Hospital Cost Review Comm.

Establishes an independent commission to oversee and regulate
hospital rates and charges to ensure affordable emergency and
in-patient health care to the general public.

HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The purpose of this Act is to ensure affordable
 2 emergency and in-patient health care at all hospitals for
 3 residents of the State by regulating the rates and charges
 4 assessed by hospitals.  It is the intent of the legislature to
 5 reduce or eliminate excessive hospital costs by overseeing,
 6 evaluating, and regulating rate changes, cost management, and
 7 billing practices of hospitals in the State. 
 8      SECTION 2.  Chapter 323D, Hawaii Revised Statutes, is
 9 amended by adding a new part to be appropriately designated and
10 to read as follows:
12      323D-A  Definitions.  As used in this part: 
13      "Commission" means the hospital cost review commission.
14      "Hospital" means any health care facility subject to section
15 321-11(10) that provides in-patient diagnosis, care, and
16 treatment of human illness and injury.
17      "Indigent person" means any person who is:
18      (1)  Not covered by any health insurance; and
19      (2)  Ineligible for medicare, medicaid, or any other federal

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 1           or state program of public assistance covering the
 2           provision of health care.
 3      "Rate" means each charge billed to a patient by a hospital
 4 for health care and related services.
 5      323D-B  Hospital cost review commission; creation.  There
 6 is created a hospital cost review commission to be placed within
 7 the department of commerce and consumer affairs for
 8 administrative purposes.  The commission shall be composed of
 9 five members to be appointed by the governor for staggered terms
10 as provided under section 26-34.  In appointing commissioners,
11 the governor shall select persons who have experience in
12 accounting, business, health, finance, law, insurance, or similar
13 fields.  No member shall be involved, directly or indirectly,
14 with the management or policy of any hospital.  The governor
15 shall designate a member to be chairperson of the commission.
16      Commissioners shall serve on a part-time basis and shall be
17 compensated at a rate of $           for each day the member is
18 required to attend meetings of the commission.
19      323D-C  Quorum; meetings.  A majority of the members to
20 which the commission is entitled shall be a quorum.  If a quorum
21 is present at any meeting, the commission may act on any matter
22 before it by a majority vote of those members present.  The
23 commission shall meet at least four times a year, at the times

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 1 and places that it determines.
 2      323D-D  Employment of personnel.  The commission may:
 3      (1)  Employ persons it finds necessary to the performance of
 4           its functions, without regard to chapters 76 and 77;
 5      (2)  Dismiss and discipline its employees at its pleasure;
 6           and
 7      (3)  Determine the compensation of its employees.
 8      323D-E  Hearings officer.  The chairperson of the
 9 commission may appoint a hearings officer, who shall not be
10 subject to chapters 76 and 77, to hear and recommend decisions in
11 any proceeding before the commission other than a proceeding
12 involving rate changes.  The hearings officer shall have the
13 power to take testimony, make findings of fact and conclusions of
14 law, and recommend a decision; provided that the findings of
15 fact, the conclusions of law, and the recommended decision shall
16 be reviewed and may be approved by the commission after notice to
17 the parties and an opportunity to be heard.  The hearings officer
18 shall have all of the powers conferred upon the commission under
19 sections 323D-G, 323D-H, and 323D-I except as limited by this
20 section.
21      323D-F  Annual report.  The commission shall prepare and
22 present to the governor, through the director of commerce and
23 consumer affairs, in the month of January in each year a report

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 1 of its actions and proceedings during the preceding calendar
 2 year.  This report shall include summary information and
 3 analytical data concerning:
 4      (1)  Cost review proceedings for each hospital;
 5      (2)  Rate approvals and reductions;
 6      (3)  Rate trends for hospitals in the State;
 7      (4)  Comparative data on each hospital, as obtained under
 8           section 323D-P; and
 9      (5)  Actions of the federal government affecting the costs
10           and charges of hospitals.
11      323D-G  General powers and duties.  The commission shall
12 oversee hospital rates and charges as set forth in this part, and
13 shall perform the duties and exercise the powers conferred upon
14 it by this part, including but not limited to:
15      (1)  Approving rate changes proposed by hospitals;
16      (2)  Reducing existing rates charged by hospitals;
17      (3)  Approving billing practices which may affect the
18           overall cost of services provided by hospitals;
19      (4)  Adopting rules pursuant to chapter 91 to carry out the
20           purposes of this part;
21      (5)  Conducting hearings or proceedings under this part in
22           accordance with law;
23      (6)  Examining the financial condition, cost management, and

