Dean Ownership Bill Counts Individual Providers As Health Care Entities

The text as introduced · 2,401 words

89R8830 LRM-F

By: Dean
H.B. No. 4408

A BILL TO BE ENTITLED

AN ACT

relating to required reporting of information on the ownership and

control of certain health care entities; providing a civil penalty;

authorizing a fee.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle I, Title 4, Government Code, as

effective April 1, 2025, is amended by adding Chapter 550A to read

as follows:

CHAPTER 550A. REQUIRED REPORTING ON OWNERSHIP AND CONTROL OF

HEALTH CARE ENTITIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 550A.0001. DEFINITIONS. In this chapter:

(1) "Health care entity" means a health care provider,

health care facility, provider organization, pharmacy benefit

manager, or health carrier that offers a health benefit plan in this

state.

(2) "Health care facility" means a facility licensed

to provide health care services, including:

(A) a hospital or other inpatient facility for

providing health care services;

(B) a health system consisting of jointly owned

or managed health care entities;

(C) a skilled nursing facility licensed under

Chapter 242, Health and Safety Code;

(D) an ambulatory surgical center licensed under

Chapter 243, Health and Safety Code;

(E) a freestanding emergency medical care

facility licensed under Chapter 254, Health and Safety Code;

(F) a general residential operation licensed

under Chapter 42, Human Resources Code, that provides treatment

services;

(G) a diagnostic, laboratory, or imaging center;

(H) an outpatient clinic licensed in this state

to provide health care services; or

(I) a rehabilitation center or other therapeutic

center licensed in this state to provide health care services.

(3) "Health care provider" means an individual

qualified or licensed to perform or provide health care services in

this state.

(4) "Health care services" means:

(A) services provided for the care, prevention,

diagnosis, treatment, cure, or relief of a medical, dental, or

behavioral health condition, including:

(i) inpatient, outpatient, habilitative,

rehabilitative, dental, palliative, therapeutic, supportive, home

health, or behavioral services provided by a health care entity;

(ii) retail and specialty pharmacy

services, including drugs, devices, and medical supplies provided

by a pharmacy; and

(iii) performance of functions to refer,

arrange, or coordinate health care services;

(B) equipment used to provide services described

by Paragraph (A), including durable medical equipment and

diagnostic, infusion, and surgical devices; and

(C) technology associated with the provision of

services and equipment described by Paragraphs (A) and (B),

including telehealth services, telemedicine medical services,

electronic health records, software, claims processors, and

utilization systems.

(5) "Health carrier" has the meaning assigned by

Section 1507.002, Insurance Code.

(6) "Management services organization" means an

organization or entity that contracts with a health care provider

or provider organization to perform management or administrative

services relating to, supporting, or facilitating the provision of

health care services.

(7) "Material change transaction" means a transaction

that entails a material change to ownership, operations, or

governance structure involving health plans, health insurers,

hospitals or hospital systems, physician organizations, health

care providers, health care facilities, pharmacy benefit managers,

and other health care entities.

(8) "Pharmacy benefit manager" has the meaning

assigned by Section 4151.151, Insurance Code.

(9) "Provider organization" means an incorporated or

unincorporated corporation, partnership, business trust,

association, or organized group of persons that is in the business

of health care service delivery or management and that represents

at least one health care provider in contracting with a health

carrier for the payment of health care services. The term includes

a physician organization, physician-hospital organization,

independent practice association, provider network, accountable

care organization, management services organization, or other

organization that contracts with a health carrier for the payment

of health care services.

Sec. 550A.0002. APPLICABILITY OF CHAPTER TO MATERIAL CHANGE

TRANSACTIONS; EXCEPTIONS. (a) This chapter applies to a material

change transaction, whether occurring as a single transaction or a

series of related transactions within a consecutive five-year

period, involving a health care entity in this state that has:

(1) a total of assets and annual revenue, including

in-state and out-of-state assets and revenue, in an amount equal to

at least $10 million; or

(2) for a new health care entity, anticipated annual

revenue in an amount equal to at least $10 million, including

in-state and out-of-state revenue.

