H 4401 Session 110 (1993-1994)
H 4401 General Bill, By J.H. Hodges, Allison, R.S. Corning, Delleney, Jennings,
I.K. Rudnick and Wilkes
Similar(S 1233, 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 of 1994,
which provides for health care cooperative agreements and for the Department
of Health and Environmental Control to certify, regulate, and monitor these
agreements.
12/15/93 House Prefiled
12/15/93 House Referred to Committee on Labor, Commerce and Industry
01/11/94 House Introduced and read first time HJ-43
01/11/94 House Referred to Committee on Labor, Commerce and
Industry HJ-43
01/19/94 House Recalled from Committee on Labor, Commerce and
Industry HJ-50
01/19/94 House Committed to Committee on Judiciary HJ-50
02/09/94 House Committee report: Majority favorable with amend.,
minority unfavorable Judiciary HJ-21
COMMITTEE REPORT
February 9, 1994
H. 4401
Introduced by REPS. Hodges, Jennings, Allison, Wilkes, Rudnick,
Delleney and Corning
S. Printed 2/9/94--H.
Read the first time January 11, 1994.
THE COMMITTEE ON JUDICIARY
To whom was referred a Bill (H. 4401), 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, etc., respectfully
REPORT:
That they have duly and carefully considered the same, and
recommend that the same do pass with amendment:
Amend the bill, as and if amended, by striking all after the enacting
words and inserting:
/"Article 4
Health Care Cooperation Act of 1994
Section 44-7-500. This article may be known and cited as the
`Health Care Cooperation Act of 1994'.
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; and
(viii) the extent of financial risk-sharing by the parties as a
result of 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; 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./
Renumber sections to conform.
Amend title to conform.
Majority favorable. Minority unfavorable.
JAMES H. HODGES DONALD W. BEATTY
For Majority. For Minority.
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 OF 1994,
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 of 1994
Section 44-7-500. This article may be known and cited as the
`Health Care Cooperation Act of 1994'.
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 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 or between
hospitals and others 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
who provides or purchases health care services in the geographic area
served or to be served by the applicants for a certificate of public
advantage and who has notified the department of his interest in
applications for certificates of public advantage. 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 that might be construed
to be violations of state or federal antitrust laws.
(3) `Cooperative agreement' means an agreement between two
health providers or among more than two health care providers 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 the acquisition or merger of assets among or by two or more health
providers, 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) `Accountable health plan' means an organization that integrates
health care providers and facilities and assumes financial risk in order
to provide care or services. An accountable health plan may be created
by health providers, health maintenance organizations, or health
insurers.
(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 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 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 or accountable health plan
may negotiate and enter into cooperative agreements with other health
care providers or accountable health plans 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. The department may require an
application fee from the submitting parties sufficient to cover the cost of
processing the application.
Section 44-7-540. 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, may hold a public hearing in
accordance with regulations promulgated by the department. The
department shall grant or deny the application within ninety days after
receipt of a completed application 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 the 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 its receipt. 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
constitutes 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 thirty-day period, but not later than ninety days after receipt of the
application, the department shall issue an order approving or denying the
application for a certificate of public advantage. 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 facilities close to
communities traditionally served by those facilities;
(iii) gains in the cost-efficiency of the services offered by
the health care facilities involved;
(iv) improvements in the use of health care facility
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.
(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;
(ii) the extent of any reduction in competition among health
care providers or other persons furnishing goods or services to or in
competition with health care providers 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; and
(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; 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,
the availability of arrangements that:
(a) are less restrictive to competition and achieve the same
benefits; or
(b) offer a more favorable balance of benefits over
disadvantages attributable to a reduction in competition likely to result
from the agreement.
(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. The department
may include conditions to control prices of health care services provided
under the cooperative agreement.
Section 44-7-570. (A) The department shall actively monitor and
regulate agreements approved under this article 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 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.
(D) Every two years the department shall analyze the market power
of accountable health plans that have entered into approved cooperative
agreements to determine when the market share of an accountable health
plan reaches a point where the exclusion of any health care provider
from the accountable health plan would result in the substantial inability
of excluded health care providers to continue their practice, thereby
restricting consumer access to needed health services. In analyzing the
market power of accountable health plans that have entered into
approved cooperative agreements the department shall consider the:
(1) ease with which health care providers may obtain contracts
with other plans;
(2) amount of the private pay and government employer business
that is controlled by accountable health plans taking into account the
selling of its health plans to self-insured employer plans;
(3) difficultly 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 accountable health plan; and
(4) sufficiency of the number or type of providers under contract
with the plan available to meet the needs of plan enrollees.
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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