Regular Session 2023-2024 House Bill 2344 P.N. 3503

PRIOR PRINTER'S NOS. 3177, 3406

PRINTER'S NO. 3503

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,

GREEN, PIELLI, WEBSTER, T. DAVIS AND MADSEN, MAY 28, 2024

AS AMENDED ON SECOND CONSIDERATION, HOUSE OF REPRESENTATIVES,

JULY 10, 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

context clearly indicates otherwise:

"Acquired entity." The entity, or portion of an entity,

acquired under an agreement or transaction.

"ACQUIRING ENTITY." THE ENTITY, OR PORTION OF AN ENTITY,

THAT ACQUIRES OR TAKES CONTROL OF AN ACQUIRED ENTITY 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."

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

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.).

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"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." As defined in section 809.2.

"Material amount." An amount equal to $10,000,000

$25,000,000 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,

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

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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.

(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:

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(1) begin on the date of receipt by the Attorney General

of:

(i) the notification required under subsection (c);

(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.

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

following , IF APPLICABLE :

(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:

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(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 .

(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 .

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(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

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.

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(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) 806-C(2) .

(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.

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.

involves acquiring a provider organization or a hospital or

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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.

(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 likely to create a material change

that is against the public interest, after reviewing and

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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

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

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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

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

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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.

shall not be revoked, denied, impeded or cited for noncompliance

due solely to a filing or review under this chapter.

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 (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,

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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 806-C. COMPLIANCE AND POWER OF COURT.

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 SECTION 803-C(D), THE COURT MAY, IN ITS DISCRETION, DO ANY

OR ALL OF THE FOLLOWING:

(1) ORDER COMPLIANCE.

(2) EXTEND THE WAITING PERIOD UNTIL THERE HAS BEEN

SUBSTANTIAL COMPLIANCE.

(3) 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.--

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(1) The Attorney General may do the following:

(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.

(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. A CONTRACT SHALL BE ON A

NONCOMPETITIVE BID BASIS.

(3) THE ATTORNEY GENERAL SHALL BE ENTITLED TO

REIMBURSEMENT FROM THE TRANSACTION PARTIES SEEKING CONSENT

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FOR THE AGREEMENT OR TRANSACTION FOR 50% OF ALL ACTUAL,

REASONABLE AND DIRECT COSTS INCURRED IN REVIEWING, EVALUATING

AND MAKING A DETERMINATION UNDER SECTION 805-C(A), INCLUDING

ADMINISTRATIVE COSTS. THE TRANSACTION PARTIES SHALL PAY THE

ATTORNEY GENERAL WITHIN 30 DAYS OF THE REQUEST FROM THE

ATTORNEY GENERAL. THE ATTORNEY GENERAL MAY PROVIDE ADDITIONAL

TIME FOR THE TRANSACTION PARTIES TO PAY THEIR SHARE OF THE

COSTS, NOT TO EXCEED 90 ADDITIONAL DAYS. IF THE TRANSACTION

INVOLVES A MERGER OR ACQUISITION, THE FOLLOWING SHALL APPLY:

(I) NEITHER THE ATTORNEY GENERAL NOR THE ACQUIRING

ENTITY MAY SEEK REIMBURSEMENT FROM THE ACQUIRED ENTITY

FOR ANY COSTS UNDER THIS PARAGRAPH AND THE ACQUIRING

ENTITY SHALL BE RESPONSIBLE FOR THE FULL 50% OF THE

COSTS. AS PART OF ANY SETTLEMENT, COURT DECREE OR OTHER

AGREEMENT, THE ACQUIRING ENTITY MUST AGREE THAT IT WILL

NOT RECOUP ANY OF ITS SHARE OF THE COSTS FROM THE

ACQUIRED ENTITY.

(II) AN ACQUIRING ENTITY MAY PETITION A COURT OF

COMPETENT JURISDICTION FOR A WAIVER OF ANY OR ALL OF ITS

SHARE OF THE COSTS DUE TO FINANCIAL HARDSHIP OR OTHER

FACTORS THAT THE COURT DETERMINES FOR GOOD CAUSE SHOWN.

THE COURT SHALL DETERMINE WHETHER THE ACQUIRING ENTITY

INTENTIONALLY AND KNOWINGLY MISMANAGED ITS FUNDS FOR THE

PURPOSE OF BECOMING FINANCIALLY DISTRESSED TO OBTAIN

APPROVAL UNDER THIS SUBPARAGRAPH. IF THE COURT FINDS THAT

THE ACQUIRING ENTITY INTENTIONALLY AND KNOWINGLY

MISMANAGED ITS FUNDS FOR THE PURPOSE OF BECOMING

FINANCIALLY DISTRESSED TO OBTAIN APPROVAL UNDER THIS

SUBPARAGRAPH, THE COURT MAY NOT GRANT THE WAIVER

PETITION.

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(1) 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.

(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.

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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

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 60 180 days.

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