[atlas:bill]

AN ACT Relating to the regulation of negotiations between health providers and health carriers; amending RCW 43.72.300 and 43.72.310; adding a new section to chapter 43.72 RCW; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. RCW 43.72.300 and 1997 c 274 s 6 are each amended to read as follows:

(1) The legislature recognizes that competition among health care providers, facilities, payers, and purchasers will yield the best allocation of health care resources, the lowest prices for health care services, and the highest quality of health care when there exists a large number of buyers and sellers, easily comparable health plans and services, minimal barriers to entry and exit into the health care market, and adequate information for buyers and sellers to base purchasing and production decisions. ((~~However~~)) The legislature further recognizes, however, that managed competition may be adversely affecting the supply of health care providers in this state. The provision of health services by health care providers in participating provider agreements with health carriers, while resulting in health cost containment, is leading to a flight of these providers to other areas of the country where bureaucratic demands on practices are less cumbersome and reimbursement levels are noticeably higher, causing a serious drain on the supply of health care providers available for serving patients and otherwise threatening public access to health care services in the state. As the marketplace of health carriers tends to be more concentrated than the market for health care providers, there is often a disparity of bargaining power between them, resulting in a dramatic disadvantage of health care providers in their efforts to negotiate the terms and conditions of their contracts with health carriers. This inequality of bargaining power is exacerbated by the absence of a health carrier's obligation to bargain in good faith. The prohibition under current law to negotiate appropriate reimbursement levels forces health care providers to either accept the contract proposals offered by health carriers or seek more acceptable terms available in other states. The requirement of good faith negotiations is a recognized and proven process for inducing parties in dispute to resolve their differences professionally with accommodations resulting in their mutual benefit. In addition, the legislature finds that purchasers of health care services and health care coverage do not have adequate information upon which to base purchasing decisions; that health care facilities and providers of health care services face legal and market disincentives to develop economies of scale or to provide the most cost-efficient and efficacious service; that health insurers, contractors, and health maintenance organizations face market disincentives in providing health care coverage to those Washington residents with the most need for health care coverage; and that potential competitors in the provision of health care coverage bear unequal burdens in entering the market for health care coverage.

(2) The legislature further finds that the regulation of health insurance by whatever means authorized by state law is within the sovereign and constitutional powers of state government to further its interests in protecting the health, safety, and welfare of the people of the state, and includes regulating the procedures under which health carriers negotiate the terms and conditions of contracts for health care provider services, including reimbursement for these services. The legislature therefore intends to exempt from state anti-trust laws, and to provide immunity from federal anti-trust laws through the state action doctrine for collective negotiations by health care providers with health carriers, including customary communications between health care providers with those negotiating for them to inform and advance the negotiations with other activities approved under this chapter that might otherwise be constrained by such laws and intends to displace competition in the health care market: To contain the aggregate cost of health care services; to promote the development of comprehensive, integrated, and cost-effective health care delivery systems through cooperative activities among health care providers and facilities; to promote comparability of health care coverage; to improve the cost-effectiveness in providing health care coverage relative to health promotion, disease prevention, and the amelioration or cure of illness; to assure universal access to a publicly determined, uniform package of health care benefits; and to create reasonable equity in the distribution of funds, treatment, and medical risk among purchasers of health care coverage, payers of health care services, providers of health care services, health care facilities, and Washington residents. To these ends, any lawful action taken pursuant to ((~~chapter 492, Laws of 1993~~)) this section and RCW 43.72.310 by any person or entity created or regulated ((~~by chapter 492, Laws of 1993~~)) under these sections are declared to be taken pursuant to state statute and in furtherance of the public purposes of the state of Washington.

(3) The legislature does not intend and, unless explicitly permitted in accordance with this section and RCW 43.72.310 or under rules adopted ((~~pursuant to chapter 492, Laws of 1993~~)) under these sections, does not authorize any person or entity to engage in activities or to conspire to engage in activities that would constitute per se violations of state and federal anti-trust laws including but not limited to conspiracies or agreements:

(a) Among competing health care providers not to grant discounts, not to provide services, or to fix the price of their services;

(b) Among health carriers as to the price or level of reimbursement for health care services;

(d) Among purchasers of health plan coverage to boycott a particular plan or class of plans;

(e) Among health carriers to divide the market for health care coverage; or

(f) Among health carriers and purchasers to attract or discourage enrollment of any Washington resident or groups of residents in a health plan based upon the perceived or actual risk of loss in including such resident or group of residents in a health plan or purchasing group.

