1Amending the act of July 19, 1979 (P.L.130, No.48), entitled "An
2act relating to health care; prescribing the powers and
3duties of the Department of Health; establishing and
4providing the powers and duties of the State Health
5Coordinating Council, health systems agencies and Health Care
6Policy Board in the Department of Health, and State Health
7Facility Hearing Board in the Department of Justice;
8providing for certification of need of health care providers
9and prescribing penalties," in preliminary provisions,
10further providing for definitions; providing for organization
11and powers and duties of the Health Care Competition
12Oversight Board; in licensing of health care facilities,
13further providing for definitions, for licensure and for
14issuance of license and providing for confidentiality; and
15making editorial changes.

16The General Assembly of the Commonwealth of Pennsylvania
17hereby enacts as follows:

18Section 1. Section 103 of the act of July 19, 1979 (P.L.130,
19No.48), known as the Health Care Facilities Act, is amended by 
20adding a definition to read:

21Section 103. Definitions.

22The following words and phrases when used in this act shall
23have, unless the context clearly indicates otherwise, the
24meanings given to them in this section:

1* * *

2"Competition oversight board."  The Health Care Competition
3Oversight Board.

4* * *

5Section 2. Chapter 3 heading of the act is amended to read:

6CHAPTER 3

7ORGANIZATION AND POWERS AND DUTIES OF THE

8HEALTH CARE [POLICY] COMPETITION OVERSIGHT BOARD

9Section 3. The act is amended by adding sections to read:

10Section 301.1. Health Care Competition Oversight Board.

11(a) The Health Care Competition Oversight Board is
12established. The membership of the competition oversight board
13shall be as follows:

14(1) The Secretary of Health, who shall serve ex officio
15and act as cochair.

16(2) The Insurance Commissioner, who shall serve ex
17officio and act as cochair.

18(3) The Attorney General, who shall serve ex officio.

19(4) Two physicians, one of whom shall be from a
20physician practice organization operating as part of an
21integrated delivery network.

22(5) Three representatives of hospitals, one of whom
23shall be from a hospital operating as part of an integrated
24delivery network.

25(6) One person with demonstrated expertise in health
26care delivery, health care management at a senior level or
27health care finance and administration, including payment
28methodologies.

29(7) One representative of a Blue Cross or Blue Shield
30plan.

1(8) Two representatives of commercial insurance
2carriers.

3(9) One person with demonstrated expertise in health
4care consumer advocacy.

5(10) One person with demonstrated expertise as a
6purchaser of health insurance representing business
7management or health benefits administration.

8(11) One representative of organized labor.

9(12) One health care competition economist.

10(b) Thirteen members of the competition oversight board
11listed under subsection (a) shall be appointed by the Governor
12and confirmed by a majority vote of the Senate. The Governor
13shall make all appointments to the competition oversight board
14within 90 days of the effective date of this section and the
15operations of the competition oversight board shall begin
16immediately upon confirmation of the members. The secretary and
17Insurance Commissioner shall convene the first meeting within 30
18days after the confirmation of the members.

19(c) The terms of the competition oversight board shall be as
20follows:

21(1) Of the members first appointed, four shall be
22appointed for a term of one year, four for a term of two
23years and five for a term of three years. Thereafter,
24appointments shall be made for a term of three years.

25(2) A vacancy during a term shall be filled for the
26unexpired term in the same manner as the predecessor was
27appointed.

28(3) No appointed member shall serve more than two full
29consecutive terms of three years.

30(d) A simple majority of the members of the competition

1oversight board shall constitute a quorum for the transaction of
2any business. No member may act or attend through a designee or
3proxy.

4(e) All meetings of the competition oversight board shall be
5subject to the act of February 14, 2008 (P.L.6, No.3), known as
6the "Right-to-Know Law." The competition oversight board shall
7meet at least four times a year and may convene additional
8meetings as may be necessary.

