This legislation is modeled after Oregon House Bill 2362.
SECTION 1. As used in this section and sections 2 and 3 of this 2021 Act:
(1) “Corporate affiliation” has the meaning prescribed by the state health authority by rule, including:
(a) Any relationship between two organizations that reflects, directly or indirectly, a partial or complete controlling interest or partial or complete corporate control; and
(b) Transactions that merge tax identification numbers or corporate governance.
(2) “Essential services” means:
(a) Services that are funded on the prioritized list described in state staute; and
(b) Services that are essential to achieve health equity.
(3) “Health benefit plan” has the meaning given that term in state statute.
(4)(a) “Health care entity” includes:
(A) An individual health professional licensed or certified in this state;
(B) A hospital, as defined in state statute, or hospital system, as defined by the authority by rule;
(C) A carrier, as defined in state statute, that offers a health benefit plan in this state;
(D) A Medicare Advantage plan;
(E) A coordinated care organization or a prepaid managed care health services organization, as both terms are defined in state statute; and
(F) Any other entity that has as a primary function the provision of health care items or services or that is a parent organization of, or is an entity closely related to, an entity that has as a primary function the provision of health care items or services.
(b) “Health care entity” does not include:
(A) Long term care facilities, as defined in state statute.
(B) Facilities licensed and operated under state statute.
(5) “Health equity” has the meaning prescribed by the state health board or agency and adopted by the authority by rule.
(6)(a) “Material change transaction” means:
(A) A transaction in which at least one party had average revenue of $25 million or more in the preceding three fiscal years and another party:
(i) Had an average revenue of at least $10 million in the preceding three fiscal years; or
(ii) In the case of a new entity, is projected to have at least $10 million in revenue in the first full year of operation at normal levels of utilization or operation as prescribed by the authority by rule.
(B) If a transaction involves a health care entity in this state and an out-of-state entity, a transaction that otherwise qualifies as a material change transaction under this paragraph that may result in increases in the price of health care or limit access to health care services in this state.
(b) “Material change transaction” does not include:
(A) A clinical affiliation of health care entities formed for the purpose of collaborating on clinical trials or graduate medical education programs.
(B) A medical services contract or an extension of a medical services contract.
(C) An affiliation that:
(i) Does not impact the corporate leadership, governance or control of an entity; and
(ii) Is necessary, as prescribed by the authority by rule, to adopt advanced value-based payment methodologies to meet the health care cost growth targets.
(D) Contracts under which one health care entity, for and on behalf of a second health care entity, provides patient care and services or provides administrative services relating to, supporting or facilitating the provision of patient care and services, if the second health care entity:
(i) Maintains responsibility, oversight and control over the patient care and services; and
(ii) Bills and receives reimbursement for the patient care and services.
(E) Transactions in which a participant that is a health center as defined in 42 U.S.C. 254b, while meeting all of the participant’s obligations, acquires, affiliates with, partners with or enters into any agreement with another entity unless the transaction would result in the participant no longer qualifying as a health center under 42 U.S.C. 254b.
(7)(a) “Medical services contract” means a contract to provide medical or mental health services entered into by:
(A) A carrier and an independent practice association;
(B) A carrier, coordinated care organization, independent practice association or network of providers and one or more providers, as defined by state statute;
(C) An independent practice association and an individual health professional or an organization of health care providers;
(D) Medical, dental, vision or mental health clinics; or
(E) A medical, dental, vision or mental health clinic and an individual health professional to provide medical, dental, vision or mental health services.
(b) “Medical services contract” does not include a contract of employment or a contract creating a legal entity and ownership of the legal entity that is authorized under state statute or under any other law authorizing the creation of a professional organization similar to those authorized by state statute, as may be prescribed by the authority by rule.
(8) “Net patient revenue” means the total amount of revenue, after allowance for contractual amounts, charity care and bad debt, received for patient care and services, including:
(a) Value-based payments;
(b) Incentive payments;
(c) Capitation payments or payments under any similar contractual arrangement for the prepayment or reimbursement of patient care and services; and
(d) Any payment received by a hospital to reimburse a hospital assessment under state statute.
