Proposed Regulations
NEW YORK STATE DEPARTMENT OF HEALTH
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Proposed Rule Making:
Addition of Subpart 83-1 to Title 10 NYCRR (Certificate of Public Advantage)
NOTICE OF REVISED RULEMAKING


Publication Date: 08/27/2014Comment Period Expiration: 09/26/2014
Proposed Text and Statements:

REVISED SUMMARY OF EXPRESS TERMS

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,” “Mental Hygiene Agency,” “Person,” “Planning Process” and “Primary Service Area.”

Section 83-1.2 Certificate of Public Advantage. Describes the effect of obtaining a Certificate of Public Advantage (“COPA”) 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 COPA.

Section 83-1.6 Issuance of a Certificate of Public Advantage. Provides for consultation with the Attorney General, the mental hygiene agencies (as appropriate), and the Public Health and Health Planning Council (“PHHPC”) in the issuance of a 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 COPAs 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, mental hygiene agencies (as appropriate), and the PHHPC, and that any party to a Cooperative Agreement covered by a COPA must file notice of such termination with the Department at least thirty days prior to the termination. The notice of termination will be provided by the Department to the Attorney General and the mental hygiene agencies (as appropriate).

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 of Public Advantage. 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 rights. 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.

Section 83-1.15 Effect of consultation or recommendations. Clarifies treatment of input received pursuant to consultations with, or recommendations from, the Attorney General, mental hygiene agencies (as appropriate), or the PHHPC.

Section 83-1.16 Certificate of need and other requirements. Provides that nothing in this Subpart shall relieve parties from any responsibility for compliance with laws or regulations governing certificate of need or other approval or notice submission requirements.

A copy of the full text of the regulatory proposal is available on the Department of Health website (www.health.ny.gov).


Pursuant to the authority vested in the Commissioner of Health pursuant to section 2999-bb of the Public Health Law, the Official Compilation of Title 10 of the Codes, Rules and Regulations of the State of New York (“NYCRR”) is amended to add a new Subpart 83-1, to be effective upon publication of a Notice of Adoption in the New York State Register, to read as follows:

A new Subpart 83-1 is added to the Subchapter L of Chapter II of 10 NYCRR, to read as follows:


SUBPART 83-1

CERTIFICATE OF PUBLIC ADVANTAGE


83-1.1 Definitions

83-1.2 Certificate of Public Advantage

83-1.3 Public notice

83-1.4 Fees for applications and monitoring

83-1.5 Review process

83-1.6 Issuance of a Certificate of Public Advantage

83-1.7 Record keeping

83-1.8 Modification and termination

83-1.9 Periodic reports

83-1.10 Review after issuance of Certificate of Public Advantage

83-1.11 Application for renewal

83-1.12 Revocation

83.1.13 Hearing rights

83-1.14 Voluntary surrender

83-1.15 Effect of consultation or recommendations
83-1.16 Certificate of need and other requirements

83-1.1 Definitions. The following terms shall have the following meanings for purposes of this Article:

