IML C.S.S.B. 1246 75(R)BILL ANALYSIS PUBLIC HEALTH C.S.S.B. 1246 By: Madla (Berlanga) 5-8-97 Committee Report (Substituted) BACKGROUND The expansion of Medicaid managed care has sparked serious concern about the impact of this transformation on rural health care delivery. Rural community health system legislation has been developed as an alternative to the urban-based Medicaid health maintenance organizations now operating in rural Texas. Insufficient reimbursement, network exclusion, and the loss of patients and health care dollars to urban centers are all factors which threaten the long-term viability of rural health care networks. Rural physicians and hospitals acknowledge the need for budget certainty within the Medicaid program, and they support efforts to enhance Medicaid recipients' health care access and quality. However, there is growing consensus that an alternative model, predicated on local management and control, must be sought to accomplish these goals without sacrificing quality, accessibility, or cost-effectiveness in rural Texas. Legislation is needed to establish a statewide rural health care system (system) to deliver health care services in rural communities. The system will be a statewide, central risk-bearing entity that contracts with locally developed rural community health plans and assumes responsibility for functions such as licensure, reinsurance, information management, claims processing, and actuarial analysis. Local community networks will administer functions such as quality and utilization management, credentialing, and resource allocation. Each local community health plan will deliver the scope of locally available health services and services not available within the community will be externally contracted. The system will be awarded at least one of any state contracts awarded to provide health care services to beneficiaries of a governmental health program to certain rural areas, so long as it satisfies contractual and licensure requirements, and the system will be allowed to contract with both private and public sector insurance programs. PURPOSE CSSB 1246 establishes a statewide rural health care system. RULEMAKING AUTHORITY It is the committee's opinion that this bill grants rulemaking authority to the board of directors of the rural health care system in SECTION 1 (Article 20C.09(a), 20C.11(a), and 20C.12(a), Insurance Code), and to the Commissioner of Insurance in SECTION 1 (Article 20C.15, Insurance Code). Requires the Commissioner of Insurance to adopt necessary rules by January 1, 1998, in SECTION 4(b). SECTION BY SECTION ANALYSIS SECTION 1. Amends the Insurance Code by adding Chapter 20C, STATEWIDE RURAL HEALTH CARE SYSTEM, as follows: Art. 20C.01. SHORT TITLE: Statewide Rural Health Care System Act. Art. 20C.02. DEFINITIONS. Defines "board," "enrollee," "health care services," "hospital provider," "local health care provider," "participating provider," "person," "rural area," "system," and "territorial jurisdiction." Art. 20C.03. ESTABLISHMENT OF SYSTEM. Establishes the statewide rural health care system (system) to arrange for or provide health care services on a prepaid basis to enrollees who reside in rural areas. Art. 20C.04. DESIGNATION AS SYSTEM; QUALIFICATIONS. Requires the commissioner of insurance (commissioner) to designate as the system one organization created under Article 20C.05 of this chapter. Sets forth the standards for eligibility for designation as the system. Requires the system to meet all reserve requirements required by the commissioner; allows the system to fulfill these requirements through the purchase of reinsurance from certain insurance companies. Art. 20C.05. ORGANIZATION OF SYSTEM; APPLICATION OF OTHER LAWS. Requires the system to be a corporation organized under the Texas Non-Profit Corporation Act and composed of a combination of two or more hospital providers that are members of the corporation and located in a rural area. Provides that the system is a unit of local government that is a governmental unit and a local government. Allows the system to enter into interlocal cooperation contracts, and provides that the system is a local government for purposes of that chapter. Art. 20C.06. BOARD. Sets forth the terms under which the system is governed by a board of directors. Establishes the composition of the board and the selection of board members. Requires the participating providers to appoint directors as specified. Requires the governor to appoint directors as specified. Art. 20C.07. TERMS; VACANCIES. Sets forth the conditions under which members of the board serve certain terms, and by which vacancies are filled. Prohibits a member of the board from serving consecutive terms. Art. 20C.08. ADMINISTRATION BY BOARD; COMMITTEES. Requires the board to administer the system and adopt policies and procedures for the system that are consistent with the purposes of this chapter. Allows the board to elect officers, appoint an executive committee, and delegate certain responsibility as specified. Allows the board, on a majority vote, to contract for administrative services or hire an