Provider Contracts and Provider Compensation Agreements.
Health insurance carriers must file all provider contracts and provider compensation agreements with the Office of the Insurance Commissioner (OIC) 30 calendar days before use.  When a carrier and provider negotiate an agreement that deviates from a filed agreement, the specific contract must be filed 30 days prior to use.  Any provider compensation agreements not affirmatively disapproved by the OIC are deemed approved, except the OIC may extend the approval date an additional 15 days with notice before the initial 30-day period expires.  Changes to the previously filed agreements that modify the compensation or related terms must be filed and are deemed approved upon filing if no other changes are made to the previously approved agreement.  The OIC may not base a disapproval of the agreement on the amount of the compensation or other financial arrangements between the carrier and provider, unless the compensation amount causes the underlying health benefit plan to be in violation of state or federal law.
 
Provider compensation agreements are confidential and not subject to public inspection or public disclosure if they are filed following the procedures for submitting confidential filings in the electronic rate and form filings.  If the filing instructions are not followed and the carrier indicates that the compensation agreement will be withheld from public inspection, the OIC must reject the filing and notify the carrier to amend the filing in order to comply with the confidentiality instructions.

Critical Access Hospitals.
There are 39 hospitals in Washington that are federally certified by the Centers for Medicare or Medicaid Services (CMS) as Critical Access Hospitals.  These are hospitals with 25 beds or less that are generally located in rural areas.  They must deliver continuous emergency department services and they may not have an average length of stay of more than 96 hours per patient.  The Critical Access Hospital program allows hospitals under Washington's medical assistance programs to receive payment for hospital services based on allowable costs and to have more flexibility in staffing.

Sole Community Hospitals.
Sole Community Hospital (SCH) is a federal hospital classification for hospitals that meet certain criteria based on location, size, or distance.  To be designated as an SCH by the CMS the hospital must meet one of the following criteria:

• the hospital is located at least 35 miles from other like hospitals;
• the hospital is rural—located in a rural area, located between 25 and 35 miles from other like hospitals, and meets one of the following criteria:  no more than 25 percent of residents who become hospital inpatients or no more than 25 percent of the Medicare beneficiaries who become hospital inpatients in the hospital's service area are admitted to other like hospitals located within a 35-mile radius of the hospital or, if larger, within its service area; or the hospital has fewer than 50 beds and would meet the 25-percent criterion above if not for the fact that some beneficiaries or residents were forced to seek specialized care outside of the service area due to the unavailability of necessary specialty services at the hospital;
• the hospital is rural and located between 15 and 25 miles from other like hospitals but because of local topography or periods of prolonged severe weather conditions, the other like hospitals are inaccessible for at least 30 days in each of two out of three years; or
• the hospital is rural and because of distance, posted speed limits, and predictable weather conditions, the travel time between the hospital and the nearest like hospital is at least 45 minutes.

 
Consumer Protection Act.
Under the Consumer Protection Act (CPA), unfair or deceptive acts or practices in trade or commerce are unlawful.  The CPA provides that any person injured in his or her business or property through such practices may bring a civil action to recover actual damages sustained and costs of the suit, including reasonable attorneys' fees.  The Attorney General may bring an action under the CPA to restrain and prevent unfair and deceptive acts and practices.

Beginning January 1, 2022, a contract between a hospital or affiliate hospital and a health carrier may not, directly or indirectly:

• set provider compensation agreements or other terms for affiliates of the hospital that are out of the carrier's network;
• require a health carrier to contract with multiple hospitals owned or controlled by the same single entity;
• require health carriers to place a hospital or affiliate in an enrollee cost-sharing tier that reflects the lowest or lower enrollee cost-sharing amounts; or
• require health carriers to keep the contracts payment rates confidential from any existing or potential payor that is or may become financially responsible for the payments, though these communications may be subject to a reasonable nondisclosure agreement.

 
The restriction on prohibiting a contract from requiring a health carrier to contract with multiple hospitals owned or controlled by the same single entity does not prohibit a  health carrier from voluntarily agreeing to contract with other hospitals owned or controlled by the same single entity.  If the health carrier voluntarily agrees to contract with other hospitals owned or controlled by the same single entity, the health carrier must file an attestation with the Office of the Insurance Commissioner 30 days before the contract is used. 
 
The prohibitions against these contractual requirements between a health carrier and hospital do not apply to the extent that the prohibitions impair the ability of a hospital, provider, or health carrier to participate in a state-sponsored, federally funded program, or grant opportunity.  A certified critical access hospital or an independent certified sole community hospital is not prohibited from negotiating payment rates and methodologies on behalf of an individual health care practitioner or medical group that the hospital is affiliated with. 
 
Beginning January 1, 2022, health provider contracts between a health carrier and a provider may not contain a provision that prohibits disclosure of health care service claims data to employers providing the coverage.  Any disclosure of claims data must comply with state and federal privacy laws.
 
The Attorney General is authorized to enforce the act under the Consumer Protection Act (CPA).  For purposes of CPA actions that are brought by the Attorney General, contracts that violate these provisions are considered an unfair or deceptive act in trade or commerce and an unfair method of competition.  

