A2001

An Act providing for joint negotiations by physicians with carriers, supplementing Title 52 of the Revised Statutes, and repealing P.L.2001, c.371.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. The Legislature finds and declares that:

a. Active, robust and fully competitive markets for health care services provide the best opportunity for the residents of this State to receive high-quality health care services at an appropriate cost;

b. A substantial amount of health care services in this State is purchased for the benefit of patients by health insurance carriers engaged in the financing of health care services or is otherwise delivered subject to the terms of agreements between carriers and physicians;

c. Carriers are able to control the flow of patients to physicians through compelling financial incentives for patients in their health benefits plans to utilize only the services of physicians with whom the carriers have contracted;

d. Carriers also control the health care services rendered to patients through utilization management and other managed care tools and associated coverage and payment policies;

e. Carriers are often able to virtually dictate the terms of the contracts that they offer physicians and commonly offer these contracts on a take-it-or-leave-it basis;

f. The power of carriers to unilaterally impose provider contract terms jeopardizes the ability of physicians to deliver the superior quality health care services traditionally available in this State;

g. Physicians do not have sufficient market power to reject unfair provider contract terms offered by carriers that impede their ability to deliver medically appropriate care without undue delay or difficulties;

h. Inadequate reimbursement and other unfair payment terms offered by carriers adversely affect the quality of patient care and access to care by reducing the resources that physicians can devote to patient care and decreasing the time that physicians are able to spend with their patients;

i. Inequitable reimbursement and other unfair payment terms also endanger the health care infrastructure and medical progress by diverting capital needed for reinvestment in the health care delivery system, curtailing the purchase of state-of-the-art technology, the pursuit of medical research, and expansion of medical services, all to the detriment of the residents of this State;

j. The inevitable collateral reduction and migration of the health care work force will also have negative consequences for the economy of this State;

k. Empowering independent physicians to jointly negotiate with carriers as provided in this act will help restore the competitive balance and improve competition in the markets for health care services in this State, thereby providing benefits for consumers, physicians and less dominant carriers;

l. This act is necessary and proper, and constitutes an appropriate exercise of the authority of this State to regulate the business of insurance and the delivery of health care services;

m. The pro-competitive and other benefits of the joint negotiations and related joint activity authorized by this act, including, but not limited to, restoring the competitive balance in the market for health care services, protecting access to quality patient care, promoting the health care infrastructure and medical progress, and improving communications, outweigh any potential anti-competitive effects of this act; and

n. It is the intention of the Legislature to authorize independent physicians to jointly negotiate with carriers and to qualify such joint negotiations and related joint activities for the State-action exemption to the federal antitrust laws through the articulated State policy and active supervision provided under this act.

2. As used in this act:

"Carrier" means an insurance company, health service corporation, hospital service corporation, medical service corporation or health maintenance organization which is authorized to issue health benefits plans in this State.

"Covered person" means a person on whose behalf a carrier which offers a health benefits plan is obligated to pay benefits or provide services pursuant to the plan.

"Covered service" means a health care service provided to a covered person under a health benefits plan for which the carrier is obligated to pay benefits or provide services.

"Health benefits plan" means a plan which pays or provides hospital and medical expense benefits for covered services, and is delivered or issued for delivery in this State by or through a carrier. For the purposes of this act, health benefits plan shall not include the following plans, policies or contracts: Medicare supplement coverage and risk contracts, accident only, specified disease or other limited benefit, credit, disability, long term care, TRICARE supplement coverage, coverage arising out of a workers' compensation or similar law, automobile medical payment insurance, personal injury protection insurance issued pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.), dental or vision care coverage only, or hospital expense or confinement indemnity coverage only.

"Joint negotiation representative" means a representative selected by two or more independent physicians to engage in joint negotiations with a carrier on their behalf.

"Physician" means a person who is licensed to practice medicine and surgery by the State Board of Medical Examiners in accordance with the provisions of Title 45 of the Revised Statutes.

"Utilization management" means a system for reviewing the appropriate and efficient allocation of health care services under a health benefits plan in accordance with specific guidelines, for the purpose of determining whether, or to what extent, a health care service that has been provided or is proposed to be provided to a covered person is to be covered under the health benefits plan.

