AN ACT

 1-1     relating to the establishment of a statewide rural health care

 1-2     system.

 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-4           SECTION 1.  The Insurance Code is amended by adding Chapter

 1-5     20C to read as follows:

 1-6              CHAPTER 20C.  STATEWIDE RURAL HEALTH CARE SYSTEM

 1-7           Art. 20C.01.  SHORT TITLE.  This chapter may be cited as the

 1-8     Statewide Rural Health Care System Act.

 1-9           Art. 20C.02.  DEFINITIONS.  In this chapter:

1-10                 (1)  "Board" means the board of directors of the

1-11     system.

1-12                 (2)  "Enrollee" means an individual entitled to receive

1-13     health care services through a health care plan arranged for or

1-14     provided by the system.

1-15                 (3)  "Health care services"  has the meaning assigned

1-16     by Section 2, Texas Health Maintenance Organization Act (Article

1-17     20A.02, Vernon's Texas Insurance Code).

1-18                 (4)  "Hospital provider" means a county hospital,

1-19     county hospital authority, hospital district, municipal hospital,

1-20     or municipal hospital authority.

1-21                 (5)  "Local health care provider" means:

1-22                       (A)  a person licensed, registered, or certified

1-23     as a health care practitioner in this state who resides in or

 2-1     practices in a rural area in which the person provides health care

 2-2     services; or

 2-3                       (B)  a general or specialty hospital that is not

 2-4     a hospital provider under this chapter.

 2-5                 (6)  "Participating provider" means a hospital provider

 2-6     that participates in the system.

 2-7                 (7)  "Person" means an individual, professional

 2-8     association, professional corporation, partnership, limited

 2-9     liability corporation, limited liability partnership, or nonprofit

2-10     corporation, including a nonprofit corporation created under

2-11     Section 5.01(a), Medical Practice Act (Article 4495b, Vernon's

2-12     Texas Civil Statutes).

2-13                 (8)  "Rural area" means:

2-14                       (A)  a county with a population of 50,000 or

2-15     less;

2-16                       (B)  an area that is not delineated as an

2-17     urbanized area by the federal census bureau; or

2-18                       (C)  any other area designated as rural by rules

2-19     adopted by the commissioner.

2-20                 (9)  "System" means the statewide rural health care

2-21     system established by this chapter.

2-22                 (10)  "Territorial jurisdiction" means the geographical

2-23     area in which a participating provider is obligated by law to

2-24     provide health care services.

2-25           Art. 20C.03.  ESTABLISHMENT OF SYSTEM.  The statewide rural

 3-1     health care system is established to arrange for or provide health

 3-2     care services on a prepaid basis to enrollees who reside in rural

 3-3     areas.

 3-4           Art. 20C.04.  DESIGNATION AS SYSTEM; QUALIFICATIONS.

 3-5     (a)  The commissioner shall designate as the system one

 3-6     organization created under Article 20C.05 of this code.  Except as

 3-7     provided by Subsection (b) of this article, to be eligible for

 3-8     designation as the system, the organization must meet each

 3-9     requirement imposed by the Texas Health Maintenance Organization

3-10     Act (Chapter 20A, Vernon's Texas Insurance Code), as if the

3-11     organization were a person under the Act.

3-12           (b)  The system shall meet all reserve requirements required

3-13     by the commissioner.  The system may fulfill the requirements of

3-14     this subsection through the purchase of reinsurance from insurance

3-15     companies approved for that purpose by the commissioner.

3-16           Art. 20C.05.  ORGANIZATION OF SYSTEM; APPLICATION OF OTHER

3-17     LAWS.  (a)  The system must be:

3-18                 (1)  a corporation organized under the Texas Non-Profit

3-19     Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil

3-20     Statutes); and

3-21                 (2)  composed of a combination of two or more hospital

3-22     providers that are members of the corporation and that are located

3-23     in a rural area.

3-24           (b)  The system is:

3-25                 (1)  a unit of local government that is a governmental

 4-1     unit for purposes of Chapter 101, Civil Practice and Remedies Code;

 4-2     and

 4-3                 (2)  a local government for purposes of Chapter 102,

 4-4     Civil Practice and Remedies Code.

 4-5           (c)  The system may enter into interlocal cooperation

 4-6     contracts under Chapter 791, Government Code, and is a local

 4-7     government for purposes of that chapter.

