Provides for requirements for approval for proposals to merge, consolidate, partner, acquire through the establishment of control or proposals for any other transaction or affiliation of certain health care providers.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A3583
SPONSOR: Hunter TITLE OF BILL:
An act to amend the public health law, in relation to requirements for
approval for merger and consolidation of certain health care providers
by the public health and health planning council
PURPOSE:
The legislation would provide the Public Health and Health Planning
Council with additional authority in the oversight of provider mergers,
acquisitions and affiliations.
SUMMARY OF PROVISIONS:
Section 1 amends Subdivision 3 of Section 2801-a of the public health
laws by creating a new subsection (b) that would give the Public Health
and Health Planning Council (PHHPC) greater authority to review issues
related to provider mergers and acquisitions. Under this section, as
part of their application to PHHPC, providers that propose merging,
acquiring or affiliating with another provider would be required to
demonstrate to. PHHPC how such transaction will improve access to
medically underserved individuals, lower the costs to consumers, and
advance the public health goals of the state. Additionally, PHHPC would
have the ability to prohibit the applicant from increasing prices for
services that exceed the CPI for medical care for the five years imme-
diately following any approval of such merger, consolidation, acquisi-
tion, or other transaction or affiliation. Further, it would require the
entities to submit an annual report for five years following an approval
identifying the steps they have taken to limit or lower costs to consum-
ers and otherwise benefit patients in the service area of the applicant.
JUSTIFICATION:
The wave of mergers, acquisitions and affiliations among providers is
reshaping the health care delivery system. Among the reasons that
providers often cite for joining together is to improve quality, reduce
costs, and support population health. However, there is a growing body
of research demonstrating that, in many cases, provider consolidation
has not resulted in greater efficiencies, better integration and
improved quality. Rather, the data has shown increased costs with no
notable improvement in the quality of care for patients. In fact,
studies have shown that provider consolidation is fueling unjustifiable
increases in the costs for services and that the quality of care has
dropped or remained flat at hospitals that have been acquired in recent
years.
Consolidation in the health care industry (both hospital mergers and
hospital acquisitions of physician practices) is widely recognized as
leading to greater market power for large health systems and thus higher
prices charged to insurers. The NY State Health Foundation's December
2016 report, Why are Hospital Prices Different? An Examination of New
York Hospital Reimbursement, found that "a hospital's market leverage-
its bargaining power when negotiating with insurers-is a key factor in
the prices a hospital can command." The study reported that hospitals
with greater market share are generally higher priced, and those higher
prices extend to hospitals that are part of a hospital system with large
regional market share, regardless of an individual hospital's size or
market share.
While there are valid reasons for mergers and transactions, PHHPC's
review of such transactions does not include the impact on the price of
health care following a transaction. Similarly, there are no retrospec-
tive reviews on how care was improved for consumers, how the transaction
advanced the public policies of the State and benefited medically under-
served populations. In addition, there are no commitments required by
applicants to keep costs stable for employers and consumers in the years
following a transaction. Instead, the PHHPC's authority to review 'a
transaction is limited to the financial feasibility of the project-es-
sentially whether the applicant can afford to carry it out, and what the
longterm impact of the project would be on the applicant's financial
health. In a rapidly changing environment, it is necessary to expand the
scope of the PHHPC's review authority in order to ensure that provider
consolidation is to the benefit of employers and consumers.
Ultimately, provider consolidations should benefit employers and consum-
ers through lower costs, not enhanced bargaining power, with the
combined entities expected to truly function as a system, resulting in
clinical integration and better performance. This legislation seeks to
promote greater accountability of these transactions to ensure that they
do not result in higher costs. Providing a process to review these and
other transactions is essential not only to ensure that the transaction
will benefit the public interest, but also to. ensure that the promises
made in advocating for specific transactions are promises kept in the
future.