3. Two or more independent physicians who are practicing in the service area of a carrier may jointly negotiate with a carrier and engage in related joint activity, as provided in this act, regarding non-fee-related matters which may affect patient care, including, but not limited to, any of the following:

a. the definition of medical necessity and other conditions of coverage;

b. utilization management criteria and procedures;

c. clinical practice guidelines;

d. preventive care and other medical management policies;

e. patient referral standards and procedures, including, but not limited to, those applicable to out-of-network referrals;

f. drug formularies and standards and procedures for prescribing off-formulary drugs;

g. quality assurance programs;

h. respective physician and carrier liability for the treatment or lack of treatment of covered persons;

i. the methods and timing of payments;

j. other administrative procedures, including, but not limited to, eligibility verification systems and claim documentation requirements for covered persons;

k. credentialing standards and procedures for the selection, retention and termination of participating physicians;

l. mechanisms for resolving disputes between the carrier and physicians, including, but not limited to, the appeals process for utilization management and credentialing determinations;

m. the health benefits plans sold or administered by the carrier in which the physicians are required to participate;

n. the formulation and application of reimbursement methodology;

o. the terms and conditions of physician contracts, including, but not limited to, all products clauses, and the duration and renewal provisions of the contract; and

p. the inclusion or alteration of a contractual term or condition, except when the inclusion or alteration is required by a federal or State regulation concerning that term or condition; however, the restriction shall not limit a physician's rights to jointly petition the federal or State government, as applicable, to change the regulation.

4. a. Upon a finding by the Attorney General, in consultation with the Commissioner of Banking and Insurance, that the carrier has substantial market power in its service area and that any of the terms or conditions of the contract with the carrier pose an actual or potential threat to the quality and availability of patient care among covered persons, two or more independent physicians who are practicing in the service area of a carrier may jointly negotiate with the carrier and engage in related joint activity, as provided in this act regarding fees and fee-related matters, including, but not limited to, any of the following:

(1) the amount of payment or the methodology for determining the payment for a health care service, including, but not limited to, cost of living increases;

(2) the conversion factor for a resource-based relative value scale or similar reimbursement methodology for health care services;

(3) the amount of any discount on the price of a health care service;

(4) the procedure code or other description of a health care service covered by a payment and the appropriate grouping of the procedure codes;

(5) the amount of a bonus related to the provision of health care services or a withholding from the payment due for a health care service; and

(6) the amount of any other component of the reimbursement methodology for a health care service.

b. The Department of Banking and Insurance shall have the authority to collect and investigate such information as it reasonably believes is necessary to determine, on an annual basis:

(1) the average number of covered lives and geographical distribution of covered lives per quarter per county for every carrier in the State; and

(2) the impact of the provisions of this section on average physician fees in the State.

The Department of Banking and Insurance shall provide this information to the Attorney General on an annual basis.

5. The exercise of joint negotiation rights by two or more independent physicians who are practicing in the service area of a carrier pursuant to this act shall conform to the following criteria:

a. the physicians may communicate with each other concerning any contractual term or condition to be negotiated with the carrier;

b. the physicians may communicate with the joint negotiation representative authorized to negotiate on their behalf with the carrier concerning any contractual term or condition;

c. the joint negotiation representative shall be the sole party authorized to negotiate with the carrier on behalf of the physicians as a group;

d. the physicians may, at the option of each physician, agree to be bound by the terms and conditions negotiated by the joint negotiation representative; and

e. when communicating or negotiating with a joint negotiation representative, a carrier may offer different contractual terms or conditions to, or may contract with, individual independent physicians.

6. The provisions of this act shall not apply to a health benefits plan which is certified by the Commissioner of Human Services to the Attorney General as providing covered services primarily to persons who are eligible for medical assistance under P.L.1968, c.413 (C.30:4D-1 et seq.) or NJ FamilyCare under P.L.2005, c.156 (C.30:4J-10 et seq.).

7. A person or entity proposing to act as a joint negotiation representative shall satisfy the following requirements:

a. Before entering into negotiations with a carrier on behalf of two or more independent physicians, the joint negotiation representative shall submit to the Attorney General, for his approval pursuant to section 8 of this act, on a form and in a manner prescribed by the Attorney General, a petition which identifies:

(1) the representative's name and business address;

(2) the name and business address of each physician who will be represented by the identified representative;

(3) the ratio of the physicians requesting joint representation to the total number of physicians who are practicing within the geographic service area of the carrier;

(4) the carrier with which the representative proposes to enter into negotiations on behalf of the identified physicians;

(5) the intended subject matter of the proposed negotiations with the identified carrier;

(6) the representative's plan of operation and procedures to ensure compliance with the provisions of this act;

(7) the anticipated effect of the proposed joint negotiations on the quality and availability of health care among covered persons;

(8) the anticipated benefits of a contract between the identified physicians and carrier;

(9) such other data, information and documentation as the petitioner desires to submit in support of the petition; and

(10) such other data, information and documents as the Attorney General deems necessary.