9(f) The members of the competition oversight board shall not
10receive any compensation for serving as members of the board,
11but shall be reimbursed at rates established by the executive
12board for necessary expenses incurred in the performance of
13their duties.

14Section 301.2. Powers and duties of competition oversight
15board.

16The competition oversight board shall exercise all powers
17necessary and appropriate to carry out its duties, including the
18following:

19(1) Monitor the reform of the health care delivery and
20payment system in this Commonwealth with respect to cost,
21quality and accessibility and how consumers are impacted.

22(2) Examine the changes occurring to institutional and
23structural arrangements through which health care is financed
24and delivered and its impact on consumers.

25(3) Examine the health care marketplace and the proper
26role of competition, antitrust and consumer protection laws
27and regulations and how they relate to the provision of high-
28quality, cost-effective health care.

29(4) Determine the current status and role of competition
30in health care and how competition can be enhanced to

1increase consumer welfare and protect patient access to
2necessary health care services.

3(5) Survey all Federal and state laws pertinent to
4health care competition and determine how current laws and
5regulations work to foster existing and potential competition
6in health care and how these laws impact consumers.

7(6) Make recommendations for modifications to existing
8laws or regulations or for the creation of new laws or
9regulations to achieve effective competition policy in this
10Commonwealth that at its core protects patient access to
11necessary health care services.

12(7) Consult with the Federal Trade Commission and the
13Antitrust Division of the Department of Justice, as
14appropriate.

15Section 301.3. Review of activities.

16The department shall prepare and publish on an annual basis a
17report of the activities and recommendations of the competition
18oversight board. The department's report shall be submitted to
19the Public Health and Welfare Committee of the Senate, the
20Banking and Insurance Committee of the Senate, the Health
21Committee of the House of Representatives and the Insurance
22Committee of the House of Representatives.

23Section 301.4. Study of health care competition.

24(a) The Legislative Budget and Finance Committee, in
25consultation with health care experts and specialists, shall
26conduct a study relative to certain issues related to health
27care competition in this Commonwealth, which examines and
28identifies all of the following:

29(1) The impact of hospital mergers on prices, costs,
30quality of care and competition.

1(2) The impact of hospital-physician consolidation on
2prices, costs, quality of care and competition.

3(3) The impact of health insurer consolidation on
4prices, costs, quality of care and competition.

5(4)  The correlation between health care price growth and
6market concentration, both hospital market concentration and
7health insurer market concentration.

8(5) A retrospective examination of the impact of
9hospital mergers on prices paid to hospitals by health
10insurers.

11(6) The relationship between hospital consolidation and
12quality.

13(7) The relationship between hospital-physician
14consolidation and quality.

15(8) An assessment of the hospital market concentration
16levels in this Commonwealth.

17(9)  An assessment of the health insurance market
18concentration levels in this Commonwealth.

19(b) The Legislative Budget and Finance Committee shall make
20a written report of its findings and recommendations to the
21competition oversight board, the Public Health and Welfare
22Committee of the Senate, the Banking and Insurance Committee of
23the Senate, the Health Committee of the House of Representatives
24and the Insurance Committee of the House of Representatives
25within one year of the effective date of this section.

26Section 301.5. Expiration.

27Sections 301.1, 301.2, 301.3 and 301.4 shall expire June 30,
282017.

29Section 4. Section 802.1 of the act is amended by adding
30definitions to read:

1Section 802.1. Definitions.

2The following words and phrases when used in this chapter
3shall have, unless the context clearly indicates otherwise, the
4meanings given them in this section:

5* * *

6"Default provider agreement." An agreement between a
7hospital that is part of an integrated delivery network and a
8willing health insurance carrier to provide health care
9services, which agreement is imposed upon the parties in the
10event that they fail to enter into a mutually agreeable
11contract.