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 1           billing practices of a hospital;
 2      (7)  Compelling hospitals or other state agencies to produce
 3           the information necessary or convenient to the
 4           performance of the commission's duties under this part;
 5      (8)  Imposing and collecting penalties for noncompliance
 6           with any provision of this part or with any order or
 7           ruling of the commission;
 8      (9)  Compelling hospitals to reimburse patients for any
 9           charges made in excess of authorized rates; and
10     (10)  Publish and give out information that relates to the
11           financial aspects of hospital provided health care and
12           is considered desirable in the public interest.
13      323D-H  Investigative powers.  (a)  The commission and each
14 commissioner shall have power to examine into the condition of
15 each hospital, the manner in which it is operated with reference
16 to the rates charged, cost management, billing practices, the
17 value of its physical property, the issuance by it of stocks and
18 bonds, and the disposition of the proceeds thereof, the amount
19 and disposition of its income, and all its financial
20 transactions, its business relations with other persons,
21 companies, or corporations, its compliance with all applicable
22 state and federal laws, and all matters of every nature affecting
23 the rates charged by it for health care and related services.

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 1      (b)  The commission may investigate any person acting in the
 2 capacity of or engaging in the business of a hospital within the
 3 State.
 4      (c)  Any investigation may be made by the commission on its
 5 own motion, and shall be made when requested by the hospital to
 6 be investigated, or by any person upon a sworn written complaint
 7 to the commission, setting forth any prima facie cause of
 8 complaint.
 9      323D-I  Witnesses, etc.(a)  In all investigations made by
10 the commission, and in all proceedings before it, the commission
11 and each commissioner shall have the same powers respecting
12 administering oaths, compelling the attendance of witnesses and
13 the production of documentary evidence, examining witnesses, and
14 punishing for contempt, as are possessed by circuit courts.  In
15 case of disobedience by any person to any order of the commission
16 or of any commissioner, or any subpoena issued by it or the
17 commissioner, or of the refusal of any witness to testify to any
18 matter regarding which the witness may be questioned lawfully,
19 any circuit court, on application by the commission or a
20 commissioner, shall compel obedience as in case of disobedience
21 of the requirements of a subpoena issued from a circuit court or
22 a refusal to testify therein.  
23      (b)  No person shall be excused from testifying or from

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 1 producing any book, document, paper, or account in any
 2 investigation or inquiry by a hearing before the commission or
 3 any commissioner, when ordered to do so, upon the ground that the
 4 testimony or evidence, book, document, paper, or account required
 5 of the person may tend to incriminate the person or subject the
 6 person to penalty or forfeiture; but no person shall be
 7 prosecuted for any crime, punished for any crime, or subjected to
 8 any criminal penalty or criminal forfeiture for or on account of
 9 any act, transaction, matter, or thing concerning which the
10 person shall under oath have testified or produced documentary
11 evidence. 
12      (c)  Nothing in this section shall be construed, in any
13 manner, as giving to any hospital or any person immunity of any
14 kind.  The fees and traveling expenses of witnesses shall be the
15 same as allowed witnesses in the circuit courts and shall be paid
16 by the commission out of any appropriation available for the
17 expenses of the commission.  All meetings and hearings of the
18 commission shall be public.
19      323D-J  Notices.  (a)  Whenever an investigation is
20 undertaken by the commission, reasonable notice in writing of the
21 fact and of the subject or subjects to be investigated shall be
22 given to the hospital or the person concerned, and when based
23 upon complaints made to it, a copy of the complaint, and a notice

