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.
end deleteThis bill would require any person that intends to merge with, consolidate, acquire, purchase, or control, directly or indirectly, any health care service planbegin delete or risk-bearing organizationend delete to give notice to, and to secure the prior approval from, the Director of the Department of Managed Health Care.begin delete 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.end delete The bill would require the director to hold a public hearing and to make specified findings regarding the proposal prior to approving thesebegin delete transactions or agreements,end deletebegin insert transactions,end insert 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.begin delete 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.end delete The bill would authorize the director to give conditional approval for any transactionbegin delete or agreementend delete if the parties to the transactionbegin delete or agreementend delete 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 inbegin delete contractsend deletebegin insert agreementsend insert between health
care service plans or health insurers that contract with providers for alternative rates of payment andbegin delete health careend deletebegin insert
contractingend insert providers, andbegin delete contractsend deletebegin insert agreementsend insert betweenbegin insert network vendors, as defined, orend insert payors, as defined, and general acute carebegin delete hospitals,end deletebegin insert hospitals that are contracting providers, as defined,end insert including a requirement that the health care service plan, health insurer, orbegin insert network vendor orend insert payorbegin delete includesend deletebegin insert
includeend insert in its network any one or more providers owned or controlled by, or affiliated with, thebegin delete health careend deletebegin insert contractingend insert
provider or general acute care hospitalbegin delete 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.end deletebegin insert 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.end insert The bill, commencing January 1, 2017, would provide that any contract provision that violates these prohibitions inbegin delete a contractend deletebegin insert an agreementend insert 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 1260.5 is added to the Health and Safety
2Code, to read:
(a) (1) begin deleteA contract end deletebegin insertAn agreement end insertbetween a general
4acute care hospitalbegin insert that is a contracting providerend insert and abegin insert network
5vendor orend insert payor shall not contain, directly or indirectly, any of the
6followingbegin delete terms:end deletebegin insert terms and
a contracting provider shall not impose
7any of the following terms as a condition to its participation in a
8network or as a condition to more favorable contract rates:end insert
9(A) A requirement that thebegin insert network vendor orend insert payorbegin delete includesend delete
10begin insert includeend insert in its network any one or more providers owned or
11controlled by, or affiliated with, thebegin delete general acute care hospital as begin insert
contracting provider.end insert
P4 1a condition of allowing the payor to include in its network the
2general acute care hospital.end delete
3(B) A requirement thatbegin delete a payor places all members of a provider
4group, whether medical group, independent practice association,
5organization, health care facility, or other person or institution
6licensed or authorized by the state to deliver or furnish health
7services,
in the sameend delete
8offering a tiered network plan or placeend insertbegin insert the contracting provider
9or any other provider owned, controlled, or affiliated withend insertbegin insert the
10contracting provider in a particularend insert tier of a tiered network plan.
11(C) A provision that sets rates for emergency services bybegin delete any begin insert
a provider owned, controlled, or
12general acute care hospitalend delete
13affiliated with a contracting providerend insert not participating inbegin delete aend deletebegin insert theend insert
14
network at a rate greater than that which is provided for pursuant
15to subdivision (d) of Section 1317.2a, and any regulations adopted
16pursuant to that section by the Department of Managed Health
17Care.
18(D) A requirement that thebegin insert network vendor orend insert payor compensate
19thebegin delete general acute care hospitalend deletebegin insert contracting providerend insert at the
20contracted rate for services by a provider acquired by thebegin delete general begin insert contracting
provider or its affiliateend insert during the
21acute care hospitalend delete
22term of the contract and with which thebegin insert network vendor orend insert payor,
23at the time of acquisition, has a contract in effect.
24(E) A requirement that the payor or general acute care hospital
25submit to binding arbitration, or any other alternative dispute
26resolution programs, any claims or causes of action that
arise under
27state or federal antitrust laws.
