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:

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.