COMMITTEE SUBSTITUTE
FOR

H. B. 2602

(By Mr. Speaker, Mr. Kiss, and Delegate Trump)
[By Request of the Executive]
[Originating in the Committee on Government Organization]
(March 3, 1999)

A BILL to amend sections five and six, article five-f, chapter sixteen of the code of West Virginia, one thousand nine hundred thirty-one, as amended; to further amend said article by adding thereto five new sections, designated sections seven through eleven, all relating to eliminating the hospital rate-setting powers and jurisdiction of the West Virginia health care authority eliminating authority to approve hospital discount contracts; permitting application for injunctive relief; penalties for failure to report and payment of penalties to the health care authority; requiring certain studies; requiring emergency rules for notice to the public of hospital rate increases and providing for the form of notices; requiring public hearings; providing for general rulemaking authority; providing procedures and requirements related to excessive hospital rates; providing for examinations of hospitals under certain conditions and recommendation to hospital boards of directors; providing limits on rate deregulation; reinstituting ratesetting authority in certain circumstances; and clarifying that health care authority information activities and ratesetting powers with respect to past time periods are not affected.

Be it enacted by the Legislature of West Virginia:
That sections five and six, article five-f, chapter sixteen of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted; and that said article be further amended by adding thereto five new sections, designated sections seven through eleven, all to read as follows:
ARTICLE 5F. HOSPITAL FINANCIAL DISCLOSURE.

§16-5F-5. Injunctions.

Whenever it appears that any covered facility or related organization, required to file or publish such reports, as provided in this article, has failed to file or publish such reports, or any hospital has failed to comply with procedures of the board relating to proposing and implementing hospital rate increases, the general counsel for the board or the attorney general, upon the request of the board, may apply in the name of the state to, and the circuit court of the county in which such covered facility or related organization is located shall have jurisdiction for the granting of a mandatory injunction to compel compliance with the provisions of this article.
§16-5F-6. Failure to make, publish or distribute reports; unauthorized hospital rate increases; appeal to supreme court of appeals.

