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Forming Strong Community Partnerships Part II
Adam Falcone, JD, MPH
Partner, Feldesman Tucker Leifer Fidell LLP
National Council for Behavioral Health
Montefiore Medical Center
Northwell Health
New York State Office of Mental Health
Netsmart Technologies
Disclaimer: EDUCATIONAL ONLY
• This training is provided for general informational and educational
purposes only and does not constitute legal advice or opinions.
• The information is not intended to create, and the receipt does not
constitute, an attorney-client relationship between trainer and
participant.
• For legal advice, you should consult a qualified attorney.
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Presenter: Adam J. Falcone, JD, MPH
• Partner in FTLF’s national health law practice.
• Counsels health centers, behavioral health providers, and provider networks on a wide range of health law issues, including fraud and abuse, reimbursement and payment, and antitrust and competition matters.
• Began his legal career in Washington, D.C. as a trial attorney in the Antitrust Division’s Health Care Task Force at the U.S. Department of Justice.
• Received a B.A from Brandeis University, an M.P.H. from Boston University School of Public Health, and a J.D., cum laude, from Boston University School of Law.
• Contact information: [email protected] or 202.466.8960
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
(Legal) Form Follows Function
Have a general sense of the activities likely to be performed by the partners/partnership in order to select the appropriate type of legal relationship or structure.
• Key considerations for selecting the appropriate legal structure for your partnership will ultimately depend upon:• The number of legal entities involved
• Financial/legal risks of the partnership activities
• Whether the proposed activities are already being provided by one or more of the partners or are new activities
• Licensure or regulatory requirements
• Anticipated sources for capital investments
• Governance considerations
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Legal Relationships and Structure
Partner A Partner BOwnership
or Control
Partner
A
Partner
B
Partner
C
Partner
D
Partner
E
Partner
F
Contractual
Relationship
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Contractual Relationships
A contract is an agreement between two or more parties that creates a legal obligation to perform (or not perform) a particular duty.
Contractual relationships permit a broad array of partnerships between and among agencies, and can be the basis for establishing:
• Referral arrangements
• Co-located referral arrangements
• Lease of personnel / purchase of services
• Merger or acquisition arrangements
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Referral Arrangements
Each provider agrees to furnish services to
individuals referred by the other.
Behavioral Health
ProviderProvider
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Referral Agreements
• Each provider is financially, clinically, and legally responsible and is solely liable for claims related to services it directly provides:
• Patients are patients of the provider which directly furnishes services
• Each provider’s policies, procedures, and standards govern its provision of services
• Each provider bills and collects payment for the services it directly renders
• Each provider should furnish assurances regarding professional qualifications, eligibility to participate in federal/state health care programs, standards of care, and compliance with state and federal confidentiality laws
• Each provider agrees to accept referred patients regardless of a patient’s or patient family’s ability to pay or insurance status
• Patient freedom of choice and independent clinical judgment should be safeguarded
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Referrals Agreements: Key Operational Issues
✓How will referrals be made and managed, and how will patients be tracked?
✓Does each provider (if referrals go both ways) have sufficient personnel to see additional patients?
✓Will all patients have reasonable access to the services provided by other provider?
✓Will provider agree to accept all referred patients, regardless of ability to pay, subject to capacity limitation?
✓If there is a limitation, how will the balance of patients receive the same / equal services?
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Co-Located Referral Arrangements
Referral
Similar to referral relationship, but co-located partner is physically located in and provides services to its own patients (including individuals referred to it by the partner) at the partner’s facility, subject to applicable state law.
Behavioral Health
Provider
Provider
Provider
Behavioral Health
Provider
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Co-Located Referral Arrangements: Operational IssuesIn addition to operational issues for formal written referral arrangements:
✓Are separate and distinct patient care delivery systems maintained?
✓Is there a lease of space and/or equipment?
✓Can patients distinguish between each provider (e.g., separate signage, entrances, etc.)?
✓Are providers separately identified so that neither is liable for the other’s actions?
✓How will the providers share medical records for treatment purposes?
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Lease of Personnel / Purchase of Services
Behavioral health provider leases or purchases clinical and/or administrative services from partner organization for a fair market value fee.
