On October 20, 2011, the Centers for Medicare and Medicaid Services (CMS) issued a prepublication copy of the final rule governing the Medicare Shared Savings Program for accountable care organizations (ACOs). The final rule revises many of the program’s key provisions set forth in the April 7, 2011 proposed rule. Among the major changes are:
- Removal of two-sided risk for ACOs participating in Track 1. CMS will continue to offer ACOs the opportunity to participate in a two-sided risk arrangement under Track 2, with the opportunity to receive a larger percentage of shared savings. However, ACOs that opt to participate in Track 1 will not be subject to shared losses during their third performance year as originally proposed.
- CMS will assign ACO beneficiaries on a prospective basis, subject to a final reconciliation at the end of a performance year. CMS will assign beneficiaries to an ACO based on primary care utilization for prior periods, with quarterly adjustments. CMS will perform a final reconciliation after each performance year to determine which patients received care from the ACO.
- An ACO must still exceed a minimum savings rate (MSR) in order to receive any shared savings. However, all ACOs that exceed their MSR will receive shared savings on the first dollar of such savings. Under the proposed rule, Track 1 ACOs only would receive shared savings net of two percent.
- CMS reduced the number of quality measures that ACOs must report from 65 to 33. CMS also will institute a longer phase-in for “pay for performance” on quality measures. ACOs will be paid solely for reporting such measures in the first performance year, and will be paid for reporting and performance in the second and third performance years.
- CMS extended the length of the first performance year from 12 months to 18 or 21 months, depending on whether an ACO starts on April 1, 2012 or July 1, 2012. An ACO that reports CY 2012 quality measures will be eligible for interim payments; however, a Track 2 ACO opting for interim payments must warrant that it will be able to repay any shared losses.
- CMS eliminated the proposed requirement that 50 percent of an ACO’s primary care physicians achieve “meaningful use” of certified EHR technology under the Medicare and Medicaid EHR Incentives Program. However, EHR adoption remains a quality measure and will receive higher weighting in performance evaluations than any other quality measure.
- ACOs will no longer need to seek mandatory antitrust review.
CMS has issued a chart comparing key changes between the proposed rule and final rule, which is available by clicking here. The prepublication copy of the final rule is available in full by clicking here. The final rule is scheduled to appear in the Federal Register on November 2, 2011.
In addition to the Shared Savings Program final rule, CMS and the HHS Office of Inspector General (OIG) issued a prepublication copy of an interim final rule establishing waivers under the federal Stark, anti-kickback and civil monetary penalty laws for participating ACOs. The Federal Trade Commission and Department of Justice also issued a final joint Policy Statement regarding how the agencies will enforce antitrust laws regarding ACOs. Additionally, the IRS issued a fact sheet confirming that Notice 2011-20 remains its guidance statement and further addressing several questions and answers to clarify Notice 2011-20 with respect to Shared Saving Program and non-Shared Savings Program activities of ACOs.
- ACO Shared Savings Program Waivers
To help foster the implementation of ACOs under the final Shared Savings Program Rule, CMS and the OIG shortly will issue an Interim Final Rule that will establish five waivers to protect qualifying ACOs from application of the federal Stark and anti-kickback laws and certain provisions of the federal civil monetary penalties law (the CMP). The pre-publication copy of this Interim Final Rule was released on October 20, 2011.
These waivers apply only to ACOs participating in the Shared Savings Program (including ACOs participating in the Advance Payment Initiative to be administered by the CMS Innovation Center). However, it should be noted that these waivers protect not only an ACO and its participants but also, where applicable, an ACO’s arrangements with outside persons and entities when those arrangements are reasonably related to at least one purpose of the Shared Savings Program. These five waivers are discussed separately, below.
The Pre-Participation Waiver is designed to cover any of an ACO’s qualifying start-up arrangements that pre-date the ACO’s execution of a Shared Savings Program Participation Agreement with CMS. The term “start-up arrangement” means an arrangement concerning any items, services, facilities, or goods—or any subsidy for any items, services, facilities or goods—used to create or develop an ACO that are provided by an ACO, any of its participants or any ACO provider or supplier. The preamble to the Interim Final Rule includes examples of start-up arrangements that could qualify for this Waiver. A start-up arrangement that qualifies for this Waiver would not be subject to the federal Stark or anti-kickback laws, or the CMS provisions that prohibit gainsharing arrangements (the Gainsharing CMP).
