Chapter 221. Regulations Governing Cooperative Agreements
12VAC5-221-10. Definitions.
The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:
"Applicant" means a party to a proposed cooperative agreement that submits an application to the authority pursuant to § 15.2-5384.1 of the Code of Virginia.
"Application" means the written materials submitted by applicants in accordance with § 15.2-5384.1 of the Code of Virginia.
"Attorney General" means the Attorney General for the Commonwealth of Virginia.
"Authority" has the same meaning as ascribed to the term in § 15.2-5369 of the Code of Virginia.
"Commissioner" means the State Health Commissioner or the State Health Commissioner's designee as may be designated in this chapter.
"Cooperative agreement" has the same meaning as ascribed to the term in § 15.2-5369 of the Code of Virginia.
"Day" means calendar day.
"Department" means the Virginia Department of Health.
"Hospital" has the same meaning as ascribed to the term in § 15.2-5369 of the Code of Virginia.
"Letter and order authorizing cooperative agreement" or "authorization letter" means a document that is issued by the commissioner approving a cooperative agreement.
"Measure" means some number of factors or benchmarks, which may be binary, a range, or continuous factors.
"Participating locality" has the same meaning as ascribed to the term in § 15.2-5369 of the Code of Virginia.
"Party" means a hospital entering into a cooperative agreement.
"Plan of separation" means a written proposal submitted with an application to return the parties to a preconsolidation state, which includes a plan for separation of any combined assets, offering, provision, operation, planning, funding, pricing, contracting, utilization review, or management of health services or any combined sharing, allocation, or referral of patients, personnel, employee benefits, instructional programs, support services, and facilities or medical, diagnostic, or laboratory facilities or procedures or other services traditionally offered by hospitals, including any parent or subsidiary at the time the consolidation occurs or thereafter.
"Primary service area" or "PSA" means the geographic area from which a hospital draws 75% of its patients as measured by the residential zip code of each patient.
"Secondary service area" or "SSA" means the geographic area from which a hospital draws an additional 15% of its patients, as measured by the residential zip code of each patient.
"TAP" means the technical advisory panel.
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-20. (Repealed.)
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; repealed, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-30. Application submission.
A. For each cooperative agreement that the parties within a participating locality intend to enter, the parties shall submit an application requesting an authorization letter to the authority. This provision shall apply even in the event that the parties have an existing authorization letter issued by the commissioner.
B. The parties shall submit a copy of the application and any additional requested information simultaneously to: (i) the authority, (ii) the commissioner, and (iii) the Attorney General.
C. If the applicants believe the materials submitted contain proprietary information that is required to remain confidential, the applicants shall:
1. Clearly identify the information; and
2. Submit duplicate applications, one with full information for the commissioner's use and one redacted application available for release to the public.
D. The commissioner and the department shall keep proprietary information that is clearly identified by the applicants confidential pursuant to subdivision 3 of § 2.2-3705.6 of the Code of Virginia.
E. Upon receipt of the authority's recommendation to approve an application for a cooperative agreement, the commissioner shall begin review.
Statutory Authority
§§ 32.1-12 and 15.2-5384.1 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-40. (Repealed.)
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 35, Issue 4, eff. November 14, 2018; repealed, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-50. Public hearing.
A. In addition to the hearing held in accordance with § 15.2-5384.1 C of the Code of Virginia, the commissioner may hold a public hearing for each application submitted.
B. The public hearing shall be open to the public in accordance with the provisions of the Virginia Freedom of Information Act (§ 2.2-3700 et seq. of the Code of Virginia).
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-60. Submission of public comment.
A. A member of the public may submit written comment regarding an application to the commissioner.
B. The commissioner may not consider written comment from a member of the public submitted more than 30 days after the authority's recommendation has been made on an application.
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
Part II
Application
12VAC5-221-65. Reimbursement.
A. For each application recommended for approval by the authority, a review deposit of $50,000 shall be paid by the applicants to the department.
B. The review deposit shall be:
1. Remitted only by certified check, cashier's check, bank money order, or other methods approved by the commissioner;
2. Made payable to the department; and
3. Due to the department upon the commissioner's receipt of a recommendation for approval from the authority.
C. If the commissioner determines, after review of the application, that the actual cost incurred by the department is less than $50,000, the department shall reimburse the applicant the amount that is greater than the actual cost.
