|
|
|
|
The Bureau of Primary Health Care (BPHC) encourages health
centers to affiliate with other entities to strengthen their ability to achieve their mission. However, BPHC is concerned
that some affiliation agreements may compromise health centers'
compliance with grant requirements, particularly those of section
330 of the Public Health Service (PHS) Act (and implementing
rules and program expectations). Failure to comply with these
requirements may affect a health center's eligibility for section
330 grants and Federally Qualified Health Center (FQHC) status,
as well as associated benefits [e.g., malpractice protection
through the Federal Tort Claims Act (FTCA), and reduced price
pharmaceuticals through the Drug Pricing Program].
This Policy Information Notice (PIN) serves to:
- inform health centers that BPHC is examining its
requirements and expectations regarding affiliations,
- alert health centers to potential threats to their
integrity and/or autonomy (e.g., regarding corporate
structure, governance, management and finance, health
services delivery) that may affect their eligibility for
section 330 grants or FQHC Look-Alike status,
- provide policy clarification on affiliations,
- advise health centers that further policy clarification
will be issued as additional decisions are made, and
- encourage health centers to consult with BPHC prior to
entering into affiliation agreements that may affect their
health center's compliance with applicable Federal grant-
related requirements pertaining to their integrity and/or
autonomy.
BPHC has no intent to "grandfather in" any non-compliant existing
affiliation agreement, but we will afford health centers that are
not compliant a reasonable opportunity to come into compliance.
This notice applies to:
- health centers funded under section 330 of the PHS Act
that:
- serve a population that is medically underserved by
providing services for all residents of the catchment
area [i.e., "Community Health Centers" (CHCs) funded
under section 330(e)], and/or
- serve a special medically underserved population
comprised of migratory and seasonal agricultural
workers [i.e., "Migrant Health Centers" (MHCs) funded
under section 330(g) for the purpose described in
subsection (e)]; and
- those entities designated as "Look-Alikes" for FQHC
purposes by virtue of satisfying the requirements for
Community and Migrant Health Centers (C/MHCs).
All other types of FQHCs are beyond the purview of this notice.
Further guidance is forthcoming for other section 330 health
center programs (i.e., Health Care for the Homeless and Health
Services for Residents of Public Housing).
This affiliation policy clarification and BPHC's expectations
related to networking, including the development and operation of
integrated delivery systems, are complementary. The BPHC
recognizes the necessity for health centers to collaborate and
coordinate with others in their communities to survive and thrive
in the changing health care environment. In some communities,
health centers may conclude that it is in the best interest of
their organization and the community's medically underserved
people to enter into an affiliation which does not permit them to
abide by the requirements herein, even though non-compliance will
result in loss of their section 330 and/or FQHC status and
associated benefits.
An affiliation agreement is an agreement that establishes a
relationship between a health center and one or more entities.
The subject of this notice is affiliation agreements that affect,
or may affect, the health center's compliance with applicable
Federal grant-related requirements pertaining to their integrity
and/or autonomy. The characteristic of concern to BPHC regarding
the affiliation agreements that are the subject of this notice is
that a health center's compliance with governance, management or
clinical operations requirements is, or may be, diminished by
virtue of the powers given to one or more other entities in the
proposed affiliation agreement.
The entities with which health centers affiliate include, but are
not limited to, other health centers, primary care providers,
specialists, hospitals, health and human services agencies,
managed care organizations, and management services
organizations. Types of formal affiliations include, but are not
limited to: contractual arrangements, joint ventures (e.g.,
partnerships, limited liability corporations, various kinds of
networks), and corporate integration (e.g., parent-subsidiary
models, acquisitions, mergers).
BPHC is concerned that through some affiliation agreements,
centers will be out of compliance with section 330 requirements.
That is, they will diminish their substantive section 330 role in
carrying out health center activities, merely serve as a conduit
to another party for a grant award and/or other benefits (e.g.,
those of FQHC, FTCA, and the Drug Pricing Program), and/or vest
in another party the ultimate authority to oversee and approve
key aspects of health center activities. Those affiliation
agreements that contain elements which do, or may, pose risks to
center integrity or autonomy are the subject of this notice.
