PYA Principal Jeff Ellis joined Mark Thompson of Seigfreid Bingham, PC; Daniel Peters, General Counsel of The University of Kansas Hospital; and Dr. Robert Moser, Kansas Heart and Stroke Collaborative, in presenting “Maintaining Independence through Interdependence--Alliances Between AMCs and Community Hospitals" at the AHLA Legal Issues Affecting Academic Medical Centers (AMCs) and Other Teaching Institutions program.

1. 1
Maintaining Independence
through Interdependence –
Alliances between AMCs and
Community Hospitals
1.22.2015 | 3:00 – 4:15 pm EST
1.23.2015 | 10:30-11:45 am EST
Faculty :
Daniel Peters
The University of Kansas Hospital
dpeters2@kumc.edu
Mark Thompson
Seigfreid Bingham, PC
markt@sb-kc.com
Jeff Ellis
Pershing Yoakley & Associates, PC
jellis@pyapc.com
Dr. Robert Moser
Kansas Heart and Stroke Collaborative
rmoser@kumc.edu

2. 2
Pressure to Consolidate

3. 3
Barriers to Traditional Consolidation

4. 4
Another Way: Regional Collaboration
Merger?
Acquisition?
Joint
Venture?
Regional
Hospital
Critical
Access
Hospital
Community
Hospital
AMC
Other
Providers

5. 5
Regional Collaboratives
Characteristics
• Two+ hospitals enter into formal relationship to share
resources and capabilities with an eye toward clinical
integration
• Participants together define common interests to be
advanced through the Collaborative
• Each participant’s individual interests are respected
and protected through the Collaborative’s governance
structure
• Participants make some financial commitment to
support the Collaborative’s operations, but each
remains economically independent

6. 6
Regional Collaboratives
Characteristics
• Participants retain management authority of their
respective organizations
• Participants retain financial independence of their
respective organizations
• Participants’ governance remains with their respective
governing boards

7. 7
Getting Started:
A Win/Win/Win Strategy

8. 8
Motivations
“Independence Through Interdependence”

9. 9
Motivations
• Achieve economies of scale through joint purchasing and similar
strategies
• Leverage current and future information technology investments
• Sustain members as they learn to thrive under new care models
• Design continuums of care for specific types of patients
• Improve quality of care through common evidence-based clinical
guidelines
• Develop narrow networks for contracting purposes
• Defend against competition from larger integrated delivery
systems
• Test the waters for more “involved” relationships

10. 10
Cautions
• From the AMC perspective, communicate more than you think
you need to
• Decide what you can accomplish and commit to starting there
• Make sure everyone is open and upfront about what their
limitations are
– Financial
– Governance
– Structural
• Be clear up front about geography

11. 11
Getting Started:
What Brings Participants Together?
Geography
Political
Pressure to
Support Rural
Communities
Payer
Initiatives

12. 12
Models and Resources

13. 13
Two Different Approaches

14. 14
Shared Services Operating Company
• Governance structure to support
decision-making process
Independent
providers form
new company
• Group purchasing arrangements
• Combine administrative functions
• Coordinated IT solutions
• Share best practices
Leverage
resources and
pursue
economies of
scale

15. 15
Balanced Degree of Integration
• Extended group with similar
interests or concerns who
interacts and remains in informal
contact for mutual assistance or
support
Network
• Regularly interacting or
interdependent group of items
forming a unified whole
System

16. 16
SSOC vs CSOC
Stratus Healthcare (Georgia)
Value Care Alliance (Connecticut)
Trivergent Health Alliance (Maryland)
Illinois Rural Community Care Organization
Vanderbilt Health Affiliated Network
University of Iowa Health Alliance
Health Network of Missouri
Kansas Heart and Stroke Collaborative

17. 17
Five Stages of Collaborative
Development
• Stage 1: Develop internal strategy
• Stage 2: Assess and engage potential partners
• Stage 3: Jointly establish terms of
relationship
• Stage 4: Commence and maintain
collaborative
• Stage 5: Have an exit strategy

18. 18
Stage 1: Develop Internal Strategy
• Engage in level-setting education
• Define rationale and objectives for pursuing a
collaborative
• Determine preferred scope (what you want in,
what you want out)
• Examine feasibility
• Make go/no-go decision
• Commit to action

19. 19
Stage 2: Assess and Engage
Potential Partners
• Develop selection criteria
• Identify and engage interested parties
• Execute confidentiality agreements

20. 20
Stage 3: Jointly Establish Terms
of Relationship
• Define business aims and outcomes
• Identify and prioritize objectives
• Determine scope (what’s in, what’s out)
• Custom design and memorialize governance
structure
• Develop preliminary business plan
• Commit financial and human resources
• Enter into letters of intent

