ENGROSSED SENATE BILL 5241
State of Washington 68th Legislature 2023 Regular Session
By Senators Randall, Rolfes, Kuderer, Trudeau, Pedersen, Shewmake,
Hunt, Saldaña, Kauffman, Valdez, Lovick, Robinson, Lovelett, Liias,
Frame, Nguyen, Stanford, and C. Wilson
Read first time 01/10/23. Referred to Committee on Law & Justice.
1 AN ACT Relating to material changes to the operations and
2 governance structure of participants in the health care marketplace;
3 amending RCW 19.390.010, 19.390.020, 19.390.030, 19.390.040,
4 19.390.050, 19.390.080, and 19.390.070; adding new sections to
5 chapter 19.390 RCW; creating a new section; providing an effective
6 date; and providing an expiration date.
7 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
8 NEW SECTION. Sec. 1. The legislature finds and declares that:
9 (1) The existence of accessible and affordable health care
10 services that are responsive to the needs of the community is an
11 important public policy goal.
12 (2) The COVID-19 pandemic laid bare both the crucial importance
13 of our health care systems and the inequities that exist and
14 exacerbate harm to marginalized communities, including in access to
15 and delivery of affordable, quality care.
16 (3) Health entity mergers, acquisitions, and contracting
17 affiliations impact cost, quality, and access to health care, and
18 affect working conditions and employee benefits.
19 (4) Health entity mergers, acquisitions, and contracting
20 affiliations have been shown to result in anticompetitive
21 consequences, including higher prices and a lack of any meaningful
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 1 choice among health care providers within a community or geographic
2 region. These negative outcomes are exacerbated for those in rural
3 areas with few health care providers.
4 (5) The legislature is committed to ensuring that Washingtonians
5 have access to the full range of reproductive, end-of-life, and
6 gender affirming health care services. Yet, Washingtonians continue
7 to experience difficulty accessing gender affirming care, and health
8 entity mergers and acquisitions in Washington state have resulted in
9 material reductions in reproductive and end-of-life health care
10 services, to the detriment of communities and patients.
11 (6) Health entity mergers, acquisitions, and contracting
12 affiliations must improve rather than harm access to affordable
13 quality health care.
14 Sec. 2. RCW 19.390.010 and 2019 c 267 s 1 are each amended to
15 read as follows:
16 (1) It is the intent of the legislature to ensure that
17 competition beneficial to consumers in health care markets across
18 Washington remains vigorous and robust and that health care be
19 affordable and accessible. The legislature supports ((that intent))
20 these intents through this chapter, which provides the attorney
21 general with notice of all material health care transactions in this
22 state so that the attorney general has the information necessary to
23 determine whether an investigation under the consumer protection act
24 is warranted for potential anticompetitive conduct and consumer harm.
25 This chapter is intended to supplement the federal Hart-Scott-Rodino
26 antitrust improvements act, Title 15 U.S.C. Sec. 18a, by requiring
27 notice of transactions not reportable under Hart-Scott-Rodino
28 reporting thresholds and by providing the attorney general with a
29 copy of any filings made pursuant to the Hart-Scott-Rodino act. In
30 addition to ensuring vigorous and robust competition in health care
31 markets, this chapter is also intended to ensure material change
32 transactions result in the affected communities having the same or
33 greater access to quality, affordable care, including emergency care,
34 primary care, reproductive care, end-of-life care including services
35 provided in accordance with chapter 70.245 RCW, and gender affirming
36 care.
37 (2) Notwithstanding the language in this chapter regarding the
38 attorney general's authority to determine the effect of a material
39 change transaction on access to care, nothing in this chapter is
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 1 intended to derogate from or otherwise affect in any way the attorney
2 general's authority to conduct an investigation, or the process of
3 any investigation, under chapter 19.86 RCW. Nothing in this section
4 is intended to change or affect in any way any substantive law
5 regarding the antitrust analysis of a material change transaction.
6 Sec. 3. RCW 19.390.020 and 2019 c 267 s 2 are each amended to
7 read as follows:
8 The definitions in this section apply throughout this chapter
9 unless the context clearly requires otherwise.
10 (1) "Acquisition" means an agreement, arrangement, or activity
11 the consummation of which results in a person acquiring directly or
12 indirectly the control of another person, and includes the
13 acquisition of voting securities and noncorporate interests, such as
14 assets, capital stock, membership interests, or equity interests.
15 (2) "Affiliate" means a person that directly, or indirectly
16 through one or more intermediaries, controls or has ownership of, is
17 controlled or owned by, or is under common control or ownership of a
18 person. A provider organization that is not otherwise affiliated with
19 a hospital or hospital system is not considered an affiliate of a
20 hospital or hospital system solely on the basis that it contracts
21 with the hospital or hospital system to provide facility-based
22 services including, but not limited to, emergency, anesthesiology,
23 pathology, radiology, or hospital services.
