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A BILL TO BE ENTITLED
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AN ACT
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relating to merger agreements among certain hospitals; imposing |
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fees. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subtitle F, Title 4, Health and Safety Code, is |
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amended by adding Chapter 314A to read as follows: |
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CHAPTER 314A. MERGER AGREEMENTS AMONG CERTAIN HOSPITALS |
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SUBCHAPTER A. GENERAL PROVISIONS |
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Sec. 314A.001. DEFINITIONS. In this chapter: |
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(1) "Attorney general" means the attorney general of |
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Texas or any assistant attorney general acting under the direction |
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of the attorney general of Texas. |
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(2) "Commission" means the Health and Human Services |
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Commission. |
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(3) "Executive commissioner" means the executive |
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commissioner of the Health and Human Services Commission. |
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(4) "Hospital" means a nonpublic general or special |
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hospital licensed under Chapter 241 or a private mental hospital |
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licensed under Chapter 577. |
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(5) "Merger agreement" or "merger" means an agreement |
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among two or more hospitals for the consolidation by merger or other |
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acquisition or transfer of assets by which ownership or control |
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over substantially all of the stock, assets, or activities of one or |
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more previously licensed and operating hospitals is placed under |
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the control of another licensed hospital or hospitals or another |
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entity that controls the hospitals. |
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Sec. 314A.002. APPLICABILITY. This chapter applies only to |
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a merger agreement among hospitals located within a county that: |
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(1) contains two or more hospitals; and |
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(2) has a population of: |
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(A) less than 100,000 and is not adjacent to a |
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county with a population of 250,000 or more; or |
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(B) more than 100,000 and less than 150,000 and |
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is not adjacent to a county with a population of 100,000 or more. |
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Sec. 314A.003. LEGISLATIVE FINDINGS AND PURPOSES; OTHER LAW |
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NOT AFFECTED. (a) The legislature finds that: |
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(1) a merger among hospitals may benefit the public by |
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maintaining or improving: |
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(A) the quality, efficiency, and accessibility |
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of health care services offered to the public; and |
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(B) the ability of hospital administrators to |
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operate health care facilities and take measures to improve public |
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health; and |
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(2) a merger among hospitals may provide the benefits |
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described by Subdivision (1) despite that it may be anticompetitive |
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within the meaning and intent of state and federal antitrust laws. |
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(b) The legislature believes it is in the state's best |
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interest to supplant state and federal antitrust laws with a |
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process for regulatory approval and active supervision by the |
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commission as provided by this chapter. |
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(c) Nothing in this chapter affects antitrust immunity that |
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may be provided through another provision of state law. |
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Sec. 314A.004. RULEMAKING. The executive commissioner |
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shall adopt rules for the administration and implementation of this |
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chapter by the commission. |
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SUBCHAPTER B. CERTIFICATE OF PUBLIC ADVANTAGE |
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Sec. 314A.051. REVIEW AND CERTIFICATION OF MERGER |
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AGREEMENTS REQUIRED. (a) Two or more hospitals may negotiate and |
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enter into a merger agreement, subject to approval by the |
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commission as provided by this subchapter. |
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(b) No merger agreement shall receive immunity under this |
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chapter unless the commission issues a certificate of public |
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advantage governing the merger agreement. |
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Sec. 314A.052. APPLICATION. (a) One or more parties to a |
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merger agreement may submit an application to the commission for a |
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certificate of public advantage governing the merger agreement. |
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The application must include a written copy of the merger agreement |
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and describe the nature and scope of the merger. |
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(b) If an applicant believes the documents or other |
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information required to be submitted with an application under |
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Subsection (a) contains proprietary information that is required to |
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remain confidential, the applicant shall: |
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(1) clearly identify the information; and |
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(2) submit duplicate applications, one application |
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that has complete information for the commission's use and one |
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redacted application that will be made available for public |
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release. |
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(c) A copy of the application and copies of all additional |
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related materials must be submitted to the attorney general and to |
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the commission at the same time. |
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Sec. 314A.053. APPLICATION FEE. The commission may assess |
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a fee for filing an application under Section 314A.052 in an amount |
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not to exceed $75,000. The amount of the fee must be sufficient to |
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cover the reasonable costs of the commission and attorney general |
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in reviewing and approving or denying applications under this |
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subchapter. |
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Sec. 314A.054. REVIEW OF APPLICATION BY COMMISSION; GRANT |
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OR DENIAL OF APPLICATION. (a) The commission shall review an |
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application for a certificate of public advantage in accordance |
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with the standard prescribed by Section 314A.056(a). |
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(b) The commission shall grant or deny the application not |
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later than the 120th day after the date of the filing of the |
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application. The commission's decision must: |
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(1) be in writing; |
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(2) specify the basis for the decision; and |
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(3) provide a copy of the decision to the applicants on |