Every covered facility and related organization failing to make and transmit to the board any of the reports required by law or failing to publish or distribute the reports as so required, and every hospital failing to comply with procedures of the board relating to proposing and implementing hospital rate increases, shall forthwith be notified by the board and, if such failure continues for ten days after receipt of said notice, such delinquent facility or organization shall be subject to a penalty of one thousand dollars for each day thereafter that such failure continues, such penalty to be recovered by the board through the general counsel to the board or the attorney general in a civil action and paid into the state treasury to the account of the ~~general fund~~ health care authority. Review of any final judgment or order of the circuit court shall be by appeal to the West Virginia supreme court of appeals.
§16-5F-7. Elimination of hospital rate-setting powers and jurisdiction; studies and recommended legislation.
(a) Notwithstanding any provision of this code to the contrary, on and after the effective date of this section, the board shall have no power to establish or approve hospital rates for critical access hospitals within this state. As used in this section, "critical access hospital" means a small nonprofit or public hospital located in a rural area, certified by the state as providing necessary health care services to residents in the area, and designated by the state as a critical access hospital after meeting all federal eligibility criteria. On and after the thirty-first day of December, one thousand nine hundred ninety- nine, the board shall have no power to establish or approve hospital rates for hospitals within the state having one hundred or fewer licensed beds and providing at least one percent of gross patient revenues in charity care to uninsured, self-pay or underinsured persons in poverty. On and after the thirty-first day of December, two thousand, the board shall have no power to establish or approve hospital rates for any hospital within the state.
(b) When the authority of the board to establish or approve hospital rates terminates pursuant to subsection (a) of this section, the board shall have no power or jurisdiction to:
(1) Approve or disapprove hospital rates or budgets;
(2) Adopt or approve alternative methods of setting hospital rates;
(3) Review or approve hospital discount or risk-bearing contracts;
(4) Conduct hearings relating to the approval of proposed rates; or
(5) Propose rules for promulgation relating to the approval or disapproval of hospital rates.
(c) On or before first day of January, two thousand one, the board shall conduct studies relating to (1) hospital rate changes in hospitals exempted from ratesetting; (2) preserving access to care for uninsured and underinsured citizens of the state; and (3) protecting self-pay patients, small businesses, and individuals insured under policies with large copayments or deductibles in the absence of hospital rate-setting. The board shall submit a report containing its findings, conclusions and recommendations on these issues, and shall submit drafts of proposed legislation relating to these issues, to the governor, the president of the Senate and the speaker of the House of Delegates on or before the tenth day of January, two thousand one.
§16-5F-8. Notice of rate increase; public hearing.
(a) On or before the first day of September, one thousand nine hundred ninety-nine, the board shall file emergency rules with the secretary of state in accordance with article three, chapter twenty-nine-a of this code establishing a procedure by which hospitals exempted from hospital ratesetting shall notify the public of a rate increase prior to its implementation. The rules shall provide for the form of the notice, the means for publication of the notice, and shall specify the information the hospital shall disclose to the public. The notice shall briefly, and in summary form, inform a layperson of the effect of the proposed rate increase. The notice shall include, but is not limited to:
(1) The current and proposed rates stated as average nongovernmental charge per discharge, the hospital's adjusted nongovernmental cost per discharge, and the last reported average nongovernmental charge per discharge for peer hospitals within the state;
(2) The amount of increase stated as a percentage, compared to a national measure of percentage increases in hospital costs;
(3) The proposed difference, expressed as a percentage, between the hospital's highest nongovernmental rate and its lowest discounted nongovernmental rate;
(4) Information as to the hospital's current financial status, including its profits or income and expenses, income transferred to related organizations, and the income of the hospital or related organizations from non-health care related activities;
(5) The means by which a member of the public may request a public hearing on the proposed rate increase; and
(6) The names of the members of the board of directors of the hospital.
(b) If any member of the public requests a public hearing on the proposed rate increase, the board of directors of the hospital may not adopt the proposed rate increase until the public hearing is held in the community where the hospital is located. At the public hearing, the chair or acting chair of the hospital board of directors shall preside and a quorum of the hospital board shall be present. A representative of the hospital shall explain the proposed rate increase and the reasons for the proposed rate increase, and interested members of the public shall have an opportunity to address the board of directors of the hospital. At the conclusion of the public hearing, the chair shall announce the date, time and location of the meeting of the board of directors during which the proposed rate increase will be considered for adoption by the board of directors. After a public hearing is held, the board of the hospital may modify the rate proposal, and may adopt the proposed rate increase or a lesser rate increase, but may not adopt a greater rate increase or a rate structure that imposes rates greater than those proposed with respect to any payor.
(c) Thirty days prior to any change in a hospital's rate, the hospital shall notify the director of the public employees insurance agency, the commissioner of the bureau of medical services and the commissioner of the bureau of employment programs of the increase or decrease in rates.
§16-5F-9. Excessive rates.
(a) On or before the first day of September, one thousand nine hundred ninety-nine, the board shall propose rules for legislative approval in accordance with the provisions of article three, chapter twenty-nine-a of the code necessary to effectuate the purposes of hospital rate deregulation pursuant to this article. The rules shall include, but are not limited to:
