H.B. No. 3301
 
 
 
 
AN ACT
  relating to merger agreements among certain hospitals; authorizing
  fees.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle F, Title 4, Health and Safety Code, is
  amended by adding Chapter 314A to read as follows:
  CHAPTER 314A. MERGER AGREEMENTS AMONG CERTAIN HOSPITALS
  SUBCHAPTER A. GENERAL PROVISIONS
         Sec. 314A.001.  DEFINITIONS. In this chapter:
               (1)  "Attorney general" means the attorney general of
  Texas or any assistant attorney general acting under the direction
  of the attorney general of Texas.
               (2)  "Designated agency" means the state agency
  designated by the governor under Section 314A.004.
               (3)  "Hospital" means a nonpublic general hospital that
  is licensed under Chapter 241 and is not maintained or operated by a
  political subdivision of this state.
               (4)  "Merger agreement" or "merger" means an agreement
  among two or more hospitals for the consolidation by merger or other
  acquisition or transfer of assets by which ownership or control
  over substantially all of the stock, assets, or activities of one or
  more previously licensed and operating hospitals is placed under
  the control of another licensed hospital or hospitals or another
  entity that controls the hospitals.
               (5)  "State agency" means a department, commission,
  board, office, or other agency in the executive branch of state
  government that is created by the constitution or a statute of this
  state.
         Sec. 314A.002.  APPLICABILITY. This chapter applies only to
  a merger agreement among hospitals each of which is located within a
  county that:
               (1)  contains two or more hospitals; and
               (2)  has a population of:
                     (A)  less than 100,000 and is not adjacent to a
  county with a population of 250,000 or more; or
                     (B)  more than 100,000 and less than 150,000 and
  is not adjacent to a county with a population of 100,000 or more.
         Sec. 314A.003.  LEGISLATIVE FINDINGS AND PURPOSES; GRANT OF
  ANTITRUST IMMUNITY. (a) The legislature finds that:
               (1)  a merger among hospitals may benefit the public by
  maintaining or improving the quality, efficiency, and
  accessibility of health care services offered to the public; and
               (2)  the benefits described by Subdivision (1)
  resulting from the merger may outweigh any anticompetitive effects
  of joining together competitors to address unique challenges in
  providing health care services in rural areas.
         (b)  The legislature believes it is in the state's best
  interest to supplant state and federal antitrust laws with a
  process for regulatory approval and active supervision by the
  designated agency as provided by this chapter.  It is the intent of
  the legislature that this chapter immunize from all federal and
  state antitrust laws the execution of merger agreements approved
  under this chapter and post-merger activities supervised under this
  chapter.
         (c)  Nothing in this chapter affects antitrust immunity that
  may be provided through another provision of state law.
         Sec. 314A.004.  DESIGNATION OF SUPERVISING STATE AGENCY.  
  (a)  The governor shall designate an appropriate state agency,
  other than the office of the attorney general, to:
               (1)  review and approve or deny applications submitted
  under this chapter for certificates of public advantage; and
               (2)  supervise as provided by Subchapter C the
  activities for which a certificate of public advantage is issued.
         (b)  After the governor designates a state agency under
  Subsection (a), the governor may designate another appropriate
  state agency under that subsection at any time.
         (c)  A change in the designation of a state agency made under
  this section does not affect the validity of any action taken under
  this chapter by a predecessor designated agency.
         Sec. 314A.005.  RULEMAKING. The designated agency shall
  adopt rules for the administration and implementation of this
  chapter.
  SUBCHAPTER B. CERTIFICATE OF PUBLIC ADVANTAGE
         Sec. 314A.051.  REVIEW AND CERTIFICATION OF MERGER
  AGREEMENTS REQUIRED. (a) Two or more hospitals may negotiate and
  enter into a merger agreement, subject to approval by the
  designated agency as provided by this subchapter.
         (b)  No merger agreement shall receive immunity under this
  chapter unless the designated agency issues a certificate of public
  advantage governing the merger agreement.
         Sec. 314A.052.  APPLICATION. (a) One or more parties to a
  merger agreement may submit an application to the designated agency
  for a certificate of public advantage governing the merger
  agreement. The application must include a written copy of the
  merger agreement and describe the nature and scope of the merger.
         (b)  If an applicant believes the documents or other
  information required to be submitted with an application under
  Subsection (a) contains proprietary information that is required to
  remain confidential, the applicant shall:
               (1)  clearly identify the information; and
               (2)  submit duplicate applications, one application
  that has complete information for the designated agency's use and
  one redacted application that will be made available for public
  release.
