Summary of Proposed Rules Pertaining to Accountable Care Organizations
The Centers for Medicare and Medicaid Services (CMS) has published proposed rules (Rules) implementing section 3022 of the Affordable Care Act (the Act) pertaining to Medicare payments to providers and suppliers participating in accountable care organizations (ACOs). As a part of its efforts to increase the quality of care to beneficiaries while finding ways in which to curb Medicare spending, Congress directed CMS to create a program designed to increase accountability to Medicare beneficiaries, coordinate items and services under the primary Medicare programs (Parts A and B), and redesign care processes for the delivery of high quality and efficient services.
CMS responded to this mandate by creating the Medicare Shared Savings Program, or MSSP, designed to bring together groups of service and supply providers to work together to manage and coordinate care for Medicare fee-for-service beneficiaries through an ACO. The Act provides that an ACO that meets the quality performance standards established by CMS will be eligible to split the savings realized by the ACO with the Medicare program.
The proposed Rules set forth the various components of the MSSP and explain each proposed element in detail. CMS also goes to some length in the proposed Rules to explain the methodology behind each of the proposed elements and the various options it considered in developing its final proposed program. Therefore, interested parties desiring to comment on one or more elements of the proposed regulations may want to refer to the entire Rule, available in the Federal Register for April 7, 2011 on the GPO website at www.gpo.gov/fdsys. Comments on the proposed rules must be submitted to CMS no later than May 20, 2011.
Eligibility and Governance of ACOs
Joining the four types of providers identified in the Act as being eligible for participation in the MSSP as ACOs[1], CMS has proposed to include critical access hospitals (CAH) in the list of entities that may form an ACO, but only those CAHs that bill globally for both facility and professional services. CAHs that bill Medicare only for the facility fee would not be eligible to form an ACO under the proposed Rules. While these are the types of providers that may independently form an ACO, other Medicare-enrolled providers and suppliers may participate in an ACO in order for the ACO to provide a wider range of services and more comprehensive care to its beneficiaries. CMS has also proposed to provide a financial incentive (in the form of a bigger slice of the shared savings pie) for ACOs that include rural health centers (RHCs) and federally qualified health centers (FQHCs) among its group of participating entities.
The Act requires all ACOs to have a formal legal structure that allows for (1) shared governance of the ACO and (2) the organization to receive and distribute the shared savings payments to all of the ACO's participating providers. CMS has proposed that to qualify as an ACO, the entity must be recognized and authorized to conduct business under applicable state law, must have a tax identification number, and must be capable of receiving and distributing shared savings, repaying shared losses, and ensuring its participants' compliance with the MSSP requirements. Importantly, CMS identified two things an ACO need not be in order to participate in the MSSP: First, the ACO is not required to be a distinct legal entity. Meaning that some entities, for example, an existing hospital entity employing ACO professionals, already meeting the shared governance requirements will not be forced to form a distinct entity for its ACO. Second, the ACO itself does not have to be enrolled as a provider in the Medicare program. The ACO's participants (physicians and hospitals, for example) must be enrolled as participating providers and/or suppliers, but the ACO itself does not.
In order to meet the shared governance requirements under the proposed rules, each ACO participant must have representation in the ACO's governing body and together the ACO participants must have a minimum of 75 percent control of the governing body. In addition, ACOs will need to demonstrate that they are partnering with their Medicare beneficiaries by having beneficiary representation in its governing body. CMS has also added a "community stakeholder" requirement under which an ACO must show that it has a process for integrating community resources in its activities. Those ACOs that have representation by a "community stakeholder" organization in its governing body will be deemed to have satisfied this requirement. Otherwise, the ACO will be required to explain how it will partner with community stakeholders in its application.
As part of the requirements for ACO leadership and management structure, ACOs will be required to show that their participants demonstrate financial integration through the sharing of substantial financial risk, and clinical integration by showing a degree of interaction and interdependence among the participants in their provision of medical services that enables them to jointly achieve cost efficiencies and quality improvements.
Assignment of Beneficiaries to ACOs
Each ACO
will have a minimum of 5,000 beneficiaries assigned to it and assignment of
beneficiaries is to be based on their utilization of primary care services
provided by physicians. Under the
proposed Rules, a beneficiary will be "assigned"[2] to
an ACO based on his/her assignment to a primary care physician (an internist,
general practice, family practice or geriatric medicine provider) who has
historically provided a plurality of primary care services to the
beneficiary. CMS expressed its concerns
about using this model for the assignment of beneficiaries, stating that it may
not adequately take into account the delivery of primary care by specialists,
especially in those areas having a shortage of primary care physicians. CMS has requested comments about its proposed
method and has not eliminated the option of using a second step in the process
to identify those specialists providing primary care services and assigning
beneficiaries utilizing their services to the ACO with which the specialist is
affiliated.