Sec. 2. RCW 43.72.310 and 1997 c 274 s 7 are each amended to read as follows:

(1) A health carrier, health care facility, health care provider, or other person involved in the development, delivery, or marketing of health care or health plans may request, in writing, that the department of health obtain an informal legal opinion from the attorney general as to whether particular conduct is authorized by ((~~chapter 492, Laws of 1993~~)) this section and RCW 43.72.300. Trade secret or proprietary information contained in a request for informal opinion shall be identified as such and shall not be disclosed other than to an authorized employee of the department of health or attorney general without the consent of the party making the request, except that information in summary or aggregate form and market share data may be contained in the informal opinion issued by the attorney general. The attorney general shall issue such opinion within thirty days of receipt of a written request for an opinion or within thirty days of receipt of any additional information requested by the attorney general necessary for rendering ((an)) a legal opinion unless extended by the attorney general for good cause shown. If the attorney general concludes that such conduct is not authorized by ((~~chapter 492, Laws of 1993~~)) this section and RCW 43.72.300, the person or organization making the request may petition the department of health for review and approval of such conduct in accordance with subsection (3) of this section.

(2) After obtaining the written legal opinion of the attorney general and consistent with such opinion, the department of health:

(a) May authorize conduct by a health carrier, health care facility, health care provider, or any other person that could tend to lessen competition in the relevant market upon a strong showing that the conduct is likely to achieve the policy goals of ((~~chapter 492, Laws of 1993~~)) this section and RCW 43.72.300 and a more competitive alternative is impractical;

(b) Shall adopt rules governing conduct among providers, health care facilities, and health carriers including rules governing provider and facility contracts with health carriers, rules governing the use of "most favored nation" clauses and exclusive dealing clauses in such contracts, and rules providing that health carriers in rural areas contract with a sufficient number and type of health care providers and facilities to ensure consumer access to local health care services;

(c) Shall adopt rules permitting health care providers within the service area of a plan to collectively negotiate all the terms and conditions of contracts, including reimbursement for provider services, with a health carrier ((~~including~~)). The rules must include the ability of providers to meet and communicate for the purposes of these negotiations, a requirement for representatives of health care providers and health carriers to negotiate in good faith, and options for voluntary mediation or arbitration in case of impasse. The rules must provide for the exclusion of agencies and subdivisions of the state of Washington from the requirements of this subsection. For the purpose of collective negotiation under this act, health care providers include those health care practitioners regulated under Title 18 RCW by the department of health to practice health or health-related services or otherwise practicing health care services in this state consistent with state law;

(d) Shall adopt rules governing cooperative activities among health care facilities and providers; and

(e) Effective July 1, 1997, in addition to the rule-making authority granted to the department under this section, the department shall have the authority to enforce and administer rules previously adopted by the health services commission and the health care policy board pursuant to RCW 43.72.310.

(3) A health carrier, health care facility, health care provider, or any other person involved in the development, delivery, and marketing of health care services or health plans may file a written petition with the department of health requesting approval of conduct that could tend to lessen competition in the relevant market. Such petition shall be filed in a form and manner prescribed by rule of the department of health.

The department of health shall issue a written decision approving or denying a petition filed under this section within ninety days of receipt of a properly completed written petition unless extended by the department of health for good cause shown. The decision shall set forth findings as to benefits and disadvantages and conclusions as to whether the benefits outweigh the disadvantages.

(4) In authorizing conduct and adopting rules of conduct under this section, the department of health with the advice of the attorney general, shall consider the benefits of such conduct in furthering the goals of health care reform including but not limited to:

(a) Enhancement of the quality of health services to consumers;

(b) Gains in cost efficiency of health services;

(d) Avoidance of duplication of health services resources; or

(e) And as to (b) and (c) of this subsection: (i) Facilitates the exchange of information relating to performance expectations; (ii) simplifies the negotiation of delivery arrangements and relationships; and (iii) reduces the transactions costs on the part of health carriers and providers in negotiating more cost-effective delivery arrangements.