         (c)  A copy of the application and copies of all additional
  related materials must be submitted to the attorney general and to
  the designated agency at the same time.
         Sec. 314A.053.  APPLICATION FEE. (a)  The designated agency
  may assess a fee for filing an application under Section 314A.052 in
  an amount not to exceed $75,000. The amount of the fee must be
  sufficient to cover the reasonable costs of the designated agency
  and attorney general in reviewing and approving or denying
  applications under this subchapter.
         (b)  Fees collected under this section may be appropriated to
  the designated agency for purposes of covering costs relating to
  the implementation and administration of this chapter, including
  the supervision of hospitals under this chapter.
         Sec. 314A.054.  REVIEW OF APPLICATION BY DESIGNATED AGENCY;
  GRANT OR DENIAL OF APPLICATION. (a) The designated agency shall
  review an application for a certificate of public advantage in
  accordance with the standard prescribed by Section 314A.056(a)(1).
         (b)  The designated agency shall grant or deny the
  application not later than the 120th day after the date of the
  filing of the application. The designated agency's decision must:
               (1)  be in writing;
               (2)  specify the basis for the decision; and
               (3)  provide a copy of the decision to the applicants on
  the date of the decision.
         Sec. 314A.055.  REVIEW OF APPLICATION BY ATTORNEY GENERAL.
  (a) The attorney general shall review an application for a
  certificate of public advantage and all supporting documents and
  information provided by the applicants. On completion of the
  review and subject to Subsection (b), the attorney general shall
  advise the designated agency whether:
               (1)  the proposed merger agreement would likely benefit
  the public by maintaining or improving the quality, efficiency, and
  accessibility of health care services offered to the public; and
               (2)  the likely benefits resulting from the proposed
  merger agreement outweigh any disadvantages attributable to a
  reduction in competition that may result from the proposed merger.
         (b)  The attorney general shall review an application for a
  certificate of public advantage as soon as practicable, taking into
  consideration the deadline prescribed by Section 314A.054.
         (c)  If the attorney general advises the designated agency to
  deny an application, the attorney general shall state the basis and
  reasons for the recommended denial.
         Sec. 314A.056.  ISSUANCE OF CERTIFICATE OF PUBLIC ADVANTAGE.
  (a) The designated agency, after reviewing the application and
  consulting with the attorney general in accordance with Section
  314A.055, shall issue a certificate of public advantage for a
  merger agreement if:
               (1)  the designated agency determines under the
  totality of the circumstances that:
                     (A)  the proposed merger would likely benefit the
  public by maintaining or improving the quality, efficiency, and
  accessibility of health care services offered to the public; and
                     (B)  the likely benefits resulting from the
  proposed merger agreement described by Paragraph (A) outweigh any
  disadvantages attributable to a reduction in competition that may
  result from the proposed merger; and
               (2)  the application:
                     (A)  provides specific evidence showing that the
  proposed merger would likely benefit the public as described by
  Subdivision (1)(A);
                     (B)  explains in detail how the likely benefits
  resulting from the proposed merger agreement outweigh any
  disadvantages attributable to a reduction in competition as
  described by Subdivision (1)(B); and
                     (C)  sufficiently addresses the factors listed in
  Subsection (b) and any other factor the designated agency may
  require based on the circumstances specific to the application.
         (b)  In making the determination under Subsection (a)(1),
  the designated agency shall consider the effect of the merger
  agreement on the following nonexclusive list of factors:
               (1)  the quality and price of hospital and health care
  services provided to citizens of this state;
               (2)  the preservation of sufficient hospitals within a
  geographic area to ensure public access to acute care;
               (3)  the cost efficiency of services, resources, and
  equipment provided or used by the hospitals that are a party to the
  merger agreement;
               (4)  the ability of health care payors to negotiate
  payment and service arrangements with hospitals proposed to be
  merged under the agreement; and
               (5)  the extent of any reduction in competition among
  physicians, allied health professionals, other health care
  providers, or other persons providing goods or services to, or in
  competition with, hospitals.
         (c)  The designated agency may include terms or conditions of
  compliance in connection with a certificate of public advantage
  issued under this subchapter if necessary to ensure that the
  proposed merger likely benefits the public as specified in
  Subsection (a)(1).