The Insurance Commissioner is authorized to adopt rules necessary to implement the act. 

"Provider compensation agreement" is defined as any written agreement that includes specific information about payment methodology, payment rates, and other terms that determine the remuneration a carrier will pay to a provider.  "Affiliate" is a person who directly or indirectly through intermediaries, controls or is controlled by, or is under common control with, another specified person.  "Control" is defined as the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, membership rights, by contract, or otherwise.
 
"Provider" means:

• a health care provider that is regulated under Title 18 or by in-home care agencies to practice health or health-related services and the employees or agents of a health care provider;
• a participating provider, who is a provider, who has contracted in writing with a health care service contractor to accept payment from and to look solely to such contractor according to the terms of the subscriber contract for any health care services rendered to a person who has previously paid, or on whose behalf prepayment has been made, to such contractor for such services;
• a hospital, hospice, rural health care facility, psychiatric hospital, nursing home, community mental health center, kidney disease treatment center, ambulatory diagnostic, treatment, or surgical facilities, home health agencies, and other facilities as required by federal law; and
• intermediaries that have agreed in writing with a health carrier to provide access to providers who render covered services to the enrollees of a health carrier.

(In support) The text of this bill is from the Sutter settlement in California.  Sutter is a hospital system in Northern California that was successfully able to drive up the cost of health care through their contracting practices, until charges were brought against them.  While the sponsor did not think that these contracting methods were an issue in Washington yet, it has come to the sponsor's attention that there have been several instances of this behavior in Washington.  Accordingly, this bill is very timely and can stop these contracting practices before they become widespread in Washington.
 

The consolidation of hospitals and hospital systems in Washington is a very important issue and is not good for consumers, costs, or quality of health care.  This bill is a tool in the toolbox to extract more competitive contracts and increase affordability of healthcare.  While some health plans may be concerned that the bill requires some additional administrative procedures, its benefits outweigh any additional administrative duties.  There is some question as to the last section of the bill related to claims data and the plans just want to ensure that any data shared with employers is protected.
 
(Opposed) The hospitals are generally supportive of the transparency provisions in this bill, but there are some concerns about section 1 (1)(a) and (b).  This bill came out of a settlement in California to address a specific problem in that state and so there may be unintended consequences in applying these provisions to Washington hospitals.  There is some concern that rural hospitals will not be able to contract for their provider groups in their rural communities under this bill.  Additionally, there is concern that this bill may prohibit or negatively impact the Health Care Authority's primary care and value-based arrangements that are unique to Washington.
 
Providers have a lot of concerns about this bill, but there are also a number of questions about how common these practices are in Washington.  This bill came out of a case in California where there were some pretty egregious practices.  Additionally, there is already an existing mechanism to address anti-competitive practices through the Attorney General, who is not shy about pursuing anti-trust issues.  The providers prefer that this bill does not move forward, but if it does, they request that the anti-competitive provisions apply both ways so that health carriers cannot require providers to contract with all of the carrier's health plans.

(Other) Health plans agree and support the intention of this bill.  The contract negotiating process needs to be fair and balanced.  However, there is some concern that how this bill tries to achieve this goal is a little backwards, since it regulates health plan conduct in order to prevent hospitals from doing something.  Accordingly, this process needs to be deliberate and there should be careful consideration to ensure that the regulatory process does not create any unintended consequences.

(In support) The intent of the bill is to make sure consumers do not pay increased rates secondary to mergers and acquisitions.  This bill addresses unfair contracting practices between hospitals and health insurers.  The fiscal note identifies the need for new staff within the Office of the Insurance Commissioner (OIC) for contract review and rulemaking.  The financial resources to support this important work come from the regulatory surcharge that health insurance companies pay and not the State General Fund.

(Opposed) This bill is based solely on a legal settlement in Northern California.  There is no documentation of the issues identified in the California case happening in Washington.  There are concerns about the unintended consequences of this bill as it directs the conditions of business-to-business negotiations between private parties.  Hospitals merge for financial reasons when one system can no longer remain independent.  Tipping the balance of commercial market negotiations towards health carriers does not lead to more financial stability for hospitals or lower overall costs.  The financial viability of hospitals is a real concern during the COVID-19 pandemic, especially when hospitals are underpaid by Medicare and Medicaid.  This bill allows insurers to choose which hospital affiliate they want to contract with, potentially leading to less integrated care with more balanced billing and out-of-network costs.

The biggest issue of this bill is the current financial status of physician organizations and the contracting dynamics between physician practices and health carriers.  Many physician groups are struggling through the COVID-19 pandemic as they experience decreased patient volumes and revenue.  Many are reducing hours and physician compensation or implementing furloughs and layoffs.  The recovery of physician groups has been uneven as smaller independent groups lag.  This bill increases pressure on these smaller groups, potentially leading to more consolidations.  The timing is also difficult with other recently passed legislation, primarily the balanced billing prohibition that shifted more contracting leverage to health carriers.  This will shift even more leverage towards health carriers when many physicians are struggling to secure reasonable contract terms.  This bill runs in one direction by imposing restrictions on providers.