court. The attorney
2-60 general may file an action before or after the department acts on
2-61 the application for a certificate but, except as provided in
2-62 Subsection (e), the action must be brought not later than 20 days
2-63 following the attorney general's receipt of a copy of the final and
2-64 appealable decision of the department.
2-65 (c) Upon the filing of the complaint in an action under
2-66 Subsection (b), the department's certification, if previously
2-67 issued, must be stayed and the cooperative agreement is of no
2-68 further force unless the court orders otherwise or until the action
2-69 is concluded. The attorney general may apply to the court for any
2-70 ancillary temporary or preliminary relief necessary to stay the
3-1 cooperative agreement pending final disposition of the case.
3-2 (d) In any action brought under Subsection (b), the
3-3 applicants for a certificate bear the burden of establishing by
3-4 clear and convincing evidence that in accordance with Sections
3-5 313.002(e) and (f), the likely benefits resulting from the
3-6 cooperative agreement outweigh any disadvantages attributable to a
3-7 reduction in competition that may result from the agreement. In
3-8 assessing disadvantages attributable to a reduction in competition
3-9 likely to result from the agreement, the court may draw upon the
3-10 determinations of federal and Texas courts concerning unreasonable
3-11 restraint of trade under 15 U.S.C. Sections 1 and 2, and Chapter
3-12 15, Business & Commerce Code.
3-13 (e) If, at any time following the 20-day period specified in
3-14 Subsection (b), the attorney general determines that as a result of
3-15 changed circumstances the benefits resulting from a certified
3-16 agreement no longer outweigh any disadvantages attributable to a
3-17 reduction in competition resulting from the agreement, the attorney
3-18 general may file suit in the district court seeking to cancel the
3-19 certificate of public advantage. The standard for adjudication for
3-20 an action brought under this subsection is as follows:
3-21 (1) except as provided in Subdivision (2), in any
3-22 action brought under this subsection the attorney general has the
3-23 burden of establishing by a preponderance of the evidence that as a
3-24 result of changed circumstances the benefits resulting from the
3-25 agreement and the unavoidable costs of canceling the agreement are
3-26 outweighed by disadvantages attributable to a reduction in
3-27 competition resulting from the agreement;
3-28 (2) in any action under this subsection, if the
3-29 attorney general first establishes by a preponderance of evidence
3-30 that the department's certification was obtained as a result of
3-31 material misrepresentation to the department or the attorney
3-32 general or as the result of coercion, threats, or intimidation
3-33 toward any party to the cooperative agreement, then the parties to
3-34 the agreement bear the burden of establishing by clear and
3-35 convincing evidence that the benefits resulting from the agreement
3-36 and the unavoidable costs of canceling the agreement are outweighed
3-37 by disadvantages attributable to any reduction in competition
3-38 resulting from the agreement.
3-39 Sec. 313.004. MONITORING OF APPROVED COOPERATIVE AGREEMENTS.
3-40 (a) If, at any time following the approval of a cooperative
3-41 agreement by the department, the department determines that as a
3-42 result of changed circumstances the benefits resulting from an
3-43 approved agreement no longer outweigh any disadvantages
3-44 attributable to a reduction in competition resulting from the
3-45 agreement, the department may initiate proceedings to terminate the
3-46 certificate of public advantage.
3-47 (b) The department may request documents from the parties to
3-48 the cooperative agreement regarding the current status of the
3-49 agreement, including information relative to the continued benefits
3-50 and any disadvantages of the agreement and shall, if requested,
3-51 hold a public hearing to solicit additional information concerning
3-52 the effects of the cooperative agreement.
3-53 (c) If the department determines that the likely benefits
3-54 resulting from an approved cooperative agreement no longer outweigh
3-55 any disadvantages attributable to any potential reduction in
3-56 competition resulting from the agreement, the department may
3-57 terminate the certificate of public advantage.
3-58 Sec. 313.005. JUDICIAL REVIEW OF DEPARTMENT ACTION. Any
3-59 party aggrieved by a decision of the department in granting or
3-60 denying an application, refusing to act on an application, or
3-61 terminating a certificate is entitled to judicial review of the
3-62 decision in accordance with the Administrative Procedure and Texas
3-63 Register Act (Article 6252-13a, Vernon's Texas Civil Statutes).
3-64 Sec. 313.006. VALIDITY OF CERTIFIED COOPERATIVE AGREEMENTS.
3-65 (a) Notwithstanding Section 15.05(a), Business & Commerce Code, or
3-66 any other provision of law, a cooperative agreement for which a
3-67 certificate of public advantage has been issued is a lawful
3-68 agreement. Notwithstanding Section 15.05(a), Business & Commerce
3-69 Code, or any other provision of law, if the parties to a
3-70 cooperative agreement file an application for a certificate of
4-1 public advantage governing the agreement with the department, the
4-2 conduct of the parties in negotiating and entering into a
4-3 cooperative agreement is lawful conduct.
4-4 (b) If the department, or in any action by the attorney
4-5 general the district court, determines that the applicants have not
4-6 established by clear and convincing evidence that the likely
4-7 benefits resulting from a cooperative agreement outweigh any
4-8 disadvantages attributable to any potential reduction in
4-9 competition resulting from the agreement, the agreement is invalid
4-10 and has no further force or effect.
4-11 (c) Nothing in this chapter exempts hospitals from
4-12 compliance with the requirements of Chapters 241 or 577 of this
4-13 code.
4-14 Sec. 313.007. MERGERS AND CONSOLIDATIONS INVOLVING
4-15 HOSPITALS. The provisions of this chapter do not apply to any
4-16 agreement among hospitals by which ownership or control over
4-17 substantially all of the stock, assets of activities of one or more
4-18 previously licensed and operating hospitals is placed under the
4-19 control of another licensed hospital or hospitals.
4-20 Sec. 313.008. AUTHORITY TO ADOPT RULES; EFFECTIVE DATE. The
4-21 department shall have the authority to adopt rules to implement the
4-22 requirements of this chapter. Such rules shall be adopted by March
4-23 1, 1994, at which time hospitals may file an application with the
4-24 department for a certification of public advantage.
4-25 SECTION 2. This Act takes effect September 1, 1993.
4-26 SECTION 3. The importance of this legislation and the
4-27 crowded condition of the calendars in both houses create an
4-28 emergency and an imperative public necessity that the
4-29 constitutional rule requiring bills to be read on three several
4-30 days in each house be suspended, and this rule is hereby suspended.
4-31 * * * * *
4-32 Austin,
4-33 Texas
4-34 May 23, 1993
4-35 Hon. Bob Bullock
4-36 President of the Senate
4-37 Sir:
4-38 We, your Committee on Health and Human Services to which was
4-39 referred H.B. No. 1884, have had the same under consideration, and
4-40 I am instructed to report it back to the Senate with the
4-41 recommendation that it do pass and be printed.
4-42 Zaffirini,
4-43 Chair
4-44 * * * * *
4-45 WITNESSES
4-46 FOR AGAINST ON
4-47 ___________________________________________________________________
4-48 Name: Lisa McGiffert x
4-49 Representing: Consumers Union
4-50 City: Austin
4-51 -------------------------------------------------------------------
4-52 Name: Thomas P. Perkins x
4-53 Representing: Texas Attorney General's
4-54 City: Austin
4-55 -------------------------------------------------------------------
4-56 Name: Charles Bailey x
4-57 Representing: Texas Hospital Association
4-58 City: Austin
4-59 -------------------------------------------------------------------