         Sec. 314A.057.  RECORDS. The designated agency shall
  maintain records of all merger agreements the designated agency has
  approved under this chapter, including any terms or conditions of
  issuing a certificate of public advantage that are imposed by the
  designated agency.
         Sec. 314A.058.  TERMINATION OF CERTIFICATE OF PUBLIC
  ADVANTAGE BY HOSPITAL. A hospital resulting from a merger
  agreement approved under this chapter may voluntarily terminate its
  certificate of public advantage by giving the designated agency
  notice at least 30 days before the date of the termination.
         Sec. 314A.059.  ANNUAL REVIEW OF CERTIFICATE. (a) The
  designated agency shall annually review an approved certificate of
  public advantage.
         (b)  The attorney general may annually review an approved
  certificate of public advantage.
         (c)  The designated agency may not complete its annual review
  of an approved certificate of public advantage under this section
  until:
               (1)  the attorney general informs the designated agency
  whether the attorney general intends to conduct any review of the
  certificate of public advantage as authorized under this section;
  and
               (2)  if the attorney general informs the designated
  agency of the attorney general's intent to conduct a review of an
  entity's approved certificate of public advantage, the attorney
  general has had the opportunity to conduct the review.
  SUBCHAPTER C. SUPERVISION OF MERGED HOSPITALS UNDER APPROVED
  MERGER AGREEMENT
         Sec. 314A.101.  SUPERVISION OF MERGED HOSPITALS. The
  designated agency shall supervise in the manner provided by this
  subchapter each hospital operating under a certificate of public
  advantage issued under this chapter to ensure that the immunized
  conduct of a merged entity furthers the purposes of this chapter.
         Sec. 314A.102.  RATE REVIEW. (a) A change in rates for
  hospital services by a hospital operating under a certificate of
  public advantage issued under this chapter may not take effect
  without prior approval of the designated agency as provided by this
  section.
         (b)  At least 90 days before the implementation of any
  proposed change in rates for inpatient or outpatient hospital
  services and, if applicable, at least 60 days before the execution
  of a reimbursement agreement with a third party payor, a hospital
  operating under a certificate of public advantage shall submit to
  the designated agency:
               (1)  any proposed change in rates for inpatient and
  outpatient hospital services;
               (2)  if applicable, any change in reimbursement rates
  under a reimbursement agreement with a third party payor;
               (3)  for an agreement with a third party payor, other
  than an agreement described by Subdivision (4) or in which rates are
  set under the Medicare or Medicaid program, information showing:
                     (A)  that the hospital and the third party payor
  have agreed to the proposed rates;
                     (B)  whether the proposed rates are less than the
  corresponding amounts in the producer price index published by the
  Bureau of Labor Statistics of the United States Department of Labor
  relating to the hospital services for which the rates are proposed
  or a comparable price index chosen by the designated agency if the
  producer price index described by this paragraph is abolished; and
                     (C)  if the proposed rates are above the
  corresponding amounts in the producer price index as described by
  Paragraph (B), a justification for proposing rates above the
  corresponding amounts in the producer price index;
               (4)  to the extent allowed by federal law, for an
  agreement with a managed care organization that provides or
  arranges for the provision of health care services under the
  Medicare or Medicaid program, information showing:
                     (A)  whether the proposed rates are different from
  rates under an agreement that was in effect before the date the
  applicable merger agreement took effect;
                     (B)  whether the proposed rates are different from
  the rates most recently approved by the designated agency for the
  applicable hospital, if the designated agency has previously
  approved rates for the applicable hospital following the issuance
  of the certificate of public advantage under this chapter that
  governs the hospital; and
                     (C)  if the proposed rates exceed rates described
  by Paragraph (A) or (B), a justification for proposing rates in
  excess of those rates; and
               (5)  any information concerning costs, patient volume,
  acuity, payor mix, and other information requested by the
  designated agency.
         (c)  After reviewing the proposed change in rates submitted
  under Subsection (b), the designated agency shall approve or deny
  the proposed rate change.  The designated agency shall approve the
  proposed rate change if the designated agency determines that:
               (1)  the proposed rate change likely benefits the
  public by maintaining or improving the quality, efficiency, and
  accessibility of health care services offered to the public; and
               (2)  the proposed rate does not inappropriately exceed
  competitive rates for comparable services in the hospital's market
  area.
         (d)  If the designated agency determines that the proposed
  rate change does not satisfy Subsection (c)(1) or (2), the
  designated agency shall deny or modify the proposed rate change.
