PRIOR PRINTER'S NO. 3177
PRINTER'S NO. 3406
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2344
Session of
2024
INTRODUCED BY BOROWSKI, TAKAC, PROBST, DONAHUE, GIRAL, SANCHEZ,
MAYES, KHAN, GUENST, DELLOSO, CIRESI, WAXMAN, KRAJEWSKI,
HILL-EVANS, CERRATO, KRUEGER, BOYD, DALEY, KAZEEM, O'MARA AND
GREEN, MAY 28, 2024
AS REPORTED FROM COMMITTEE ON HEALTH, HOUSE OF REPRESENTATIVES,
AS AMENDED, JUNE 26, 2024
AN ACT
Amending the act of July 19, 1979 (P.L.130, No.48), entitled "An
act relating to health care; prescribing the powers and
duties of the Department of Health; establishing and
providing the powers and duties of the State Health
Coordinating Council, health systems agencies and Health Care
Policy Board in the Department of Health, and State Health
Facility Hearing Board in the Department of Justice;
providing for certification of need of health care providers
and prescribing penalties," providing for health systems
protection; imposing a fine; and promulgating regulations.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The act of July 19, 1979 (P.L.130, No.48), known
as the Health Care Facilities Act, is amended by adding a
chapter to read:
CHAPTER 8-C
HEALTH SYSTEMS PROTECTION
Section 801-C. Definitions.
The following words and phrases when used in this chapter
shall have the meanings given to them in this section unless the
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context clearly indicates otherwise:
"Acquired entity." The entity, or portion of an entity,
acquired under an agreement or transaction.
"Acquisition." An agreement, arrangement or activity the
consummation of which results in a person acquiring direct or
indirect control of another person. The term includes the
acquisition of voting securities and noncorporate interests,
including assets, capital stock or membership interests or
equity interests.
"Against the public interest." If the effect of an action
includes, as determined by the Attorney General, any of the
following impacts:
(1) Reduced competition or increased costs for health
care payers, purchasers or consumers.
(2) Unfair methods of competition in or affecting health
care commerce or unfair or deceptive acts or practices in or
affecting health care commerce.
(3) Reduced quality of care, including the ability to
offer culturally competent and appropriate care.
(4) Reduced access to or availability of health care for
payers, purchasers or consumers.
(5) Reduced access to care in a rural, low-income or
disadvantaged community. A DETERMINATION THAT AN ACTION IS
AGAINST THE WELFARE OR WELL-BEING OF THE GENERAL PUBLIC OF
THIS COMMONWEALTH.
"Agreement or transaction." An agreement or transaction as
described under section 803-C(a).
"Attorney General." The Office of Attorney General of the
Commonwealth.
"Capital distribution." A payment made, liability incurred
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or other consideration given by a target firm health system to a
person for the purchase, acquisition, redemption, repurchase,
payment or retirement of capital stock or other equity interest
of the target firm health system or as a dividend, return of
capital or other distribution in respect of the target firm
health system's capital stock or other equity interest.
"Community health needs assessment." An assessment that
complies with the requirements of 26 U.S.C. § 501(r)(3)
(relating to exemption from tax on corporations, certain trusts,
etc.).
"Contracting affiliation." As follows:
(1) The formation of a relationship between two or more
entities that permits any of the following:
(i) The entities to negotiate jointly with carriers
or third-party administrators over rates for professional
medical services.
(ii) One entity to negotiate on behalf of the other
entity with carriers or third-party administrators over
rates for professional medical services.
(2) The term does not include an arrangement among
entities under common ownership.
"Health system." One or more health care facilities that are
owned by a common legal entity or that have entered into an
affiliation agreement to combine or coordinate delivery of
health care services under a common organizational name. AS
DEFINED IN SECTION 809.2.
"Material amount." An amount equal to $10,000,000 or more.
"Material change." Any of the following:
(1) The sale, transfer, lease or other encumbrance of a
material amount of a health system's assets or operations,
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including real property, employment groups, emergency
departments or other units.
(2) A merger, an acquisition or a contracting
affiliation with another health system or provider
organization that is valued at a material amount.
(3) A capital distribution or similar reduction of a
health system's equity capital by a material amount or the
incursion of an obligation that commits the health system to
making a capital distribution or similar reduction of equity
by a material amount.
"Merger." A consolidation of two or more organizations,
including two or more organizations joining through a common
parent organization, or two or more organizations forming a new
organization. The term does not include a corporate
reorganization.
"Person." As defined in 1 Pa.C.S. § 1991 (relating to
definitions).