The joint negotiation representative, upon submitting the petition, shall pay a fee to the Attorney General in an amount, as determined by the Attorney General, which shall be reasonable and necessary to cover the costs associated with carrying out the provisions of this act.

b. After the joint negotiation representative and the carrier identified pursuant to subsection a. of this section have reached an agreement on the contractual terms or conditions that were the subject matter of their negotiations, the joint negotiation representative shall submit to the Attorney General, for his approval and in accordance with the provisions of section 8 of this act, a copy of the proposed contract between the physicians identified pursuant to subsection a. of this section and the carrier, as well as any plan of action which the joint negotiation representative and the carrier may formally agree to for the purpose of implementing the terms and conditions of the contract.

c. Within 14 days after either party notifies the other party of its decision to decline or terminate negotiations entered into pursuant to this act, or after the date that a joint negotiation representative requests that a carrier enter into such negotiations to which request the carrier fails to respond, the joint negotiation representative shall report to the Attorney General that the negotiations have ended, on a form and in a manner to be prescribed by the Attorney General. The joint negotiation representative may resume negotiations with the carrier no later than 60 days after reporting to the Attorney General that the negotiations have ended, on the basis of the petition submitted to the Attorney General pursuant to subsection a. of this section and approved by the Attorney General in accordance with the provisions of section 8 of this act. After that date, the joint negotiation representative shall be required to submit a new petition and pay an additional fee to the Attorney General pursuant to subsection a. of this section, in order to engage in negotiations with the carrier under this act.

8. a. The Attorney General shall provide written approval or disapproval of a petition or a proposed contract furnished by a joint negotiation representative pursuant to section 7 of this act no later than 30 days after receipt of the petition or proposed contract, as applicable. If the Attorney General fails to provide written approval or disapproval within this time period, the joint negotiation representative may petition a court of competent jurisdiction for an order to require the Attorney General to take such action. If the Attorney General disapproves the petition or the proposed contract, he shall forward a written explanation of any deficiencies therein to the joint negotiation representative along with a statement of the specific remedial measures by which those deficiencies may be corrected.

A joint negotiation representative shall not engage in negotiations with a carrier over any contractual term or condition unless the petition furnished by the joint negotiation representative has been approved in writing by the Attorney General, nor shall a proposed contract between two or more independent physicians and a carrier be implemented unless the Attorney General has approved the contract.

b. The Attorney General shall approve a petition or a proposed contract furnished by a joint negotiation representative pursuant to section 7 of this act if the Attorney General determines that the petition or proposed contract demonstrates that the benefits which are likely to result from the proposed joint negotiations over a contractual term or condition or the proposed contract, as applicable, outweigh the disadvantages attributable to a reduction in competition that may result from the proposed joint negotiations. In making his determination, the Attorney General shall consider physician distribution by specialty and its effect on competition in the geographic service area of the carrier.

c. The Attorney General's written approval of a petition which is furnished by a joint negotiation representative under section 7 of this act shall be effective for all subsequent negotiations between the joint negotiation representative and the identified carrier, subject to the provisions of subsection c. of section 7 of this act.

d. In the case of a petition submitted pursuant to subsection a. of section 7 of this act, the Attorney General shall notify the carrier of the petition and provide the carrier with the opportunity to submit written comments within a specified time frame that does not extend beyond the date by which the Attorney General is required to act on the petition.

9. a. Within 30 days from the mailing by the Attorney General of a notice of disapproval of a petition submitted under section 7 of this act, the petitioners may make a written application to the Attorney General for a hearing.

b. Upon receipt of a timely written application for a hearing, the Attorney General shall schedule and conduct a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The hearing shall be held within 30 days of the application unless the petitioner seeks an extension.

c. The sole parties with respect to any petition under section 7 of this act shall be the petitioners, and notwithstanding any other provision of law to the contrary, the Attorney General shall not be required to treat any other person as a party and no other person shall be entitled to appeal the Attorney General's determination.