21. 21
Stage 4: Commence and
Maintain Collaborative
• Operationalize governance structure
• Engage in strategic and operational planning
• Refine business plan
• Secure information technology infrastructure
• Develop timelines and link resources

22. 22
Stage 5: Have an Exit Strategy
• Specify triggers
• Determine procedures to wind down formal
organization

23. 23
Form Follows Function
Define
Business Aims
and Outcomes
(Function)
Identify and
Prioritize
Objectives
(Function)
Determine Scope
(Function)
Custom Design and
Memorialize Structure
(Form)

24. 24
Unique Governance Structures with
Common Characteristics
Balanced time, energy, and economic investments by participants
Balanced voting rights and reserved powers for participants
Shared vision and goals while recognizing participants’ unique priorities
Formal but flexible and adaptable rules of operation
Fair opportunity for all participants to engage and be heard

25. 25
Health Network of Missouri

26. 26
Health Network of Missouri
Academic medical
center + 4
community
hospitals
2+ years as learning
collaborative
Formed new entity
in June 2014 to
develop clinically
integrated network

27. 27
Health Network of Missouri

28. 28
Network Compacts
Covenants among all Members
Developed and operationalized by task forces
comprised of Member representatives
Specific charges to task forces developed
through Steering Committee planning process
Interactive and mutually supportive

29. 29
Member Contracts
Vehicle for arrangements between less than
all Members
Allows Alliance to move expeditiously on
matters of interest to individual Member
groupings
Network Compact development takes priority,
but can pursue Member Contracts at same time
Transparency between Members about work
being done under Member Contracts

30. 30
Challenges to Overcome and What Works
Challenges to Overcome What Works
Learning Collaborative Focus
• Fostered Dialogue
• Created Frustration
• Need for Shared Strategy
• Need for Discipline
800-Pound Gorilla
• Desired Resources
• Feared Power
• Bureaucratic
• Independent Survey
• Self-Awareness
• Give Trust to Get Trust
Building Trust
• Equality
• Investment
• Process
• Shared Governance
• Equal Financial Investment
• Leveraged Resources
• Commitment to Process
Demonstrate Success
• Quick Wins
• Investment in Process
• Disciplined Process
• Commitment of Resources
• Shared Leadership
• Compacts/Contracts
Sustainability
• Demonstrated Progress
• Small Successes
• Continued Commitment

31. 31
Kansas Heart and Stroke Collaborative
The Kansas Heart and Stroke Collaborative is a care delivery and payment model
to improve rural Kansans’ heart health and stroke outcomes and reduce total
cost of care for that population.

32. 32
Kansas Heart and Stroke Collaborative
University of Kansas Hospital received $12.5
million Health Care Innovation Award
Develop rural clinically integrated network
involving AMC, rural tertiary care center, 10
CAHs, FQHC, and providers at all facilities
Focus on regional systems of care for patients
at risk of or who have suffered
heart attack or stroke

33. 33
Incentives
Rewards for Teamwork and Field Work
• Direct payment for care management services
• Upward payment adjustments for participating
rural physicians and mid-level providers
• Disease-specific shared savings program
Transitional
payment model
• Build shared analytic infrastructure to
identify and evaluate alternatives to
cost-based reimbursement to preserve
local access to care
Transformational
payment model

34. 34
Goals vs Concerns of Collaborating
•AMC
– Goals:
» Meet mission of improving the health of citizens of service area and expand the reach of highly acute
cases
– Concerns:
» Can we effectively address practice patterns and cultures several hundreds of miles apart?
•Regional Hospital
– Goals:
» Take advantage of AMC reputation and relationships for scope and scale
» Build relationships with other regional hospitals
» Managed care strength and support
– Concerns:
» Will the critical access hospitals be accepting of models and recommendations?
» Does the regional hospital lose out in new payment models that keep patients at home?
•Critical Access Hospitals
– Goals:
» Better access to consistent care models
» Learning from provider and technology inconsistencies
– Concerns:
» Fridays Night Lights Syndrome
» Will I lose my healthcare providers?
» We can’t afford it
» We’re running as fast as we can .. . . .