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the date of the decision. |
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Sec. 314A.055. REVIEW OF APPLICATION BY ATTORNEY GENERAL. |
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(a) The attorney general shall review an application for a |
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certificate of public advantage and all supporting documents and |
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information provided by the applicants. On completion of the |
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review and subject to Subsection (b), the attorney general shall |
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advise the commission whether the proposed merger agreement would |
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likely benefit the public and meet the standard prescribed by |
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Section 314A.056(a). |
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(b) The attorney general shall review an application for a |
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certificate of public advantage as soon as practicable, taking into |
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consideration the deadline prescribed by Section 314A.054. |
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(c) If the attorney general advises the commission to deny |
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an application, the attorney general shall state the basis and |
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reasons for the recommended denial. |
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Sec. 314A.056. ISSUANCE OF CERTIFICATE OF PUBLIC ADVANTAGE. |
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(a) The commission, after reviewing the application and consulting |
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with the attorney general in accordance with Section 314A.055, |
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shall issue a certificate of public advantage for a merger |
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agreement if the commission determines under the totality of the |
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circumstances that: |
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(1) the proposed merger would likely benefit the |
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public by maintaining or improving: |
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(A) the quality, efficiency, and accessibility |
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of health care services offered to the public; and |
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(B) the ability of hospital administrators to |
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operate health care facilities and take measures to improve public |
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health; and |
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(2) the likely benefits resulting from the proposed |
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merger agreement described by Subdivision (1) outweigh any |
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disadvantages attributable to a reduction in competition that may |
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result from the proposed merger. |
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(b) In making the determination under Subsection (a), the |
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commission shall consider the effect of the merger agreement on the |
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following nonexclusive list of factors: |
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(1) the quality and price of hospital and health care |
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services provided to citizens of this state; |
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(2) the preservation of sufficient hospitals within a |
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geographic area to ensure public access to acute care; |
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(3) the cost efficiency of services, resources, and |
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equipment provided or used by the hospitals that are a party to the |
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merger agreement; |
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(4) the ability of health care payors to negotiate |
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payment and service arrangements with hospitals proposed to be |
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merged under the agreement; and |
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(5) the extent of any reduction in competition among |
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physicians, allied health professionals, other health care |
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providers, or other persons providing goods or services to, or in |
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competition with, hospitals. |
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(c) The commission may include terms or conditions of |
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compliance in connection with a certificate of public advantage |
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issued under this subchapter if necessary to ensure that the |
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proposed merger likely benefits the public as specified in |
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Subsections (a)(1) and (2). |
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Sec. 314A.057. RECORDS. The commission shall maintain |
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records of all merger agreements the commission has approved under |
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this chapter, including any terms or conditions of issuing a |
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certificate of public advantage that are imposed by the commission. |
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Sec. 314A.058. TERMINATION OF CERTIFICATE OF PUBLIC |
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ADVANTAGE BY HOSPITAL. A hospital resulting from a merger |
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agreement approved under this chapter may voluntarily terminate its |
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certificate of public advantage by giving the commission notice at |
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least 30 days before the date of the termination. |
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Sec. 314A.059. ANNUAL REVIEW OF CERTIFICATE. (a) The |
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commission shall annually review an approved certificate of public |
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advantage. |
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(b) The attorney general may annually review an approved |
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certificate of public advantage. |
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(c) The commission may not complete its annual review of an |
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approved certificate of public advantage under this section until: |
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(1) the attorney general informs the commission |
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whether the attorney general intends to conduct any review of the |
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certificate of public advantage as authorized under this section; |
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and |
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(2) if the attorney general informs the commission of |
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the attorney general's intent to conduct a review of an entity's |
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approved certificate of public advantage, the attorney general has |
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had the opportunity to conduct the review. |
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SUBCHAPTER C. SUPERVISION OF MERGED HOSPITALS UNDER APPROVED |
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MERGER AGREEMENT |
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Sec. 314A.101. SUPERVISION OF MERGED HOSPITALS. The |
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commission shall supervise in the manner provided by this |
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subchapter each hospital operating under a certificate of public |
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advantage issued under this chapter to ensure that the immunized |
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conduct of a merged entity furthers the purposes of this chapter. |
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Sec. 314A.102. RATE REVIEW. (a) An increase in rates for |
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hospital services by a hospital operating under a certificate of |
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public advantage issued under this chapter may not take effect |
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without prior approval of the commission as provided by this |
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section. |
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(b) At least 90 days before the implementation of any |
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proposed increase in rates for inpatient or outpatient hospital |
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services and, if applicable, at least 60 days before the execution |
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of a reimbursement agreement with a third party payor, a hospital |
