PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:
Proposed Action:
Addition of Subpart 83-1 to Title 10 NYCRR.
Statutory authority:
Public Health Law, section 2999-bb
Subject:
Certificate of Public Advantage.
Purpose:
For the health care industry to obtain reasonable protections from antitrust liability through an active state oversight program.
Substance of proposed rule (Full text is posted at the following State website:www.health.ny.gov):
The proposed rule would add a new subpart 83-1 to 10 NYCRR titled Certificate of Public Advantage.
Section 83-1.1 Contains definitions for purposes of this Subpart, including definitions for “Attorney General,” “Certificate of Public Advantage,” “Cooperative agreement,” “Federal or State antitrust laws,” “Health care provider” and “Person.”
Section 83-1.2 Certificate of Public Advantage. Describes the effect of obtaining a Certificate of Public Advantage and sets forth the basic contents of an application.
Section 83-1.3 Public Notice. Provides for public notice of an application, by both the department and each party to the agreement or proposed agreement for which approval is sought.
Section 83-1.4 Fees for applications and monitoring. Sets forth fees and costs to be paid in relation to applications and renewals.
Section 83-1.5 Review Process. Sets forth the factors to be considered by the Department in its review of applications for a Certificate of Advantage.
Section 83-1.6 Issuance of a Certificate. Provides for consultation with the Attorney General and the Public Health and Health Planning Council in the issuance of a Certificate of Public Advantage (COPA), sets forth examples of conditions which may be imposed in the issuance of a COPA, and provides for the period for which such COPA may be valid.
Section 83-1.7 Record keeping. Requires the Department to maintain a record of all cooperative agreements for which certificates of public advantage are in effect and a copy of the certificate, including any conditions imposed in it.
Section 83-1.8 Modification and Termination. Provides that any material modification of an approved cooperative agreement is subject to the prior review and approval of the Department in consultation with the Attorney General and the Public Health and Health Planning Council, and that any party to a terminated approved cooperative agreement must file notice of such termination with the Department and the Attorney General at least sixty days prior to the termination.
Section 83-1.9 Periodic Reports. Requires periodic filing of reports of activity pursuant to a COPA, and sets forth the frequency and contents of such reports.
Section 83-1.10 Review after issuance of certificate. Provides for Department review of reports, and includes provisions addressing corrective measures the Department may take under certain circumstances.
Section 83-1.11 Application for renewal. Provides for renewal of an approved COPA.
Section 83-1.12 Revocation. Provides for revocation of a COPA by the Department under certain circumstances, and a procedure for doing so.
Section 83-1.13 Hearing right. Provides for a right of hearing prior to the Department’s revocation of a COPA.
Section 83-1.14 Voluntary surrender. Allows for the voluntary surrender of a COPA.
83-1.15 Effect of Consultation or Recommendations. Clarifies treatment of input received pursuant to consultations with, or recommendations from, the Attorney General or the Public Health and Health Planning Council.
A copy of the full text of the regulatory proposal is available on the Department of Health website (www.health.ny.gov).
Text of proposed rule and any required statements and analyses may be obtained from:
Katherine Ceroalo, DOH, Bureau of House Counsel, Reg. Affairs Unit, Room 2438, ESP Tower Building, Albany, NY 12237, (518) 473-7488, email: regsqna@health.state.ny.us
Data, views or arguments may be submitted to:
Same as above.
Public comment will be received until:
45 days after publication of this notice.
This rule was not under consideration at the time this agency submitted its Regulatory Agenda for publication in the register.
Regulatory Impact Statement
Statutory Authority:
The authority for the proposed addition of a new Subpart 83-1 to Title 10 NYCRR is Article 29-F of the Public Health Law (PHL).
Legislative Objectives:
In March 2011, Governor Cuomo’s Medicaid Re-Design Team (MRT), recommended providing support for integration and collaboration among health care providers by conferring immunity from state and federal antitrust liability through the active state supervision of such activities. In April 2011, the Legislature accepted the recommendation of the MRT and enacted Article 29-F of the Public Health Law.
