BILL ANALYSIS

C.S.H.B. 2747

By: Frank

Public Health

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The bill author has informed the committee that in recent years, increased consolidation of health care entities has correlated to diminished competition and increased prices, which negatively impact patients' access to affordable, high-quality care and coverage and that better enforcement of our antitrust laws could prevent certain anticompetitive behavior. The bill author has further informed the committee that the Office of the Attorney General (OAG), which has an antitrust division charged with investigating and prosecuting violations of the Texas Free Enterprise and Antitrust Act and federal antitrust statutes, should monitor material change transactions and conduct studies on the conditions of certain health care markets and the impacts of those transactions on a market. C.S.H.B. 2747 seeks to improve patient access to high-quality, affordable health care and coverage by requiring health care entities to provide the OAG with advanced notice of certain material change transactions, including mergers and acquisitions, and authorizing the OAG to conduct certain related studies.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the attorney general in SECTION 2 of this bill.

ANALYSIS

C.S.H.B. 2747 amends the Business & Commerce Code to require a health care entity to submit written notice to the attorney general of any material change transaction involving the entity not later than 90th day before the date the change is to take effect. The bill requires the attorney general by rule to prescribe the method and form of the written notice. The bill makes a person who violates the requirement liable to the state for a civil penalty in an amount capped at $10,000 for each violation and does the following with respect to the attorney general in relation to the civil penalty:

· authorizes the attorney general to bring an action to recover the penalty and restrain or enjoin a person from violating the notice requirement; and

· requires the attorney general to deposit a civil penalty collected under the bill's provisions in the state treasury to the credit of the general revenue fund.

The bill restricts the appropriation of that money to the attorney general for the purpose of operating the attorney general's antitrust division.

C.S.H.B. 2747 authorizes the attorney general to conduct studies on the following topics:

· the conditions of a health care market in Texas or in a region or political subdivision of Texas, including:

o the degree of health care entity ownership or other concentration, including horizontal and vertical concentration and integration;

o the strength of competitive forces on price and quality of health care services; and

o trends in the price, quality, and availability of health care services; and

· the impacts of completed material change transactions on a market.

The bill authorizes the attorney general, in conducting the required studies, to request that the appropriate state agencies having licensing or oversight authority over health care entities issue a call for nonproprietary documents or other information from health care and other entities involved in the health care market that is necessary to determine market concentration. The bill requires the agency, as soon as practicable after a request is made by the attorney general to make the call for information and forward relevant information the agency receives in the response to the call to the attorney general. The bill requires health care and other entities to provide the requested information not later than the 30th day after the date of such a request.

C.S.H.B. 2747 authorizes the attorney general to assess an administrative penalty in an amount capped at $1,000 against an entity that does not timely submit the requested information. Each day a violation continues is considered a separate violation for purposes of imposing such penalty.

C.S.H.B. 2747 establishes that all documents and other information provided to the attorney general under the bill's provisions, including the required notice, are not public information under state public information law, and may not be released or made public on subpoena or otherwise except as provided by the bill. The bill authorizes the attorney general to release documents or information under the following conditions:

· with the consent of the entity that submitted the information; or

· to an expert or consultant under contract with the attorney general solely for the purpose of conducting or aiding in the creation of a study, provided that the expert or consultant is bound by the same confidentiality requirements as the attorney general.

C.S.H.B. 2747 applies only with respect to the following material change transactions occurring in Texas, whether occurring as a single transaction or a series of related transactions within a consecutive 12-month period:

· a merger that includes one or more health care entities;

· a sale or other acquisition, including by lease, transfer, exchange, option, receipt through conveyance, and creation of a joint venture, of:

o one or more health care entities, including insolvent health care entities; or

o a material amount of the assets or operations relevant to the ownership or control of one or more health care entities;

· a contract or other arrangement, including an association, partnership, or joint venture, that results in a person acquiring direct or indirect control over all or a substantial part of a health care entity's operations or governance;

· the formation of a partnership, joint venture, accountable care organization, parent organization, or management services organization for the purpose of administering contracts with health carriers, third-party administrators, pharmacy benefit managers, or health care providers;

· the sale, purchase, lease, affiliation, or transfer of control of a health care entity's board of directors or other governing body; or

· a real estate sale or lease agreement involving a material amount of health care entity assets, if another party to the sale or agreement is, or will be as a result of the sale or agreement:

o an affiliate of or affiliated with the health care entity; or

o directly or indirectly, in control of, controlled by, or under common control with the health care entity.

The bill does not apply to or with respect to a clinical affiliation of health care entities formed solely to collaborate on clinical trials, a graduate medical education program, an offer of employment to, or the hiring of, not more than one physician, or a material change transaction in which the gross annual revenue of the health care entity party to the transaction with the largest gross annual revenue was less than $5 million in the preceding year.

