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Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com
Pennsylvania Association of Community Health Centers
June 23, 2009
Beyond the Basics...Establishing Successful Community Health Center & Hospital Collaborative Models – Legal Considerations
Presented by:Marcie H. Zakheim
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 2
Today’s Presentation …
Topics for today’s presentation– Reasons to collaborate– Health center – hospital
collaborative opportunities– “Hot” trends in health center -
hospital partnerships– Legal considerations– Key planning and negotiation steps
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Reasons to Collaborate: HRSA Expectations Section 330 legislation, as well as
HRSA, encourage coordination, collaboration and integration with other provider(s) located in health center’s service area– Federal, State and local health and social
services delivery projects/programs (including other HRSA grantees, Section 330 grantees and FQHC look-alike entities)
– Providers of ancillary, secondary and tertiary care
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Reasons to Collaborate: Mission Maintain / enhance amount, level and
type of services available to health center patients– Initiate new or enhance existing programs
– Bring “in-scope” services currently provided by referral only
– Bring “in-house” services currently provided off-site
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Reasons to Collaborate: Mission Facilitate / improve continuum of care
– Secure access to specialty / ancillary /tertiary services and other necessary services not provided by health center
– Provide follow-up care indicated by referral arrangements (and vice versa)
Ensure appropriate level of care on timely basis through– Emergency room diversion programs– Residency training arrangements
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Reasons to Collaborate: Good Business Expand access locations and patient bases Increase market share Enhance and improve clinical, administrative and
managerial capacities, resources, expertise and systems
Minimize risks and reduce operational costs Increase capital and financial support, revenue,
and other resources Provide opportunities for health center to
participate in programs in which it cannot do on its own
Increase integration with the medical community
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Health Center – Hospital Collaborative Opportunities
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What are the Structural Options?
Formal Referral Arrangements– Note: Informal referral arrangements
CANNOT be used to provide required services or any other “in-scope” services
Separate Contractual Arrangements Umbrella Affiliation Arrangements Integrated Programs/Services
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Formal Referral Arrangements
Hospital agrees to furnish services to all health center patients who are referred to it by the health center regardless of ability to pay (subject to capacity limitations)– Health center ensures that its patients have
access to services it does not (and/or cannot) provide
– Hospital is financially, clinically and legally responsible and is solely liable for damages related to services
– Hospital bills and collects payment for the services
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Formal Referral Arrangements Hospital agrees to
– Provide services consistent with, at a minimum, the prevailing standards of care
– Provide assurances regarding professional qualifications, licensure, eligibility to participate in federal programs
– Refer patients back to the health center for clinically appropriate care
– Share medical notes/records/feedback regarding diagnosis and treatment to assist follow-up care by health center
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Formal Referral Arrangements PIN #2008-01: “In-scope” referral
arrangements– If the hospital provides/bills for service, the
service itself is not in scope– However, the formal referral arrangement and
follow-up care provided by health center will be in-scope if the health center:
Executes a formal, written agreement, including
– How the referral will be made and managed
– Process for referring patient back to health center for follow-up care
Maintains responsibility for the treatment plan
Provides, pays for, bills for the follow-up care
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Separate Contractual Agreements
Contracts for specific health care services Leases for space, equipment, personnel Management/administrative services
contracts Contracts to co-locate services or programs
(e.g., primary care on hospital site; residency training at the health center site)
Shared service contracts and joint purchasing arrangements
Community Benefit Grant
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Separate Contractual Agreements: Lease of Personnel
Health center contracts with the hospital to furnish services to health center’s patients on behalf of health center– May be used to procure clinical,
administrative and/or managerial expertise and experience that health center cannot obtain directly but wants to include in-scope
– Health center is financially, clinically and legally responsible for the services purchased (but the hospital may agree to support the costs of care)
– The patients receiving services from the hospital and/or its personnel are considered health center patients
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Separate Contractual Agreements: Lease of Personnel
Hospital assures that hospital and its contracted personnel will– Provide services in accordance with the health
center’s Section 330 grant and applicable rules and policies
– Provide services consistent with applicable health care and personnel policies, procedures, standards, protocols
– Satisfy the health center’s licensure, credentialing and other professional qualifications
– Prepare medical records consistent with the health center’s protocols
– Develop and furnish programmatic and/or financial records required by the health center
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Separate Contractual Agreements: Lease of Personnel
Health center retains the right to– Monitor and evaluate whether contracted staff