         (e)  The designated agency shall notify the hospital in
  writing of the agency's decision to approve, deny, or modify the
  proposed rate change not later than the 30th day before the
  implementation date of the proposed change.
         Sec. 314A.103.  ANNUAL REPORT. Each hospital operating
  under a certificate of public advantage shall submit an annual
  report to the designated agency. The report must include:
               (1)  information about the extent of the benefits
  attributable to the issuance of the certificate of public
  advantage;
               (2)  if applicable, information about the hospital's
  actions taken:
                     (A)  in furtherance of any commitments made by the
  parties to the merger; or
                     (B)  to comply with terms imposed by the
  designated agency as a condition for approval of the merger
  agreement;
               (3)  a description of the activities conducted by the
  hospital under the merger agreement;
               (4)  information relating to the price, cost, and
  quality of and access to health care for the population served by
  the hospital; and
               (5)  any other information required by the designated
  agency to ensure compliance with this chapter, including
  information relating to compliance with any terms or conditions for
  issuance of the certificate of public advantage.
         Sec. 314A.104.  CORRECTIVE ACTION PLAN. (a) The designated
  agency shall require a hospital operating under a certificate of
  public advantage to adopt a plan to correct a deficiency in the
  hospital's activities if the designated agency determines that an
  activity of the hospital:
               (1)  does not benefit the public as described by
  Section 314A.056(a)(1)(A); or
               (2)  no longer meets the standard prescribed by Section
  314A.056(a)(1).
         (b)  The corrective action plan must include each provision
  required by the designated agency and must be submitted at the
  agency's direction.
         Sec. 314A.105.  SUPERVISION FEE. (a)  The designated agency
  may assess an annual supervision fee in an amount that is at least
  $75,000 but not more than $200,000 against each hospital operating
  under a certificate of public advantage under this chapter. The
  amount of the fee imposed on hospitals under this subsection must be
  based on the assessment by the designated agency of the amount
  needed to cover the reasonable costs incurred by the designated
  agency in supervising hospitals under this subchapter and in
  implementing and administering this chapter.
         (b)  Fees collected under this section may be appropriated to
  the designated agency for purposes of covering costs relating to
  the implementation and administration of this chapter, including
  the supervision of hospitals under this chapter.
  SUBCHAPTER D. ENFORCEMENT AUTHORITY BY DESIGNATED AGENCY
         Sec. 314A.151.  INVESTIGATION; REVOCATION OF CERTIFICATE.
  With respect to each hospital resulting from a merger agreement for
  which the designated agency issued a certificate of public
  advantage under this chapter, and to ensure that the hospital's
  activities continue to benefit the public under the standard
  prescribed by Section 314A.056(a)(1) and the purposes of this
  chapter, the designated agency may:
               (1)  investigate the hospital's activities; and
               (2)  require the hospital to perform a certain action
  or refrain from a certain action or revoke the hospital's
  certificate of public advantage, if the designated agency
  determines that:
                     (A)  the hospital is not complying with this
  chapter or a term or condition of compliance with the certificate of
  public advantage governing the hospital's immunized activities;
                     (B)  the designated agency's approval and
  issuance of the certificate of public advantage was obtained as a
  result of material misrepresentation;
                     (C)  the hospital has failed to pay any fee
  required under this chapter; or
                     (D)  the benefits resulting from the approved
  merger no longer outweigh the disadvantages attributable to the
  reduction in competition resulting from the approved merger.
         Sec. 314A.152.  JUDICIAL REVIEW OF DESIGNATED AGENCY ACTION.
  (a) A person aggrieved by a decision of the designated agency in
  granting, denying, or refusing to act on an application for a
  certificate of public advantage submitted under Subchapter B or
  revoking a certificate of public advantage issued under this
  chapter may appeal the final order by filing a petition for judicial
  review in a district court of Travis County.
         (b)  The filing of a petition for judicial review of a
  decision by the designated agency to revoke a certificate of public
  advantage stays enforcement of the agency's decision.
         (c)  Not later than the 45th day after the date a person files
  a petition for judicial review under this section, the designated
  agency shall submit to the district court the original copy or a
  certified copy of the entirety of the agency's record regarding the
  decision under review. By stipulation of all parties, the record
  may be shortened. The district court may require or permit later
  corrections or additions to the record. The district court may
  extend the period prescribed by this subsection for submitting the
  agency's record to the court.
         (d)  The district court shall conduct the review sitting
  without a jury.
