REPORT TITLE:
Provider Contracts


DESCRIPTION:
Establishes requirements for joint contract negotiations between
physicians and insurance companies, mutual benefit societies, and
health maintenance organizations.  Requires physicians'
representatives in contract negotiations to pay a fee.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        3039
THE SENATE                              S.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO PROVIDER CONTRACTS. 


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

 1      SECTION 1.  The legislature finds that joint negotiation by
 
 2 competing physicians of certain terms and conditions of contracts
 
 3 with insurance companies, mutual benefit societies, and health
 
 4 maintenance organizations, will result in competition in the
 
 5 absence of any express or implied threat of retaliatory joint
 
 6 actions, such as a boycott or strike, by physicians.  Although
 
 7 the legislature finds that joint negotiations over fee-related
 
 8 terms in some circumstances may yield anti-competitive effects,
 
 9 it also recognizes that there are instances in which the
 
10 insurance company, mutual benefit society, or health maintenance
 
11 organization will dominate the market to such a degree that fair
 
12 negotiations between physicians and the health plans are
 
13 unobtainable, absent any joint action on behalf of physicians.
 
14 In these instances, the insurance company, mutual benefit
 
15 society, or health maintenance organization has the ability to
 
16 virtually dictate the terms of the contracts they offer
 
17 physicians.  Consequently, the legislature finds it appropriate
 
18 and necessary to authorize joint negotiations on fee-related and
 
19 other issues where it determines that such imbalances exist.
 

 
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 1      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
 2 a new chapter to be appropriately designated and to read as
 
 3 follows:
 
 4                             "CHAPTER
 
 5                        PROVIDER CONTRACTS
 
 6      §   -1  Definitions.  As used in this chapter, unless the
 
 7 context requires otherwise:   
 
 8      "Commissioner" means the insurance commissioner.
 
 9      "Managed care plan" means a plan described by section
 
10 432E-1.
 
11      "Person" means an individual, association, corporation,
 
12 partnership, limited liability company, limited liability
 
13 partnership, or any other legal entity.
 
14      "Physician" means an individual licensed under chapter 453
 
15 or 460, or both, who is not salaried.
 
16      "Physicians' representative" means a third party, owned or
 
17 controlled by those physicians who authorize it to negotiate on
 
18 their behalf with managed care plans regarding contractual terms
 
19 and conditions affecting the physicians.
 
20      §   -2  Scope of chapter.  This chapter shall apply only to
 
21 a managed care plan that provides benefits for medical or
 
22 surgical expenses incurred as a result of a health condition,
 
23 accident, or sickness, including an individual, group, blanket,
 

 
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 1 or franchise insurance policy or insurance agreement, a group
 
 2 hospital service contract, or an individual or group evidence of
 
 3 coverage or similar coverage document.
 
 4      §   -3  Joint negotiations; permissible negotiations;
 
 5 limitations; substantial market power.(a)  Competing physicians
 
 6 in the State may communicate with each other with respect to the
 
 7 contractual terms and conditions to be negotiated with a managed
 
 8 care plan.  Physicians may communicate with the third party who
 
 9 is authorized to negotiate on their behalf with managed care
 
10 plans regarding the contractual terms and limitations.  The third
 
11 party is the sole party authorized to negotiate with managed care
 
12 plans on behalf of the physicians as a group.  At the option of
 
13 each physician, the physicians may agree to be bound by the terms
 
14 and conditions negotiated by the third party authorized to
 
15 represent their interests.
 
16      (b)  Competing physicians in the State may meet and
 
17 communicate for the purpose of jointly negotiating the following
 
18 terms and conditions of contracts with a managed care plan:
 
19      (1)  Practices and procedures to assess and improve the
 
20           delivery of effective, cost-efficient preventive health
 
21           care services, including childhood immunizations,
 
22           prenatal care, and mammograms and other cancer
 
23           screening tests or procedures;
 

 
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 1      (2)  Practices and procedures to encourage early detection
 
 2           and effective, cost-efficient management of diseases
 
 3           and illnesses in children;
 
 4      (3)  Practices and procedures to assess and improve the
 
 5           delivery of women's medical and health care, including
 
 6           treatment for menopause and osteoporosis;
 
 7      (4)  Clinical criteria for effective, cost-efficient disease
 
 8           management programs, including the management of
 
 9           diabetes, asthma, and cardiovascular disease;
 
10      (5)  Practices and procedures to encourage and promote
 
11           patient education and treatment compliance, including
 
12           parental involvement with children's health care;
 
13      (6)  Practices and procedures to identify, correct, and
 
14           prevent potentially fraudulent activities;
 
15      (7)  Practices and procedures for the effective, cost-
 
16           efficient use of outpatient surgery;
 
17      (8)  Clinical practice guidelines and coverage criteria;
 
18      (9)  Administrative procedures, including methods and timing
 
19           of physician payment for services;
 
20     (10)  Dispute resolution procedures relating to disputes
 
21           between managed care plans and physicians;
 
22     (11)  Patient referral procedures;
 
23     (12)  The formulation and application of physician
 

 
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 1           reimbursement methodolgy;
 
 2     (13)  Quality assurance programs;
 
 3     (14)  Health service utilization review procedures;
 
 4     (15)  Managed care plan physician selection and termination
 
 5           criteria; and
 
 6     (16)  The inclusion or alteration of terms to the extent they
 
 7           are the subject of government regulation prohibiting or
 
 8           requiring the particular term or condition in question;
 
 9           provided that such restriction does not limit
 
10           physicians' rights to jointly petition the government
 
11           for a change in the regulation.
 
