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Assessing and Addressing Legal Barriers to the Clinical Integration of Community Health Centers and Other Community Providers

Clinical integration of health care organizations is often seen as a means of boosting health care quality and efficiency. Interest in it has grown in recent years with a rapid escalation in health care costs and mounting evidence of the role of integration in slowing cost increases. The Patient Protection and Affordable Care Act (Affordable Care Act) encourages clinical and financial integration, doing so through its support of accountable care organizations and other innovations that promote partnership among health care providers.

Clinical integration through affiliation and collaboration has also been a long-established goal of community health centers, which now provide primary care services to approximately 20 million mostly uninsured Americans. Health centers are expected to provide care to millions more as the Accountable Care Act expands health care coverage to low-income Americans, many of whom live in the medically underserved communities where health centers operate.

Partnerships among health centers, hospitals, and clinics have enabled health centers to expand and enhance the services. For this reason, the Health Resources and Services Administration (HRSA), the federal agency that oversees health centers, supports collaboration including the formation of provider networks for shared services and joint contracting arrangements that serve to assure patients obtain the full range of services they need.

Despite the potential benefit of partnerships and encouragement from federal agencies, many health centers and their potential partners see the unique laws that govern health centers as impediments to their integration efforts. The concern is not without foundation. Section 330 of the Public Health Service Act, the statute that authorizes the establishment and operation of health centers, imposes significant requirements on health centers, including the legal obligation to serve all community residents regardless of their income, insurance status, or ability to pay for necessary health care. These requirements extend to a health center’s collaborator. And failure to comply with the statute has serious consequences. The health centers not only risk losing Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) payments, but also other benefits and protections such as eligibility for a prescription drug discount program, special antifraud “safe harbors,” and malpractice liability coverage.

The federal affiliation policy derived from the section 330 statute is designed to assure that in core matters—governance, senior financial and medical management, and overall clinical practice—health centers remain independent actors, free of the types of external pressures that could erode adherence to federal statutory obligations or cede operational and governance control as a result of economic, business, or personnel pressures.

Thus while federal guidelines encourage hospital referral arrangements, affiliations with specialty providers, admitting privileges and established arrangements for hospitalization, discharge planning and patient tracking, after-hours coverage, and participation in integrated delivery systems, they also impose certain affiliation limits, including a bar on arrangements in which a corporation obtains actual or effective control over a health center’s board.

Despite these limitations, close examination of the legal framework of the health center program reveals that the law not only permits but encourages collaborations that further the health center mission. And as a review of ongoing affiliations reveals, health centers are widely engaged in collaborative activities. These affiliation and collaboration activities advance the goals of access, comprehensive care, quality improvement, and efficiency. Such health center collaborations are varied, but experts have identified several common types including:

  • Referral arrangements in which the parties seek services from one another on a preferred basis and furnish services to the patients of each party.
  • Co-location arrangements in which a provider, maintaining its own practice and control, agrees to treat patients referred to it, but in the referring provider’s physical location. For example, a health center might agree to provide medical care to patients of a community mental health center, at the mental health center’s site.
  • Nonexclusive contractual arrangements in which health centers and their partners jointly contract for the purchase or provision of services or capacity, and operate with respect to these services on behalf of each other. As an example, a health center might enter into a relationship with a family planning program receiving federal support under the Public Health Service Act to offer enhanced services for adolescent patients because of the program’s expertise in serving this population.
  • Umbrella affiliation agreements in which a health center and its partner agree to undertake multiple collaborations and engage in joint planning under a broad and binding affiliation agreement. Health centers remain independent partners but generally agree to act collaboratively in order to achieve specific goals. An umbrella affiliation might include a broad agreement to evaluate and develop shared systems or services, with specific subagreements around the purchase and management of electronic health record (EHR) systems or the joint purchase of specialized laboratory services.
  • Corporate integration strategies that involve legal arrangements in which the partners develop a formal involvement in (but not control over) each entity’s corporate governance, which in turn allows for a greater alignment of corporate activities and strategy while continuing to maintain the corporations as separate entities. This type of affiliation, which may require amendments to corporate bylaws as well as board resolutions, might be used when a health center desires to form a close affiliation with a major supplier of goods and services, such as the local hospital.
  • New health center sites, a particularly fast-growing area in which a non-health center health care provider essentially converts an existing non-health center primary care clinic(s) into a health center service site that meets all federal health center requirements and is governed and operated by an existing health center with partner input.
  • Creating new non-health center entities that are separate from the health center but are jointly governed by a health center and its partners.

This report outlines the laws and policies that govern collaborations between health centers and their partners, and profiles health centers that have worked within the legal framework to develop partnerships that benefit patients, while adhering to the health centers’ core mission to assure health care for all patients regardless of insurance coverage, income, or ability to pay for services.

Similar collaborations will be increasingly common, as the federal government’s $11 billion investment in community health centers under the Affordable Care Act makes clinical integration between health centers and community partners even more feasible.

As this report illustrates, a well-designed federal strategy will foster such innovation both through policy issuance and expanded technical support, training, and learning opportunities that allow health centers and their partners to grow from one another’s experience.

Publication Details



S. Rosenbaum, M. H. Zakheim, J. C. Leifer et al., Assessing and Addressing Legal Barriers to the Clinical Integration of Community Health Centers and Other Community Providers, The Commonwealth Fund, July 2011.