24 (3) "Carrier" means the same as in RCW 48.43.005.
25 (((3))) (4) "Contracting affiliation" means the formation of a
26 relationship between two or more entities that permits the entities
27 to negotiate jointly with carriers or third-party administrators over
28 rates for professional medical services, or for one entity to
29 negotiate on behalf of the other entity with carriers or third-party
30 administrators over rates for professional medical services.
31 "Contracting affiliation" does not include arrangements among
32 entities under common ownership or arrangements where at least one
33 entity in the arrangement is owned or operated by a state entity.
34 (((4))) (5) "Gender affirming care" means a service or product
35 that a health care provider, as defined in RCW 70.02.010, prescribes
36 to an individual to treat any condition related to the individual's
37 gender identity and is prescribed in accordance with generally
38 accepted standards of care. Gender affirming care must be covered in
39 a manner compliant with the federal mental health parity and
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 1 addiction equity act of 2008 and the federal patient protection and
2 affordable care act of 2010. Gender affirming care can be prescribed
3 to two spirit, transgender, nonbinary, intersex, and other gender
4 diverse individuals.
5 (6) "Health care services" means medical, surgical, chiropractic,
6 hospital, optometric, podiatric, pharmaceutical, ambulance, mental
7 health, substance use disorder, therapeutic, preventative,
8 diagnostic, curative, rehabilitative, palliative, custodial, and any
9 other services relating to the prevention, cure, or treatment of
10 illness, injury, or disease. Health care services may be provided
11 virtually, on-demand, or in brick and mortar settings.
12 (((5))) (7) "Health care services revenue" means the total
13 revenue received for health care services in the previous ((twelve))
14 12 months.
15 (((6))) (8) "Health maintenance organization" means an
16 organization receiving a certificate of registration pursuant to
17 chapter 48.46 RCW which provides comprehensive health care services
18 to enrolled participants of such organization on a group practice per
19 capita prepayment basis or on a prepaid individual practice plan,
20 except for an enrolled participant's responsibility for copayments
21 and deductibles, either directly or through contractual or other
22 arrangements with other institutions, entities, or persons, and which
23 qualifies as a health maintenance organization pursuant to RCW
24 48.46.030 and 48.46.040.
25 (((7))) (9) "Hospital" means a facility licensed under chapter
26 70.41 or 71.12 RCW.
27 (((8))) (10) "Hospital system" means:
28 (a) A parent corporation of one or more hospitals and any entity
29 affiliated with such parent corporation ((through ownership or
30 control)); or
31 (b) A hospital and any entity affiliated with such hospital
32 ((through ownership)).
33 (((9))) (11) "Merger" means a consolidation of two or more
34 organizations, including two or more organizations joining through a
35 common parent organization or two or more organizations forming a new
36 organization, but does not include a corporate reorganization.
37 (((10))) (12) "Person" means, where applicable, natural persons,
38 corporations, trusts, and partnerships.
39 (((11))) (13) "Provider" means a natural person who practices a
40 profession identified in RCW 18.130.040.
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 1 (((12))) (14) "Provider organization" means a corporation,
2 partnership, business trust, association, or organized group of
3 persons, whether incorporated or not, which is in the business of
4 health care delivery or management and that represents seven or more
5 health care providers in contracting with carriers or third-party
6 administrators for the payments of health care services. A "provider
7 organization" includes physician organizations, physician-hospital
8 organizations, independent practice associations, provider networks,
9 and accountable care organizations.
10 (((13))) (15) "Reproductive health care" means any medical
11 services or treatments, including pharmaceutical and preventive care
12 services or treatments, directly involved in the reproductive system
13 and its processes, functions, and organs involved in reproduction, in
14 all stages of life.
15 (16) "Successor persons" means persons formed by, resulting from,
16 or surviving any material change transaction under this chapter.
17 (17) "Third-party administrator" means an entity that administers
18 payments for health care services on behalf of a client in exchange
19 for an administrative fee.
20 Sec. 4. RCW 19.390.030 and 2019 c 267 s 3 are each amended to
21 read as follows:
22 (1) Not less than ((sixty)) 120 days prior to the effective date
23 of any transaction that results in a material change, the parties to
24 the transaction shall submit written notice to the attorney general
25 of such material change transaction.