"Provider organization." A person or organized group of
persons, whether incorporated or not, which is in the business
of health care delivery or management and that represents seven
or more physicians in contracting with carriers or third-party
administrators for the payment of health care services. The term
includes a physician organization, physician-hospital
organization, independent practice association, provider network
or accountable care organization.
Section 802-C. Transactions against public interest.
(a) General rule.--Except as provided under subsection (b),
a person may not enter into an agreement or transaction
involving a material change with a health system or provider
organization in a manner that is against the public interest.
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(b) Exception.--An action prohibited under subsection (a)
may be permitted when, as determined by the Attorney General,
there is no feasible alternative to prevent a health system's
closure or a greater loss of health services.
Section 803-C. Filing.
(a) General rule.--A health system or provider organization
shall file a notification in accordance with subsection (c) and
shall observe the waiting period under subsection (b) prior to
entering into an agreement or transaction that results in a
material change.
(b) Waiting period.--A health system or provider
organization shall undergo a waiting period prior to entering
into an agreement or transaction, which shall:
(1) begin on the date of receipt by the Attorney General
of:
(i) the notification required under subsection (c);
or
(ii) if notification is not completed, the
notification to the extent completed and a statement of
the reasons for noncompliance with subsection (c) from
both persons; and
(2) end:
(i) ninety days following the date of receipt under
paragraph (1) for all agreements or transactions; or
(ii) on a later date as may be prescribed under
subsection (d) or section 808-C.
(c) Notice.--The notification of the transaction or
agreement required under subsection (a) shall be submitted to
the Attorney General on a form and in a manner developed by the
Attorney General. The notification shall include all of the
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following :
(1) All organic documents, including articles of
incorporation, bylaws, operating agreements and other
documents related to governance and ownership of each party .
(2) All complete transaction documents with attachments,
including collateral or ancillary agreements involving
officers, directors or employees .
(3) All documents signed by the principals, or their
agents, that are necessary to determine the proposed
transaction's effect, if any, on related or subsidiary
business entities, whether nonprofit or for profit .
(4) Any of the following that comprise part or all of
the transaction:
(i) Asset contribution agreements .
(ii) Operating agreements .
(iii) Management contracts .
(5) All information necessary to evaluate the effects of
the transaction on each component of an integrated delivery
system if that transaction involves a hospital, including any
changes in contracts between the integrated delivery system
entities and related physician groups .
(6) All financial documents of the transaction parties
and related entities, if applicable, including audited
financial statements, ownership records, business projection
data, current capital asset valuation data and any records
upon which future earnings, existing asset values and fair
market value analysis can be based .
(7) All fairness opinions and independent valuation
reports of the assets and liabilities of the parties,
prepared on the parties' behalf .
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(8) A list of all donor restricted assets, together with
origination documents and current fund balances.
(9) All relevant contracts that may affect value,
including business contracts and employee contracts, such as
buy-out provisions, profit-sharing agreements and severance
packages .
(10) All information and representations disclosing
related party transactions that are necessary to assess
whether the transaction is at arm's length or involves self-
dealing .
(11) All documents relating to noncash elements of the
transaction, including pertinent valuations of security for
loans and stock restrictions .
(12) All tax-related information, including the
existence of tax-free debt subject to redemption and
disqualified person transactions yielding tax liability .
(13) A list of ongoing litigation, including full court
captions, involving the transaction parties or their related
entities, that may affect the interests of the parties .
(14) All information in the possession of the
transacting parties relative to the perspective of the health
system's patient base and communities served, or their
representatives .
(15) All information, including internal and external
reports and studies, bearing on the effect of the proposed
transaction on the availability or accessibility of health
care in the affected community .
(16) A complete list of all insurance plans under
contract and their expiration dates.
(17) Organizational charts of the parties to the
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transaction, as they exist both pre-consummation and post-
consummation of the transaction, detailing the relationship
between the principal parties, including any subsidiary.
(18) All additional documents that the Attorney General
deems necessary for review purposes.
(d) Additional information and waiting period extensions.--
(1) The Attorney General may, prior to the expiration of
the waiting period under subsection (b), require the
submission of additional information or documentary material ,
including a community health needs assessment, from a person
required to file notification under subsection (c), or from
any officer, director, partner, agent or employee of the
person.
(2) The Attorney General may, in its discretion, extend
the waiting period under subsection (b) for an additional 30
days for a transaction after the date on which the Attorney
General receives either of the following from a person to
whom a request is made under paragraph (1):
(i) all of the additional information and
documentary material requested; or
(ii) if the request is not fully complied with, the
information and documentary material submitted and a
statement of the reasons for the noncompliance.
