ADVANCED AFFILIATION AGREEMENTS: KEY TERMS AND NEGOTIATION STRATEGIES

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ADVANCED AFFILIATION AGREEMENTS KEY TERMS AND
NEGOTIATION STRATEGIES
Presented By Jacqueline C. Leifer
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COLLABORATION OPPORTUNITIES
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New Opportunity ER Diversion Grant Program

• The Deficit Reduction Act of 2006 authorizes
  payments over four years of 50 million to States
  to award grants to providers who are able to
  furnish alternatives to non-emergency care in the
  emergency room (alternate non-emergency
  provider)
• Includes Community Health Centers, Health
  Clinics, Physicians Offices, Hospital Outpatient
  Departments

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New Opportunity ER Diversion Grant Program

• Preference will be given to States that establish
  or have alternate non-emergency services
  providers or networks of providers that
• Serve rural or underserved areas where
  beneficiaries may not have regular access to
  providers of primary care services OR
• Are in partnership with local community hospitals

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New Opportunity ER Diversion Grant Program

• Alternate non-emergency services provider must be
  able to provide clinically appropriate services
  for the diagnosis or treatment of a condition at
  a time that is contemporaneous with the time that
  the services would have been provided in the ER
  of the hospital

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Range of Collaboration Opportunities

• Informal Hand-Shake Agreements
• Referral Agreements
• Formal Contracts
• Establishment of a New Entity
• Corporate Participation
• Health Center Integration
• Hybrid

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General Considerations for All Agreements

• Compliance with all Section 330-related
  requirements
• Scope of services and service provision
• Professional qualifications, licensure,
  certification, eligibility to participate in
  Federal programs, etc.
• Non-exclusivity
• Exercise of professional medical judgment

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General Considerations for All Agreements

• Patient freedom of choice
• Confidentiality of patient and business
  information
• Insurance indemnification
• Records and reports
• Term, termination and remedies

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Referral Agreements

• Referral Agreement
• Referral provider (RP) agrees to furnish services
  to health center patients who are referred to
  him/her/it by Health Center
• Health Center is able to ensure that its patients
  have access to services not provided directly by
  Health Center
• RP (not Health Center) is responsible and bills
  for the services and provides them on his/her/its
  own accord

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Referral Agreements

• Referral Agreement (cont.)
• RP agrees to
• Furnish services to Health Centers patients
  regardless of ability to pay (subject to capacity
  limitations)
• Provide services consistent with, at a minimum,
  the prevailing standards of care, BUT Health
  Center disclaims liability for services provided
  by RP
• Provide assurances regarding professional
  qualifications, licensure, eligibility to
  participate in Federal programs
• Refer patients back to Health Center for
  clinically appropriate care

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Referral Agreements

• Referral Agreement (cont.)
• Other key terms
• General considerations (see slides 7 8)
• Manner by which referral will be made and managed
• Follow-up care and sharing of medical
  records/notes
• NO GUARANTEE OF REFERRALS!!

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Referral Agreements

• Co-location Agreement
• RP co-locates in the health center facility
• Health center should
• Retain the right to request removal of any health
  care professional who fails to meet
  qualifications or who provides sub-standard care
• Not guarantee a specific number or level of
  referrals (no minimums/maximums)
• Not assume liability for the services provided by
  the referral provider
• Health center MUST distinguish between the
  referral provider and the health center (e.g.,
  signs clearly identifying the RP as the provider
  of the referral services)

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Referral Agreements

• Co-location Agreement (cont.)
• Other key terms
• General considerations (see slides 7 8)
• Terms specific to referral agreements (see slides
  9, 10 and 11)
• COOPERATION AND COMMUNICATION BETWEEN THE PARTIES
  IS CRUCIAL!!