is complying with all qualifications, policies, procedures, standards and protocols, and whether they are performing satisfactorily
– Terminate the contract or request/require removal, suspension and/or replacement of any contracted professional who fails to meet qualifications, is non-complaint, performs unsatisfactorily, and/or provides sub-standard care
– Bill and collect from third party payors/patients, and retain all revenue, for services provided by the hospital and it personnel
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Separate Contractual Agreements: Community Benefit Grant Defrays a portion of the costs of providing
otherwise uncompensated care to the health center’s patients– “Bona fide” charitable donation to assist the
community– Furthers the charitable missions of the parties– Presents a minimal risk of abuse of federal
health care programs– Does not limit or restrict patient’s freedom of
choice or the provider’s professional judgment– Terms are narrowly tailored to accomplish stated
purpose only– Arrangement contains certain safeguards to
protect against prohibited referrals or generation of business
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Umbrella “Affiliation” Agreements
Joint planning process and planning body Priorities and associated time frames Nature of joint control and management
of collaborative activities “outside” of Section 330 scope
Extent of preferred relationship, if any Each party’s financial expectations and
commitments Right to change the collaboration over
time Right to terminate the agreement if the
other party affiliates with a mission-incompatible entity or a competitor
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Integrated Services/Programs
If operated in the health center’s scope of project– Integrated services/programs are operated as
under the health center umbrella– Health center must assume operational and
financial authority for the services/programs– The hospital clinicians are either integrated into
the health center’s workforce or purchased by the health center through a Lease of Clinical Capacity
– May require “Transition Agreement”– Must ensure that the integration does not impact
the health center board’s Compliance with Section 330 size, composition and
selection requirements Autonomous and independent decision-making
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“Hot” Trends in Health Center – Hospital
Partnerships
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What are the “Hot” Trends in Partnerships?
Residency training arrangements
ER diversion programs Leveraging the safe harbor for
Section 330 grantees Leveraging ARRA funding
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Residency Training Arrangements
Core Principles – Hospital maintains control over, and
responsibility for the costs of teaching activities performed at the health center, which are provided in accordance with the hospital’s policies and procedures
Classroom teaching, undergraduate programs, and orientation programs
Curriculum development and faculty meetings
Resident recruitment, selection, placement and evaluation, and setting of schedules
Program administration and evaluation
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 23
Residency Training Arrangements
Core Principles (cont.)– Hospital retains general responsibility for
salaries and benefits (including malpractice insurance) of hospital faculty and residents and other costs but health center pays for clinical time of faculty for which it bills (need to avoid “double billing” of Medicare/Medicaid and Federal grants)
– Hospital provides FMV payment to the health center for the time spent by health center clinicians and support staff in providing (as well as equipment and space used for) teaching activities
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 24
Residency Training Arrangements
Core Principles (cont.)– Health center maintains responsibility and
authority over activities related to direct patient care services
Scope, location and scheduling of services Right to approve/require removal,
suspension, replacement of hospital faculty/residents providing clinical services to health center patients
Diagnosis and treatment-related activities Billing third parties for clinical services
provided
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ER Diversion Programs
CMS guidance pertaining to ER Diversion grants: overall impact on health center– Provides opportunity for initiating or increasing
health center- local hospital collaborative activities that recognize health centers as appropriate alternate non-emergency services providers
– Establishes legal principle that, after an appropriate EMTALA screening and non-emergency determination, the patient can choose whether to receive care from the hospital or from an alternative provider
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 26
ER Diversion Programs Potential Models:
– Hospital refers patients who present with non-emergent/urgent conditions to the health center’s existing site(s), possibly with transportation linkage
– Health center places personnel in hospital for purposes of intake, registration, making appointments for patients who present with non-emergent/urgent conditions
– Health center assumes operator status for hospital-owned ambulatory clinic or new health center site located on or near hospital campus to provide alternate non-emergency services
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 27
ER Diversion Programs
- Under all potential models, must address- Whether patients are referred to the
health center in lieu of treatment of non-emergency condition OR only for follow-up appointment
- Separation of EMTALA screening personnel from ER treating clinicians
- Documentation of patient choice- Referral protocols- Collaboration between providers and other
staff of hospital and of health center- Development, maintenance and sharing of
medical records
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 28
Safe Harbor for Section 330 Grantees
Health Center Safe Harbor under Federal Anti-Kickback statue: final OIG rule issued October 4, 2007 [42 C.F.R. 1001.952(w)]– Protects certain arrangements between
health center grantees and other providers or suppliers of goods, services, donations, loans, etc.