(3) A further extension of the waiting period required
under subsection (b) must be granted by a court in accordance
with section 806-C(2)(ii) .
(e) Right-to-Know Law.-- A document provided to the Attorney
General under this chapter shall be exempt from public access
under the act of February 14, 2008 (P.L.6, No.3), known as the
Right-to-Know Law.
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Section 804-C. Public hearings and notice.
(a) General rule.--Prior to the expiration of the respective
waiting period under section 803-C(b), along with any extension
granted under section 803-C(d), the Attorney General shall
conduct one or more public hearings on the proposed agreement or
transaction.
(b) Format.--A public hearing required under subsection (a)
shall be live-streamed on the Attorney General's publicly
accessible Internet website. A video recording of the public
hearing shall be posted on the Attorney General's publicly
accessible Internet website.
(c) Specific entities.--If any agreement or transaction
involves acquiring a provider organization or a hospital or
hospital system, the Attorney General shall hold a public
hearing in any county in which the acquired entity is located to
hear comments from interested parties. Interested parties shall
include legal aid and health advocacy organizations within a
county in which the acquired entity is located. The Attorney
General may request testimony at a hearing from State agencies
subject to section 807-C(c).
(d) Notice.--A t least 14 days before the date of the public
hearing, the Attorney General shall provide written notice of
the date, time and place of the public hearing:
(1) on the Attorney General's publicly accessible
Internet website;
(2) through social and broadcast media;
(3) through publication in one or more newspapers of
general circulation in the affected community; and
(4) to the governing body of each county in which the
acquired entity is located.
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(e) Substantive changes to proposal.--If a substantive
change in the agreement or transaction is submitted to the
Attorney General after the initial public hearing, the Attorney
General may conduct an additional public hearing to hear
comments from interested parties with respect to the change.
Section 805-C. Determination and restraining prohibited
transactions.
(a) Determination.--No later than the final date of
expiration of the respective waiting period under section 803-
C(b), along with any extension granted under section 803-C(d),
the Attorney General shall determine whether the proposed
agreement or transaction is against the public interest. LIKELY
TO CREATE A MATERIAL CHANGE THAT IS AGAINST THE PUBLIC INTEREST,
AFTER REVIEWING AND EVALUATING THE FOLLOWING:
(1) THE MARKET SHARE OF A TRANSACTING PARTY OR THE
CHANGE IN MARKET CONCENTRATION OR COMPETITION RESULTING FROM
THE TRANSACTION;
(2) THE PRICES CHARGED, OR ANY LIKELY CHANGES IN PRICES
FOLLOWING THE TRANSACTION, BY EITHER OF THE TRANSACTING
PARTIES TO INDIVIDUALS, EMPLOYERS OR INSURERS FOR SERVICES,
INCLUDING RELATIVE PRICES COMPARED TO OTHER PROVIDERS FOR THE
SAME SERVICES IN THE SAME GEOGRAPHIC AREA;
(3) T HE QUALITY OF THE SERVICES PROVIDED, OR ANY LIKELY
CHANGES IN THE QUALITY OF SERVICES PROVIDED FOLLOWING THE
TRANSACTION, BY A HEALTH CARE PROVIDER PARTY TO THE
TRANSACTION, INCLUDING, BUT NOT LIMITED TO, PATIENT
EXPERIENCE, PERFORMANCE ON PROVIDER QUALITY MEASURES AND
OUTCOME MEASURES, HISTORY OF CITATIONS, INSPECTION RESULTS
AND ENFORCEMENT ACTIONS TAKEN BY OVERSIGHT ENTITIES;
(4) TH E AVAILABILITY AND ACCESSIBILITY OF SERVICES OR