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Formal Contracts

• 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

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Formal Contracts

• Multi-Contractual Arrangement, e.g., an
  arrangement under which a health center assumes
  financial and operational responsibility for a
  teaching hospitals outpatient primary care
  clinic may involve
• Lease for space and/or equipment
• Lease of clinical personnel, administrative
  support and/or support staff
• Residency training agreement
• Community Benefit Grant

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Formal Contracts

• Lease of Clinical Personnel/Services
• Health Center purchases or leases
  capacity/services from another provider/vendor
  and integrates them into Health Centers
  operation
• Health Center is responsible for the services and
  Vendor provides them on behalf of Health Center
• The patients receiving services from the vendor
  are considered Health Center patients

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Formal Contracts

• Lease of Clinical Personnel/Services (cont.)
• Vendor agrees to
• Provide services in accordance with Health
  Centers Section 330 grant and applicable rules
  and policies
• Furnish services consistent with Health Centers
  internal policies, procedures and standards
  (e.g., clinical guidelines, productivity and
  quality assurance standards, standards of conduct

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Formal Contracts

• Lease of Clinical Personnel/Services (cont.)
• Vendor agrees to
• Satisfy Health Centers licensure, credentialing
  and other professional qualifications
• Prepare medical records consistent with Health
  Centers protocols
• Develop and furnish programmatic and/or financial
  records and reports required by Health Center

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Formal Contracts

• Lease of Clinical Personnel/Services (cont.)
• Health center maintains responsibility and
  authority for monitoring, evaluating, and, as
  necessary, removing contracted personnel (or
  terminating the contract)
• Compliance with qualifications, policies,
  procedures and standards
• Satisfactory performance
• Health, safety and welfare of patients
• Health center pays Vendor for services, bills and
  collects from third parties/patients, and retains
  all revenue from contracted services

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Formal Contracts

• Lease of Clinical Personnel/Services (cont.)
• Other key terms
• General considerations (see slides 7 8)
• Contract provisions required by 45 CFR Part 74
• Termination for breach
• Government access to records
• Compliance with certain Federal laws

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Formal Contracts

• Administrative Services Contract
• Vendor provides administrative or management
  services to Health Center
• Health center must directly employ the CEO
• BPHC prefers that Health Center directly employs
  key management staff such as CFO and CMO, subject
  to good cause exceptions
• Same oversight, accountability, and
  responsibility requirements as those that apply
  to leasing clinical personnel, except reporting
  is to CEO or CFO instead of CMO

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Formal Contracts

• Residency Training Agreement
• Hospital maintains control over, and
  responsibility for the costs of, teaching
  activities performed at the health center
  facility
• Classroom teaching, undergraduate programs, and
  orientation programs
• Curriculum development and faculty meetings
• Resident recruitment, selection, placement and
  evaluation, and setting of schedules (but the
  health center should have input and right to
  receive prior notice regarding changes)
• Program administration and evaluation

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Formal Contracts

• Residency Training Agreement (cont.)
• Hospital retains general responsibility for
  salaries and benefits (including the costs of
  malpractice insurance) of faculty and residents,
  as well as other GME-related costs (but Health
  Center pays for clinical time for which it bills
  see Lease of Clinical Personnel/Services)
• Hospital provides payment to Health Center for
• Precepting by Health Center clinicians
• Time spent by Health Center support staff in
  connection with teaching activities
• Space and equipment used for teaching activities

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Formal Contracts

• Residency Training Agreement (cont.)
• Health center maintains responsibility and
  authority over activities related to direct
  patient care services
• Scope, location and scheduling of services
• Diagnosis and treatment-related activities (e.g.,
  history, examination, medical decision-making)
• Direct patient involvement and interaction

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Formal Contracts

• Residency Training Agreement (cont.)
• Right to approve/require removal, suspension,
  replacement of Hospital faculty/residents
  providing clinical services to Health Center
  patients (see Lease of Clinical
  Personnel/Services)
• Billing third parties and patients for clinical
  services provided (see Lease of Clinical
  Personnel/Services)

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Formal Contracts

• Community Benefit Grant
• Defrays a portion of the costs of providing
  otherwise uncompensated care to Health Centers
  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 patients freedom of
  choice or the providers professional judgment
• Terms are narrowly tailored

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Formal Contracts

• Community Benefit Grant (cont.)
• The arrangement contains safeguards to protect
  against prohibited referrals or generation of
  other business
• Fixed amount
• Funds do not include discounts, rebates or
  reductions in charges
• Only restriction is to expend funds for
  uncompensated care
• Ancillary agreements consistent with applicable
  safe harbors
• NOTE See OIG Advisory 01-9 (favorable opinion
  re a hospitals award of community benefit grant
  to a health center that acquired the hospitals
  ambulatory care site)