LEGISLATIVE HISTORY:
2020: A.10142
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
3583
2021-2022 Regular Sessions
IN ASSEMBLY
January 27, 2021
___________
Introduced by M. of A. HUNTER -- read once and referred to the Committee
on Health
AN ACT to amend the public health law, in relation to requirements for
approval for merger and consolidation of certain health care providers
by the public health and health planning council
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivision 3 of section 2801-a of the public health law,
2 as amended by section 57 of part A of chapter 58 of the laws of 2010, is
3 amended to read as follows:
4 3. The public health and health planning council shall not approve a
5 certificate of incorporation, articles of organization or application
6 for establishment unless it is satisfied, insofar as applicable, as to
7 (a) the public need for the existence of the institution at the time and
8 place and under the circumstances proposed, provided, however, that in
9 the case of an institution proposed to be established or operated by an
10 organization defined in subdivision one of section one hundred seventy-
11 two-a of the executive law, the needs of the members of the religious
12 denomination concerned, for care or treatment in accordance with their
13 religious or ethical convictions, shall be deemed to be public need; (b)
14 the character, competence, and standing in the community, of the
15 proposed incorporators, directors, sponsors, stockholders, members or
16 operators; with respect to any proposed incorporator, director, sponsor,
17 stockholder, member or operator who is already or within the past ten
18 years has been an incorporator, director, sponsor, member, principal
19 stockholder, principal member, or operator of any hospital, private
20 proprietary home for adults, residence for adults, or non-profit home
21 for the aged or blind which has been issued an operating certificate by
22 the state department of social services, or a halfway house, hostel or
23 other residential facility or institution for the care, custody or
24 treatment of the mentally disabled which is subject to approval by the
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD05941-01-1
A. 3583 2
1 department of mental hygiene, no approval shall be granted unless the
2 public health and health planning council, having afforded an adequate
3 opportunity to members of health systems agencies, if any, having
4 geographical jurisdiction of the area where the institution is to be
5 located to be heard, shall affirmatively find by substantial evidence as
6 to each such incorporator, director, sponsor, principal stockholder or
7 operator that a substantially consistent high level of care is being or
8 was being rendered in each such hospital, home, residence, halfway
9 house, hostel, or other residential facility or institution with which
10 such person is or was affiliated; for the purposes of this paragraph,
11 the public health and health planning council shall adopt rules and
12 regulations, subject to the approval of the commissioner, to establish
13 the criteria to be used to determine whether a substantially consistent
14 high level of care has been rendered, provided, however, that there
15 shall not be a finding that a substantially consistent high level of
16 care has been rendered where there have been violations of the state
17 hospital code, or other applicable rules and regulations, that (i)
18 threatened to directly affect the health, safety or welfare of any
19 patient or resident, and (ii) were recurrent or were not promptly
20 corrected; (c) the financial resources of the proposed institution and
21 its sources of future revenues; [and] (d) an applicant that proposes to
22 merge, consolidate, partner, acquire through the establishment of
23 control, or proposes any other transaction or affiliation with other
24 health care providers governed under this article, that such merger,
25 consolidation, acquisition, or other transaction or affiliation with
26 other health care providers governed under this article, shall improve
27 access to medically underserved individuals, lower the costs to consum-
28 ers, advance the public health goals of the state, and the applicant
29 shall not increase charges for services that exceed the consumer price
30 index for medical care for the five years immediately following any
31 approval of such merger, consolidation, acquisition, or other trans-
32 action or affiliation; and pursuant to this section. Such approved
33 applicant shall submit an annual report to the department by December
34 thirty-first of each year for the five years following such approval
35 demonstrating how the approval of a certificate of incorporation, arti-
36 cles of organization or application for establishment, benefited the
37 public, including but not limited to, lowering costs to consumers,
38 providing efficiencies, and otherwise benefiting the service area of the
39 applicant; and (e) such other matters as it shall deem pertinent.
40 § 2. This act shall take effect immediately.
