On January 10, 2013, the Centers for Medicare & Medicaid Services (“CMS”) announced that it selected 106 new Accountable Care Organizations (“ACO’s”) to participate in the Medicare Shared Savings Program.

CMS Acting Principal Deputy Administrator Jonathan Blum blogged about the aim of ACO’s and described them as having the potential to improve the US health system:  

“In other words, great health care requires a team that will work together at every stage of your care, which can lead to better health at lower cost.  That’s the aim of the ACOs.  Affordable Care Act reforms such as ACOs have helped to set Medicare on a more sustainable path today and into the future, as well as serve as a model for what improvements are possible for our nation’s health care system.”

Northwest organizations were included on the complete list of 106 new ACO’s, including the Billings Clinic in Montana, Franciscan Northwest Physicians Health Network, LLC in Washington, and St. Luke’s Clinic Coordinated Care, Ltd. serving Idaho and Oregon. 

CMS plans to issue dates for the January 2014 application cycle sometime during the spring, 2013.  For more information about ACO’s and ACO development, please contact Adam Snyder at (206) 442-1317.

NCQA Awards First ACO Accreditations

The National Committee for Quality Assurance (“NCQA”) awarded its first Accountable Care Organization (“ACO”) accreditations in December, 2012.  Established as a voluntary accreditation program in 2011, the NCQA awarded accreditations to the following organizations:  Billings Clinic, Crystal Run Healthcare, HealthPartners and Kelsey-Seybold Clinic.   The NCQA website contains detailed information regarding ACO Accreditation.

In general, NCQA Accreditation includes evaluation of seven categories:

  • ACO Structure and Operations
  • Access to Needed Providers
  • Patient-Centered Primary Care
  • Care Management
  • Care Coordination and Transitions
  • Patient Rights and Responsibilities
  • Performance Reporting and Quality Improvement

In contrast to those organizations that raced to the ACO accreditation finish line, overall ACO readiness has been elusive for hospital/health system ACOs.  The Commonwealth Fund published a report from the Premier Research Institute (Premier) in December, 2012, finding a generally low level of readiness across 59 hospital organizations who were members of the Premier Partnership for Care Transformation (PACT) Readiness Collaborative.

To assess readiness, Premier assessed ACOs progress by evaluation of six core components:  a patient-centered foundation, primary care medical home, a high-value network, payer partnership, population health data management, and ACO leadership.  Although the hospital organizations were part of PACT for the purpose of easing the transition to accountable care, the report finds that no organization achieved full implementation of the six core components and several failed to undertake a single activity relative to the core components.

For more information contact Adam Snyder at 206.442.1317 or

ACO: Understanding Beneficiary Assignments

In the final rule, CMS chose to adopt a preliminary prospective assignment methodology with final retrospective reconciliation.  Under this model, CMS will create a list of beneficiaries likely to receive care from the ACO based on primary care utilization during the most recent periods for which adequate dates are available, and provide a copy of the list to the ACO.  During the performance year, CMS will update the list periodically on a rolling basis to allow the ACO to adjust to likely changes in its assigned population.  At the end of each performance year, CMS will reconcile the list to reflect beneficiaries who actually meet the criteria for assignment to the ACO during the performance year.  Determination of shares savings or losses for the ACO will be based on this final, reconciled population.

CMS chose this approach because it believes that it will provide the ACO with adequate information to redesign care processes while also encouraging ACOs to standardize care for all Medicare FFS beneficiaries instead of a subset.  At the same time, CMS believes that the model will provide adequate incentives for each ACO to provide quality care to its beneficiary population.

CMS has also announced a Pioneer ACO Model which will test alternative savings and alignment.  The Pioneer ACO Model will provide CMS with the opportunity to gain experience and evaluate a more prospective hybrid model than the approach explained above.  CMS will study the Pioneer ACO Model and will consider its experiences in the next rulemaking.

Majority vs. Plurality Rule for Beneficiary Assignment

The Act requires that beneficiaries be assigned to “an ACO based on their utilization of primary care services” furnished by an ACO professional who is a physician, but it does not prescribe the methodology for such assignment.  For its methodology, CMS adopted a plurality of primary care services model, defined in terms of allowed charges, as follows:

CMS considered whether to assign beneficiaries to an ACO when they receive a plurality of their primary care services from an ACO, or to adopt a stricter standard under which a beneficiary will be assigned to an ACO only when he or she receives a majority of their primary care services from an ACO.  CMS chose a plurality methodology because it would result in a greater number of beneficiaries being assigned to an ACO, thus promoting statistical stability and a greater incentive for ACOs to redesign care processes.  Additionally, CMS voiced that the plurality methodology promotes ACO accountability for patients that might otherwise fall through the cracks because they would not meet a majority standard.