(b) “Certificate of Public Advantage” or “Certificate” means a Certificate issued by the Department pursuant to this Subpart signifying the approval of a Cooperative Agreement or of a planning process.
(c) “Cooperative Agreement” means an executed agreement among a health care provider and one or more persons or entities, including other health care providers, governing any of the following:
(1) The sharing, allocation, or referral of patients, personnel, instructional programs, information technology resources, support services and facilities, or medical, diagnostic, or laboratory facilities or equipment, or procedures or other services traditionally offered by health care providers or health care-related entities, including but not limited to, the implementation of clinical integration programs and payment mechanisms that involve the sharing of data and resources to develop, implement, and monitor the effectiveness of, and adherence to, performance standards, clinical protocols and evidence-based practices; or
(2) A lawful purchase of assets pursuant to a merger or sale, a partnership, a joint venture, or any other affiliation by which ownership or control over all or substantially all of the stock, assets, or activities of one or more health care providers, or health care-related entities, are transferred to another entity who controls a health care provider or health care-related entity.
“Cooperative Agreement” shall not include any Agreement that would permit a health care provider to act in a manner which would be otherwise prohibited by law, except as authorized pursuant to Article 29-F of the Public Health Law.
(d) “Federal or state antitrust laws” means any and all federal or state laws prohibiting monopolies or agreements in restraint of trade, including the federal Sherman Act, Clayton Act, Federal Trade Commission Act and laws set forth in Article 22 of the New York General Business Law , including amendments thereto.
(e) “Health care provider” shall include, but not be limited to, a facility, agency or program licensed or certified pursuant to article twenty-eight, thirty-six, or forty of the Public Health Law; a health care professional licensed pursuant to title eight of the Education Law or a lawful combination of such health care professionals; or an entity licensed, certified or funded pursuant to article sixteen, thirty-one, thirty-two or forty-one of the Mental Hygiene Law.
(f) “Mental hygiene agency” means one of the autonomous offices of the state Department of Mental Hygiene established under section 5.01 of the Mental Hygiene Law.
(g) “Person” means any individual, firm, partnership, corporation, association, public or private institution, political subdivision, or government agency.
(h) “Planning process” means a process, including a process convened and overseen by a planning entity approved by the Department, intended to plan for and result in a Cooperative Agreement.
(i) “Primary service area” means the lowest number of postal zip codes from which the party draws at least 75 percent of its patients for each service or group of services provided.

83-1.2 Certificate of Public Advantage.
(a) Effect. Parties that have received a Certificate of Public Advantage issued by the Department shall be provided state action immunity under federal antitrust laws and immunity from private claims under state antitrust laws and may negotiate, enter into, and conduct business pursuant to, a cooperative agreement or a planning process covered by a duly issued Certificate of Public Advantage. The Attorney General may seek relief under state antitrust law after: (i) consulting with the Department, the mental hygiene agencies as appropriate, and the parties to the Certificate of Public Advantage; and (ii) providing the parties with a reasonable opportunity to modify their conduct or Agreement, if the challenged conduct is inconsistent with or beyond the scope of the Certificate of Public Advantage, or if the Attorney General determines that the anticompetitive effects of the parties’ conduct or business arrangement outweigh the benefits of the conduct or business arrangement.
(b) Application.
(1) Parties to a Cooperative Agreement or planning process may apply to the Department for a Certificate of Public Advantage governing that Cooperative Agreement or planning process. The application must be submitted in a format determined by the Department and shall be provided by the Department to the Attorney General and, as appropriate, the mental hygiene agencies.
(2) The application for a Certificate of Public Advantage governing a Cooperative Agreement must include a copy of the Cooperative Agreement, any related agreements or side letters (including a description of any related oral agreement), a description of the nature and scope of the activities and cooperation included in the Cooperative Agreement, a full description of any consideration passing to any party under the Cooperative Agreement and any additional materials or information required by the Department.
(3) The application for a Certificate of Public Advantage governing a planning process must include a detailed letter of intent with respect to the potential Cooperative Agreement, a description of the nature and scope of the activities and cooperation likely to be included in the potential Cooperative Agreement and any additional materials or information required by the Department.
(4) The applicants must supply any additional documentation or information requested by the Department within 30 days, or any other stated time frame of such request, or must obtain from the Department an extension of the time in which to provide such documentation or information which is requested during the review of the application. Any request for an extension of time shall set forth reasons why such documentation or information could not be obtained within the prescribed time. The granting of a request for an extension shall be at the discretion of the Department.
(5) Failure to provide such documentation or information within the time prescribed or as extended by the Department shall constitute an abandonment or withdrawal of the application without any further action from the Department, the Attorney General, mental hygiene agencies as appropriate, or the Public Health and Health Planning Council.
(c) To the extent that the Cooperative Agreement contemplates activities that are subject to certificate of need or other approval or notice submission requirements pursuant to law or regulation, the parties shall also submit the required applications or notices.


83-1.3 Public notice.
(a) Upon submission of an application for a Certificate of Public Advantage or an application to renew a Certificate of Public Advantage, each party to be covered by the Certificate shall conspicuously post on its public website, in a form determined by the Department, a description of the application with an electronic link to the section of the Department’s public website where applications for Certificates of Public Advantage are summarized. If the party has no public website, it shall provide notice to the public in a manner acceptable to the Department.
(b) The Department shall publish on the Department’s public website a notice of the receipt of each application for a Certificate of Public Advantage, with a brief summary of the application and instructions for persons wishing to provide comments.