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ANY CHANGES TO THE AVAILABILITY AND ACCESSIBILITY OF SERVICES
PROVIDED BY EITHER TRANSACTING PARTY WITHIN ITS PRIMARY
SERVICE AREAS AND DISPERSED SERVICE AREAS;
(5) T HE IMPACT OF THE MATERIAL CHANGE TRANSACTION ON
COMPETING OPTIONS FOR THE DELIVERY OF HEALTH CARE SERVICES
WITHIN ITS PRIMARY SERVICE AREAS AND DISPERSED SERVICE AREAS,
INCLUDING, IF APPLICABLE, THE IMPACT ON EXISTING SERVICE
PROVIDERS OF A LARGE PROVIDER'S EXPANSION, CORPORATE
AFFILIATION, MERGER OR ACQUISITION, TO ENTER A PRIMARY OR
DISPERSED SERVICE AREA IN WHICH IT DID NOT PREVIOUSLY
OPERATE;
(6) T HE ROLE OF THE TRANSACTING PARTIES IN SERVING
VULNERABLE, UNDERSERVED, GOVERNMENT PAYER PATIENT POPULATIONS
OR LOW-INCOME PATIENT POPULATIONS, RURAL COMMUNITIES, RACIAL
AND ETHNIC MINORITIES, INDIVIDUALS WITH BEHAVIORAL, SUBSTANCE
USE DISORDER OR MENTAL HEALTH CONDITIONS AND INDIVIDUALS WITH
OTHER DISABILITIES WITHIN THE PROVIDER'S PRIMARY SERVICE
AREAS AND DISPERSED SERVICE AREAS AND ANY LIKELY IMPACT TO
THESE POPULATIONS;
(7) THE ROLE OF THE TRANSACTING PARTIES IN PROVIDING LOW
MARGIN OR NEGATIVE MARGIN SERVICES WITHIN ITS PRIMARY SERVICE
AREAS AND DISPERSED SERVICE AREAS AND ANY LIKELY IMPACT TO
THESE SERVICES ;
(8) C ONSUMER CONCERNS, INCLUDING, BUT NOT LIMITED TO,
COMPLAINTS OR OTHER ALLEGATIONS THAT A LARGE PROVIDER OR
PROPOSED OWNER HAS ENGAGED IN ANY UNFAIR METHOD OF
COMPETITION OR ANY UNFAIR OR DECEPTIVE ACT OR PRACTICE AS
DEFINED IN THE ACT OF DECEMBER 17, 1968 (P.L.1224, NO.387),
KNOWN AS THE UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION
LAW , AND ANY LIKELY INCREASE IN UNFAIR METHODS OF COMPETITION
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OR UNFAIR OR DECEPTIVE ACTS OR PRACTICES IN OR AFFECTING
HEALTH CARE COMMERCE;
(9) THE METHODS USED BY EITHER TRANSACTING PARTY TO
ATTRACT AND RETAIN PATIENT VOLUME, RECRUIT, HIRE OR RETAIN
HEALTH CARE PRACTITIONERS OR ACQUIRE HEALTH CARE FACILITIES;
(10) T HE IMPACT ON WAGES PAID BY, OR THE NUMBER OF
EMPLOYEES EMPLOYED BY, A HEALTH CARE ENTITY INVOLVED IN A
TRANSACTION;
(11) T HE IMPACT ON WAGES, COLLECTIVE BARGAINING UNITS
AND COLLECTIVE BARGAINING AGREEMENTS OF EXISTING OR FUTURE
WORKERS EMPLOYED BY A HEALTH CARE ENTITY INVOLVED IN A
TRANSACTION;
(12) EITHER TRANSACTING PARTY'S PRIOR HISTORY OR
RELEVANT OUTCOMES RELATED TO ANY OF THE FACTORS UNDER
PARAGRAPHS (1), (2), (3), (4), (5), (6), (7), (8), (9), (10)
AND (11), INCLUDING PROVIDER CLOSURE, REDUCTION IN WORKFORCE
OR CHANGE IN PRICE, QUALITY OR AVAILABILITY OF CARE FOLLOWING
A PRIOR MATERIAL CHANGE, IN ADDITION TO ANY VIOLATIONS OF
RELEVANT FEDERAL LAW OR REGULATIONS PERTAINING TO HEALTHCARE,
COMPETITION, WORKFORCE OR LABOR; AND
(13) any other factors that the Attorney General
determines to be in the public interest.
(b) Action.--If the Attorney General determines that the
proposed agreement or transaction is against the public interest
under subsection (a), the Attorney General may commence an
action in a court of competent jurisdiction to enjoin the
agreement or transaction.
(c) Licensing.--A State license of a health care facility
shall not be revoked, denied, impeded or cited for noncompliance
due solely to a filing or review under this chapter.
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Section 806-C. Civil penalty, compliance and power of court.
The following shall apply:
(1) In addition to any other proceeding at law, and
except as provided under paragraph (2), a person, or any
officer, director, partner, agency or employee of the person,
who fails to comply with this chapter shall be subject to a
fine of not less than $10,000 for each day of noncompliance.