  • No Plurality Threshold:  CMS declined to set a threshold requirement on the plurality of primary care services methodology.  This will maximize the number of patients assigned to an ACO.
  • Simple Service Count vs. Accumulated Allowed Charges:  CMS could determine the plurality of services on the basis of a simple service count for each visit or on the basis of the accumulated allowed charges for services delivered.  The method of using a plurality of allowed charges would place greater weight on more complex primary care services in the assignment methodology, while a simple service method count would weigh all primary care encounters equally in determining assignment.  CMS chose to adopt the accumulated allowed charges method count, which put responsibility on the ACO providing the highest complexity and intensity of primary care services.  Additionally, this method results in the assignment of responsibility for containing costs to the provider who generates the most costs.

Assigning Patients to ACOs

A hotly contested area of the proposed ACO rules concerns the assignment of Medicare Fee-for-Service (“FFS”) beneficiaries to ACOs.  Once a Medicare beneficiary is assigned to an ACO, the ACO will then be held accountable “for the quality, cost and overall care” of that beneficiary.  The ACO may also qualify to receive a share of any savings that are realized in the care of these assigned beneficiaries due to appropriate efficiencies and quality improvements that the ACO may be able to implement.

As the final rule explains, assigning Medicare beneficiaries requires several elements:

  1. An operational definition of an ACO, as opposed to a formal definition of an ACO, so that ACOs can be efficiently identified, distinguished, and associated with the beneficiaries for whom they are providing services;
  2. A definition of primary care services for purposes of determining the appropriate assignment of beneficiaries;
  3. A determination concerning whether to assign beneficiaries to ACOs prospectively, at the beginning of a performance year on the basis of services rendered prior to the performance year, or retrospectively, on the basis of services actually rendered by the ACO during the performance year; and
  4. A determination concerning the proportion of primary care services that is necessary for a beneficiary to receive from an ACO in order to be assigned to that ACO, as compared to the proportion of primary care services from other ACOs or non-ACOs.

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 Final Rule – Drastically Reduces Quality Measure Requirements

The Accountable Care Organization (“ACO”) final rules show that comments to CMS really do make a difference.  The public outcry against the 65 quality measures proposed in the spring led to CMS’ 50% cut of the number quality measures.  Along with the large cut, CMS explained its plan for allowing ACOs to meet the measure requirements by reporting on the measures in the first year and receiving “pay for performance” in the following years based on the weighted scores received in each quality measure.

Quality Measures

The revised list of quality measures are broken out into 33 different measures (predominately with NQF measure numbers) with four umbrella categories and five subcategories as follows:

  1. Patient/Caregiver Experience (7 measures)
  2. Care Coordination/Patient Safety (6 measures, includes the EHR Incentive Program)
  3. Preventative Health (8 measures)
  4. At Risk Population (12 measures)
    1. Diabetes (6 measures)
    2. Hypertension (1 measure)
    3. Ischemic vascular disease (2 measures)
    4. Heart failure (1 measure)
    5. Coronary Artery Disease (2 measures)

The tables provided in the final rule at pages 67889-90 are particularly helpful in visually identifying the measures, the method of data submission and whether the particular measure is pay for reporting or pay for performance.  The measures will be submitted to CMS through either surveys (for patient/caregiver experience measures), claims, the EHR Incentive Program, or the Group Practice Reporting Option (“GPRO”) Web Interface.  The surveys will be conducted using the Consumer Assessment of Healthcare Providers and System (“CAHPS”) surveys for 2012 and 2013, in future years, ACOs will have to select a CMS approved vendor to administer the surveys.

EHR Incentive Program

One of the significant changes to the quality measures was the expansion of the EHR incentive program related measure.  The quality measure no longer requires that 50% of the primary care providers to achieve meaningful use in order for the ACO to participate.  The EHR quality measure now recognizes those participating in the Medicaid EHR Incentive Program do not have to meet meaningful use requirements in their first year of participation.  As such, the new measure now includes primary care providers that successfully qualify for the EHR Incentive Program under either Medicare or Medicaid.  In addition, CMS cut previously proposed measures that were redundant with the EHR Incentive Program such as the measure concerning clinical decision support and electronic prescribing.

