may 22-24, 2011 richland, wa

Bradley J. Berg206.447.8970 | [email protected]

AWPHD A Retreat for CEOs and Administrators Only

“Leading Wisely, Living Well”

Current Legal Hot Topics forPublic Hospital Districts

May 22-24, 2011

Richland, WA

2Collaborations and Partnerships – Opportunities, Limits and Barriers

Introduction

First part of presentation will focus on current

state and federal legal issues affecting public

hospital districts

Second part of presentation will provide an

update on collaborations and affiliations

involving public hospital districts


State Legislative Changes

SB 5116 authorizes PHDs to engage in fundraising directly

or indirectly through separate foundations

SB 5117 revises the definition of “rural public hospital

district” to increase the population threshold from 30,000 to

50,000

EHB 1730 authorizes boards to delegate to management to

enter into bond purchase contracts

EHB 1669 exempts flood control districts from property tax

limitations in counties with population greater than 750,000


State Legislative Changes

SHB 1899 revises the public records act to delete the $5 per

day minimum threshold for penalties

A number of bills relating to the open public meetings act

and the public records act were introduced and the focus on

transparency is likely to continue in the next legislative

session

SHB 1315 authorizes nursing homes to employ physicians


State Regulatory Issues

New PDC policy interpretation applying the Telford court decision

to limitation on use of public resources in election campaigns

Recent B&O tax court decision regarding “pass-through”

payments

Eligibility of EMTs to participate in state retirement system

(LEOFF)

Court decisions challenging peer review/quality assurance

protections

State auditor focus on marketing/promotion expenditures and

public bidding and prevailing wage compliance


Federal Regulatory Issues

Federal tax treatment of commissioner compensation and

benefits

DEA registration fee exemption for PHDs and physicians

employed by PHDs

Extension of withholding obligation to certain payments

made by governmental entities

Credentialing/privileging of physicians providing

telemedicine services


Federal Regulatory Issues

Change in physician signature requirement on lab

requisitions

Change in physician supervision requirements for hospital

outpatient therapeutic services

CAH eligibility for Section 340B drug discount program

PHDs and ACOs


Factors Motivating Collaborations

Reductions in payment and changes in payor mix

Reduction in demand

Increase in expenses

Inadequate supply of physicians and other trained personnel

Lack of capital for replacing/upgrading facilities and technology (including electronic medical record systems)

Health care reform encourages integration (Accountable Care Organizations, medical homes, bundled payments, payments for quality outcomes)

Increase in competition


Potential Responses

Do nothing

Get out of the health care business entirely

Substantially change or reduce the scope of services

Consider one or more collaboration options


Key Evaluation Criteria—does the collaboration:

Maintain the hospital’s mission?

Maintain and expand services?

Improve quality?

Increase revenue and/or reduce costs?

Increase access to capital?

Increase access to specialized technology and personnel?

Reduce competitive threats?


Potential Collaborators

Public hospital districts

Other public health care providers

Nonprofit/for profit hospitals

Physicians

Community Health Clinics

Local governments

Payors

Others?


Collaboration Options

Contracts for specific services or involving specific service

lines

Joint venture agreements

Transfer of assets through lease or sale

Merger/Consolidation

Dissolution


Key Variables in Collaboration Models

Who owns the assets?

Who is responsible for funding capital?

Who has the right to receive revenue and who has

responsibility for liabilities and expenses?

Who owns the licenses and provider agreements?

Who employs the staff?

Who is responsible for governance and management?


Do PHDs Have the Legal Authority to Collaborate?

PHD Boards have broad statutory authority to decide

- What services are provided

- How services are provided

- Who services are provided to

- Where services are provided


PHD Statute Provides Additional Authority for Rural PHDs

Rural PHD is defined as a PHD whose boundaries do not

include a city with a population > 50,000

Authorizes

Allocation of health services among PHDs

Joint purchasing of equipment and technology

Joint contracting with payors

Other cooperative arrangements


Collaboration Examples Involving Public Hospitals

Joint payor contacting

Cooperative agreements such as

Rural Health Care Quality Network

and Western Washington Rural

Healthcare Collaborative

Service line joint ventures and

agreements

Hospital management agreements

Physician employment


Collaboration Examples Involving PHDs

Snohomish County PHD No. 2

Swedish Health Services:

PHD agreed to lease all of its

health care facilities to

Swedish Health Services.