CMS also considered the best method of assigning beneficiaries to ACOs for purposes of calculating the ACOs eligibility for shared savings. Its proposed approach is to assign beneficiaries retrospectively after the end of a performance year, based on utilization data demonstrating the provision of primary care services to beneficiaries. CMS believes that this approach will more accurately reflect the patient population actually cared for by the ACO given that such populations tend to vary by approximately 25 percent over the course of a year. However, in an effort to assist ACOs in identifying those patients who would most likely benefit from specific care initiatives, CMS has proposed to provide each ACO with aggregate beneficiary level data for its assigned population of beneficiaries during the "benchmark" period, or the time in which the baseline Medicare costs for a beneficiary population is being measured in order to make shared savings determinations. This would provide the ACO with information on the population it will most likely be responsible for (taking into account the 25 percent annual variation rate) while discouraging the ACO from limiting its care improvement activities to only the subset of beneficiaries it believes to be assigned to it.
Quality and Other Reporting Requirements
for ACOs
Regardless of how dramatically an
ACO is able to decrease its per capita expenditures for its beneficiaries to
share in any of those savings, the ACO must meet the quality measures
established by CMS. As proposed by CMS,
the quality measures are categorized into five key domains: (i) the
patient/caregiver experience, (ii) care coordination, (iii) patient safety, (iv) preventive health, and (v) at-risk population /frail
elderly health.
Under the first category of the patient/caregiver experience, the proposed measures include data gathered from patient and caregiver surveys on such issues as receiving timely care, the courtesy of office staff and the amount and quality of patient education provided. The coordination of care domain includes performance measures focused on patient transitions, such as physician follow-up visits and medication reconciliation measures after a patient has been discharged from an inpatient facility, and provider use of available information systems. Measures in the patient safety domain are centered around the prevention of health care acquired conditions such as pressure ulcers and surgical site infections. Preventative health measures are predictably focused on weight, blood pressure, and cholesterol management, along with screenings for tobacco use and depression. Finally, the at-risk population and frail elderly health proposed measures include the receipt of specific tests and screenings for at-risk populations such as diabetics and those with congestive heart failure, and fall risk analysis and osteoporosis management in females with a fracture or the frail elderly.
The proposed measures are those CMS anticipates to be in effect for the first year of the MSSP, with additional or more refined measures developed over subsequent years. Hospital and other facility-based quality measures are also expected to be added as the program continues. Each ACO will receive a set benchmark and minimum attainment level for every performance measure using claims data and current quality performance rates. CMS proposes to reward an ACO's performance using a sliding scale when the ACO's scores are equal to or greater than the minimum attainment level but less than the performance benchmark.
Shared Savings Determinations
As proposed, an ACO would enter
into a three year agreement with CMS pursuant to which the ACO would be
eligible to receive shared savings payments for each year of the agreement
period. In determining how the shared
savings portion of the MSSP would work, CMS has proposed a system in which ACOs
can choose one of two tracks depending on the ACO's
willingness to share in any losses generated by the ACO. The proposed "Track 1" would allow
for an ACO's shared savings to be reconciled for the
first two years of the agreement, with the ACO not being responsible for any
portion of losses to the Medicare program if the ACO is not able to meet its
expenditure targets (referred to as a "one-sided payment model"). For the third year of the arrangement,
however, the ACO would be required to share in any losses that may be generated
as well as savings (or "two-sided payment model"). Those ACOs opting for "Track 2"
would be under the two-sided model for the entire three years, meaning that the
ACO would be at risk for a portion of losses sustained, but also eligible for
higher shared savings rates than are available under the one-sided payment
model.
As proposed, the shared savings payment model would look something like this: CMS would establish a minimum savings rate (MSR) for each ACO, which is the percentage that expenditures must be below the applicable benchmark. The MSR will be determined by CMS using a sliding scale based on the total number of beneficiaries. The benchmark itself is based on a risk adjusted, per capita fee for service expenditures for Parts A and B for the previous three years, and it will be adjusted to account for characteristics of the beneficiaries assigned to the ACO. The benchmark will be set for the entire three year agreement period. In determining the shared savings amount, the ACO's MSR will be applied to the benchmark and if the ACO's per capita expenditures for its beneficiaries is less than the adjusted benchmark, the difference between the actual per capita expenditures and the adjusted benchmark will be shared between CMS and the ACO.
For ACOs on the Track 1 path (one-sided model), CMS has proposed that they receive 50 percent of the savings, not to exceed 7.5 percent of the benchmark. Track 2 participants (two-sided model) would be eligible to receive 60 percent of the savings up to 10 percent of the benchmark. Combined with the incentives for including FQHCs and RHCs, a Track 1 ACO could earn up to an additional 2.5 percentage points in shared savings (for a total of up to 52.5 percent) and Track 2 ACOs could earn up to an additional 5 percentage points (for a total of up to 65 percent of the shared savings).
