AN ACT Relating to the creation of independent practice associations; amending RCW 21.20.321, 24.06.015, and 24.06.030; adding a new section to chapter 19.86 RCW; and adding a new section to chapter 34.04 RCW.

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

Sec. 1. Section 14, chapter 457, Laws of 1987 and RCW 21.20.321 are each amended to read as follows:

The intent of the legislature in amending RCW 21.20.320 is to except from chapter 21.20 RCW membership shares in cooperatives that are organized under cooperative principles. The securities division of the department of licensing shall retain its authority to investigate organizations purporting to be cooperatives to ensure that such organizations are organized and operating under cooperative principles. The legislature finds that such cooperative principles include, but are not limited to: (1) Nontransferability of membership interests, except in the case of death, operation of law, or redemption by the cooperative; (2) no profits paid to such membership interests; and (3) each member in the cooperative has voting rights on the basis of one vote per member: PROVIDED, That as to independent practice associations, it is sufficient that within each membership class, each member has one vote.

Sec. 2. Section 3, chapter 120, Laws of 1969 ex. sess. and RCW 24.06.015 are each amended to read as follows:

Corporations may be organized under this chapter for any lawful purpose including but not limited to mutual, social, cooperative, fraternal, beneficial, service, labor organization, and other purposes; but excluding purposes which by law are restricted to corporations organized under other statutes.

Corporations may be organized under this chapter to serve as independent practice associations, and such corporations previously organized under other laws of this state may elect to be governed by this chapter by amending their articles of incorporation to comply with the provisions of this chapter. Such corporations organized under this chapter may elect to be organized under any other appropriate laws by amending their articles of incorporation to comply with the provisions of those laws.

As used in this section, an independent practice association is a group of health care providers who form an organization, in part, to arrange and coordinate the provision of health care services to patients through contracts or otherwise with health care insurers, health care service contractors, health maintenance organizations, or other organizations or groups performing similar functions.

Sec. 3. Section 6, chapter 120, Laws of 1969 ex. sess. and RCW 24.06.030 are each amended to read as follows:

Each corporation shall have power:

(1) To have perpetual succession by its corporate name unless a limited period of duration is stated in its articles of incorporation.

(2) To sue and be sued, complain and defend, in its corporate name.

(3) To have a corporate seal which may be altered at pleasure, and to use the same by causing it, or a facsimile thereof, to be impressed or affixed or in any other manner reproduced.

(4) To purchase, take, receive, lease, take by gift, devise or bequest, or otherwise acquire, own, hold, be trustee of, improve, use and otherwise deal in and with real or personal property, or any interest therein, wherever situated.

(5) To sell, convey, mortgage, pledge, lease, exchange, transfer and otherwise dispose of all or any part of its property and assets.

(6) To lend money to its employees.

(7) To purchase, take, receive, subscribe for, or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in, or obligations of, other domestic or foreign corporations, whether for profit or not for profit, associations, partnerships or individuals, or direct or indirect obligations of the United States, or of any other government, state, territory, governmental district or municipality or of any instrumentality thereof.

(8) To make contracts and incur liabilities, borrow money at such rates of interest as the corporation may determine, issue its notes, bonds, and other obligations, and secure any of its obligations by mortgage or pledge of all or any of its property, franchises and income.

(9) To lend money for its corporate purposes, invest and reinvest its funds, and take and hold real and personal property as security for the payment of funds so loaned or invested.

(10) To conduct its affairs, carry on its operations, and have offices and exercise the powers granted by this chapter, in any state, territory, district, or possession of the United States, or in any foreign country.

(11) To elect or appoint officers and agents of the corporation, and define their duties and fix their compensation.

(12) To make and alter bylaws, not inconsistent with its articles of incorporation or with the laws of this state, for the administration and regulation of the affairs of the corporation.

(13) To establish and maintain reserve, equity, surplus or other funds, and to provide for the time, form and manner of distribution of such funds among members, shareholders or other persons with interests therein in accordance with the articles of incorporation.