D. If the commissioner determines that the actual cost incurred by the department is greater than $50,000, the applicant shall pay any additional amount to be:
1. Remitted only by certified check, cashier's check, bank money order, or other methods approved by the commissioner;
2. Made payable to the department; and
3. Due to the department 30 days after receipt of a request for payment from the commissioner.
E. The commissioner shall:
1. Incur only those costs necessary to adequately review the application as determined in the commissioner's sole discretion; and
2. Maintain detailed records of all costs incurred for which reimbursement is sought.
F. An applicant seeking approval of a cooperative agreement shall reimburse the commissioner for all reasonable and actual costs incurred by the commissioner in the commissioner's review of the application, including costs of experts and consultants retained by the commissioner.
G. The applicants shall make payment to the department within 30 days of receipt of a request for reimbursement.
H. Prior to contracting with experts or consultants, the commissioner shall provide a seven-day notice to the applicants describing the proposed scope of work and anticipated costs of those experts and consultants.
I. The applicants shall have seven days from the date of receipt of the commissioner's notice pursuant to subsection H of this section to provide to the commissioner possible alternatives to the use of those experts and consultants.
J. The commissioner shall consider information submitted by the applicants in determining whether to retain an expert or consultant.
K. All reimbursement requests by the commissioner shall be subject to the provisions of § 2.2-4805 of the Code of Virginia.
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-70. Commissioner's request for information.
A. Upon receipt of the authority's recommendation for approval, the commissioner may request supplemental information from the applicants.
B. To the extent the information is not present within the application, the commissioner shall request a plan of separation with an independent opinion from a qualified organization verifying the plan of separation can be operationally implemented without undue disruption to essential health services provided by the parties.
C. The commissioner may designate the department to request and to receive supplemental information from the applicants.
D. All supplemental information submitted to the commissioner shall be accompanied by a verified statement signed by the chairperson of the board of directors and chief executive officer of each party, or if one or more party is an individual, signed by the individual attesting to the accuracy and completeness of the enclosed information.
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-80. Commissioner's review.
A. When reviewing an application, the commissioner shall consult: (i) the Attorney General and (ii) all other affected agencies of the Commonwealth.
B. When reviewing an application, the commissioner may (i) consult with the Federal Trade Commission and (ii) consult and coordinate with other affected jurisdictions.
C. During review of an application, the commissioner shall examine (i) the record developed by the authority, (ii) the authority's recommendation for approval, (iii) any additional information received from the parties, and (iv) any other data and information available.
D. The commissioner may not render a decision on an application until all requested supplemental information is received.
E. The commissioner shall consider the factors that the authority is required to consider pursuant to § 15.2-5384.1 E of the Code of Virginia when reviewing an application.
F. The commissioner shall approve the application if he finds by a preponderance of the evidence that the benefits likely to result from the proposed cooperative agreement outweigh the disadvantages likely to result from a reduction in competition from the proposed cooperative agreement.
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-90. Action on an application.
A. The commissioner shall issue a decision in writing within 45 days of receipt of the authority's recommendation. However, if the commissioner has requested supplemental information from the applicants, the commissioner shall have an additional 15 days, following receipt of the supplemental information, to issue a decision.
B. At the request of the applicants, the commissioner may delay the issuance of a decision to provide additional time to review the record.
C. The commissioner's decision to approve or deny an application shall constitute a case decision pursuant to the Virginia Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia).
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
Part II
Application
12VAC5-221-95. Conditions.
The commissioner may condition the approval of the authorization letter on the applicant's commitment to achieving improvements to population health, access to health care services, quality, and cost-effectiveness identified by the applicant in support of the application. The conditions may include:
1. A cap on the negotiated case-mix adjusted revenue per discharge by payer by product;
2. A commitment to return a portion of the cost savings and efficiencies gained through the cooperative agreement to residents in the participating localities through specific proposed mechanisms;
3. An agreement that the parties may not prevent or discourage health plans from directing or incentivizing patients to choose certain providers;
4. An agreement that the parties may not have any contractual clauses or provisions that prevent health plans from directing or incentivizing patients;
5. An agreement that the parties may not engage in the typing of sales of the health system's services with the health plan purchase of other services from the health system;
6. An agreement that the parties may not restrict a health plan's ability to make available to its health plan enrollees cost, quality, efficiency, and performance information to aid enrollees in evaluating and selecting providers in the health plan;
7. A commitment that the parties may not refuse to include certain provisions in contracts with health plans that have been utilized in health plan contracts in other parts of the Commonwealth in order to promote value-based health care, including bundled payments, pay for performance, utilization management, and other processes that reward improvements in quality and efficiency; and
8. A commitment to reduce the total cost of care and improve the quality of care in the region served by the new entity.
Statutory Authority
§ of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-100. Ongoing and active supervision.