CMS still emphasizes the importance of the usage of the EHR technology by giving the EHR quality measure a higher weight.  Eligible professionals participating in ACOs are still eligible to separately participate in the EHR Incentive Programs or the e-prescribing incentive program.

Pay for Reporting vs. Pay for Performance

In the first year of participation, all of the quality measures may be satisfied by merely reporting on the quality measures.  For pay for reporting, ACOs will earn the maximum sharing rate for complete and accurate reporting of 100% of the required data, and no quality threshold must be met.  In the second year, 25 of the quality measures will be pay for performance, and eight will continue to be pay for reporting.  In the third year, all but one quality measure will be on a pay for performance basis.

In the pay for performance years, each domain will be given equal weight of 25% in the calculation of the ACOs overall quality performance score.  Each of the individual measures will be equally weighted within the domains, except for the EHR Incentive Program quality measure which is double weighted.  ACOs must minimally attain 30% (or be in the national 30th percentile) for that quality measure.  Subregulatory guidance will indicate the quality performance rates an ACO needs to achieve in order to earn the maximum quality points in a domain.

Recognizing that meeting all 33 measures in a given year may be difficult, CMS is requiring that ACOs achieve the quality performance standards on 70% of the measures in each domain.  Failure to achieve the 70% standard will result in a corrective action plan and re-evaluation in the final year.  However, if an ACO scores a zero for an entire measure, it will not be able to share in the savings generated.  Due to the double weight of the EHR measure, failure to meet the EHR measure in the Care Coordination domain would cause the ACO to miss the 70% cut-off.

Reporting Calendar & PQRS

ACOs are expected to report on the quality measures on a calendar year basis, beginning with the reporting period starting January 1, 2012 through December 31, 2012.  Even though a “performance year” in the regulations may begin in April or July of 2012 and end in December 2013, the quality performance for the first performance year will be based on reporting of the measures from January 1, 2013 through December 31, 2013.  Eligible professionals participating in an ACO that start the agreement in April or July of 2012 will also qualify for the 2012 PQRS incentive under the Shared Savings program by reporting the ACO GPRO measures for the full 2012 Physician Quality Reporting System (“PQRS”) calendar year reporting period.

Note that ACO participant entities that want to qualify for PQRS must participate as group practices and not separately participate or earn a PQRS incentive outside of the Shared Savings Program.  Individual ACO providers may not seek to qualify for the individual PQRS incentive under the traditional PQRS plans.  CMS also relaxed its requirements regarding the PQRS incentives.  If an ACO fails to meet the Shared Savings Program quality performance measures and therefore is not eligible for shared savings, the participating entities may still be eligible to receive the PQRS incentive under the Shared Savings Program.   

More Updates Coming

ACO participants should keep an eye out for subregulatory guidance which will detail the annual measure specifications.  CMS plans on releasing specifications in December and in the first quarter of 2012.

For more information regarding the ACO quality measures or ACOs in general, please contact Elana Zana.

The Nuts and Bolts of Determining Shared Savings and Losses for ACOs.

Under the final rules released by CMS on Accountable Care Organizations (“ACOs”), CMS offers ACOs the opportunity to participate in one of two models — a shared savings only model during the duration of the ACO’s first agreement period (Track 1), or a two-sided model in which there is a sharing of both savings and losses (Track 2).

Track 1 – Shared Savings Only Model

Citing the importance of attracting broad participation in the ACO program, including from small, rural, safety net and small and medium-sized physician groups, CMS created a shared savings only model for the duration of the ACO’s first three-year agreement period.  Under Track 1, which CMS deems a “gentler on ramp” into the ACO world, the ACO shares in the savings without the financial risk of sharing in the losses.  After the initial agreement period, the ACO must move to the two-sided model under Track 2.  Unlike in the Proposed Rule, ACOs who experience net losses under Track 1 in their first agreement period may renew their participation under Track 2.

Track 2 – Shared Savings/Losses Model

Track 2 is known as a two-sided model in which the ACO shares in both the savings and losses, with the opportunity for higher reward in exchange for performance-based risk.  Track 2 is available for ACOs during their first agreement period, and is the only option available for ACOs who have exhausted their first agreement period under Track 1.

