CHAPTER 314. COOPERATIVE AGREEMENTS AMONG HOSPITALS

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Statutes > Texas > Health-and-safety-code > Title-4-health-facilities > Chapter-314-cooperative-agreements-among-hospitals

HEALTH AND SAFETY CODE

TITLE 4. HEALTH FACILITIES

SUBTITLE F. POWERS AND DUTIES OF HOSPITALS

CHAPTER 314. COOPERATIVE AGREEMENTS AMONG HOSPITALS

Sec. 314.001. DEFINITIONS. In this chapter:

(1) "Attorney general" means the attorney general of Texas or

any assistant attorney general acting under the direction of the

attorney general of Texas.

(2) "Cooperative agreement" means an agreement among two or more

hospitals for the allocation or sharing of health care equipment,

facilities, personnel, or services.

(3) "Department" means the Texas Department of Health.

(4) "Hospital" means a general or special hospital licensed

under Chapter 241 or a private mental hospital licensed under

Chapter 577.

Added by Acts 1993, 73rd Leg., ch. 638, Sec. 1, eff. Sept. 1,

1993. Renumbered from Health & Safety Code Sec. 313.001 by

Acts 1995, 74th Leg., ch. 76, Sec. 17.01(25), eff. Sept. 1, 1995.

Sec. 314.002. REVIEW AND CERTIFICATION OF COOPERATIVE

AGREEMENTS. (a) A hospital may negotiate and enter into

cooperative agreements with other hospitals in the state if the

likely benefits resulting from the agreement outweigh any

disadvantages attributable to a reduction in competition that may

result from the agreements. Acting through their boards of

directors, a group of hospitals may conduct discussions or

negotiations concerning cooperative agreements, provided that the

discussions or negotiations do not involve price fixing or

predatory pricing.

(b) Parties to a cooperative agreement may apply to the

department for a certification of public advantage governing the

cooperative agreement. The application must include a written

copy of the cooperative agreement and describe the nature and

scope of the cooperation in the agreement and any consideration

passing to any party under the agreement. A copy of the

application and copies of all additional related materials must

be submitted to the attorney general and to the department at the

same time. The department shall charge an application fee in an

amount not to exceed $10,000 per application.

with the standards set forth in Subsections (e) and (f) and

shall, if requested, hold a public hearing in accordance with

rules adopted by the department. The department shall grant or

deny the application within 120 days of the date of filing of the

application and that decision must be in writing and set forth

the basis for the decision. The department shall furnish a copy

of the decision to the applicants, the attorney general, and any

intervenor within 10 days of its issuance.

(d) The department shall issue a certificate of public advantage

for a cooperative agreement if it determines that the applicants

have demonstrated by clear and convincing evidence that the

likely benefits resulting from the agreement outweigh any

disadvantages attributable to a reduction in competition that may

result from the agreement.

(e) In evaluating the potential benefits of a cooperative

agreement, the department shall consider whether one or more of

the following benefits may result from the cooperative agreement:

(1) enhancement of the quality of hospital and hospital-related

care provided to Texas citizens;

(2) preservation of hospital facilities in geographical

proximity to the communities traditionally served by those

facilities;

(3) gains in the cost efficiency of services provided by the

hospitals involved;

(4) improvements in the utilization of hospital resources and

equipment; and

(5) avoidance of duplication of hospital resources.

(f) The department's evaluation of any disadvantages

attributable to any reduction in competition likely to result

from the agreement may include, but need not be limited to, the

following factors:

(1) the extent of any likely adverse impact on the ability of

health maintenance organizations, preferred provider

organizations, or other health care payors to negotiate optimal

payment and service arrangements with hospitals, physicians,

allied health care professionals, or other health care providers;

(2) the extent of any reduction in competition among physicians,

allied health professionals, other health care providers, or

other persons furnishing goods or services to, or in competition

with, hospitals;

(3) the extent of any adverse impact on patients in the quality,

availability, and price of health care services; and

(4) the availability of arrangements that are less restrictive

to competition and achieve similar benefits.

