Accountable Care Organizations (ACOs)

On March 23, 2010, the Patient Protection and Affordable Care Act ("PPACA") was enacted, which marked the present-day overhaul of the U.S. healthcare system. One of PPACA's key characteristics was to implement value-based purchasing and Section 3022 established the Medicare Shared Savings Program ("MSSP") to encourage the development of Accountable Care Organizations ("ACOs") in the Medicare program. On April 7, 2011, the Centers for Medicare and Medicaid Services ("CMS") published its proposed rule ("Proposed Rule") in the Federal Register and in that Proposed Rule, CMS set its three-part aim for the MSSP:

  1. Better care for individuals;
  2. Better health for populations; and
  3. Lower growth in Medicare Parts A and B expenditures

According to CMS:

The intent of the Shared Savings Program is to promote accountability for a population of Medicare beneficiaries, improve the coordination of FFS items and services, encourage investment in infrastructure and redesigned care processes for high quality and efficient service delivery, and incent higher value care. As an incentive to ACOs that successfully meet quality and savings requirements, the Medicare Program can share a percentage of the achieved savings with the ACO. Under the Shared Savings Program, ACOs will only share in savings if they meet both the quality performance standards and generate shareable savings.

The Proposed Rule was met with a great deal of opposition and, after six months of waiting, the MSSP final rule ("Final Rule") was released on October 20, 2011. The Final Rule made significant modifications to the Proposed Rule, including:

  • Greater flexibility in eligibility to participate in the Shared Savings Program;
  • Multiple start dates in 2012;
  • Establishment of a longer agreement period for those starting in 2012;
  • Greater flexibility in the governance and legal structure of an ACO;
  • Simpler and more streamlined quality performance standards;
  • Adjustments to the financial model to increase financial incentives to participate;
  • Increased sharing caps;
  • No down-side risk and first-dollar sharing in Track 1;
  • Removal of the 25 percent withhold of shared savings;
  • Greater flexibility in timing for the evaluation of sharing savings (claims run-out reduced to 3 months);
  • Greater flexibility in antitrust review;
  • Greater flexibility in timing for repayment of losses; and
  • Additional options for participation of FQHCs and RHCs.

In addition to the release of the Final Rule on October 20, the Office of Inspector General ("OIG") also released its interim final rule entitled Final Waivers in Connection with the Shared Savings Program ("Waiver Rule"); the Federal Trade Commission ("FTC") and the Department of Justice ("DOJ") jointly released the Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program ("Antitrust Statement"); and the Internal Revenue Service ("IRS") issued a fact sheet entitled Tax-Exempt Organizations Participating in the Medicare Shared Savings Program Through Accountable Care Organizations ("Fact Sheet").

Importantly, the Waiver Rule establishes instances in which CMS will grant ACOs waivers of the physician self-referral law (i.e., Stark), the Federal anti-kickback statute ("AKS"), and certain civil monetary penalties ("CMP") law provisions.  CMS narrowed the waivers to five (5) circumstances:

  1. An "ACO pre-participation" waiver of the Physician Self-Referral Law, the Federal anti-kickback statute, and the Gainsharing CMP that applies to ACO-related start-up arrangements in anticipation of participating in the Shared Savings Program, subject to certain limitations, including limits on the duration of the waiver and the types of parties covered;
  2. An "ACO participation" waiver of the Physician Self-Referral Law, the Federal anti-kickback statute, and the Gainsharing CMP that applies broadly to ACO-related arrangements during the term of the ACO's participation agreement under the Shared Savings Program and for a specified time thereafter;
  3. A "shared savings distributions" waiver of the Physician Self-Referral Law, Federal anti-kickback statute, and Gainsharing CMP that applies to distributions and uses of shared savings payments earned under the Shared Savings Program;
  4. A "compliance with the Physician Self-Referral Law" waiver of the Gainsharing CMP and the Federal anti-kickback statute for ACO arrangements that implicate the Physician Self-Referral Law and meet an existing exception; and
  5. A "patient incentive" waiver of the Beneficiary Inducements CMP and the Federal anti-kickback statute for medically related incentives offered by ACOs under the Shared Savings Program to beneficiaries to encourage preventive care and compliance with treatment regimes.
An arrangement need only fit one waiver to be protected.

In the Antitrust Statement, the FTC and DOJ describe (1) the ACOs regulated by the Antitrust Statement will apply; (2) when the FTC and DOJ will apply the rule of reason test to those ACOs; (3) the antitrust safety zone; and (4) the additional antitrust guidance for ACOs that are outside the safety zone, including voluntary expedited antitrust review process for newly formed ACOs.

The IRS's fact sheet elaborates on the IRS's position on issues including the tax status of ACOs and participation in the MSSP as an ACO by a charitable organization.

Greater detail surrounding the Final Rule, the Waiver Rule, the Antitrust Statement and the Fact Sheet will be forthcoming.

Publications

"Know your Legal Obligations Before Joining an ACO", by Joel M. Greenberg, Esq. and Claudia Hinrichsen, Esq.

"CMS Finally Speaks (Again): The Medicare Shared Savings Program Final Rule and its Relevance to Anesthesiologists", by Kathryn Hickner-Cruz, Esq. and Neda Mirafzali, Esq., Communique, Winter 2012.

“ACO Final Rule and Guidance Documents Released,” by Adrienne Dresevic, Esq. and Carey F. Kalmowitz, Esq., AHRA Link, November 2011.

"CMS Finally Speaks: The Accountable Care Organization (ACO) Proposed Regulations and What They Mean for Anesthesiologists", by Kathryn Hickner-Cruz, Esq. and  Neda Mirafzali, Esq., Communique, Summer 2011.

"Accountable Care Organizations: The Proposal and The Basics," Adrienne Dresevic, Esq. and Carey F. Kalmowitz, Esq., AHRA Link, May 2011.

Regulatory Review: Ten Facts You Should Know About Medicare ACOs,” by Adrienne Dresevic, Esq., Carey F. Kalmowitz, Esq., and Kathryn Hickner-Cruz, Esq., AHRA Link, November 2010.

Helpful Resources

CMS's Preliminary Questions & Answers on Accountable Care Organizations

Accountable Care Organization Questions?

Any questions pertaining to Accountable Care Organizations should be directed to founding partners, Carey F. Kalmowitz, Esq. or Abby Pendleton, Esq.