Determining Shared Savings

In order to determine shared savings, CMS must take the following steps for each ACO:

Step 1.  Establish the expenditure benchmark.  The expenditure benchmark is a three-year benchmark (one year for each year in the agreement period).

Determining Patient Population for Whom the Benchmark is Calculated

 CMS’ methodology for establishing an ACO’s expenditure benchmark is based on the Medicare FFS Parts A and B expenditures of beneficiaries who would have been assigned to the ACO in any of the three years prior to the start of an ACO’s agreement period using the ACO participants’ TINs identified at the start of the agreement period.  CMS indicated, however, that it favors a benchmarking methodology based on an ACO’s actual  assigned population and intends to revisit whether it should adopt such a methodology in future rulemaking.

CMS calculates the benchmark expenditures by categorizing beneficiaries in the following cost categories:  ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries and aged/non-dual eligible Medicare and Medicaid beneficiaries.  CMS also finalized its proposal to truncate an assigned beneficiary’s total annual Parts A and B FFS per capita expenditures at the 99th percentile of the national Medicare FFS expenditures for each benchmark performance year, which has the advantage of excluding outlier payments from the expenditure benchmark calculations.  CMS adopted its proposed policy of weighting benchmark expenditures for each benchmark year as follows:  BY1 = 10%, BY2 = 30% and BY3 = 60%.

Benchmark Adjustments

 CMS adopted the CMS-HHC risk adjustment model that has been used under the Medicare Advantage program for adjusting the ACO’s benchmark expenditures. CMS will make additional risk adjustments for performance years to take into account changes in assigned beneficiaries.  For newly assigned beneficiaries, CMS will annually update the ACO’s CMS-HHC risk scores.  For continuously assigned beneficiaries, if there is no decline in the ACO’s CMS-HHC risk scores, CMS will use demographic factors to adjust for severity and case mix.  However, if the continuously assigned population shows a decline in its CMS-HHC risk scores, CMS will lower the risk score for that population.  An ACO’s updated benchmark will be restated in the appropriate performance year based on the health status of the ACO’s assigned beneficiaries.  In addition, CMS will make adjustments for  ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries and aged/non-dual eligible Medicare and Medicaid beneficiaries.

Trending Factors

CMS finalized its proposal to trend forward the most recent three years of per-beneficiary expenditures using growth rates in per beneficiary expenditures for Medicare Parts A and B services in order to estimate the benchmark for each ACO.  In addition, CMS will make calculations for separate cost categories for ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries and aged/non-dual eligible Medicare and Medicaid beneficiaries.  For initial expenditure determinations in the performance period, CMS finalized its proposed rule to use the national growth rate in expenditures for Part A and B services for FFS beneficiaries.  During the rest of the agreement period, CMS will update the benchmark by a flat amount, using the projected absolute amount of growth in national per capita Medicare Part A and B expenditures.

Step 2.  Determine per capita Medicare expenditures in each performance year of the agreement period.

Step 3.  Determine the appropriate minimum savings rate (MSR).

 CMS stated that the purpose of the MSR is to account for normal variation in expenditures.

Track 1 MSR Sliding Scale – Under Track 1, CMS adopted a sliding MSR scale to account for normal variation in expenditures based on the number of Medicare fee for service beneficiaries assigned to the ACO.  For Track 1 the sliding scale varies from a high of 3.6% – 3.9% for 5,000-5,999 assigned beneficiaries, to a low of 2% for 60,000+ assigned beneficiaries.

Track 2 – Flat 2% MSR.  Under Track 2, CMS will apply a flat two percent MSR to all ACOs.

Step 4.  Determine the appropriate sharing rate for ACOs meeting or exceeding the MSR.

 For those ACOs that have realized savings by meeting or exceeding the MSR, the following shared savings rate percentages will apply:

Track 1 – The ACO may earn up to 50% of the shared savings.

Track 2 – The ACO may  earn up to 60% of the shared savings.

Both Track 1 and Track 2 ACOs will share on a first dollar savings once the ACO achieves savings in excess of the MSR.

Step 5.  Determine the required sharing cap.

 CMS adopted the following payment limits, which are the maximum amounts of shared savings that can be realized by the ACO in any performance year and are intended to avoid creating incentives for excessive reductions in utilization.

