C A L I FOR N I A H EALTH C ARE F OU NDATION Adding Specialty Services to a California FQHC: Legal and Regulatory Issues Prepared for California HealthCare Foundation by Regina M. Boyle, J.D. July 2009 About the Author Regina M. Boyle, J.D., is an attorney practicing in Sacramento, California. Her practice is limited to health care law, with a focus on regulatory compliance and reimbursement issues impacting public and nonprofit Federally Qualified Health Centers and Rural Health Clinics. Ms. Boyle was director of legal affairs for the California Primary Care Association for five years during the transition of such health centers and clinics to the Medicaid prospective payment reimbursement system, and drafted much of the state legislation providing the framework for this transition. The author wishes to note that this paper is designed to provide accurate and authoritative information with respect to the subject matter covered but is offered with the understanding that neither the author nor the publisher is engaged in rendering legal or other professional services. If legal advice or other expert assistance is required, the services of a competent health care attorney should be obtained to address individual circumstances. Acknowledgments The author would like to acknowledge the assistance of Catherine Teare in the preparation of this paper. Ms. Teare’s work includes research, writing, consulting, and advocacy in the fields of health and youth policy in California. About the Foundation The California HealthCare Foundation is an independent philanthropy committed to improving the way health care is delivered and financed in California. By promoting innovations in care and broader access to information, our goal is to ensure that all Californians can get the care they need, when they need it, at a price they can afford. For more information, visit www.chcf.org. ©2009 California HealthCare Foundation Contents 2 I. Executive Summary 5 II. Introduction 6 III. ederal Law Regarding FQHC Scope of Services and Fees F Scope of Project Modifications Sliding Fee Scale Requirements 12 IV. Medicaid and Medicare Reimbursement Medicare Medicaid (Medi-Cal) 16 V. Malpractice Coverage and the Federal Tort Claims Act Overview of FTCA Coverage Limitations on FTCA Coverage 19 VI. eferral and Compensation Agreements Relating to R Professional Services The Anti-Kickback Statute The Stark Law 24 VII. California Licensing and Permitting Requirements 26 VIII. Conclusion 27 Appendices: A: ummary of Statutory Requirements for Maintaining Federally S Qualified Health Center Status B: mployee Relationship Guidelines for Federal Employment Tax: E The Twenty Factor Assessment C: rincipal California State Agencies Regulating Services or P Equipment in FQHCs D: equired Primary Health Services and Additional Health Services R for FQHCs 34 Endnotes I. Executive Summary “ deeper frustration for health A M any F ederally Q ualified H ealth C enters (FQHC s ) in California lack specialty care services for their patients. But FQHCs centers concerns their difficulty in that want to add specialty services face significant legal and regulatory securing follow-up appointments barriers. An FQHC seeking to include specialty care must make certain that those services will fit within federal regulations, that the with specialists for patients who health center will be fully reimbursed for them, and that its individual are uninsured or have Medicaid… providers will have liability protection regarding those services. This paper is intended for FQHCs and FQHC Look-Alikes that ‘That’s when our doctors feel they’re are expanding services to include specialty care. It outlines the federal practicing Third World medicine,’ laws and regulations that govern the provision of and reimbursement for specialty services by FQHCs. It also addresses the more she said. ‘You will die if you have limited role of California state law and agencies, most significantly cancer or a heart condition or bad involving Medi-Cal reimbursement but also facility, equipment, and professional licensing and permitting. The paper suggests how an asthma or horrible diabetes. If you FQHC can best comply with these complex federal and state rules, need a specialist and specialty tests and includes practical checklists targeted to each set of important issues for a clinic adding specialty services. and specialty meds and specialty surgery, those things are totally out Federal Law Regarding FQHC Scope of Services and Fees of your reach.’” Any significant change in a health center’s Scope of Project —  — Kevin Sack, quoting United Neighborhood Health Services CEO including the addition of medical specialty services — requires Mary Bufwack, in “Expansion of Clinics approval by the Bureau of Primary Health Care (BPHC). An FQHC Shapes Bush Legacy,” The New York Times (December 26, 2008) must submit a comprehensive narrative regarding federal requirements for specialty services, in particular addressing whether the services fall within “required primary health services” or “additional health services,” as defined by federal law. Despite the possibility of retroactive approval and a grace period for implementation, it is crucial that an FQHC file its application for approval well in advance of its proposed implementation date. The consequences of failure to win timely approval can be so costly to a health center that premature commitment to new services should be assiduously avoided. An FQHC must also determine how its fees for new services will comply with federal sliding scale requirements. With respect 2 | C alifornia H ealth C are F oundation to specialty services, FQHCs historically have had circumstances. An FQHC must be aware of these difficulty complying with these requirements and complicated rules concerning FTCA coverage as it with the obligation to make their services equally makes decisions about offering specialty care. available to all patients. These requirements should be fully appreciated by an FQHC and its governing Referral and Compensation board before the decision is made to add specialty Arrangements for Professional Services care. Federal anti-kickback and conflict-of-interest laws are complex terrains that FQHCs must negotiate to Medi-Cal and Medicare Reimbursement establish specialty services. The federal Anti-Kickback Between them, Medi-Cal and Medicare provide Statute (AKS) restricts the kinds of contractual coverage for 43 percent of California FQHC arrangements health centers may make with specialist patients. Since another 45 percent of patients are providers, but also provides “safe harbors” for certain uninsured and often able to pay little or nothing employment and personal services agreements. for services, these two government health insurance Qualifying for these safe harbors can be extremely programs provide the largest source of remuneration tricky, however, often requiring legal advice. AKS to clinics. This paper explains how each program also provides a limited safe harbor specifically for addresses the reimbursement of specialty services, FQHCs, but this can only protect payments to a including Medi-Cal’s per-visit and individual health center, not from an FQHC to an individual. provider rates, and its “four walls” policy that Conflicts of interest are defined by the federal limits the sites where reimbursable services may Stark Law, which covers Medicare and Medicaid be provided. The setting of rates under Medi-Cal related referrals. A physician (or family member) who reimbursement rules are so complex that this paper has a financial relationship with an entity may not strongly urges FQHCs to consult an experienced make a referral to that entity for the furnishing of health services auditor before attempting to establish designated health services billed to those programs. rates for proposed specialty services. The reach of the prohibition is broad: “Referral” under the Stark Law includes a physician request Malpractice Insurance and the for any item or service which can be reimbursed Federal Tort Claims Act under Medicare, including consultation with another FQHCs must ensure that their individual providers physician and even a request for establishment of a are protected against malpractice liability claims. plan of care — all of which are common in specialty In general, FQHCs have access to malpractice medicine. Like AKS, however, the Stark Law has coverage under the Federal Tort Claims Act (FTCA). exceptions for certain employment and personal But coverage for any particular specialist provider services agreements. may depend on the exact contours of the work arrangement between the clinic and that provider. California Licensing and Permitting While most employees of an FQHC are covered by Requirements FTCA, independent contractors — the arrangement The majority of FQHCs in California are nonprofit by which many specialist physicians provide services “primary care clinics” licensed by the California for a clinic — are covered only in very limited Department of Public Health, Center for Health Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 3 Care Quality’s Licensing and Certification program, as either community or free clinics. California law requires licensed clinics to give notice of any changes in services or physical plant. Certain types of clinic activities may require additional state agency approvals. For example, the Clinic Licensing Law requires a special permit when a clinic offers one or more “special services” (although such a special permit has to date only been required for the provision of “birth services”). Additional approvals may be required in order to add certain specialty services that use particular equipment or present additional risks. An FQHC considering adding specialty services should analyze the facilities and equipment needed, and identify the required special state permits or licenses. 4 | C alifornia H ealth C are F oundation II. Introduction A lthough the safety net for primary The paper is directed at public and nonprofit care services is well-established in California, in entities that fall within the Medicaid or Medicare many of the state’s communities the safety net for definitions of FQHCs, including FQHC Look- specialty care is far less developed. Patients who rely Alikes, and that are obligated to meet requirements on Federally Qualified Health Centers (FQHCs) —  applicable to health centers under 42 U.S.C. § 254b. a crucial component of the safety net — are acutely (For basic information on FQHCs and other safety- affected by the lack of specialty care services available net entities in California, see the recent California there. As a consequence, FQHCs are increasingly HealthCare Foundation report, California’s Safety-Net interested in expanding the quality and range of Clinics: A Primer.)1 specialty services they offer. Doing so, however, The sections that follow provide specific means facing a variety of significant regulatory information for clinics about the following areas of barriers. An FQHC seeking to expand clinic services federal law as they affect the provision of specialty to include medical specialties must understand where services by FQHCs: such services might fit within controlling regulatory Scope of Project modifications; schemes. In particular, it must recognize and be able to articulate how the proposed new services will Sliding scale fee requirements; either fit into or parallel “required primary health Malpractice insurance and the FTCA; services,” as that term is interpreted under sometimes ambiguous federal regulations. An FQHC must Medicaid and Medicare reimbursement; and also ensure that it will be properly reimbursed for Referral and compensation arrangements for new specialist services, and that legal protection is professional service agreements. provided to individual providers. This paper is designed as a reference for FQHCs A final section discusses state laws having to do and consortia that are considering expanding services with licensing and permitting of specific health care to include specialty care. It has two primary purposes: services. To outline federal and state laws and regulations that govern the provision of and reimbursement for specialty care services by FQHCs; and To suggest how FQHCs can best comply with these complex regulations, including specifically targeted checklists for clinics regarding each important set of issues. Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 5 III. ederal Law Regarding FQHC Scope of F Services and Fees FQHC s must comply with specific sets expansion of clinic services is discussed in Section of laws and regulations that address where and how VII, below. they provide health care services, how they are paid The present section discusses federal regulations for these services, and how they in turn pay their concerning changes to an FQHC’s Scope of Project, medical providers. Most of these laws and regulations and how a health center making such changes must are promulgated by the federal government. The at the same time address regulations regarding sliding Bureau of Primary Health Care (BPHC), within scale fees. the Health Resources and Services Administration (HRSA), and the Center for Medicaid and Medicare Scope of Project Modifications Services (CMS) are the two federal agencies most The threshold for an FQHC seeking to add medical directly involved with FQHC operations. The specialty services is BPHC approval of the services as definitions of FQHC and FQHC services, for part of the clinic’s Scope of Project. example, are contained in the federal statutes An FQHC’s Scope of Project stipulates what the relating to the Medicare and Medicaid programs. project budget may support, and specifically defines Receiving FQHC designation depends on meeting the services, sites, providers, target population, the criteria for a health center grant under 42 U.S.C. and service area for which federal grant funds may § 254b (hereinafter referred to as Section 254b), be used, all of which is primarily directed toward as determined by HRSA (see Appendix A). Rules ensuring that funds be expended for the benefit regarding FQHC qualification and operation are of the most vulnerable populations. The Scope implemented and primarily enforced by BPHC, of Project also drives, though it does not entirely which regularly clarifies and elaborates on the legal coincide with, the scope of a health center’s coverage requirements binding FQHCs in Policy Information under the 340B Discount Drug Program,3 the Notices (PINs) and Program Assistance Letters FTCA, and the reimbursement provisions of the (PALs), all of which are available on the BPHC Medicare and Medicaid programs. Web site.2 Any significant changes to an FQHC’s or FQHC California state law plays a more limited, but still Look-Alike’s 4 Scope of Project — including the critical, role in defining FQHC operations. Most addition of specialty care services — requires the significantly, the state Department of Health Care prior approval of BPHC.5 (This process should not Services (DHCS) interprets federal Scope of Project be confused with adjusting Medicaid prospective rules for the purpose of Medi-Cal reimbursement, payment rates based on changes in the FQHC’s scope and develops and enforces other policies related to of services, as discussed below.6 ) payment. In addition, state laws relating to facility, In the last two years, BPHC has issued new equipment, and professional licensing and permitting guidance regarding both Scope of Project generally must be considered by an FQHC as it seeks to add and the inclusion of specialty services in a clinic’s specialty services. California state laws pertaining to Scope of Project in particular. 6 | C alifornia H ealth C are F oundation General Scope of Project Rules: PIN 2008-01 Providers exercise independent judgment in Policies regarding Scope of Project changes are providing services to the patient; provided in detail in PIN 2008-01; FQHC Look- Services are provided directly by or on behalf Alikes follow the instructions in PIN 2003-21 (as of the grantee, whose governing board retains modified by PIN 2005-17).7 These PINs describe control and authority over provision of and elaborate on how an FQHC is expected to services at the location; and comply with the basic requirements of Section 254b. (For a summary of these requirements, see Services are provided on a regularly scheduled Appendix A.) basis; however, there is no minimum number The framework for an application to expand of hours per week that services must be services, including medical specialist services, is available at an individual site. set out in the five basic components of a Scope of I n general, to the extent that an FQHC intends Project, as defined by HRSA in the PIN, as follows: to seek reimbursement or claim costs for the Services. An FQHC’s services are listed (on Form operation of service sites or the provision of 5, Part A) for the FQHC as a whole, not on a services under Medicare or Medicaid, or to seek site-specific basis. Grantees must provide the coverage of services under the FTCA, the clinic “required primary health services” directly and/or will have to add the site to the Scope of Project.8 through a formal written referral agreement under (FQHCs should contact their Project Officers if which the FQHC is responsible for providing they are uncertain regarding these obligations.) and/or billing or paying for the direct care. If Providers. Providers are defined as individual the service is both provided and billed for by health care professionals who deliver services to another entity, it is not included in the FQHC’s health center patients on behalf of the FQHC, Scope of Project; informal referral arrangements exercise independent judgment as to the services are also excluded from an FQHC’s Scope of rendered to the patient during an encounter, and Project. Services must be provided to all patients, assume primary responsibility for assessing the regardless of ability to pay. patient and documenting services in the patient’s Sites. An FQHC’s sites (listed on Form 5, Part record. B) are defined as any location where a grantee, Target Population. This is the health center- either directly or through a sub-recipient or defined underserved population from within established arrangement, provides primary health the established service area to which the FQHC care services “to a defined service area or target directs its services, and which is “usually a subset population.” Sites may be permanent or seasonal, of the entire service area population, but in some and may include mobile van, migrant voucher, cases, may include all residents of the service area or intermittent sites, as defined more specifically if it is determined that the entire population of in the PIN. Approved service sites must meet the the service area is underserved, and lacking access following conditions: to adequate comprehensive, culturally competent Face-to-face contacts between patients and quality primary health care services.” The target providers are documented as “encounters;” Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 7 population is reported in the aggregate and not has interpreted this to mean that the proposed on a site-by-site basis. services must “function as a logical extension of the required primary care services already Service Area. Referred to in the statute as the provided by the health center.” The PIN gives “catchment area,” it is where the majority of the the following examples of specialty services that FQHC’s patients reside. support required primary care services: Pulmonary consultations and examinations, Addition of Specialty Services: PIN 2009-02 where the health center serves a substantial In December 2008, BPHC released PIN 2009-02, number of patients with asthma, COPD, which describes the factors that it will consider Black Lung, or tuberculosis; in evaluating FQHC Scope of Project requests relating to specialty services.9 This PIN offers a Cardiology screenings and diagnoses, where general definition of “specialists,” describing them as the health center serves a substantial number “appropriately credentialed health care provider[s]… of patients at risk for heart disease or high who [have] been granted appropriate specialty- blood pressure; specific privileges by the health center…” It warns, Minor podiatry outpatient examinations and however, that “the full range of services within a procedures, where the health center serves a specialist’s area of expertise may or may not be within population with a high prevalence of diabetes; the Federal scope of project.” BPHC requires an FQHC to submit a Psychiatric consultations, examinations, and comprehensive narrative regarding certain diagnoses, where the health center serves a requirements for specialty services. In particular, substantial number of patients with mental clinics must address questions related to the health and/or substance abuse diagnoses; distinction between “required primary health Periodontic services, where the health center services” and “additional health services,” as such serves a significant population of children phrases are defined by federal law. (See Appendix D.) with poor oral health; If an FQHC is adding a medical specialist who will perform services within his or her specialty but Colonoscopies; and who will not provide primary care services, that Appropriate oncological care of health center change is defined by the PIN as providing “additional patients with cancer. health services” rather than “primary health services.” In this case, certain statutory requirements must be 2. The FQHC must show that the target population met; BPHC has identified the following four key needs the specialty services. The application areas it focuses on when determining whether a must demonstrate this need in narrative format Scope of Project application to add specialty services and with relevant data, and the FQHC must has met these requirements: additionally “demonstrate its ability to maintain 1. An FQHC must establish that the services are the level and quality of the required primary “necessary for the adequate support of [the health services currently provided to the target required] primary health services.”10 BPHC population.” 8 | C alifornia H ealth C are F oundation 3. The Scope of Project change must be must “demonstrate and document the target accomplished without additional Section 330 population’s need for the proposed services” and that grant support. The application must address “[u]nmet need should be described both in narrative whether the services that the FQHC proposes format and with data.” will meet Medicare and Medicaid definitions The third criterion above — that the FQHC of “FQHC services,” and whether the site and/ address whether the proposed services will meet or services to be added will generate sufficient Medicare and Medicaid definitions of “FQHC revenue to sustain the services and associated services”— typically does not present any problem overhead costs. The application must also reflect if the services to be added are medical services and an understanding by the FQHC that it must provided by an MD (though the rules are much less provide the services to all patients regardless of clear for services that are not provided by medical ability to pay. doctors). BPHC’s attention to this issue reflects concern about the vulnerability of certain services, 4. The services must be provided at a site within the particularly as states cut Medicaid “optional benefits” FQHC’s Scope of Project, such that the proposed in a weak economic environment. new service will be accessible to the FQHC’s In sum, PIN 2009-02 offers useful guidance on patients and the FQHC “will be able to maintain how to submit an application for a Scope of Project appropriate control over service delivery.”11 change for the addition of specialty services. But it FQHCs are required to provide the services: does not offer a clear picture of the limits on these At an approved “service site” as defined by services, or of HRSA’s priorities in this regard. the PIN; Importance of Prior Approval Within the FQHC’s federal Scope of Project BPHC repeatedly emphasizes the requirement to catchment area; obtain prior approval for Scope of Project changes. At a new site that will be proximate to This requirement takes on added importance for available FQHC services; or FQHCs planning to add specialty services. An approved Scope of Project change may be At a location where current in-scope services effective retroactively to the date of receipt of a are provided but that does not meet the completed application. Looking forward, if a grantee definition of a service site. cannot determine the exact date by which a change The first and second criteria above reflect in scope will be fully implemented, the grantee is BPHC’s intention that FQHCs provide an analysis allowed up to 120 days following the date of the of the specific health needs of the population being Notice of Grant Award, which indicates approval for served, and the role of the specialty services in the the change in scope, to implement that change (e.g., continuum of care being offered. The PIN guidance open the site or begin providing a new service). Also, does not list specific services that are eligible for HRSA’s stated goal is to decide on requests within inclusion in a Scope of Project, nor does it define 30 days of a completed application. specific eligible providers. It is prescriptive, however, These rules and policies may incline an FQHC regarding the application process: the health center to begin implementing changes at the time of Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 9 application; some clinics implement Scope of Project changes even before the application is complete. In Clinic Checklist: Scope of Project Modifications light of the complex requirements of PIN 2009-02, ✓✓ Can the services be provided, equally to all patients insured or uninsured, without additional Section however, FQHCs should be extremely cautious 330 grant support, and does the application about entering into commitments to provide adequately support this fact? medical specialty services — including contracts ✓✓ Are the services to be provided “FQHC services” with specialist providers — before actually receiving as defined by Medicaid/Medi-Cal and Medicare, and “covered services” under other third-party approval. Instead, health centers should submit payer agreements? their requests well in advance of committing to add ✓✓ Does the application demonstrate that the new services in order to limit the potential for avoidable services would improve or maintain access and quality of care for the target population? losses