Bill Text: CA SB932 | 2015-2016 | Regular Session | Amended
Bill Title: Health care mergers, acquisitions, and collaborations.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Failed) 2016-11-30 - From committee without further action. [SB932 Detail]
Download: California-2015-SB932-Amended.html
BILL NUMBER: SB 932 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 26, 2016
AMENDED IN SENATE APRIL 11, 2016
INTRODUCED BY Senator Hernandez
FEBRUARY 1, 2016
An act to add Sections 1260.5 and 1375.71 to, and to add Article
10.5 (commencing with Section 1399.65) to Chapter 2.2 of Division 2
of, the Health and Safety Code, and to add Section 10133.651 to the
Insurance Code, relating to health care.
LEGISLATIVE COUNSEL'S DIGEST
SB 932, as amended, Hernandez. Health care mergers, acquisitions,
and collaborations.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975,
provides for the licensure and regulation of health care service
plans by the Department of Managed Health Care and makes a willful
violation of the act a crime. Existing law also provides for the
regulation of health insurers by the Department of Insurance.
Existing law requires every nonprofit health care service plan
applying to restructure, as defined, or convert its activities to
secure the approval of the Director of the Department of Managed
Health Care. Existing law requires the Director of the Department of
Managed Health Care to provide the public notice of, reasonable
access to, and an opportunity to comment on, public records relating
to the restructuring or conversion of a health care service plan.
Existing law requires any nonprofit health care service plan that is
formed under, or subject to, either the Nonprofit Public Benefit
Corporation Law or the Nonprofit Mutual Benefit Corporation Law to
secure the written consent of the Director of the Department of
Managed Health Care prior to any merger. If a health care service
plan proposes a merger, consolidation, acquisition of a controlling
interest, or sale of the plan or all or substantially all of the
assets of the plan, existing law requires the plan to file a notice
of material modification with the Director of the Department of
Managed Health Care, who shall, within 20 business days or additional
time as the plan may specify, approve, disapprove, suspend, or
postpone the effectiveness of the change, subject to specified
procedural requirements.
Existing law requires risk-bearing organizations to provide
certain organizational and financial capacity information to the
Department of Managed Health Care.
This bill would require any person that intends to merge with,
consolidate, acquire, purchase, or control, directly or indirectly,
any health care service plan or risk-bearing organization
to give notice to, and to secure the prior approval from,
the Director of the Department of Managed Health Care. The
bill would require any risk-bearing organization to give notice to,
and to secure the prior approval from, the Director of the Department
of Managed Health Care for any agreement, collaboration,
relationship, or joint venture entered into with another risk-bearing
organization or any other organization, such as a hospital or health
care service plan, for the purpose of increasing the level of
collaboration in the provision of health care services. The
bill would require the director to hold a public hearing and to make
specified findings regarding the proposal prior to approving these
transactions or agreements, transactions,
including that the proposal does not adversely affect
competition. In making this finding, the bill would require the
director to request an advisory opinion from the Attorney General
regarding whether competition would be adversely affected and what
mitigation measures could be adopted to avoid this result.
The bill would require the Attorney General to prepare and submit to
the director an independent health care impact statement to assist
the director in his or her approval of the transaction if the
director determines that a material amount of assets, as defined by
the director by regulation, of a health care service plan or
risk-bearing organization is subject to merger, consolidation,
acquisition, purchase, or control. The bill would authorize
the director to give conditional approval for any transaction
or agreement if the parties to the transaction
or agreement commit to taking action to prevent
adverse impacts on competition, or health care costs, access, and
quality of care in this state.
This bill would prohibit specified provisions in
contracts agreements between health care service
plans or health insurers that contract with providers for
alternative rates of payment and health care
contracting providers, and contracts
agreements between network vendors, as defined, or
payors, as defined, and general acute care hospitals,
hospitals that are contracting providers, as defined,
including a requirement that the health care service plan,
health insurer, or network vendor or payor
includes include in its network any one or more
providers owned or controlled by, or affiliated with, the
health care contracting provider or general
acute care hospital as a condition of allowing the health
care service plan, health insurer, or payor to include in its network
the health care provider or general acute care hospital.
that is a contracting provider. The bill would also prohibit a
contracting provider from imposing these prohibited terms as a
condition to its participation in a network or as a condition to more
favorable contract rates. The bill, commencing January 1,
2017, would provide that any contract provision that violates these
prohibitions in a contract an agreement
entered into, issued, amended, or renewed before, on, or after
January 1, 2017, shall become void and unenforceable.