The key requirements to qualify for the Pre-Participation Waiver are as follows:
- The start-up arrangement at issue must be undertaken in good faith with the intent to develop an ACO under the Shared Savings Program.
- The parties to the start-up arrangement must include at least the ACO itself or one participant who/which is eligible to form an ACO under the Shared Savings Program. The parties to the start-up arrangement may not include drug or device manufacturers, distributors, DME suppliers or home health agencies.
- The parties to the start-up arrangement must be taking diligent steps to develop an ACO that would be eligible to participate in the Shared Savings Program.
- The ACO’s governing body must make and duly authorize a bona fide determination that the start-up arrangement is reasonably related to at least one purpose of the Shared Savings Program.
- There must be contemporaneous documentation of the key terms of the start-up arrangement, and the authorization of that arrangement by the ACO’s governing body. There also must be contemporaneous documentation of the diligent steps the parties are taking to develop the ACO. Any material changes in the start-up arrangement also must comply with these documentation requirements as well as the governing body requirements stated in Point 4, above. The Interim Final Rule specifies the required contents of this documentation. It is not necessary for the ACO or its participants to sign any of this documentation. All required documentation must be maintained for ten years.
- A description of the start-up arrangement must be publicly disclosed in accordance with requirements to be established by CMS (provided that the description should not include financial or economic terms).
- If the ACO ultimately does not submit a timely application to participate in the Shared Savings Program, the ACO must submit a statement to CMS describing the reasons why the ACO was unable to submit an application.
- An ACO may rely on this Waiver only during a single pre-participation period.
For a start-up arrangement that qualifies for this Waiver, the protections under the Waiver would apply from one year prior to the ACO’s Shared Savings Program application due date through whichever of the following dates is applicable:
- The date when the ACO’s Shared Savings Program Participation Agreement with CMS becomes effective;
- The date when the ACO’s Shared Savings Program application is rejected by CMS; or
- If the ACO fails to submit a Shared Savings Program application, the earlier of the last due date for such application or the date when the ACO submits the statement referred to in Point 7, above, regarding why the ACO did not submit an application).
The period for which a Pre-Publication Waiver is in effect for any particular start-up arrangement may be extended by CMS on a case-by-case basis.
The Participation Waiver is designed to cover a variety of financial arrangements in the course of an ACO’s operations under its agreement with CMS. A number of the safeguards included in the Pre-Participation Waiver are also required to qualify for the Participation Waiver.
Under the Participation Waiver, the provisions of the Stark law, the anti-kickback law and the Gainsharing CMP are waived with respect to any arrangement of an ACO, one or more of its ACO participants or its ACO providers/suppliers, or a combination thereof, if the following conditions are met:
- The ACO has entered into, and is in good standing under, its participation agreement with CMS.
- The requirements of the ACO rule pertaining to governance, leadership and management are met.
- The ACO’s governing body has made a bona fide determination that the arrangement is reasonably related to the purposes of the Shared Savings Program.
- The arrangement and the governing body’s authorization of the arrangement are documented, contemporaneous with the establishment and the authorization of the arrangement. The documentation must identify—
- A description of the arrangement, including the date and purpose of the arrangement and all parties to the arrangement.
- The items, services, facilities or goods covered by the arrangement.
- The basis for the governing body’s determination that the arrangement is reasonably related to the purposes of the Shared Savings Program, and the date and manner of that authorization.
- The description of the arrangement must be publicly disclosed as determined by the Secretary; however, the financial and economic terms are not to be publicly disclosed.
The waiver period for qualifying arrangements starts on the date of the participation agreement and extends six months after the expiration of the participation agreement or, if earlier, the date on which the ACO voluntarily terminated the arrangement.
