BILL NUMBER: SB 932 AMENDED
BILL TEXT
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 and
acquisitions. 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 restructure 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 t he 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 declare the intent of the Legislature to
enact legislation that would require a review of health care mergers
and acquisitions for impacts on health care costs, access, and
quality of care. 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, 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 wou ld 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 between
health care service plans or health insurers that contract with
providers for alternative rates of payment and health care providers,
and contracts between payors, as defined, and general acute care
hospitals, including a requirement that the health care service plan,
health insurer, or payor includes in its network any one or more
providers owned or controlled by, or affiliated with, the health care
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.
The bill, commencing January 1, 2017, would provide that any contract
provision that violates these prohibitions in a contract 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: no
yes . State-mandated local program: no
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 between a general acute care hospital
and a payor shall not contain, directly or indirectly, any of the
following terms:
(A) A requirement that the payor includes 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.
(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 tier of a tiered network plan.
(C) A provision that sets rates for emergency services by any
general acute care hospital not participating in a 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 payor compensate the general acute care
hospital at the contracted rate for services by a provider acquired
by the general acute care hospital during the term of the contract
and with which the 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.
(F) A provision that prohibits offering incentives to subscribers,
enrollees, insureds, or a payor's beneficiaries that encourages a
subscriber, enrollee, insured, or payor's beneficiary to access
health care providers other than the general acute care hospital, or
that creates disincentives to access the general acute care hospital.
(G) A provision that prohibits the disclosure of the contracted
rate between the payor and the general acute care hospital to
subscribers, enrollees, insureds, payor's beneficiaries, or the payor
before the services or products of the general acute care hospital
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 between a general acute care hospital and a 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.
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 between a health care service plan
and a health care provider shall not contain, directly or indirectly,
any of the following terms:
(A) A requirement that the health care service plan includes 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.
(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 tier of a tiered network
plan.
(C) A provision that sets rates for emergency services by any
health care provider not participating in a 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 provider at the contracted rate for services by a
provider acquired by the health care provider 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.
(F) A provision that prohibits offering incentives to subscribers
or enrollees, or a payor's beneficiaries, that encourages an
enrollee, subscriber, or payor's beneficiary to access health care
providers other than the health care provider, or that creates
disincentives to access the health care provider.
(G) A provision that prohibits the disclosure of the contracted
rate between the health care service plan and the health care
provider to subscribers, enrollees, payor's beneficiaries, or the
payor before the services or products of the health care provider 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 between a health care service plan and a health care
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" 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.
SEC. 3. Article 10.5 (co mmencing 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
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 between a health insurer and a
health care 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:
(A) A requirement that the health insurer includes 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
insurer to include in its network the health care 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 tier of a tiered network plan.
(C) A provision that sets rates for emergency services by any
health care provider not participating in a 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 provider at the contracted rate for services by a provider
acquired by the health care provider 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.
(F) A provision that prohibits offering incentives to insureds or
a payor's beneficiaries, that encourages an insured or payor's
beneficiary to access health care providers other than the health
care provider, or that creates disincentives to access the health
care provider.
(G) A provision that prohibits the disclosure of the contracted
rate between the health insurer and the health care provider to
insureds, payor's beneficiaries, or the payor before the services or
products of the health care provider 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 between a health insurer and a health care 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" 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.
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.
SECTION 1. It is the intent of the Legislature
to enact legislation that would require a review of health care
mergers and acquisitions for impacts on health care costs, access,
and quality of care.