81R4452 PB-F

By: Hinojosa S.B. No. 556

A BILL TO BE ENTITLED

AN ACT

relating to requirements for certain contracts with physicians and health care providers.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle F, Title 8, Insurance Code, is amended by adding Chapter 1459 to read as follows:

CHAPTER 1459. REQUIREMENTS FOR CERTAIN CONTRACTS WITH PHYSICIANS

AND HEALTH CARE PROVIDERS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 1459.001. GENERAL DEFINITIONS. In this chapter, unless the context otherwise requires:

(1) "Edit" means a practice or procedure under which an adjustment is made regarding procedure codes that results in:

(A) payment for some, but not all, of the health care procedures performed under a procedure code;

(B) payment made under a different procedure code;

(C) a reduced payment as a result of services provided to a patient that are claimed under more than one procedure code on the same service date;

(D) a reduced payment related to a modifier used with a procedure code; or

(E) a reduced payment based on multiple units of the same procedure code billed for a single date of service.

(2) "Health benefit plan issuer" means an insurance company, association, organization, group hospital service corporation, or health maintenance organization that delivers or issues for delivery an individual, group, blanket, or franchise insurance policy or insurance agreement, a group hospital service contract, or an evidence of coverage that provides health insurance or health care benefits. The term includes:

(A) a life, health, and accident insurance company operating under Chapter 841 or 982;

(B) a general casualty insurance company operating under Chapter 861;

(C) a fraternal benefit society operating under Chapter 885;

(D) a mutual life insurance company operating under Chapter 882;

(E) a local mutual aid association operating under Chapter 886;

(F) a statewide mutual assessment company operating under Chapter 881;

(G) a mutual assessment company or mutual assessment life, health, and accident association operating under Chapter 887;

(H) a mutual insurance company operating under Chapter 883 that writes coverage other than life insurance;

(I) a Lloyd's plan operating under Chapter 941;

(J) a reciprocal exchange operating under Chapter 942; and

(K) a stipulated premium company operating under Chapter 884.

(3) "Health care contract" means a contract entered into or renewed between a health care contractor and a physician or health care provider for the delivery of health care services to others.

(4) "Health care contractor" means an individual or entity whose primary business purpose consists of contracting with physicians or health care providers for the delivery of health care services. The term includes a health benefit plan issuer and an administrator regulated under Chapter 4151.

(5) "Health care provider" means:

(A) an individual licensed or certified in this state to practice pharmacy, chiropractic, nursing, physical therapy, podiatry, dentistry, optometry, occupational therapy, or another healing art; and

(B) an ambulatory surgical center or a licensed pharmacy.

(6) "Line of business" means one of the following products offered by or administered by a health care contractor:

(A) a health care plan offered by a health maintenance organization;

(B) any other contract for the delivery of health care services;

(C) Medicare coverage;

(D) Medicaid coverage;

(E) health care provided under a workers' compensation insurance policy; or

(F) the state child health plan.

(7) "Physician" means:

(A) an individual licensed to engage in the practice of medicine in this state; or

(B) an entity organized under Subchapter B, Chapter 162, Occupations Code.

(8) "Procedure code" means an alphanumeric code used to identify a specific health procedure performed by a health care provider. The term includes:

(A) the American Medical Association's Current Procedural Terminology code, also known as the "CPT code";

(B) the Centers for Medicare and Medicaid Services Health Care Common Procedure Coding System; and

(C) other analogous codes published by national organizations and recognized by the commissioner.

Sec. 1459.002. DEFINITION OF MATERIAL CHANGE. For purposes of this chapter, a "material change" means a change to a contract that decreases the physician's or health care provider's payment or compensation, changes the administrative procedures required under the contract in a way that increases the provider's administrative expense, or adds coverage for a new line of business.

Sec. 1459.003. APPLICABILITY OF CHAPTER. (a) This chapter does not apply to:

(1) an exclusive contract with a single medical group in a specific geographic area to provide or arrange for health care services;

(2) an employment contract or arrangement between physicians or health care providers;

(3) a contract or arrangement entered into by a hospital or health care facility, other than an ambulatory surgical center or a licensed pharmacy, that is licensed or certified under state law; or

(4) contracts for pharmacy benefit management, including a contract with a pharmacy benefit manager under Subchapter D, Chapter 4151.