Track 1 – 10% of the ACO’s updated expenditure benchmark for the performance year.

Track 2 – 15% of the ACO’s updated expenditure benchmark for the performance year.

Determining Shared Losses

 Just as shared savings must be calculated for ACOs, shared losses for Track 2 ACOs must also be determined.  The methodology for determining shared losses under Track 2 will mirror the methodology for determining shared savings, including a formula for calculating shared losses based on the final sharing rate, use of a MLR to protect against losses resulting from random variation and a loss sharing limit to provide a ceiling on the amount of losses an ACO will be required to repay.  To be responsible for sharing losses with the Medicare program, an ACO’s average per capita Medicare expenditures for the performance year must exceed its updated benchmark costs for the year by at least two percent.  Once losses meet or exceed the MLR (which is calculated as one minus the final sharing rate), an ACO would be responsible for paying the percentage of excess expenditures, on a first dollar basis, up to the proposed annual limit (60%) on shared losses.

For more information regarding the shared savings model or ACO’s in general, please contact Carrie Soli.

ACO Fraud and Abuse Law Waivers

In conjunction with the issuance of the final rules related for Accountable Care Organizations (“ACOs”) under the Medicare Shared Savings Program, the OIG published an interim final rule establishing waivers to fraud and abuse laws in connection with the Shared Savings Program.

The waivers were created to address industry concerns that restrictions in certain laws aimed at preventing fraud and abuse of federal health care programs, i.e., the Physician Self-Referral law (commonly known as the “Stark Law”), the federal anti-kickback statute (“AKS”), and the federal civil monetary penalties (“CMP”) law, would limit or otherwise impede development of innovative integrated care models envisioned by the Shared Savings Program.  The goal of the waivers is to effectively balance the need for ACO innovation and flexibility in the Shared Savings Program while protecting beneficiaries and the Medicare program.

The interim final rule establishes five waivers to the fraud and abuse laws which CMS and the OIG deemed necessary to carry out provisions of the Shared Savings Program.  Parties seeking to ensure that an arrangement is covered by a waiver for a particular law may look to any waiver that applies to that law.  An arrangement may meet the criteria of more than one waiver.

Key Points/General Overview:

  • To qualify for a waiver, the arrangement must meet all of the conditions set forth in the waiver.
  • A waiver of a specific fraud and abuse law is not needed for an arrangement to the extent that the arrangement: (1) does not implicate the specific fraud and abuse law, or (2) implicates the law, but either fits within an existing exception or safe harbor, as applicable, or does not otherwise violate the law.  Arrangements that do not fit a waiver have no special protection and must be evaluated on a case-by-case basis for compliance.  Failure to fit in a wavier is not, in and of itself, a violation of the fraud and abuse laws.
  • For purposes of the waivers, “reasonably related to the purposes of the Shared Savings Program” means the purposes of promoting accountability for the quality, cost, and overall care for a Medicare population; managing and coordinating care for Medicare fee-for-service beneficiaries through an ACO; and encouraging investment in infrastructure and redesigned care processes for high quality and efficient service delivery for patients, including Medicare beneficiaries.
  • CMS, OIG, and HHS will closely monitor ACOs entering into the program in 2012 through June 2013, and plan to narrow the waivers if they result in the unintended effect of shielding abusive arrangements.  The waivers could be narrowed by modifying the waivers to add or substitute conditions to the waivers; limiting ACO arrangements involving referral sources to those that are fair market value or commercially reasonably or involve services performed by the referral sources; preclude waiver protections for arrangements that involve individuals or entities that are not part of the ACO; or include a requirement that ACOs submit reports regarding their arrangement.  CMS and the OIG seek comments on these approaches to narrow the waivers.

Detailed summaries of the five waivers are provided below:

“ACO Pre-Participation” Waiver.  This waiver of the Stark Law, the AKS, and the gainsharing CMP applies to ACO-related start-up arrangements in anticipation of participation in the Shared Savings Program, but which pre-date an ACO’s participation agreement.