(b) This chapter applies to the following material change

transactions:

(1) a corporate merger that includes one or more

health care entities;

(2) an acquisition of one or more health care

entities, including insolvent health care entities;

(3) a contract resulting in a health care entity's

change of control;

(4) the formation of a partnership, joint venture,

accountable care organization, parent organization, or management

services organization for the purpose of administering contracts

with health carriers, third-party administrators, pharmacy benefit

managers, or health care providers;

(5) the sale, purchase, lease, affiliation, or

transfer of control of a health care entity's board of directors or

governing body;

(6) a real estate sale or lease agreement involving a

material amount of health care entity assets; or

(7) as determined by rules adopted by the secretary of

state:

(A) the closure of a health care facility;

(B) the significant reduction or discontinuation

of any essential health care service provided by a provider

organization or health care facility; or

(C) any clinical or contractual affiliations

that would eliminate or significantly reduce essential health care

services.

(c) This chapter does not apply to the following:

(1) a clinical affiliation of health care entities

formed solely to collaborate on clinical trials;

(2) a graduate medical education program;

(3) an offer of employment to, or the hiring of, not

more than one physician; or

(4) a transaction, including a corporate

restructuring, in which a health care entity directly, or

indirectly through one or more intermediaries, currently controls,

is controlled by, or is under common control with, all other parties

to the transaction.

Sec. 550A.0003. CONTROL; CHANGE OF CONTROL. (a) A person

is considered to have control of a health care entity if the person,

directly or indirectly, through ownership, contractual agreement,

or otherwise, has the ability to:

(1) vote more than 10 percent of any class of voting

shares of the health care entity; or

(2) direct the actions or policies of the health care

entity.

(b) A change of control of a health care entity requires a

contract or arrangement in which another person acquires direct or

indirect control over the operations of a health care entity wholly

or in substantial part.

SUBCHAPTER B. TRANSPARENCY REPORTING IN OWNERSHIP AND

CONTROL OF HEALTH CARE ENTITIES

Sec. 550A.0101. REQUIRED INFORMATION REGARDING OWNERSHIP

AND CONTROL OF HEALTH CARE ENTITIES. Except as provided by Section

550A.0102, each health care entity shall report to the secretary of

state annually and on the execution of a material change

transaction, in the form and manner the secretary of state

requires, the following information:

(1) the legal name of the health care entity;

(2) the business address of the health care entity;

(3) the locations of the health care entity's

operations;

(4) the applicable business identification numbers of

the health care entity, including:

(A) the taxpayer identification number;

(B) the national provider identifier number;

(C) the employer identification number;

(D) the Centers for Medicare and Medicaid

Services certification number;

(E) the national association of insurance

commissioners identification number;

(F) a personal identification number associated

with a license issued by the Texas Department of Insurance; and

(G) the pharmacy benefit manager identification

number associated with a license or registration of the pharmacy

benefit manager in this state;

(5) the name and contact information of a

representative of the health care entity;

(6) the name, business address, and business

identification numbers described by Subdivision (4) for each person

that, with respect to the relevant health care entity:

(A) has an ownership or investment interest;

(B) has a controlling interest;

(C) is a management services organization; or

(D) is a significant equity investor, including:

(i) a private equity fund or other investor

with direct or indirect ownership of a health care entity or

provider;

(ii) an investor with direct or indirect

possession of equity totaling more than 10 percent of a provider's

organization; or

(iii) a private equity fund or investor

that operates a health care entity under a lease, management, or

operating agreement;

(7) a current organizational chart showing the

business structure of the health care entity, including:

(A) any person described by Subdivision (6);

(B) each affiliate of the health care entity; and

(C) each subsidiary of the health care entity;

(8) for a health care entity that is a provider

organization or a health care facility the following information

regarding each health care provider affiliated with the provider

organization or health care facility:

(A) the name, license type, specialty, national

provider identifier number, and other applicable identification

numbers described by Subdivision (4) applicable to the health care

provider;

(B) the address of the health care provider's

principal practice location; and

(C) whether the health care provider is employed

or contracted by the health care entity;

(9) the name and address of each affiliated health

care facility by license number, license type, and capacity in each

major health care service area; and

(10) comprehensive financial reports of the health

care entity and any affiliate, including audited financial

statements, cost reports, annual costs, annual receipts, realized

capital gains and losses, accumulated surplus, and accumulated

reserves.

