Public Health Committee

JOINT FAVORABLE REPORT

Bill No.:

SB-35

Title:

AN ACT CONCERNING NOTICE OF ACQUISITIONS, JOINT VENTURES AND AFFILIATIONS OF GROUP MEDICAL PRACTICES.

Vote Date:

3/21/2014

Vote Action:

Joint Favorable Substitute

PH Date:

3/5/2014

File No.:

SPONSORS OF BILL:

Public Health Committee

REASONS FOR BILL:

This bill makes several changes pertaining to transactions between hospitals, medical group practices, and certain other medical entities. It requires such entities engaging in any transaction resulting in a material change to a group practice to notify the Attorney General's Office and provide details of the transaction. The bill defines a material change as any merger, consolidation, or partnership that involves a hospital or group practice of eight or more physicians, or that results in a group practice of eight or more physicians. The bill also sets forth certain monetary thresholds, which are tied to federal anti-trust laws) for such transactions, above which the parties involved must report to the Attorney General.

The bill also requires hospitals and hospital systems to report annually to the Attorney General regarding the activities of group practices affiliated with the hospital or hospital system.

RESPONSE FROM ADMINISTRATION/AGENCY:

George Jepsen, Office of the Attorney General: Supports SB 35. This bill does not afford the Office of the Attorney General any additional enforcement authority to investigate, prevent or reverse a merger beyond what the enactment of the Connecticut Antitrust Act of 1971 allows. The required annual reporting regarding the group practices owned by hospitals or their affiliates would allow the Attorney General to better monitor competition and more readily determine whether a particular transaction reported under other sections of the bill have competitive implications.

The bill would provide the Attorney General's office with an important tool to fulfill its responsibilities under antitrust laws in an area that affects all Connecticut citizens.

Benjamin Barnes, Office of Policy Management: This bill mandates that the Office of the Attorney General (OAG) be notified of changes in business relationships of physician practices. It also requires that all hospitals and hospital systems file with the OAG and the Commissioner of Public Health a written report regarding the group practices which the hospitals or hospital systems own or are affiliated with.

In section 1 (b) persons conducting business in this state are required to file merger or acquisition information with the Federal Trade Commission or the Department of Justice or other information regarding market concentration to which a hospital or health care provider in this state is a party, to also notify the OAG.

Section 1 (c) requires that not less than 90 days prior to the effective date of a transaction that results in a material change to a group practice structure, the parties to any transaction submit written notice to the OAG. Material changes would include: merger; acquisition; formation of partnerships; joint ventures' common entities; accountable care organizations or parent organizations. Notice shall identify all parties to transactions and provide a summary of the material change.

Section 1 (e) mandates that no later than December 31,2014, and annually thereafter, all hospitals and hospital systems file with the OAG and the Commissioner of Public Health a written report describing the activities of group practices owned or affiliated with hospitals or hospital systems.

Victoria Veltri, State Healthcare Advocate:

Supports SB 35. The trend towards consolidation threatens to limit consumer choice and decrease competition. This bill addresses this trend by requiring group practices to provide notice to the Attorney General of its intent to merge with another practice or hospital system. This acts as an investigatory tool for the AG to assess if there is any anticompetitive effect on the primary service area or the state.

NATURE AND SOURCES OF SUPPORT:

Barbara Simonetta President, Ct Health Care Associates/NUHHCE/AFSCME: Supports Bill SB 35 as recent out of state for profit entities are seeking to purchase hospitals hoping control large sectors of the state's healthcare industry. These deals should be transparent, open for public review in order to determine what are in the best interests of the state. SB 35 is a good start in the process. The passage of this bill would ensure that these transactions benefit not only the acquiring entities but patients, tax payers and employees. SB 35 would afford protection from Corporations which would secure its bottom line and nothing else.

Deborah Chernoff, Public Policy Director, New England Health Care Employees Union, District 1199, SEIU: District 1199 members support SB 35 because it empowers Connecticut to collect information on proposed mergers, affiliations and other joint ventures in which hospitals and healthcare providers engage, as they seek to maximize the revenue they make in Connecticut. These deals should be transparent so that tax payers and policymakers can decide what the best interest of the state is. It is important that we take appropriate steps to ensure that whoever operates those hospitals in the future operates them to our collective benefit not just for the financial benefit of a few.

