PRINTER'S NO. 1943
No. 1554 Session of 1985
INTRODUCED BY LAUGHLIN, LASHINGER, SWEET, KUKOVICH, BOYES,
BRANDT, PICCOLA, POTT, CESSAR, BOWSER, LETTERMAN, BELARDI,
CHADWICK, HERMAN, CORNELL, BUNT, GLADECK, BOOK AND McVERRY,
JUNE 27, 1985
REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, JUNE 27, 1985
AN ACT
1 Providing for the creation of a Pennsylvania Health Services
2 Council, for the collection and dissemination of health care
3 data, for the establishment of regional uncompensated care
4 pools, for the establishment of utilization review
5 requirements, for the promotion of preferred provider
6 organizations, and for the establishment of antiprice
7 discrimination prohibitions governing hospital rate and
8 charge negotiations; and making repeals.
9 TABLE OF CONTENTS
10 Section 1. Short title.
11 Section 2. Legislative findings and declarations.
12 Section 3. Declaration of policy.
13 Section 4. Definitions.
14 Section 5. Pennsylvania Health Services Council.
15 Section 6. Powers and duties of council.
16 Section 7. Funding.
17 Section 8. Enforcement powers.
18 Section 9. Data.
19 Section 10. Audit powers.
20 Section 11. Access to data.
1 Section 12. Specific data reports.
2 Section 13. Uncompensated care.
3 Section 14. Utilization review.
4 Section 15. Reports to General Assembly.
5 Section 16. Preferred provider organizations.
6 Section 17. Negotiation of discounts.
7 Section 18. Repeals.
8 Section 19. Expiration.
9 Section 20. Effective date.
10 The General Assembly of the Commonwealth of Pennsylvania
11 hereby enacts as follows:
12 Section 1. Short title.
13 This act shall be known and may be cited as the Health Care
14 Consumer Information and Market Incentives Act.
15 Section 2. Legislative findings and declarations.
16 The General Assembly finds and declares as follows:
17 (1) It is of vital interest to this Commonwealth that
18 rapidly escalating health care costs and charges be contained
19 so that continued access to high quality medical care can be
20 maintained.
21 (2) The failure of the health care market to perform in
22 an efficient manner is the primary obstacle to desirable
23 health care system improvements.
24 (3) The principal causes of market failure have been the
25 lack of meaningful price competition among providers; the
26 lack of reliable, timely and publicly available data
27 concerning the relative quality and cost of provider
28 services; the absence of strong utilization review programs
29 to assure that services performed by providers are necessary,
30 delivered in an appropriate setting and of high quality; the
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1 disproportionate impact of uncompensated care expenses on
2 some hospitals and payors; and the existence of
3 anticompetitive payment advantages by hospital service
4 organizations which act as barriers to competition in the
5 hospital insurance market and as obstacles to the development
6 of health maintenance organizations, preferred provider
7 organizations, competitive medical plans and other
8 alternative delivery systems.
9 Section 3. Declaration of policy.
10 The General Assembly intends to promote the public interest
11 through the development of a competitive health care service and
12 insurance market in which health care costs and charges will be
13 contained, access will be maintained, quality will be protected
14 and anticompetitive obstacles will be removed from providers,
15 insurers and purchasers.
16 Section 4. Definitions.
17 The following words and phrases when used in this act shall
18 have the meanings given to them in this section unless the
19 context clearly indicates otherwise:
20 "Charge" or "rate." The amount to be billed by a hospital
21 for specific goods or services provided to a patient.
22 "Council." The Pennsylvania Health Services Council.
23 "Discount." Any reduction in the amount to be paid to a
24 hospital by a purchaser.
25 "Government payor." Any Federal, State or local government
26 unit which is responsible for all or part of the payments due to
27 hospitals for goods or services rendered to beneficiaries of the
28 Medicare, Medicaid or other government-sponsored health care
29 programs.
30 "Gross patient service revenues" or "GPSR." The product of
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1 the volume of services provided or goods sold to a patient and
2 the charge for each good or service at the hospital's full
3 established prices.