In many instances, centers do not risk loss of integrity or
autonomy with potential affiliation agreements. For example,
contracts for specific services (e.g., ancillary services and
allied health services) generally do not pose such risks (unless,
for example, significant management or clinical services will be
furnished by another entity). Such affiliation agreements which
pose no risk to health center integrity or autonomy, and
therefore are not the subject of this PIN, are at one end of the
continuum of risk.
In contrast, considering the threat to health center integrity,
BPHC is greatly concerned about health center autonomy in
affiliations between health centers and entities that are not
subject to the same section 330 grant-related equirements. The
basic mission, goals and objectives of the other entities may
vary markedly, and their commitment to community-based care for
the underserved may be less than that required of health centers.
While health center-to-health center affiliation agreements that
contain elements which do, or may, pose risks to center integrity
or autonomy are included in the subject of this PIN, BPHC is less
concerned about threats to health center autonomy when section
330 funded C/MHCs are affiliating with other section 330 funded
C/MHCs, given that the requirements are the same and the
monitoring processes for section 330 funded C/MHCs provide a
greater assurance of compliance. Indeed, it is BPHC's intent to
afford flexibility relative to health center autonomy, when
section 330 funded C/MHCs are affiliating with other section 330
funded C/MHCs for purposes of cost efficiencies and shared
expertise. While the affiliation policy clarification in this
PIN stipulates the standard against which all affiliations will
be compared, the flexibility for section 330 funded health
center-to-health center affiliations will be provided in the form
of exceptions to specific policy provisions that are not explicit
in law and regulations. For example, C/MHCs may be permitted
under certain circumstances to share a finance director. This
approach is consistent with the BPHC's expectations regarding
networking, as well as with certain conditions and remarks on
notices of grant award which encourage health centers to work
together and to integrate functions where appropriate.
BPHC is also willing to afford greater flexibility in the form of
exceptions to specific policy provisions that are not explicit in
law and regulations for affiliations between section 330 funded
C/MHCs and organizations controlled by health centers, such as
some managed care networks and plans. The term "controlled by
health centers" shall, in this document, mean that the health
center or health centers in the organization collectively have
the authority to appoint a minimum of 51 percent of the
organization's board members. In addition:
- In for-profit organizations, the health center(s) in
the organization must hold a minimum of 51 percent of the
equity in the organization, and have the right to a minimum
of 51 percent of any distribution of the profits; and,
- In non-profit organizations, subject to State law and
applicable tax laws, the health center(s) in the
organization must have a right to a minimum of 51 percent of
any distribution of excess revenues. Further, if the non-
profit corporation is a membership corporation, the health
center(s) must have a minimum of 51 percent of the
membership.
The BPHC expects and encourages C/MHCs and FQHC Look-Alikes to
affiliate with other entities in ways that will strengthen the
health center's ability to achieve its mission of increasing
access to primary health care for underserved populations and
improving health outcomes, while preserving or enhancing the
health center's integrity and autonomy. As a health center
considers the value and costs involved in a proposed affiliation,
there are several issues to be considered that pertain to health
center integrity and autonomy.
Section 330 of the PHS Act authorizes grants to support the
operation of C/MHCs. The statute and implementing regulations
(42 CFR Part 51c for CHCs and 42 CFR Part 56 for MHCs), as well
as applicable grants regulations (45 CFR Part 74 for private,
non-profit health centers and 45 CFR Part 92 for public centers),
impose certain requirements which are relevant to the interaction
of the centers and other entities with which they may affiliate.
Furthermore, the "Program Expectations for Community and Migrant
Health Centers", dated May 1, 1991, which describe the
expectations for operational C/MHCs (including priorities and elements associated with successful programs), and the PHS Grants
Policy Statement, dated April 1, 1994, are relevant to
affiliation agreements.
The required control over the health center is accomplished
through various mechanisms, including but not limited to:
- the corporate structure of the organization which
operates a health center,
- the selection process and composition of the governing
board,
- the authorities and responsibilities of the governing
board, and
- specific management and clinical requirements for health
centers.
These requirements ensure that health centers maintain their
focus on providing community-based, responsive health care to the
medically underserved, including the uninsured and underinsured.