A. The commissioner shall maintain active and continuing supervision of the parties in accordance with the terms under this section and to ensure compliance with the cooperative agreement and the letter authorizing cooperative agreement.
B. Any party who receives an authorization letter shall submit any information that is requested by the commissioner for ongoing monitoring and supervision. The commissioner may designate the department to request and to receive additional information from the parties.
C. In the selection of the measures for reviewing the proposed benefits of the cooperative agreement and during the monitoring and active supervision of any approved cooperative agreement, the commissioner shall:
1. Draw from consensus health and health care metrics, such as those being developed pursuant to the state health improvement plan to ensure validity and consistency of the measure;
2. Use historical, actual experience in the region to establish baseline performance and evaluate progress over time;
3. Consider recommendations on the measures and goals from the TAP appointed pursuant to 12VAC5-221-120; and
4. Allow for flexibility, to the extent quantifiable goals and targets are specified, should environmental factors that are outside the control of the parties change significantly.
D. The commissioner shall establish benchmarks and quantitative measures that will be used to evaluate the proposed and continuing benefits of the cooperative agreement. The quantitative measures shall include measures of the identifiable benefits from the cooperative agreement in at least the following categories:
1. Population health;
2. Access to health services;
3. Economic;
4. Patient safety;
5. Patient satisfaction; and
6. Health outcomes.
E. The TAP and the parties of the cooperative agreement may make recommendations for the creation and evaluation of quantitative measures, but the commissioner shall have the exclusive authority to add, modify, accept, or reject recommendations when creating or interpreting the quantitative measures.
F. Upon receipt of any requested additional information submitted pursuant to subsection B of this section, the commissioner shall notify the parties within 45 days regarding whether the additional information satisfies the commissioner's request.
G. The parties shall:
1. Report any update to the parties' plan of separation; and
2. Submit the updated plan of separation to the commissioner within 30 days of that update with an independent opinion from a qualified organization that states the plan of separation may be operationally implemented without undue disruption to essential health services provided by the parties.
H. The commissioner may (i) develop other mechanisms of monitoring the parties to determine compliance with the cooperative agreement and whether compliance continues to meet the requirements of § 15.2-5384.1 of the Code of Virginia and (ii) modify the mechanisms of monitoring the parties upon notice to the parties.
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-110. Annual reporting.
A. The parties shall report annually to the commissioner on the extent of the benefits realized and compliance with any terms and conditions placed on their letter authorizing cooperative agreement. The report shall:
1. Describe the activities conducted pursuant to the cooperative agreement;
2. Include any actions taken in furtherance of commitments made by the parties or terms imposed by the commissioner as a condition for approval of the cooperative agreement;
3. Include information related to changes in price, cost, quality, access to care, and population health improvement;
4. Include actual costs, revenues, profit margins, and operating costs;
5. Include a charge master;
6. Include information reflecting the contracted rates negotiated with nonphysician providers, allied health professionals, and others;
7. Include any measures requested by the department based on the recommendations of the technical advisory panel appointed pursuant to 12VAC5-221-120; and
8. Include the current status of the quantitative measures and the information requested by the department for benchmarks established in 12VAC5-221-100 D.
B. The commissioner may require the parties to supplement the annual report with additional information to the extent necessary to ensure compliance with the cooperative agreement and the letter authorizing cooperative agreement.
C. All annual reports submitted pursuant to this section shall be certified audited by a third-party auditor.
D. The parties shall reimburse the commissioner for all costs and expenses deemed necessary by the commissioner regarding the ongoing and active supervision of the cooperative agreement, including costs of experts and consultants retained by the commissioner.
E. The parties shall:
1. Remit payment only by certified check, cashier's check, bank money order, or other methods approved by the commissioner;
2. Make all payments payable to the department; and
3. Submit payment to the department 30 days after the receipt of a request for reimbursement from the commissioner.
F. The commissioner shall:
1. Maintain detailed records of all costs incurred for which reimbursement is sought;
2. Incur only those expenses necessary to actively supervise the cooperative agreement as determined in the commissioner's sole discretion; and
3. Provide the parties a written quarterly report detailing all costs incurred by the commissioner related to the supervision of the cooperative agreement for which the commissioner seeks reimbursement within 30 days of the end of each quarter.
G. Prior to contracting with experts or consultants, the commissioner shall provide a seven-day notice to the parties describing the proposed scope of work and anticipated costs of those experts and consultants.