28
(E) A requirement that the network vendor or payor submit
29disputes, other than claims for breach of contract, for resolution
30through arbitration. A separate and voluntary arbitration
31agreement that is negotiated and concluded after the execution of
32the contract between the contracting provider and the network
33vendor or payor and is not obtained under threat of
34nonparticipation in the network or threat of less favorable contract
35rates shall not be subject to this provision.
36(F) A provision that prohibits offering incentives to subscribers,
37enrollees, insureds, or a payor’s beneficiaries thatbegin delete encouragesend delete
38begin insert
encourageend insert a subscriber, enrollee, insured, or payor’s beneficiary
39to access health care providers other than thebegin delete general acute care begin insert
contracting providerend insert or that
P5 1hospital,end deletebegin delete createsend deletebegin insert createend insert disincentives
2to access thebegin delete general acute care hospital.end deletebegin insert contracting provider.end insert
3(G) A provision that prohibits the disclosure of the contracted
4rate between thebegin insert
network vendor orend insert payor and thebegin delete general acute begin insert contracting provider or its affiliatesend insert to subscribers,
5care hospitalend delete
6enrollees, insureds, payor’s beneficiaries, or the payorbegin insert
at any timeend insert
7 before the services or products of thebegin delete general acute care hospitalend delete
8begin insert contracting provider or its affiliatesend insert are utilized and billed.
9(2) Commencing January 1, 2017, any contract provision that
10violates subparagraphs (A) to (G), inclusive, of paragraph (1) in
11begin delete a contractend deletebegin insert an agreementend insert between abegin delete general
acute care hospitalend delete
12begin insert contracting providerend insert and abegin insert network vendor orend insert payor entered into,
13issued, amended, or renewed before, on, or after January 1, 2017,
14shall become void and unenforceable.
15(b) For purposes of this section,begin delete “payor” shall have the same begin insert the following definitions shall
16meaning as set forth in subparagraph (A) of paragraph (3)
17subdivision (d) of Section 1395.6.end delete
18apply:end insert
19
(1) “Contracting provider” means a provider, as that term is
20defined in paragraph (4), that has a contract with a network vendor
21or payor.
22
(2) “Network vendor” means a person that enters into one or
23more contracts with a provider for discounted rates and other
24benefits and makes the discounted rates and other benefits under
25one or more of those contracts available to payors.
26
(3) “Payor” means a person that is financially responsible, in
27whole or in part, for paying or reimbursing the cost of health care
28services received by beneficiaries of a health care welfare benefit
29plan sponsored or arranged by that
person.
30
(4) “Provider” means any medical group, independent practice
31association, organization, health care facility, or institution
32licensed or authorized by the state to deliver or furnish health
33services. Provider does not include a medical group with 10 or
34fewer professional persons that is not owned, controlled, or
35affiliated with a hospital or health care system.
Section 1375.71 is added to the Health and Safety
37Code, immediately following Section 1375.7, to read:
(a) (1) begin deleteA contract end deletebegin insertAn agreement end insertbetween a health
39care service plan and abegin delete health careend deletebegin insert contractingend insert provider shall not
40contain, directly or indirectly, any of the followingbegin delete terms:end deletebegin insert terms
P6 1and a contracting provider shall not impose any
of the following
2terms as a condition to its participation in a network or as a
3condition to more favorable contract rates:end insert
4(A) A requirement that the health care service planbegin delete includesend delete
5begin insert includeend insert in its network any one or more providers owned or
6controlled by, or affiliated with, thebegin delete health care provider as a begin insert contracting provider.end insert
7condition of allowing the health care service plan to include in its
8network the health care provider.end delete
9(B) A requirement that a health care service planbegin delete places all
10members of a provider group, whether medical group, independent
11practice association, organization, health care facility, or other
12person or institution licensed or
authorized by the state to deliver
13or furnish health services, in the sameend delete
14network plan or placeend insertbegin insert the contracting provider or any other
15provider owned, controlled, or affiliated with the contracting
16provider in a particularend insert tier of a tiered network plan.