Critical integrity and autonomy considerations identified to
date, specific to C/MHCs and FQHC Look-Alikes, are set forth
below. BPHC, through its review process, will determine whether
or not health centers meet requirements. Further policy
clarification related to these and other issues will be
stipulated in one or more forthcoming guidance documents as
decisions are made.
A. Corporate Structure
Health centers considering affiliation agreements should examine the proposed affiliation to assure that their corporate structure
remains in compliance with all section 330 requirements.
This notice serves as an alert that BPHC, in reviewing
affiliation agreements, will evaluate corporate structure, paying
particular attention to corporate integration, i.e., structural
relationships between the health center and any other entity or
entities. Corporate integration involves a change in the corporate structure and identity of one or both of the parties to
the affiliation. The BPHC is particularly (but not exclusively)
concerned about the "parent-subsidiary model" of corporate integration in which the health center becomes a subsidiary of
another corporation. "Sole corporate member" refers to single
entity (i.e., an organization, such as a hospital, or an
individual) which is the only "member" of a corporation, having
certain powers and authorities which could supersede those of the
corporation's board (e.g., a hospital is a sole member of the
health center corporation, having certain powers and authorities
which can supersede those of the health center board). When the
parent-subsidiary model (most particularly the sole corporate
member approach) is used, specific authorities, that are required
under section 330 of the PHS Act to be vested in the health
center board, are reserved (by State law in a number of States)
to the affiliate parent. Examples include selection and removal
of board members, selection and removal of the chief executive
officer, and approval of plans and budgets.
Policy Clarification: No sole corporate member or any other
parent-subsidiary approach to corporate integration, or any
approach with a different name that appears to be structurally
similar, will be deemed to have met all statutory and regulatory
requirements unless there is no violation of any aspect of the
affiliation policy clarification. Based on our understanding of
State law we believe that few, if any, sole corporate member
approaches to integration will be able to comply with the
applicable requirements described herein. Therefore, the onus is
on the grantee or applicant, to a greater extent than with other
affiliation approaches, to demonstrate in its documentation the
acceptability of the approach. The Bureau may require the
grantee or applicant to provide legal and/or management analyses.
B. Governance
In light of governance requirements specified in the law and
regulations, health centers considering an affiliation agreement
should examine the proposed affiliation to assure that their
governing boards will remain in compliance with all relevant
governance provisions. To maintain compliance with requirements,
the health center board must, in general:
1) be composed of at least 9 but not more than 25
individuals,
a majority of whom are being served by the center and who, as
a group, represent the individuals being
served by the center in
terms of demographic factors such as
race, ethnicity and sex,
2) have less than one-quarter of the board members be
individuals who derive more than 10 percent of their annual
income from the health care industry,
3) be representative of the community in which the service
area is located and have appropriate expertise in community
affairs, local government, finance and banking, legal
affairs, trade unions, and other commercial and industrial
concerns, or social service agencies within the community,
4) not have an employee of the center (or spouse or child,
parent, brother or sister by blood or marriage of such an
employee) on the board,
5) retain, and not be restricted in, its prescribed
authorities, functions and responsibilities, such as:
meeting at least once a month, selecting the services to be
provided by the center, scheduling the hours during which
such services will be provided, approving the center's
annual budget, approving the selection and dismissal of a
director for the center, adopting health care policies,
evaluating center activities, assuring that the center is
operated in compliance with applicable laws and regulations,
and, except in the case of a governing board of a public
center, establishing general policies for the center), and
6) be chosen through a selection process, subject to the
approval of BPHC, which is prescribed in the by-laws of the
center.
This notice serves as an alert that BPHC, in reviewing
affiliation agreements, will evaluate:
1) the composition and expertise of the health center board,
2) any authorities, functions or responsibilities relative
to the health center that are delegated to one or more
entities from outside the health center, and
3) authority to select or remove any health center governing
board members by one or more entities from outside the
health center.