should the application be significantly delayed ✓✓ If there would be a change in service sites or or denied altogether. populations served, would appropriate governing The potential costs to clinics that implement board representation and other requirements Scope of Project changes in advance of BPHC be met as set out in Section 254b and related regulations and policies? approval are high. An FQHC that adds specialty ✓✓ Will the FQHC appropriately credential and privilege services that are later deemed not to have been the added providers? within its approved Scope of Project will be exposed ✓✓ Does the application establish that the services to repayment obligations under Medicare and are “necessary for the adequate support of the Medicaid. Malpractice claims for services provided required primary health services” and would function as a “logical extension” of the primary outside of the FQHC’s Scope of Project will not be care services already provided by the health center covered by the FTCA and, to the extent not covered (such as by fitting within a BPHC example of what by other liability coverage, may subject the FQHC is supportive of primary care services)? ✓✓ Is the target population’s need for the specialty to significant defense, indemnification and associated services adequately supported in the narrative and costs. with relevant data? ✓✓ Is the site at which the services will be provided within the FQHC’s Scope of Project? ✓✓ Would the new services be sufficiently accessible to the FQHC’s patients, and permit the FQHC to exercise appropriate control and supervision of service delivery? ✓✓ Can the FQHC establish the availability of necessary enabling services, such as translation and transportation, associated with the proposed services? ✓✓ Has the application received the approval of the governing board? ✓✓ Will the application be submitted well in advance (at least 30 days) of the planned commencement of services? ✓✓ Does the proposed professional services agreement account for the possibility of delayed approval or the risk of BPHC’s denial of the Scope of Project application? 10 | C alifornia H ealth C are F oundation Sliding Fee Scale Requirements With respect to medical specialty services, Both PIN 2008-01 and 2009-02 emphasize an FQHCs historically have had difficulty complying FQHC’s responsibility to provide all its services, with the sliding fee scale requirements and the including those by physician specialists, to all obligation to make their services equally available patients regardless of their ability to pay. Consistent to all patients. These difficulties may arise from with this requirement, an FQHC must have a sliding a failure to properly account for uncompensated fee scale that is consistent with locally prevailing rates care needs when negotiating professional services or charges, but also designed to cover the FQHC’s agreements with specialists. They may also result reasonable cost of operation. The FQHC must apply from misinterpretation of the statutory requirement a schedule of discounts to this fee scale, adjusted that FQHCs ensure that uninsured patients not on the basis of the patient’s ability to pay, with no be denied the health care services that the FQHC patient denied services based on inability to pay.12 provides to insured patients. The need to fulfill Federal regulations implementing this sliding fee these requirements should be fully appreciated by an scale require: FQHC and its governing board before a decision is made to add these services. In particular, projected A full discount to patients with family incomes budgets should take into account the need to provide at or below 100 percent of the U.S. Department the services to all patients regardless of ability to pay. of Health & Human Services Federal Poverty Guidelines; No discount for patients with annual family Clinic Checklist: Sliding Fee Scale incomes greater than 200 percent of such levels; ✓✓ Does the FQHC have a sliding fee scale policy? and ✓✓ Has the FQHC surveyed locally prevailing rates for the specialty services it seeks to add, and ensured A sliding fee scale for patients with annual family that its charges would be consistent with such rates? incomes between these ranges.13 ✓✓ Are “nominal” charges to be imposed on patients with incomes below 200 percent of the Federal FQHCs are permitted to charge “nominal” fees Poverty Guidelines? “where imposition of such fees is consistent with ✓✓ Does the FQHC’s schedule of fees ensure that the FQHC’s reasonable costs of operation would be project goals.” “Nominal” is not defined by the covered? regulations, but is interpreted to mean a minimal ✓✓ Would the sliding fee scale policy be implemented charge in comparison to the actual cost of the to ensure that no person shall be denied services services. While not directly applicable, FQHCs may by reason of his or her inability to pay for the services? look to Medicare reasonable cost principles — which ✓✓ Has the FQHC’s governing board approved the define “nominal” as “a charge equal to 60 percent sliding fee scale and charges that would be applied or less of the reasonable cost of a service”14 — in to the added specialty services? determining these amounts. The FQHC’s fee schedule must be consistent with locally prevailing rates, and charges must not act as a barrier to the patient’s receipt of health care services.15 Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 11 IV. edicaid and Medicare Reimbursement M In 2007, 37.8 percent of California FQHC Otherwise covered drugs furnished by, and patients were covered by Medicaid (Medi-Cal) and “incident to,” services of physicians and non- 5.2 percent were Medicare beneficiaries (45.2 percent physician practitioners; were uninsured).16 Thus, Medicaid and Medicare Outpatient diabetes self-management training definitions of “FQHC services,” and the two and medical nutrition therapy for beneficiaries programs’ reimbursement policies, play a significant with diabetes or renal disease; and role in a health center’s ability to sustain health services. An FQHC considering providing specialty “Preventive primary health services” that a center services to its patients must therefore understand is required to provide under Section 254b.17 how each program addresses reimbursement of these services. Medicare pays FQHCs in two different ways. The definitions of “Federally Qualified Health It pays for certain services at the FQHC rate, and Center” and “Federally Qualified Health Center for other services on a fee-for-service basis. In order services” are found in the laws relating to the to be fully reimbursed under Medicare, the FQHC Medicare and Medicaid programs. These definitions must be enrolled both with the appropriate Medicare rely in turn on the statutory criteria for receiving administrative contractor as an FQHC, and with the a health center grant (see Appendix A). Although local Medicare carrier as a clinic.18 Specialists who Medicaid provides far more reimbursement to most provide only defined FQHC services need not enroll FQHCs, it is Medicare that defines coverage of individually in Medicare. If, however, they provide FQHC “core” services, including those provided by non-FQHC services — such as inpatient care — to physicians and other key professional staff. FQHC patients, they need to enroll individually and familiarize themselves with the FQHC-specific Medicare billing requirements relating to such services.19 Medicare defines “FQHC services” as including the FQHCs that provide Medicare services through following: agreements with managed care plans should Physician services, and services and supplies determine if these agreements cover specialty services; provided “incident to” such services; if not, they will need to be amended. Additionally, specialists will need to be credentialed by the Nurse practitioner, physician assistant, certified plan in accordance with the terms of the FQHC’s nurse midwife, clinical psychologist, and clinical agreements. social worker services, and other services and Before adding medical specialty services, FQHC supplies provided “incident to” such services; clinical and administrative leadership, as well as Visiting nurse services in a CMS-designated billing staff, should thoroughly review the provisions home health shortage area; of Chapter 13 of CMS Pub. 102, as well as the Medicare Claims Processing Manual, Chapter 9, 12 | C alifornia H ealth C are F oundation relating to “Rural Health Clinics/Federally Qualified ◾◾ Comprehensive perinatal services practitioner; Health Centers,” and thoroughly investigate any ◾◾ Adult day health center (four-hour session only); coverage of services that a specialist will provide on or behalf of the FQHC. ◾◾ Dental hygienist and registered dental assistant Medicaid (Medi-Cal) in alternative practice.24 Federal law defines “FQHC services” more Under Medi-Cal, an FQHC receives an initial expansively for the Medicaid program than for “prospective payment” rate that is, at its election, Medicare. FQHC services are a mandatory Medicaid either based on the average of the per-visit rates of benefit and are defined to include not only the three FQHCs in the same or an adjacent service area so-called Medicare “core providers”— the first four with a comparable caseload, or on 100 percent of its Medicare coverage bullets listed above — but also actual, reasonable costs (determined in accordance any other ambulatory service that is offered by the with Medicare reasonable cost principles), for its first FQHC and is covered by the state’s Medicaid plan.20 full fiscal year. Federal law requires that these rates be Therefore, in order to budget for the addition of new adjusted annually based on the Medicare Economic services, a California FQHC needs to understand the Index, to account for operational cost increases. basic features of the Medi-Cal reimbursement system Additionally, rates may be adjusted where there governing its services.21 are increases or decreases in costs arising from changes in the type, intensity, duration, or amount Medi-Cal Reimbursement: Per-Visit Rate of “FQHC services” that a health center provides. Medi-Cal reimbursement is based on an all-inclusive, California has implemented a process for this “scope per-visit rate.22 This means that an FQHC clinic will of service” rate adjustment in Welfare & Institutions be paid the same for specialty services as for all other Code § 14132.100(e). The determination is a two- visits. California law defines a “visit” as a face-to-face step process. encounter with one of the following: 1. First, the change in services is assessed to ensure ◾◾ Physician (defined by reference to the Medicare that it fits one of the categories of circumstances program as a doctor of medicine, doctor of set out in Section 14132.100(e)(2)(A)–(I). A osteopathic medicine, dentist, optometrist, change in services generally is acceptable as a podiatrist, or chiropractor);23 “scope change” if it is the result of a change of any ◾◾ Physician assistant; “FQHC service” as defined by federal law or in the provider mix of an FQHC or one of its sites, ◾◾ Nurse practitioner; or any changes in the scope of a project approved ◾◾ Nurse midwife; by HRSA. ◾◾ Clinical psychologist; 2. Once it has been determined that there has been a change in the scope of “FQHC services” ◾◾ Licensed clinical social worker; provided, the impact of the change is assessed ◾◾ Visiting nurse (only in a CMS-designated home under Medicare reasonable cost principles, using health shortage area); a cost report, to determine if the rate change Adding Specialty Services to a California FQHC: Legal and Regulatory Issues |13 meets a minimum threshold. The net change is no duplicative reimbursement for the same services in the FQHC’s rate must equal or exceed increases program costs without additional benefit 1.75 percent. to patients, and in some cases may be considered fraudulent. Professional Audit May Be Needed Medi-Cal Reimbursement: It is almost always essential that an FQHC utilize an experienced auditor to prepare an application for rate “Four Walls” Policy changes based on a change in the FQHC’s scope Specialists often are unwilling to provide services of services. There is wide variance in FQHC rates through the Medi-Cal program in light of Medi-Cal’s under Medi-Cal, with an average rate of $150.80 for freestanding, nonprofit FQHCs, and $235.61 for low reimbursement rates. As a result, many rural county FQHCs.25 At least part of this variance can specialists propose providing FQHC services in their be attributed to an FQHC’s failure, when setting own offices, with those services treated as FQHC or modifying rates, to obtain assistance from an experienced cost report auditor familiar with services for purposes of billing, reimbursement, and California’s system of FQHC reimbursement. An credentialing. Such an arrangement can be very FQHC that is planning to add new services should beneficial as a means of eliminating duplicative costs, obtain such assistance, and base its projected budget on a well-grounded understanding of the impact of especially where the specialist uses significant space these services on the FQHC’s rate and on aggregate or costly equipment. Congress has recognized this reimbursement. fact by prohibiting state Medicaid agencies from preventing FQHCs from entering into contractual