(1) Procedures determining at what amount or under what circumstances proposed rate increases shall be considered by the board to be excessive;
(2) A standard for determining under what circumstances the overall rate structure of an individual hospital exempt from ratesetting may be determined to include excessive rates for non- discounted payors; and
(3) A procedure relating to hospital overcharges, when a hospital's actual charges are more than the rates published, presented to the public or approved by the hospital board of directors.
(b) A hospital exempted from ratesetting under this article may not:
(1) Charge an uninsured or self-pay patient more than the average reimbursement for all nongovernmental payors; or
(2) Charge a patient for whom payment is obligated by a governmental payor, but who is not covered under medicare, medicaid or another health insurance plan provided through federal, state or local government, including a prisoner, more than the average reimbursement for all governmental payors.
(c) Any hospital that intends to raise its rates more than the sum of the DRI forecast hospital price index plus two percent (DRI + 2) shall be required to justify the reasonableness of the proposed rate increase in a public hearing and to the board. In the event that the board determines that a hospital's proposed rate increase may be excessive, or if the board determines that the hospital's rate structure includes excessive rates for non- discounted payors, the board may require that the hospital board of directors hold a public hearing in the community where the hospital is located prior to approving the proposed rate increase: Provided, That the board may, in lieu of requiring a separate public hearing, participate in the public hearing held pursuant to section eight of this article. A representative of the authority shall, on behalf of the board, explain to interested members of the public the basis for concluding that the rate is excessive, and the hospital shall respond. Interested members of the public shall have an opportunity to address the board of directors of the hospital. Following the public hearing, if the board believes that the proposed rate increase is justified, the hospital may implement the increase. If the hospital fails to justify the proposed rate increase to the board, and if the board of directors of the hospital fails to voluntarily reduce its proposed rate increase to not more than the DRI forecast price index plus two percent, the board may issue an order mandating that the rate increase be reduced to the increase reflected in the DRI forecast hospital price index, and any rate increase in the next succeeding year is limited to the increase reflected in the DRI forecast hospital price index.
§16-5F-10. Examinations.
(a) The board may, with respect to any hospital that adopts excessive rates, or as may otherwise be necessary for the protection of the public, make an examination of the activities, operations, financial condition and affairs of any hospital and related organization with whom the hospital has contracts, agreements or other arrangements.
(b) The board may contract with an accounting firm licensed to do business within the state or any entity which has been accredited by a nationally recognized accrediting organization and has been approved by the board to make examinations concerning the fiscal affairs of the hospital or related organization and the quality of health care services: Provided, That in making the examination, the accredited entity shall utilize the services of persons or organizations with demonstrable expertise in assessing quality of health care.
(3) Every hospital and related organization shall submit its books and records to the examiners and in every way facilitate the examinations. For the purpose of examinations, the board has all powers necessary to conduct the examinations, including, but not limited to, the power to issue subpoenas, the power to administer oaths to and examine the officers and agents of the hospital and the principals of the related organization concerning hospital business.
(4) Following the examination, the board shall report its findings and recommendations to the hospital board of directors. The report may include recommended actions to improve the financial condition and operations of the hospital during a six- month improvement period. The report and recommendations are public information and shall be made available for inspection by members of the general public, during regular business hours, upon request. The board is empowered to publish and disseminate any information which would be useful to members of the general public in making informed choices about health care providers.
(5) The hospital may be assessed and shall pay the costs of the examination.
§16-5F-11. Limitations on rate deregulation.
(a) On the first day of June, two thousand four, the board shall calculate the increase in the statewide average nongovernmental charge per discharge for all hospitals within the state, excluding critical access hospitals, from the time those hospitals were exempted from ratesetting through the end of the hospitals' fiscal year two thousand three. If the statewide average nongovernmental charge for those hospitals in the aggregate has increased more than the increase reflected by the DRI forecast hospital price index, compounded annually, from the time of deregulation, the exemption for all hospitals, excluding critical access hospitals, shall terminate, and, notwithstanding the provisions of section seven of this article, the provisions of article twenty-nine-b of this chapter authorizing the board to review, approve or disapprove hospital rates shall be fully applicable with respect to those hospitals. The board may, by order, in reinstituting rate regulation during the first year of effect, phase in ratesetting by establishing annual review periods and assigning the hospitals to a specific review period. (b) Nothing in this article may be construed to limit the powers of the authority relating to information gathering and coordination, or public disclosure of information, pursuant to this article and article twenty-nine-b of this chapter. Nothing in this section may be construed to relieve any hospital from the duty to report to the authority such information, including rate information and information relating to discount contracts, as the board may require pursuant to this article and article twenty-nine-b of this chapter. Following the effective date of this section, the board shall have the continuing duty to monitor and report on hospital rates and rate structures within the state.
(c) Nothing in this article may be construed to limit any power of the board with respect to rate review or rate decisions applicable to former time periods in which actions of the board to review, approve or disapprove hospital rates or discount contracts were authorized under article twenty-nine-b of this chapter.