In addition to flexibility relating to entities that do not fit the current law and regulations, DSHS
has likewise identified a need for flexibility in its ability to investigate entities that are not
compliant with regulations. For instance, there is a growing trend in healthcare and consumer
product delivery industries to hide control and ownership of companies through various
privately held and specialized corporations and/or private partnerships. These complex
organizations are often formed to shield assets and individuals from litigation and/or sanctions
or to circumvent existing regulatory activities, challenging the success and ability of the agency
to properly investigate and enforce regulatory requirements. in some cases, the owner of a
problem business is out-of?state and fundamentally out of reach of Texas administrative laws.

A recent example is a physician who leased or purchased a number of rural hospitals, setting

each up as a separate corporation that he wholly owned. Problems began to emerge in these

facilities but the common ownership was not readily apparent. Two other examples include the
following.

a An investigation led to a proposed enforcement action; however, the company investigated
was owned by a second holding corporation and the manager was listed as the contact
person. Further background work was needed to determine that the actual owner of the
second holding corporation lived in California and had legal issues involving allegations of
Centers for Medicare Medicaid (CMS) fraud.

0 A minority stakeholder was listed as an organization?s contact person, while the principle
stakeholder was a second corporation set up to shield the true company owners from
having required criminal background checks done prior to the State issuing a license.

 

C. Possible Solutions and Impact

 

 

 

The issues described above are complex and are present across all of the major DSHS regulatory
programs. Greater flexibility within statutes would allow DSHS to create new license ?types"
through the rulemaking process. However, this approach may be met with concern by the
entities that meet the current requirements and would prefer that there not be such flexibility.
in addition, federal entities such as CMS and the Food and Drug Administration have voiced
concerns about the rapidly growing numbers of certain types of entities in Texas, which in many
cases exceeds population growth.

Mandating greater ownership disclosure requirements could improve ability to take
regulatory action and to track individuals who may try to reenter a field in which they have
already been disciplined or are a potential threat to consumers or patients. Additionally, as a
part of the application process for business entities, the applicants could be required to list all
persons having a five percent or greater share in the company. Other possible options to
address this issue may exist in other states.

 

IX. Major Issues 467 DSHS