12* * *

13"Health insurance carrier." An entity licensed in this
14Commonwealth to issue health insurance, subscriber contracts,
15certifications or plans that provide medical or health care
16coverage by a health care facility or licensed health care
17provider that is offered or governed under the act of May 17,
181921 (P.L.682, No.284), known as The Insurance Company Law of
191921, including section 630 and Article XXIV thereof, or any of
20the following:

21(1) The act of December 29, 1972 (P.L.1701, No.364),
22known as the "Health Maintenance Organization Act."

23(2) The act of May 18, 1976 (P.L.123, No.54), known as
24the "Individual Accident and Sickness Insurance Minimum
25Standards Act."

26(3) 40 Pa.C.S. Chs. 61 (relating to hospital plan
27corporations) and 63 (relating to professional health
28services plan corporations).

29* * *

30"Integrated delivery network." One or more entities with

1common ownership, operation or control, which include both of
2the following:

3(1) One or more hospitals, one or more physician
4practices and/or one or more health care providers offering
5health care services.

6(2) One or more entities operating as a health insurance
7carrier offering health insurance, administering health
8benefits, operating a health maintenance organization and/or
9offering other health care benefits and coverage to employers
10and/or individuals in this Commonwealth.

11* * *

12Section 5. Section 806 of the act is amended by adding a
13subsection to read:

14Section 806. Licensure.

15* * *

16(j) Hospitals operating as part of an integrated delivery
17network.--

18(1) In addition to complying with the standards and
19regulations promulgated under this section, hospitals
20operating as part of an integrated delivery network or any
21entity directly or indirectly owned, operated or controlled
22as part of these entities shall contract with any health
23insurance carrier that is willing to enter into a contract.

24(2) When contracting with health insurance carriers,
25hospitals operating as part of an integrated delivery network
26shall be:

27(i) prohibited from using contractual provisions and
28engaging in business practices that impede the
29availability of health care and that restrict access to
30facilities based solely on the type of insurance coverage

1offered by a health insurance carrier;

2(ii) prohibited from incorporating contractual
3provisions that limit or preclude the use of tiered
4networks by health insurance carriers;

5(iii) prohibited from using any portion of the
6reimbursement rate to subsidize a health insurance
7carrier operating as part of the same integrated delivery
8network;

9(iv) prohibited from incorporating a termination
10provision with a health insurance carrier for reasons
11other than a willful breach of contract; and

12(v) permitted to contract for its services at
13reimbursement rates that are based upon sound actuarial
14data.

15(3) Failure of any hospital operating as part of an
16integrated delivery network and a willing health insurance
17carrier to maintain a mutually agreeable contract shall
18result in the parties entering into a default provider
19agreement while they submit to mandatory binding arbitration.
20The default provider agreement shall set forth payment terms,
21while all other contractual terms of the previously executed
22contract shall remain in effect until the arbitration process
23is completed. The arbitrator shall set all terms of the new
24contract.

25(4) Failure of any newly affiliated hospital with an
26existing integrated delivery network or failure of any
27hospital operating as part of a newly formed integrated
28delivery network and a willing health insurance carrier to
29enter into a mutually agreeable contract within 90 days of
30the affiliation or formation shall result in the parties

1submitting to mandatory binding arbitration to establish a
2contract. The arbitrator shall set all terms of the new
3contract.

4(5) A mutually agreeable arbitrator shall be chosen by
5the parties from the American Arbitration Association's
6National Healthcare Panel of arbitrators experienced in
7handling payor-provider disputes.

8(6) All costs associated with the arbitration shall be
9split equally between the parties.

10(7) The arbitrator shall conduct the arbitration
11pursuant to the American Arbitration Association's Healthcare
12Payor Provider Arbitration Rules.

13(8) Contract terms and conditions shall be established
14as follows:

15(i) Each party shall submit best and final contract
16terms to the arbitrator.

17(ii) The arbitrator may request the production of
18documents, data and other information.

19(iii) Payment terms and all other contractual
20provisions shall be set by the arbitrator.

21(9) The default provider agreement shall remain in
22effect until the hospital operating as part of an integrated
23delivery network and a willing health insurance carrier
24complete the arbitration process.