83-1.4 Fees for applications and monitoring.
(a) An application filing fee of $5,000 must be paid to the Department at the time an application for a Certificate of Public Advantage or for renewal of a Certificate of Public Advantage is submitted pursuant to this Subpart.
(b) The applicant shall also cover the cost of consultants needed by the Department to assist in the review of the application for a Certificate of Public Advantage and any subsequent applications for renewal and in periodic monitoring, as determined by the Department.

83-1.5 Review process. The Department shall review applications pursuant to this Subpart, in consultation with the Attorney General and, as appropriate, the mental hygiene agencies. The factors to be considered in evaluating applications shall include, but shall not be limited to:
(a) the financial condition of the parties to the agreement, including whether any health care provider party is experiencing financial distress and may be forced to cease operations or eliminate a service in the absence of the Cooperative Agreement;
(b) the dynamics of the relevant primary service area, including the availability of suitable and accessible health care services and the level of competition in the primary service area, the likelihood that other health care providers will enter or exit the primary service area, the health care workforce and the existence of unique challenges such as difficulties in recruiting and retaining health care professionals;
(c) the potential benefits of a Cooperative Agreement or planning process, including but not limited to the likelihood that one or more of the following may result from such Cooperative Agreement or planning process:
(1) Preservation of needed health care services in the relevant primary service area that would be at risk of elimination in the absence of a Cooperative Agreement;
(2) Improvement in the nature or distribution of health care services in the primary service area, including expansion of needed health care services or elimination of unnecessary health care services;
(3) Enhancement of the quality of health care provided by the parties to the Cooperative Agreement;
(4) Expansion of access to care by medically-underserved populations;
(5) Lower costs and improved efficiency of delivering health care services; including reductions in administrative and capital costs and improvements in the utilization of health care provider resources and equipment; or
(6) Implementation of payment methodologies that control excess utilization and costs, while improving outcomes;

(d) the potential disadvantages of a Cooperative Agreement or planning process, including but not limited to the likelihood that one or more of the following may result from such Cooperative Agreement or planning process:
(1) Increased costs or prices of health care in the primary service area resulting from the Cooperative Agreement, after taking into consideration improvements in quality and outcomes;
(2) Diminished quality, availability, and efficiency of health care services;
(3) Inability of health care payers or health care providers to negotiate reasonable payment and service arrangements; or
(4) Reduced competition among physicians, allied health professionals, other health care providers, or other persons furnishing goods or services to, or in competition with, health care providers and the potential for adverse health system quality, accessibility and cost consequences.
(e) the availability of arrangements that are less restrictive to competition and achieve the same benefits or a more favorable balance of benefits over disadvantages attributable to any reduction in competition;
(f) other benefits or disadvantages identified in the course of review; and
(g) the extent to which active supervision is likely to mitigate the disadvantages.

83-1.6 Issuance of a Certificate of Public Advantage.
(a) The Department shall not issue a Certificate of Public Advantage without first consulting with the Attorney General and, as appropriate, the mental hygiene agencies, and consulting with, and receiving a recommendation from, the Public Health and Health Planning Council.
(b) After consulting with the Attorney General, the mental hygiene agencies as appropriate, and the Public Health and Health Planning Council, and receiving a recommendation from the Public Health and Health Planning Council, the Department may issue a Certificate of Public Advantage for the Cooperative Agreement or planning process, if it determines that the benefits likely to result from the Agreement or planning process outweigh the disadvantages.
(c) The Certificate shall include any conditions that the Department, in consultation with the Attorney General, the mental hygiene agencies as appropriate, and the Public Health and Health Planning Council, and receiving a recommendation from the Public Health and Health Planning Council, determines to be appropriate in order to ensure that the Cooperative Agreement or the planning process and the activities conducted under it are consistent with Article 29-F of the Public Health Law and its purpose to improve health care quality, access, efficiency and clinical outcomes. Such conditions shall be related to the proposed activities and goals of the Cooperative Agreement or the planning process and may include, but need not be limited to:
(1) Implementation of a clinical integration plan;
(2) Achievement of quality benchmarks, implementing evidence-based practices and clinical protocols, reducing preventable admissions and readmissions and sub-optimal emergency department use, and achieving other outcomes as identified by the Department;
(3) Maintaining or expanding certain services or levels of access by under-served populations;
(4) Investment in primary care and population health activities;
(5) Improvement in population health benchmarks;
(6) Measures to prevent unwarranted price increases and achieve savings;
(7) Measures to promote efficiencies and achieve savings, including reductions in duplication of services, unnecessary or preventable utilization, capital expenditures, and administrative overhead;
(8) Improvement in recruitment and retention of needed health care professionals; and
(9) Conditions reasonably necessary to ameliorate likely disadvantages, including potential disadvantages identified in section 83-1.5(d) of this Subpart.
(e) A Certificate of Public Advantage may be issued for a period to be determined by the Department, which shall be no less than two years in duration, and shall be subject to active supervision as provided in this Subpart and renewal, as applicable, pursuant to the procedure set forth in sections 83-1.10 and 83-1.11 of this Subpart.