  • The parties must act with the good faith intent to develop an ACO that will participate in the Shared Savings Program starting in a particular year, must submit a completed application to participate in a Shared Savings Program for that year, and must be taking diligent steps to develop an ACO.
  • The ACO’s governing body must make a bona fide determination that the arrangement is reasonably related to the purposes of the Shared Savings Program.
  • Certain documentation of the arrangement must be maintained for at least 10 years following completion of the arrangement and made available to HHS upon request.
  • An ACO may use the pre-participation waiver (including any extensions granted) only one time.
  • As used in the waiver, “start-up arrangement” means any items, services, facilities, or goods (including non-medical items, services, facilities, or goods) used to create or develop an ACO that are provided by such ACO, ACO participants, or ACO providers/suppliers.  Commentary on the waiver provides a non-exhaustive list of examples of items, services, facilities and goods considered as start-up arrangements.
  • The start and end dates for when the waiver applies varies based on the ACO’s target year, whether an ACO’s participation application is accepted or denied, whether the ACO failed to submit an application for the target year, and whether the ACO was granted an extension of the waiver.
  • This pre-participation wavier does not cover arrangements involving drug and device manufacturers, distributors, DME suppliers, or home health suppliers.

“ACO Participation” Waiver.  This waiver of the Stark Law, the AKS, and the gainsharing CMP applies to ACO-related arrangements during the term of the ACO’s participation agreement under the Shared Savings Program and for a limited time thereafter.

  • The ACO must have entered into a participation agreement and remain in good standing under its participation agreement.
  • The ACO’s governing body must make a bona fide determination that the arrangement is reasonably related to the purposes of the Shared Savings Program.
  • Certain documentation of the arrangement must be maintained for at least 10 years following completion of the arrangement and made available to HHS upon request.
  • The waiver period starts on the start date of the participation agreement, and ends six (6) months following the earlier of the expiration of the participation agreement (including any renewals thereof) or the date on which the ACO has voluntarily terminated the participation agreement.  If CMS terminates the participation agreement, the waiver period ends on the date of the termination notice.

“Shared Savings Distribution” Waiver.  This waiver of the Stark Law, the AKS, and the gainsharing CMP applies to distributions and uses of shared savings payments earned under the Shared Savings Program.  The waiver permits shared savings to be distributed or used with the ACO in any form or manner, including “downstream” distributions or uses of shared savings funds between or among the ACO, its ACO participants, and its ACO providers/suppliers.

  • The ACO must have entered into a participation agreement and remain in good standing under its participation agreement.
  • The waiver applies to distributions and uses of shared savings earned during the term of the ACO’s participation agreement, even if the actual distribution or use of the shared savings occurs after expiration of the agreement.  The waiver also applies to individuals or entities that were ACO participants and ACO providers/suppliers at the time the shared savings were earned, even if they are not part of the ACO at the time of the actual distribution.
  • The waiver does not protect distributions of shared savings to referring physicians outside the ACO, unless those referring physicians are being compensation (using shared savings) for activities that are reasonably related to the purposes of the Shared Savings Program or were ACO participants or ACO providers/suppliers during the year in which the shared savings were earned by the ACO.
  • Under this waiver, payments of shared savings distributions made directly or indirectly from a hospital to a physician are not made knowingly to induce the physician to reduce or limit medically necessary items or services to patients to patients under the physician’s direct care.

“Compliance with the Physician Self-Referral Law” Waiver.  This waiver of the AKS and the gainsharing CMP applies to ACO arrangements that implicate the Stark Law but which meet an existing exception under the Stark Law.

  • The ACO must have entered into a participation agreement and remain in good standing under its participation agreement.
  • The financial relationship must be reasonably related to the purposes of the Shared Savings Program.
  • The financial relationship must fully comply with an exception under the Stark Law, as set forth at 42 CFR §411.255 through 411.357.
  • The waiver period begins on the start date of the participation agreement, and ends on the earlier of the expiration of the term of the participation agreement (including any renewals thereof) or the date on which the participation agreement has been terminated.

“Patient Incentive” Waiver.  This waiver of the beneficiary inducement CMP and the AKS applies to medically related incentives offered by ACOs under the Shared Savings Program to beneficiaries to encourage preventive care and compliance with treatment regimes.  More specifically, those fraud and abuse laws are waived with respect to items or services provided by an ACO, its ACO participants, or its ACO providers/suppliers to beneficiaries for free or below fair market value.