35. 35
How Structure Facilitates
Organization’s Function
Provides structured
environment for
discussion and
decision
Promotes trust and
transparency
Balances power
among diverse
participants
Protects individual
rights and concerns
Facilitates joint
decision making in
a safe
environment

36. 36
Legal Issues
State
Law
Antitrust
Others?
Stark
Anti-
Kickback
CMPs
HIPAA

37. 37
Antitrust
The Sherman Act prohibits the unreasonable restraint of trade;
and the FTC Act prohibits unfair methods of competition in or
affecting commerce.
Some restraints of trade are considered “per se” illegal – e.g., naked
price fixing and market allocation agreements among competitors.
“Rule of reason” analysis applies to arrangements between
competing healthcare providers that are financially and/or clinically
integrated where the arrangement is reasonably necessary to
accomplish the pro-competitive benefits of integration.

38. 38
Factors Supporting Rule of Reason
Analysis
Potential for
Pro-Consumer
Cost Savings or
Quality
Improvement
Not Simply a
Mechanism to
Create Leverage
with Payers
Agreements Are
Reasonably
Necessary to
Achieve
Benefits of
Collaboration
Bona Fide
Integration

39. 39
Rule of Reason Analysis
Does the arrangement, on balance, benefit consumers?
Or, is it likely to diminish quality, reduce output, or
increase price?
Define the relevant product and geographic markets
Identify the market participants
Calculate market shares and concentration

40. 40
Rule of Reason Analysis (cont’d)
Consider the likelihood of expansion by existing
players or entry by new players
Determine whether efficiencies will likely result
Consider whether the individual members may
continue to compete independently

41. 41
Antitrust Safety Zones
• Exclusive Networks
• Non-Exclusive Networks
FTC/DOJ
Guidelines
• Automatic Rule of Reason Analysis for
MSSP ACOs
• Safety Zone for MSSP ACOs with PSA
less than 30%
MSSP
ACOs

42. 42
Certificate of Public Advantage (COPA)
State legislation intended to provide “state action” antitrust
immunity under the state purpose doctrine to collaborations of
healthcare providers who demonstrate that the benefits of the
proposed arrangement outweigh the disadvantages resulting
from reduced competition.
Disadvantages caused
by any reduction in
competition
Benefits of proposed
arrangement

43. 43
Civil Monetary Penalties
CMP Statute assesses civil penalties against hospitals for:
Knowingly paying a physician to induce the
physician to reduce or limit services provided to a
Medicare or Medicaid patient
Offering or paying remuneration to Medicare or
Medicaid beneficiaries to influence the
beneficiaries to order or receive an item or service
from a particular provider, practitioner or supplier

44. 44
Civil Monetary Penalties:
OIG Seeking Input
The OIG is seeking comments on how the CMP
Statute’s implementing regulations should be
revised to promote hospital-physician
alignment and to encourage beneficiaries to
engage in health behaviors.

45. 45
Anti-Kickback Statute (AKS)
AKS prohibits the knowing and willful offer, payment, solicitation, or
receipt of remuneration as an inducement for referrals or for items or
services paid for by federal healthcare programs.
“Remuneration” includes anything of value
AKS is violated if “one purpose” of the
remuneration is to induce referrals
Some states have anti-kickback statutes as well

46. 46
Common Themes for AKS Compliance
Written
Agreement
Commercially
Reasonable
Compensation
Fair Market
Value
Compensation
Set in Advance
Signed by the
Parties

47. 47
Stark Law
The Stark Law prohibits referrals by a physician to an entity for the
provision of “designated health services” if:
The entity has a direct or indirect financial
relationship with the physician, and
The financial relationship does not satisfy a statutory or
regulatory exception to the Stark Law. (Note: To avoid a
Stark violation, the arrangement must meet every
requirement of the applicable exception.)

48. 48
Examples of Stark Law Exceptions
Academic
Medical Center
Fair Market
Value
Compensation
Indirect
Compensation
Electronic
Health
Records
Personal
Services
Arrangements

49. 49
Federal Innovation Program Waivers
Waivers for CMP, AKS, and Stark may be available if the
collaborative chooses to participate in a federal
innovation program.
ACO Pre-Participation
Waiver
(no application
required –
automatically applies
if requirements are
met)
ACO Participation
Waiver
(no application
required –
automatically applies
if requirements are
met)
Bundled Payment for
Care Improvement
Initiative
(must request specific
waiver in the BPCI
program participation
application)

50. 50
Questions

51. 51
Daniel Peters
In-House General Counsel
The University of Kansas Hospital
dpeters2@kumc.edu
Mark Thompson
Shareholder
Seigfreid Bingham, PC
markt@sb-kc.com
Jeff Ellis
Principal
Pershing Yoakley & Associates, PC
jellis@pyapc.com
Dr. Robert Moser
Executive Director
Kansas Heart and Stroke Collaborative
rmoser@kumc.edu