Because a willful violation of the act is a crime, the bill would
impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1260.5 is added to the Health and Safety Code,
to read:
1260.5. (a) (1) A contract An agreement
between a general acute care hospital that is a
contracting provider and a network vendor or payor
shall not contain, directly or indirectly, any of the following
terms: terms and a contracting
provider shall not impose any of the following terms as a condition
to its participation in a network or as a condition to more favorable
contract rates:
(A) A requirement that the network vendor or payor
includes include in its network any one
or more providers owned or controlled by, or affiliated with, the
general acute care hospital as a condition of allowing the
payor to include in its network the general acute care hospital.
contracting provider.
(B) A requirement that a payor places all members of a
provider group, whether medical group, independent practice
association, organization, health care facility, or other person or
institution licensed or authorized by the state to deliver or furnish
health services, in the same a network vendor or
payor refrain from offering a tiered network plan or place
the contracting provider or any other provider owned,
controlled, or affiliated with the contracting provider in
a particular tier of a tiered network plan.
(C) A provision that sets rates for emergency services by
any general acute care hospital a provider owned,
controlled, or affiliated with a contracting provider not
participating in a the network at a
rate greater than that which is provided for pursuant to subdivision
(d) of Section 1317.2a, and any regulations adopted pursuant to that
section by the Department of Managed Health Care.
(D) A requirement that the network vendor or payor
compensate the general acute care hospital
contracting provider at the contracted rate for services by a
provider acquired by the general acute care hospital
contracting provider or its affiliate
during the term of the contract and with which the network
vendor or payor, at the time of acquisition, has a contract in
effect.
(E) A requirement that the payor or general acute care hospital
submit to binding arbitration, or any other alternative dispute
resolution programs, any claims or causes of action that arise under
state or federal antitrust laws.
(E) A requirement that the network vendor or payor submit
disputes, other than claims for breach of contract, for resolution
through arbitration. A separate and voluntary arbitration agreement
that is negotiated and concluded after the execution of the contract
between the contracting provider and the network vendor or payor and
is not obtained under threat of nonparticipation in the network or
threat of less favorable contract rates shall not be subject to this
provision.
(F) A provision that prohibits offering incentives to subscribers,
enrollees, insureds, or a payor's beneficiaries that
encourages encourage a subscriber, enrollee,
insured, or payor's beneficiary to access health care providers other
than the general acute care hospital,
contracting provider or that creates
create disincentives to access the general acute care
hospital. contracting provider.
(G) A provision that prohibits the disclosure of the contracted
rate between the network vendor or payor and the
general acute care hospital contracting provider or
its affiliates to subscribers, enrollees, insureds, payor's
beneficiaries, or the payor at any time before the
services or products of the general acute care hospital
contracting provider or its affiliates are
utilized and billed.
(2) Commencing January 1, 2017, any contract provision that
violates subparagraphs (A) to (G), inclusive, of paragraph (1) in
a contract an agreement between a
general acute care hospital contracting
provider and a network vendor or payor entered into,
issued, amended, or renewed before, on, or after January 1, 2017,
shall become void and unenforceable.
(b) For purposes of this section, "payor" shall have the
same meaning as set forth in subparagraph (A) of paragraph (3)
subdivision (d) of Section 1395.6. the following
definitions shall apply:
(1) "Contracting provider" means a provider, as that term is
defined in paragraph (4), that has a contract with a network vendor
or payor.
(2) "Network vendor" means a person that enters into one or more
contracts with a provider for discounted rates and other benefits and
makes the discounted rates and other benefits under one or more of
those contracts available to payors.
(3) "Payor" means a person that is financially responsible, in
whole or in part, for paying or reimbursing the cost of health care
services received by beneficiaries of a health care welfare benefit
plan sponsored or arranged by that person.
(4) "Provider" means any medical group, independent practice
association, organization, health care facility, or institution
licensed or authorized by the state to deliver or furnish health
services. Provider does not include a medical group with 10 or fewer
professional persons that is not owned, controlled, or affiliated
with a hospital or health care system.
SEC. 2. Section 1375.71 is added to the Health and Safety Code,
immediately following Section 1375.7, to read:
1375.71. (a) (1) A contract An agreement
between a health care service plan and a health care
contracting provider shall not contain, directly
or indirectly, any of the following terms:
terms and a contracting provider shall not impose any of
the following terms as a condition to its participation in a network
or as a condition to more favorable contract rates:
(A) A requirement that the health care service plan
includes include in its network any one or more
providers owned or controlled by, or affiliated with, the
health care provider as a condition of allowing the health care
service plan to include in its network the health care provider.
contracting provider.