(14) Unless otherwise provided in the articles of incorporation, to make donations for the public welfare or for charitable, scientific or educational purposes, and in time of war to make donations in aid of the United States and its war activities.

(15) To indemnify any director or officer or former director or officer ((of the corporation, or any person who may have served at its request as a director or officer of another corporation, against expenses actually and necessarily incurred by him in connection with the defense of any action, suit or proceeding in which he is made a party by reason of being or having been such director or officer, except in relation to matters as to which he shall be adjudged in such action, suit or proceeding to be liable for negligence or misconduct in the performance of duty: PROVIDED, That such indemnification shall not be deemed exclusive of any other rights to which such director or officer may be entitled, under any bylaw, agreement, vote of board of directors or members, or otherwise)) in the manner and to the extent provided in RCW 23A.08.025 except that "shareholder" shall include members for purposes of this chapter.

(16) To cease its corporate activities and surrender its corporate franchise.

(17) To have and exercise all powers necessary or convenient to effect any or all of the purposes for which the corporation is organized and not inconsistent with the articles of incorporation or the provisions of this chapter.

NEW SECTION. Sec. 4. A new section is added to chapter 19.86 RCW to read as follows:

(1) An independent practice association is a group of health care providers who form an organization, in part, to arrange and coordinate the provision of health care services to patients through contracts or otherwise with health care insurers, health care service contractors, health maintenance organizations, or other groups performing similar functions.

(2) The legislature recognizes that many independent practice association agreements with third party payors can advance health care cost containment and competition within the health care industry, and therefore the creation of independent practice associations is to be encouraged. The legislature recognizes further that such arrangements can result in anticompetitive effects. The legislature intends to reconcile these features of independent practice associations by mandating that such organizations be regulated in the following manner. In so doing, the legislature intends to displace pure competition and substitute in its stead a regulatory model as well as to displace the reach of the federal antitrust laws to the fullest extent permitted by @beParker v. Brown@ee, 317 U.S. 341 (1943) and its progeny.

(3)(a) Before an independent practice association begins operation, it shall first allow the attorney general to evaluate it consistent with the principles enunciated in (b) of this subsection.

(b) The attorney general shall investigate the structure and operation of operational independent practice associations he or she suspects of anticompetitive practices in order to determine whether their health care cost containment potential or effects are substantially outweighed by their anticompetitive potential or effects under this chapter. The attorney general may consult with the insurance commissioner in the course of his or her inquiry. If the attorney general so finds, he or she may issue a cease and desist order to bring those two factors into acceptable balance under this subsection. For purposes of this section, a cease and desist order shall be a final judgment under chapter 34.04 RCW and is appealable as such.

(4) The remedy in subsection (3) of this section shall be the exclusive remedy for redressing the anticompetitive and related business tort potential or effects of independent practice associations.

(5) Applications for formative independent practice associations shall conform to the format the attorney general adopts by rule. The attorney general shall respond in writing within ninety days of receipt of a complete application. If any application is deemed to be incomplete, the attorney general shall advise the applicant in writing within ten days of receipt. The attorney general may, in his or her sole discretion, advise the applicant of changes that could be made in the application that would result in his or her approval, allow the applicant to withdraw the application in response thereto, and permit it to be refiled which shall begin the ninety-day review period again.

(6) The attorney general shall issue advisory opinions binding the parties to the opinion to any operational independent practice association upon its request regarding its proposed or actual structure and function under the principles set forth in subsection (3)(b) of this section. The substance of such opinions is not subject to judicial review, but a cease and desist order issued in conformity therewith is appealable in accordance with subsection (3)(b) of this section.

NEW SECTION. Sec. 5. A new section is added to chapter 34.04 RCW to read as follows:

A cease and desist order under section 4 of this act shall be a final order and shall be appealable as such.

NEW SECTION. Sec. 6. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.