Ellen Andrews, PhD, Executive Director, Connecticut Health Policy Project: Consolidation of the market resulting from mergers of hospitals and provider groups have been a primary cause of rising health cost in Connecticut as in other states. These mergers can affect access to care, often by pricing services beyond the means of many patients. SB 35 notification provisions are important to protect the State's interest. The inclusion of a broader public notice requirement would immensely improve the Bill's reach. Patients and communities should have an opportunity to weigh in on potential mergers. These reports should also be disclosed to the public by posting it online. Disclosure of financial details of any agreements must be detailed as small changes in financial arrangements can disrupt incentives in important ways. SB 35 adds transparency provisions to improve affordability of healthcare in Connecticut.

Barbara Bunk, PhD and Traci Cipriano, PhD, Connecticut Psychological Association (CPA): The Connecticut Psychological Association writes in support of SB 35. We suggest an addition or clarification of the language in the Bill to include acquisitions, joint ventures affiliated medical practices with non-physician practice because the current language appears exclusive to physicians while the intent of the bill appears to also include acquisitions, joint ventures affiliated medical practices with non-physician entities.

Gloria Timpko, Yale New Haven Department of Cardiology: The act of hospitals buying up doctor's practices is a makeover of our healthcare system which has little oversight. SB 35 is a good step forward as it will give the Attorney General a chance to review transactions like the Yale New Haven Hospital acquisition of our Clinic. The data reporting requirement of the Bill will allow patients, insurers and policymakers to start to get a handle on the much higher costs that facility fees charged at hospital owned clinics are imposing on patients.

NATURE AND SOURCES OF OPPOSITION:

Connecticut State Medical Association (CSMA): The Bill as drafted might have adverse impact on the ability of smaller physician practices to keep their autonomy and continue to provide quality care without corporate influence.

CSMA has two concerns with the bill as currently drafted: section 1 (c) would require a partnership of two to go through the same reporting requirements as larger group practices. This level of detail was not intended for small or solo physician groups and would have negative impact on their ability to retain their independence; and second, the 90 day notice requirement may not account for the consolidation of smaller practices which can happen in a timelier manner. This might also hamper a patient's ability in some circumstances, from receiving timely service and necessary medical treatment. The Bill's intentions are supported and we welcome the opportunity to work with the Committee members on the issues of concern.

Connecticut Hospital Association (CHA): S.B. would have a negative impact on affiliations, mergers, and acquisitions that are essential to properly modernize healthcare delivery. This bill would apply to any material change to a group practice with as few as two physicians and provides no explanation to why small changes in the marketplace should be subject to advance notice requirements.

CHA shared similar concerns as CSMA in section 1 (c) including the 90 day notice requirement. Other concerns expressed were in section (e) which creates an unleveled playing field for hospitals and healthcare systems on one side and large physician practices on the other. The bill is unclear as to the reason only hospitals and healthcare systems are required to file annual reports while larger group practices are not. This annual reporting requirement singles out hospitals efforts to create new integrated care models and could place Connecticut hospitals at a disadvantage in efforts to respond to the changing healthcare landscape.

Section (d) indicates that the Attorney General would specifically employ his antitrust authority in connection with the reported information. Although the bill states only notice is required, it is unclear why SB35 authorizes the Attorney General to employ his antitrust powers with respect to the reported information. CHA suggests that section (d) should remove its inherent ambiguity since the goal is to ensure that submissions are treated as confidential.

Ross Benthien, MD, President, Connecticut Orthopedic Society (COS): SB 35 singles out the business of medical practice with another regulatory burden not applicable to most business entities in the state. Mechanisms already exist in State and Federal law to address unreasonable concentration of market power and we are unaware of any crisis in this area in the medical marketplace that would justify this dramatic step towards regulating private medical practice. Strongly urges that the Committee oppose this legislation by voting no.

Reported by: Tashika Russell

Date: 3/27/2014