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.