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CHC/FQHC & Hospital: Opportunities for Strategic Relationships & Synergies

Presented by

February 27, 2019

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2/25/2019

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YourPanelists

Jeff AllenPartner

jeallen@bkd.com

Jeff AdestPartner/Director

jadest@garfunkelwild.com

David TaylorPartner

dtaylor@bkd.com

1Identify the grant reporting requirements specific to CHCs & recognize their effect on any agreement with a hospital2

3 Analyze the opportunities & challenges associated with both organizations involved in the change of clinic ownership

Recognize collaborative opportunities between hospitals & CHCs that can create financial & quality strengths

Today’s Topics

Apply knowledge regarding other arrangements between CHCs/FQHCs & hospitals, including referral agreements, arrangements with hospitals for specialist services on a session or similar basis & resident rotation agreements

4

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Successful Collaborations

Hospitals & CHC/FQHCs

› Any collaboration needs to be a “win/win” to be successful long term

› Financial due diligence is a must to help ensure that any additions or major changes do not put the overall organization at financial risk

› There is pressure to grow, but grow wisely

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Collaboration Examples

Hospital transfersexisting outpatient clinic to an established FQHC/CHC

Hospital works with external community group/organization to establish a new FQHC or FQHC look-alike in their community

Hospital establishes an emergency room diversion program with the local FQHC

Hospital enters into other arrangement with local FQHC (staffing, leasing arrangement, sharing resources, other)

› Transferring hospital clinic to existing CHC/FQHC

› Specialist arrangements

› Resident rotation arrangements

› Referral arrangements

› Other hospital relationships

Relationship Opportunities with Hospitals/Health Systems

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› Many hospitals operate outpatient clinics

› Hospitals often operate these clinics to satisfy their charitable mission

› Hospital clinics may not be operated as efficiently & cost effectively as CHC/FQHC sites

› CHCs/FQHCs have a strong track record of offering quality, efficient care; through the right arrangement, can improve care to the community

› CHCs/FQHCs should consider approaching hospitals to discusspossibility of the hospital transferring its outpatient clinics to the CHC/FQHC

Transferring Hospital Clinic to CHC/FQHC

› Potential benefits to CHC/FQHC• New site• Expanded operations• Increase number of patients• Less competition from hospital• Can potentially lead to change of Medicaid

rate (state-specific)• Hospital can provide grant to CHC/FQHC to help offset losses

Transferring Hospital Clinic to CHC/FQHC

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› Potential benefits to hospital• Ability to limit its losses resulting from operating an outpatient clinic• Can help ensure that its patients will still receive high-quality care• Especially attractive for high-risk activities such as obstetrics

› Hospital can provide grant to CHC/FQHC to help offset losses & help with hospital’s obligation to provide charity care

Transferring Hospital Clinic to CHC/FQHC

› Related considerations• Need for state licensure/certificate

of need approvals as applicable• Space leasing considerations• Construction considerations• Timing

› NAP application (if available)

› HRSA change of scope

Transferring Hospital Clinic to CHC/FQHC

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› Related considerations• Staffing

› Hiring new personnel

› Hiring former hospital personnel

› Temporary personnel leasing arrangement with hospital

• Credentialing providers• Potential for specialist arrangements • Potential for residency arrangements

Transferring Hospital Clinic to CHC/FQHC

› Related considerations• Notification to patients• New Medicare number• Notification to payors• Determination of which services will be transferred & which will be

covered by hospital• Improved coordination with hospital for referred services &

hospital/referral tracking

Transferring Hospital Clinic to CHC/FQHC

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Does your CHC/FQHC have a hard time finding

specialists?

Specialist Arrangements

Explore an arrangement with a hospital to provide specialist services on a session or similar basis

Explore an arrangement with a private practice

› Benefit to CHC/FQHC• Patients can receive services that they would otherwise be

unable to easily receive• Furthers CHC/FQHC mission of providing care for totality of

patient• Ability to bill for E&M type visits at CHC/FQHC rates• Can potentially lead to change of Medicaid rate (state-

specific)

Specialist Arrangements

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› Benefit to hospital• Hospital avoids having patients who can be seen at CHC/FQHC show

up at hospital on unscheduled basis, e.g., emergency room• Helps hospital avoid unnecessary/avoidable hospital visits that are

much more costly to the hospital & the patient • While E&M visits at the CHC/FQHC take place at CHC/FQHC, testing

& more intensive services continue to be performed at the hospital• Specialists that typically do not see Medicaid patients in their private

offices could consider seeing Medicaid patients at the CHC/FQHC

Specialist Arrangements

› Related considerations• Need for state licensure/certificate of need

approvals as applicable• HRSA change of scope• Pricing for these arrangements can be flexible