relationships with private practice dental providers in the provision of “FQHC services.”26 However, the Medi-Cal Reimbursement: DHCS “Four Walls” policy, which limits the place Individual Provider Payment of service, would prevent such an arrangement for To the extent that the specialists whose part-time medical specialists. services are being added are physicians who operate This Four Walls rule is derived from a series of independent practices, special attention should be letters from CMS’s predecessor agency, the Health paid to the fee-for-service rules governing services Care Financing Administration. If a patient is treated provided by individual physicians. Where some outside the FQHC site but the service is billed as an services are provided to a patient by the FQHC, FQHC service, DHCS has interpreted these letters to which is reimbursed at an all-inclusive rate, and require the following: others are provided by the independent physician and reimbursed at a global or bundled rate, there 1. The provider (physician, nurse practitioner, is a risk of duplicative payment. For example, a physician assistant, nurse-midwife, clinical physician billing Medi-Cal on the basis of a global psychologist, clinical social worker, or visiting rate may already have been reimbursed for services nurse) has a written contract with the FQHC to provided in the FQHC. The FQHC would not be provide the services; aware of this unless staff made inquiries regarding 2. The services are furnished only to FQHC patients the applicable billing rules relating to the fee-for- at that location; service environment, in addition to those relating to FQHC reimbursement. Failing to ensure that there 14 | C alifornia H ealth C are F oundation 3. The patient must be treated at that location, The state plan amendment’s evolving same-day rather than at the FQHC, for health or medical visit rule; and reasons; and The requirement (inconsistently applied) that 4. The services provided are of the type commonly mid-levels be separately enrolled in Medi-Cal furnished in the FQHC setting.27 while physicians need not be. Where FQHCs have sought to treat patients at Ongoing confusion among FQHCs about even other locations for reasons of patient or provider such basic issues as DHCS requirements relating to convenience, to reduce costs, to expand access, or enrollment and which services are covered by the for some other reason, the second and third of these program can cause delays and present challenges for requirements have proven an obstacle. In 2003, planning and budgeting. An FQHC, and its counsel, DHCS generally acknowledged that this and other of seeking to add specialty services in a manner not its FQHC policies, including those in its state plan, clearly defined in the Provider Manual or applicable were potentially invalid as a result of the department’s law should request advance guidance from DHCS failure to adopt them in compliance with the regarding all aspects of its proposed changes. California Administrative Procedures Act.28 Also, other states have interpreted the intention of the federal policies differently, and the situation remains Clinic Checklist: Medicare and Medi-Cal in flux. However, until the stated DHCS policy is ✓✓ Has the FQHC reviewed all applicable Medicare either changed, clarified, or invalidated, a California manuals and policies, and do all relevant staff as well as the governing board understand the FQHC’s professional services should be provided implications of adding specialty services? only on-site, or otherwise in compliance with the ✓✓ Have experienced cost estimators been consulted above-described policy. regarding the addition of services and the impact Other California state policies may also limit an on FQHC rates? ✓✓ Has the FQHC worked with experienced auditors FQHC’s ability to provide specialty services. These to assess whether it may be entitled to a rate include: change as the result of the new services? ✓✓ Do contracts with individual specialist physicians DHCS offsetting of grant expenditures against specify a mechanism for addressing issues grant proceeds; regarding fee-for-service provider payment? ✓✓ Are the services to be provided entirely on-site? If DHCS denial of certain costs where the services not, has legal counsel determined the availability are not “physician type” services; of Medi-Cal reimbursement for services provided off-site? DHCS denial of certain scope of service changes ✓✓ Has the FQHC worked with legal counsel and which are viewed as “insubstantial” according to DHCS to obtain advance review of any proposed standards developed by individual auditors; new services or new service sites? DHCS application of some fee-for-service utilization controls to FQHC services; Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 15 V. alpractice Coverage and the Federal Tort M Claims Act FQHC s benefit significantly from access FQHC Look-Alikes and other entities that are to medical malpractice coverage under FTCA. not receiving grant funds under Section 254b are However, this coverage often is unavailable to not eligible for FTCA coverage.33 Thus, FQHC medical specialists providing services on a contract Look-Alikes, as well as FQHCs that are Section basis, so clinics must be aware of the limits of FTCA 330 grantees but that have not been “deemed as they make decisions about offering specialty care.29 covered” by HRSA,34 need to obtain commercial professional liability policies. It is usually preferable Overview of FTCA Coverage for the FQHC, as opposed to individual physicians, The Federally Supported Health Centers Assistance to obtain this coverage, since that reduces both Act of 1995 makes federally-funded community overall cost and the likelihood that the FQHC health centers, their employees, officers, and certain will be exposed to unanticipated gaps in coverage. part-time contractors eligible for medical malpractice An FQHC’s agreement with a physician should coverage under FTCA to the same extent as federal address who will purchase both the policy and any employees of the United States Public Health continuation, or “tail coverage,” in the event of Service.30 termination. The agreement should also address how FTCA provides liability coverage for claims the parties will timely be made aware of, and be able “for personal injury, including death, resulting to address, any failures to obtain or pay for required from the performance of medical, surgical, dental, coverage. or related functions . . .”31 Once a physician has been deemed a federal employee, or a covered non- Limitations on FTCA Coverage employee contractor, acting within the scope of his The key limitation of FTCA coverage in the context or her duties, the United States is substituted as the of specialty services is that many FQHCs staff their defendant and FTCA provides the exclusive remedy specialty practice with community physicians who for the physician’s negligence.32 Personal injury work part-time under independent contracts, and claims asserted against an FQHC, its employee, FTCA coverage of contractors is extremely limited. or other covered representative must be asserted in For independent contractors to be covered by FTCA, the manner dictated by FTCA. Also, if a service is they must either: covered under FTCA when the event giving rise to Normally perform, on average, at least 32.5 hours the claim occurs, it will be covered regardless of when of service per week for the entity, for the period of the claim is filed. Therefore, no continuation or the contract; or “tail” coverage is needed. However, to the extent that services are not clearly covered by FTCA, an FQHC Be a licensed or certified provider of services must obtain a policy covering professional errors and in the fields of family practice, general internal omissions. medicine, general pediatrics, or obstetrics and gynecology.35 16 | C alifornia H ealth C are F oundation Thus, while employee physicians are eligible to minimize the risk of non-covered claims. As for FTCA coverage regardless of the number of summarized by the FTCA Clinician’s Handbook,38 hours they work, independent contractors outside the following circumstances are not covered by of the traditional “primary care” training categories FTCA: described above are not eligible unless their contract Activities that are either not associated with is for more than 32.5 hours weekly. Also, professional a deemed FQHC, not within the FQHC’s corporations and other forms of business entities Scope of Project, not within the physician’s are not eligible for coverage under FTCA, so some scope of employment, or not related to clinical physicians who practice under such a rubric would malpractice; need to be privately insured.36 Activities related to supervision of non-FQHC employees and staff, such as actions undertaken Direct Employment of Part-time MDs May as Medical Director for an FQHC-contracted Permit Coverage Direct employment of part-time providers may help nursing home or for a local emergency medical some clinics to achieve FTCA coverage for their system; specialty services. Under a 1975 opinion from the California Attorney General, nonprofit community Supervision of care provided by students or clinics (in contrast to county clinics) are viewed as residents to non-FQHC patients, unless the being entitled to directly employ physicians under California law.37 Therefore, instead of entering into patient is part of the physician’s required on-call an independent contract agreement with a physician scope of employment; to become a part-time provider of specialty services for the clinic, an FQHC could hire the physician as an Moonlighting or other activities outside the employee. This would obviate the problem of lack of physician’s scope of employment; FTCA coverage for contract providers who work for the clinic less than an average of 32.5 hours per week. Claims of a type customarily covered by However, clinics must consider other issues relating general liability, directors’ and officers’ liability, to making treating physicians actual employees. For example, California Labor Code § 515.6(a) provides automobile, fire, theft, or any other non- that a physician employee must be paid an hourly malpractice coverage; and pay rate equal to or greater than a certain threshold amount ($69.13 as of January 1, 2009), in order for Community activities, such as community the physician to be exempt from the employer’s call coverage, hospital calls, emergency room requirement to pay overtime. Other issues may include increased costs relating to FICA, unemployment, or coverage, and services such as medical care for other taxes, and eligibility for employee benefits such local events, may or may not be covered. as health insurance, pension, and family leave. If an individual professional, rather than the FQHC, is directly reimbursed for certain off-site Assuming that the FQHC and specialist services and/or inpatient services, and the provider physicians are otherwise eligible for FTCA coverage, then remits the payment to the FQHC, the services an FQHC that is adding specialty care needs may be covered if certain conditions (set out in PIN to carefully consider the exceptions to FTCA 2001-11) are met.39 coverage in the context of the newly added services, Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 17 Job descriptions and professional services agreements with specialists should be drafted Clinic Checklist: FTCA carefully to ensure that they do not create or overlook ✓✓ Have areas of coverage that are outside of FTCA been clearly identified and appropriate wrap-around gaps in coverage. An individual provider’s FTCA insurance coverage obtained, prior to any services coverage is driven in part by his or her “scope of being delivered? employment,” defined by the duties contained in the ✓✓ Do contracts with specialists address their scope of job description, contract, and related documents, employment in a manner that addresses concerns under FTCA? as well as by regular activities on the job. Also, an ✓✓ Are all professional services agreements with FQHC needs to ensure that new providers have been providers entered into with an individual, rather credentialed and that related due diligence has been than a professional corporation, if FTCA coverage is relied upon? performed. Wrap-around coverage is recommended ✓✓ Has the FQHC reviewed the BPHC checklist in for FQHCs, to avoid unanticipated exposure if Sections II through V of Attachment 1 of PAL a claim is found not to be within the physician’s 2008-05, to ensure that requirements related to risk scope of employment or is otherwise excluded from management systems and hospital and coverage issues, among others, have been met? coverage by FTCA. Finally, the substance of the FTCA initial application and annual renewal have been recently modified, with requirements set out in a Program Assistance Letter (PAL) entitled “New Requirements for Deeming under the Federally Supported Health Centers Assistance Act for Calendar Year 2010.”40 Attachment 1 of this PAL includes a checklist to assist FQHCs in updating their risk management systems to reflect services provided by the health center. 