(b) Notwithstanding Subsection (a)(1) or (2), this chapter applies to contracts for health care services between a medical group and other medical groups.

(c) Notwithstanding Subsection (a)(4), this chapter applies to a contract for health care services between a health care contractor and a pharmacy, a pharmacist, or a professional corporation composed of pharmacies or pharmacists as permitted by the laws of this state.

Sec. 1459.004. CODE OF ETHICS; DISCRIMINATION LAWS. This chapter may not be used to justify any act or omission by a physician or health care provider that is prohibited by any applicable professional code of ethics or a state or federal law prohibiting discrimination against any person.

[Sections 1459.005-1459.050 reserved for expansion]

SUBCHAPTER B. GENERAL CONTRACT REQUIREMENTS

Sec. 1459.051. REQUIREMENTS FOR REIMBURSEMENT ON DISCOUNTED FEE BASIS. (a) A health care contractor may not reimburse a physician or health care provider on a discounted fee basis for covered services furnished to a covered person unless:

(1) the health care contractor has directly contracted with the physician or provider and:

(A) the physician or provider:

(i) has agreed in writing to the terms of the contract for specific payors; and

(ii) has agreed in writing to provide health care services under the terms of the contract;

(B) the health care contractor has agreed in writing to provide coverage for those health care services under the terms of the health benefit plan; and

(C) the contract was in effect at the time the physician or provider furnished the covered services to the insured;

(2) the health care contractor has contracted with a preferred provider organization and:

(A) the preferred provider organization has directly contracted with the physician or provider;

(B) the physician or provider has agreed in writing to the terms of the contract and has agreed in writing to provide health care services under the terms of the contract; and

(C) the physician or provider has actual prior notice of the specific payors who may access the contract rate; or

(3) the health care contractor has contracted with:

(A) any other entity and:

(i) the entity has indirectly contracted with the provider;

(ii) the physician or provider has agreed in writing to the terms of the contract and has agreed in writing to provide health care services under the terms of the contract; and

(iii) the health care contractor can demonstrate that the contractor furnished the physician or provider, before the date on which the contract rate is purchased, leased, or accessed, written notice of the specific contractor's or other entity's right to access the contract rate under a specific contract, and, as applicable, underlying contracts, by demonstrating submission of the notice in compliance with Subsection (b); or

(B) a preferred provider organization that has contracted with any other entity and:

(i) the entity has directly or indirectly contracted with the provider;

(ii) the physician or health care provider has agreed in writing to the terms of the provider contract and has agreed in writing to provide health care services under the terms of the contract; and

(iii) the health care contractor can demonstrate that the contractor furnished the physician or health care provider, before the date on which the contract rate is purchased, leased, or accessed, written notice of the specific contractor's right to access the contract rate under a specific preferred provider organization contract, and, as applicable, underlying contracts, by demonstrating submission of the notice in compliance with Subsection (b).

(b) A health care contractor is presumed to have submitted timely notice of the contractor's right to reimburse the physician or health care provider on a discounted fee basis for covered services furnished to a covered person if the contractor submits a notice to the physician or provider, before the date on which the contractor purchases the discount, that contains the following:

(1) the name of the preferred provider organization or other entity that has the direct contract with the physician or provider;

(2) the date of the contract; and

(3) the address to which the physician or provider may send a letter terminating the contract.

(c) The notice required by Subsection (b) may be provided:

(1) by United States mail, sent first class, return receipt requested, or by overnight delivery;

(2) electronically, if the health care contractor maintains proof of the electronic submission;

(3) by facsimile transmission, if the physician or health care provider accepts facsimile transmissions for the type of notice being sent and the health care contractor maintains proof of the transmission; or

(4) by hand delivery, if the health care contractor maintains proof of the delivery.

Sec. 1459.052. WAIVER OF CERTAIN RIGHTS PROHIBITED. Except as permitted by this chapter, a health care contractor may not require, as a condition of contracting, that a physician or health care provider waive any right or benefit to which the physician or health care provider may be entitled under a state or federal law or regulation that provides legal protections to a person solely based on the person's status as a physician or health care provider providing services in this state.

