S 1233 Session 110 (1993-1994)
S 1233 General Bill, By Bryan
Similar(H 4401, H 4775)
A Bill to amend the Code of Laws of South Carolina, 1976, by adding Article 4,
Chapter 7, Title 44 so as to enact the Health Care Cooperation Act, which
provides for health care cooperative agreements and for the Department of
Health and Environmental Control to certify, regulate, and monitor these
agreements.
03/03/94 Senate Introduced and read first time SJ-5
03/03/94 Senate Referred to Committee on Medical Affairs SJ-5
A BILL
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976,
BY ADDING ARTICLE 4, CHAPTER 7, TITLE 44 SO AS TO
ENACT THE HEALTH CARE COOPERATION ACT, WHICH
PROVIDES FOR HEALTH CARE COOPERATIVE AGREEMENTS
AND FOR THE DEPARTMENT OF HEALTH AND
ENVIRONMENTAL CONTROL TO CERTIFY, REGULATE, AND
MONITOR THESE AGREEMENTS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Chapter 7 of Title 44 of the 1976 Code is amended
by adding:
"Article 4
Health Care Cooperation Act
Section 44-7-500. This article may be known and cited as the
`Health Care Cooperation Act'.
Section 44-7-505. The General Assembly makes the following
findings:
(1) that the cost of improved health technology and scientific
methods contributes significantly to the increasing cost of health care;
(2) that cooperative agreements among hospitals health care
purchasers, and other health care providers would foster improvements
in the quality of health care for South Carolinians, moderate cost
increases, improve access to needed services in rural areas, and
enhance the likelihood that rural hospitals can remain open;
(3) that federal and state antitrust laws may prohibit or discourage
cooperative agreements that are beneficial to South Carolinians and
that such agreements should be encouraged; and
(4) that competition as currently mandated by federal and state
antitrust laws should be supplanted by a regulatory program to permit
and encourage cooperative agreements between hospitals, health care
purchasers, or other health care providers when the benefits outweigh
the disadvantages caused by their potential adverse effects on
competition.
Section 44-7-510. As used in this article:
(1) `Affected persons' means a health care provider or purchaser:
(a) who provides or purchases the same or similar health care
services in the geographic area served or to be served by the
applicants for a certificate of public advantage: or
(b) who has notified the department of his interest in
applications for certificates of public advantage and has a direct
economic interest in the decision. Other than health insurers licensed
in South Carolina, persons from other states who would otherwise be
considered `affected persons' are not included unless that state
provides for similar involvement of persons from South Carolina in a
similar process in that state.
(2) `Certificate of public advantage' means the formal approval,
including any conditions or modifications, by the department of a
contract, business or financial arrangement, or other activities or
practices between two or more health providers, health provider
networks, or health care purchasers that might be construed to be
violations of state or federal antitrust laws.
(3) `Cooperative agreement' means an agreement between two
health providers, health provider networks, or purchasers or among
more than two health care providers, health provider networks, or
purchasers for the sharing, allocation, or referral of patients or the
sharing or allocation of personnel, instructional programs, support
services and facilities, medical, diagnostic or laboratory facilities,
procedures, equipment, or other health care services traditionally
offered by health care facilities or other health care providers or the
acquisition or merger of assets among or by two or more health
providers, health provider networks or health care purchasers, provided
the agreement does not involve price-fixing or predatory pricing.
(4) `Department' means the Department of Health and
Environmental Control.
(5) `Health care provider' means a health care professional
licensed, certified, or registered under the laws of this State, an
organization licensed pursuant to Section 44-69-30 or Section 44-71-30, or a facility licensed pursuant to Section 44-7-260 or Section
44-89-40 to provide health care services or any other person as
defined in Section 44-7-130(15) who provides health services in a
freestanding or mobile facility.
(6) `Health care purchaser' means a person or organization that
purchases health care services on behalf of an identified group of
persons, regardless of whether the cost of coverage of services is paid
for by the purchaser or by the person receiving coverage or services,
including but not limited to:
(a) health insurers as defined by Section 38-71-92;
(b) employee health plans offered by self-insured employers;
(c) group health coverage offered by fraternal organizations,
professional associations, or other organizations;
(d) state and federal health care programs; and
(e) state and local public employee health plans.
(7) `Health provider networks' means an organization of health
care providers which offers health services to residents of this State.