4 "Hospital." A hospital registered under the act of July 19,
5 1979 (P.L.130, No.48), known as the Health Care Facilities Act,
6 except for:
7 (1) Institutions owned or operated by the Federal
8 Government.
9 (2) Institutions that provide medical and surgical care
10 only as part of a specified program for the treatment of
11 mental or nervous disorders.
12 (3) Institutions that provide medical and surgical care
13 only as part of a specialized program for the long-term
14 maintenance of the aged and of other persons suffering from
15 irreversible infirmities.
16 (4) Institutions in which at least 75% of the patient
17 days are associated with the treatment of patients who are 14
18 years of age or younger.
19 (5) Institutions specializing in rehabilitation, as
20 defined by regulations issued under Title XVIII of the Social
21 Security Act (Public Law 74-241, 42 U.S.C. § 301 et seq.).
22 "Payment." All value given or money paid to hospitals for
23 health care services, including fees, charges and cost
24 reimbursements.
25 "Private payor." Any purchaser who is not a government
26 payor.
27 "Provider." Any hospital, as defined in this section, or
28 ambulatory surgical facility.
29 "Purchaser." An individual, trust or estate, partnership,
30 corporation, insurance company, hospital plan corporation,
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1 association, preferred provider organization (PPO), health
2 maintenance organization (HMO), Federal, State or local
3 government unit, or any other entity responsible for full or
4 partial payment for goods or services provided by a hospital to
5 a patient.
6 "Uncompensated care." Any uncollected charges, reduced to
7 cost, associated with the provision of free care, delivered to
8 persons deemed unable to pay for those services, or with bad
9 debts, services rendered to persons deemed able to pay but who
10 have not paid after reasonable collection efforts as defined in
11 the hospital's credit and collection policy as approved by the
12 council.
13 Section 5. Pennsylvania Health Services Council.
14 (a) Establishment.--The General Assembly establishes the
15 Pennsylvania Health Services Council.
16 (b) Composition.--The council shall be composed of:
17 (1) Two representatives of the business community who
18 are purchasers of health care and who are not also providers
19 of health care, appointed by the Governor from a list of six
20 qualified persons recommended by the Pennsylvania Chamber of
21 Commerce.
22 (2) Two representatives of organized labor who are not
23 directly involved in providing health care services and who
24 do not represent unions which represent health care workers,
25 appointed by the Governor from a list of six qualified
26 persons recommended by the Pennsylvania AFL-CIO.
27 (3) One representative of an organized consumer
28 organization which is not directly or indirectly involved in
29 the provision of health care services, appointed by the
30 Governor.
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1 (4) One representative of hospitals, appointed by the
2 Governor from a list of three hospital representatives
3 recommended by the Hospital Association of Pennsylvania.
4 (5) One representative of physicians, appointed by the
5 Governor from a list of three physician representatives
6 recommended by the Pennsylvania Medical Society.
7 (6) One representative of the Blue Cross and Blue Shield
8 Plans in Pennsylvania, appointed by the Governor from a list
9 of three qualified persons recommended jointly by the Blue
10 Cross and Blue Shield Plans of Pennsylvania.
11 (7) One representative of commercial insurance carriers,
12 appointed by the Governor from a list of these persons
13 recommended by the Insurance Federation of Pennsylvania, Inc.
14 (8) One representative from the HMO industry, appointed
15 by the Governor from a list of three persons recommended by
16 the Association of Pennsylvania HMO's.
17 (9) The Secretary of Health of the Commonwealth.
18 (10) The Insurance Commissioner of the Commonwealth.
19 (11) The Secretary of Public Welfare of the
20 Commonwealth.
21 (c) Chairperson.--The members shall annually select the
22 chairperson of the council from among the members.
23 (d) Quorum.--A majority of the members constitute a quorum.
24 (e) Meetings.--The council shall meet at least once during
25 each calendar quarter. Meeting dates shall be set by a majority
26 of the members of the council or by call of the chairperson upon
27 five days' notice to the members. Action of the council shall
28 not be taken except upon the affirmative vote of a majority of
29 the voting members of the council.
