PRINTER'S NO.  2864

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

HOUSE BILL

 

No.

2052

Session of

2011

  

  

INTRODUCED BY VULAKOVICH, DeLUCA, MICOZZIE, FRANKEL, MUSTIO, BROOKS, BARBIN, B. BOYLE, BURNS, CAUSER, D. COSTA, P. COSTA, DALEY, DEASY, DeWEESE, DUNBAR, ELLIS, J. EVANS, FABRIZIO, GEIST, GERGELY, GIBBONS, HALUSKA, HARKINS, HELM, HORNAMAN, HUTCHINSON, KORTZ, KOTIK, KRIEGER, KULA, LONGIETTI, MAHER, MAJOR, MARKOSEK, MARSHALL, MATZIE, METZGAR, MILLARD, NEUMAN, PASHINSKI, PRESTON, DERMODY, PYLE, RAVENSTAHL, READSHAW, REESE, ROAE, SAINATO, SAYLOR, M. SMITH, S. H. SMITH, SONNEY, STERN, STEVENSON, TURZAI, VEREB, WHEATLEY AND WHITE, DECEMBER 9, 2011

  

  

REFERRED TO COMMITTEE ON INSURANCE, DECEMBER 9, 2011  

  

  

  

AN ACT

  

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Amending Title 40 (Insurance) of the Pennsylvania Consolidated

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Statutes, in hospital plan corporations, further providing

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for rates and contracts.

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The General Assembly of the Commonwealth of Pennsylvania

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hereby enacts as follows:

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Section 1.  Section 6124(c) of Title 40 of the Pennsylvania

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Consolidated Statutes is amended to read:

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§ 6124.  Rates and contracts.

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* * *

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(c)  Maintenance of contractual relationships.--

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(1)  Declaration of necessity.--It is hereby found that

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many subscribers to nonprofit hospital plans make payments

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over long periods of time prior to becoming entitled to

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benefits under such a plan and that it is important in the

 


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public interest that the reasonable expectations of such

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subscribers as to coverage should be fulfilled if possible.

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It is hereby declared to be essential for the maintenance of

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the health of the residents of this Commonwealth that

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subscribers to nonprofit hospital plans be assured receipt of

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the hospitalization and related health care benefits prepaid

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by them through payment of the rates approved under this

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chapter and charged by a hospital plan corporation and that

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to accomplish this essential purpose termination or

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expiration without renewal of contracts between hospital plan

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corporations and hospitals entered into pursuant to section

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6121 (relating to eligible hospitals) and this section be

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subject to prior approval by the department as provided in

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this subsection.

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(2)  Notification period.--No contract between a hospital

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plan corporation and any hospital providing for the rendering

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of [hospitalization] health care services to subscribers to

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the hospital plan shall be terminated or left to expire 

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unless the party seeking such termination or expiration gives

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90 days advance written notice to the other party to the

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contract and to the department of the proposed termination or

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expiration.

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(2.1)  Penalty.--The failure to provide the written

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notice under paragraph (2) to any party to the contract or to

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the department shall result in the automatic renewal of the

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contract on the existing terms and conditions in force under

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the terms of the contract for a period of one year following

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the proposed termination date or the date of expiration.

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(3)  [Hearing] Investigation period.--Whenever a

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termination or expiration subject to paragraph (2) involves

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contracts with hospitals having more than 5% of the beds in

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the area served by a hospital plan corporation, the

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department, in conjunction with the Department of Health, 

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shall hold [public hearings on at least 15 days notice] a

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public hearing after providing at least 15 days notice to

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each party to the contract for the purpose of investigating

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the reasons for the termination or the refusal to renew and

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the effects the termination or refusal to renew would cause

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on the public health of the area served by the hospital plan

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corporation. Pending completion of said investigation by the

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department, termination or expiration of the [hospital]

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health care service contracts shall be suspended for a period

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not to exceed six months from the termination or expiration

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of the period provided for in paragraph (2). All terms and

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conditions of the contract between the hospital plan

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corporation and the hospital or hospitals shall continue in

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full force and effect during said investigation by the

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department. Based on the record made during the hearings, the

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department shall make specific findings as to the facts of

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the dispute and shall [either] approve the termination of the

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[contracts] contract, permit the contract to expire or

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recommend such terms for continuation of the contract as are

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in the public interest, based upon the facts, the right of a

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hospital to be paid its costs for [hospitalization] health

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care services to subscribers and the need of subscribers for

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efficient, reliable [hospitalization] health care services at

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a reasonable cost.