An organization may be a partnership, corporation including an
association, a joint stock company, or any other legal entity recognized
by the State.
(8) `Federal or state antitrust laws' means a federal or state law
prohibiting monopolies or agreements in restraint of trade, including
the Federal Sherman Act and Clayton Act, the Federal Trade
Commission Act, and Chapters 3 and 5 of Title 39 of the 1976 Code.
Section 44-7-520. (A) It is the intent of this article to require the
State to provide direction, supervision, regulation, and control over
approved cooperative agreements through the department and the
Attorney General. This state direction, supervision, regulation, and
control of cooperative agreements will provide immunity for health
care providers, health provider networks, or purchasers who participate
in discussions or negotiations authorized by this article from civil and
criminal prosecution under federal or state antitrust laws.
(B) A health care provider, health provider network, or health care
purchaser may negotiate, enter into, and conduct business pursuant to
a cooperative agreement without being subject to damages, liability,
or scrutiny under any state antitrust law. In addition, conduct in
negotiating and entering into a cooperative agreement for which an
application for a certificate of public advantage is filed in good faith
is immune from challenge or scrutiny under state antitrust laws,
regardless of whether a certificate is issued. It is the intention of the
General Assembly that this article immunizes covered activities from
challenge or scrutiny under federal antitrust laws.
Section 44-7-530. A health care provider, health care purchaser,
or health provider network may negotiate and enter into cooperative
agreements with other health care providers or health provider
networks or health care purchasers if the likely benefits resulting from
the agreements outweigh any likely disadvantages resulting from the
agreements. Parties to a cooperative agreement may apply to the
department for a certificate of public advantage. The application must
include an executed written copy of the cooperative agreement and
describe the nature and scope of the cooperation in the agreement and
any monetary or other consideration passing to a party under the
agreement including change of ownership, merger, or other change in
control of the assets of either party. Information obtained by the
department under this section must be available to the public unless
the department certifies the information as being proprietary. The
department may make this certification where a person shows to the
satisfaction of the department that the information should be
proprietary. The department may require an application fee from the
submitting parties sufficient to cover the cost of processing the
application.
Section 44-7-540. Upon receipt of an application, the department
shall publish in the State Register notice of receipt of the application.
The department shall review the application in accordance with the
standards set forth in Section 44-7-560 and if requested by an affected
person within thirty days of the department's receipt of a completed
application, may hold a public hearing in accordance with regulations
promulgated by the department. Within thirty days of receipt of the
application, the department may request additional information as may
be necessary to complete the application. The applicant has thirty days
from the date of the request to submit the additional information. If
the applicant fails to submit the requested information within the
thirty-day period, the application is considered withdrawn. However,
the department may grant one fifteen-day extension for the applicant
to submit this information. The department shall grant or deny the
application within sixty days after receipt of a completed application
or from the date of the public hearing, if one is requested, and that
decision must be in writing and must set forth the basis for the
decision. The department shall furnish a copy of the decision to the
applicants and any affected persons who have asked to be notified.
The department shall publish its decisions in the State Register.
Section 44-7-550. (A) Upon receipt of a completed application
the department shall forward a copy of the application to the Attorney
General. The Attorney General shall review the request not later than
thirty days after receiving the completed application. The Attorney
General may advise the department, in writing, to approve or deny the
application. Failure by the Attorney General to notify the department
within thirty days of receiving a completed application constitutes a
recommendation for approval of the request. Advisement by the
Attorney General to the department to deny a request shall set forth
the reasons for the denial.
(B) Upon receipt of the advice of the Attorney General or at the
end of the review period outlined in Section 44-7-540, the department
shall issue an order approving or denying the application for a
certificate of public advantage. Upon request from the applicant or an
affected person, the department's order to approve or deny the
application for the certificate is entitled to judicial review in
accordance with the Administrative Procedures Act.
Section 44-7-560. (A) The department shall issue a certificate of
public advantage for a cooperative agreement if it determines that:
(1) the applicants have demonstrated that the likely benefits
resulting from the agreement outweigh the likely disadvantages from
the agreement;
(a) in evaluating the benefits likely to result from the
cooperative agreement, the department shall consider, but is not
limited to:
(i) enhancement of the quality of health and health
related care provided to South Carolina citizens;
(ii) preservation of health care providers close to
communities traditionally served by those providers;
(iii) gains in the cost-efficiency of the services offered by
the health care providers or purchasers involved;
(iv) improvements in the use of health care provider
resources and equipment;
(v) avoidance or elimination or reduction of duplication
of health care resources;
(vi) improvement in access to health care for citizens in
the community;
(vii) support of the agreement by purchasers and payers
in the health service area;
(viii) the extent of financial risk-sharing by the parties as
a result of the agreement;
(ix) the provision or enhancement of health care services
to Medicaid, indigent, or charity care patients by the parties to the
agreement.