Sec. 1459.053. EFFECT ON NEW PATIENTS. (a) In this section, "new patient" means an individual who has not received services from a physician or health care provider in the three years immediately preceding the date of the notice under Subsection (b). A patient does not become a "new patient" solely by changing coverage from one health care contractor to another.

(b) On 60 days' notice, a physician or health care provider may decline to provide service under a health care contract to new patients covered by the health care contractor. The notice must state the reasons for the declination.

Sec. 1459.054. EFFECT OF CONTRACT TERMINATION. A contract provision concerning compensation or payment of a physician or health care provider does not survive the termination of a health care contract, other than a provision for continuation of coverage required by law or made with the agreement of the physician or health care provider.

Sec. 1459.055. DISCLOSURE TO THIRD PARTY. A health care contract may not preclude the use of the contract or disclosure of the contract to a third party to enforce this chapter or other state or federal law. The third party is bound by any applicable confidentiality requirements, including those stated in the contract.

Sec. 1459.056. RIGHT TO TERMINATE CONTRACT. In addition to termination rights described under Section 1459.152, a health care contract must provide to each party a right to terminate the contract without cause on at least 90 days' written notice.

Sec. 1459.057. ARBITRATION AGREEMENTS. A health care contract subject to this chapter may include an agreement for binding arbitration.

Sec. 1459.058. ENFORCEMENT. (a) With respect to the enforcement of this chapter, including enforcement through arbitration, a physician or health care provider:

(1) may exercise private rights of action at law and in equity;

(2) is entitled to equitable relief, including injunctive relief;

(3) is entitled to reasonable attorney's fees when the physician or health care provider is the prevailing party in an action to enforce this chapter, except to the extent that the violation of this chapter consisted of a mere failure to make payment under a contract; and

(4) may introduce as persuasive authority prior arbitration awards regarding a violation of this chapter.

(b) An arbitration award related to the enforcement of this chapter may be disclosed to persons who have a bona fide interest in the arbitration.

[Sections 1459.059-1459.100 reserved for expansion]

SUBCHAPTER C. DISCLOSURE OF CONTRACT CHANGES

Sec. 1459.101. NOTICE REGARDING CHANGE TO CONTRACT. (a) A health care contractor must notify each physician and health care provider affected by a change to a health care contract of the change. The notice must include information sufficient for the physician or health care provider to determine the effect of the change.

(b) A change to a health care contract that is administrative only takes effect on the date stated in the notice, which may not be earlier than the 30th day after the date of the notice.

(c) A health care contractor shall provide notice regarding a material change in the manner prescribed by Section 1459.102 and the contract.

Sec. 1459.102. MATERIAL CHANGES; NOTICE. (a) A material change to a contract may be implemented only if the health care contractor provides written notice to the affected physician or health care provider regarding the proposed change at least 90 days before the effective date of the change. The notice must be conspicuously entitled "Notice of Material Change to Contract."

(b) If the physician or health care provider does not object to the material change, the change takes effect in the manner specified in the notice of material change to the contract made under Subsection (a).

(c) If the physician or health care provider objects to the material change not later than the 30th day after the date of the notice under Subsection (a), the change does not take effect, and the objection does not constitute a basis on which the health care contractor may terminate the contract.

[Sections 1459.103-1459.150 reserved for expansion]

SUBCHAPTER D. DISCLOSURE OF OTHER INFORMATION

Sec. 1459.151. SUMMARY DISCLOSURE FORM. (a) Each health care contract must include a summary disclosure form that states, in plain language, the following information:

(1) the terms of the contract governing compensation and payment;

(2) any line of business for which the physician or health care provider is to provide services;

(3) the duration of the contract and how the contract may be terminated;

(4) the identity of the health care contractor responsible for the processing of the physician's or health care provider's claims for compensation or payment;

(5) any internal mechanism required by the health care contractor to resolve disputes that arise under the terms or conditions of the contract;

(6) the subject and order of any addenda to the contract; and

(7) other information as required by this subchapter.