18 | C alifornia H ealth C are F oundation VI. eferral and Compensation Agreements R Relating to Professional Services As a matter of basic due diligence , an statute, and therefore, potentially subject to criminal FQHC should seek the assistance and advice of prosecution.”42 As a result, the federal government an experienced health law attorney in contracting has created a number of “safe harbors” within which for medical services, and at a minimum should certain arrangements will not be viewed as running ensure that all agreements are reviewed by counsel. afoul of AKS. The two safe harbors most likely to Nevertheless, it is also essential that individuals be relied upon by FQHCs entering into agreements conducting negotiations on behalf of an FQHC have with medical specialists are those relating to “bona a broad understanding of the main federal and state fide employees” and “personal services agreements” limitations on such arrangements. This is particularly with independent contractors; a limited, FQHC- so since the mere offer of improper compensation specific safe harbor also may apply. Given the may constitute a kickback or improper self-referral significant penalties for violating the AKS law, an arrangement in violation of federal law, exposing the FQHC seeking to add medical specialist services FQHC to the risk of civil or criminal penalties. must adhere closely to the requirements of these safe harbors. The Anti-Kickback Statute The federal Anti-Kickback Statute (AKS) makes it a AKS Safe Harbor for Bona Fide crime to knowingly and willfully offer, pay, solicit, or Employment Agreements receive any “remuneration,” directly or indirectly, for AKS excludes from the definition of impermissible inducing or rewarding referrals of items or services remuneration “any amount paid by an employer reimbursable by Medicare, Medicaid, and other to an employee (who has a bona fide employment federal health care programs.41 Violation of the law is relationship with such employer) for employment” a felony punishable by a fine of up to $25,000 and/ in the provision of items or services covered by the or imprisonment for up to five years. Violations of federal health care program.43 Whether or not an AKS may also serve as the basis for imposition of civil employment arrangement is viewed as “bona fide” money penalties, exclusion from all federal health is determined in accordance with Internal Revenue care programs, and liability under the federal False Service rules.44 The key elements of an employment Claims Act. Both sides of a transaction or proposed arrangement that make it bona fide are described in transaction — in the case of health centers adding the Internal Revenue Code as follows: a specialist, both the FQHC and the individual “ The person for whom services are performed physician — are subject to criminal liability under has the right to control and direct the individual AKS. who performs the services, not only as the result As explained by the Office of the Inspector to be accomplished by the work, but also as to General, “[b]ecause of the broad reach of the statute, the details and means by which that result is concern was expressed that some relatively innocuous accomplished. That is, an employee is subject to commercial arrangements were covered by the Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 19 the will and control of the employer not only as that takes into account the volume or value of any to what shall be done but how it shall be done.”45 referrals or business otherwise generated between the parties for which payment may be made in The IRS test to determine whether sufficient whole or in part under Medicare, Medicaid or control is present for an individual to be viewed as an other federal health care programs. employee is set out in Appendix B. A safe harbor-qualifying employment agreement 6. The services performed under the agreement gives an FQHC greater flexibility regarding do not involve the counseling or promotion of compensation terms than does a personal service a business arrangement or other activity that agreement (see immediately below). However, such violates any state or federal law. an agreement must be drafted to meet the additional 7. The aggregate services contracted for do not requirements for employment agreements set forth in exceed those which are reasonably necessary the Stark Law,46 as discussed later in this section. for accomplishing the commercially reasonable business purpose of the services. AKS Safe Harbor for Personal Services Agreements This personal services agreement safe harbor AKS also includes a safe harbor protecting certain provides broad protection for an FQHC seeking to independent contractor arrangements. An agreement add medical specialist services: Whether the new with an independent contractor must fully meet each physicians are part-time or full-time, to the extent of the following seven requirements in order to be the criteria set out in this safe harbor are otherwise protected by this personal services safe harbor: met, the health center’s agreement with them will not 1. The agreement is set out in writing and signed violate AKS. by the parties. AKS Limited Safe Harbor Specifically for 2. The agreement covers all of the services the FQHCs agent provides to the principal for the term of In 2007, a new safe harbor was added to AKS, the agreement and specifies the services to be protecting individuals or entities “providing goods, provided by the agent. items, services, donations, loans, or a combination 3. If the agreement is intended to provide for the thereof ” to health centers “pursuant to a contract, services of the agent on a periodic, sporadic, lease, grant, loan, or other agreement, if such or part-time basis, the agreement specifies the agreement contributes to the ability of the health schedule, length, and charge for such intervals. center entity to maintain or increase the availability, or enhance the quality, of services provided to a 4. The term of the agreement is for not less than medically underserved population served by the one year. health center entity.”47 An example of the kind of 5. The aggregate compensation paid to the agent payment that might fall within the protection of this over the term of the agreement is set in advance, safe harbor (if its nine standards are fully satisfied) is consistent with fair market value in arms-length is a donated or below-cost service provided by a transactions, and is not determined in a manner medical specialist to a Section 330-funded health 20 | C alifornia H ealth C are F oundation center. However, the crucial limitation of this safe encompasses, for example, a request by a physician harbor is that it only protects payments to a Section for a consultation with another physician, and any 330-funded health center, not from an FQHC to an test or procedure ordered by, to be performed by, or individual.48 Also, this FQHC safe harbor provides under the supervision of, that other physician. It also no protection for FQHC Look-Alikes, and no includes a request for or establishment of a plan of protection for above fair market value payments. care by a physician for a designated health service.51 To the extent that an FQHC is leasing space and/or The “designated health services” covered by the equipment to the physician, additional safe harbors Stark Law are: relating to space and equipment rental arrangements Clinical laboratory services; are available. Physical therapy services; The Stark Law Occupational therapy services; Beginning in the 1980’s, concerns about excessive, medically unjustified referrals by physicians to Radiology services, including magnetic resonance entities in which they had financial interests imaging, computerized axial tomography scans, prompted Congress to restrict self-referral and ultrasound services; arrangements. Named after Congressman Fortney Radiation therapy services and supplies; “Pete” Stark, the Stark Law applies to referrals by physicians for “designated health services.” This Durable medical equipment and supplies; law applies directly to Medicare, and indirectly to Parenteral and enteral nutrients, equipment, and Medicaid; that is, a Medicaid federal match, or FFP, supplies; may not be paid for a designated health service on the basis of a referral that would result in the denial Prosthetics, orthotics, and prosthetic devices and of payment for the service under Medicare.49 supplies; In general, the Stark Law provides that, unless Home health services; an exception applies, if a physician50 (or physician’s immediate family member) has a financial Outpatient prescription drugs; relationship with an entity, the physician may not Inpatient and outpatient hospital services; and make a referral to the entity for the furnishing of designated health services for which payment Outpatient speech-language pathology services otherwise may be made under Medicare. The entity (for services furnished on or after July 1, 2009). may not present or cause to be presented a claim to Medicare or a bill to any individual, third party An item or service that is paid as a part of a payer, or other entity for designated health services “composite” rate is not a “designated health service” furnished pursuant to a prohibited referral. and the referral is not subject to the Stark Law.52 The definition of “referral” under the Stark Law Initially, this limitation would appear to exempt is extremely broad and includes a physician request many clinic services, since most FQHC services are for an item or service which can be reimbursed reimbursed under Medicare and Medicaid on the under Medicare Part B. This term therefore basis of an all-inclusive, or composite, rate. However, Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 21 the benefit of this limitation is largely illusory. 2. The amount of the remuneration under the FQHCs are reimbursed by Medicare on a fee-for- employment is consistent with the fair market service basis for most of the designated health services value of the services; that are the primary focus of the Stark Law, including 3. The amount of the remuneration is not clinical laboratory services, radiology, and hospital determined in a manner that takes into account inpatient services. As a result, FQHCs must ensure (directly or indirectly) the volume or value of that their agreements with physicians, as that term is any referrals by the referring physician; defined by Medicare, comply fully with one or more of the exceptions identified in either the Stark statute 4. The remuneration is provided pursuant to itself or its implementing regulations. an agreement which would be commercially Some of the Stark exceptions that FQHCs reasonable even if no referrals were made to might rely upon are similar to AKS safe harbors. the employer; and In particular, the Stark Law contains exceptions for 5. The employment meets such other requirements bona fide employment agreements and for personal as the Secretary of HHS may impose by services agreements (independent contracts). As with regulation as needed to protect against program AKS, the Stark Law’s complexity and the significance or patient abuse.54 of the penalties associated with failing to meet its requirements suggest the wisdom of an FQHC fully At the heart of the Stark Law’s prohibition and unstintingly conforming with the letter and on self-referral is an effort to eliminate unearned spirit of the Stark exceptions for either bona fide compensation. Thus, a determination that the employees or personal services agreements. payments are at fair market value is critical to establishing that the arrangement qualifies under Stark Exception for Bona Fide the exception. The Stark Law defines the fair market Employment Agreements value of services as follows: The Stark Law contains an exception, from its “ Fair market value means the value in arm’s- definition of “compensation arrangements,” for length transactions, consistent with the general bona fide employment agreements which satisfy market value. ‘General market value’ means… the certain requirements.53 Under Stark, an individual compensation that would be included in a service is considered “employed by” or an “employee” of an agreement as the result of bona fide bargaining FQHC if the individual would be considered to be between well-informed parties to the agreement an employee of the entity under analogous Internal who are not otherwise in a position to generate Revenue Service rules. This Stark employment business for the other party, … at the time of the exception would protect an agreement between service agreement. Usually, the fair market price a physician who has a bona fide employment is… the compensation that has been included in relationship with the FQHC if each of the following bona fide service agreements with comparable requirements is satisfied: terms at the time of the agreement, where the… 1. The employment is for identifiable services; compensation has not been determined in any manner that takes into account the volume or value of anticipated or actual referrals.”55 22 | C alifornia H ealth C are F oundation Because of the limitations on access to health the volume or value of any referrals or other care services in areas served by FQHCs, many health business generated between the parties. centers use physicians on a part-time basis to provide 6. The services to be furnished under each specialty services. These clinics need to balance arrangement must not involve the counseling or greater flexibility under the Stark exceptions for bona promotion