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operating under a certificate of public advantage shall submit to |
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the commission: |
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(1) any proposed increase in rates for inpatient and |
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outpatient hospital services; |
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(2) if applicable, any increase in reimbursement rates |
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under a reimbursement agreement with a third party payor; and |
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(3) any information concerning costs, patient volume, |
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acuity, payor mix, and other information requested by the |
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commission. |
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(c) After reviewing the proposed increase in rates |
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submitted under Subsection (b), the commission shall approve or |
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deny the proposed rate increase. The commission shall approve the |
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proposed rate increase if the commission determines that: |
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(1) the proposed rate increase likely benefits the |
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public by maintaining or improving: |
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(A) the quality, efficiency, and accessibility |
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of health care services offered to the public; and |
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(B) the ability of hospital administrators to |
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operate health care facilities and take measures to improve public |
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health; and |
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(2) the proposed rate does not inappropriately exceed |
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competitive rates for comparable services in the hospital's market |
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area. |
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(d) If the commission determines that the proposed rate |
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inappropriately exceeds competitive rates for comparable services |
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in the hospital's market area, and that the proposed rate is |
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inconsistent with the standard prescribed by Section 314A.056(a), |
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the commission shall deny or modify the proposed rate increase. |
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(e) The commission shall notify the hospital in writing of |
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the commission's decision to approve, deny, or modify the proposed |
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rate increase not later than the 30th day before the implementation |
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date of the proposed increase. |
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Sec. 314A.103. ANNUAL REPORT. Each hospital operating |
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under a certificate of public advantage shall submit an annual |
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report to the commission. The report must include: |
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(1) information about the extent of the benefits |
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attributable to the issuance of the certificate of public |
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advantage; |
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(2) if applicable, information about the hospital's |
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actions taken: |
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(A) in furtherance of any commitments made by the |
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parties to the merger; or |
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(B) to comply with terms imposed by the |
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commission as a condition for approval of the merger agreement; |
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(3) a description of the activities conducted by the |
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hospital under the merger agreement; |
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(4) information relating to the price, cost, and |
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quality of and access to health care for the population served by |
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the hospital and the health improvements of that population; and |
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(5) any other information required by the commission |
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to ensure compliance with this chapter, including information |
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relating to compliance with any terms or conditions for issuance of |
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the certificate of public advantage. |
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Sec. 314A.104. CORRECTIVE ACTION PLAN. (a) The commission |
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shall require a hospital operating under a certificate of public |
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advantage to adopt a plan to correct a deficiency in the hospital's |
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activities if the commission determines that an activity of the |
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hospital does not benefit the public as described by Section |
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314A.056(a) and no longer meets the standard prescribed by that |
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subsection. |
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(b) The corrective action plan must include each provision |
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required by the commission and must be submitted at the |
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commission's direction. |
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Sec. 314A.105. SUPERVISION FEE. The commission may assess |
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an annual supervision fee in an amount not to exceed $75,000 against |
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each hospital operating under a certificate of public advantage |
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under this chapter. The amount of the fee must be sufficient to |
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cover the reasonable costs incurred by the commission in |
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supervising hospitals under this subchapter and in implementing and |
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administering this chapter. |
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SUBCHAPTER D. ENFORCEMENT AUTHORITY BY COMMISSION |
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Sec. 314A.151. INVESTIGATION; REVOCATION OF CERTIFICATE. |
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With respect to each hospital resulting from a merger agreement for |
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which the commission issued a certificate of public advantage under |
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this chapter, and to ensure that the hospital's activities continue |
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to benefit the public under the standard prescribed by Section |
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314A.056(a) and the purposes of this chapter, the executive |
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commissioner may: |
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(1) investigate the hospital's activities; and |
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(2) require the hospital to perform a certain action |
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or refrain from a certain action or revoke the hospital's |
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certificate of public advantage, if the commission determines that: |
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(A) the hospital is not complying with this |
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chapter or a term or condition of compliance with the certificate of |
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public advantage governing the hospital's immunized activities; |
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(B) the commission's approval and issuance of the |
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certificate of public advantage was obtained as a result of |
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material misrepresentation; |
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(C) the hospital has failed to pay any fee |
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required under this chapter; or |
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(D) the benefits resulting from the approved |
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merger no longer outweigh the disadvantages attributable to the |
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reduction in competition resulting from the approved merger. |
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Sec. 314A.152. JUDICIAL REVIEW OF COMMISSION ACTION. (a) A |
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person aggrieved by a decision of the commission in granting, |
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denying, or refusing to act on an application for a certificate of |