83-1.7 Record keeping.
The Department shall maintain on file each Cooperative Agreement for which a Certificate of Public Advantage is in effect and a copy of the Certificate, including any conditions imposed on it.

83-1.8 Modification and termination.
(a) Any material modification of a Cooperative Agreement or planning process which is the subject of a Certificate of Public Advantage issued pursuant to this Subpart shall be subject to the prior review and approval of the Department in consultation with the Attorney General, the mental hygiene agencies as appropriate, and the Public Health and Health Planning Council, and the receipt of a recommendation from the Public Health and Health Planning Council.
(b) Any party to a Cooperative Agreement covered by a Certificate of Public Advantage that terminates such Agreement shall file a notice of termination with the Department at least 30 days prior to termination of the agreement, in addition to any other notices or approvals required by applicable law or regulations. Such notice of termination shall be provided by the Department to the Attorney General and, as appropriate, the mental hygiene agencies, and shall be deemed a voluntary surrender of a Certificate of Public Advantage pursuant to section 83-1.14.

83-1.9 Periodic reports.
(a) A report of activities pursuant to the Cooperative Agreement or the planning process shall be filed with the Department in such form as the Department, in consultation with the Attorney General and the mental hygiene agencies as appropriate, may require. Such report of activities shall be provided by the Department to the Attorney General and, as appropriate, the mental hygiene agencies. Subject to the terms of the Certificate of Public Advantage and any extensions thereof, such reports shall be filed annually after the issuance of the Certificate of Public Advantage, on or before the anniversary date on which the Certificate was issued, for each year that the Certificate is in effect and at such other times as the Department, in consultation with the Attorney General and the mental hygiene agencies as appropriate, may require.
(b) Such report shall include the following, unless waived by the Department:
(1) A description of the activities conducted pursuant to the Cooperative Agreement or planning process.
(2) Price, cost, and savings information, including efficiencies achieved and additional information requested by the Department, the Attorney General or the mental hygiene agencies as appropriate, related to conditions required under section 83-1.6(c)(9) of this Subpart.
(3) The nature and scope of the activities expected to be undertaken pursuant to the Cooperative Agreement or planning process during the next two years or for the remainder of the Certificate of Public Advantage, if the balance of the Certificate’s term is less than two years, and the likely effect of those activities.
(4) Data concerning the utilization of services in the communities served by the Cooperative Agreement and quality of care delivered by the health care provider parties to the Agreement, including any data on progress in achieving quality benchmarks or targets for reducing preventable hospital admissions or readmissions or sub-optimal emergency department use specified by the Department.
(5) Most recent available data concerning population health in the communities served by the agreement and progress in meeting any population health benchmarks.
(6) Data concerning health care professional recruitment and retention under the Cooperative Agreement or planning process.
(7) An analysis of the benefits and/or expected benefits of the Cooperative Agreement or planning process under the Certificate of Public Advantage, taking into account any conditions imposed by the Department, and how they outweigh the disadvantages or likely disadvantages of any reduction in competition from the Agreement.
(8) A description of the measures taken to comply with conditions imposed by the Department in issuing the Certificate of Public Advantage, along with an assessment of compliance with, and the effectiveness of, such measures.
(9) Any additional information requested by the Department, the Attorney General or, as appropriate, the mental hygiene agencies.