(b) The disclosure form is for informational purposes only and may not be construed as a term or condition of the contract.

(c) The disclosure form must reasonably summarize the applicable contract provisions.

Sec. 1459.152. TERMINATION INFORMATION. (a) A health care contract that provides for termination for cause by either party must state the reasons that may be grounds for termination for cause. The terms must be reasonable.

(b) The contract must state the time by which notice of termination for cause must be provided and to whom the notice must be given.

Sec. 1459.153. INFORMATION REGARDING UTILIZATION REVIEW AND RELATED PROGRAMS. A health care contractor shall identify any utilization review program or management program, quality improvement program, or similar program that the contractor uses to review, monitor, evaluate, or assess the services provided under a contract.

Sec. 1459.154. COMPENSATION INFORMATION; FEE SCHEDULES. (a) The disclosure of payment and compensation terms under Sections 1459.151-1459.153 must include information sufficient for a physician or health care provider to determine the compensation or payment for the physician's or provider's services.

(b) The summary disclosure form under Section 1459.151 must include:

(1) the manner of payment, such as fee-for-service, capitation, or risk sharing;

(2) the methodology used to compute any fee schedule, such as use of a relative value unit system and conversion factor, percentage of Medicare payment system, or percentage of billed charges;

(3) the fee schedule for procedure codes reasonably expected to be billed by the physician or health care provider for services provided under the contract and, on request, the fee schedule for other procedure codes used by, or which may be used by, the physician or health care provider; and

(4) the effect of edits, if any, on payment or compensation.

(c) As applicable, the methodology disclosure under Subsection (b)(2) must include:

(1) the name of any relative value system used;

(2) the version, edition, or publication date of that system;

(3) any applicable conversion or geographic factors; and

(4) the date by which compensation or fee schedules may be changed by the methodology, if allowed under the contract.

(d) The fee schedule described by Subsection (b)(3) must include, as applicable, service or procedure codes and the associated payment or compensation for each code. The fee schedule may be provided electronically.

(e) The health care contractor shall provide the fee schedule described by Subsection (b)(3) to an affected physician or health care provider when a material change related to payment or compensation occurs. Additionally, a physician or health care provider may request that a written fee schedule be provided up to twice annually, and the health care contractor must provide the written fee schedule promptly.

(f) A health care contractor may satisfy the requirement under Subsection (b)(4) regarding the effect of edits by providing a clearly understandable, readily available mechanism that allows a physician or health care provider to determine the effect of an edit on payment or compensation before a service is provided or a claim is submitted.

Sec. 1459.155. REQUIRED INFORMATION AFTER CLAIM PROCESSING. On completion of processing of a claim, a health care contractor shall provide information to the affected physician or health care provider stating how the claim was adjudicated and the responsibility of any party other than the contractor for any outstanding balance.

Sec. 1459.156. PROPOSED CONTRACT; CONFIDENTIALITY. (a) If a proposed contract is presented by a health care contractor for consideration by a physician or health care provider, the contractor shall provide in writing or make reasonably available the information required under Section 1459.154. If the information is not disclosed in writing, the information must be disclosed in a manner that allows the physician or health care provider to timely evaluate the proposed payment or compensation for services under the contract.

(b) The disclosure obligations under this chapter do not prevent a health care contractor from requiring a reasonable confidentiality agreement regarding the terms of a proposed contract.

(c) Notwithstanding Subsections (a) and (b), a contract may be modified by operation of law as required by any applicable state or federal law or regulation, and the health care contractor may disclose this change by any reasonable means.

SECTION 2. (a) A health care contractor that contracts with a physician or health care provider is required to comply with Chapter 1459, Insurance Code, as added by this Act, beginning on January 1, 2010, and shall include the provisions required by that chapter in each health care contract entered into or renewed on or after that date.

(b) A health care contract in existence before January 1, 2010, must comply with the disclosure requirements of Sections 1459.151, 1459.153, 1459.154, and 1459.155, Insurance Code, as added by this Act, not later than January 31, 2010. Chapter 1459, Insurance Code, as added by this Act, may not be construed to require the renegotiation of a contract in existence before January 1, 2010.

SECTION 3. This Act takes effect September 1, 2009.