(b) In evaluating the disadvantages likely to result from the
agreement, the department shall consider, but is not limited to:
(i) the likely adverse impact, if any, on the ability of the
health care purchasers to negotiate optimal payment and service
arrangements with the health care providers or health provider
networks;
(ii) the extent of any reduction in competition among health
care providers, purchasers, or other persons furnishing goods or
services to or in competition with health care providers or purchasers
that is likely to result directly or indirectly from the health care
cooperative agreement; and
(iii) the likely adverse impact, if any, on patients in the
quality, availability, and price of health care services;
(iv) the extent to which the agreement may increase the
costs of prices of health care at a hospital or other health care provider
which is a party to the agreement;
(v) the extent to which services to Medicaid, indigent, or
charity care patients are adversely impacted by the agreement; and
(2) reduction in competition likely to result from the agreement is
reasonably necessary to obtain the benefits likely to result. In
evaluating whether the reduction in competition is necessary to obtain
the likely benefits, the department shall consider, but is not limited
to:
(a) the availability of arrangements that:
(i) are less restrictive to competition and achieve the same
benefits;
(ii) offer a more favorable balance of benefits over
disadvantages attributable to a reduction in competition likely to result
from the agreement.
(b) the ease with which health care providers or health care
purchasers may obtain contracts with other health plans;
(c) the difficulty in establishing new competing health plans in
the relevant geographic market, including the ability to offer services
requiring a certificate of need or purchasing these services from
another health care provider or health provider network; and
(d) the sufficiency of the number or type of providers under
contract with the health plan available to meet the needs of plan
enrollees.
(B) The department also may establish conditions for approval that
are reasonably necessary to ensure that the cooperative agreement and
the activities engaged under it are consistent with this article and its
purpose to promote cooperation and limit health care costs, protect
against abuse of private economic power, and to ensure that the
activity is appropriately supervised and regulated by the State.
Section 44-7-570. (A) The department shall actively monitor and
regulate agreements approved under this article and may request
information whenever necessary to ensure that the agreements remain
in compliance with the conditions of approval. The department shall
charge an annual fee to cover the cost of monitoring and regulating
these agreements. During the time the certificate is in effect, a report
on the activities pursuant to the cooperative agreement must be filed
with the department every two years so that the department may
determine that the cooperative agreement continues to comply with the
terms of the certificate of public advantage. The department may
revoke a certificate upon a finding that:
(1) the agreement is not in substantial compliance with the terms
of the application or the conditions of approval; or
(2) the likely benefits resulting from the certified agreement no
longer outweigh any disadvantages attributable to any potential
reduction in competition resulting from the agreement; or
(3) the department's certification was obtained as a result of
intentional material misrepresentation to the department or as the result
of coercion, threats, or intimidation toward any party to the
cooperative agreement.
(B) A decision by the department to revoke a certificate of public
advantage is entitled to judicial review in accordance with the
Administrative Procedures Act.
(C) Nothing in this article limits the authority of the Attorney
General to initiate civil enforcement action or criminal prosecution
upon the determination that health care providers, health provider
networks, or health care purchasers have exceeded the scope of the
certificate of public advantage approved by the department. A review
by the Attorney General must be conducted according to the standards
set forth in this article.
Section 44-7-580. The department shall maintain on file all
cooperative agreements for which certificates of public advantage
remain in effect. A dispute among the parties to a cooperative
agreement concerning its meaning or terms is governed by normal
principles of contract or other applicable law. A party to a cooperative
agreement who terminates the agreement shall notify the department
within fifteen days of the termination. If all parties terminate their
participation in the cooperative agreement, the department shall revoke
the certificate of public advantage for the agreement.
Section 44-7-590. Nothing in this or an article exempts health care
providers or purchasers from compliance with the provisions of Article
3 of this chapter concerning certificates of need."
SECTION 2. This act takes effect upon approval by the Governor.
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