PYA Principal Jeff Ellis spoke on alliances between academic medical centers (AMCs) and community hospitals April 16, 2015, at a Greater Kansas City Society of Healthcare Attorneys luncheon meeting.

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Kansas Heart and Stroke
Collaborative
Daniel Peters Jeff Ellis, PYA

2. 22
Kansas Heart and Stroke
Collaborative –
Alliances between AMCs and
Community Hospitals

3. 3
Pressure to Consolidate

4. 4
Barriers to Traditional Consolidation

5. 5
Another Way: Regional Collaboration
Merger?
Acquisition?
Joint
Venture?
Regional
Hospital
Critical
Access
Hospital
Community
Hospital
AMC
Other
Providers

6. 6
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

7. 7
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

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Getting Started:
A Win/Win/Win Strategy

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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 is needed
• 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

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

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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

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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

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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

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

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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

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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

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

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

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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

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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

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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

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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

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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 health care providers?
» We can’t afford it
» We’re running as fast as we can .. . . .

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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

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

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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.

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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

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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

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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

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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

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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

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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

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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.

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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

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

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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.)

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

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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)

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Questions