Must contribute to the health center’s ability to maintain or increase the availability, or enhance the quality, of services provided to its medically underserved patients
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 29
Safe Harbor for Section 330 Grantees
Requirements– Written agreement signed by both parties that
covers and specifies the amount of all goods, items, services, donations, loans, etc. provided to the health center, which may be fixed sum, fixed percentage, or established by a fixed methodology
– Goods, items, services, donations, loans, etc., must be medical or clinical in nature or directly relate to any services (not just patient services) provided under the scope of project
– Reasonable expectation (and documentation of the basis) that the arrangement will contribute meaningfully to services to the underserved – must re-evaluate at least annually
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 30
Safe Harbor for Section 330 Grantees
Requirements (cont.) Disclosure of the existence and nature of the
arrangement to patients who inquire about it
No restriction on referrals (maintenance of provider professional judgment), health center’s ability to contract with others and/or patient freedom of choice
Goods, items, and/or services furnished under the arrangement must be available to all health center patients who clinically qualify for them, regardless of payor status or ability to pay, subject to hospital capacity
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 31
The American Recovery and Reinvestment Act (ARRA)
Signed into law on February 17, 2009 Includes $2 billion in grants to health centers
to – Support comprehensive primary and preventive
health care to an increasing number of patients– Create or retain thousands of health center jobs– Support pressing capital improvement needs, such
as construction, repair, renovation, and equipment purchases (including health information technology – HIT – systems)
HHS has already distributed– $155 million to establish 126 new health center
sites– $338 million to support care to an increasing
number of patients and to create or retain jobs at all existing health centers
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 32
The American Recovery and Reinvestment Act (ARRA)
Still to come– Capital Improvement Program (CIP) grants - $862.5
million appropriated to support infrastructure needs, such as construction, repair, renovation, and equipment purchases (including health information technology systems)
– Health Information Technology (HIT) Systems/Networks grants - $125 million appropriated to support Electronic Health Record (HER) and HIT systems for health centers
– Facility Investment Program (FIP) grants - $512.5 million appropriated to fund an estimated 100 significant facility projects (major facility investments in health centers including construction, repair, renovation, and equipment purchase)
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 33
The American Recovery and Reinvestment Act (ARRA)
ARRA offers great opportunities for expansion but also presents a high level of responsibility– Transparency and accountability are critical
elements of ARRA – Health centers should anticipate a high level of
scrutiny in their use of these funds Funds can be used in conjunction with other
funding as necessary to complete projects, but must be tracked and reported separately– Separate Notice of Grant Award, Payment
Management System Account– Internal tracking – examples include time and effort
reports, cost centers, ledgers, etc.