of a business arrangement or other fide employment agreements against the added cost activity that violates any federal or state law. of directly employing such physicians. Stark Exception for Personal Services Clinic Checklist: Referral and Compensation Agreements Agreements The Stark Law also exempts agreements for ✓✓ Is there a written contract with the specialist that personal services between FQHCs and physicians covers all services that are provided on behalf of (and their immediate family members), where the the FQHC, whether the specialist is an employee or independent contractor? agreements meet requirements similar to those in ✓✓ If the arrangement with the specialist is an the AKS personal services safe harbor. Specifically, an independent contractor relationship, does it meet agreement must satisfy each of the following criteria: each of the requirements of the AKS personal services safe harbor and the requirements of the 1. The agreement must be set out in writing, signed personal services arrangements exception from the by each of the parties, specifying the services Stark Law? ✓✓ If the arrangement with the specialist is an covered by the agreement. employment relationship, does it meet each of the requirements of the AKS bona fide employee safe 2. The agreement must cover all of the services to be harbor and the bona fide employee exception from furnished by the physician to the entity. the Stark Law? ✓✓ If a productivity bonus is to be paid to either the 3. The aggregate services contracted for must be physician or an immediate family member of the reasonable and necessary for the legitimate physician, has the arrangement been reviewed business purposes of the arrangement(s). by legal counsel and determined to meet the requirements of all applicable law relating to referral 4. The term of each arrangement must be for at least and compensation? one year. If an arrangement is terminated during ✓✓ Has the determination that the compensation does not exceed fair market value been adequately the term (with or without cause), the parties may documented for AKS and Stark purposes? not enter into the same or substantially same ✓✓ If the compensation arrangement is based on arrangement during the first year of the original part-time services, or if reimbursement is on a term of the arrangement. per-encounter basis, has legal counsel reviewed the agreement to ensure that concerns regarding 5. Compensation to be paid over the term of each potential violations of state and federal law relating to kickbacks have been fully addressed? arrangement must be set in advance, must not exceed fair market value, and — except for a physician incentive plan that has been reviewed by legal counsel and determined to be in compliance with applicable law relating to referral and compensation — must not take into account Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 23 VII. alifornia Licensing and Permitting C Requirements C alifornia law related to licensing Licensing Law requires a “Special Permit” in addition and certification provides the primary state-level to a clinic license when a clinic offers one or more regulatory framework affecting the provision of “special services,”59 although such a special permit health care services by FQHCs. The majority of has to date only been required for the provision of FQHCs in California are nonprofit clinics as defined “birth services.” in the California Health & Safety Code.56 As such, Additional approvals may be required in order they fall within the definition of “primary care to add certain specialty services, to use particular clinics” for which a license must be obtained from equipment, or to provide additional services that the California Department of Public Health, Center present unique risks. For example, if a nonprofit for Health Care Quality’s Licensing and Certification primary care clinic were to provide ambulatory program. Community and free clinics, as defined surgery services, it would be required to obtain a by Health & Safety Code § 1204(a), must also be separate license for the relevant space, and comply licensed. All such entities licensed by the California with the applicable building code standards for Department of Health Care Services (DHCS) are such facilities, including seismic safety standards.60 by definition “primary care clinics.” Surgical clinics, Or, a clinic in which a dentist places patients under chronic dialysis clinics, and rehabilitation clinics general anesthesia would be required to obtain a as defined by Health & Safety Code §1204(b), on general anesthesia permit from the Dental Board of the other hand, are defined as “specialty clinics.” California. Other commonly required permits or However, the fact that an entity is designated as a licenses include the following: “primary care clinic” under California law does not Air tank permit; restrict it from providing specialty care services as they are commonly understood. Board of Pharmacy drug dispensary permit; California’s clinic licensing law requires clinics Optometrist diagnostic or therapeutic to provide written notice of changes in services pharmaceutical agent certification; or physical plant no less than 60 days prior to adding the services or remodeling or modifying an Medical waste generator registration and existing primary care clinic site.57 Clinics making treatment/transfer station permit; such changes should base the descriptions in their Radiation source registration; notifications on the types of services as described in the relevant statute, including medical, surgical, X-ray certification; and dental, optometric, or podiatric advice, services, or Controlled substances registration. treatment.58 Certain types of activities in an outpatient setting require additional approvals from either DHCS or a professional licensing board. For example, the Clinic 24 | C alifornia H ealth C are F oundation Any FQHC considering adding specialty services should analyze the particular facilities and equipment Clinic Checklist: Licensing and Permitting that will be needed, and should consult the relevant ✓✓ Has notice been provided to the California Department of Public Health, Center for Health licensing and permitting bodies in order to determine Care Quality’s Licensing and Certification program the need for special permits or licenses. Agencies regarding the addition of the services at least 60 involved in licensing and permitting in California days prior to the addition of the new services? FQHCs are identified in Appendix C. Additional ✓✓ Are any additional licenses or permits required in order to provide the services, or with respect to information regarding required permits and licenses equipment to be used by the specialist? can be found at www.calgold.ca.gov, under the category “physician.” Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 25 VIII. Conclusion A s C alifornia ’ s safety net providers face increasing demand for primary care, they also see increased need to provide specialty care services. The analysis required of an FQHC seeking to add specialty services to its scope of project presents both a challenge and an opportunity. BPHC requires that the FQHC review the community’s need for the proposed services, as well as the FQHC’s ability to successfully implement, integrate, and sustain those services. The health center must examine third- party payer coverage policies, insurance and FTCA coverage issues, potential conflicts of interest, and licensure and permitting obligations. While these tasks require complicated assessments, perhaps with the assistance of outside professional legal and accounting professionals, they also provide an excellent opportunity for an FQHC to conduct a fundamental review of its patients’ need for specialty services, and can position the health center to serve as a consistent and reliable source of precisely those specialty services most appropriate for the community it serves. 26 | C alifornia H ealth C are F oundation Appendix A: ummary of Statutory Requirements for Maintaining S Federally Qualified Health Center Status The definitions of “Federally Qualified Health Center” and The FQHC must establish and maintain collaborative “Federally Qualified Health Center services” are contained relationships with other health care providers in its in the laws relating to the Medicare and Medicaid programs. catchment area.67 The Medicare and Medicaid definitions of entities qualifying The FQHC must have an ongoing quality improvement as FQHCs rely in turn on satisfaction of the criteria for system that includes clinical services and management, receiving a health center grant under 42 U.S.C. § 254b, and that maintains the confidentiality of patient records.68 as determined by the federal Health Resources & Services The FQHC must demonstrate its financial responsibility Administration (HRSA). These criteria address all aspects by use of required accounting procedures.69 of health center operations. An FQHC applying to add specialty services should establish that the health center’s The FQHC must have or intend to contract or otherwise administration understands this framework and intends to provide Medicare, Medicaid and State Children’s comply with all of these requirements.61 They include the Health Insurance Program (SCHIP) services, and must following: make every reasonable effort to collect appropriate reimbursement for its costs in providing services to The FQHC must be located in a medically underserved patients covered by these or other public assistance or area, or serve a special medically underserved population.62 private insurance programs.70 The FQHC must be a public or nonprofit entity.63 The FQHC must prepare a fee schedule that is consistent The FQHC must provide certain “required primary with locally prevailing rates, designed to cover its health services,” made up of “basic health services” reasonable costs of operation, and that is accompanied by related to traditionally defined primary care services, a schedule of discounts based on the patient’s ability to diagnostic laboratory and radiology services, preventative pay.71 health treatment, immunization and screening services, The FQHC must make every reasonable effort to emergency medical services, appropriate pharmaceutical collect payments for services in accordance with its fee services, referrals to providers of medical services, schedules, and to collect full and undiscounted fees from including “specialty referral when medically indicated” beneficiaries or enrollees in Medicaid, Medicare, or other and for other health-related services (including substance public assistance program or private health insurance abuse and mental health services), case management, program.72 various enabling services such as outreach, translation and transportation, and patient health education.64 The FQHC must ensure that no patient will be denied health care services due to the individual’s inability to pay The FQHC may also provide such “additional health for such services, and that any fees or payments required services” as may be appropriate for particular centers, by the health center be waived in order to fulfill this where the services are “necessary for the adequate support obligation.73 of the ‘required primary health services’.”65 A majority of the FQHC’s governing board must be users The FQHC must make the “required primary health of the health center’s services, and as a group the board services” available promptly in its service area (referred to must represent the individuals being served by the health as its “catchment area”).66 centers. The governing board must meet at least monthly, select the services to be provided by the FQHC, approve Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 27 the selection of the center’s director, and establish the general policies of the health center.74 The FQHC must have developed a business plan and budget that meet specified requirements, and an effective procedure for compiling and reporting the cost of its operations, the pattern of use of its services, the availability, accessibility, and acceptability of its services, and other operational matters.75 The FQHC must periodically review its catchment area to ensure that its size is such that the services provided by the FQHC are available and accessible to its residents, that the boundaries of the catchment area, to the extent practicable, conform to the relevant boundaries of political subdivisions, school districts, and federal and state health and social service programs; and that the boundaries of such area eliminate, to the extent possible, barriers of access to the services of the center, including those resulting from the area’s physical characteristics, its residential patterns, its economic and social grouping, and available transportation.76 FQHCs that serve a population including a substantial proportion of individuals of limited English-speaking ability must develop a plan and make arrangements responsive to the needs of this population for providing services to the extent practicable in the language and cultural context most appropriate to such individuals.77 The FQHC must develop an ongoing referral relationship with one or more hospital.78 The FQHC must encourage persons receiving or seeking health services from the center to participate in any public or private health program or plan for which they are eligible, while ensuring that they are not denied care based on an inability to pay.79 28 | C alifornia H ealth C are F oundation Appendix B: Employee Relationship Guidelines for Federal Employment Tax: The Twenty Factor Assessment (IRS Revenue Ruling #87– 41, June 8, 1987) The twenty factors the IRS uses in assessing the employment 6. Continuing Relationship. A continuing relationship status of an individual for federal employment tax purposes between the worker and the person or persons for whom are: the services are performed indicates that an employer- employee relationship exists. A continuing relationship 1. Instructions. A worker who is required to comply with may exist where work is performed at frequently recurring other persons’ instructions about when, where, and how although irregular intervals. he or she is to work is ordinarily an employee. This control factor is present if the person or persons for 7. Set Hours of Work. The establishment of set hours of whom the services are performed have the right to require work by the person or persons for whom the services are compliance with instructions. performed is a factor indicating control. 