(9) “Revenue” means:
(a) Net patient revenue; or
(b) The gross amount of premiums received by a health care entity that are derived from health benefit plans.
(10) “Transaction” means:
(a) A merger of a health care entity with another entity;
(b) An acquisition of one or more health care entities by another entity;
(c) New contracts, new clinical affiliations and new contracting affiliations that will eliminate or significantly reduce, as defined by the authority by rule, essential services;
(d) A corporate affiliation involving at least one health care entity; or
(e) Transactions to form a new partnership, joint venture, accountable care organization, parent organization or management services organization, as prescribed by the authority by rule.
(1) The purpose of this section is to promote the public interest.
(2) In accordance with subsection (1) of this section, the State Health Authority shall adopt by rule criteria approved by the State Health Policy Board for the consideration of requests by health care entities to engage in a material change transaction and procedures for the review of material change transactions under this section.
(3)(a) A notice of a material change transaction involving the sale, merger or acquisition of a domestic health insurer shall be submitted to the Department of Consumer and Business Services, or similar consumer agency, as an addendum to filings required by state statute. The department shall provide to the authority the notice submitted under this subsection to enable the authority to conduct a review in accordance with subsections (5) and (7) of this section.
The authority shall notify the department of the outcome of the authority’s review.
(b) The department shall make the final determination in material change transactions involving the sale, merger or acquisition of a domestic health insurer and shall coordinate with the authority to incorporate the authority’s review into the department’s final determination.
(4) An entity shall submit to the authority a notice of a material change transaction, other than a transaction described in subsection (3) of this section, in the form and manner prescribed by the authority, no less than 180 days before the date of the transaction and shall
pay a fee prescribed in section 4 of this 2021 Act.
(5) No later than 30 days after receiving a notice described in subsections (3) and (4) of this section, the authority shall conduct a preliminary review to determine if the transaction has the potential to have a negative impact on access to affordable health care in this state and meets the criteria in subsection (9) of this section.
(6) Following a preliminary review, the authority or the department shall approve a transaction or approve a transaction with conditions designed to further the goals described in subsection (1) of this section based on criteria prescribed by the authority by rule, including but not limited to:
(a) If the transaction is in the interest of consumers and is urgently necessary to maintain the solvency of an entity involved in the transaction; or
(b) If the authority determines that the transaction does not have the potential to have a negative impact on access to affordable health care in this state or the transaction is likely to meet the criteria in subsection (9) of this section.
(7)(a) Except as provided in paragraph (b) of this subsection, if a transaction does not meet the criteria in subsection (6) of this section, the authority shall conduct a comprehensive review and may appoint a review board of stakeholders to conduct a comprehensive review and make recommendations as provided in subsections (11) to (18) of this section. The authority shall complete the comprehensive review no later than 180 days after receipt of the
notice unless the parties to the transaction agree to an extension of time.
(b) The authority or the department may intervene in a transaction described in section 1 (6)(a)(C) of this 2021 Act in which the final authority rests with another state and, if the transaction is approved by the other state, may place conditions on health care entities operating in this state with respect to the insurance or health care industry market in this
state, prices charged to patients residing in this state and the services available in health care facilities in this state, to serve the public good.
(8) The authority shall prescribe by rule:
(a) Criteria to exempt an entity from the requirements of subsection (4) of this section if there is an emergency situation that threatens immediate care services and the transaction is urgently needed to protect the interest of consumers;
(b) Provision for the authority’s failure to complete a review under subsection (5) of this section within 30 days; and
(c) Criteria for when to conduct a comprehensive review and appoint a review board under subsection (7) of this section that must include, but is not limited to:
(A) The potential loss or change in access to essential services;
(B) The potential to impact a large number of residents in this state; or
(C) A significant change in the market share of an entity involved in the transaction.
