• printer-friendly PIN 99-09 (Acrobat/PDF)
DOCUMENT NUMBER: PIN 99-09

DATE: April 20, 1999

DOCUMENT NAME: Implementation of the Balanced Budget Act Amendment

This Policy Information Notice (PIN) establishes the Bureau of Primary Health Care's (BPHC) interpretation of the statutory limits on the involvement of another entity in the ownership, control and/or operation of a public FQHC Look-Alike entity. It also formally ends the moratorium on HRSA processing of applications from public entities for FQHC Look-Alike designation and recertification. A separate PIN provides the interpretation of the revised language for private non-profit FQHC Look-Alike entities.

Under option (b), the public agency must have a co-applicant board which meets the section 330 composition and responsibility requirements except for the requirement that the board establish general policies for the health center. Section 330 allows the public agency to retain general policy setting functions and authorities. The BPHC expects, however, that the community- based governing board will be vested with the authority to manage the health center to the extent allowed by the public entity's charter, with shared responsibility in the exercise of some authorities. The delegation of authority to the board and shared roles and responsibilities must be fully described in an agreement that is to be submitted with the public entity's application for FQHC Look-Alike designation or recertification.

We have determined that public entities are not owned, controlled or operated by another entity when the following guidelines are met:

A. Public Center With No Co-Applicant
In one form of public center, a public entity qualifies as a grantee or FQHC Look-Alike without needing a co-applicant. In this case, the public entity receives theFQHC Look-Alike designation and its board meets section 330 requirements.

Thus, the public entity that receives the FQHC Look-Alike designation is the Aentity that cannot be owned, controlled or operated by another entity as stated in the BBA. In this context, the restrictions on the powers that Aanother entity may exercise vis-a-vis the public center refer to powers exercised by any separately incorporated entity, or entities, that are otherwise legally distinct from the public entity. This does not include departments or divisions of a single entity (e.g., a city, county, or other single governmental body) that are not legally distinct. Accordingly, no separate entity or entities may own, control or operate the public entity.

B. Public Center with Co-Applicant Arrangements
In the other form of public center, there is a public entity applicant with a co-applicant entity which, when combined, meet the section 330 governance requirements. In co-applicant arrangements, the public entity receives the FQHC Look-Alike designation, and the co-applicant entity serves as the Ahealth center board, with the two collectively referred to as the Ahealth center. The preferred model is to have the co-applicant incorporated as a separate entity, with adopted bylaws which specify its authorities and methods of operation vis-a-vis the public entity. Experience has shown that this method assures maximum accountability for the user majority board and best achieves the purposes of the section 330 programs. It is recognized, however, that incorporation of the co-applicant may not be appropriate or feasible for all public entities and, therefore, is not a requirement.

1. Required Authorities of the Co-Applicant
The governing board selection, composition and responsibility requirements apply to the coapplicant since it functions as the community-based board of the health center. The BPHC has established standards in the context of health center affiliations which pertain also to the relationship between a public entity and its coapplicant. These standards are stipulated in BPHC PIN 97-27, Affiliation Agreements of Community and Migrant Health Centers, dated July 22, 1997. This PIN addresses compliance with the selection and composition requirements to ensure the board's independence and the limitations on a third party (e.g., to select and remove board members) which apply to the public entity applicant as well as other third parties.

Section 330 permits the public entity to retaingeneral policy-making authority. (See thediscussion following the list of activities and item2, below.) The purpose of this provision is to recognize that public entities are constrained by law, in some cases, not to delegate certain governmental functions to private entities. At the same time, we recognize the statutory objective of section 330 that the health center's policy setting process be carried out, to the extent possible, by a community-based governing board. This guidance is designed to accommodate, to the extent feasible, both of these objectives.

As provided by statute and regulation, governing boards of health centers are responsible for the following activities:

1. Selection of the services to be provided by the health center;

2. Approval of the health center's annual budget, with the overall plan and budget prepared under its direction by a committee consisting of representatives of the health center board, administrative staff, and the medical staff of the health center;

3. Approval of the selection and dismissal of the Executive Director for the center;

4. Approval of the application for a second or subsequent grant or FQHC recertification;

5. Adopt health care policies, including scope and availability of services, location and hours of services and quality of care audit procedures;

6. Assure that the health center is operated in compliance with applicable Federal, State and local laws and regulations; and

7. Evaluate center activities including services utilization patterns, productivity of the center, patient satisfaction, achievement of project objectives, and development of a process for hearing and resolving patient grievances.

Relative to the governance authorities required of the health center board as described in (a) through (g) above, we do not require that all authorities be exercised solely by the co-applicant board. It is acceptable for the public entity to share in the exercise of authorities. For example, section 330 requires that the governing board retain the authority for approval of the annual budget but does not preclude arrangements in which active, joint decision-making precedes that approval or in which the public entity also approves the budget. The same approach can apply to the selection of the Executive Director. Other decisions regarding how the authorities may be shared are a matter of choice. On the other hand, a pure Aconsensus approach, without the subsequent required approval by the health center board, would not be acceptable. It also would not be acceptable for the public entity to require an Executive Director to be retained whom the health center board voted to dismiss.

2. Optional Policy Setting Authorities of the Public Entity
Section 330 established that the public entity may retain general policy setting authority.
The BPHC recognizes that many public entities are required by law to retain final authority for certain types of activities. No justification is required for arrangements in which the public entity retains authority for the following:

a. To establish personnel policies and procedures, including selection and dismissal procedures, salary and benefit scales, employee grievance procedures, and equal employment opportunity practices; and

2. To develop management and control systems that are in accordance with sound financial management procedures, including: the provision for an audit on an annual basis to determine, at a minimum, the fiscal integrity of financial transactions and reports and compliance with the terms and conditions of FQHC Look-Alike designation; approval of the annual center budget; establishment of systems for eligibility determination, billing and collection, including partial payment schedules; making other reasonable efforts to collect for costs in providing health services to persons eligible for Federal, State or local public assistance; and, long range financial planning.

For other decision-making which is to be exercised by the public entity to the exclusion of the co-applicant's governing board, BPHC requires the submission of explanatory documentation as to the legal basis for the exclusion of the governing board.

3. Agreement Between Public Entity and Co-Applicant
The BPHC requires public entities and their co-applicants to execute, and present for BPHC review and approval, an agreement which describes the delegation of authority and defines each party's role, responsibilities, and authorities. Such agreements must assure that the relationship is structured in compliance with section 330 of the Public Health Service Act, implementing regulations, and PIN 97-27, Affiliation Agreements of Community and Migrant Health Centers, and subsequent clarifications.

Public entities that are currently designated as FQHC Look-Alikes and are determined not to meet the requirements of this PIN will have up to 1 year from date of notification of noncompliance to satisfactorily address areas of concern.