Behavioral Health Provider
Policies & Procedures
Fair Market Value Fee
Partner Organization
(Contractor)
Services or Capacity
Behavioral Health Patients
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Lease of Personnel / Purchase of Services
Behavioral health provider is financially, clinically, and legally responsible for
provision of the leased services
➢Patients receiving services from contractor’s personnel are considered your patients and you
are accountable
➢You bill and collect from third party payors/patients and retains all revenue secured for
services provided by contractor
➢You pay a fair market value fee to contractor for all of your patients served under the
agreement
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Lease of Personnel / Purchase of Services
▪ Is there an assurance that partner and its personnel assigned to you will:✓ Furnish services consistent with your applicable health care and personnel
policies, procedures, standards and protocols?
✓ Satisfy your professional standards and qualifications, including licensure, credentialing and privileging, and cooperate in your clinical quality and compliance activities?
✓ Prepare medical records consistent with your standards?
✓ Provide your organization’s required programmatic and financial reports?
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Lease of Personnel / Purchase of Services
▪Do you retain the right to:
✓Monitor, oversee, and evaluate compliance and performance of the personnel assigned to your organization?
✓Terminate the contract or request/require removal, suspension and/or replacement of any leased professional assigned to your organization who fails to meet qualifications, is non-complaint, performs unsatisfactorily, and/or provides sub-standard care?
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Merger or Acquisitions• Partial corporate consolidation:
1. Both corporations continue in existence post-integration
• One corporation “acquires” certain lines of business that are currently
operated by the other corporation
• Transferor may reorganize to assume related, often supportive functions
2. Parent/subsidiary model
• Full corporate consolidation through merger
• One corporation ceases to operate as an independent entity and one
corporation is the “surviving entity”
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Formation of New Legal Entity
➢ Two or more parties may establish a new legal entity to conduct activities under
shared ownership or control.
• The benefits of forming a new legal entity include:
• Shielding each partner from liability for debts, obligations and other liabilities of the network and
other partners
• Partners retain control over their own organizational operations because shared control only
extends to network’s joint activities
• Partners maintain their independence and autonomy while working together
• Partners can pool resources to make joint investments in information technology, clinical or
financial expertise, or equipment
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
New Legal Entity: Provider Networks
Many terms have been given to describe different types of provider networks:
• Independent Practice Association (IPA)
• Management Services Organization (MSO)
• Administrative Services Organizations (ASO)
• Clinically Integrated Network (CIN)
• Accountable Care Organization (ACO)
• Group Purchasing Organization (GPO)
Note: Some of these terms may only be used when approved by regulatory agencies.
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Types of Provider Network Functions
Managed Care Contracting
✓ Marketing network of health care providers/agencies
✓ Facilitating managed care contracting
✓ Negotiating contracts (see slides on antitrust considerations!)
Shared Support Services
✓ IT Support for Electronic Health
Record (EHR)
✓ Health Information Exchange (HIE)
✓ Credentialing practitioners;
exclusion/debarment background
checks
✓ Third-Party Billing
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Choice of Legal Entity• Legal entities generally available under state law:
• Business corporation (For-Profit)
• Non-profit organization
• Limited Liability Company (LLC)
• This choice is critical as there are many advantages and disadvantages inherent in each type of structure.
• The selected option should reflect the goals and purposes of the new entity and the owners'/founders’ expectations regarding governance, capital/financing, the parties’ intent regarding receiving a return on investment (i.e., distribution of surpluses) and taxation.
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Comparison of LLC and Non-Profit EntitiesLLC NON-PROFIT 501(C)(3)
ORGANIZATION
PURPOSE Any lawful purpose Charitable purposes
CAPITAL (PRIMARY SOURCE)
Private parties Grants, tax-deductible contributions, loans
OWNERSHIP Direct ownership as “members”; freely transferable (per terms of Operating Agreement)
No “owners”
PROFITS Can retain or distribute dividends to owners
Corporation must retain surplus;no private inurement; can make unrestricted gifts to other charitable entities in furtherance of own charitable purposes
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Governance Structure Considerations
• Many options for structuring governing board or board of managers (subject to
state laws):
• Each founding member receives the same number of seats on the governing board,
regardless of the individual member's size, contributions to the network, revenue, patient
base, etc.
• Board seats may be allocated in proportion to the amount of equity held by each member.