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(4)  Negotiation period.--[If the department recommends

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terms for continuation of the contract, the hospital plan

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corporation and the hospitals involved shall renew their

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negotiations in order to determine whether a new agreement

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can be reached substantially on the basis of the terms for

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continuation recommended by the department and pending such

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negotiations, the termination of the hospital contracts shall

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be suspended for a further period not to exceed 90 days from

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the date of the decision of the department. If the hospital

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plan corporation and the hospitals are unable to consummate a

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new contract within said further period of 90 days, they

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shall so advise the department. The department shall in that

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event approve termination of the contracts effective at the

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end of a further period of 30 days and shall prescribe the

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form and extent of notice which the hospital plan corporation

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shall use in advising its subscribers that hospitalization in

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the hospitals involved is not covered by a contract between

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the hospital plan corporation and such hospitals.] If the

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department recommended terms for continuation of the

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contract, the parties to the contract shall renew

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negotiations in order to determine whether a new agreement

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can be reached substantially on the basis of the terms for

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continuation recommended by the department. If a new

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agreement is reached, the terms and conditions of the new

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contract shall be retroactive to the date of the termination

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or expiration of the contract previously in effect between

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the parties. If, after a period of 30 days, no agreement has

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been reached, the parties shall notify the Insurance

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Commissioner who shall, within 15 days of receiving the

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notification, issue an order requiring the parties to submit

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to mediation conducted in accordance with paragraph (4.1).

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Pending completion of the negotiation period under this

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paragraph, termination or expiration of the health care

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service contracts shall be suspended. All terms and

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conditions of the contract between the hospital plan

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corporation and the hospital or hospitals shall continue in

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full force and effect during the negotiation period.

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(4.1)  Mediation period.--Within 15 days of receipt of

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the notice under paragraph (4), the commissioner shall

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appoint an independent mediator who is familiar with health

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care delivery, provider reimbursement and health insurance to

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conduct mediation between the parties to the contract. The

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department shall provide staff and administrative support to

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the mediator as necessary for the mediator to carry out the

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mediation responsibilities under this paragraph. The mediator

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may engage experts to assist the mediator. The costs of any

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experts engaged by the mediator shall be paid equally by the

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parties to the mediation. The mediator shall have the

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authority to charge all of the costs to either of the parties

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at the conclusion of the mediation, if the mediator

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determines the charging of costs is appropriate. The

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mediation shall not be subject to 65 Pa.C.S. Ch. 7 (relating

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to open meetings) or to the act of February 14, 2008 (P.L.6,

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No.3), known as the Right-to-Know Law. If a new agreement is

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reached, the terms and conditions of the new contract shall

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be retroactive to the date of the termination or expiration

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of the contract previously in effect between the parties. If,

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after a period of 30 days, no agreement has been reached, the

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parties shall notify the Secretary of Health and the

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commissioner that no agreement has been reached. Upon

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receiving the notice, if the secretary determines that

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termination of the contract or permitting the contract to

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expire would substantially disrupt the delivery of health

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care services in the area served by the hospital plan

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corporation and that the continuation of the contract is in

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the public interest, the secretary shall notify the

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commissioner requesting that the department implement binding

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arbitration under paragraph (4.2). Pending completion of the

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mediation period under this paragraph, termination or

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expiration of the health care service contracts shall be

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suspended. All terms and conditions of the contract between

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the hospital plan corporation and the hospital or hospitals

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shall continue in full force and effect during the mediation

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period.