10. All information, including documents and copies thereof, obtained by or disclosed to the Attorney General or any other person in a petition under section 7 of this act, shall be treated confidentially and shall be deemed proprietary and shall not be made public or otherwise disclosed by the Attorney General or any other person without the written consent of the petitioners to whom the information pertains.

11. A carrier and a joint negotiation representative shall negotiate in good faith regarding the terms and conditions of physician contracts pursuant to this act.

12. a. The provisions of this act shall not be construed to:

(1) permit two or more physicians to jointly engage in a coordinated cessation, reduction or limitation of the health care services which they provide;

(2) permit two or more physicians to meet or communicate in order to jointly negotiate a requirement that at least one of the physicians, as a condition of participation with a carrier, be allowed to participate in all of the products offered by the carrier;

(3) permit two or more physicians to jointly negotiate with a carrier to exclude, limit or otherwise restrict a non-physician health care provider from participating in the carrier's health benefits plan based substantially on the fact that the health care provider is not a physician, unless that exclusion, limitation or restriction is otherwise permitted by law;

(4) prohibit or restrict activity by physicians that is sanctioned under federal or State law or subject such activity to the requirements of this act;

(5) affect governmental approval of, or otherwise restrict activity by, physicians that is not prohibited under federal antitrust law; or

(6) require approval of physician contract terms to the extent that the terms are exempt from State regulation under section 514(a) of the "Employee Retirement Income Security Act of 1974," Pub.L.93-406 (29 U.S.C. s.1144(a)).

b. Prior to entering into negotiations with a carrier on behalf of two or more independent physicians over a contractual term or condition, a joint negotiation representative shall notify the physicians in writing of the provisions of this act and advise them as to their potential for legal action against physicians who violate federal antitrust law.

13. The Attorney General, in consultation with the Commissioner of Banking and Insurance, shall report to the Governor and the Legislature, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1) no later than four years after the effective date of this act on its implementation.

The report shall include the number of petitions submitted for approval to engage in joint negotiations and the outcome of the petitions and the negotiations, an assessment of the effect the joint negotiations provided for in this act has had in restoring the competitive balance in the market for health care services and in protecting access to quality patient care, an assessment of the impact this act has had on health insurance premiums in the State, and such other information that the Attorney General deems appropriate. The report shall also include the Attorney General's recommendations as to whether the provisions of this act shall be expanded to include other types of health care professionals and facilities.

14. The Attorney General, in consultation with the Commissioner of Banking and Insurance and pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), shall adopt rules and regulations to effectuate the purposes of this act.

15. P.L.2001, c.71 (C.52:17B-196 et seq.) is repealed.

16. This act shall take effect 90 days after enactment, but the Attorney General, in consultation with the Commissioner of Banking and Insurance, may take such anticipatory administrative action in advance of the effective date as shall be necessary to implement the act.

STATEMENT

This bill provides physicians with the right to engage in joint negotiations over the terms and conditions of their contracts with health insurance carriers, that is, health, hospital and medical service corporations, commercial health insurers, and health maintenance organizations. The bill is based on legislation enacted in 2002 (P.L.2001, c.371) that authorized physicians and dentists to engage in joint negotiations with carriers, which legislation expired in 2008.

The bill permits two or more independent physicians who are practicing in the geographic service area of a carrier to jointly negotiate with the carrier and engage in related joint activity over the terms and conditions of a proposed contract. The negotiations would be carried out through a joint negotiation representative selected by the physicians to act on their behalf.

The terms and conditions that may be the subject of the negotiations include non-fee-related matters which may affect patient care, such as any of the following:

· the definition of medical necessity and other conditions of coverage;

· utilization management criteria and procedures;

· clinical practice guidelines;

· preventive care and other medical management policies;

· patient referral standards and procedures, including, but not limited to, those applicable to out-of-network referrals;

· drug formularies and standards and procedures for prescribing off-formulary drugs;

· quality assurance programs;

· respective physician and carrier liability for the treatment or lack of treatment of covered persons;

· the methods and timing of payments;

· other administrative procedures, including, but not limited to, eligibility verification systems and claim documentation requirements for covered persons;

· credentialing standards and procedures for the selection, retention and termination of participating physicians;

· mechanisms for resolving disputes between the carrier and physicians, including, but not limited to, the appeals process for utilization management and credentialing determinations;

· the health benefits plans sold or administered by the carrier in which the physicians are required to participate;

· the formulation and application of reimbursement methodology;

· the terms and conditions of physician contracts, including, but not limited to, all products clauses, and the duration and renewal provisions of the contract; and

· the inclusion or alteration of a contractual term or condition, except when the inclusion or alteration is required by a federal or State regulation concerning that term or condition; however, the restriction shall not limit a physician's rights to jointly petition the federal or State government, as applicable, to change the regulation.