 4-8           Art. 20C.06.  BOARD.  (a)  The system is governed by a board

 4-9     of directors composed of 18 members.  Notwithstanding the Texas

4-10     Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's

4-11     Texas Civil Statutes), the board of directors is selected as

4-12     provided by this chapter.

4-13           (b)  The participating providers shall appoint as

4-14     representatives of the participating providers six directors

4-15     selected in the manner provided by Article 20C.10 of this code.

4-16           (c)  The governor shall appoint six directors from persons

4-17     residing in the territorial jurisdictions of the participating

4-18     providers, including:

4-19                 (1)  two persons who represent employers;

4-20                 (2)  two persons who are local government officials;

4-21     and

4-22                 (3)  two persons who are consumers of health care

4-23     services.

4-24           (d)  In addition to the directors appointed under Subsection

4-25     (c) of this article, the governor shall appoint six directors from

 5-1     among licensed physicians who reside and practice in the

 5-2     territorial jurisdictions of the participating providers.  At least

 5-3     three of the physicians appointed under this subsection must

 5-4     perform as their professional practice the general practice of

 5-5     medicine.

 5-6           (e)  Directors appointed under Subsection (c) or (d) of this

 5-7     article shall be appointed in such a manner as to represent the

 5-8     territorial jurisdictions of all participating providers.

 5-9           Art. 20C.07.  TERMS; VACANCIES.  (a)  The members of the

5-10     board serve staggered six-year terms, with the terms of six members

5-11     expiring February 1 of each odd-numbered year.

5-12           (b)  A member of the board may not serve consecutive terms.

5-13     A person who has served as a member and has left the board at the

5-14     expiration of the person's term is eligible for consideration for

5-15     appointment to the board for a nonconsecutive term.

5-16           (c)  A vacancy on the board is filled for the remainder of

5-17     the unexpired term by appointment by the same entity that appointed

5-18     the director vacating the position.

5-19           Art. 20C.08.  ADMINISTRATION BY BOARD; COMMITTEES.  (a)  The

5-20     board shall administer the system and shall adopt policies and

5-21     procedures for the system that are consistent with the purposes of

5-22     this chapter.  The board may elect officers as it considers

5-23     appropriate.

5-24           (b)  The board may appoint an executive committee as

5-25     determined by the board to be useful in conducting the business of

 6-1     the board.  The board may delegate to the executive committee any

 6-2     responsibility considered reasonable by the board.

 6-3           (c)  An executive committee appointed under this article must

 6-4     be composed of six members, as follows:

 6-5                 (1)  two representatives of the participating

 6-6     providers;

 6-7                 (2)  two persons who are community representatives,

 6-8     including employers, local government officials, or consumers of

 6-9     health care services; and

6-10                 (3)  two physicians who meet the requirements adopted

6-11     under Article 20C.06(d) of this code.

6-12           (d)  On a majority vote, the board may:

6-13                 (1)  contract for administrative services; or

6-14                 (2)  hire an executive director, consultants, attorneys

6-15     and other professionals, and other staff as necessary to implement

6-16     the duties of the system.

6-17           (e)  If the board hires an executive director for the system,

6-18     the board shall delegate to the executive director the authority to

6-19     hire staff for the system and may delegate to the executive

6-20     director other duties determined to be appropriate by the board.

6-21           (f)  The board shall appoint an advisory committee composed

6-22     of:

6-23                 (1)  hospital administrators who represent nonprofit

6-24     and investor-owned facilities;

6-25                 (2)  representatives of hospital districts located in

 7-1     urban areas;

 7-2                 (3)  representatives of health care teaching

 7-3     facilities;

 7-4                 (4)  representatives of health care specialty

 7-5     facilities;

 7-6                 (5)  representatives of medical residency programs in

 7-7     family practice; and

 7-8                 (6)  representatives of rural health clinics, federally

 7-9     qualified health centers, and ambulatory surgical centers.

7-10           (g)  In addition to the advisory committee appointed under

7-11     Subsection (f) of this article, the board may appoint other

7-12     advisory committees as determined to be appropriate by the board.

7-13           (h)  A member of an advisory committee appointed under this

7-14     article is not entitled to compensation for service on the

7-15     committee.

7-16           Art. 20C.09.  MEETINGS; RECORD.  (a)  The board shall adopt

7-17     rules for the holding of regular and special meetings.