The MRT and the Legislature found that coordination of health care services is essential to the improvement of health care quality, efficiency, access and outcomes. In addition, the Legislature found that collaborative arrangements among, or consolidation, mergers or acquisition of, providers may be necessary to preserve access to essential services in some communities, while improving the quality of the services they provide, the efficiency of their operations, and containing costs. Furthermore, health system reform proposals at the federal and state levels, including mechanisms such as accountable care organizations, health homes, patient-centered medical homes, and payment reforms such as penalties for potentially preventable readmissions, all rely on integration and collaboration among providers.
The Legislature concluded that competition as currently mandated by federal and state antitrust laws should be supplanted by a regulatory program to permit and encourage mergers, acquisitions, and cooperative, collaborative and integrative agreements among health care providers, and others, in order to assure access to essential health care services, to improve health care quality and outcomes, to enhance efficiency, or to minimize the cost of health care. According to the Legislature, regulatory oversight of such arrangements should be provided to ensure that the benefits of such agreements outweigh any disadvantages attributable to any reduction in competition that may result from the agreements, and to provide “state action immunity” to the parties engaged in such activities subject to active state supervision under the program.
Current Requirements:
Providers seeking to merge or to create a common active parent are currently required to receive approval from the Department as part of the Certificate of Need process. However, a Certificate of Need does not provide protection from antitrust liability at the state or federal levels. Many other collaborative arrangements among providers and other entities, or between non-provider entities, may proceed without Certificate of Need approval, are subject to little or no state oversight, and have no protection from antitrust scrutiny.
Other statutory provisions provide for state supervision for the purpose of promoting health care collaborations and immunity from antitrust liability in specific contexts. These include the multi-payer patient-centered medical home demonstration program (Article 29-AA), accountable care organization demonstration (Article 29-E), and Article 29-A, relating to rural health networks and rural health care access.
Needs and Benefits:
Increased integration and collaboration among health care providers, and among providers, payors and other healthcare-related entities, are essential to many of the health system reform proposals under the Affordable Care Act and the state MRT initiatives. In addition, payment reforms, such as penalties for potentially preventable readmissions and value-based purchasing, will encourage integration and collaboration among providers. These collaborations promise to improve health care quality and outcomes, strengthen care coordination among providers, reduce inappropriate utilization, increase efficiency and contain health care costs. Further, a collaboration between a strong provider and a weak one may be able to protect the weaker provider from financial failure and preserve access to care in the community.
However, some collaborative arrangements might be construed as anti-competitive under the antitrust laws and might expose the participants to antitrust liability. Federal case law provides for a defense against federal antitrust enforcement (“state action immunity”) where the arrangement is: subject to active state supervision to ensure that the public benefits derived from the integrative and collaborative arrangements outweigh any anticompetitive effects; pursuant to a state-created oversight and approval process; and based upon the state's explicit intent to supplant competition with state oversight and to confer state action immunity upon those entities and activities approved under the process. Article 29-F expresses that intent, and the proposed regulations implement the program provided for by the statute, including the active supervision necessary to provide a “state action immunity” defense to a federal antitrust claim.
Under these regulations, health care providers that are entering into cooperative agreements with other providers, or other healthcare-related entities, may gain limited protection from liability under state antitrust laws, and a defense against federal antitrust claims, by obtaining a certificate of public advantage. This process is optional – providers and other entities may continue to enter into cooperative agreements without seeking such protection. For example, an entity may determine that the risk of antitrust liability resulting from their arrangement is low and that a certificate of public advantage is not necessary. However, these regulations will provide a path to pursue protection from antitrust liability for those providers that choose to seek a certificate of public advantage, and which are engaging in collaborations that would preserve or expand access to care, improve quality and outcomes, enhance efficiency, and/or curb costs, and which otherwise meet the criteria for approval under the program.