In addition, the bill provides that a proposed contract concerning fees and fee-related matters may be subject to joint negotiations if the Attorney General, in consultation with the Commissioner of Banking and Insurance, finds that the carrier has substantial market power in its service area and that any of the terms or conditions of the contract with the carrier pose an actual or potential threat to the quality and availability of patient care among covered persons. These matters include, but are not limited to, any of the following:

· the amount of payment or the methodology for determining the payment for a health care service, including, but not limited to, cost of living increases;

· the conversion factor for a resource-based relative value scale or similar reimbursement methodology for health care services;

· the amount of any discount on the price of a health care service;

· the procedure code or other description of a health care service covered by a payment and the appropriate grouping of the procedure codes;

· the amount of a bonus related to the provision of health care services or a withholding from the payment due for a health care service; and

· the amount of any other component of the reimbursement methodology for a health care service.

The bill requires that a person or entity proposing to act as a joint negotiation representative shall submit a petition to the Attorney General, for his approval. The petition shall identify the representative, the physicians who the representative will represent, the intended subject matter of the proposed negotiations and other information specified in the bill. Upon submitting the petition, the representative shall pay a fee to the Attorney General, in an amount determined by the Attorney General, which shall be reasonable and necessary to cover the costs associated with carrying out the provisions of this bill.

After the joint negotiation representative and the carrier have reached an agreement on the contractual terms or conditions that were the subject matter of their negotiations, the representative shall submit a copy of the proposed contract between the physicians and the carrier to the Attorney General, for his approval. The Attorney General shall provide written approval or disapproval of a petition or a proposed contract furnished by the representative no later than 30 days after receipt of the petition or proposed contract.

The bill provides that a joint negotiation representative shall not engage in negotiations with a carrier unless the representative's petition has been approved in writing by the Attorney General, and a proposed contract between physicians and a carrier negotiated under this bill shall not be implemented unless the Attorney General has approved the contract. The bill further provides that either party may decline to negotiate or terminate negotiations. In either event, the representative shall so notify the Attorney General.

The Attorney General shall approve a petition or a proposed contract if he determines that the petition or proposed contract demonstrates that the benefits which are likely to result from the proposed joint negotiations or contract, as applicable, outweigh the disadvantages attributable to a reduction in competition that may result from the proposed joint negotiations. In making his determination, the Attorney General shall consider physician distribution by specialty and its effect on competition in the geographic service area of the carrier.

The bill provides that its provisions shall not be construed to:

· permit two or more physicians to jointly engage in a coordinated cessation, reduction or limitation of the health care services which they provide;

· permit two or more physicians to meet or communicate in order to jointly negotiate a requirement that at least one of the physicians, as a condition of participation with a carrier, be allowed to participate in all of the products offered by the carrier;

· permit two or more physicians to jointly negotiate with a carrier to exclude, limit or otherwise restrict a non-physician or health care provider from participating in the carrier's health benefits plan based substantially on the fact that the health care provider is not a physician, unless that exclusion, limitation or restriction is otherwise permitted by law;

· prohibit or restrict activity by physicians that is sanctioned under federal or State law or subject such activity to the requirements of this bill;

· affect governmental approval of, or otherwise restrict activity by, physicians that is not prohibited under federal antitrust law; or

· require approval of physician contract terms to the extent that the terms are exempt from State regulation under ERISA.

The bill provides that its provisions shall not apply to a health benefits plan which is certified by the Commissioner of Human Services to the Attorney General as providing covered services exclusively or primarily to persons who are eligible for Medicaid or NJ FamilyCare.

The bill requires the Attorney General, in consultation with the Commissioner of Banking and Insurance, to report to the Governor and the Legislature no later than four years after its effective date on its implementation, and to include in that report an assessment of the impact that the bill has had on health insurance premiums in the State. The report shall also include the Attorney General's recommendations as to whether the provisions of the bill shall be expanded to include other types of health care professionals and facilities.

The bill repeals P.L.2001, c.71 (C.52:17B-196 et seq.), which expired in 2008.

The bill takes effect 90 days after enactment.