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(4.2)  Fact finding period.--Within 15 days of receipt of

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the notice from the Secretary of Health under paragraph

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(4.1), the commissioner shall issue an order requiring the

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parties to submit to binding arbitration conducted by the

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department. The order shall appoint the mediator under

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paragraph (4.1) as the finder of fact. The finder of fact

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shall be vested with authority to direct the production of

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any information or data not otherwise privileged or made

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confidential by law from any party to the arbitration. The

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finder of fact shall have the discretion to establish rules

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of confidentiality, exchange and verification of information

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and other procedures to ensure fairness of the process for

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all parties and to protect appropriate trade secret or

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confidential business information. The finding of fact shall

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not be subject to 65 Pa.C.S. Ch. 7 or to the Right-to-Know

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Law. A hearing shall commence within 20 days after

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appointment of the finder of fact and may not exceed two days

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of presentation and testimony by each party. The finder of

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fact shall report the findings to the commissioner within

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five days of the conclusion of the presentations and

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testimony to the finder of fact. Each party shall bear its

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own costs with respect to presentations and testimony to the

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finder of fact.

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(4.3)  Arbitration period.--Within 15 days of receipt of

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the report under paragraph (4.2), the commissioner shall

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issue an order imposing contract terms on the hospital plan

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corporation and the hospital or extending any contract

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existing between the the hospital plan corporation and

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hospital for a period not to exceed 18 months. The order

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shall be a determination of public policy and public interest

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and shall not be considered an adjudication under 2 Pa.C.S.

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Ch. 5 Subch. A (relating to practice and procedure of

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Commonwealth agencies) and Ch. 7 Subch. A (relating to

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judicial review of Commonwealth agency action) and shall not

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be appealable to a court of law. In reaching the decision,

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the commissioner shall consider all of the following:

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(i)  The terms of any current health care service

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contract between the parties.

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(ii)  Historic contract reimbursement rates for the

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geographic area served by any party to the arbitration,

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including weighted average rates of health care providers

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in the area for all payers.

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(iii)  Inflation rates.

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(iv)  Average reimbursement rates for similarly

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situated health care providers.

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(v)  Costs incurred by health care providers in the

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provision of health care services to patients.

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(vi)  Actuarial impacts of any proposed contract or

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reimbursement rate on insurance rates.

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(vii)  Whether a health care provider is placed at

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risk of providing additional care without additional

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compensation.

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(viii)  Expected patient volume under the contract.

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(ix)  Alternative health care providers'

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accessibility to individuals.

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(x)  Any other factors as the commissioner deems

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appropriate.

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(5)  Retroactivity.--Upon the settlement of any dispute

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between a hospital plan corporation and any hospital pursuant

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to [paragraphs (2) and (4)] this subsection, the terms and

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conditions of any new health care service contract shall be

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retroactive to the date of expiration or termination of the

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contract previously in effect between the parties.

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(6)  Definitions.--The following words and phrases when

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used in this subsection shall have the meanings given to them

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in this paragraph unless the context clearly indicates

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otherwise:

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(i)  "Health care service."  The term includes:

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(A)  Hospitalization.

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(B)  Any care or treatment rendered by an

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individual who is employed by a hospital or a

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physician practice owned by a hospital.

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(ii)  "Hospital."  An entity which is both of the

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following:

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(A)  Is licensed as a hospital under the act of

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July 19, 1979 (P.L.130, No.48), known as the Health

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Care Facilities Act.

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(B)  Is either of the following:

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(I)  claiming tax exempt status under the act

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of November 26, 1997 (P.L.508, No.55), known as

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the Institutions of Purely Public Charity Act; or

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(II)  has received funds under the act of

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February 9, 1999 (P.L.1, No.1), known as the

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Capital Facilities Debt Enabling Act.

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Section 2.  The amendment of 40 Pa.C.S. § 6124(c) shall apply

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to all terminations or expirations of contracts between a

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hospital and a hospital plan corporation occurring on or after

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the effective date of this section.

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Section 3.  This act shall take effect immediately.

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