Policy Clarification:
Composition of the Governing Board: In assessing
the representativeness of the board relative to the
community in general and the individuals served/to be
served in particular, BPHC will determine whether or
not the board meets the composition requirements
stipulated in the health center authorizing legislation
and regulations. In addition to the board as a whole,
BPHC is concerned about the composition of the
Executive Committee (i.e., the officers of the board
and chairpersons of the committees) since it typically
has authority to act on behalf of the full board. The
extent to which board members or other individuals
selected by or representing any outside entity can fill
leadership positions is expected to be limited.
Specifically, the standard is that:
the Chairman of the Board may not be selected
by any other entity, and
b) no other entity may select a majority of the
members of the Executive Committee.
Authorities, Functions, or Responsibilities given
to Others: Relative to any authority, function or
responsibility which the law or regulations explicitly
require of the health center board:
a) no other entity may have an overriding approval
authority,
b) there can be no requirement for a majority of
the affiliating entity's board to also exercise
approval (i.e., a "dual majority" requirement),
and
c) no other entity may have veto power, including
"super-majority" provisions which give another
entity an effective veto power.
Method of Selection of Board Members: No other
entity or entities may select a majority of the health
center board members. In addition, it is not
acceptable for any other entity or entities to select a
majority of the non-user members. The only health
center board members who can be removed by an outside
entity are those permitted to be selected by the
entity. Furthermore, no other entity or entities will
be permitted to preclude the selection of, or require
the dismissal of, health center board members who are
not "endorsed" by that entity or those entities.
C. Management and Finance
In light of the management and finance requirements specified in the law and regulations, health centers considering an
affiliation agreement should examine the proposed affiliation to
assure that the governing board in particular and the health
center in general will remain in compliance with all relevant
management and finance provisions.
This notice serves as an alert that BPHC, in reviewing
affiliation agreements, will evaluate:
1) the role of the governing board, center staff, and any
entity or entities from outside the health center, in
determining the overall plan and budget for the center;
2) employment arrangements of key management staff of the
health center, including the executive director, finance
director and medical director;
3) role of the health center's governing board relative to
personnel policies and procedures of the health center;
4) role of the health center's governing board relative to
financial management of the health center;
5) role of the health center's governing board in evaluating
center activities; and
6) the systems used by the health center for information,
cost accounting, reporting and monitoring.
Policy Clarification:
- Strategic and Operational Planning: The overall
plan must be prepared under the direction of the health
center governing board, and health center
administrative and medical staff must be involved.
- Budget Preparation and Approval: The budget must
be prepared under the direction of the health center
governing board, and health center administrative and
medical staff must be involved.
- Selection of Key Management Staff:
a) Executive Director: By law, the health
center must select and directly employ an
Executive Director (i.e., Chief Executive
Officer). In some health centers, this
position may be combined with that of Finance
Director or Medical Director. No other
entity can have the authority to select or
dismiss the Executive Director. The
individual who fills the Executive Director
position is expected to work full-time for
the health center.
b) Finance Director: The BPHC recommends that
the health center select and directly employ a
Finance Director, and no other entity should have
the authority to select or dismiss the Finance
Director. In some health centers, this position
may be combined with that of Executive Director.
c) Medical Director: The BPHC recommends that
the health center select and directly employ a
Medical Director, and no other entity should have
the authority to select or dismiss the Medical
Director. In some health centers, this position
may be combined with that of Executive Director.
Temporary deviations from the above
policy clarification regarding key
management staff may be addressed,
at the discretion of BPHC, within
its authority under section
330(e)(1)(B) to make grants for a
period not to exceed 2 years for
entities that fail to meet certain
requirements. In such cases, the
BPHC may authorize a health center
to have a "management services
contract," preferably for not more
than one budget period, for the
provision of certain staff
services.
- Personnel Policies and Procedures: The
establishment of personnel policies and procedures must
remain under the control of the health center board.
The exception, by law, is the governing board of a
public center (i.e., a public entity is the grantee)
with a co-applicant governing board that meets all
health center board requirements except that it does
not establish general policies for the center. Note:
Co-applicant health center boards are only permitted in the case of public centers.
- Financial Management: The adoption of policy for
financial management practices must remain under the
control of the health center board. The exception, by
law, is the governing board of a public center (i.e., a
public entity is the grantee) with a co-applicant
governing board that meets all health center board
requirements except that it does not establish general
policies for the center. Note: Co-applicant health
center boards are only permitted in the case of public
centers.