• Board seats apportioned to assure representation of sub-groups of the network
• If the network includes non-providers, the board seats could be allocated to ensure that the
provider members retain majority decision-making authority.
• All board seats are voted on democratically by the entire membership, but each member is
not guaranteed a seat.
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Legal Considerations: Antitrust Risks
In general, providers must make independent, unilateral decisions on
contractual terms and negotiate separately in order to comply with state and federal
antitrust laws.
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Antitrust Legal StandardsPer-Se Illegal (e.g., price-fixing, market allocation)
• The joint activity of the network is likely to produce significant efficiencies that benefit consumers and
• Price agreements by the network providers are reasonably necessary to realize those efficiencies.
“Rule of Reason” test determines whether lawful if:
• DOJ/FTC Statements of Enforcement Policy in Health Care (1996)
• http://www.ftc.gov/bc/healthcare/industryguide/policy/statement8.htm
• Medicare Shared Savings Program (MSSP)
Antitrust “Safety Zones”
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Negotiating Managed Care Contracts
• Can a provider network negotiate fee-for-service (i.e., non-risk) contracts with MCOs?
• Generally, no as the joint activities would constitute price-fixing.
• But the answer can change:
• If the network is not composed of competitors (or potential competitors)
• If the network is “financially integrated“
• If the network is “clinically integrated” and the joint negotiation is necessary to make the clinically integrated activities work
• If the network participates as an ACO in the Medicare Shared Savings Program (MSSP)
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Health Care Antitrust Enforcement PolicyStatement 9: Multiprovider Networks
Examples of “substantial financial risk-sharing” include:
• Capitation payments
• Global fee arrangements
• Fee withholds
• Cost or utilization based bonuses or penalties for participants, as a group, to achieve specified cost-containment goals
• Agreement by the venture to provide a complex or extended course of treatment that requires the substantial coordination of care by different types of providers offering a complementary mix of services, for a fixed, predetermined payment, where the costs of that course of treatment for any individual patient can vary greatly due to the individual patient's condition, the choice, complexity, or length of treatment, or other factors.
Compliance Tip: The Enforcement Agencies encourage multiprovider networks which are uncertain whether their proposed arrangements constitute substantial financial risk sharing to take advantage of the Agencies' expedited business review and advisory opinion procedures.
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Antitrust Analysis of Incentive-Only Payments• Can provider networks jointly negotiate incentive payments?
• “Value-based” payment models such as shared savings (upside only) or shared risk (upside/downside) for managing total costs of defined population
• Performance incentives earned for achieving certain clinical outcomes (e.g., HEDIS measures)
• Legal Test: Do the network members share “substantial financial risk” (as described in Statement 9) under the proposed arrangement?
• Yes, if the financial incentives are based on group performance, as a whole, to achieve specified cost-containment or clinical goals.
• Conclusion: The network may negotiate incentive-only payments that are based on overall network performance.
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Non-Integrated Networks: Permitted Conduct
Non-integrated provider networks do not meet
legal standards for financial or clinical
integration
Non-integrated provider networks may facilitate
(but not negotiate) contracts involving base reimbursement rates if
they carefully comply with the “Messenger Model”
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Non-Integrated Networks: Messenger Model
Provider Network communicates each provider’s decision back to MCO
Each provider determines whether to accept (or reject) MCO’s payment terms
Provider Network, as the messenger, transmits proposed rates to each provider in network
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Antitrust Strategy: Combination Approach?Base Reimbursement
Messenger Model
• Network members accept FFS rates offered by MCO (without engaging in any negotiation).
• May be little or no downside if State mandates minimum rates for Medicaid enrollees, e.g., NYS APGs.
Payment Incentives
Financial Risk-Sharing
• Network negotiates incentives (e.g., P4P, shared savings, shared risk) with MCO
• Payment incentives won or lost on group performance
• Network distributes incentive payments, if any, to providers, pursuant to methodology agreed by the members of the network.
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com
Thank you!www.CareTransitionsNetwork.org
The project described was supported by Funding Opportunity Number CMS-1L1-15-003 from the U.S. Department of Health & Human Services, Centers for Medicare & Medicaid Services.
Disclaimer: The contents provided are solely the responsibility of the authors and do not necessarily represent the official views of HHS or any of its agencies.
© 2018 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com