30 (f) Compensation and expenses.--The members of the council
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1 shall not receive a salary or per diem for being council members
2 but shall receive reimbursement for necessary travel expenses
3 while engaged in council business.
4 (g) Commencement of operations.--The appointments called for
5 in subsection (b) shall be made within three months after the
6 effective date of this act and the council shall begin
7 operations immediately following those appointments.
8 Section 6. Powers and duties of council.
9 (a) General rule.--The council shall perform the following
10 functions:
11 (1) Collect and disseminate data and other information
12 to which the council is entitled from providers, prepared
13 according to formats, time frames and confidentiality
14 provisions specified by the council.
15 (2) Establish, operate and monitor regional
16 uncompensated care funds pools.
17 (3) Establish hospital utilization review guidelines and
18 certify compliance with these guidelines.
19 (4) Promote greater competition in the health care and
20 insurance markets by monitoring and disclosing
21 anticompetitive pricing practices by providers.
22 (5) Do all things necessary to carry out its
23 responsibilities under the provisions of this act.
24 (b) Director and staff.--The council shall have the power to
25 hire an executive director and other staff, and to engage
26 professional consultants, as it deems necessary to the
27 performance of its duties. Such actions must be undertaken
28 within the budget of the council.
29 Section 7. Funding.
30 The council shall be funded by a uniform surcharge to be
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1 applied to all hospital bills. This surcharge shall be
2 established by the council and shall not exceed .001 of the
3 gross patient service revenues of hospitals operating in
4 Pennsylvania. This surcharge shall be applied as a uniform
5 markup to all hospital bills and the funds generated shall be
6 forwarded by hospitals on a quarterly basis to a fund to be
7 established by the council. During the startup period prior to
8 initial receipt of such funds, and throughout the period of its
9 existence, the council may also be funded by grants from
10 charitable organizations, contributions from organizations
11 appointing members to the council, and contributions, loans or
12 other sources of funding, including services in kind, received
13 from organizations or individuals interested in assisting in the
14 development and ongoing activities of the council. The council
15 shall also have the right to impose user fees as needed to cover
16 the costs of meeting data requests from other organizations and
17 members of the public. Any funds raised by the hospital
18 surcharge, but not spent in any year, shall be carried over to
19 defray expenses in the following year.
20 Section 8. Enforcement powers.
21 The council shall have the power to require submission of any
22 data specified in section 9 or otherwise required to carry out
23 its duties, to collect the surcharges imposed on hospitals
24 pursuant to this act, to compel payments by hospitals into the
25 regional uncompensated care funds pools to monitor and disclose
26 anticompetitive price practices, to require the establishment of
27 utilization activities and to carry out all other functions
28 specified in this act. The council is authorized to issue
29 subpoenas as necessary to acquire data and other information to
30 which the council is entitled by this act and to impose fines of
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1 not more than $1,000 per day for each day a provider is in
2 violation of its responsibilities under this act.
3 Section 9. Data.
4 (a) Submission of data.--The council is hereby authorized to
5 require providers to submit data according to uniform submission
6 formats, coding systems and other technical specifications
7 necessary to render the incoming data substantially valid,
8 consistent, compatible and manageable using electronic data
9 processing methods.
10 (b) Date elements.--The council shall be required to collect
11 the following specific data elements:
12 (1) Patient identification number for episodes, patient
13 medical record number or other continuous identifier.
14 (2) Patient date of birth.
15 (3) Patient sex.
16 (4) Patient zip code.
17 (5) Date of admission.
18 (6) Date of discharge.
19 (7) Principal and up to four other diagnoses by council-
20 specified code.
21 (8) Principal procedure by council-specified code and
22 date.
23 (9) Up to three other procedures by council-specified
24 code and dates.
25 (10) Patient status.
26 (11) Identity of the provider, including existing
27 provider identification number.
28 (12) Identity of the admitting physician, including
29 unique physician identification number to be established by
30 the council.
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1 (13) Identity of consulting physicians, including
2 physician identification numbers to be specified by the
3 council.
