Consultants offer Health District details, advice on health-care solutions

— by Susan McBain, Orcas Issues reporter —

For the commissioners of the Orcas Island Health Care District, December has been a month of digging deep into what potential structures would work best for providing primary, urgent, and after-hours care to all residents and visitors on Orcas Island. And the answer is: It depends—on whether the commissioners are more interested in having control over operations or minimizing financial risk; on the assumptions underlying various financial projections; and on which partners, if any, are interested in working with them in different types of structures.

The commissioners held a special five-hour meeting on December 10 with two experts from WIPFLi CPAs and Consultants: Steve Rousso, a specialist in Federally Qualified Health Centers (FQHCs), and Katie Jo Raebel, who specializes in Rural Health Clinics (RHCs). Either of these federal designations would increase Medicare and Medicaid reimbursements for services to covered patients. (Currently, Orcas Family Health Center is already an RHC, while the UW Neighborhood Clinic has neither designation.)

Rousso started the presentation by noting some basic issues. The central question, he said, was whether the District “wants to operate health care or subsidize health care.” Owning and running a clinic or clinics will maximize control over services but also maximize financial risk to the District, whereas subsidizing providers does the opposite. He also noted that much of the presentation would assume that the District formally owns or controls at least one of the clinics, which it does not at present. Also noted was the unusually high percentage of government payers for Orcas patients: 40% of patient services here are reimbursed under Medicare and 20% under Medicaid.

The consultants listed five options for an overall structure and described the pros and cons of each. Their full presentation is on the District website. The options and (believe it or not!) simplified discussions of each are given below.

• Develop a “Co-Applicant” FQHC. In this structure, the District and a provider would co-apply to start a new FQHC ( “look-alike”). The District would be required to set up a new nonprofit board to run the practice. The District’s degree of control over operations would be established in the co-applicant agreement and the nonprofit’s by-laws; however, the nonprofit would have the final say in day-to-day operations. The District would subsidize clinic expenses according to the co-applicant agreement. Startup costs for the new practice would be significant, and ongoing costs for the extensive reporting required could reach $150,000-$200,000 per year or more. The approval process would take at least 18 months, and approval would not be guaranteed even when all the startup work was complete. Medicare and Medicaid reimbursements would increase, but the increased amounts would not begin until final approval of FQHC status.
• Partner with an existing FQHC. If the District identified an existing FQHC willing to add an Orcas clinic as a site under its designation, the process would be much shorter, about three months. The existing FQHC’s nonprofit board would have the final say on operations; however, the FQHC would likely have an interest in adding an Orcas resident to its Board. Medicare/Medicaid reimbursements for clinic patients would increase as noted above. The District’s contribution to the partnership would be a subsidy to cover added costs, such as those for any additional services needed on Orcas.
• Combine the two clinics and affiliate with a hospital as a new “provider-based” RHC. Combining the two practices would, of course, lower overhead rates. The new RHC would ideally partner with a hospital of 50 beds or fewer (the “provider”) for the highest reimbursement rates. The best staffing for reimbursements includes at least as many mid- level practitioners (nurse practitioners, physician assistants, and nurse midwives) as physicians, and preferably more. The process for obtaining RHC designation is much quicker and easier than that for FQHCs, and required reports are less onerous. The hospital would own the practice, but management contracts would affect how and what services were offered. The District’s contribution to the partnership would be a subsidy to cover gaps in reimbursement and any additional services.
• Combine the two clinics as a free-standing RHC. A free-standing RHC is one not affiliated with a hospital or other organization, such as OFHC is at present. The District would own the practice, have full control over operations, and assume all financial risks. According to Raebel, a free-standing RHC typically receives lower reimbursements than a provider-based RHC. She gave a hypothetical example using typical rates of charges and reimbursement for the two RHC types under Medicare: for a service with a customary charge of $120, a provider-based RHC would receive $64 more in reimbursement than a free-standing RHC.
• Continue subsidizing the two clinics under their current ownership while seeking to improve reimbursements and operations. For example, the two clinics might co-locate in a single space to achieve some reduction in overhead.

The afternoon discussion began with the question of where to start in pursuing one or more of these options. Rousso suggested identifying several likely partners of both types and sending out letters of intent, perhaps after making personal contacts. “You would quickly learn who to pursue,” he added. When pressed, he stated that in our position he would seek provider-based RHC status, and Raebel agreed. Second choice would be affiliating with an existing FQHC, and third would be subsidizing a physician as owner of a free-standing RHC. Talking to a group like the Family Care Network of independent providers might also be useful. Both consultants offered to provide samples of documents and names of contacts.

The commissioners explored the issue of whether to consolidate the clinics before or after seeking a partner. They agreed that discussing the possibilities with each potential partner would be the best approach. In order to be prepared to do that, they agreed that next steps would be to: 1) finish the draft prospectus describing the District’s current status, its desired direction, and benefits for potential partners; 2) identify FQHCs and RHCs that might be interested in becoming partners; and 3) if none were found that seemed suitable, contact the Family Care Network. They established work groups of two commissioners for each of these tasks, and others for further refining FQHC requirements and for interacting with the two existing clinics.

The December 17 regular District meeting has been cancelled. The next regular meeting is scheduled for January 7 at 5 p.m. at the Eastsound Fire Hall. For readers interested in more detail about meetings, minutes of each meeting are posted soon after final approval by the commissioners, usually at their next meeting.