7-18           (b)  Meetings of the board are open to the public in

7-19     accordance with Chapter 551, Government Code.  This subsection does

7-20     not require the board to conduct an open meeting to deliberate:

7-21                 (1)  pricing or financial planning information relating

7-22     to a bid or negotiation for arranging or providing services or

7-23     product lines to another person if disclosure of the information

7-24     would give the advantage to competitors;

7-25                 (2)  information relating to a proposed new service,

 8-1     product line, or marketing strategy;

 8-2                 (3)  patient information made confidential under

 8-3     Section 5.08, Medical Practice Act (Article 4495b, Vernon's Texas

 8-4     Civil Statutes), or Subchapter G, Chapter 241, Health and Safety

 8-5     Code; or

 8-6                 (4)  information relating to the credentialing of

 8-7     physicians or peer review made confidential under Section 5.06,

 8-8     Medical Practice Act (Article 4495b, Vernon's Texas Civil

 8-9     Statutes), or Subchapter G, Chapter 241, Health and Safety Code.

8-10           (c)  The board shall keep a record of its proceedings in

8-11     accordance with Chapter 551, Government Code.

8-12           Art. 20C.10.  LIMITATION ON AUTHORITY OF PARTICIPATING

8-13     PROVIDERS; EFFECT OF SALE OR DISSOLUTION.  (a)  The powers of the

8-14     participating providers are limited to:

8-15                 (1)  the election, by a majority vote of the governing

8-16     bodies of the participating providers, of the six members of the

8-17     board of directors of the system to be appointed by the combined

8-18     participating providers under Article 20C.06(b) of this code;

8-19                 (2)  the authorization by a two-thirds vote of the sale

8-20     of the system or substantially all of the assets of the system; and

8-21                 (3)  the removal by a two-thirds vote of any member of

8-22     the board who was appointed by the participating providers.

8-23           (b)  Except as otherwise provided by law, in the event of the

8-24     sale or dissolution of the system or substantially all of the

8-25     assets of the system, the net revenue shall be redistributed on an

 9-1     equal basis to the participating providers after payment of any

 9-2     outstanding debts, liabilities, or other obligations incurred by

 9-3     the system.

 9-4           Art. 20C.11.  PROVISION OF ADMINISTRATIVE SERVICES.  (a)  The

 9-5     board may adopt rules regarding the provision of administrative

 9-6     services by the system.

 9-7           (b)  The system may enter into contracts or joint ventures to

 9-8     provide administrative services under this chapter.

 9-9           (c)  The system may enter into intergovernmental and

9-10     interlocal agreements.

9-11           (d)  The system may provide technical assistance and

9-12     management services to local health care providers as necessary to

9-13     deliver health care services.

9-14           Art. 20C.12.  PROVISION OF HEALTH CARE SERVICES.  (a)  The

9-15     board may adopt rules to regulate the provision of health care

9-16     services by the system.

9-17           (b)  The system shall contract with or otherwise arrange for

9-18     local health care providers to deliver health care services to

9-19     enrollees residing in the rural areas of the territorial

9-20     jurisdiction of the participants.  If those local health care

9-21     providers are unable to provide the type and quality of services

9-22     needed by the enrollees, the system may contract with health care

9-23     practitioners who are not local health care providers.

9-24           (c)  In contracting with or otherwise arranging for local

9-25     health care providers to deliver health care services to rural

 10-1    enrollees, the system may contract only with local health care

 10-2    provider networks that are composed of not more than 19 counties.

 10-3          Art. 20C.13.  GIFTS AND GRANTS.  The system may accept gifts

 10-4    and grants of money, personal property, and real property to use in

 10-5    the provision of the system's programs and services.

 10-6          Art. 20C.14.  MANDATED PROVIDER; EXCEPTION.  (a)  To the

 10-7    extent consistent with federal law, the state shall award to the

 10-8    system at least one of any state managed care contracts awarded to

 10-9    provide health care services to beneficiaries of the Texas Medical

10-10    Assistance Program under Chapter 32, Human Resources Code, in the

10-11    rural areas within the territorial jurisdiction of the

10-12    participating providers.

10-13          (b)  This article does not apply to a contract that expands

10-14    coverage of the Texas Medical Assistance Program under Chapter 32,

10-15    Human Resources Code, to certain children that is implemented

10-16    during the 1997-1998 state fiscal biennium, except that the system

10-17    shall receive a subcontract from the funding entity to provide

10-18    services to those children if the system elects to receive a

10-19    subcontract not later than November 1, 1997, the system provides

10-20    the state share of matching funds for the entire population covered

10-21    by the subcontract, and the subcontract does not cover an area that

10-22    is included in the statutory territorial jurisdiction of a hospital

10-23    district.  If the system elects not to receive a subcontract or to

10-24    provide the state share of matching funds, then any entity that is

10-25    selected by the state Medicaid contracting entity to provide health

 11-1    care to those children shall use local health care providers and

 11-2    hospital providers in establishing its provider network.

