Health care mergers, acquisitions, and collaborations.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law requires every nonprofit health care service plan applying to restructure, as defined, or convert its activities to secure the approval of the Director of the Department of Managed Health Care. Existing law requires the Director of the Department of Managed Health Care to provide the public notice of, reasonable access to, and an opportunity to comment on, public records relating to the restructuring or conversion of a health care service plan. Existing law requires any nonprofit health care service plan that is formed under, or subject to, either the Nonprofit Public Benefit Corporation Law or the Nonprofit Mutual Benefit Corporation Law to secure the written consent of the Director of the Department of Managed Health Care prior to any merger. If a health care service plan proposes a merger, consolidation, acquisition of a controlling interest, or sale of the plan or all or substantially all of the assets of the plan, existing law requires the plan to file a notice of material modification with the Director of the Department of Managed Health Care, who shall, within 20 business days or additional time as the plan may specify, approve, disapprove, suspend, or postpone the effectiveness of the change, subject to specified procedural requirements. This bill would require any person that intends to merge with, consolidate, acquire, purchase, or control, directly or indirectly, any health care service plan to give notice to, and to secure the prior approval from, the Director of the Department of Managed Health Care. The bill would require the director to hold a public hearing and to make specified findings regarding the proposal prior to approving these transactions, including that the proposal does not adversely affect competition. In making this finding, the bill would require the director to request an advisory opinion from the Attorney General regarding whether competition would be adversely affected and what mitigation measures could be adopted to avoid this result. The bill would authorize the director to give conditional approval for any transaction if the parties to the transaction commit to taking action to prevent adverse impacts on competition, or health care costs, access, and quality of care in this state. This bill would prohibit specified provisions in agreements between health care service plans or health insurers that contract with providers for alternative rates of payment and contracting providers, and agreements between network vendors, as defined, or payors, as defined, and general acute care hospitals that are contracting providers, as defined, including a requirement that the health care service plan, health insurer, or network vendor or payor include in its network any one or more providers owned or controlled by, or affiliated with, the contracting provider or general acute care hospital that is a contracting provider. The bill would also prohibit a contracting provider from imposing these prohibited terms as a condition to its participation in a network or as a condition to more favorable contract rates. The bill, commencing January 1, 2017, would provide that any contract provision that violates these prohibitions in an agreement entered into, issued, amended, or renewed before, on, or after January 1, 2017, shall become void and unenforceable. Because a willful violation of the act is a crime, the bill would impose a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.