  • The ACO must have entered into a participation agreement and remain in good standing under its participation agreement.
  • There must be a reasonable connection between the items or services and the medical care of the beneficiary.
  • The items or services must be in-kind, and must be either preventive care items or services, or advance certain clinical goals (i.e., adherence to a treatment regime, drug regime or follow-up care plan, or management of a chronic disease or condition).
  • The waiver does not protect financial incentives to beneficiaries, such as waiving or reducing patient cost sharing amounts (i.e., co-payments or deductibles).  (Note that the Shared Savings Program itself prohibits ACO, ACO participants, and ACO providers/suppliers from providing gifts or other remuneration to beneficiaries as inducement from receiving items or services from, or remaining in, an ACO.)
  • The waiver also does not protect or the provision of free or below fair market value items or services by manufacturers or other vendors to beneficiaries, the ACO, ACO participants, or ACO providers/suppliers, including any discount arrangements between a manufacturer and an ACO.
  • The waiver period begins on the start date of the participation agreement, and ends on the earlier of the expiration of the term of the participation agreement (including any renewals thereof) or the date on which the participation agreement has been terminated.  However, a beneficiary may keep items received before the participation agreement expired or was terminated, and may receive the remainder of any service initiated before the participation agreement expired or was terminated.

For more information regarding the OIG’s fraud and abuse waiversor ACO’s in general contact Lee Kuo.

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.

CMS Releases Final Rule on Accountable Care Organizations

On October 20, 2011, the Centers for Medicare and Medicaid Services (CMS) released its final rule on Accountable Care Organizations (ACOs), also known as the Medicare Shared Savings Program (the “Program”), enacted as a part of the Patient Protection and Affordable Care Act of 2010 (aka Health Reform).  The Program is designed to encourage providers and hospitals to create networks that deliver efficient and collaborative care, and allows ACOs to receive a portion of the savings that they produce.

The proposed rule was met with criticism from many providers, hospitals, and trade groups.  In response, CMS adopted a relaxed version of the proposed requirements for ACOs.  Some key changes, include:

  • One-Sided Risk Model:  Under the proposed rule, all ACOs would have operated under a “two-sided” risk model where ACOs had the chance of losing money if they did not produce sufficient savings.  In the final rule, ACOs are allowed to participate in a “one-side” risk model, which will allow providers to participate in the program without risking a loss in the event that their ACO does not produce savings.  The final rule also allows ACOs to opt into a “two-sided” risk model in exchange for the opportunity to receive a greater share of savings.
  • Shared Savings:  The proposed rule originally required that the ACO provide a savings of at least 2% to receive the shared savings payments.  Under the final rule, ACO’s are eligible beginning with the first savings they create.
  • Prospective Beneficiary Assignment:  Originally, CMS intended to assign Medicare beneficiaries retrospectively based on where the beneficiaries received care during the previous year.  In the final rule, CMS sought to provide ACOs more certainty about their beneficiary population and thus implemented a “preliminary perspective assignment” of Medicare beneficiaries.  CMS will modify the beneficiary assignment lists at the end of each contract year in order to determine final assignments.
  • Reduction in Quality Measures:  The proposed rules required ACOs to track 65 performance measures; whereas the final rule requires ACOs to track only 33 measures.
  • Eliminating the Savings Threshold:  The proposed rule required ACOs to produce savings of at least two percent in order to be eligible for shared savings.  The final rule allows ACOs to share in savings beginning with the first savings that they produce.
  • Changes to ACO Organization and Governance: The final rules allows for more flexible ACO organization and governance requirements.  Under the final rule, ACOs are still required to be a legal entity, as recognized under state, federal, or tribal law.  ACOs must meet requirements for governance, leadership, and management. However, the final rule also allows CMS to consider an innovative ACO with a management or governance structure that does not meet the regulatory requirements.
  • Advanced Payment Model:  In attempt to remove some funding hurdles faced by small ACOs, CMS introduced an Advance Payment program that will allow a select number of rural and small physician-owned ACOs to receive up-front payments that the agency will later recoup from the savings that the ACOs produce.
  • Expanded Participation:  The final rule broadens participation to include RHCs and FQHC, as well as practices/organizations in which specialists provide primary care.
  • Relaxed EHR Requirements:  The final rule eases EHR burdens by no longer requiring EHR meaningful use compliance for participation in the Program.  Under the final rule, EHR is retained as a quality measure, but weighted higher than measures for quality scoring purposes.

CMS will begin to accept applications for the Program on January 1, 2012, with start dates on April 1, 2012 and July 1, 2012.