2. Training. Training a worker by requiring an experienced 8. Full Time Required. If the worker must devote employee to work with the worker, by corresponding substantially full time to the business of the person with the worker, by requiring the worker to attend or persons for whom the services are performed, such meetings, or by using other methods, indicates that the person or persons have control over the amount of time person or persons for whom the services are performed the worker spends working and impliedly restrict the want the services performed in a particular method or worker from doing other gainful work. An independent manner. contractor, on the other hand, is free to work when and for whom he or she chooses. 3. Integration. Integration of the worker’s services into the business operations generally shows that the worker is 9. Doing Work on Employer’s Premises. If the work is subject to direction and control. When the success or performed on the premises of the person or persons for continuation of a business depends to an appreciable whom the services are performed, that factor suggests degree upon the performance of certain services, the control over the worker, especially if the work could workers who perform those services must necessarily be be done elsewhere. Work done off the premises of the subject to a certain amount of control by the owner of person or persons receiving the services, such as at the business. the office of the worker, indicates some freedom from control. However, this fact by itself does not mean that 4. Services Rendered Personally. If the services must be the worker is not an employee. The importance of this rendered personally, presumably the person or persons factor depends on the nature of the service involved and for whom the services are performed are interested in the the extent to which an employer generally would require methods used to accomplish the work as well as in the that employees perform such services on the employer’s results. premises. Control over the place of work is indicated 5. Hiring, Supervising, and Paying Assistants. If the person when the person or persons for whom the services are or persons for whom the services are performed hire, performed have the right to compel the worker to travel supervise, and pay assistants, that factor generally shows a designated route, to canvass a territory within a certain control over the workers on the job. However, if one time, or to work at specific places as required. worker hires, supervises, and pays the other assistants 10. Order or Sequence Set. If a worker must perform services pursuant to a contract under which the worker agrees to in the order or sequence set by the person or persons provide materials and labor and under which the worker for whom the services are performed, that factor shows is responsible only for the attainment of a result, this that the worker is not free to follow the worker’s own factor indicates an independent contractor status. Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 29 pattern of work but must follow the established routines 16. Realization of Profit or Loss. A worker who can realize a and schedules of the person or persons for whom the profit or suffer a loss as a result of the worker’s services services are performed. Often, because of the nature of an (in addition to the profit or loss ordinarily realized by occupation, the person or persons for whom the services employees) is generally an independent contractor, but are performed do not set the order of the services or set the worker who cannot is an employee. For example, the order infrequently. It is sufficient to show control, if the worker is subject to a real risk of economic loss however, if such person or persons retain the right to do due to significant investments or a bona fide liability for so. expenses, such as salary payments to unrelated employees, that factor indicates that the worker is an independent 11. Oral or Written Reports. A requirement that the worker contractor. The risk that a worker will not receive submit regular or written reports to the person or persons payment for his or her services, however, is common to for whom the services are performed indicates a degree of both independent contractors and employees and thus control. does not constitute a sufficient economic risk to support 12. Payment by Hour, Week, Month. Payment by the hour, treatment as an independent contractor. week, or month generally points to an employer- 17. Working for More Than One Firm at a Time. If a worker employee relationship, provided that this method of performs more than de minimis services for a multiple of payment is not just a convenient way of paying a lump unrelated persons or firms at the same time, that factor sum agreed upon as the cost of a job. Payment made by generally indicates that the worker is an independent the job or on a straight commission generally indicates contractor. However, a worker who performs services for that the worker is an independent contractor. more than one person may be an employee of each of 13. Payment of Business and/or Traveling Expenses. If the person the persons, especially where such persons are part of the or persons for whom the services are performed ordinarily same service arrangement. pay the worker’s business and/or traveling expenses, the 18. Making Service Available to General Public. The fact that worker is ordinarily an employee. An employer, to be able a worker makes his or her services available to the general to control expenses, generally retains the right to regulate public on a regular and consistent basis indicates an and direct the worker’s business activities. independent contractor relationship. 14. Furnishing of Tools and Materials. The fact that the person 19. Right to Discharge. The right to discharge a worker is a or persons for whom the services are performed furnish factor indicating that the worker is an employee and the significant tools, materials, and other equipment tends to person possessing the right is an employer. An employer show the existence of an employer-employee relationship. exercises control through the threat of dismissal, which 15. Significant Investment. If the worker invests in facilities causes the worker to obey the employer’s instructions. An that are used by the worker in performing services and independent contractor, on the other hand, cannot be are not typically maintained by employees (such as the fired so long as the independent contractor produces a maintenance of an office rented at fair value from an result that meets the contract specifications. unrelated party), that factor tends to indicate that the 20. Right to Terminate. If the worker has the right to end his worker is an independent contractor. On the other hand, or her relationship with the person for whom the services lack of investment in facilities indicates dependence are performed at any time he or she wishes without on the person or persons for whom the services are incurring liability, that factor indicates an employer- performed for such facilities and, accordingly, the employee relationship. existence of an employer-employee relationship. Special scrutiny is required with respect to certain types of facilities, such as home offices. 30 | C alifornia H ealth C are F oundation Appendix C: rincipal California State Agencies Regulating Services or P Equipment in FQHCs Service /E quipment Agenc y Air Tanks Department of Industrial Relations, Pressure Vessel Unit Certification for Optometrists — primary open angle glaucoma, lachrymal Department of Consumer Affairs, irrigation and dilation, and therapeutic pharmaceutical agents Board of Optometry Clinic Drug Dispensing Permit Department of Consumer Affairs, Board of Pharmacy Community/Free Clinic Licensure California Department of Public Health, Licensing and Certification Program • Dentists Department of Consumer Affairs, • Registered Dental Hygienist California Dental Board (including those with extended functions and/or in alternative practice) • Registered Dental Assistant (including those with extended functions) • Physicians Department of Consumer Affairs, • Licensed Midwives Medical Board of California • Medical Assistants • Registered Dispensing Opticians • Research Psychoanalysts (including students) • Registered Nurse Department of Consumer Affairs, • Clinical Nurse Specialist California Board of Registered Nursing • Nurse Anesthetist • Nurse-Midwife (including those furnishing number • Nurse Practitioner (including those furnishing number • Psychiatric/Mental Health Nurse • Public Health Nurse Physician Assistants Department of Consumer Affairs, Physician Assistant Committee Radiation Source Registration — radiation-emitting machines or devices Department of Public Health, containing radioactive material; X-ray certification Radiologic Health Branch Request for Business & Professions Code § 805 Report • Department of Consumer Affairs, (required before licensed clinic may grant or renew staff privileges for physician, Medical Board of California dentist or psychologist) • California Board of Psychology • California Dental Board • Osteopathic Medical Board of California Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 31 Appendix D: equired Primary Health Services and Additional Health R Services for FQHCs Req uired Primary Health S ervices Additio nal Health Services [ 4 2 U .S .C . S ecti o n 2 5 4b(b)(1)] [42 U .S .C. S ec t i on 254b(b)(2)] The term “required primary health services” means: The term “additional health services” means: (i) asic B health services which, for purposes of this section, Services that are not included as required primary health shall consist of: services and that are appropriate to meet the health needs (I) health services related to family medicine, internal of the population served by the health center involved. Such medicine, pediatrics, obstetrics, or gynecology that term may include: are furnished by physicians and, where appropriate, (A) B ehavioral and mental health and substance abuse physician assistants, nurse practitioners, and nurse services. midwives; (II) diagnostic laboratory and radiologic services; (III)preventive health services, including: (aa) prenatal and perinatal services; (bb)appropriate cancer screenings; (cc) well-child services; (dd)immunizations against vaccine-preventable diseases; (ee) creenings s for elevated blood lead levels, communicable diseases, and cholesterol; (ff) pediatric eye, ear, and dental screenings to determine the need for vision and hearing correction and dental care; (gg)voluntary family planning services; and (hh)preventive dental services; (IV)emergency medical services; and (V) pharmaceutical services as may be appropriate for particular centers. (ii) eferrals to providers of medical services (including R (B) Recuperative care services. specialty referrals when medically indicated) and other health-related services (including substance abuse and mental health services). (iii) P atient case management services (including counseling, (C) nvironmental E health services, including- referral, and follow-up services) and other services (i) thedetection and alleviation of unhealthful conditions designed to assist health center patients in establishing associated with: eligibility for and gaining access to Federal, State, and local programs that provide or financially support the provision (I) water supply; of medical, social, housing, educational, or other related (II) chemical and pesticide exposures; services. (III) air quality; or (IV) exposure to lead; (ii) sewage treatment; (iii) olid s waste disposal; (iv) odent r and parasitic infestation; (v) field sanitation; (vi) ousing; h and (vii) ther o environmental factors related to health. 