Swedish will operate the

hospital under its license.

The PHD is exploring other

activities beyond operating a

hospital.



University of Washington/

King County PHD No. 1 (Valley Medical Center)

The agreement creates a new board composed of the

district commissioners, representatives of UW and

community members to oversee the operation of

Valley Medical Center.



San Juan County PHD No. 1/Peace Health:

PHD closing its ambulatory care clinic and

contracting with PeaceHealth to construct a new

critical care hospital which will be owned, licensed

and operated by PeaceHealth, and a new EMS facility

which will be owned and operated by the District



Point Roberts PHD/Interfaith Community Health Center

Mason County PHD No. 2/ Harrison Medical Center

Grant County PHD No. 7/Wenatchee Valley Clinic

Grant County PHD No. 5/Mattawa Community Medical Clinic

Skagit PHD No. 1/Skagit Valley Medical Center

Skagit PHD No. 1/Snohomish PHD No. 3 Smokey Point Clinic

King County PHD No. 4/PeaceHealth

Skagit PHD No. 1/Skagit PHD No. 304



Clallam County PHD No. 1, Clallam County PHD No. 2 and

Jefferson County PHD No. 2:

The districts distributed a request for information to

tertiary medical centers and systems in September

2010 requesting proposals to provide support

services to the three districts including EMR and

tertiary services. The districts have selected

Swedish Health Services.



Snohomish County PHD No. 1:

The district distributed a request for proposals to the

major health care systems in Washington in

February 2011 requesting proposals to enter into a

strategic partnership with the district.


Collaboration Examples Involving Public Hospitals

University of Washington/Northwest Hospital

University of Washington/Harborview Medical Center

Pacific Hospital and Preservation Development

Authority/Pacific Medical Centers


Public Hospital District Issues

1. Constitutional limitations

-- prohibition against gift of public funds or property

-- prohibition against lending public funds or public credit

-- prohibition against owning stock in any private company

-- requirement that public funds be used for public purposes


Public Hospital District Issues

2. Statutory limitations Relating to:

-- Appointment of a superintendent

-- Sale of real and personal property

-- Lease of real property

-- Open public meetings

-- Public records

-- Public bid

-- Prevailing wages

-- Conflicts of interest


Restrictions Relating to Outstanding Bonds

1. Bond Covenants

-- Restrictions on transfers of property

Unlimited tax general obligation bonds

Limited tax general obligation bonds

Revenue bonds

-- Restrictions on issuance of additional debt


Restrictions Relating to Outstanding Bonds

2. Federal Tax Law Limitations

-- Restrictions on change in

use of property financed with the

proceeds of tax-exempt bonds

-- Restrictions on

management agreements or

services

agreements relating to the use of

property financed with the

proceeds of tax-exempt bonds


Government Approvals

1. Certificate of Need

2. Special Approval for sales to for profit entities

3. Licensing

4. State Auditor

5. CMS

6. Antitrust


Other Legal Issues

1. Labor Issues

-- Multiple unions

-- Jurisdiction of National Labor Relations Board

versus Public Employees Relations Commission

-- Compensation and benefits structures

-- Reductions in work force

-- Other?


Other Legal Issues

2. Medicare Reimbursement

-- Billing under a single provider

-- Other?

3. State Tax Issues

-- Business and occupation tax and requirements for

social welfare organizations

-- Property tax exemptions


Other Legal Issues

4. Restrictions on assignment of existing contracts

including significant payers

5. Other?

33Collaborations and Partnerships – Opportunities, Limits and Barriers 33

Contact Information

Brad Berg

Telephone: 206-447-8970

Email: [email protected]

Foster Pepper PLLC

1111 Third Avenue, Suite 3400

Seattle, WA 98101

www.foster.com

may 22-24, 2011 richland, wa

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