COSTS
Costs to Private Regulated Parties:
As a certificate of public advantage is optional, this regulation creates no mandatory burdens or costs to regulated parties. However, applicants will be charged a $5,000 fee for initial applications, and for renewals, and will be required to pay for any consultants needed by the Department to analyze the application and the balance of benefits and disadvantages presented by the proposed collaborative arrangement. Applicants will also have ongoing costs with regard to periodic reporting and response to issues arising in the course of oversight. Those costs will vary depending on the size and nature of the project, the complexity of the review, the extent of any issues arising subsequent to initial approval, and other factors. In most cases, however, such costs will be more than offset by the savings resulting from not having to go through federal antitrust reviews, which require similar analysis. Such costs could be several multiples of the cost of participating in the program, even with imposition of the application and consultant fees. Entities need not participate if they choose not to, whether for financial or any other reason. Accordingly, the program may often provide an opportunity for cost savings.
Costs to Local Government:
There are no costs to local government, except to the extent that a local government chooses to seek a certificate of public advantage for its covered activity.
Costs to the Department of Health:
The review of certificate of public advantage applications will require the commitment of staff resources. However, the number of applications is expected to be small, and the reviews will be conducted largely by consultants paid for by the applicants.
Costs to Other State Agencies:
The regulations will require the dedication of some staff resources by the Antitrust Bureau of the Attorney General’s Office, which will also review these applications. However, the number of applications is expected to be small, and the Attorney General already engages in antitrust-related reviews. Accordingly, the associated costs to other state agencies should be nonexistent or minimal.
Local Government Mandates:
The proposed regulation does not impose any new programs, services, duties or responsibilities upon any county, city, town, village, school district, fire district or other special district.
Paperwork:
The proposed regulation requires the submission of an application if the parties to a cooperative agreement wish to seek protection from antitrust liability, together with subsequent ongoing reports and provision of additional information as requested by the Department where necessary during the course of its active supervision of the arrangement. Such paperwork will likely be less burdensome than would be associated with obtaining approval from state and federal antitrust authorities, in addition to possible ongoing enforcement risks in the absence of state action immunity.
Duplication:
There are no relevant State regulations which duplicate, overlap or conflict with the proposed amendment.
Alternatives:
The certificate of public advantage (COPA) process has been adopted in several other states. The Department opted for this type of process because it is known to the federal antitrust enforcement agencies and has withstood their scrutiny. The Department considered alternative fee requirements and determined that a $5,000 fee plus the costs of needed consultants would be appropriate for both initial applications and renewals. The Department also considered making all COPAs valid for the same number of years, but determined that the better course would be to tailor the COPA and its duration to the particular arrangement in question.
Federal Standards:
These regulations do not duplicate or conflict with any federal regulations.
Compliance Schedule:
The proposed amendment will be effective upon publication of a Notice of Adoption in the New York State Register.
Regulatory Flexibility Analysis
No regulatory flexibility analysis is required pursuant to section 202-(b)(3)(a) of the State Administrative Procedure Act. The proposed amendment does not impose an adverse economic impact on small businesses or local governments, and it does not impose reporting, record keeping or other compliance requirements on small businesses or local governments. The Department bases this determination on the voluntary nature of the program, the fact that any obligations associated with participation in the program are no different for small business or local governments than for any other participant, and the fact that participation will likely be chosen only if the costs and burdens associated with participation, including those associated with reporting or other obligations, will be less than the overall costs associated with not participating, and foregoing the opportunity for obtaining state action immunity for the relevant activity.
Rural Area Flexibility Analysis
No rural area flexibility analysis is required pursuant to section 202-bb(4)(a) of the State Administrative Procedure Act. The proposed amendment does not impose an adverse impact on facilities in rural areas, and it does not impose reporting, record keeping or other compliance requirements on facilities in rural areas. The Department bases this determination on the voluntary nature of the program, the fact that any obligations associated with participation in the program are no different for rural areas than for any other participant, and the fact that participation will likely be chosen only if the costs and burdens associated with participation, including those associated with reporting or other obligations, will be less than the overall costs associated with not participating, and foregoing the opportunity for obtaining state action immunity for the relevant activity.
Job Impact Statement
No Job Impact Statement is required pursuant to section 201 a(2)(a) of the State Administrative Procedure Act. It is apparent, from the nature of the proposed amendment, that it will not have an adverse impact on jobs and employment opportunities.
