forming strong community partnerships€¦ · choice of legal entity •legal entities generally...

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


mailto:[email protected]

(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


Legal Relationships and Structure

Partner A Partner BOwnership

or Control

Partner

A

Partner

B

Partner

C

Partner

D

Partner

E

Partner

F

Contractual

Relationship


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


Referral Arrangements

Each provider agrees to furnish services to

individuals referred by the other.

Behavioral Health

ProviderProvider


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


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?


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


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?


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



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



▪ 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?



▪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?


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”


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


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.


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


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.


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


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.


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.


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”


http://www.ftc.gov/bc/healthcare/industryguide/policy/statement8.htm

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)


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.


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.


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”


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


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.


Thank you!www.CareTransitionsNetwork.org

[email protected]

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.


http://www.caretransitionsnetwork.org/

mailto:[email protected]

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