26 (2) For the purposes of this ((section)) chapter, a material
27 change transaction includes a merger, acquisition, or contracting
28 affiliation ((between)) :
29 (a) Between two or more ((entities)) of the following ((types))
30 entities:
31 (((a))) (i) Hospitals;
32 (((b))) (ii) Hospital systems; or
33 (((c))) (iii) Provider organizations; or
34 (b) Between the following entities:
35 (i) An entity described in (a) of this subsection and a carrier
36 or an insurance holding company system, as defined in RCW 48.31B.005;
37 or
38 (ii) An entity described in (a) of this subsection and any other
39 person or entity that has as its primary function the provision of
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 1 health care services or that is a parent organization of, has control
2 over, or governance of, an entity that has as its primary function
3 the provision of health care services.
4 (3) A material change transaction includes proposed changes
5 identified in subsection (2) of this section between ((a Washington
6 entity and an out-of-state entity where the out-of-state entity
7 generates ten million dollars or more in health care services revenue
8 from patients residing in Washington state, and the entities are of
9 the types identified in subsection (2) of this section)) Washington
10 entities, as well as between Washington entities described in
11 subsection (2)(a) of this section and out-of-state entities. Any
12 party to a material change transaction that is licensed or operating
13 in Washington state shall submit a notice as required under this
14 section.
15 (4) For purposes of subsection (2) of this section, a merger,
16 acquisition, or contracting affiliation between two or more
17 ((hospitals, hospital systems, or provider organizations)) entities
18 only qualifies as a material change transaction if the ((hospitals,
19 hospital systems, or provider organizations)) entities did not
20 previously have common ownership or a contracting affiliation.
21 Sec. 5. RCW 19.390.040 and 2019 c 267 s 4 are each amended to
22 read as follows:
23 (1) ((The)) For material change transactions where none of the
24 parties are hospitals or hospital systems or an affiliate of a
25 hospital or hospital system and none of the parties or an affiliate
26 of a party have generated $10,000,000 or more in health care services
27 revenue from patients residing in Washington state in any of their
28 preceding three fiscal years, the written notice provided by the
29 parties, as required by RCW 19.390.030, must include:
30 (a) The names of the parties and their current business
31 addresses;
32 (b) Identification of all locations where health care services
33 are currently provided by each party and its affiliates;
34 (c) A brief description of the nature and purpose of the proposed
35 material change transaction; and
36 (d) The anticipated effective date of the proposed material
37 change transaction.
38 (2) For material change transactions where none of the parties
39 are hospitals or hospital systems or an affiliate of a hospital or
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 1 hospital system and all of the parties serve predominantly low-
2 income, medically underserved individuals, and all of the parties had
3 for each of their preceding three fiscal years at least 50 percent of
4 their total patient revenue come from medicaid or local, state, or
5 federal funding to provide care to uninsured or underinsured
6 individuals, and the material change transaction would not result in
7 materially lowering the overall level of care the successor persons'
8 provide to individuals on medicaid or who are uninsured or
9 underinsured, or cause, for the successor persons, the percentage of
10 total patient revenue that comes from medicaid or local, state, or
11 federal funding to provide care to uninsured or underinsured
12 individuals to drop below 50 percent, the written notice provided by
13 the parties, as required by RCW 19.390.030, must include:
14 (a) The information and documentation required under subsection
15 (1)(a) through (d) of this section; and
16 (b) Documentation demonstrating that all the parties to the
17 material change transaction had for each of their preceding three
18 fiscal years at least 50 percent of their total patient revenue come
19 from medicaid or local, state, or federal funding to provide care to
20 uninsured or underinsured individuals, and a statement from the
21 parties describing how the material change transaction will result in
22 the successor persons complying with the requirements under this
23 subsection.
24 (3) For all material change transactions other than those
25 specified under subsections (1) and (2) of this section, the written
26 notice provided by the parties, as required by RCW 19.390.030, must
27 include:
28 (a) The information and documentation required under subsection
29 (1)(a) through (d) of this section;
30 (b) A copy of the material change transaction agreements;
31 (c) A copy of the organizational charts of the parties to the
32 transaction and proposed organizational charts, if any, for after the
33 closing of the transaction;
34 (d) Financial statements for the prior three fiscal years;
35 (e) If applicable, a copy of the notification and report form
36 submitted to the federal trade commission and United States
37 department of justice under the Hart-Scott-Rodino Act of 1976, and
38 all rules and regulations promulgated thereunder, and any attachments
39 thereto;
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 1 (f) If applicable, a statement from each of the parties' board of
2 directors that explains the anticipated effect the material change
3 transaction will likely have on delivery and cost of health-related
4 services to the communities impacted by the material change
5 transaction, and the basis for this opinion;
6 (g) If applicable, a copy of the two most recent community health
7 needs assessments or any similar evaluations or assessments prepared
8 by or for any entities that are the subject of the material change
9 transaction;
10 (h) If applicable, a description of all charity care provided in
11 the last three years, as well as denials, and the projected charity
12 care for three years following the material change transaction by the
13 parties to the material change transaction, or