(B) A requirement that a health care service plan places
all members of a provider group, whether medical group, independent
practice association, organization, health care facility, or other
person or institution licensed or authorized by the state to deliver
or furnish health services, in the same refrain
from offering a tiered network plan or place the
contracting provider or any other provider owned, controlled, or
affiliated with the contracting provider in a particular tier
of a tiered network plan.
(C) A provision that sets rates for emergency services by
any health care a provider owned,
controlled, or affiliated with a contracting provider not
participating in a the network at a
rate greater than that which is provided for pursuant to subdivision
(d) of Section 1317.2a, and any regulations adopted pursuant to that
section by the department.
(D) A requirement that the health care service plan compensate the
health care contracting provider at
the contracted rate for services by a provider acquired by the
health care contracting provider
or its affiliate during the term of the contract and with which
the health care service plan, at the time of acquisition, has a
contract in effect.
(E) A requirement that the health care service plan, payor, or
health care provider submit to binding arbitration, or any other
alternative dispute resolution programs, any claims or causes of
action that arise under state or federal antitrust laws.
(E) A requirement that the health care service plan submit
disputes, other than claims for breach of contract, for resolution
through arbitration. A separate and voluntary arbitration agreement
that is negotiated and concluded after the execution of the contract
between the contracting provider and the health care service plan and
is not obtained under threat of nonparticipation in the network or
threat of less favorable contract rates shall not be subject to this
provision.
(F) A provision that prohibits offering incentives to subscribers
or enrollees, or a payor's beneficiaries,
beneficiaries that encourages encourage
an enrollee, subscriber, or payor's beneficiary to access
health care providers other than the health care provider,
contracting provider or that creates
create disincentives to access the
health care contracting provider.
(G) A provision that prohibits the disclosure of the contracted
rate between the health care service plan and the health
care contracting provider or its affiliates
to subscribers, enrollees, payor's beneficiaries, or the payor
at any time before the services or products of the
health care contracting provider
or its affiliates are utilized and billed.
(2) Commencing January 1, 2017, any contract provision that
violates subparagraphs (A) to (G), inclusive, of paragraph (1) in
a contract an agreement between a
health care service plan and a health care
contracting provider entered into, issued, amended, or renewed
before, on, or after January 1, 2017, shall become void and
unenforceable.
(b) For purposes of this section, "health care provider"
the following definitions shall apply:
(1) "Contracting provider" means a provider, as that term is
defined in paragraph (3), that has a contract with a health care
service plan.
(2) "Payor" means a person that is financially responsible, in
whole or in part, for paying or reimbursing the cost of health care
services received by beneficiaries of a health care welfare benefit
plan sponsored or arranged by that person.
(3) "Provider" means any
professional person, medical group, independent practice
association, organization, health care facility, or other
person or institution licensed or authorized by the state
to deliver or furnish health services. Provider does not include
a medical group with 10 or fewer professional persons that is not
owned, controlled, or affiliated with a hospital or health care
system.
SEC. 3. Article 10.5 (commencing with Section 1399.65) is added to
Chapter 2.2 of Division 2 of the Health and Safety Code, to read:
Article 10.5. Mergers and Acquisitions of Health Care
Services Service Plans and Risk-Based
Organizations
1399.65. (a) Any person
that intends to merge with, consolidate, acquire, purchase, or
control, directly or indirectly, any health care service plan
or risk-bearing organization organized and doing
business in this state shall give notice to, and secure the prior
approval from, the director. Any person that intends to merge with,
consolidate, acquire, purchase, or control, directly or indirectly,
any health care service plan shall file an application for licensure
pursuant to Article 3 (commencing with Section 1349) as a health care
service plan under this chapter.
(b) Any risk-bearing organization shall give notice to, and shall
secure the prior approval from, the director for any agreement,
collaboration, relationship, or joint venture entered into with
another risk-bearing organization or any other organization, such as
a hospital or health care service plan, for the purpose of increasing
the level of collaboration in the provision of health care services,
which may include, but are not limited to, each of the following:
(1) Sharing of physician resources in hospital or other ambulatory
settings.
(2) Cobranding.
(3) Expedited transfers to advanced care settings.
(4) The provision of inpatient consultation coverage.
(5) Enhanced electronic access and communications.
(6) Colocated services.
(7) Provision of capital for service site development.
(8) Joint training programs.
(9) Video technology to increase access to expert resources and
sharing of hospitalists or intensivists.
1399.66. (a) Prior to approving any transaction or
agreement described in Section 1399.65, the department
shall do both of the following:
(1) Hold a public hearing on the proposal.
(2) Find that the proposal meets all of the following criteria:
(A) Provides short-term and long-term benefits to purchasers,
subscribers, enrollees, and patients, in the form of lower prices,
better quality, and improved access to care.