› Session basis

› Patient basis

• These relationships can fit in FQHC safe harbor

Specialist Arrangements

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› Related considerations• If the hospital credentials the specialists, the CHC/FQHC may not need

to credential them• Can give priority for these services to CHC/FQHC primary care patients• Notification to payors• “Value-based” potential

Specialist Arrangements

› Benefit to CHC/FQHC• Residents can be a good source of “free” labor• Good recruiting tool

› CHC/FQHC can recruit residents to work at CHC/FQHC following completion of residency based on experience at CHC/FQHC

› National Health Services Corps loan forgiveness programs

› Visa candidates

Resident Rotation Arrangements

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› Benefit to CHC/FQHC• Primary care exception – allows one physician to supervise up to four

residents at a time so four patients can be seen simultaneously under supervision of one physician

• Hospital can provide its preceptors to supervise residents at CHC/FQHC under “leased employee” or similar model with potential for flexible pricing

• Potential for grant from hospital

Resident Rotation Arrangements

› Benefit to hospital• Hospital can have its residents receive hands-on experience at primary care

site

• CHCs/FQHCs focus on totality of patient care which is important for residents

• Primary care exception – allows one physician to supervise up to four residents at a time so four patients can be seen simultaneously under supervision of one physician

• Hospital can continue to have its preceptors oversee the residents to help ensure compliance with GME requirements under “leased employee” or similar model with potential for flexible pricing

• Hospital continues to receive GME funding for time residents spend at CHC/FQHC

Resident Rotation Arrangements

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› Related considerations• CHC/FQHC needs to determine time frame for residency programs, e.g., only certain

days or sessions• CHC/FQHC needs to determine specialties it will allow for residents• CHC/FQHC needs to determine limit on number of residents• CHC/FQHC needs to determine if it will have its clinicians supervise the residents or

have the hospital preceptors supervise the residents• Consider effect on Medicaid productivity rates (state-specific)• Need residency rotation agreement• Need agreement relating to supervision of the residents• Right for CHC/FQHC to remove residents if potential for patient harm

Resident Rotation Arrangements

› CHCs/FQHCs must provide either directly or through contract or referral arrangement• All required primary & preventive services • Additional (supplemental) health services that are appropriate to meet the health needs of the

population served by the health center

› These services include (among others)• General primary medical care• Diagnostic laboratory• Diagnostic radiology• Obstetrical care (prenatal, intrapartum, postpartum)• Behavioral health services

CHC/FQHC Requirements: HRSA Form 5A

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› Why does the CHC/FQHC need these agreements?• The CHC/FQHC may not have the capability to provide the required services

directly

• May arrange with another entity, including a hospital, to provide the required services

• Note: while the CHC/FQHCs do not need to refer these services to hospitals, it’s helpful to have arrangements with hospitals because private practices generally do not want to agree to offer sliding fee discounts to the CHC’s/FQHC’s patients

• These arrangements can also address the CHC’s/FQHC’s obligations relating to referral tracking & coverage by the hospital’s physicians of CHC/FQHC patients in the hospital

Hospital Referral Agreements

› The CHC/FQHC agrees to refer patients to hospital

› The hospital bills & collects from patients & third-party payors for the services it provides

› Agreement must specify the services which the CHC/FQHC will be referring to the hospital

Hospital Referral Agreements

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› The hospital must agree to• Apply the CHC’s/FQHC’s sliding fee discount or apply the hospital’s charity care

policies to the CHC’s/FQHC’s patients provided that the hospital’s charity care policies offer a sliding fee discount to patients at or below 200% of the federal poverty level & offer either a full discount or a nominal fee to patients at or below 100% of the federal poverty level

• Report to the CHC/FQHC regarding the condition, care & treatment of the patient, including any applicable lab & diagnostic test results

• Refer patients back to the CHC/FQHC for follow-up care

• The agreement should preferably contain a representation by the hospital that its providers are appropriately licensed & qualified to perform the services

Hospital Obligations

› Potential for CHCs/FQHCs & hospitals to work together• Value-based arrangements• Clinically integrated networks (CIN)• ACOs• IPAs

Population Health: Value-Based Payment

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› Value-based payment arrangements• Health care delivery reform• Different types of providers expected to work together• Enables buyers to hold providers of health care accountable for both

cost & quality of care• Incentives to reduce unnecessary care• Shifting care from more expensive to less expensive settings• Shifting cost-cutting burden to providers

Population Health: Value-Based Payment

› Clinically integrated networks• Central governance

• Continuum of health care providers

• Mechanisms to monitor utilization, control costs & help assure quality of care

• Use of common IT to help ensure exchange of all relevant patient data

• Development & adoption of clinical protocols

• Care review based on adherence to implemented protocols

• Enforcement of adherence to protocols – selectivity of participants

• Significant investment of monetary & human capital

Population Health: Clinically Integrated Networks

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› An ACO is an organization of clinically integrated health care providers that work together to provide, manage & coordinate health care (including primary care) for a defined population with a mechanism for shared governance, the ability to negotiate, receive & distribute payments & to be accountable for the quality, cost & delivery of health care to the ACO’s patients