In commentary explaining the final waivers, CMS notes that although it is not providing a specific waiver for private payer arrangements in the Interim Final Rule, “nothing precludes arrangements ‘downstream’ of commercial plans (for example, arrangements between hospitals and physician groups) from qualifying for the participation waiver … [which] does not turn on the source of the funds for the arrangement.” CMS also notes that such commercial plan arrangements might be structured to comply with the Stark law exception for risk-sharing arrangements or another exception, and might fit within an anti-kickback safe harbor.
Shared Savings Distribution Waiver
The Shared Savings Distribution Waiver closely follows the provisions of the proposed waivers. The provisions of the Stark law, the Gainsharing CMP and anti-kickback statute are waived with respect to distributions or use of shared savings earned by an ACO if the following conditions are met:
- The ACO has entered into, and is in good standing under, its participation agreement with CMS.
- The shared savings are earned by the ACO pursuant to the Shared Savings Program and during the term of its participation agreement, even if the actual distribution occurs after the expiration of the participation agreement.
- The shared savings are either (i) distributed among the ACO’s participants, its ACO providers/suppliers, or individuals and entities that were ACO participants or ACO providers/suppliers during the year in which the shared savings were earned, or (ii) used for activities that are reasonably related to the purposes of the Shared Savings Program.
- For purposes of waiver of the Gainsharing CMP, payments of shared savings that are made directly 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 under the direct care of the physician.
Compliance with the Physician Self-Referral Law Waiver
The waiver pertaining to Compliance with the Physician Self-Referral Law (the Stark law) also closely follows the proposed waivers. The provisions of the Stark law are waived with respect to any financial relationship between or among the ACO, its ACO participants and its ACO providers/suppliers that implicates the Stark law, if all of the following conditions are met:
- The ACO has entered into, and is in good standing under, its participation agreement with CMS.
- The financial relationship is reasonably related to the purposes of the Shared Savings Program.
- The financial relationship fully complies with a Stark Law exception.
The waiver period for qualifying arrangements starts on the date of the participation agreement and ends with the expiration of the participation agreement or, if earlier, the date on which the participation agreement has been terminated.
CMS notes that some arrangements among the ACO, its participants and ACO providers/suppliers and others outside the ACO may not need to rely on a waiver but may qualify under a Stark Law exception, including exceptions for employment, risk sharing, personal services, or indirect compensation.
Waiver for Patient Incentives
Provision of remuneration or free/discounted items and services to a Medicare patient in return for purchasing items or services from a particular provider has been found to implicate the federal anti-kickback law (Social Security Act Section 1128B(b)(1) & (2)), and the Civil Monetary Penalties law (Social Security Act Section 1128A(a)(5)) which specifically prohibits attempts to influence a patient to receive covered items and services from a particular provider through the offer or transfer of remuneration to the patient. In recognition that ACOs will need tools to motivate patients to become more involved in managing their own chronic health conditions, the Waiver for Patient Incentives permits ACOs to offer free or below fair market items and services to patients if they advance certain goals of the Shared Savings Program. The waiver applies to all patients rather than only those assigned to the ACO, although CMS and the OIG are soliciting comments on whether application to all patients is appropriate. The Waiver for Patient Incentives is effective only during the term of the ACO's participation agreement. However, patients may keep any items received during that time, and may complete any service initiated during the term.
The goals which ACOs may seek to advance by offering patient incentives include provision of preventive care, adherence to treatment, drug or follow-up care regimens, or management of chronic diseases. There must be a reasonable connection between the incentives and the care received by the patient. CMS and the OIG have not provided a definition of preventive care so that ACOs will have flexibility in adopting various care models. The agencies, however, are soliciting comments on whether there should be such a definition. Examples of permissible incentives, which are limited to in-kind items and services, include the following:
- blood pressure cuffs or home telehealth monitoring of blood pressure for a hypertensive patient;
- home visits to a post-surgical patient to coordinate in-home care during the patient's recovery; and
- a course of smoking cessation treatment.