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 1 in writing of the date and place fixed by the commission for
 2 beginning the investigation, shall be served upon the hospital or
 3 the person concerned, or other respondent and the complainant not
 4 less than two weeks before the date designated for the hearing.
 5      (b)  Any notice provided pursuant to sections 323D-Q and
 6 323D-R, shall plainly state the rate, charge, or fee schedule
 7 proposed to be changed and the proposed effective date of that
 8 change and shall be given by filing the notice with the
 9 commission.
10      (c)  Any public hearing held pursuant to sections 323D-Q and
11 323D-R, shall be held pursuant to a public notice of the public
12 hearing or hearings under section 1-28.5 on the island on which
13 the hospital is situated.  Public notice of the hearing, with the
14 purpose thereof and the date, time, and place, shall be
15 advertised not less than once in each of three weeks, the first
16 public notice being not less than twenty-one days before the
17 public hearing and the last public notice being not more than two
18 days before the scheduled hearing.  Any hospital applying for the
19 rate change under section 323D-Q shall notify its patients and
20 consumers of the proposed change in rates and of the time and
21 place of the public hearing not less than one week before the
22 date set.  The manner and the fact of notification shall be
23 reported to the commission before the date of hearing.  The

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 1 commission may use any media to advise the public if it finds it
 2 necessary to do so.
 3      323D-K  Right to be represented by counsel.  At any
 4 investigation by or proceeding before the commission, the
 5 hospital or the person concerned, or other respondent or party
 6 and any complainant or permitted intervenor may be present,
 7 represented by counsel, present any evidence desired, and
 8 cross-examine any witness who may be called.
 9      323D-L  Proceedings to enforce chapter; citations.(a)  If
10 the commission is of the opinion that any hospital or any person
11 is violating or neglecting to comply with any provision of this
12 part or of any rule, regulation, order, or other requirement of
13 the commission, it shall inform the hospital or the person in
14 writing and may institute proceedings before it that may be
15 necessary to require the hospital or the person to correct the
16 deficiency.  The commission may examine any of the matters
17 referred to in section 323D-H, notwithstanding that the same may
18 be within the jurisdiction of any court or other body; provided
19 that this section shall not be construed as in any manner
20 limiting or otherwise affecting the jurisdiction of any court or
21 other body.
22      (b)  In addition to any other remedy available, the
23 commission or its designated hearings officer may issue citations

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 1 to any hospital within the State that is not in compliance with
 2 this part or the rules adopted under this part.
 3      (1)  The citation may contain an order of abatement and an
 4           assessment of civil penalties as provided in section
 5           323D-S.  Service of a citation issued under this
 6           subsection shall be made by personal service whenever
 7           possible, or by certified mail, restricted delivery,
 8           sent or given to an authorized representative of the
 9           hospital at the last known business or residence
10           address of the hospital cited;
11      (2)  Any hospital served with a citation under this
12           subsection may submit a written request to the
13           commission for a hearing, within twenty days from the
14           receipt of the citation, with respect to the violations
15           alleged, the scope of the order of abatement, and the
16           amount of civil penalties assessed.  If the hospital
17           cited under this subsection timely notifies the
18           commission of the request for a hearing, the commission
19           shall afford an opportunity for a hearing under chapter
20           91.  The hearing shall be conducted by the commission
21           or the commission may designate a hearings officer to
22           hold the hearing;
23      (3)  If the hospital cited under this subsection does not

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 1           submit a written request to the commission for a
 2           hearing within twenty days from the receipt of the
 3           citation, the citation shall be deemed a final order of
 4           the commission.  The commission may apply to the
 5           appropriate court for a judgment to enforce the
 6           provisions of any final order, issued by the commission
 7           or designated hearings officer pursuant to this
 8           subsection, including the provisions for abatement and
 9           civil penalties imposed.  In any proceeding to enforce
10           a final order of the commission or designated hearings
11           officer, the commission need only show that the notice
12           was given, a hearing was held or the time granted for
13           requesting the hearing has run without a request, and a
14           certified copy of the final order of the commission or
15           designated hearings officer; and
16      (4)  If any party is aggrieved by the decision of the
17           commission or the designated hearings officer, the
18           party may appeal to the circuit court; provided that
19           the operation of an abatement order shall not be stayed
20           on appeal unless specifically ordered by a court of
21           competent jurisdiction after applying the stay criteria
22           enumerated in section 91-14(c).  The sanctions and
23           disposition authorized under this subsection shall be