17(C) A provision that sets rates for emergency services bybegin delete any begin insert
aend insert providerbegin insert owned, controlled, or affiliated with a
18health careend delete
19contracting providerend insert not participating inbegin delete aend deletebegin insert
theend insert network at a rate
20greater than that which is provided for pursuant to subdivision (d)
21of Section 1317.2a, and any regulations adopted pursuant to that
22section by the department.
23(D) A requirement that the health care service plan compensate
24thebegin delete health careend deletebegin insert contractingend insert provider at the contracted rate for
25services by a provider acquired by thebegin delete health careend deletebegin insert contractingend insert
26 providerbegin insert or its affiliateend insert
during the term of the contract and with
27which the health care service plan, at the time of acquisition, has
28a contract in effect.
29(E) A requirement that the health care service plan, payor, or
30health care provider submit to binding arbitration, or any other
31
alternative dispute resolution programs, any claims or causes of
32action that arise under state or federal antitrust laws.
33
(E) A requirement that the health care service plan submit
34disputes, other than claims for breach of contract, for resolution
35through arbitration. A separate and voluntary arbitration
36agreement that is negotiated and concluded after the execution of
37the contract between the contracting provider and the health care
38service plan and is not obtained under threat of nonparticipation
39in the network or threat of less favorable contract rates shall not
40be subject to this provision.
P7 1(F) A provision that prohibits offering incentives to subscribers
2or enrollees, or a payor’sbegin delete beneficiaries,end deletebegin insert
beneficiariesend insert that
3begin delete encouragesend deletebegin insert
encourageend insert an enrollee, subscriber, or payor’s
4beneficiary to access health care providers other than thebegin delete health begin insert contracting providerend insert or that
5care provider,end deletebegin delete createsend deletebegin insert createend insert
6 disincentives to access thebegin delete health careend deletebegin insert
contractingend insert provider.
7(G) A provision that prohibits the disclosure of the contracted
8rate between the health care service plan and thebegin delete health careend delete
9begin insert contractingend insert providerbegin insert
or its affiliatesend insert to subscribers, enrollees,
10payor’s beneficiaries, or the payorbegin insert at any timeend insert before the services
11or products of thebegin delete health careend deletebegin insert contractingend insert providerbegin insert or its affiliatesend insert
12 are utilized and billed.
13(2) Commencing January 1, 2017, any contract provision that
14violates subparagraphs (A) to (G), inclusive, of paragraph (1) in
15begin delete a contractend deletebegin insert
an agreementend insert between a health care service plan and a
16begin delete health careend deletebegin insert
contractingend insert provider entered into, issued, amended, or
17renewed before, on, or after January 1, 2017, shall become void
18and unenforceable.
19(b) For purposes of this section,begin delete “health care provider”end deletebegin insert the
20following definitions shall apply:end insert
21
(1) “Contracting provider” means a provider, as that term is
22defined in paragraph (3), that has a contract with a health care
23service plan.
24
(2) “Payor” means a person that is financially responsible, in
25whole or in part, for paying or
reimbursing the cost of health care
26services received by beneficiaries of a health care welfare benefit
27plan sponsored or arranged by that person.
28begin insert (3)end insertbegin insert end insertbegin insert“Provider”end insert means anybegin delete professional person,end delete medical group,
29independent practice association, organization, health care facility,
30or otherbegin delete person orend delete institution licensed or authorized by the state to
31deliver or furnish health services.begin insert
Provider does not include a
32medical group with 10 or fewer professional persons that is not
33owned, controlled, or affiliated with a hospital or health care
34system.end insert
Article 10.5 (commencing with Section 1399.65) is
36added to Chapter 2.2 of Division 2 of the Health and Safety Code,
37to read:
begin delete(a)end deletebegin delete end deleteAny person that intends to merge with,
5consolidate, acquire, purchase, or control, directly or indirectly,
6any health care service planbegin delete or risk-bearing organization organized doing business in this state shall give notice to, and secure the
7andend delete
8prior approval from, the director. Any person that intends to merge
9with, consolidate, acquire, purchase, or control, directly or
10indirectly, any health care service plan shall file an application for
11licensure pursuant to Article 3 (commencing with Section 1349)
12as
a health care service plan under this chapter.