(B) Does not adversely affect competition. In making this finding,
the director shall request an advisory opinion from the Attorney
General regarding whether competition would be adversely affected and
what mitigation measures could be adopted to avoid this result.
(C) Does not jeopardize the financial stability of the parties or
prejudice the interests of their purchasers, subscribers, enrollees,
and patients.
(D) Does not result in a significant effect on the availability or
accessibility of existing health care services.
(b) The director may give conditional approval for any transaction
or agreement described in Section 1399.65 if the
parties to the transaction or agreement commit to
taking action to prevent adverse impacts on competition, or health
care costs, access, and quality of care in this state.
1399.67. (a) If the director determines that a material amount of
assets of a health care service plan or risk-bearing organization is
subject to merger, consolidation, acquisition, purchase, or control,
directly or indirectly, the Attorney General shall prepare and
submit to the department an independent health care impact statement
to assist the director in his or her approval of a transaction
described in subdivision (a) of Section 1399.65.
(b) The director shall develop by regulation a definition of a
"material amount of assets" for purposes of this section.
SEC. 4. Section 10133.651 is added to the Insurance Code,
immediately following Section 10133.65, to read:
10133.651. (a) (1) A contract An
agreement between a health insurer and a health care
contracting provider for the provision of
covered benefits at alternative rates of payment to an insured shall
not contain, directly or indirectly, any of the following
terms: terms and a contracting provider shall not
impose any of the following terms as a condition to its participation
in a network or as a condition to more favorable contract rates:
(A) A requirement that the health insurer includes
include in its network any one or more providers
owned or controlled by, or affiliated with, the health care
contracting provider as a condition of allowing
the health insurer to include in its network the health
care contracting provider.
(B) A requirement that a health insurer places all
members of a provider group, whether medical group, independent
practice association, organization, health care facility, or other
person or institution licensed or authorized by the state to deliver
or furnish health services, in the same refrain
from offering a tiered network policy or place the
contracting provider or any other provider owned, controlled, or
affiliated with the contracting provider in a particular tier
of a tiered network plan. policy.
(C) A provision that sets rates for emergency services by
any health care a provider owned,
controlled, or affiliated with a contracting provider not
participating in a the network at a
rate greater than that which is provided for pursuant to subdivision
(d) of Section 1317.2a of the Health and Safety Code, and any
regulations adopted pursuant to that section by the department.
(D) A requirement that the health insurer compensate the
health care contracting provider at the
contracted rate for services by a provider acquired by the
health care contracting provider or its
affiliate during the term of the contract and with which the
health insurer, at the time of acquisition, has a contract in effect.
(E) A requirement that the health insurer, payor, or health care
provider submit to binding arbitration, or any other alternative
dispute resolution programs, any claims or causes of action that
arise under state or federal antitrust laws.
(E) A requirement that the health insurer submit disputes, other
than claims for breach of contract, for resolution through
arbitration. A separate and voluntary arbitration agreement that is
negotiated and concluded after the execution of the contract between
the contracting provider and the health insurer and is not obtained
under threat of nonparticipation in the network or threat of less
favorable contract rates shall not be subject to this provision.
(F) A provision that prohibits offering incentives to insureds or
a payor's beneficiaries, beneficiaries
that encourages encourage an insured or
payor's beneficiary to access health care providers other than the
health care provider, contracting provider
or that creates create
disincentives to access the health care
contracting provider.
(G) A provision that prohibits the disclosure of the contracted
rate between the health insurer and the health care
contracting provider or its affiliates
to insureds, payor's beneficiaries, or the payor at any
time before the services or products of the health
care contracting provider or its affiliates
are utilized and billed.
(2) Commencing January 1, 2017, any contract provision that
violates subparagraphs (A) to (G), inclusive, of paragraph (1) in
a contract an agreement between a
health insurer and a health care contracting
provider entered into, issued, amended, or renewed before, on,
or after January 1, 2017, shall become void and unenforceable.
(b) For purposes of this section, "health care provider"
the following definitions shall apply:
(1) "Contracting provider" means a provider, as that term is
defined in paragraph (3), that has a contract with a health insurer.
(2) "Payor" means a person that is financially responsible, in
whole or in part, for paying or reimbursing the cost of health care
services received by beneficiaries of a health care welfare benefit
plan sponsored or arranged by that person.
(3) "Provider" means any
professional person, medical group, independent practice
association, organization, health care facility, or other person or
institution licensed or authorized by the state to deliver or furnish
health services. Provider does not include a medical group with
10 or fewer professional persons that is not owned, controlled, or
affiliated with a hospital or health care system.
SEC. 5. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