(9) A health care entity may engage in a material change transaction if, following a comprehensive review conducted by the authority and recommendations by a review board appointed under subsection (7) of this section, the authority determines that the transaction meets the criteria adopted by the department by rule under subsection (2) of this section and:
(a)(A) The parties to the transaction demonstrate that the transaction will benefit the public good and communities by:
(i) Reducing the growth in patient costs in accordance with the health care cost growth targets established under state statute or maintain a rate of cost growth that exceeds the target that the entity demonstrates is the best interest of the public;
(ii) Increasing access to services in medically underserved areas; or
(iii) Rectifying historical and contemporary factors contributing to a lack of health equities or access to services; or
(B) The transaction will improve health outcomes for residents of this state; and
(b) There is no substantial likelihood of anticompetitive effects from the transaction that outweigh the benefits of the transaction in increasing or maintaining services to underserved populations.
(10) The authority may suspend a proposed material change transaction if necessary to conduct an examination and complete an analysis of whether the transaction is consistent with subsection (9) of this section and the criteria adopted by rule under subsection (2) of this section.
(11)(a) A review board convened by the authority under subsection (7) of this section must consist of members of the affected community, consumer advocates and health care experts. No more than one-third of the members of the review board may be representatives of institutional health care providers. The authority may not appoint to a review board an individual who is employed by an entity that is a party to the transaction that is under review or is employed by a competitor that is of a similar size to an entity that is a party to the transaction.
(b) A member of a review board shall file a notice of conflict of interest and the notice shall be made public.
(12) The authority may request additional information from an entity that is a party to the material change transaction, and the entity shall promptly reply using the form of communication requested by the authority and verified by an officer of the entity if required by the authority.
(13)(a) An entity may not refuse to provide documents or other information requested under subsection (4) or (12) of this section on the grounds that the information is confidential.
(b) Material that is privileged or confidential may not be publicly disclosed if:
(A) The authority determines that disclosure of the material would cause harm to the public;
(B) The material may not be disclosed, nor is the material subject to disclosure under state statute.
(c) The authority shall maintain the confidentiality of all confidential information and documents that are not publicly available that are obtained in relation to a material change transaction and may not disclose the information or documents to any person, including a member of the review board, without the consent of the person who provided the information or document. Information and documents described in this paragraph are exempt from disclosure under state statute.
(14) The authority or the Department of Justice may retain actuaries, accountants or other professionals independent of the authority who are qualified and have expertise in the type of material change transaction under review as necessary to assist the authority in conducting the analysis of a proposed material change transaction. The authority or the Department of Justice shall designate the party or parties to the material change transaction that shall bear the reasonable and actual cost of retaining the professionals.
(15) A review board may hold up to two public hearings to seek public input and otherwise engage the public before making a determination on the proposed transaction. A public hearing must be held in the service area or areas of the health care entities that are parties to the material change transaction. At least 10 days prior to the public hearing, the authority shall post to the authority’s website information about the public hearing and materials related to the material change transaction, including:
(a) A summary of the proposed transaction;
(b) An explanation of the groups or individuals likely to be impacted by the transaction;
(c) Information about services currently provided by the health care entity, commitments by the health care entity to continue such services and any services that will be reduced or eliminated;
(d) Details about the hearings and how to submit comments, in a format that is easy to find and easy to read; and
(e) Information about potential or perceived conflicts of interest among executives and
members of the board of directors of health care entities that are parties to the transaction.
(16) The authority shall post the information described in subsection (15)(a) to (d) of this section to the authority’s website in the languages spoken in the area affected by the material change transaction and in a culturally sensitive manner.
(17) The authority shall provide the information described in subsection (15)(a) to (d) of this section to:
(a) At least one newspaper of general circulation in the area affected by the material change transaction;
(b) Health facilities in the area affected by the material change transaction for posting by the health facilities; and
(c) Local officials in the area affected by the material change transaction.
