ACO Application Requirements and Procedures

The final ACO regulations outline the process and required content for ACO applicants to participate in the Shared Savings Program.  For the initial applications in 2012, the required term of the agreement will be either (i) April 1, 2012 through December 31, 2015, or (ii) July 1, 2012 through December 31, 2015.  Thereafter all agreements will commence on January 1 and have a three year term.  An ACO must submit an application on a form required by CMS that includes extensive information, disclosures and certificates.  Some (but not all) of the more significant requirements are that the ACO applicant must:

  • certify that the ACO, its participants, providers and suppliers have agreed to become accountable for the quality, cost, and overall care of the Medicare beneficiaries assigned to the ACO;
  • provide documents sufficient to describe the ACO’s participants and providers rights and obligations to receive shared savings and to adhere to the quality assurance and evidence based clinical guidelines, which, for example, include participation agreements, employment contracts, and operating policies;
  • include a description of how the ACO will implement the required patient-centeredness criteria, including the potential remedies and penalties, including expulsion;
  • provide materials documenting its organizational structure, including an organization chart, a list of committees with the names of the members, and key job descriptions;
  • either include a description or copy of a compliance plan;
  • list all ACO participating providers, along with their Medicare enrolled TINs;
  • describe (i) how the ACO plans to use shared savings payment, including the criteria for distributing the savings; (ii) how its plan will achieve the specific goals of the Shared Savings Program; and (iii) how the plan will achieve the general aims of better care for individuals, better health for populations, and lower growth in expenditures; and
  • include documentation that it is capable of repaying losses or other monies determined to be owed upon the first year reconciliation.

The detailed requirements for the application will make it imperative that ACO applicants comprehensively organize and document the ACO structure before applying.  Compliance with the extensive application requirements will require significant financial and other resources.

CMS will evaluate applications and provide a notice of determination to the applicant.  If the application is denied, the reasons will be provided.  If the application is approved, the ACO must sign the participation agreement, agreeing to comply with all provisions of the regulations.  Interestingly, ACOs that sign a three year agreement are still subject, with a few exceptions, to all statutory and regulatory changes that are effective during the term of the agreement.  The exceptions are limited to (i) eligibility requirements concerning the structure and governance of ACOs, (ii) calculation of the shared savings, and (iii) beneficiary assignment.  An ACO that fails to modify its processes as required by a change in the law or regulations will be placed on a corrective action plan, and if the ACO fails to comply with the corrective action plan it will be terminated.  It is likely that there will be material revisions to the ACO regulations to address issues identified as the first ACOs qualify and commence operation.  Therefore it will be important for ACOs to be structured in a manner that provides for effective governance and management as the rules change over time.

For more information regarding the ACO application or ACO’s in general, please contact Doug Albright.

ACO Antitrust Guidance

In coordination with CMS publishing the final Accountable Care Organization (ACO) regulations, the federal antitrust agencies issued a Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Saving Program (the Statement).  Under existing antitrust laws, providers who band together to jointly negotiate with payors are normally in “per se” violation of the antitrust laws unless they can show that they are financially or clinically integrated.  To be financially integrated the providers who wish to jointly negotiate with payors must share material financial risk, through risk pools or other mechanisms.  Most providers in ACOs will not be financially integrated, and the criteria for qualifying as clinically integrated have been vague and uncertain.  If an ACO is not either financially or clinically integrated, it will not be permitted to negotiate rates with commercial payors.

While ACOs may initially be formed to take advantage of the Medicare Shared Savings Program, it is anticipated that the commercial market for ACOs will be a significant opportunity for expansion.  Therefore, one of the most significant aspects of the Statement is the announcement that ACOs participating in the Medicare Shared Savings Program will be presumed to be clinically integrated, which will allow joint contracting with commercial payors.  While such ACOs may be subject to antitrust scrutiny, the analysis will be subject to the “rule of reason”, and a determination of whether the ACO is pro or anti-competitive.

The Statement also provides guidance on the percentage of the market an ACO’s participants may have without being found to have excessive market power.  Absent “extraordinary circumstances” if the ACO’s participants account for 30% or less of the services (each considered separately) within their primary service areas, the ACO will be in a “safety zone”.  The identification of each service included within an ACO, and the extent of the primary service areas of the participants must be determined for each ACO, and the ACO must complete a thorough market analysis.  The Statement includes guidance on the definition of distinct physician and hospital services.  The participation of hospitals and ambulatory surgery centers in an ACO must be on a non-exclusive basis in order to qualify for the safety zone.  A primary service area is defined as the lowest number of zip codes from which the participant obtains at least 75% of its patients for each service.  These calculations are complex and require statistical analysis of the primary service area per physician/group in each specialty.  There is a special rural exception to the 30% requirement allowing the inclusion of one physician or group practice for each specialty from each rural area.

ACOs that fall outside of the 30% safety zone are not necessarily illegal.  The Statement acknowledges that such ACOs may be “pro-competitive”.  Such ACOs will be subject to a higher level of scrutiny, and should avoid conduct that appears to be anticompetitive.  The Statement provides guidance on a number of specific practices that should be avoided.

Lastly, antitrust guidance from the agencies is available on an expedited basis.

It should be noted that the Statement does not limit the rights of private parties, or the states, to challenge ACO arrangements.

For more information regarding the FTC’s antitrust enforcement guidance or ACO’s in general contact Doug Albright.

Arbitration Clauses & Statutes of Limitations

The Washington State Supreme Court recently ruled in Broom v. Morgan Stanley DW Inc. that the statute of limitations, which limits the time within which a party may initiate a dispute, does not apply to agreements governed by the Washington Arbitration Act, in which the parties have agreed to arbitrate disputes unless the parties have expressly agreed that the statute of limitations applies.  Since the Washington Arbitration Act does not apply to employment agreements or collective bargaining agreements, this ruling does not directly affect the interpretation of employment related arbitration clauses, but the ruling creates some uncertainty regarding whether the court may apply similar reasoning to individual employment agreements.  This ruling will affect most other agreements that contain arbitration clauses.

This ruling by the court was unexpected, and contrary to the manner in which parties in Washington have typically drafted arbitration provisions.  The result is that disputes related to agreements with arbitration clauses executed before this recent Supreme Court option may now be brought at any time, and will not be barred by the passage of time. 

In most cases it will be mutually advantageous to amend the arbitration clause, since most businesses do not want an open ended exposure to claims.  And, while the recent case does not directly cover employment and collective bargaining agreements, the cautious approach is to review all arbitration provisions within all contracts, including employment contracts and consider the addition of statute of limitation language.

For assistance in reviewing your contracts or drafting an amendment to your arbitration clause please contact Doug Albright.