(g) The department shall consult with the attorney general

regarding any potential reduction in competition that may result

from a cooperative agreement. The attorney general shall review

the application and all supporting documents provided by the

applicants, any documents or other information provided by any

intervenors, and any documents or testimony provided at a public

hearing, if any, on the application and shall advise the

department whether the proposed cooperative agreement would have

inappropriate impact on competition. If the attorney general

advises the department to deny an application, the attorney

general shall state the basis and reasons for the recommended

denial.

Added by Acts 1993, 73rd Leg., ch. 638, Sec. 1, eff. Sept. 1,

1993. Renumbered from Health & Safety Code Sec. 313.002 by

Acts 1995, 74th Leg., ch. 76, Sec. 17.01(25), eff. Sept. 1, 1995.

Sec. 314.003. ATTORNEY GENERAL AUTHORITY. (a) The attorney

general, at any time after an application is filed under Section

313.002(b), may require by civil investigative demand the

attendance and testimony of witnesses and the production of

documents in Travis County or the county in which the applicants

are located for the purpose of investigating whether the

cooperative agreement satisfies the standards set forth in

Section 313.002. All nonpublic documents produced and testimony

given to the attorney general are subject to the prohibitions on

disclosure and use of Section 15.10(i), Business & Commerce

Code. The attorney general may seek an order from the district

court compelling compliance with a civil investigative demand

issued under this section.

(b) The attorney general may seek to enjoin the operation of a

cooperative agreement for which an application for certificate of

public advantage has been filed by filing suit against the

parties to the cooperative agreement in district court. The

attorney general may file an action before or after the

department acts on the application for a certificate but, except

as provided in Subsection (e), the action must be brought not

later than 20 days following the attorney general's receipt of a

copy of the final and appealable decision of the department.

Subsection (b), the department's certification, if previously

issued, must be stayed and the cooperative agreement is of no

further force unless the court orders otherwise or until the

action is concluded. The attorney general may apply to the court

for any ancillary temporary or preliminary relief necessary to

stay the cooperative agreement pending final disposition of the

case.

(d) In any action brought under Subsection (b), the applicants

for a certificate bear the burden of establishing by clear and

convincing evidence that in accordance with Sections 313.002(e)

and (f), the likely benefits resulting from the cooperative

agreement outweigh any disadvantages attributable to a reduction

in competition that may result from the agreement. In assessing

disadvantages attributable to a reduction in competition likely

to result from the agreement, the court may draw upon the

determinations of federal and Texas courts concerning

unreasonable restraint of trade under 15 U.S.C. Sections 1 and 2,

and Chapter 15, Business & Commerce Code.

(e) If, at any time following the 20-day period specified in

Subsection (b), the attorney general determines that as a result

of changed circumstances the benefits resulting from a certified

agreement no longer outweigh any disadvantages attributable to a

reduction in competition resulting from the agreement, the

attorney general may file suit in the district court seeking to

cancel the certificate of public advantage. The standard for

adjudication for an action brought under this subsection is as

follows:

(1) except as provided in Subdivision (2), in any action brought

under this subsection the attorney general has the burden of

establishing by a preponderance of the evidence that as a result

of changed circumstances the benefits resulting from the

agreement and the unavoidable costs of canceling the agreement

are outweighed by disadvantages attributable to a reduction in

competition resulting from the agreement;

(2) in any action under this subsection, if the attorney general

first establishes by a preponderance of evidence that the

department's certification was obtained as a result of material

misrepresentation to the department or the attorney general or as

the result of coercion, threats, or intimidation toward any party

to the cooperative agreement, then the parties to the agreement

bear the burden of establishing by clear and convincing evidence

that the benefits resulting from the agreement and the

unavoidable costs of canceling the agreement are outweighed by

disadvantages attributable to any reduction in competition

resulting from the agreement.

Added by Acts 1993, 73rd Leg., ch. 638, Sec. 1, eff. Sept. 1,

1993. Renumbered from Health & Safety Code Sec. 313.003 by

Acts 1995, 74th Leg., ch. 76, Sec. 17.01(25), eff. Sept. 1, 1995.

Sec. 314.004. MONITORING OF APPROVED COOPERATIVE AGREEMENTS.

