WSHA/AWPHD Health Care Leadership in Dynamic Times Collaborations and Partnerships--Opportunities, Limits and Barriers

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WSHA/AWPHDHealth Care Leadership in Dynamic
Times Collaborations and Partnerships--Opportuni
ties, Limits and Barriers
The Edgewater Hotel Seattle, WA October 12, 2010
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Introduction

• Presentation will focus on collaborations and
  partnerships involving public hospital districts
• Collaborations may involve other public hospital
  districts or other governmental entities, but may
  also involve nonprofit and for profit hospitals
  and other types of health care providers
• Collaborations may take a wide variety of forms

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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

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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

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Key Questions

• What is your view of the future?
• What is your vision for your hospital and health
  care system and how can your mission best be
  served in the future?
• What is your financial strength?
• What is your appetite for risk?
• What is your need for control?

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Key Evaluation Criteriadoes the collaboration

• Maintain the hospitals 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?

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Potential Collaborators

• Public hospital districts
• Other public health care providers
• Nonprofit/for profit hospitals
• Physicians
• Community Health Clinics
• Local governments
• Payors
• Others?

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Collaboration Options

• Contracts for specific services or involving
  specific service lines
• Joint venture agreements
• Transfer of assets through lease or sale
• Merger/Consolidation
• Dissolution

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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?

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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

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PHD Statute Authorizes

• Providing services directly or by contract
• Providing services through facilities located
  outside the boundaries of the district
• Providing services through ventures with other
  public or private entities including through
  joint venture entities

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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 gt 30,000
• Authorizes
• Allocation of health services among PHDs
• Joint purchasing of equipment and technology
• Joint contracting with payors
• Other cooperative arrangements

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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

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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.

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Collaboration Examples Involving PHDs

• King County PHD No. 4
• PeaceHealth
• In the 1980s, PHD leased all of its health
  care facilities to PeaceHealth. PeaceHealth
  operated the hospital under its license. The
  lease was terminated in the early 90s and PHD
  resumed operations.

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Collaboration Examples Involving PHDs

• Mason County PHD No. 2
• Harrison Medical Center
• New PHD formed for the purpose of collecting
  taxes and contracting with Harrison to own and
  operate an urgent care clinic within the District

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Collaboration Examples Involving PHDs

• 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

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Collaboration Examples Involving PHDs

• Grant County PHD No. 7
• Wenatchee Valley Medical Center
• PHD contracts with Wenatchee Valley Medical
  Center to operate a primary medical clinic and
  pharmacy within the District

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Collaboration Examples Involving PHDs

• Grant County PHD No. 5
• Mattawa Community Medical Clinic
• PHD contracts with a separate nonprofit
  corporation to operate a Federally Qualified
  Health Center Look-A-Like in the PHDs facilities

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Collaboration Examples Involving PHDs

• Skagit County PHD No. 1/Skagit County PHD No. 304
• During the 1990s the Districts operated their
  health care facilities on a joint basis under a
  joint operating agreement.

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Collaboration Examples Involving PHDs

• Skagit County PHD No. 1
• Skagit Valley Medical Center
• PHD acquired a large multi-specialty physician
  practice and now employs all of the physicians

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Collaboration Examples Involving Public Hospitals

• University of Washington/Northwest Hospital
• UW has become the sole corporate member of the
  nonprofit corporation that owns and operates
  Northwest Hospital and has been granted certain
  reserved powers.

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Collaboration Examples Involving Public Hospitals

• Other examples
• - University of Washington/Harborview
• - Pacific Hospital and Preservation
  Development
  Authority/Pacific Medical Centers

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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

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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

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Restrictions Relating to Outstanding Bonds

• 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

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Restrictions Relating to Outstanding Bonds

• 2. Federal Tax Law Limitations
• -- Restrictions on change in use of property
  financedwith the proceeds of tax-exempt bonds
• -- Restrictions on management agreements or
  servicesagreements relating to the use of
  property financed with the proceeds of tax-exempt
  bonds

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Government Approvals

• Certificate of Need
• Special Approval for sales to for profit entities
• Licensing
• State Auditor
• CMS
• Antitrust

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Other Legal Issues

• Labor Issues
• -- Multiple unions-- Jurisdiction of National
  Labor Relations Board versus Public Employees
  Relations Commission-- Compensation and benefits
  structures-- Reductions in work force-- Other?

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Other Legal Issues

• Medicare Reimbursement
• -- Billing under a single provider-- Other?
• State Tax Issues
• -- Business and occupation tax and requirements
  for social welfare organizations-- Property
  tax exemptions

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Other Legal Issues

• Restrictions on assignment of existing contracts
  including significant payers
• Other?

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Questions?
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Contact Information
Brad BergTelephone 206-447-8970Email
BergB_at_Foster.com Foster Pepper PLLC1111
Third Avenue, Suite 3400Seattle, WA
98101www.foster.com
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