83-1.10 Review after issuance of Certificate of Public Advantage.
(a) The Department shall review each periodic report, application for renewal, and any information submitted in response to a request under this Subpart, and consult with the Attorney General and, as appropriate, the mental hygiene agencies, to determine, based on the factors set forth in section 83-1.5 of this Subpart, whether:
(1) the benefits or likely benefits of the Cooperative Agreement or the planning process continue to outweigh the disadvantages or likely disadvantages that flow from the Cooperative Agreement or planning process; and
(2) the parties to the Cooperative Agreement or planning process are in compliance with the conditions imposed on the Certificate of Public Advantage.
(b) If upon review of a periodic report or application for renewal and any information submitted in response to a request, or at any time following the issuance of a Certificate of Public Advantage, it appears to the Department, in consultation with the Attorney General and, as appropriate, the mental hygiene agencies, that the parties to the Cooperative Agreement or planning process have failed to comply with any condition of the Certificate or that the benefits or likely benefits resulting from a Cooperative Agreement or planning process no longer outweigh the disadvantages or likely disadvantages resulting from the Agreement, the Department shall advise the parties to the Agreement and request any documentation or information necessary to complete a review of the matter.
(c) The parties must supply any additional documentation or information requested by the Department within 30 days, or any other stated time frame, of such request, or must obtain from the Department an extension of the time in which to provide such documentation or information which is requested. Any request for an extension of time shall set forth reasons why such documentation or information could not be obtained within the prescribed time. The granting of a request for an extension shall be at the discretion of the Department. Failure to provide such documentation or information within the time prescribed or as extended by the Department may result in revocation of the Certificate of Public Advantage pursuant to section 83-1.12 of this Subpart.
(d) Following a review of a periodic report, an application for renewal, or of information submitted in response to a request made pursuant to this Subpart, if the Department determines, in consultation with the Attorney General and, as appropriate, the mental hygiene agencies, that the standards set forth in subdivision (a) of this section are satisfied, the Certificate of Public Advantage shall be continued or, if appropriate, renewed.
(e) The Department may, in consultation with the Attorney General and the mental hygiene agencies, as appropriate, at any time following the issuance of a Certificate of Public Advantage, require modifications to the Cooperative Agreement or the planning process and impose changes in the conditions of the Certificate of Public Advantage to promote the goals of Article 29-F of the Public Health Law and assure that the benefits or likely benefits of the Cooperative Agreement or planning process continue to outweigh the disadvantages or likely disadvantages.
(f) The parties shall be notified in writing of the Department's decision and any required modifications to the Cooperative Agreement or planning process and/or changes in the conditions of the Certificate of Public Advantage and shall be given an opportunity to implement any required modifications by a date set by the Department.

83-1.11 Application for renewal.
(a) The parties to a Certificate of Public Advantage issued for a definite term may renew such Certificate. An application to renew the Certificate of Public Advantage shall, no later than 120 days prior to the expiration of the Certificate, be submitted to the Department in a format determined by the Department and shall be provided by the Department to the Attorney General and, as appropriate, the mental hygiene agencies.
(b) The application for renewal shall include the information required pursuant to subdivision (b) of section 83-1.9 of this Subpart, unless waived by the Department, and any other information requested by the Department, and shall be accompanied by the fee set forth in section 83-1.4 of this Subpart.
(c) A Certificate of Public Advantage may be renewed pursuant to the procedure set forth in section 83-1.10 of this Subpart for a period determined by the Department, which shall be no less than two years in duration and shall be subject to active state supervision pursuant to this Subpart.