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Safe Harbor for Section 330 Grantees

• Signed into law December 8, 2003
• Protects from prosecution under the Federal
  anti-kickback law certain arrangements between
  health center grantees and other
  providers/suppliers of goods and services
• Written agreement
• Arrangement supports or expands the
  accessibility, availability, and/or quality of
  services provided to health center patients

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Safe Harbor for Section 330 Grantees

• OIG was directed to establish standards, taking
  into consideration whether the arrangement
• Results in savings of Federal grant funds or
  increased revenue to the health center
• Restricts or limits an individuals freedom of
  choice
• Protects a health care professionals medical
  judgment regarding medically appropriate
  treatment
• OIG was permitted to consider other factors
  consistent with Congressional intent of
  legislation

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Formal Contracts

• 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 partys 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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Establishment of a New Entity

• Types of entities
• PMN practice management network
• MSO - management services organization
• Multi-purpose networks integrated service
  delivery initiatives, healthy communities access
  programs
• PSO - provider sponsored organization
• MCNN - managed care negotiating network
• PHP - prepaid health plan
• HMO - health maintenance organization
• Under HIPAA organized health care arrangement

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Establishment of a New Entity

• Characteristics of new entity
• Controlled by affiliating entities (shareholders,
  Board of Directors, Management committee
  depends on structural option)
• Corporate independence of new entitys
  participating members/owners maintained
• Should not preclude collaborations with other
  partners for other purposes

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Corporate Participation

• Cross Board participation
• Cross membership on each others Boards of
  Directors
• Participation in key committees
• Joint Steering Committee

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Health Center to Health Center Integration

• Affiliation through contract
• Combining health centers
• Corporate merger one entity dissolves and the
  surviving entity assumes rights and liabilities
• Combine grants both entities survive, but grant
  and operations of one entity is transferred to
  the other entity

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THE NEGOTIATION PROCESS
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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

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Confidentiality Agreement

• Mutual promises to
• Maintain confidentiality of information shared
  during planning and negotiation process
• Upon completion, to continue to hold such
  information as confidential, as well as return
  all confidential information (and all copies)

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Memorandum of Agreement

• Typically nonbinding, subject to each partys due
  diligence review and each Boards approval of all
  definitive agreements
• To the extent feasible, all commitments should be
  reciprocal and compliant with applicable laws and
  regulations (including Section 330, its
  implementing regulations, and, unless an
  exception is granted, BPHC affiliation policies)
• Documents should include flexibility to
  collaborate with other providers and disclosure
  of other negotiations

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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

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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 partys 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

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Regulatory Approvals

• Prior to executing the definitive documents, the
  parties must satisfy all relevant regulatory
  approvals, as necessary. Examples include
• State requirements licensure, certificate of
  need, credentialing
• Change in the health centers approved scope of
  project
• Advance rulings, advisory opinions, other
  Federal/State regulatory approvals

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Definitive Legal Documents

• Depending on the agreed-upon structure and terms
  of collaborative arrangements, definitive
  documents may include
• Contracts
• Umbrella agreement
• Corporate documents
• Combination of the above

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Leave Room For Change

• Form of the collaboration may change over time,
  as participants get closer and trust builds
• Original partners may want to invite others to
  join (but consider whether founders want to
  reserve certain rights)
• Collaboration may need to form an affiliated
  venture(s) to house new opportunities

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LEGAL CONSIDERATIONS
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BPHC Affiliation Policies

• Policy Information Notice (PIN) 97-27
  Affiliation Agreements of Community and Migrant
  Health Centers
• Only applies to health centers receiving funds
  under the community health center (Section 330(e)
  and migrant health center (Section 330 (g)
  programs
• An affiliation is any arrangement with another
  entity or entities (contract, joint venture,
  corporate integration) that affects a health
  centers compliance with Federal grant
  requirements pertaining to health center
  integrity and autonomy

