Amended in Senate April 11, 2016

Senate Bill No. 932

Introduced by Senator Hernandez

February 1, 2016

An act begin insert 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, end insert relating to health care.

LEGISLATIVE COUNSEL’S DIGEST

SB 932, as amended, Hernandez. Health care begin delete mergers and acquisitions. end delete begin insert mergers, acquisitions, and collaborations. end insert

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. begin insert Existing law also provides for the regulation of health insurers by the Department of Insurance. end insert 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 begin delete restructure end delete begin insert restructuring end insert 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. begin insert 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. end insert

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Existing law requires risk-bearing organizations to provide certain organizational and financial capacity information to the Department of Managed Health Care.

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This bill would begin delete 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. end delete begin insert 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 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. end insert

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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.

end insert begin insert

Because a willful violation of the act is a crime, the bill would impose a state-mandated local program.

end insert begin insert

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.

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This bill would provide that no reimbursement is required by this act for a specified reason.

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Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program:  begin delete no end delete begin insert yes end insert .

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 1260.5 is added to the end insert begin insert Health and Safety
Code end insert begin insert , to read: end insert

begin insert

begin insert 1260.5. end insert   

(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.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 1375.71 is added to the end insert begin insert Health and Safety
Code end insert begin insert , end insert immediately following Section 1375.7 begin insert , to read: end insert

begin insert

begin insert 1375.71. end insert   

(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.

end insert

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Article 10.5 (commencing with Section 1399.65) is
added to Chapter 2.2 of Division 2 of the end insert begin insert Health and Safety Code end insert begin insert ,
to read: end insert

begin insert

 

Article begin insert 10.5. end insert   Mergers and Acquisitions of Health Care Services
Plans and Risk-Based Organizations

 

begin insert 1399.65. end insert   

(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.

begin insert 1399.66. end insert   

(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.

begin insert 1399.67. end insert   

(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.

end insert

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 10133.651 is added to the end insert begin insert Insurance Code end insert begin insert , end insert
immediately following Section 10133.65 begin insert , to read: end insert

begin insert

begin insert 10133.651. end insert   

(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.

end insert

begin insert

begin insert SEC. 5. end insert   

end insert begin insert

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.

end insert

begin delete

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.

end delete