83-1.12 Revocation.
(a) The Department may revoke, at any time, the Certificate of Public Advantage, if any of the following occur:
(1) the Department, after consultation with the Attorney General and, as appropriate, the mental hygiene agencies, determines that the parties to a Certificate of Public Advantage have not complied with a condition or terms of such Certificate of Public Advantage;
(2) the Department, after consultation with the Attorney General and, as appropriate, the mental hygiene agencies, determines that the benefits or likely benefits of the Cooperative Agreement and the unavoidable costs of terminating the Agreement do not continue to outweigh the disadvantages or likely disadvantages resulting from the Agreement;
(3) the Attorney General or, as appropriate, the mental hygiene agencies, objects to the continuation of a Certificate of Public Advantage and the Department determines, after consultation with the Attorney General and, as appropriate, the mental hygiene agencies, that such objections are not overcome by modifying the Cooperative Agreement or planning process or changing the conditions imposed on the Certificate of Public Advantage. Any modifications or changed conditions must be satisfied by a date set or agreed to by the Department;
(4) the holder of a Certificate of Public Advantage fails to file a report required by this Subpart or fails to provide information requested pursuant to a review under this Subpart, after notice of default; or
(5) a change in state or federal law or regulations warrants revocation of the Certificate of Public Advantage.
(b) Upon a decision to revoke the Certificate of Public Advantage, the Department shall notify the parties to the Certificate of Public Advantage in writing of its determination, and any objections or concerns of the Department that are part of the basis for the determination. The parties to the Certificate of Public Advantage shall have 90 days to respond to such determination, and any objections or concerns. If the objections or concerns are not resolved to the satisfaction of the Department based on its review of such response, the Department may revoke the Certificate.
(c) If the Certificate is revoked, the parties shall be entitled to no benefits under Article 29-F of the Public Health Law and this Subpart, beginning on the date of revocation.

83-1.13 Hearing rights.
No Certificate of Public Advantage shall be revoked without affording the applicant an opportunity to request a hearing pursuant to part 51 of this title.

83-1.14 Voluntary Surrender.
(a) The parties to a Cooperative Agreement or a planning process may mutually agree to voluntarily surrender their Certificate of Public Advantage. At least 30 days prior to the surrender of the Certificate of Public Advantage, the parties shall file a notice of such decision with the Department. Such notice shall be provided by the Department to the Attorney General and, as appropriate, the mental hygiene agencies.
(b) The termination of the Cooperative Agreement which is the subject of the Certificate of Public Advantage by one or more parties to such Cooperative Agreement shall be considered to result in a voluntary surrender.

83-1.15 Effect of consultation or recommendations.
The response and recommendations of the Attorney General, the mental hygiene agencies as appropriate, and the Public Health and Health Planning Council, when sought or required pursuant to any provision of this Subpart, shall be considered by the Department; provided however that such recommendations or the result of such consultation shall not be binding on the Department.

83-1.16 Certificate of need and other requirements.
Nothing in this Subpart shall relieve parties from any responsibility for compliance with laws or regulations governing certificate of need or other approval or notice submission requirements.


REVISED 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 Redesign 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. Subsequently, the Legislature accepted the recommendation of the MRT and enacted PHL Article 29-F (Chapter 59 of the Laws of 2011, Part H, 50-51).

In enacting PHL Article 29-F, 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. Such collaborative agreements also may improve the quality of the services provided to patients, the efficiency of provider operations, and help contain 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 statute reflects the Legislature’s finding 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. Further, active state supervision 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. The proposed regulations provide a mechanism for accomplishing this objective.

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, an operating certificate issued as a result of the Certificate of Need process 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 Department approval, are subject to little or no state oversight, and have no protection from antitrust scrutiny.

Other statutory provisions already provide for state supervision for the purpose of promoting health care collaborations and immunity from antitrust liability in specific contexts. These include the multipayor patient-centered medical home program (PHL Article 29-AA), accountable care organization program (PHL Article 29-E) and PHL 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 implementing 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 an economically strong provider and an economically 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 a defense against federal antitrust claims (“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. PHL 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.

Health care providers that are entering into Cooperative Agreements or a planning process with other providers, or other health care-related entities, may gain a defense against federal antitrust claims and protection from private claims under state antitrust laws by obtaining a Certificate of Public Advantage and complying with these regulations.

This process is optional – providers and other entities may continue to enter into Cooperative Agreements or a planning process 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 engage 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 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 and, as appropriate, the mental hygiene agencies, 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 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.
Contact Person: Katherine Ceroalo
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.


STATEMENT IN LIEU OF
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.

STATEMENT IN LIEU OF
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.