executive director, consultants, attorneys, other professionals, and other staff. Requires the board, if the board hires an executive director for the system, to delegate to the executive director certain duties. Requires the board to appoint an advisory committee composed of certain members, and allows the board to appoint other advisory committees. Provides that a member of an advisory committee is not entitled to compensation for service. Art. 20C.09. MEETINGS; RECORD. Requires the board to adopt rules for the holding of regular and special meetings. Provides that meetings of the board are open to the public in accordance with Chapter 551, Government Code. Provides that this subsection does not require the board to conduct an open meeting to deliberate certain issues. Requires the board to keep a record of its proceedings in accordance with Chapter 551, Government Code. Art. 20C.10. LIMITATION ON AUTHORITY OF PARTICIPATING PROVIDERS; EFFECT OF SALE OR DISSOLUTION. Provides that the authority of the participating providers is limited to certain powers. Requires the net revenue on sale or dissolution of the system to be redistributed as specified. Art. 20C.11. PROVISION OF ADMINISTRATIVE SERVICES. Allows the board to adopt rules regarding the provision of administrative services by the system. Allows the system to enter into contracts or joint ventures to provide administrative services, enter into intergovernmental and interlocal agreements, and provide technical assistance and management services to local health care providers as necessary to deliver health care services. Art. 20C.12. PROVISION OF HEALTH CARE SERVICES. Allows the board to adopt rules to regulate the provision of health care services by the system. Requires the system to contract with or otherwise arrange for local health care providers to deliver health care services to enrollees residing in the rural areas of the territorial jurisdiction of the participants. Allows the system to contract with health care practitioners who are not local health care providers as specified if local providers are unable to provide the type and quality of services needed. Limits certain contracts to networks composed of not more than 19 counties. Art. 20C.13. GIFTS AND GRANTS. Allows the system to accept gifts and grants of money, personal property, and real property to use in the provision of the system's programs and services. Art. 20C.14. MANDATED PROVIDER; EXCEPTION. Requires the state to award to the system at least one of any state contracts awarded to provide health care services to beneficiaries of a governmental health program to the rural areas within the territorial jurisdiction of the participating providers. Provides that this article does not apply to certain contracts. Requires the system to fulfill certain requirements for participation in any state contract. Requires the system to be reimbursed by the Medicaid contracting agency as specified. Art. 20C.15. RULES. Requires the commissioner to adopt rules as necessary to implement this chapter. SECTION 2. Amends Section 2(1), Texas Health Maintenance Organization Act (Article 20A.02, Vernon's Texas Insurance Code), by amending the definition of "person," to include the rural community health care system. SECTION 3. Sets forth the dates by which the terms of the initial members of the board of directors, as designated by the participating providers and the governor, are to expire. SECTION 4. (a) Effective date is September 1, 1997, except as provided by Subsections (b) and (c) of this section. (b) Requires the commissioner to adopt rules not later than January 1, 1998. (c) Requires the system to begin offering health care services not later than March 1, 1998, unless the system determines that it is unprepared to fulfill its obligations. SECTION 5. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE SECTION 1. The following changes are made to SB 1246: In Art. 20C.02, CSSB 1246 adds language to the definition of "local health care provider" to clarify that hospitals that are not members of the non-profit organization can participate in the system as providers. In Art. 20C.04, CSSB 1246 adds permissive language in subsection (b) to allow the system to fulfill reserve requirements as specified. In Art. 20C.08, CSSB 1246 adds "federally qualified health centers" in subsection (f)(6). In Art. 20C.10, CSSB 1246 adds "EFFECT OF SALE OR DISSOLUTION" to the heading, and adds subsection (b) to clarify the dispensation of revenue in the event of sale or dissolution of the system. In Art. 20C.12, CSSB 1246 adds subsection (c) to limit the geographic scope of the local networks to 19 counties. This was added to address concerns regarding effective competition in the rural market. In Art. 20C.14, CSSB 1246 adds references to managed care and the Texas Medical Assistance Program to subsection (a) to clarify and conform with the intent of the bill. Makes other nonsubstantive changes to renumber and redesignate subdivisions and subsections. SECTION 4. CSSB 1246 adds language to subsection (c) to give the system the ability to delay its start-up date if necessary.