These benefits must outweigh disadvantages including and not limited to:

(i) Reduced competition among health carriers, health care providers, or health care facilities;

(ii) Adverse impact on quality, availability, or price of health care services to consumers; or

(iii) The availability of arrangements less restrictive to competition that achieve the same benefits.

(5) Conduct authorized by the department of health shall be deemed taken pursuant to state statute and in the furtherance of the public purposes of the state of Washington.

(6) With the assistance of the attorney general's office, the department of health shall actively supervise any conduct authorized under this section to determine whether such conduct or rules permitting certain conduct should be continued and whether a more competitive alternative is practical. The department of health shall periodically review petitioned conduct through, at least, annual progress reports from petitioners, annual or more frequent reviews by the department of health that evaluate whether the conduct is consistent with the petition, and whether the benefits continue to outweigh any disadvantages. If the department of health determines that the likely benefits of any conduct approved through rule, petition, or otherwise by the department of health no longer outweigh the disadvantages attributable to potential reduction in competition, the department of health shall order a modification or discontinuance of such conduct. Conduct ordered discontinued by the department of health shall no longer be deemed to be taken pursuant to state statute and in the furtherance of the public purposes of the state of Washington.

(7) Nothing contained in chapter 492, Laws of 1993 is intended to in any way limit the ability of rural hospital districts to enter into cooperative agreements and contracts pursuant to RCW 70.44.450 and chapter 39.34 RCW.

(8) The secretary of health shall from time to time establish fees to accompany the filing of a petition or a written request to the department to obtain ((an)) a legal opinion from the attorney general under this section and for the active supervision of conduct approved under this section. Such fees may vary according to the size of the transaction proposed in the petition or under active supervision. In setting such fees, the secretary shall consider that consumers and the public benefit when activities meeting the standards of this section are permitted to proceed; the importance of assuring that persons sponsoring beneficial activities are not foreclosed from filing a petition under this section because of the fee; and the necessity to avoid a conflict, or the appearance of a conflict, between the interests of the department and the public. The total fee for a petition under this section, a written request to the department to obtain ((an)) a legal opinion from the attorney general, or a combination of both regarding the same conduct shall not exceed the level that will defray the reasonable costs the department and attorney general incur in considering a petition and in no event shall be greater than twenty-five thousand dollars. The fee for review of approved conduct shall not exceed the level that will defray the reasonable costs the department and attorney general incur in conducting such a review and in no event shall be greater than ten thousand dollars per annum. The fees shall be fixed by rule adopted in accordance with the provisions of the administrative procedure act, chapter 34.05 RCW, and shall be deposited in the health professions account established in accordance with RCW 43.70.320.

NEW SECTION. Sec. 3. A new section is added to chapter 43.72 RCW to read as follows:

The insurance commissioner may, subject to a hearing if one is demanded, revoke, suspend, or refuse to accept or renew registration from any health carrier, issue a cease and desist order, or bring an action in any court of competent jurisdiction to enjoin a health carrier from doing any further business in this state, if the health carrier violates the provisions of RCW 43.72.310(2)(c) or any rules promulgated under that subsection. After hearing or upon stipulation by the registrant and in addition to or in lieu of the suspension, revocation, or refusal to renew any registration of a health carrier, the commissioner may levy a fine against the party involved for each offense in an amount not less than ten thousand dollars. The order levying the fine shall specify the period within which the fine shall be fully paid. The period shall not be less than thirty days from the date of the order. Upon failure to pay any fine when due, the insurance commissioner shall revoke the registration of the health carrier, and the fine shall be recovered in a civil action brought in behalf of the commissioner by the attorney general. Any fine collected shall be paid by the commissioner to the state treasurer for deposit in the general fund.

NEW SECTION. Sec. 4. This act is remedial in nature and shall be construed to effect the purposes expressed in section 1 of this act.