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.
(c) The department shall review the application in accordance
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.
(c) Upon the filing of the complaint in an action under
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.
(c) If the department determines that the likely benefits
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.
(c) Nothing in this chapter exempts hospitals from compliance
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.