Sec. 550A.0102. EXCEPTIONS. (a) Subject to Subsection (b),

a health care entity is exempt from the reporting requirements

under Section 550A.0101 if the health care entity:

(1) is an independent provider organization that is

not under the ownership or control of another entity; and

(2) consists of not more than three physicians.

(b) A health care entity that is exempt under Subsection (a)

and that undergoes a material change transaction is subject to the

reporting requirements under Section 550A.0101 on the completion of

the material change transaction.

(c) A health care provider or provider organization that is

owned or controlled by another health care entity is exempt from the

reporting requirements under Section 550A.0101 if:

(1) the controlling health care entity reports all the

information required under Section 550A.0101 on behalf of the

health care provider or provider organization; and

(2) the health care provider or provider organization

is shown in the organizational chart submitted under Section

550A.0101(7).

(d) A health care facility is not exempt under Subsection

(c).

Sec. 550A.0103. SHARING OF OWNERSHIP INFORMATION TO IMPROVE

TRANSPARENCY. (a) Information described by this section is

subject to disclosure under Chapter 552 and may not be considered

confidential, proprietary, or a trade secret, except that an

individual health care provider's taxpayer identification number

that is also the provider's social security number is confidential.

(b) Not later than July 1 of each year, the secretary of

state shall post on the secretary of state's publicly accessible

Internet website a report that includes the following information

for the preceding year:

(1) the number of health care entities reporting for

that year, disaggregated by the business structure of each

specified health care entity;

(2) the names, addresses, and business structure of

any entity with an ownership or controlling interest in each health

care entity;

(3) any change in ownership or control for each health

care entity;

(4) any change in the tax identification number of a

health care entity;

(5) as applicable, the name, address, tax

identification number, and business structure of other affiliates

under common control, subsidiaries, and management services

entities of the health care entity, including the business type and

the tax identification number of each entity; and

(6) an analysis of trends in horizontal and vertical

consolidation, disaggregated by business structure and provider

type.

(c) The secretary of state may share information reported to

the secretary of state under this subchapter with the attorney

general, state agencies, and state officials to reduce or avoid

duplication in reporting requirements or to facilitate oversight or

enforcement. A tax identification number that is an individual's

social security number and is shared with the attorney general, a

state agency, or a state official under this subchapter is

confidential. The secretary of state may, in consultation with the

relevant state agencies, merge similar reporting requirements as

appropriate.

Sec. 550A.0104. AUDIT AND INSPECTION. (a) The secretary of

state may audit and inspect the records of a health care entity:

(1) that has failed to submit complete information

required under this subchapter; or

(2) for which the secretary of state has reason to

question the accuracy or completeness of the information submitted

by the entity under this subchapter.

(b) The secretary of state shall conduct random annual

audits of health care entities to verify compliance with, accuracy

of, and completeness of the reported information under this

subchapter.

Sec. 550A.0105. CIVIL PENALTY. (a) A health care entity

that fails to provide a complete report under Section 550A.0101, or

submits a report containing false information, is liable to this

state for a civil penalty. The amount of the civil penalty assessed

under this section may not exceed:

(1) $50,000 for each violation for a health care

entity consisting of independent health care providers or provider

organizations without any third-party ownership or control

entities, with not more than 10 physicians, and with not more than

$10 million in annual revenue; and

(2) $500,000 for each violation for a health care

entity not described by Subdivision (1).

(b) The attorney general may bring an action to:

(1) recover the civil penalty imposed under this

section; or

(2) restrain or enjoin the person from violating this

chapter.

(c) The attorney general may recover reasonable attorney's

fees and other reasonable expenses incurred in investigating and

bringing an action under this section.

(d) The attorney general shall deposit a civil penalty

collected under this section in the state treasury to the credit of

the general revenue fund.

Sec. 550A.0106. RULES; FEES. (a) The secretary of state

shall adopt rules as necessary to implement this chapter, including

rules identifying essential health care services and establishing

standards for determining the factors constituting a significant

reduction of those services for purposes of determining a material

change transaction under this chapter.

(b) The secretary of state may assess an administrative fee

on a health care entity in an amount sufficient to cover the costs

of overseeing and implementing this chapter.

SECTION 2. The secretary of state shall begin posting the

annual report on the secretary of state's website, as required

under Section 550A.0103, Government Code, as added by this Act, on

July 1, 2026.

SECTION 3. This Act takes effect September 1, 2025.