13(b) Any risk-bearing organization shall give notice to, and shall
14secure the prior approval from, the director for any agreement,
15collaboration, relationship, or joint venture entered
into with
16another risk-bearing organization or any other organization, such
17as a hospital or health care service plan, for the purpose of
18increasing the level of collaboration in the provision of health care
19services, which may include, but are not limited to, each of the
20following:
21(1) Sharing of physician resources in hospital or other
22ambulatory settings.
23(2) Cobranding.
24(3) Expedited transfers to advanced care settings.
25(4) The provision of inpatient consultation coverage.
26(5) Enhanced electronic access and communications.
27(6) Colocated services.
28(7) Provision of capital for service site development.
29(8) Joint training programs.
30(9) Video technology to increase access to expert resources and
31sharing of hospitalists or intensivists.
(a) Prior to approving any transactionbegin delete or agreementend delete
33 described in Section 1399.65, the department shall do both of the
34following:
35(1) Hold a public hearing on the proposal.
36(2) Find that the proposal meets all of the following criteria:
37(A) Provides short-term and long-term benefits to purchasers,
38subscribers, enrollees, and patients, in the form of lower prices,
39better quality, and improved access to care.
P9 1(B) Does not adversely affect competition. In making this
2finding, the director shall request an advisory opinion from the
3Attorney General regarding whether competition would be
4adversely affected and what mitigation measures could be adopted
5to avoid this result.
6(C) Does not jeopardize the financial stability of the parties or
7prejudice the interests of their purchasers, subscribers, enrollees,
8and patients.
9(D) Does not result in a significant effect on the availability or
10accessibility of existing health care services.
11(b) The director may give conditional approval for any
12transactionbegin delete or agreementend delete described in Section 1399.65 if
the parties
13to the transactionbegin delete or agreementend delete commit to taking action to prevent
14adverse impacts on competition, or health care costs, access, and
15quality of care in this state.
(a) If the director determines that a material amount
17of assets of a health care service plan or risk-bearing organization
18is subject to merger, consolidation, acquisition, purchase, or
19control, directly or indirectly, the Attorney General shall prepare
20and submit to the department an independent health care impact
21statement to assist the director in his or her approval of a
22transaction described in subdivision (a) of Section 1399.65.
23(b) The director shall develop by regulation a definition of a
24“material amount of assets” for purposes of this section.
Section 10133.651 is added to the Insurance Code, 26immediately following Section 10133.65, to read:
(a) (1) begin deleteA contract end deletebegin insertAn agreement end insertbetween a health
28insurer and abegin delete health careend deletebegin insert contractingend insert provider for the provision of
29covered benefits at alternative rates of payment to an insured shall
30not contain, directly or indirectly, any of the followingbegin delete terms:end deletebegin insert
terms
31and a contracting provider shall not impose any of the following
32terms as a condition to its participation in a network or as a
33condition to more favorable contract rates:end insert
34(A) A requirement that the health insurerbegin delete includesend deletebegin insert includeend insert in its
35network any one or more providers owned or controlled by, or
36affiliated with, thebegin delete health careend deletebegin insert contractingend insert provider as a condition
37of allowing the health insurer to include in its network thebegin delete health begin insert
contractingend insert provider.
38careend delete
39(B) A requirement that a health insurerbegin delete places all members of
40a provider group, whether medical group, independent practice
P10 1association, organization, health care facility, or
other person or
2institution licensed or authorized by the state to deliver or furnish
3health services, in the sameend delete
4policy or placeend insertbegin insert the contracting provider or any other provider
5owned, controlled, or affiliated with the contracting provider in
6a particularend insert tier of a tiered networkbegin delete plan.end deletebegin insert policy.end insert
7(C) A provision that sets rates for emergency services bybegin delete any begin insert
aend insert
providerbegin insert owned, controlled, or affiliated with a
8health careend delete
9contracting providerend insert not participating inbegin delete aend deletebegin insert theend insert network at a rate
10greater than that which is provided for pursuant to subdivision (d)
11of Section 1317.2a of the Health and Safety Code, and any
12regulations adopted pursuant to that section by the department.
