Current Status Introducing Body:House Bill Number:4401 Primary Sponsor:Hodges Type of Legislation:GB Subject:Health Care Cooperation Act of 1994 Residing Body:House Current Committee:Judiciary Computer Document Number:JIC/5273AC.94 Introduced Date:19940111 Last History Body:House Last History Date:19940209 Last History Type:Committee Report: majority favorable, with amendment, minority unfavorable Scope of Legislation:Statewide All Sponsors:Hodges Jennings Allison Wilkes Rudnick Delleney Corning Type of Legislation:General Bill
Bill Body Date Action Description CMN Leg Involved
____ ______ ____________ ______________________________ ___ ____________
4401 House 19940209 Committee Report: majority 25
favorable, with amendment,
minority unfavorable
4401 House 19940119 Referred to Committee 25
4401 House 19940119 Recalled from Committee 26
4401 House 19940111 Introduced, read first time, 26
referred to Committee
4401 House 19931215 Prefiled, referred to 26
Committee
View additional legislative information at the LPITS web site.
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.
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
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:
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.
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:
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.