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 1           separate and in addition to all other remedies either
 2           civil or criminal provided in any other applicable
 3           statutory provision.  The commission may adopt rules
 4           under chapter 91 as may be necessary to fully
 5           effectuate this subsection.
 6      323D-M  Hospitals to furnish information.  Every hospital
 7 shall:
 8      (1)  Furnish, at all times upon request of the commission,
 9           all information that the commission deems relevant to
10           matters under sections 323D-G and 323D-H; 
11      (2)  Permit the examination of books, records, accounts, and
12           other written documents that the commission deems
13           relevant to matters under sections 323D-G and 323D-H;
14           and
15      (3)  Provide other information deemed relevant by the
16           commission for the preparation of its annual report.
17      This section shall not be deemed to include privileged
18 patient or treatment information.
19      323D-N  Location of records.  A hospital shall keep and
20 maintain records, books, papers, accounts, and other documents
21 relevant to compliance with this part within the State.
22      323D-O  Commission to impose fees.  The commission shall
23 impose an annual fee upon each hospital for the expenses of the

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 1 commission.  The fee shall be a percentage of the hospital's
 2 revenue, as determined by rule adopted by the commission pursuant
 3 to chapter 91.  The fee shall be paid into the general fund.
 4      323D-P  Required reports of hospitals.(a)  Every hospital
 5 shall file with the commission the following financial statements
 6 and reports in a form and at intervals specified by the
 7 commission:
 8      (1)  Balance sheet detailing assets, liabilities, and net
 9           worth;
10      (2)  Statement of income and expenses; and
11      (3)  Any other statement or report that the commission
12           requires about costs incurred in providing services.
13      (b)  All documents filed under subsection (a) shall be open
14 to public inspection.
15      323D-Q  Approval of rate changes.(a)  Changes in rates
16 shall be subject to prior approval of the commission.  A hospital
17 shall charge for services only at rates set in accordance with
18 this part.  A hospital seeking to change its rates shall file a
19 notice of proposed rate change with the commission with
20 supporting documentation at least ninety days prior to the
21 effective date of the rate change.
22      (b)  The commission may approve or disapprove a rate change
23 pursuant to a chapter 91 hearing.  A hospital may file a notice

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 1 of proposed rate change with the commission no more than twice a
 2 year.
 3      (c)  In approving a change of rates, the commission shall
 4 consider all factors relevant to the financial condition of the
 5 hospital and to fairness to the public of the proposed rate
 6 change.  In considering approval of the rate change, the
 7 commission shall consider, without limitation, the following:
 8      (1)  Necessary operating expenses;
 9      (2)  Appropriate expenses that are incurred in providing
10           services to indigent persons;
11      (3)  Incurred interest charges; and
12      (4)  Reasonable depreciation expenses that are based on the
13           expected useful life of property or equipment.
14      (d)  Upon receipt of a notice of proposed rate change, if
15 the commission fails to commence a proceeding under subsection
16 (b) within sixty days or fails to render a decision within ninety
17 days after the receipt of the notice, the rate change shall be
18 deemed to be approved.
19      323D-R  Reduction of rate.  The commission may reduce the
20 rate of any hospital at any time if the commission finds that the
21 rate is unjustified in the interest of fairness to the public;
22 provided that a hospital shall be allowed a reasonable income and
23 profit to maintain its operation, invest in improvements, and

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 1 provide reasonable shareholder return.
 2      A reduction in rate by the commission shall be pursuant to a
 3 chapter 91 hearing.
 4      323D-S  Penalties; restitution.  (a)  Upon a determination
 5 by the commission that a hospital is not in compliance with this
 6 part or an order or ruling of the commission, it may impose a
 7 penalty on the non-complying hospital as follows:
 8      (1)  Three times the amount actually received by the
 9           hospital which is attributable to the difference
10           between the rates actually charged and the rates
11           authorized by the commission, for violations relating
12           to overcharging or exceeding authorized rates;
13      (2)  $10,000 for violations relating to failure or refusal
14           to provide relevant or pertinent information to the
15           commission; and
16      (3)  $1,000 for each day that the hospital is not in
17           compliance, and each day of non-compliance shall
18           constitute a separate violation under this chapter.
19      (b)  Any moneys collected under this section other than
20 under subsection (c) shall be deposited into the special fund for
21 assistance to indigent persons established in section 323D-T.
22      (c)  Upon a finding by the commission that a hospital has
23 charged its patients a rate in excess of the authorized rate, the