4 (14) Total charges of providers, segregated into major
5 categories, including, but not limited to, room and board,
6 radiology, laboratory, operating room, drugs, medical
7 supplies and other goods and services according to guidelines
8 specified by the council.
9 (15) Amount actually paid to the provider.
10 (16) Charges of each physician rendering service
11 relating to an incident of hospitalization or treatment in a
12 free-standing short procedure care unit.
13 (17) Identity of the primary payor categorized as
14 Medicare; Medicaid; Blue Cross and other nonprofit hospital
15 service organizations; commercial insurance companies; health
16 maintenance organizations; and all other payors, including
17 self-pay. The council may, at its discretion, call for more
18 specific payor categorizations.
19 (18) Zip code of the facility at which the service was
20 rendered.
21 (19) Insurance contract number if deemed feasible by
22 council.
23 (c) Submission of statements.--The council shall also
24 require each provider to annually submit a copy of its audited
25 financial statements within 30 days after its receipt of such
26 statements and to submit one copy of its Medicare cost report
27 (OMB form 2552 or equivalent Federal form) at the same time as
28 it submits this report to its fiscal intermediary. In addition,
29 each provider shall submit to the council one copy of its
30 standard notice of the amount of program reimbursement to be
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1 allowed by the Medicare program. This notice shall be provided
2 to the council within 30 days after its receipt by the provider.
3 The council shall have the right to specify other data filing
4 requirements as necessary to perform its duties.
5 Section 10. Audit powers.
6 The council shall have the right to audit information
7 submitted by providers as needed to corroborate the accuracy of
8 the submitted data. Audits shall be performed on a sample and
9 issue-specific basis, as needed by the council, and shall be
10 coordinated, to the extent practical, with the audits performed
11 by the Commonwealth. Providers shall cooperate by making all
12 books, records of account and other data needed by the auditors
13 available to them at a convenient location within one month of a
14 request by the council.
15 Section 11. Access to data.
16 The council shall strive to make the data which it collects
17 maximally available to hospitals and all other providers,
18 insurers, physicians, businesses and all other members of the
19 public, except that the council shall be required to maintain
20 the confidentiality of its own personnel records and of
21 information which by itself would permit the identification of
22 individual patients. In no case shall the names of individual
23 patients be revealed. In addition, the council shall not release
24 payment data other than the primary payor designations specified
25 in this act, except that any payor may receive those data which
26 pertain to its own utilization. Release of facility-specific
27 data, coded physician information and all other information
28 collected by the council is intended by this act.
29 Section 12. Specific data reports.
30 The council shall publish, at least annually, information
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1 which will stimulate increased competition in the pricing of
2 provider services and which will aid consumers, employers and
3 other purchasers to make informed choices in their purchasing of
4 health care services. The council shall, from time to time,
5 investigate and analyze providers' costs, charges, gross
6 revenues, net revenues, differentials, discounts, volume of
7 services, financial condition or any other appropriate related
8 matters. In order to carry out the purposes of this section, at
9 a minimum, the council shall publish the average gross charge
10 and the average payment by diagnosis for each provider by class
11 of payor on at least an annual basis.
12 Section 13. Uncompensated care.
13 The council is hereby required to estimate, on the basis of
14 audited financial statements, Medicare cost reports and
15 settlement data, and other relevant data obtained from the
16 providers or otherwise available, the reasonable uncompensated
17 care expenses to be incurred by providers in their upcoming
18 fiscal years. The council shall establish regional uncompensated
19 care funds pools and shall require that the pools be funded by
20 assessments against all providers operating in each region of
21 the Commonwealth and covered by this act. These pools shall be
22 funded by uniform surcharges to be applied to the gross charges
23 on all provider bills, with the funds generated by the providers
24 to be forwarded to the council in accordance with a schedule and
25 a mode of transfer to be specified by the council. The funds
26 raised shall cover 75% of the reasonable uncompensated care
27 expenses of all providers, less an offset of nonoperating
28 revenues and other income, and shall, in no case, exceed 5% of
29 the gross patient service revenues of the providers covered by
30 this act. The funds raised shall be distributed back to the
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1 providers on the basis of their relative uncompensated care
2 burden. The recommendations of the regional hospital councils of
3 the Hospital Association of Pennsylvania shall be considered in
4 this distribution process and in establishing criteria for
5 determining the relative uncompensated care burdens of
6 providers. Providers shall be expected to use funds received
7 from the uncompensated care pools to meet their uncompensated
8 care needs and shall be expected to reduce charges consistent
9 with the level of funds received unless otherwise authorized by
10 the council. Any provider who wishes to be eligible for a
11 distribution from the uncompensated care pools shall be required
12 to file and comply with a credit and collection policy which is
13 acceptable to the council.