› IPAs involve different providers coming together through financial or clinical integration

Population Health: ACOs

› The health center safe harbor under the federal anti-kickback statute protects the CHC/FQHC from prosecution under the federal anti-kickback law

› Certain arrangements between a CHC/FQHC & providers/supplies of goods, items, services, donations & loans

• That contribute to the CHC’s/FQHC’s ability to maintain or increase the availability, or enhance the quality, of service provided to the CHC’s/FQHC’s medically underserved patients

› Under the FQHC/CHC safe harbor, the hospital can provide• Community benefit grants

• Services/personnel at below fair market value

CHC/FQHC Safe Harbor

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› In order to qualify for the safe harbor, the following requirements must be met• The transfer must be made pursuant to a contract, lease, grant, loan or other agreement that

› Is set out in writing;

› Is signed by the parties; &

› Covers, & specifies the amount of, all goods, items, services, donations or loans to be provided by the individual or entity to the CHC/FQHC

• The amount of goods, items, services, donations or loans specified in the agreement may be a fixed sum, fixed % or set forth by a fixed methodology

• The amount may not be conditioned on the volume or value of federal health care program business generated between the parties

• The goods, items, services, donations or loans are medical or clinical in nature or relate directly to services provided by the CHC/FQHC as part of the scope of the CHC/FQHC Section 330 grant

CHC/FQHC Safe Harbor

› The CHC/FQHC reasonably expects the arrangement to contribute meaningfully to the CHC’s/FQHC’s ability to maintain or increase the availability, or enhance the quality, of services provided to a medically underserved population served by the CHC/FQHC, & the CHC/FQHC documents the basis for the reasonable expectation prior to entering the arrangement

› At least annually, the CHC/FQHC must re-evaluate the arrangement to ensure that it is expected to continue to satisfy the standards & must document the re-evaluation contemporaneously

› The entity making the payment/transfer does not (i) require the CHC/FQHC (or its affiliated health care professionals) to refer patients to a particular individual or entity; or (ii) restrict the CHC/FQHC (or its affiliated health care professionals) from referring patients to any individual or entity

CHC/FQHC Safe Harbor

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› Entities that offer to furnish goods, items or services without charge or at a reduced charge to the CHC/FQHC must furnish such goods, items or services to all patients from the CHC/FQHC who clinically qualify regardless of the patient’s payor status or ability to pay

› The agreement must not restrict the CHC’s/FQHC’s ability to enter into agreements with other providers or suppliers of comparable goods, items or services or with other lenders or donors

› The CHC/FQHC must provide effective notification to patients of their freedom to choose any willing provider or supplier

CHC/FQHC Safe Harbor

Hospital Perspective

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› Physicians can be structured several ways within a hospital or health system

› Understanding differences before discussions start is important

› Based on structure, degree of change will be easier in certain situations (hospitals have more control in certain structures)

Physician Operations in Hospitals

Physician Operations OptionsProvider/Hospital

BasedRural Health Clinic Freestanding Separate Legal

Entity

Degree of integration with hospital

High High Medium Low

Reimbursement Generally highest Can be highest reimbursement,

especially in rural settings

Lower Lower

Other Act & look like department of

hospital. Status has recently been subject

to Medicare reductions (site neutral payment

movement)

Seen more in rural hospitals. Mid-level

requirement. Must do lab procedures.

Certification process.

Included as part of hospital, but little

integration or enhanced

reimbursement received. Best for truly independent

clinics

Very little integrationpossible (separate payroll, benefits, branding, etc.)

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› Physician operations generally show negative operating results within hospitals & health systems

› Detailed understanding needed since diversity in practice exists on how overhead & other costs are allocated

• Direct vs. indirect costs

• Which costs will be transferred to CHC/FQHC vs. remain with hospital

• Space costs

› Clear financial picture of operations being transferred is essential for both parties

Physician Operations in Hospitals

› How will the following be impacted?• Downstream revenue• Alternative payment models• Care coordination & network development strategies• Information systems & sharing of records• Other hospital competitors

Potential Hospital Concerns

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› 340B Drug Discount Program• If hospital not eligible, could be additional benefit from collaboration if

CHC/FQHC has successful program

› Community Health Needs Assessment• IRS required for tax-exempt hospitals• Could provide insight on hospital needs & potential opportunities for

collaboration

Other Considerations

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The information contained in these slides is presented by professionals for your information only & is not to be considered as legal advice. Applying specific information to your situation requires careful consideration of facts & circumstances. Consult your BKD advisor or legal counsel before acting on any matters covered.