(a) If, at any time following the approval of a cooperative

agreement by the department, the department determines that as a

result of changed circumstances the benefits resulting from an

approved agreement no longer outweigh any disadvantages

attributable to a reduction in competition resulting from the

agreement, the department may initiate proceedings to terminate

the certificate of public advantage.

(b) The department may request documents from the parties to the

cooperative agreement regarding the current status of the

agreement, including information relative to the continued

benefits and any disadvantages of the agreement and shall, if

requested, hold a public hearing to solicit additional

information concerning the effects of the cooperative agreement.

resulting from an approved cooperative agreement no longer

outweigh any disadvantages attributable to any potential

reduction in competition resulting from the agreement, the

department may terminate the certificate of public advantage.

Added by Acts 1993, 73rd Leg., ch. 638, Sec. 1, eff. Sept. 1,

1993. Renumbered from Health & Safety Code Sec. 313.004 by

Acts 1995, 74th Leg., ch. 76, Sec. 17.01(25), eff. Sept. 1, 1995.

Sec. 314.005. JUDICIAL REVIEW OF DEPARTMENT ACTION. Any party

aggrieved by a decision of the department in granting or denying

an application, refusing to act on an application, or terminating

a certificate is entitled to judicial review of the decision in

accordance with Chapter 2001, Government Code.

Added by Acts 1993, 73rd Leg., ch. 638, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.95(49),

eff. Sept. 1, 1995. Renumbered by Health & Safety Code Sec.

313.005 by Acts 1995, 74th Leg., ch. 76, Sec. 17.01(25), eff.

Sept. 1, 1995.

Sec. 314.006. VALIDITY OF CERTIFIED COOPERATIVE AGREEMENTS. (a)

Notwithstanding Section 15.05(a), Business & Commerce Code,

or any other provision of law, a cooperative agreement for which

a certificate of public advantage has been issued is a lawful

agreement. Notwithstanding Section 15.05(a), Business &

Commerce Code, or any other provision of law, if the parties to a

cooperative agreement file an application for a certificate of

public advantage governing the agreement with the department, the

conduct of the parties in negotiating and entering into a

cooperative agreement is lawful conduct.

(b) If the department, or in any action by the attorney general

the district court, determines that the applicants have not

established by clear and convincing evidence that the likely

benefits resulting from a cooperative agreement outweigh any

disadvantages attributable to any potential reduction in

competition resulting from the agreement, the agreement is

invalid and has no further force or effect.

with the requirements of Chapters 241 or 577 of this code.

Added by Acts 1993, 73rd Leg., ch. 638, Sec. 1, eff. Sept. 1,

1993. Renumbered from Health & Safety Code Sec. 313.006 by

Acts 1995, 74th Leg., ch. 76, Sec. 17.01(25), eff. Sept. 1, 1995.

Sec. 314.007. MERGERS AND CONSOLIDATIONS INVOLVING HOSPITALS.

The provisions of this chapter do not apply to any agreement

among hospitals by which ownership or control over substantially

all of the stock, assets of activities of one or more previously

licensed and operating hospitals is placed under the control of

another licensed hospital or hospitals.

Added by Acts 1993, 73rd Leg., ch. 638, Sec. 1, eff. Sept. 1,

1993. Renumbered from Health & Safety Code Sec. 313.007 by

Acts 1995, 74th Leg., ch. 76, Sec. 17.01(25), eff. Sept. 1, 1995.

Sec. 314.008. AUTHORITY TO ADOPT RULES; EFFECTIVE DATE. (a)

This Act specifically excludes ground and/or air ambulance

services.

(b) The department shall have the authority to adopt rules to

implement the requirements of this chapter. Such rules shall be

adopted by March 1, 1994, at which time hospitals may file an

application with the department for a certification of public

advantage.

Added by Acts 1993, 73rd Leg., ch. 638, Sec. 1, eff. Sept. 1,

1993. Renumbered from Health & Safety Code Sec. 313.008 by

Acts 1995, 74th Leg., ch. 76, Sec. 17.01(25), eff. Sept. 1, 1995.

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