14 Section 14. Utilization review.
15 The council is hereby instructed to establish utilization
16 review guidelines to govern utilization review activities in and
17 by providers. All providers must establish utilization review
18 programs which meet these guidelines. The guidelines shall
19 require such programs to offer preadmission certification and
20 concurrent review. Any third party insurer or purchaser electing
21 not to use the provider utilization review program must certify
22 to the council that it is subjecting its inpatient admissions to
23 a utilization review program which meets the guidelines
24 established by the council. Such alternative utilization review
25 programs may be conducted by the third party insurer or
26 purchaser or by a utilization review organization under contract
27 to the third party insurer or purchaser. Providers shall make
28 all data necessary for review activities available to the third
29 party insurer or purchaser or their agents in a timely and
30 satisfactory manner. In establishing its utilization review
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1 guidelines, the council shall build, to the extent possible, on
2 existing utilization review requirements of State and Federal
3 agencies or private certification organizations.
4 Section 15. Reports to General Assembly.
5 The Pennsylvania Health Services Council shall annually
6 report to the Insurance Committee in the House of
7 Representatives and to the Banking and Insurance Committee in
8 the Senate on its activities during the prior year and shall
9 specifically identify any ongoing defects in the health care
10 marketplace or other problems impeding the development of a more
11 competitive health care system.
12 Section 16. Preferred provider organizations.
13 Notwithstanding any other provision of law to the contrary,
14 the General Assembly asserts the right of any health care
15 insurer or purchaser to:
16 (1) Enter into agreements with providers or physicians
17 relating to health care services which may be rendered to
18 persons for whom the insurer or purchaser is providing health
19 care coverage, including agreements relating to the amounts
20 to be charged by the provider or physician for services
21 rendered.
22 (2) Issue or administer policies or subscriber contracts
23 in the Commonwealth which include incentives for the covered
24 person to use the services of a provider who has entered into
25 an agreement with the insurer or purchaser.
26 (3) Issue or administer policies or subscriber contracts
27 in the Commonwealth that provide for reimbursement for
28 services only if the services have been rendered by a
29 provider or physician who has entered into an agreement with
30 the insurer or purchaser.
19850H1554B1943 - 14 -
1 Section 17. Negotiation of discounts.
2 It shall be unlawful for a provider to accept as payment any
3 rate or charge which is higher than that stated in its publicly
4 available schedule of rates or charges. A provider may accept a
5 reduction to its rates or charges or an alternative payment
6 arrangement that is negotiated with any nongovernmental payor.
7 No part of the full cost of providing services, including a
8 proportionate liability for the reasonable uncompensated care
9 expenses of the hospital, for which a reduction to rates or
10 charges or alternative payment arrangement has been accepted,
11 shall be borne by payors to whom such reduction or alternative
12 payment arrangement does not apply. Any person who is injured by
13 reason of a violation of this section may sue in any court of
14 competent jurisdiction in this Commonwealth. The remedies shall
15 include, but shall not be limited to, mandatory injunctive
16 relief, monetary damages and any other relief the court deems
17 reasonable, including attorney fees if the court finds for the
18 plaintiff.
19 Section 18. Repeals.
20 Section 6124 of Title 40 (Insurance) of the Pennsylvania
21 Consolidated Statutes is repealed.
22 Section 19. Expiration.
23 This act shall expire five years from its effective date
24 unless extended by statute.
25 Section 20. Effective date.
26 This act shall take effect in 60 days.
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