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 1 commission may order the hospital to reimburse all of its
 2 patients who were charged the excessive rate, for the difference
 3 between the excessive rate and the authorized rate.
 4      323D-T  Special fund for assistance to indigent persons;
 5 establishment.  (a)  There is established in the state treasury a
 6 special fund for assistance to indigent persons, into which shall
 7 be deposited:
 8      (1)  All penalties impose under section 323D-S; and
 9      (2)  Appropriations made by the legislature to the fund.
10      (b)  Moneys in the special fund shall be used by the
11 commission to offset losses incurred by hospitals due to
12 uncompensated health care services rendered to indigent persons
13 or to support any program related to the provision of health care
14 services to indigent persons.
15      (c)  To the extent that funds are available, the commission
16 shall make disbursements from the special fund at least once a
17 year.  The commission shall determine the amount of distributions
18 and identify which hospital will receive distributions from the
19 special fund, after considering the following:
20      (1)  Amount of services actually rendered by the hospital to
21           indigent persons;
22      (2)  Needs of the indigent population in the community in
23           which the hospital is located;

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 1      (3)  Needs of the indigent population in the State; and
 2      (4)  Any other factor which is relevant to the delivery of
 3           quality health care services to indigent persons."
 4      SECTION 3.  Section 323D-12, Hawaii Revised Statutes, is
 5 amended by amending subsection (a) to read as follows:
 6      "(a)  The state agency shall:
 7      (1)  Have as a principal function the responsibility for
 8           promoting accessibility for all the people of the State
 9           to quality health care services at reasonable cost.
10           The state agency shall conduct such studies and
11           investigations as may be necessary as to the causes of
12           health care costs including inflation.  The state
13           agency may contract for services to implement this
14           paragraph.  The certificate of need program mandated
15           under part V shall serve this function.  The state
16           agency shall promote the sharing of facilities or
17           services by health care providers whenever possible to
18           achieve economies and shall restrict unusual or
19           unusually costly services to individual facilities or
20           providers where appropriate;
21      (2)  Serve as staff to and provide technical assistance and
22           advice to the statewide council and the subarea
23           councils in the preparation, review, and revision of

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 1           the state health services and facilities plan;
 2      (3)  Conduct the health planning activities of the State in
 3           coordination with the subarea councils, implement the
 4           state health services and facilities plan, and
 5           determine the statewide health needs of the State after
 6           consulting with the statewide council; [and]
 7      (4)  Administer the state certificate of need program
 8           pursuant to part V[.]; and
 9      (5)  Provide copies of all reports prepared pursuant to this
10           chapter and all information obtained from providers of
11           health care and health insurance under this chapter to
12           the hospital cost review commission established under
13           section 323D-B, notwithstanding any prohibition against
14           the release of those reports or information under
15           section 323D-18.6."
16      SECTION 4.  There is appropriated out of the general
17 revenues of the State of Hawaii, the sum of $          , or so
18 much thereof as may be necessary for fiscal year 2000-2001, to
19 establish the hospital cost review commission.
20      SECTION 5.  The sum appropriated shall be expended by the
21 department of commerce and consumer affairs for the purposes of
22 this Act.
23      SECTION 6.  In codifying the new part added to chapter 323D,

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 1 Hawaii Revised Statutes, set forth in section 2 and referred to
 2 in section 3 of this Act, the revisor of statutes shall
 3 substitute appropriate section numbers for the letters used in
 4 the new sections designated in this Act.
 5      SECTION 7.  Statutory material to be repealed is bracketed.
 6 New statutory material is underscored.
 7      SECTION 8.  This Act shall take effect upon its approval;
 8 provided that section 4 shall take effect on July 1, 2000.
10                           INTRODUCED BY:  _______________________