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BPHC Affiliation Policies

• Areas of critical concern
• Corporate structure
• Governance
• Management and finance
• Health services/clinical operations
• Corporate Structure
• No parent/subsidiary or similar structures (e.g.,
  Sole Member) unless the health center retains all
  Board selection and composition requirements and
  authorities, and structure is specifically
  approved by BPHC

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BPHC Affiliation Policies

• Governance
• Under all affiliation arrangements, Board must
  remain compliant with all Section 330-related
  selection and composition requirements
• Size
• Consumer majority
• Limit on health care industry representation
• Demographic composition
• Appropriate expertise of non-consumer members
• Conflict of interest standards

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BPHC Affiliation Policies

• Governance (cont.)
• No other entity/individual may
• Select (1) the majority of the health center
  Board members (2) the majority of the
  non-consumer members (3) the Board Chairperson
  or (4) the majority of members of Executive
  Committee
• Preclude the selection, or require the dismissal,
  of Board members not appointed by that party

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BPHC Affiliation Policies

• Governance (cont.)
• Under all affiliation arrangements, Board must
  retain all authorities required by law or
  regulation
• Preparing and approving the health centers
  overall plan, including its strategic and
  operational plans
• Preparing and approving the health centers
  annual budget
• Establishing and adopting personnel, financial
  management, and health care policies and
  procedures

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BPHC Affiliation Policies

• Governance (cont.)
• Authorities (cont.)
• Evaluating the health centers activities
• Establishing and maintaining collaborative
  relationships with other health care providers
  and social agencies in the relevant service area
• Maintaining a commitment to provide services to
  the medically underserved population(s) served by
  the health center

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BPHC Affiliation Policies

• Governance (cont.)
• No other entity/individual may, with respect to
  such authorities
• Have overriding approval authority
• Have veto authority (through super-majority
  requirement or other means)
• Have dual majority authority

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BPHC Affiliation Policies

• Management and Finance No other
  entity/individual can
• Select or dismiss the health centers Executive
  Director/CEO (no exceptions)
• Select or dismiss the health centers CFO or CMO
  (subject to good cause exception)
• Health Services/Clinical Operations No other
  entity/individual can
• Hire or dismiss the majority of the health
  centers full-time primary care providers
  (subject to good cause exception)
• Control the health centers relationships with
  other entities unless there is no impact on
  compliance with statutory and/or regulatory
  requirements

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BPHC Affiliation Policies

• PIN 98-24 Amendment to 97-27
• BPHC states a preference that health centers
  directly employ CFO, CMO, and majority of
  full-time primary care providers
• BPHC may grant a good cause exception based on
• Demonstration of programmatic benefit
• Maintenance of sufficient accountability for
  operation and direction of grant-approved project
  and expenditure of grant funds

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BPHC Affiliation Policies

• Programmatic Benefit
• Continued or improved access
• Improved expertise
• Increased capital
• Maintained or improved quality of care

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BPHC Affiliation Policies

• Accountability criteria (should include in
  written agreements between the parties)
• Reservation of sufficient rights and control to
  maintain overall responsibility
• Justification for the performance of the work by
  a third party
• Establishment of appropriate systems/processes to
  assure satisfactory performance in accordance
  with Section 330
• Execution of a written agreement that complies
  with DHHS administrative requirements

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BPHC Affiliation Policies

• Review Process
• As part of the Review Process, either in
  conjunction with a grant application or under an
  independent submission (for a new affiliation
  established in the interim between applications),
  the health center will submit an Affiliation
  Checklist and may need to submit related
  documents that demonstrate compliance with
  accountability requirements

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Other Legal Considerations

• Other Section 330-related laws, regulations,
  expectations and policies
• PIN 98-23 Program Expectations
• PIN 2002-07 Scope of Project Policy
• Other PINs and Program Assistance Letters (PALs)
• 45 CFR Part 74 (or Part 92) Procurement and
  property standards (incorporating OMB Circulars
  A-110 and A-122)
• Public Health Service (PHS) policies
• Notice of Grant Award (NGA) and special terms
  and conditions
• FTCA coverage
• Section 340B discount drug pricing

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Other Legal Considerations

• Medicaid and Medicare
• Tax considerations
• Fraud and abuse (anti-kickback, false claims)
• Physician self-referral (Stark I II)
• Antitrust
• State laws and regulations