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 35
HRSA Scope of Project
PIN #2008-01: Scope of Project Policy– All health centers must request and obtain prior
approval from BPHC to implement significant changes in the federally-approved scope of project
Add or delete services Increase, decrease or relocate service sites
– Examples of changes that do not require prior approval
Adding a service to a site already within scope as long as the service is already provided in scope at another site
Changing type of providers furnishing an in-scope service
Changing hours of operation of in-scope site
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 36
HRSA Scope of Project
In general, a request to change the approved scope of project will be approved if it – Does not require any additional 330 funding– Does not shift resources from the current target
population– Furthers the health center’s mission by increasing /
maintaining access and quality of care – Is consistent with Section 330 and Program
Expectations– Provides credentialing / privileging of providers
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 37
HRSA Scope of Project
Approval factors (cont.)– Does not eliminate or reduce access to a
required services– Does not result in diminution of the level
or quality of services provided to current target population
– As applicable, continues to serve an MUA/MUP
– Board minutes document approval by the health center’s board
– Does not significantly affect the current operation of another health center located in same or adjacent service area
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 38
HRSA Scope of Project
Additional considerations for new services– All required services must be provided
within the approved scope of project Either directly or through established written
purchase agreement or formal referral arrangement
Regardless of how they are furnished, all in-scope services must be
– Readily available and reasonably accessible to all patients equally regardless of ability to pay
– Offered on a sliding fee / discount schedule– Can provide non-required services in-scope
or out-of-scope
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HRSA Scope of Project
Additional considerations for new sites– To include a new site, the following
conditions must be met: Face-to-face encounters between the health
center’s patient and provider are generated Provider exercises independent professional
judgment in furnishing services Services are provided directly or on behalf of the
health center, whose board retains control and authority over the services
Services are provided on a regularly scheduled basis
– Includes “contracted” sites if all criteria are met
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HRSA Scope of Project
Format and Timing for Change in Scope Request– All requests must be prepared as described in the
PIN 2008-01 and must be electronically through the Electronic Hand Book (EHB) separate from the continuation grant application
– BPHC expects to indicate a final decision within 60 days of submission but could take longer
– Effective date of an approved change No earlier than the date that BPHC receives a
complete request No later than 120 days from NGA No retroactive coverage for changes that are
implemented prior to receipt of the request
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 41
Scope of Project: Adding Specialty Services PIN #2009-02 – 12/18/08 Factors for approval – in addition to all
general factors from PIN 2008-01– Necessary for the adequate support of primary
care – demonstrate that the proposed service Is a logical extension of required primary care
services already provided; and/or Complements required primary care services
– Demonstrate and document target population’s need for the proposed services – describe unmet needs in narrative and with data
– Demonstrate ability to maintain level and quality of required primary health services
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 42
Scope of Project: Adding Specialty Services Factors for approval (cont.)
– Demonstrate the additional service will generate adequate revenue to cover its costs
– Provide assurance that Service will be accessible and equally available
to all patients of the center regardless of ability to pay and on a sliding fee scale (as necessary)
Center will be able to maintain control over service delivery
Service will be provided at a site or location that is presently in approved scope or eligible to be included according to scope definitions
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 43
Scope of Project: Adding Specialty Services Examples of potentially “acceptable”
specialty services– Pulmonary consultations/exams– Cardiology screenings/diagnoses– Minor podiatry outpatient
procedures/exams– Psychiatric consultations/exams– Periodontic services– Colonoscopies– Oncological care
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 44
Scope of Project: Changing Target Population PIN # 2009-05 – 3/23/09
– Applies solely to health centers receiving only special population funding (no 330(e) funding) that want to add a new target population beyond the one for which the health center was funded
Factors for approval – in addition to all general factors from PIN 2008-01, the health center must– Document unmet need of new population– Document support and/or cooperation from any
neighboring health center(s) in the form of a Board-endorsed letter, or an explanation why such letter cannot be obtained
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 45
Scope of Project: Changing Target Population Factors for approval (cont.)