12      (c)  Competing physicians shall not meet and communicate for
 
13 the purposes of jointly negotiating the following terms and
 
14 conditions of contracts with managed care plans:
 
15      (1)  Fees or prices for services, including those arrived at
 
16           by applying new reimbursement methodology procedures;
 
17      (2)  Conversion factors in a resource-based relative value
 
18           scale reimbursement methodology or similar
 
19           methodologies;
 
20      (3)  The amount of any discount on the price of services to
 
21           be rendered by physicians; and
 
22      (4)  The dollar amount of capitation or fixed payment for
 
23           health services rendered by physicians to managed care
 

 
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 1           plan enrollees;
 
 2 provided that competing physicians may negotiate the terms and
 
 3 conditions in this subsection where the managed care plan has
 
 4 substantial market power.  The commissioner shall determine what
 
 5 constitutes substantial market power.  The commissioner may
 
 6 collect and investigate information necessary to determine
 
 7 annually the average number of covered lives per month per county
 
 8 by every health care entity in the State, and the annual impact,
 
 9 if any, of this chapter on average physician fees in the State. 
 
10      (d)  Nothing in this chapter shall be construed to authorize 
 
11 physicians to jointly coordinate any cessation, reduction, or
 
12 limitation of health care services.  Physicians may not negotiate
 
13 with the managed care plan to exclude, limit, or otherwise
 
14 restrict non-physician health care providers from participation
 
15 in a managed care plan based substantially on the fact that the
 
16 health care provider is not a licensed physician unless the
 
17 restriction, exclusion, or limitation is otherwise permitted by
 
18 law.
 
19      §   -4  Filing requirements; approval.(a) Before engaging
 
20 in any joint negotiations with managed care plans on behalf of
 
21 physicians, the physicians' representative shall file for
 
22 approval with the commissioner a report containing:
 
23      (1)  The name and address of the physicians' representative;
 

 
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 1      (2)  The names and addresses of the physicians who will be
 
 2           represented by the physicians' representative;
 
 3      (3)  The relationship of the physicians requesting joint
 
 4           representation to the total population of physicians in
 
 5           a geographic service area;
 
 6      (4)  The managed care plans with which the physicians'
 
 7           representative intends to negotiate on behalf of the
 
 8           client physicians;
 
 9      (5)  The proposed subject matter of the negotiations or
 
10           discussions with the managed care plans;
 
11      (6)  The physicians' representative plan of operation and
 
12           procedures to ensure compliance with this section;
 
13      (7)  The expected impact of negotiations on the quality of
 
14           patient care; and
 
15      (8)  The benefits of the contact between the managed care
 
16           plan and physicians.
 
17      (b)  After the parties to the initial filing required by
 
18 subsection (a) have reached an agreement on a contract, the
 
19 physicians' representative shall file for approval with the
 
20 commissioner a copy of the proposed contract and plan of action;
 
21 provided that if the managed care plan or physicians'
 
22 representative fails to respond to a request for, declines, or
 
23 terminates negotiations, within fourteen days thereof, the
 

 
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 1 managed care plan or the physicians' representative shall report
 
 2 the end of the negotiations to the commissioner.  If the
 
 3 negotiations resume within thirty days of the notification to the
 
 4 commissioner, the physicians' representative may renew the
 
 5 previously filed report.  If negotiations are not resumed within
 
 6 thirty days of notification to the commissioner, the commissioner
 
 7 shall initiate binding arbitration in accordance with rules
 
 8 adopted under chapter 91.
 
 9      (c)  The commissioner shall approve or disapprove an initial
 
10 filing, supplemental filing, or a proposed contract within thirty
 
11 days of the filing.  If the commissioner disapproves a filing,
 
12 the commissioner shall furnish a written explanation of the
 
13 filing's deficiencies and specific remedial measures that may be
 
14 taken to correct the deficiencies.  The commissioner shall
 
15 approve a request to enter into joint negotiations or a proposed
 
16 contract if the commissioner determines that the applicants have
 
17 demonstrated that the likely benefits resulting from the joint
 
18 negotiation or proposed contract outweigh the disadvantages
 
19 attributable to a reduction in competition that may result from
 
20 the joint negotiation or proposed contract.  An approval of the
 
21 initial filing shall be effective for all subsequent negotiations
 
22 between the parties specified in the initial filing.  If the
 
23 commissioner does not issue a written approval or disapproval of
 

 
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 1 an initial filing, supplemental filing, or proposed contract
 
 2 within thirty days from the date of filing, the applicant may
 
 3 petition the court for a mandamus order requiring the
 
 4 commissioner to approve or disapprove the filing or proposed
 
 5 contract.  
 
 6      §   -5  Rulemaking authority.  The commissioner may adopt
 
 7 rules under chapter 91 to implement this chapter.  The
 
 8 commissioner, by rule, may authorize podiatric physicians to
 
 9 participate in the joint negotiations authorized by this chapter.
 
10      §   -6  Construction.  This chapter shall not be construed
 
11 to prohibit physicians from negotiating the terms and conditions
 
12 of contracts as permitted by other state or federal law.
 
13      §   -7  Physicians' representative fees.  Each person who
 
14 acts as a physicians' representative shall pay a fee to the
 
15 department of commerce and consumer affairs.  The commissioner
 
16 shall establish the amount of the fee by rule in an amount
 
17 reasonable and necessary to defray the costs of administering
 
18 this chapter.  All fees collected under this chapter shall be
 
19 deposited into the state treasury to the credit of the operating
 
20 fund which incurred expenses related to the administration of
 
21 this chapter.  
 
22      §   -8  Termination of chapter.  This chapter shall
 
23 terminate upon the effective date of federal legislation that
 

 
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 1 includes physicians within the scope of the National Labor
 
 2 Relations Act, title 29 United States Code, section 151 et seq."
 
 3      SECTION 3.  This Act shall take effect upon its approval.
 
 4 
 
 5                       INTRODUCED BY:  ___________________________