         (e)  The district court may reverse a decision by the
  designated agency regarding revocation of a certificate of public
  advantage if the court finds that the decision is:
               (1)  in violation of a constitutional or statutory
  provision;
               (2)  in excess of the agency's statutory authority;
               (3)  made through unlawful procedure;
               (4)  arbitrary or capricious or characterized by abuse
  of discretion or clearly unwarranted exercise of discretion; or
               (5)  unsupported by substantial and material evidence
  in light of the record as a whole.
         (f)  Under Subsection (e)(5), in determining the
  substantiality of the evidence, the district court:
               (1)  shall consider other evidence that detracts from
  the substantiality; and
               (2)  may not substitute its judgment for the judgment
  of the designated agency on the weight of the evidence as to a
  question of fact.
         (g)  The district court shall issue a written decision
  setting forth the court's findings of fact and conclusions of law.
  The designated agency shall add the court's decision to the agency's
  record.
  SUBCHAPTER E. ATTORNEY GENERAL INVESTIGATION AND ENFORCEMENT
  AUTHORITY
         Sec. 314A.201.  CIVIL INVESTIGATIVE DEMAND. (a) The
  attorney general, at any time after an application is filed under
  Section 314A.052 and before the designated agency makes a
  determination on the application, or in connection with the
  agency's annual review of a certificate of public advantage under
  Section 314A.059, may require by civil investigative demand the
  attendance and testimony of witnesses and the production of
  documents in Travis County or the county in which the applicants are
  located for the purpose of investigating whether the merger
  agreement satisfies or, after issuance of the certificate of public
  advantage, continues to satisfy the standard prescribed by Section
  314A.056(a)(1).
         (b)  All nonpublic documents produced for and testimony
  given to the attorney general under Subsection (a) are subject to
  the prohibitions on disclosure and use under Section 15.10(i),
  Business & Commerce Code.
         (c)  The attorney general may seek an order from the district
  court compelling compliance with a civil investigative demand
  issued under this section.
         Sec. 314A.202.  ACTION TO REVOKE CERTIFICATE OF PUBLIC
  ADVANTAGE FOLLOWING CHANGED CIRCUMSTANCES. (a) If, following an
  annual review of a certificate of public advantage, the attorney
  general determines that as a result of changed circumstances the
  benefits resulting from a certified merger agreement as described
  by Section 314A.056(a)(1)(A) no longer outweigh any disadvantages
  attributable to a reduction in competition resulting from the
  merger agreement, the attorney general may bring an action in a
  district court in Travis County seeking to revoke the certificate
  of public advantage in accordance with the procedures prescribed by
  this section.
         (b)  Except as provided by Subsection (c), in an action
  brought under this section, the attorney general has the burden of
  establishing by clear and convincing evidence that as a result of
  changed circumstances the benefits resulting from the certified
  merger agreement and the unavoidable costs of revoking the
  certificate of public advantage are outweighed by disadvantages
  attributable to a reduction in competition resulting from the
  merger agreement.
         (c)  In any action brought under this section, if the
  attorney general first establishes by clear and convincing evidence
  that the designated agency's certification was obtained as a result
  of material misrepresentation to the designated agency or the
  attorney general or as the result of coercion, threats, or
  intimidation directed toward any party to the merger agreement,
  then the parties to the merger agreement bear the burden of
  establishing by clear and convincing evidence that despite changed
  circumstances the benefits resulting from the certified merger
  agreement and the unavoidable costs of revoking the certificate of
  public advantage are not outweighed by disadvantages attributable
  to a reduction in competition resulting from the merger agreement.
         SECTION 2.  As soon as practicable after the effective date
  of this Act, the governor shall designate a state agency under
  Section 314A.004, Health and Safety Code, as added by this Act.
         SECTION 3.  This Act takes effect September 1, 2019.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 3301 was passed by the House on May 9,
  2019, by the following vote:  Yeas 133, Nays 4, 2 present, not
  voting; and that the House concurred in Senate amendments to H.B.
  No. 3301 on May 24, 2019, by the following vote:  Yeas 134, Nays 6,
  2 present, not voting.
 
  ______________________________
  Chief Clerk of the House   
 
         I certify that H.B. No. 3301 was passed by the Senate, with
  amendments, on May 21, 2019, by the following vote:  Yeas 31, Nays
  0.
 
  ______________________________
  Secretary of the Senate   
  APPROVED: __________________
                  Date       
   
           __________________
                Governor