– Maintain, to the extent possible, existing level of services for current target population for which it was originally funded Demonstrate compliance with any and all applicable requirements (e.g., no governance waivers, services available to all residents of the service are)
– Demonstrate that the center can generate sufficient revenue from the new population to cover direct costs and a reasonable share of overhead costs
– Provide a reasonable projection of grant funds and patients allocated between appropriate 330 sub-parts
Must propose an amount of current 330 grant to be reallocated to the new population
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 46
HRSA Affiliation Policies
HRSA Affiliation PIN #97-27:– Purpose: to protect the autonomy and integrity of
health center project by limiting third party involvement in the structure, governance and operation of health center
Corporate Structure– No parent/subsidiary or similar structures (e.g.,
Sole Member) unless Health center retains all Board selection and
composition requirements, and exercises all prescribed authorities and
The structure is specifically approved by HRSA
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 47
HRSA Affiliation Policies
Governance: under all affiliation arrangements, board must remain compliant with all Section 330-related selection and composition requirements and retain all prescribed authorities– No other entity or appointed individual
may Select the majority of health center board
members, non-consumer members, or members of the Executive Committee, or function as board chair
Preclude the selection, or require the dismissal, of board members not appointed by that party
Have overriding approval authority, veto authority or “dual majority” authority
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 48
HRSA Affiliation Policies
Management and Finance
– No other entity can employ Executive Director/CEO– No other entity can employ CFO and/or CMO,
subject to good cause exception (PIN #98-24)
Health Services/Clinical Operations– No other entity can employ the majority of health
center’s PCPs, subject to good cause exception (PIN #98-24)
– Non-exclusivity: no other entity can control health center’s relationships with other providers unless control will not impact health center’s ability to collaborate and coordinate with other local providers
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 49
HRSA Affiliation Policies
PIN #98-24: Amendment to #97-27– HRSA prefers that health centers directly
employ CFO, CMO, and core staff of primary care providers
– HRSA may grant a “good cause” exception Programmatic benefit (e.g., improved or
increased access, expertise, quality, capital) Sufficient accountability for operation and
direction of grant-approved project and the expenditure of grant funds – should include accountability criteria in written agreements between the parties
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 50
Other Legal Considerations
Section 330-related laws, regulations, expectations and policies– Other PINs and Program Assistance Letters
(PALs) (including PIN 98-23 – Program Expectations)
– 45 CFR Part 74 (or Part 92): Procurement and property standards (incorporating OMB Circulars A-110 and A-122)
– HHS Grants Policy Statement– Notice of Grant Award/special terms and
conditions– FTCA coverage– Section 340B discount drug pricing
Other federal/state law – Medicaid/Medicare, Fraud and Abuse, physician self referral, tax law, antitrust, etc.
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 52
Value Assessment
Identify and assess strengths (and weaknesses) of the health center corporation– Clinical and administrative capacity– Infrastructure– Existing relationships with community
providers/agencies Identify benefits available to Section 330 grantees
and/or FQHC Look-alike entities – for example– Access to grants and loan guarantees– Enhanced Medicaid/Medicare reimbursement– Federal Tort Claims Act coverage– 340B Discount Drug Pricing– Anti-kickback safe harbors– National Health Service Corp clinicians
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 53
Preliminary Agreements and Planning Process Execute preliminary agreements
– Confidentiality Agreement – Non-binding Memorandum of Agreement
Establish and conduct planning process– Identify proposed scope of joint activities– Establish timeline for negotiations and
planning– Define critical terms of proposed collaboration– Form planning teams to identify and evaluate
collaborative opportunities– Engage legal counsel and business consultants
as necessary
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 54
Due Diligence Process
Timing: after parties reach agreement in principle as to the basic terms of proposed transaction
Process– Parties request relevant operational
information from each other – Each party analyzes information to determine
the other party’s “fitness” (and, as necessary, requests additional information or clarification)
Conclusion: each party summarizes its findings and recommends either to execute, negotiate changes to, or terminate negotiations of the affiliation
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 55
Regulatory Approvals and Definitive Agreements
Prior to executing the definitive documents, the parties must satisfy all relevant regulatory approvals, as necessary - examples– State requirements: licensure, certificate of
need, credentialing– Change in the health center’s approved scope
of project– Advance rulings, advisory opinions, other
Federal/State regulatory approvals Execute definitive agreements (see prior
slides) … AND Leave room for change!
Copyright © Feldesman Tucker Leifer Fidell LLP 2009 www.ftlf.com 56
Marcie H. Zakheim: [email protected]
Feldesman Tucker Leifer Fidell LLP2001 L Street, NW – 2nd Floor
Washington, DC 20036(202) 466-8960
www.ftlf.com