25(10) Payment terms under the default provider agreement
26will be set according to an amount equal to the greatest of
27the following three possible amounts:

28(i) The amount the health insurance carrier
29negotiated with other in-network hospitals for the same
30service.

1(ii) The amount calculated by the same method the
2health insurance carrier uses to determine payments for
3out-of-network services, such as the usual, customary and
4reasonable charge.

5(iii) The amount that would be paid under Medicare
6for the same services.

7(11) Copies of all contracts between hospitals operating
8as part of an integrated delivery network and all health
9insurance carriers shall be provided to the department and
10the Insurance Department.

11Section 6. Section 808(a) of the act, amended December 22,
122011 (P.L.563, No.122), is amended and the section is amended by
13adding subsections to read:

14Section 808. Issuance of license.

15(a) Standards.--The department shall issue a license to a
16health care provider when it is satisfied that the following
17standards have been met:

18(1) that the health care provider is a responsible
19person;

20(2) that the place to be used as a health care facility
21is adequately constructed, equipped, maintained and operated
22to safely and efficiently render the services offered;

23(3) that the health care facility provides safe and
24efficient services which are adequate for the care, treatment
25and comfort of the patients or residents of such facility;

26(4) that there is substantial compliance with the rules
27and regulations adopted by the department pursuant to this
28act;

29(5) that a certificate of need has been issued if one is
30necessary; [and]

1(6) that, in the case of abortion facilities, such
2facility is in compliance with the requirements of 18 Pa.C.S.
3Ch. 32 (relating to abortion) and such regulations
4promulgated thereunder[.]; and

5(7) that, in the case of a hospital operating as part of 
6an integrated delivery network, such facility:

7(i) has contracts with all willing health insurance
8carriers;

9(ii) does not place restrictive covenants in its 
10employment contracts that restrain any health care 
11practitioner from engaging in his lawful profession; and

12(iii) has submitted an attestation statement to the
13department and the Insurance Department certifying that
14no portion of any reimbursement rate with a health
15insurance carrier is subsidizing the health insurance
16carrier operating as part of the same integrated delivery
17network.

18* * *

19(d) Methodology records.--Every hospital submitting an
20attestation statement in accordance with this section must keep
21all books, records, accounts, papers, documents and any or all
22computer or other recordings relating to its methodology for
23developing reimbursement rates for every health insurance
24carrier in such manner and for such time periods as the
25department, in its discretion, may require in order that its
26authorized representatives may readily verify that no portion of
27any reimbursement rate is subsidizing the health insurance
28carrier operating as part of the same integrated delivery
29network.

30(e) Survey.--The department or any of its surveyors may

1conduct a survey under this section of any hospital operating as
2part of an integrated delivery network as often as the
3secretary, in his sole discretion, deems appropriate.

4(f) Survey expenses.--When conducting a survey under this
5section, the department may retain attorneys, independent
6actuaries, independent certified public accountants or other
7professionals and specialists as surveyors. All expenses
8incurred in and about the survey of any hospital, including
9compensation of department or Insurance Department employees
10assisting in the survey and any other professionals or
11specialists retained in accordance with this section shall be
12charged to and paid by the hospital surveyed in such a manner as
13the secretary shall by regulation provide.

14Section 7. The act is amended by adding a section to read:

15Section 902.2. Confidentiality.

16(a) Received materials.--Any insurance contracts, documents,
17materials or information received by the department or Insurance
18Department from a hospital for the purpose of compliance with
19this act and any regulations developed pursuant to this act
20shall be confidential.

21(b) Access.--The department may use the information under
22section 806 and any regulations developed pursuant to this act
23for the sole purpose of a licensure or corrective action against
24a health care facility.

25(c) Right-to-know requests.--Any insurance contracts,
26documents, materials or information made confidential under this
27act shall not be subject to requests under the act of February
2814, 2008 (P.L.6, No.3), known as the "Right-to-Know Law."

29Section 8. This act shall take effect in 90 days.