Financial incentives such as forgiveness of patient cost sharing amounts are not protected by the Waiver for Patient Incentives, nor are inducements for remaining in a particular ACO. Free or discounted items and services given by manufacturers to the ACO or its providers or beneficiaries are not protected by the waiver. However, the ACO may give beneficiaries discounted items or services received from a manufacturer under the Waiver for Patient Incentives. The agencies note that an ACO and its providers also remain free to offer incentives to patients that are covered by an existing safe harbor or exception.
Innovation Center Project Waivers
The waivers set out in the Interim Final Rule announced on October 20, 2011, address only the Shared Savings Program. These waivers do not address projects sponsored by the Center for Medicare and Medicaid Innovation, including Pioneer ACOs and the recently announced bundled payment demonstration project. Similar waiver authority is included in the Affordable Care Act for Innovation Center projects, and agency commentary to the Interim Final Rule states that CMS “will exercise that waiver authority in guidance relevant to those programs.”
- DOJ/FTC Antitrust Guidelines
On October 20, 2011, the Department of Justice (DOJ) and Federal Trade Commission (FTC), (together the “Agencies”) issued the final version of a joint Policy Statement that describes how the Agencies will enforce the U.S. antitrust laws regarding ACOs. A draft policy statement was issued for public comment in March 2011. Since then, the Agencies have received a substantial number of comments and other input. Nonetheless, nearly all of the key features of the draft policy statement remain unchanged by the final Policy Statement. These features include the following:
- The Agencies will not challenge as per se illegal a Shared Savings Program ACO that jointly negotiates with private insurers to serve patients in commercial markets if the ACO satisfies certain condition, including compliance with CMS’s eligibility criteria and use of the same governance and leadership structures and clinical and administrative processes to serve patients in both Medicare and commercial markets. For ACOs that meet those criteria, the Agencies will employ a “rule of reason” analysis to determine whether the ACO may violate the antitrust laws.
- The final Policy Statement provides an antitrust “safety zone” for certain ACOs. Generally, to fall within the safety zone, an ACO’s independent participants that provide a common service must have a combined share of 30 percent or less of each common service in each participant’s PSA, where two or more participants provide that service to patients in that PSA.
- The Agencies will offer voluntary expedited 90-day reviews for newly formed ACOs that choose to seek additional antitrust guidance from the Agencies. Like the draft statement, the final Policy Statement provides instructions for newly formed ACOs that wish to engage in this process.
There are two noteworthy changes in the final Policy Statement:
- Expanded Coverage. While the draft policy statement applied only to ACOs formed after March 23, 2010 (the date on which the Affordable Care Act was enacted), the final Policy Statement, except voluntary expedited review, applies to all provider collaborations that are eligible and intend, or have been approved, to participate in the Medicare Shared Savings Program.
- Shift from Mandatory to Voluntary Review. According to the Agencies, because the Medicare Shared Savings Program final rule no longer requires a mandatory antitrust review for certain collaborations as a condition of entry into the Shared Savings Program, the final Policy Statement no longer contains provisions relating to mandatory antitrust review.
The FTC’s press release regarding the Policy Statement is available by clicking here.
- IRS Guidelines
CMS notes in its commentary to the Interim Final Rule that the Shared Savings Program waivers do not extend to laws outside the scope of the Shared Savings Program, such as the Internal Revenue Code. Contemporaneous with the issuance of the draft Shared Savings Program waivers, the IRS issued Notice 2011-20 to provide guidance regarding the participation of tax-exempt entities in ACOs under the Shared Savings Program. On October 20, 2011, the IRS issued a fact sheet confirming that Notice 2011-20 remains its guidance statement and further addressing several questions and answers to clarify Notice 2011-20 with respect to Shared Saving Program and non-Shared Savings Program activities of ACOs. For example, the fact sheet states that exempt entities participating in qualifying ACOs treated as partnerships do not necessarily need to control those organizations in order to remain consistent with their charitable purposes, taking into account their Shared Savings Program activities under an agreement with CMS. The fact sheet also indicates that the application of unrelated business rules to non-Shared Savings Program activities of ACOs will turn on the facts and circumstances of the arrangement.