(2) Notwithstanding paragraph (2) (1) , a person, or any
officer, director, partner, agent or employee of the person,
that substantially fails to comply with the notification
requirement under section 803-C(a) or any request for the
submission of additional information or documentary material
under section 803-C(d) within the respective waiting period,
along with any extension granted under 803-C(d), the court
may, in its discretion, do any or all of the following:
(i) Order compliance.
(ii) Extend the waiting period until there has been
substantial compliance.
(iii) Grant other equitable relief as the court
determines necessary or appropriate.
Section 807-C. Powers and duties of Attorney General.
(a) Rules and regulations.--The Attorney General, in
consultation with the department, shall promulgate rules and
regulations as may be necessary to carry out and enforce the
provisions of this chapter. The Attorney General and the
department shall ensure that the rules and regulations of the
Office of Attorney General and the department are not in
conflict.
(b) Contracts.--
(1) The Attorney General may do the following:
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(i) Contract with, share information with and
consult and receive advice from any Federal agency or
Commonwealth agency as the Attorney General deems
appropriate to implement this chapter.
(ii) At the Attorney General's sole discretion,
contract with experts or consultants to assist in
reviewing the proposed agreement or transaction.
(2) The cost of a contract entered into under paragraph
(1) must be an amount that is reasonable and necessary to
conduct the review and evaluation. The following shall apply:
(i) A contract shall be on a noncompetitive bid
basis.
(ii) Upon request, the Attorney General shall be
paid promptly by the entities seeking consent for all
contract costs.
(3) The Attorney General shall be entitled to
reimbursement from the entities seeking consent for the
agreement or transaction for all actual, reasonable and
direct costs incurred in reviewing, evaluating and making a
determination under section 805-C(a), including
administrative costs. The entities seeking consent shall
promptly pay the Attorney General, upon request, for all the
costs.
(c) Agency cooperation.-- The Department of Aging, the
department, the Department of Human Services and the Insurance
Department shall assist the Attorney General in reviewing the
proposed agreement and transaction, if requested, and shall
promptly comply with any request for testimony or information.
(1) THE DEPARTMENT OF AGING, THE DEPARTMENT, THE
DEPARTMENT OF HUMAN SERVICES AND THE INSURANCE DEPARTMENT
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SHALL ASSIST THE ATTORNEY GENERAL IN REVIEWING THE PROPOSED
AGREEMENT AND TRANSACTION, IF REQUESTED, AND SHALL PROMPTLY
COMPLY WITH ANY REQUEST FOR TESTIMONY OR INFORMATION.
(2) THE ATTORNEY GENERAL SHALL COMPLY WITH ANY REQUEST
FOR INFORMATION FROM THE INSURANCE DEPARTMENT AS MAY BE
NECESSARY AND APPROPRIATE FOR THE INSURANCE DEPARTMENT TO
CONCURRENTLY REVIEW A PROPOSED TRANSACTION UNDER ARTICLE XIV
OF THE ACT OF MAY 17, 1921 (P.L.682, NO.284), KNOWN AS THE
INSURANCE COMPANY LAW OF 1921. DOCUMENTS PROVIDED BY THE
ATTORNEY GENERAL TO THE INSURANCE DEPARTMENT UNDER THIS
PARAGRAPH SHALL BE TREATED AS CONFIDENTIAL AND ARE EXEMPT
FROM PUBLIC ACCESS UNDER THE ACT OF FEBRUARY 14, 2008 (P.L.6,
NO.3), KNOWN AS THE RIGHT-TO-KNOW LAW.
Section 808-C. Construction.
This chapter shall not be construed to:
(1) narrow, abrogate or otherwise alter the authority of
the Attorney General to maintain competitive markets and
prosecute or enforce violations of antitrust and unfair trade
practices laws; or
(2) prohibit any Federal agency, Commonwealth agency or
other state agency from regulating an agreement or
transaction or joining as party in an action seeking to
enjoin an agreement or transaction . , INCLUDING THE INSURANCE
DEPARTMENT'S JURISDICTION TO REVIEW AN EXPOSED TRANSACTION
UNDER ARTICLE XIV OF THE ACT OF MAY 17, 1921 (P.L.682,
NO.284), KNOWN AS THE INSURANCE COMPANY LAW OF 1921.
Section 809-C. Severability.
The provisions of this chapter are severable. If any
provision of this chapter or its application to any person or
circumstance is held invalid, the invalidity shall not affect
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other provisions or applications of this chapter which can be
given effect without the invalid provision or application.
Section 2. This act shall take effect in 60 days.
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