(18) A review board shall make recommendations to the authority to approve the material change transaction, disapprove the material change transaction or approve the material change transaction subject to conditions, based on subsection (9) of this section and the criteria adopted by rule under subsection (2) of this section. The authority shall issue a proposed order and allow the parties and the public a reasonable opportunity to make written exceptions to the proposed order. The authority shall consider the parties’ and the public’s written exceptions and issue a final order setting forth the authority’s findings and rationale for adopting or modifying the recommendations of the review board. If the authority modifies the recommendations of the review board, the authority shall explain the modifications in the final order and the reasons for the modifications. A party to the material change transaction may contest the final order as provided in state statute.
(19) A health care entity that is a party to an approved material change transaction shall notify the authority upon the completion of the transaction in the form and manner prescribed by the authority. One year, two years and five years after the material change transaction is completed, the authority shall analyze:
(a) The health care entities’ compliance with conditions placed on the transaction, if any;
(b) The cost trends and cost growth trends of the parties to the transaction; and
(c) The impact of the transaction on the health care cost growth target established under state statute.
(20) The authority shall publish the authority’s analyses and conclusions under subsection (19) of this section and shall incorporate the authority’s analyses and conclusions under subsection (19) of this section in the report described in state statute.
(21) This section does not impair, modify, limit or supersede the applicability of relevant state statutes.
(22) Whenever it appears to the Director of the State Health Authority, or similar agency, that any person has committed or is about to commit a violation of this section or any rule or order issued by the authority under this section, the director may apply to a court of appropriate jurisdiction for an order enjoining the person, and any director, officer, employee or agent of the person, from the violation, and for such other equitable relief as the nature of the case and
the interest of the public may require.
(23) The remedies provided under this section are in addition to any other remedy, civil or criminal, that may be available under any other provision of law.
(24) The authority may adopt rules necessary to carry out the provisions of this section.
(1) An officer or employee of the State Health Authority, or similar agency, who is delegated responsibilities in the enforcement of section 2 of this Act or rules adopted pursuant to section 2 of this Act may not:
(a) Be a director, officer or employee of or be financially interested in an entity that is a party to a proposed material change transaction except as an enrollee or patient of a health care entity or by reason of rights vested in compensation or benefits related to services performed prior to affiliation with the authority; or
(b) Be engaged in any other business or occupation interfering with or inconsistent with the duties of the authority.
(2) This section does not permit any conduct, affiliation or interest that is otherwise prohibited by public policy.
(1) The State Health Authority, or similar agency, shall prescribe by rule a fee to be paid under section 2 (3) of this Act, proportionate to the size of the parties to the transaction, sufficient to reimburse the costs of administering section 2 of this Act.
(2) Moneys received by the authority under this section shall be deposited to the State Health Authority Fund, or similar fund, established by state statute or administrative rule to be used for carrying out section 2 of this Act.
(1) In addition to any other penalty imposed by law, the Director of the
State Health Authority, or similar agency, may impose a civil penalty, as determined by the director, for a violation of state statute or section 2 of this Act. The amount of the civil penalty may not exceed $10,000 for each offense. The civil penalty imposed on an individual health professional may not exceed $1,000 for each offense.
(2) Civil penalties shall be imposed and enforced in accordance with state statute.
(3) Moneys received by the State Health Authority under this section shall be paid to the State Treasury and credited to the General Fund.
Every four years, the State Health Authority, or similar agency, shall commission a study of the impact of health care consolidation in this state. The study must review consolidation occurring during the previous four-year period and include an analysis of:
(1) The impact on costs to consumers for health care either to the benefit or the detriment of consumers; and
(2) Any increases or decreases in the quality of care, including:
(a) Improvement or reductions in morbidity;
(b) Improvement or reductions in the management of population health;
(c) Changes to health and patient outcomes, particularly for underserved and uninsured individuals, recipients of medical assistance and other low-income individuals and individuals living in rural areas, as measured by nationally recognized measures of the quality of health care, such as measures used or endorsed by the National Committee for Quality Assurance, the National Quality Forum, the Physician Consortium for Performance Improvement or the Agency for Healthcare Research and Quality.
The State Health Authority, or similar agency, shall commission the first study under section 6 of this Act no later than five years after enactment of this Act.