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Legal Requirements of the New Community Health Organization

Antitrust Issues

Do the Network Participants Share Substantial Financial Risk or Engage in Sufficient Clinical Integration?

Antitrust Recommendations

Ensure that the Network is Pursuing Substantial Financial Risk or Sufficient Clinical Integration, including:

  • capitation
  • withholds or other means to incentivize providers to control costs; or
  • meaningful involvement in such programs as cooperative quality assurance and utilization review programs

Antitrust Issues

Does the Network Involve an Appropriate Share of the Relevant Provider Specialty Types in the Geographic Market?

Antitrust Recommendations

Be Aware of the Rural Network's Market Shares by Analyzing the Number of Similar Providers Offering Like Services within the Relevant Geographic Market Area.

Antitrust Issues

Does the Network take Appropriate Steps to Minimize Any Potential Anti-Competitive Effects?

  • how are providers chosen for the network?
  • how are price negotiations handled?
  • how is network data maintained?

Antitrust Recommendations

Ensure that the Network is Intending to Pursue Procompetitive Goals.

  • document in mission statement, governing documents and/or meeting agendas and minutes the goals and actions to achieve increased access, increased quality and/or lower costs for purchasers
  • develop and adopt antitrust compliance policies and procedures that ensure that participants understand the limits of their cooperative activities

Ensure that the Network has a Process in Place to Prevent Sharing of Pricing and Other Confidential Information.

  • Messenger Model/Attorney in Fact Negotiating Model
  • Confidentiality Agreements
  • Meeting Agendas Limited to Non-Price Discussions

Document Pro-Consumer Accomplishments.

  • Increased access
  • Quality improvements; and/or
  • Actual efficiencies achieved

Defenses and Immunities

Are there Defenses or Immunities that Protect the Network’s Activities?

  • community support
  • efficiences
  • state action immunity
  • buyer (HMO) power

Antitrust Recommendations

  • Seek the Advice of an Attorney if Any Questions or Concerns Arise.
  • Consider the Advantages or Disadvantages of a DOJ Business Review Letter or FTC Advisory Opinion.

Tax Exemption Issues

  • Do the Network’s Goals Further the Exempt Purposes of the Participating Tax Exempt Entities?
  • How Much Control do the Tax-Exempt Entities have over Governance Decisions?

Tax Exemption Recommendations

  • Know Which Network Participants are Tax-Exempt and Which are For-Profit.
  • Ensure that Contributions from Tax-Exempt Entities are Directed Solely for the Use of Tax-Exempt Purposes.
  • Ensure that Tax-Exempt Entities have Control over How Tax-Exempt Dollars will be Utilized through Either:
    • majority representation on the board; or
    • reserved powers over financial and other matters impacting the use of tax-exempt dollars (i.e. selection of officers)

Tax Exemption Issues

Does the Network Seek to Benefit a Broad Cross Section of the Community?

Community Benefit

  • Health Promotion/Disease Prevention Activities.
  • Serving Members Regardless of Ability to Pay.
  • Participating in Managed Care Programs including Medicare/Medi-Cal.

Tax Exemption Recommendations

  • Ensure that Network Participants or Third Parties are not Paid Excessive Compensation.
    • assess fair market value
    • review comparable data
    • ensure that individuals with a conflict of interest are recusing themselves from decision making; and
    • document analysis and decision making
    • ensure that returns are proportionate to the parties’ interest or efforts
  • Seek Advice from an Attorney or the IRS.

Insurance/Health Plan Regulation Issues

  • Does the Network Have an Insurance License or Health Plan License?
  • Does the Network Contract Directly with Employers or Other Purchasers?
  • In What Manner does the Network Assume Financial Risk?

Insurance/Health Plan Regulation Recommendations

  • Networks Seeking to Contract Directly with Purchasers can Protect Themselves by:
    • partnering with an insurer/health plan;
    • contracting on a fee-for-service basis (with withholds);
    • pursuing provider-sponsored organization certification; or
    • obtaining an insurance/health plan license
  • Networks Contracting Directly with Purchasers Should be Aware of State Regulatory Requirements Applicable to Networks.

Tort Recommendations

  • Maintain Adequate Insurance Coverage
  • Include Indemnification Provisions on CHO Contracts
  • Advertise Independence of Participating Provider
  • Ensure Adequate Review/Grievance Process

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