13(D) A requirement that the health insurer compensate thebegin delete health begin insert contractingend insert provider at the
contracted rate for services by a
14careend delete
15provider acquired by thebegin delete health careend deletebegin insert contractingend insert providerbegin insert or its
16affiliateend insert during the term of the contract and with which the health
17insurer, at the time of acquisition, has a contract in effect.
18(E) A requirement that the health insurer, payor, or health care
19provider submit
to binding arbitration, or any other alternative
20dispute resolution programs, any claims or causes of action that
21arise under state or federal antitrust laws.
22
(E) A requirement that the health insurer submit disputes, other
23than claims for breach of contract, for resolution through
24arbitration. A separate and voluntary arbitration agreement that
25is negotiated and concluded after the execution of the contract
26between the contracting provider and the health insurer and is not
27obtained under threat of nonparticipation in the network or threat
28of less favorable contract rates shall not be subject to this
29provision.
30(F) A provision that prohibits offering incentives to insureds or
31a payor’sbegin delete beneficiaries,end deletebegin insert
beneficiariesend insert thatbegin delete encouragesend deletebegin insert encourageend insert
32 an insured or payor’s beneficiary to access health care providers
33other than thebegin delete health care provider,end deletebegin insert contracting providerend insert or that
34begin delete createsend deletebegin insert createend insert disincentives to access thebegin delete health careend deletebegin insert
contractingend insert
35 provider.
36(G) A provision that prohibits the disclosure of the contracted
37rate between the health insurer and thebegin delete health careend deletebegin insert contractingend insert
38
providerbegin insert
or its affiliatesend insert to insureds, payor’s beneficiaries, or the
39payorbegin insert at any timeend insert before the services or products of thebegin delete health careend delete
40begin insert contractingend insert providerbegin insert or its affiliatesend insert are utilized and billed.
P11 1(2) Commencing January 1, 2017, any contract provision that
2violates subparagraphs (A) to (G), inclusive, of paragraph (1) in
3begin delete a contractend deletebegin insert
an agreementend insert between a health insurer and abegin delete health careend delete
4begin insert
contractingend insert provider entered into, issued, amended, or renewed
5before, on, or after January 1, 2017, shall become void and
6unenforceable.
7(b) For purposes of this section,begin delete “health care provider”end deletebegin insert the
8following definitions shall apply:end insert
9
(1) “Contracting provider” means a provider, as that term is
10defined in paragraph (3), that has a contract with a health insurer.
11
(2) “Payor”
means a person that is financially responsible, in
12whole or in part, for paying or reimbursing the cost of health care
13services received by beneficiaries of a health care welfare benefit
14plan sponsored or arranged by that person.
15begin insert (3)end insertbegin insert end insertbegin insert“Provider”end insert means anybegin delete professional person,end delete medical group,
16independent practice association, organization, health care facility,
17or other person or institution licensed or authorized by the state to
18deliver or furnish health services.begin insert
Provider does not include a
19medical group with 10 or fewer professional persons that is not
20owned, controlled, or affiliated with a hospital or health care
21system.end insert
No reimbursement is required by this act pursuant to
23Section 6 of Article XIII B of the California Constitution because
24the only costs that may be incurred by a local agency or school
25district will be incurred because this act creates a new crime or
26infraction, eliminates a crime or infraction, or changes the penalty
27for a crime or infraction, within the meaning of Section 17556 of
28the Government Code, or changes the definition of a crime within
29the meaning of Section 6 of Article XIII B of the California
30Constitution.
O
97