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public advantage submitted under Subchapter B or revoking a |
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certificate of public advantage issued under this chapter may |
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appeal the final order by filing a petition for judicial review in a |
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district court of Travis County. |
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(b) The filing of a petition for judicial review of a |
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decision by the commission to revoke a certificate of public |
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advantage stays enforcement of the commission's decision. |
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(c) Not later than the 45th day after the date a person files |
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a petition for judicial review under this section, the commission |
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shall submit to the district court the original copy or a certified |
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copy of the entirety of the commission's record regarding the |
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decision under review. By stipulation of all parties, the record |
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may be shortened. The district court may require or permit later |
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corrections or additions to the record. The district court may |
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extend the period prescribed by this subsection for submitting the |
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commission's record to the court. |
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(d) The district court shall conduct the review sitting |
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without a jury. |
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(e) The district court may reverse a decision by the |
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commission regarding revocation of a certificate of public |
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advantage if the court finds that the decision is: |
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(1) in violation of a constitutional or statutory |
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provision; |
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(2) in excess of the commission's statutory authority; |
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(3) made through unlawful procedure; |
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(4) arbitrary or capricious or characterized by abuse |
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of discretion or clearly unwarranted exercise of discretion; or |
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(5) unsupported by substantial and material evidence |
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in light of the record as a whole. |
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(f) Under Subsection (e)(5), in determining the |
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substantiality of the evidence, the district court: |
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(1) shall consider other evidence that detracts from |
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the substantiality; and |
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(2) may not substitute its judgment for the judgment |
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of the commission on the weight of the evidence as to a question of |
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fact. |
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(g) The district court shall issue a written decision |
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setting forth the court's findings of fact and conclusions of law. |
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The commission shall add the court's decision to the commission's |
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record. |
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SUBCHAPTER E. ATTORNEY GENERAL INVESTIGATION AND ENFORCEMENT |
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AUTHORITY |
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Sec. 314A.201. CIVIL INVESTIGATIVE DEMAND. (a) The |
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attorney general, at any time after an application is filed under |
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Section 314A.052 and before the commission makes a determination on |
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the application, or in connection with the commission's annual |
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review of a certificate of public advantage under Section 314A.059, |
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may require by civil investigative demand the attendance and |
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testimony of witnesses and the production of documents in Travis |
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County or the county in which the applicants are located for the |
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purpose of investigating whether the merger agreement satisfies or, |
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after issuance of the certificate of public advantage, continues to |
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satisfy the standard prescribed by Section 314A.056(a). |
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(b) All nonpublic documents produced for and testimony |
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given to the attorney general under Subsection (a) are subject to |
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the prohibitions on disclosure and use under Section 15.10(i), |
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Business & Commerce Code. |
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(c) The attorney general may seek an order from the district |
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court compelling compliance with a civil investigative demand |
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issued under this section. |
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Sec. 314A.202. ACTION TO REVOKE CERTIFICATE OF PUBLIC |
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ADVANTAGE FOLLOWING CHANGED CIRCUMSTANCES. (a) If, following an |
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annual review of a certificate of public advantage, the attorney |
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general determines that as a result of changed circumstances the |
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benefits resulting from a certified merger agreement as described |
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by Section 314A.056(a) no longer outweigh any disadvantages |
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attributable to a reduction in competition resulting from the |
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merger agreement, the attorney general may bring an action in a |
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district court in Travis County seeking to revoke the certificate |
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of public advantage in accordance with the procedures prescribed by |
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this section. |
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(b) Except as provided by Subsection (c), in an action |
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brought under this section, the attorney general has the burden of |
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establishing by clear and convincing evidence that as a result of |
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changed circumstances the benefits resulting from the certified |
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merger agreement and the unavoidable costs of revoking the |
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certificate of public advantage are outweighed by disadvantages |
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attributable to a reduction in competition resulting from the |
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merger agreement. |
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(c) In any action brought under this section, if the |
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attorney general first establishes by clear and convincing evidence |
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that the commission's certification was obtained as a result of |
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material misrepresentation to the commission or the attorney |
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general or as the result of coercion, threats, or intimidation |
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directed toward any party to the merger agreement, then the parties |
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to the merger agreement bear the burden of establishing by clear and |
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convincing evidence that despite changed circumstances the |
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benefits resulting from the certified merger agreement and the |
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unavoidable costs of revoking the certificate of public advantage |
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are not outweighed by disadvantages attributable to a reduction in |
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competition resulting from the merger agreement. |
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SECTION 2. This Act takes effect September 1, 2019. |