H. The parties shall have seven days from the date of receipt of the commissioner's notice pursuant to subsection G of this section to provide to the commissioner possible alternatives to the use of those experts or consultants.
I. The commissioner shall consider information submitted by the parties in determining whether to retain an expert or consultant.
J. All reimbursement requests by the commissioner shall be subject to the provisions of § 2.2-4805 of the Code of Virginia.
K. The commissioner shall annually issue a written decision and the basis for the decision as to whether the benefits of the cooperative agreement continue to outweigh the disadvantages attributable to a reduction in competition that have resulted from the cooperative agreement.
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
Part III
Monitoring
12VAC5-221-115. Onsite inspection.
A. The commissioner may make periodic unannounced onsite inspections of the party's facilities as necessary.
B. The commissioner may designate the department to conduct onsite inspections or investigations of the party's facilities.
C. The party shall make available to the commissioner requested records and shall allow access to interview the agents, employees, contractors, and any other person under control, direction, or supervision of the party.
D. The commissioner shall investigate complaints received regarding noncompliance with the cooperative agreement or the authorization letter.
E. When the investigation is complete, the commissioner shall notify the party and the complainant, if known, of the findings of the investigation.
Statutory Authority
§ of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-120. Technical advisory panel.
A. The commissioner shall appoint a TAP to provide (i) initial recommendations to the commissioner as to the quality, cost, and access measures and benchmarks to be considered to objectively track the benefits and disadvantages of a cooperative agreement and (ii) ongoing input to the commissioner on the evolution of these and other new measures and the progress of the parties with respect to achievement of commitments with respect to these measures.
B. The TAP shall consist of:
1. A representative of the commissioner who shall serve as chair of the TAP;
2. The chief medical or quality officers of the parties;
3. A chief medical or quality officer of a hospital or health system from other state market areas with no affiliation with the parties;
4. A chief medical or quality officer of a health plan that has subscribers in the affected area;
5. Experts in the area of health quality measurement and performance;
6. A consumer and employer representative from the affected area;
7. A representative from the Bureau of Insurance of the State Corporation Commission;
8. The chief financial officers of the parties;
9. A chief financial officer of a hospital or health system from other state market areas with no affiliation with the parties; and
10. A chief financial officer of a health plan that has subscribers in the affected area.
C. The TAP shall:
1. Meet at least on an annual basis;
2. Identify evidence-based cost, quality, and access measures in areas including population health, patient safety, health outcomes, patient satisfaction, access to care, and any other areas identified by the TAP; and
3. Make recommendations regarding how to best report performance on quality metrics.
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-130. Enforcement procedures.
A. If the commissioner has reason to believe that compliance with a cooperative agreement no longer meets the requirements of § 15.2-5384.1 of the Code of Virginia or this chapter, the commissioner shall initiate a proceeding pursuant to § 2.2-4019 of the Code of Virginia to determine whether compliance with the cooperative agreement no longer meets those requirements.
B. During the proceeding, the commissioner may seek reasonable modifications to a letter authorizing cooperative agreement with the consent of the parties.
C. The commissioner may revoke a letter authorizing cooperative agreement upon finding that:
1. The parties are not complying with the terms or conditions of the cooperative agreement or the letter authorizing cooperative agreement;
2. The cooperative agreement is not in substantial compliance with the terms of the parties' application or the letter authorizing cooperative agreement;
3. The benefits resulting from the cooperative agreement no longer outweigh the disadvantages attributable to the reduction in competition resulting from the cooperative agreement;
4. The commissioner's approval was obtained as a result of intentional material misrepresentation to the commissioner or as the result of coercion, threats, or intimidation toward any party to the cooperative agreement; or
5. The parties have failed to pay any required fee.
D. The proceeding initiated by the commissioner under this section, and any judicial review thereof, shall be held in accordance with and governed by the Virginia Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia).
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-140. Voluntary termination of cooperative agreement.
A. A party shall file notice in writing to the commissioner no later than 30 days after terminating its participation in a cooperative agreement.
B. In the event of a termination of a cooperative agreement, the parties shall return the authorization letter to the commissioner.
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.
12VAC5-221-150. Official records.
The department shall make available on its website:
1. All authorization letters of the approved cooperative agreements;
2. All reports collected pursuant to 12VAC5-221-110; and
3. The commissioner's annual determination of compliance with the authorization letter.
Statutory Authority
§ 32.1-12 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 34, Issue 1, eff. October 20, 2017; amended, Virginia Register Volume 42, Issue 8, eff. January 15, 2026.