D. Health Services
In light of the health services requirements specified in the law
and regulations, centers considering affiliation agreements
should examine the proposed affiliation to assure that the
governing board in particular and the health center in general
will remain in compliance with all relevant health services
provisions.
This notice serves as an alert that BPHC, in reviewing
affiliation agreements, will evaluate:
- commitment to the medically underserved population(s)
that are the basis for the grant or FQHC Look-Alike status;
- the impact of the affiliation on availability,
accessibility, continuity, and acceptability of health
center services;
- any limitations by an outside entity or entities on
health center relationships (i.e., any limitations on other
health center affiliation agreements); and
- role of the health center's governing board relative to
health care policies and procedures of the health center.
Policy Clarification:
- Commitment to the Medically Underserved
Population(s): The health center must be focused on
the mission of providing care to the medically
underserved.
- Impact on Availability, Accessibility, Continuity
and Acceptability of Services: For services to be
available in a manner which assures continuity, the
BPHC recommends that the health center directly employ
a core staff of full-time primary care providers (i.e.,
in general, a majority of the health center providers).
- Limitations on Health Center Relationship:s By
law, the health center must make reasonable efforts to
establish and maintain collaborative relationships with
other health providers in the service area.
Furthermore, to the extent possible, center activities
must be coordinated and integrated with the activities
of other federally funded, as well as State and local,
health services delivery projects and programs serving
the same population. No other entity or entities
should dictate, preclude or otherwise control health
center relationships with other entities (i.e.,
affiliation agreements), except when the control
delegated to the entity or entities is so limited that
it does not preclude, or have the potential to
preclude, the health center from complying with the
statutory and regulatory provisions regarding health
center relationships.
- Health Care Policies and Procedures: An
affiliation agreement will be considered unacceptable
if it precludes the health center board from exercising
its authority and fulfilling its responsibilities
relative to evaluating service utilization patterns,
productivity of the center, patient satisfaction,
achievement of center objectives, development of a
patient grievance process, and adopting health care
policies which include scope and availability of
services, location and hours of services, and quality
of care audit procedures.
E. Considerations Beyond BPHC'S Purview
Centers are encouraged to seek legal advice from their own
counsel in order to assure that organizational documents and
contractual agreements accurately reflect the parties'
affiliation objectives. In addition, legal advice about the
proposed affiliation should be sought in the following areas:
- anti-kickback statutes, commonly referred to as the
fraud and abuse provisions,
- antitrust,
- tax-exempt status of the health center,
- Medicaid and Medicare reimbursement issues, and
- State law.
Although it is beyond the scope of this notice to provide
authoritative guidance on this topic, it is important that
centers consider the provisions of the Medicare and Medicaid
anti-kickback statute [42 U.S.C. 1320a-7b(b)]. This statute
makes it a felony for a person or entity to knowingly and
willfully offer, pay, solicit, or receive remuneration with the
intent to induce a referral, or in return for a referral, under Medicare or a State health care program. Applicable State health
care programs are Medicaid, the Maternal and Child Health Block
Grant program, and the Social Services Block Grant program.
Apart from the criminal penalties, a person or entity is also
subject to exclusion from participation in the Medicare and State
health care programs for a knowing and willful violation of the
statute pursuant to 42 U.S.C. 1320a-7(b)(7).
The anti-kickback statute is very broad. Prohibited conduct
covers not only remuneration intended to induce referrals of
patients, but also remuneration intended to induce the
purchasing, leasing, ordering, or arranging for any good,
facility, service, or item paid for by Medicare or a State health
care program. Illegal remuneration may be furnished directly or
indirectly, overtly or covertly, in cash or in kind, and covers
situations where there is no payment at all, but merely a
discount or other reduction in price or the offering of free
goods.
Under the authority in 42 U.S.C. 1320a-7b(b)(3), the Secretary of
HHS has published regulations setting forth certain exceptions to
the anti-kickback statute, commonly referred to as "safe
harbors". These regulations are codified at 42 CFR 1001.952.
Each of the safe harbors sets forth various requirements which
must be met in order for a person or entity to be immune from prosecution or exclusion for violation of the anti-kickback
statute.