 11-3          (c)  As a requirement of participation in any state contract,

 11-4    the system must satisfactorily address the qualifications for

 11-5    arranging to provide health care services to beneficiaries of

 11-6    certain governmental health care programs as delineated in the

 11-7    contractor's request for proposal, including:

 11-8                (1)  readiness reviews and adequacy of credentialing,

 11-9    medical management, quality assurance, claims payment, information

11-10    management, provider and patient education, and complaint and

11-11    grievance procedures; and

11-12                (2)  adequacy of physician and provider networks,

11-13    including such factors as diversity, geographic accessibility,

11-14    inclusion of physicians and other providers that have furnished a

11-15    significant amount of Medicaid or charity care to beneficiaries,

11-16    and tertiary and subspecialty services.

11-17          (d)  The system shall be reimbursed by the Medicaid

11-18    contracting agency at the state-defined capitation rate for each

11-19    service area in which the system operates.

11-20          (e)  It is not a condition of participation for the system to

11-21    accept from the Medicaid contracting agency a capitation rate which

11-22    is lower than the state-defined capitation rate for each service

11-23    area in which the system operates.

11-24          (f)  The state retains the right to cancel a contract awarded

11-25    under this article if the system is sold or dissolved.

 12-1          Art. 20C.15.  RULES.  The commissioner shall adopt rules as

 12-2    necessary to implement this chapter.

 12-3          SECTION 2.  Subsection (l), Section 2, Texas Health

 12-4    Maintenance Organization Act (Article 20A.02, Vernon's Texas

 12-5    Insurance Code), is amended to read as follows:

 12-6          (l)  "Person" means any natural or artificial person,

 12-7    including, but not limited to, individuals, partnerships,

 12-8    associations, organizations, trusts, hospital districts, limited

 12-9    liability companies, limited liability partnerships, [or]

12-10    corporations, or the rural community health care system under

12-11    Chapter 20C, Insurance Code.

12-12          SECTION 3.  In appointing the initial members of the board of

12-13    directors of the statewide rural health care system established

12-14    under Chapter 20C, Insurance Code, as added by this Act:

12-15                (1)  the participating providers shall designate two

12-16    members for terms expiring February 1, 1999, two members for terms

12-17    expiring February 1, 2001, and two members for terms expiring

12-18    February 1, 2003; and

12-19                (2)  of the members appointed under Subsection (c) or

12-20    (d), Article 20C.06, Insurance Code, as added by this Act, the

12-21    governor shall designate two for terms expiring February 1, 1999,

12-22    two for terms expiring February 1, 2001, and two for terms expiring

12-23    February 1, 2003.

12-24          SECTION 4.  (a)  Except as provided by Subsections (b) and

12-25    (c) of this section, this Act takes effect September 1, 1997.

 13-1          (b)  The Commissioner of Insurance shall adopt rules as

 13-2    necessary to implement Chapter 20C, Insurance Code, as added by

 13-3    this Act, not later than January 1, 1998.

 13-4          (c)  The statewide rural health care system established under

 13-5    Chapter 20C, Insurance Code, as added by this Act, shall begin

 13-6    offering health care services under that chapter not later than

 13-7    March 1, 1998, unless the system determines that it is not prepared

 13-8    to fulfill its regulatory or contractual obligations by that date.

 13-9          SECTION 5.  The importance of this legislation and the

13-10    crowded condition of the calendars in both houses create an

13-11    emergency and an imperative public necessity that the

13-12    constitutional rule requiring bills to be read on three several

13-13    days in each house be suspended, and this rule is hereby suspended.

         _______________________________     _______________________________

             President of the Senate              Speaker of the House

               I hereby certify that S.B. No. 1246 passed the Senate on

         April 28, 1997, by a viva-voce vote; and that the Senate concurred

         in House amendments on May 23, 1997, by a viva-voce vote.

                                             _______________________________

                                                 Secretary of the Senate

               I hereby certify that S.B. No. 1246 passed the House, with

         amendments, on May 21, 1997, by a non-record vote.

                                             _______________________________

                                                 Chief Clerk of the House

         Approved:

         _______________________________

                     Date

         _______________________________

                   Governor