C.S.H.B. 2747 defines the following terms:

· "health care entity" as a health care provider, health care facility, provider organization, pharmacy benefit manager, or health carrier that offers a health benefit plan in Texas;

· "health care facility" as the following facilities licensed or otherwise authorized to provide health care services in Texas:

o a hospital or other inpatient facility for providing health care services;

o a health system consisting of jointly owned or managed health care entities;

o a licensed skilled nursing facility;

o a licensed ambulatory surgical center;

o a licensed freestanding emergency medical care facility;

o a licensed general residential operation;

o a diagnostic, laboratory, or imaging center;

o an outpatient clinic licensed in Texas to provide health care services; or

o a rehabilitation center or other therapeutic center licensed in Texas to provide health care services;

· "health care provider" as an individual licensed, or otherwise authorized to perform or provide health care services in Texas;

· "health care services" as:

o services provided for the care, prevention, diagnosis, treatment, cure, or relief of a medical, dental, or behavioral health condition, including:

§ inpatient, outpatient, habilitative, rehabilitative, dental, palliative, therapeutic, supportive, home health, or behavioral services provided by a health care entity;

§ retail and specialty pharmacy services, including drugs, devices, and medical supplies provided by a pharmacy; and

§ performance of functions to refer, arrange, or coordinate health care services;

o equipment used to provide such services, including durable medical equipment and diagnostic, infusion, and surgical devices; and

o technology associated with the provision of the specified services and equipment, including telehealth services, telemedicine medical services, electronic health records, software, claims processors, and utilization systems;

· "health carrier" by reference as any entity authorized under the Insurance Code or another state insurance law that provides health insurance or health benefits in Texas, including an insurance company, a group hospital service, and a stipulated premium company;

· "management services organization" as an organization or entity that contracts with a health care provider or provider organization to perform management or administrative services relating to, supporting, or facilitating the provision of health care services;

· "material change transaction" as a transaction that entails a material change to ownership, operations, or governance structure of a legal entity;

· "pharmacy benefit manager" by reference as a person, other than a pharmacy or pharmacist, who acts as an administrator in connection with pharmacy benefits; and

· "provider organization" as an incorporated or unincorporated corporation, partnership, business trust, association, or organized group of persons that is in the business of health care service delivery or management and that represents at least one health care provider in contracting with a health carrier for the payment of health care services, including a physician organization, physician-hospital organization, independent practice association, provider network, accountable care organization, management services organization, or other organization that contracts with a health carrier for the payment of health care services.

The bill establishes that "person" has the meaning assigned by the Texas Free Enterprise and Antitrust Act of 1983.

C.S.H.B. 2747 establishes the following:

· health care patients and consumers benefit when there are robust markets for goods and services, in which providers of coverage and care compete to offer higher quality care and better prices;

· consolidation in health care markets has reduced competition and driven up prices; and

· the purpose of the bill's provisions is to promote competitive markets by strengthening the state's ability to enforce laws and prevent anticompetitive behavior.

EFFECTIVE DATE

September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 2747 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

While both the introduced and substitute require a health care entity to submit written notice to the attorney general of any material change transaction involving the entity, the substitute changes the deadline to submit the written notice from not less than 90 days before the date the change is to take effect, as in the introduced, to not later than the 90th day before the date the change is to take effect.

The substitute omits an authorization from the introduced for the attorney general to recover reasonable attorney's fees and other reasonable expenses incurred in investigating and bringing an action under the bill's provisions.

Both the introduced and the substitute authorize the attorney general to conduct studies on the topic of the conditions of a health care market in Texas or in a region or political subdivision of Texas, including the degree of health care entity ownership or other concentration. However, the substitute specifies that the topic includes horizontal and vertical concentration and integration.

Whereas the introduced authorized the attorney general to request necessary documents or other information from health care and other relevant entities involved in the health care market to conduct the required studies, the substitute does the following:

· authorizes the attorney general to request that the appropriate state agencies having licensing or oversight authority over health care entities issue a call for nonproprietary documents or other information from health care and other entities involved in the health care market that is necessary to determine market concentration; and

· requires the agency, as soon as practicable after a request is made by the attorney general, to make the call for information and forward relevant information the agency receives in the response to the call to the attorney general.

While both the introduced and the substitute establish the applicability of the bill's provisions to certain material change transactions, whether occurring as a single transaction or a series of related transactions within a consecutive 12-month period, those versions differ as follows:

· the substitute includes a specification not in the introduced that those change transactions are occurring in Texas;

· whereas the introduced included in the change transactions a material amount of the assets or operations of one or more health care entities, the substitute specifies that the material amount of the assets or operations be relevant to the ownership or control of one or more health care entities; and

· the introduced included in the change transactions a real estate sale or lease agreement involving a material amount of health care entity assets, whereas the substitute conditions this agreement upon whether another party to the sale or agreement is, or will be as a result of the sale or agreement, an affiliate of or affiliated with the health care entity or directly or indirectly, in control of, controlled by, or under common control with the health care entity.

The substitute includes a provision not in the introduced establishing that the bill's provisions do not apply to a material change transaction in which the gross annual revenue of the health care entity party to the transaction with the largest gross annual revenue was less than $5 million in the preceding year.

Whereas the introduced defined "health care facility" as a facility licensed to provide the specified health care services, the substitute defines the term as those facilities that are licensed or otherwise authorized to provide health care services in Texas.

The substitute changes the definition of "health care provider" from an individual qualified or licensed to perform or provide health care services in Texas, as in the introduced, to an individual licensed or otherwise authorized to perform or provide health care services in Texas.