Centers are encouraged to seek legal advice from their own
counsel about the implications of any proposed affiliation
agreement under the fraud and abuse statutes, and in particular,
under the anti-kickback provisions described above.
Centers are also encouraged to seek business advice from their
own experts. In addition to providing financial advice, business
experts can provide advice on such matters as permitting access
to financial statements and/or to the books and records of the
health center. In general, BPHC cautions health centers about
permitting others to have access to such information. BPHC is
especially concerned when access is permitted without
confidentiality protections.
The
BPHC process for reviewing actual or
proposed affiliation agreements is now
and will continue to be overseen by
headquarters staff in the BPHC, Division
of Community and Migrant Health. The
review process is currently being further
refined, including work to incorporate
affiliation reviews and documentation
as appropriate into BPHC's standard
documents and procedures (such as, Program
Expectations, Pre-Application Guidance
Letters; Single Grant Application; Regional
Review Summary; Primary Care Effectiveness
Review; and, Prevention, Problem Identification
and Resolution).
These affiliation reviews can be characterized as BPHC compliance
reviews for C/MHCs and FQHC Look-Alikes. The focus of these r eviews is on Federal statutory and regulatory requirements and
program expectations as clarified by this PIN. Whether the
proposed affiliation is a sound business decision may be
addressed to a limited extent, but centers should not rely solely
on these reviews in that regard. Compliance with fraud and abuse
requirements, antitrust, tax-exempt status, Medicaid and Medicare
requirements, and State law is beyond the scope of assistance
being offered under this notice. Thus, this review will not
obviate the need for review by appropriate experts, including the
center's own legal counsel and financial advisors.
As the policy has been evolving, all potentially new FQHCs have been assessed based on our interpretation of the applicable
requirements (i.e., FQHC Look-Alikes as well as applicants in
head-to-head competition). In addition, we are currently
preparing to assess the affiliation agreements of new start
applicants and the affiliation agreements pertaining to proposed
Integrated Delivery System Development Initiative projects. Now
that the policy clarification is issued in writing, the
affiliation agreements of all FQHCs (including both new and
existing C/MHCs and FQHCs) must be in compliance and are subject
to HRSA review for compliance at any time.
FQHCs will have a limited period to come into compliance with
affiliation requirements. In accordance with section
330(e)(1)(B) of the Act, HRSA has the discretion to fund an
entity which does not meet requirements for up to 2 years.
Nonetheless, FQHCs are advised that BPHC is not inclined to
exercise that authority if the affiliation agreement was made
after the policy clarification was issued or if the FQHC was in
violation of the policy clarification when it was issued and has
chosen not to consult with BPHC about efforts to come into
compliance.
Centers considering entering into affiliation agreements that may
affect their compliance with Federal grant-related requirements
should contact the appropriate Health Resources and Services
Administration (HRSA) Field Office (see the list attached to this
PIN) to initiate consultation, including discussion and review of
all relevant documents, i.e., any document in which the terms of
the relationship between the health center and the affiliate are
stipulated, as early in the center's decision-making process as
feasible. The relevant documents may include, but are not
limited to, the proposed affiliation agreement, articles of
incorporation of the center, by-laws of the center, management
services agreement, successor-in-interest agreement, credit
agreement, Memorandum of Agreement, Memorandum of Understanding,
and/or other contract such as a lease. Headquarters staff in the
Division of Community and Migrant Health will oversee review of
the proposed affiliations and be responsible for ensuring
consistency in the responses. The BPHC is aware of the need for
timeliness of these reviews, and is enhancing its capacity to
expedite the reviews.
In response to a request for review of a proposed affiliation, the BPHC will provide the health center with definitive guidance,
to the extent that policy interpretations have already been made.
The health center may also be advised of concerns regarding
certain provisions relative to which we are considering issuing
additional policy clarification or which we do not think are in
the best interest of the health center.
Although the health center will be permitted to proceed with
caution, if future policy clarification renders any provision
unacceptable, BPHC has no intent to "grandfather in" any non-compliant affiliation agreement. However, a reasonable
opportunity to come into compliance would be afforded.
|
|