32 | C alifornia H ealth C are F oundation Req uired Primary Health S ervices Additio nal Health Services [4 2 U .S .C . S ecti o n 254b(b)(1)] [42 U .S .C. S ec t i on 254b(b)(2)] The term “required primary health services” means: The term “additional health services” means: (iv) S ervices that enable individuals to use the services of In the case of health centers receiving grants under § the health center (including outreach and transportation 254b(g), special occupation-related health services for services and, if a substantial number of the individuals in migratory and seasonal agricultural workers, including — the population served by a center are of limited English- (i) creening for and control of infectious diseases, including s speaking ability, the services of appropriate personnel parasitic diseases; and fluent in the language spoken by a predominant number of such individuals). (ii) njury prevention programs, including prevention of i exposure to unsafe levels of agricultural chemicals including pesticides. (v) E ducation of patients and the general population served by the health center regarding the availability and proper use of health services. Exception. With respect to a health center that receives a grant only under subsection (g), the Secretary, upon a showing of good cause, shall — (i) waive the requirement that the center provide all required primary health services under this paragraph; and (ii) approve, as appropriate, the provision of certain required primary health services only during certain periods of the year. Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 33 Endnotes 1. California HealthCare Foundation, California’s Safety-Net 9. See “Defining Scope of Project and Policy for Requesting Clinics: A Primer, March 2009 (www.chcf.org/topics/view. Changes,” HRSA PIN 2008-01, and the associated cfm?itemID=115960). technical correction PIN 2009-03. See also “Specialty Services and Health Centers’ Scope of Project,” PIN 2. The PINs are available on HRSA’s Web site (bphc. 2009-02. hrsa.gov/policy). The applicable regulations are set out in Parts 51c and 56c of Title 42 of the Code of 10. 42 U.S.C. § 254b(a)(1)(B). See also PIN 2009-02: 8. Federal Regulations (www.access.gpo.gov/nara/cfr/ 11. PIN 2009-02: 9. waisidx_08/42cfrv1_08.html). 12. 42 U.S.C. § 254b(k)(3)(G). 3. 42 U.S.C. § 256b. 13. 42 C.F.R. § 51c.303(f ) and (u). While the regulation 4. This requirement of prior BPHC approval applies to all ties the sliding fee scale to the now-obsolete CSA Poverty FQHCs, including Look-Alikes. FQHC Look-Alikes Income Guidelines (formerly in 45 C.F.R. § 1060.2), follow a different, more streamlined process for applying HRSA has consistently interpreted the applicable income for changes to their sites and services. Nevertheless, the scale to be the Federal Poverty Guidelines general principles derived from the basic requirements of (aspe.hhs.gov/poverty). 42 U.S.C. § 254b are applicable to all FQHC Scope of 14. 42 C.F.R. § 413.13. Project modification requests. 15. FQHCs must also be certain that they comply with the 5. 42 C.F.R. 51c.107(c) states that “[p]rior approval by requirements of any sliding fee scale obligations in grant the Secretary of revisions of the budget and project programs such as the Ryan White CARE Act, which also plan is required whenever there is to be a significant has an annual payment cap, and California’s Expanded change in the scope or nature of project activities.” See Access to Primary Care program. also “Changes in Scope.” HHS Grants Policy Statement. January 1, 2007; II:55 – 56 (www.hhs.gov/grantsnet/docs/ 16. HRSA Uniform Data System. 2007 California data, HHSGPS_107.doc). Table 4, lines 7– 9 (excludes FQHC Look-Alikes) (bphc.hrsa.gov/uds/2007data/california/table2.htm). 6. 42 U.S.C. § 1396a(bb)(3)(B) requires state Medicaid plans to provide for an annual adjustment to PPS rates in 17. See 42 U.S.C. § 1395x(aa)(3) for the Medicare definition order to take into account any increase or decrease in the of FQHC services. While the statutory Medicare scope of FQHC services furnished by the center. definition of covered FQHC services includes those “preventive primary health services” that a center is 7.Grantees are required to submit Scope of Project required to provide under 42 USC § 254b, this phrase modification requests on behalf of any sub-grantees. has been further refined in regulation to exclude some 8.Only “service sites” as defined in the PIN must be added of these required health-related services (42 C.F.R. § to the FQHC’s Scope of Project. Administrative offices 405.2448). Most notably, Medicare-covered FQHC or locations that do not provide direct health care services services do not include the provision of outreach, are not service sites. PIN 2009-02: 6. translation, transportation, and certain other services that FQHC’s are required to provide. 18. For more information regarding Medicare billing and enrollment policies, see www.cms.hhs.gov/center/ fqhc.asp. 34 | C alifornia H ealth C are F oundation 19. See § 30.3 of 2008-05, May 5, 2008, relating to in fact been adopted as regulations, they have been relied non-FQHC services that are covered by Medicare and upon to retroactively disallow reimbursement for FQHC reimbursed on a fee-for-service basis. CMS Pub. 102, services, at times in the millions of dollars. Ch. 13. 28. Letter from Diana M. Bonta, Director, California 20. 42 U.S.C. §§ 1396a(a)(10)(A), 1396d(a)(2)(C), 1396d(l) Department of Health Care Services, to John D. Smith, (2), 1395x(aa)(1)(A) – (C) and 1396a(bb). The Medicare Interim Director, Office of Administrative Law, in “core providers” are those described in §1395x(aa)(1) response to Executive Order S-2-03, requiring a report of (A) – (C). potential violations of California Government Code § 11340.5(a). 21. Administrative and clinical leadership should be familiar with the full provisions of California law defining the 29. For extensive information concerning FQHCs and FTCA manner of reimbursement for FQHC services as set coverage, see “New Requirements for Deeming under the out in California Welf. & Inst. Code §§ 14087.325 Federally Supported Health Centers Assistance Act for and 14132.100 –14132.108, and expanded upon in the Calendar Year 2009,” PIN 08-05; “Health Centers and Medi-Cal Provider Manual, Inpatient/Outpatient —  The Federal Tort Claims Act,” PIN 99-08; “Clarification Clinics and Hospitals — Rural Health Clinics (RHCs) of Policy for Health Centers Deemed Covered Under the and Federally Qualified Health Centers (FQHCs) Federal Tort Claims Act for Medical Malpractice,” PIN (files.medi-cal.ca.gov/pubsdoco/Manuals_menu.asp). 2001-11; and “Questions and Answers on the Federal Tort Claims Act Coverage for Section 330, Deemed 22. 42 U.S.C. §1396a(bb) and California Welf. & Inst. Code Grantees,” Program Assistance Letter (PAL), 99-15. § 14132.100. 30. See 28 U.S.C. §§ 1346 and 2672-2680 for the Federal 23.Effective July 1, 2009, California Welf. & Inst. Code Tort Claims Act, and 42 U.S.C. § 233(g) for the §14131.10(b) eliminated Medi-Cal coverage of optional provisions of the Public Health Service Act relating to adult dental services, including dental hygienist and coverage of FQHCs under FTCA. RDHAP services, acupuncture, audiology, speech therapy, chiropractic, optometry and optician services, podiatry, 31. 42 U.S.C. § 233(a). and psychology, with certain exceptions. This statute 32. See 42 U.S.C. § 233(c), (g). Moreover, once the Secretary overrides any other Medi-Cal law describing these services of HHS deems a physician to be an employee of the to the extent that it reflects coverage of an “optional” Public Health Service, “the determination shall be final Medicaid benefit. Psychology services are clearly and binding upon the Secretary and the Attorney General recognized as part of the “mandatory” FQHC benefit and other parties to any civil action or proceeding.” which states are required to reimburse in FQHCs/RHCs 42 U.S.C. § 233(g)(1)(F). even if eliminated as an “optional” Medicaid benefit. 33. 42 U.S.C. § 233(g)(4). 24. California Welf. & Inst. Code § 14132.100(g). 34. In order for an FQHC to be “deemed covered” by 25. Listing of FQHC/RHC rates obtained from California FTCA, it must receive approval from HRSA pursuant Department of Health Care Services. February, 2009. to the requirements set out in Program Assistance Letter 26. 42 U.S.C. § 1396a(a)(72). 2009-05. 27. DHCS Audits & Investigations, Policy and Procedure 35. 42 U.S.C. § 233(g)(1) and (4). Questions and Answers, June 26, 2000, retracted by DHCS by letter to all providers dated July 14, 2000, and not subsequently reissued. While these policies have never Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 35 36. Some courts have recently held that professional 47. 42 U.S.C. § 1320a-7b(b)(3)(I). corporations solely owned by a single professional are 48. 42 C.F.R. § 1001.952(w). covered by FTCA despite language to the contrary in 49. 42 U.S.C. § 1396b(s). PIN 99-08 (April 12, 1999). See El Rio Santa Cruz Neighborhood Health Center v. HHS, 396 F.3d 1265 50. “Physician” means a doctor of medicine or osteopathic (2005). See also Ismie Mut. Ins. Co. v. HHS, 413 F. medicine, a doctor of dental surgery or dental medicine, Supp.2d 954 (N.D. Ill. 2006). Before contracting with an a doctor of podiatric medicine, a doctor of optometry, individually owned professional corporation, an FQHC or a chiropractor. 42 C.F.R. § 411.351 and 42 U.S.C. § must verify FTCA coverage directly with the Bureau of 1395x(r). “Referring physician” means a physician who Primary Health Care. makes a referral for designated health services, directs another person or entity to make a referral, or controls 37. 58 Ops. Cal. Atty. Gen. 291. May 20, 1975. referrals made by another person or entity. A physician 38. Clinician’s Handbook on the Federal Tort Claims Act, and the professional corporation of which he or she is a 2nd edition; 2002 (ftp://ftp.hrsa.gov/bphc/pdf/ sole owner are the same for purposes of the Stark Law. quality/2002clinicianhandbook.pdf). 42 C.F.R. § 411.351. 39. PIN 2001-11 addresses circumstances where providers 51. 42 U.S.C. § 1395nn(h)(5)(A); 42 C.F.R. § 411.351. bill for the services and remit the funds received for that service to the health center. It is the policy of the BPHC 52. 42 C.F.R. § 411.351. If the service itself is payable through a composite rate (for example, all services that such an arrangement will not by itself remove the provided as home health services or inpatient and provider of that service from coverage under FTCA. outpatient hospital services), it would still be considered Instead, FTCA coverage will apply to the provider a “designated health service” subject to the Stark Law’s and the center so long as all of the following apply: referral prohibition. (1) the provider reports to the health center all such billings; (2) the funds received by the provider for the 53. 42 U.S.C. § 1395nn(h)(2). specific billings are transferred directly to the health 54. 42 C.F.R. § 411.357(c). center within a reasonable period of time; and (3) the provider’s employment contract authorizes the billing 55. 42 C.F.R. § 411.351. Prior efforts by CMS to define fair market value by reference to particular salary surveys have arrangement as described. Care should be taken to ensure been eliminated from the implementing regulations. that no services are provided without either FTCA or wrap-around coverage. Where Medicare or Medicaid 56. California Health & Safety Code § 1204(a). funds are involved, the health center should make certain 57. California Health & Safety Code § 1212(b)(1). that the arrangement is permitted under the reassignment of benefits rules applicable to such programs. 58. California Health & Safety Code § 1200. 59. California Health & Safety Code §§ 1202 and 1203. 40. PAL 2009-05. May 1, 2009. 60. It is not clear that BPHC would approve a Scope of 41. 42 U.S.C. § 1320a-7b(b). Project application permitting the addition of ambulatory 42. 72 Fed. Reg. 56632. October 4, 2007. care center services, but such approval would be a 43. 42 U.S.C. § 1320a-7b(b)(3)(B). prerequisite for reimbursement of the services as FQHC services. 44. 42 C.F.R. § 1001.952(i) and 26 U.S.C. § 3121(d)(2). 45. 26 U.S.C. § 3121(d)(2). 46. 42 U.S.C. § 1395nn(e)(2) and 42 C.F.R. § 411.357(c). 36 | C alifornia H ealth C are F oundation 61. Additional conditions that FQHCs must meet in order to be certified to participate in Medicare are set out in Part 491 of Title 42 of the Code of Federal Regulations. 62. 42 U.S.C. § 254b(a)(1) and (b)(3). 63. 42 U.S.C. § 254b(c)(1) and (e)(1). 64. 42 U.S.C. § 254b(a)(1). Health centers that are only receiving migrant farm-worker grants may obtain full or partial waivers of the obligation to provide these “required primary health services.” Recipients of homeless grants must also provide substance abuse services. 65. 42 U.S.C. § 254b(b)(1)(B) and (b)(2). 66. 42 U.S.C. § 254b(a)(1) and (k)(3)(A). This requirement does not apply to FQHCs that are only recipients of grants relating to migrant farm-worker, homeless, or public housing health care services under § 254b(g), (h) or (i). 67. 42 U.S.C. § 254b(k)(3)(B). 68. 42 U.S.C. § 254b(k)(3)(C). 69. 42 U.S.C. § 254b(k)(3)(D). 70. 42 U.S.C. § 254b(k)(3)(E) – (F). 71. 42 U.S.C. § 254b(k)(3)(G)(i). 72. 42 U.S.C. § 254b(k)(3)(G)(ii). 73. 42 U.S.C. § 254b(k)(3)(G)(iii). 74. 42 U.S.C. § 254b(k)(3)(H). 75. 42 U.S.C. § 254b(k)(3)(I). 76. 42 U.S.C. § 254b(k)(3)(J). 77. 42 U.S.C. § 254b(k)(3)(K). 78. 42 U.S.C. § 254b(k)(3)(L). 79. 42 U.S.C. § 254b(k)(3)(M). Adding Specialty Services to a California FQHC: Legal and Regulatory Issues | 37 C A L I FOR N I A H EALTH C ARE F OU NDATION 1438 Webster Street, Suite 400 Oakland, CA 94612 tel: 510.238.1040 fax: 510.238.1388 www.chcf.org