Of course, those ACOs using the Track 2 methodology (and those in the third year of Track 1) will also be responsible for any increases in spending that occur. CMS will establish a minimum loss rate (MLR), which is similar to the MSR. Once the ACO meets its MLR, it will have to pay CMS a percentage of the losses based on its quality performance and FQHC/RHC participation. The losses an ACO could sustain would be capped at 5 percent for the first year, 7.5 percent in the second year and increasing to 10 percent in year three. Track 2 ACOs will be required to provide for reinsurance and place funds in escrow, or engage in some other repayment mechanism to assure the repayment of losses. This is particularly important since at least some ACOs will not be enrolled as Medicare providers, thus limiting CMS's ability to recoup loss payments through reimbursement withholdings.
Monitoring and Termination
CMS proposes to use basically the
same tools it uses for other programs to conduct oversight and monitoring of ACOs—that
is, audits, evaluations, investigation of complaints and on–site
inspections. Of special concern to CMS
is the monitoring of an ACO's avoidance of at-risk
beneficiaries and compliance with quality standards. CMS defines those beneficiaries it considers
to be "at-risk" to be those that have two or more hospitalizations or
emergency room visits per year, are dually eligible for Medicare and Medicaid,
have a high utilization pattern, have one or more chronic conditions, or have a
recent diagnosis that is expected to result in increased costs. Using medical record audits, beneficiary
survey results and beneficiary and/or provider complaints, CMS proposes to
require ACOs engaging in at-risk beneficiary avoidance activities to enter into
a corrective action plan followed by termination for continued
non-compliance. An ACO would not be
eligible to receive shared savings payments during the time the corrective
action plan was in place.
For those ACOs failing to meet the minimum required level of quality for one or more quality domains, CMS has proposed that it will first issue a warning to the ACO, followed by termination the next year if the ACO's quality performance has not improved. In the proposed Rules, CMS also identifies other program requirements that an ACO's failure to satisfy will result in termination from the MSSP, and those actions for which it believes there should be no administrative or judicial review, such as an ACO's failure to meet the quality standards and CMS's assignment of beneficiaries to an ACO.
Coordination with Other Federal Laws
a. Fraud and Abuse Laws.
Because the arrangements between and among ACOs, ACO participants, ACO providers and suppliers and third parties may implicate the Civil Monetary Penalties (CMP) law, the federal anti-kickback statute, and/or the Stark Law, the Act authorized CMS to waive these laws as necessary to carry out the provisions of the MSSP. Accordingly, CMS and the Office of the Inspector General (the OIG) for Health and Human Services (HHS) have jointly published a notice with comment period addressing the application of the fraud and abuse laws to ACOs. The joint CMS/OIG notice proposes waivers to the fraud and abuse laws, but anticipates that the final form of the waivers will depend on the form of the final ACO regulations.
As proposed, the Secretary of HHS will waive the application of the provisions of the Stark Law to the distributions of shared savings received by an ACO from CMS under the MSSP: (i) to or among ACO participants and ACO providers/suppliers; or (ii) for activities necessary for and directly related to the ACO's participation in the MSSP. The proposed waiver would apply only to the distributions of shared savings under the MSSP and all other financial relationships involving physicians or entities participating in the MSSP that implicate the Stark Law would still need to satisfy an existing Stark exception.
The Secretary will also waive the application of the prohibitions of the anti-kickback statute with respect to (i) the distributions of shared savings received by an ACO from CMS under the MSSP to and among ACO participants and ACO providers/suppliers and for activities necessary for and directly related to the ACO's participation in and operations under the MSSP; and (ii) any financial relationship between or among the ACO, ACO participants and ACO providers and suppliers necessary for and directly related to the ACO's participation in and the operations under the MSSP that implicates the Stark Law and that complies fully with one of the Stark Law's exceptions.
Those portions of the CMP law that prohibit payments to a provider to induce the provider to reduce or limit the provision of services to beneficiaries would be waived under the CMS/OIG proposal if: (i) the distribution of shared savings received by an ACO from CMS made by a hospital to a physician are not made as an inducement to limit or reduce medically necessary items or services, and both the hospital and the physician were participants in the ACO during the year in which the shared savings were earned by the ACO; and (ii) any financial relationship between or among the ACO and its participants and providers/suppliers that are necessary and directly related to the ACO's participation in the MSSP that implicates the Stark Law fully meets one of the Stark Law exceptions.
b. IRS Considerations
The Internal Revenue Service (IRS) issued a notice to solicit comments regarding whether the existing guidance related to tax-exempt organizations is sufficient for those tax-exempt organizations participating in the MSSP. In the notice, the IRS recognizes that tax-exempt organizations will participate in ACOs with private parties and that to avoid adverse tax consequences, the tax-exempt organization must ensure that its participation in the MSSP is structured so as to avoid its net earnings inuring to the benefit of its insiders and so that it is not being operated for the benefit of the private parties participating in the ACO. The IRS stated that it does not anticipate a tax-exempt organization's participation in the MSSP through an ACO to result in either inurement or private benefit when the tax-exempt organization's participation in the ACO meets certain standards, including that the organization's terms of participation in the ACO are set forth in advance in a written agreement negotiated at arm's-length and are at fair market value, and the tax-exempt's share of economic benefit from the ACO is proportional to the benefits or contributions it provides to the ACO.
Absent any inurement or private benefit, and subject to the ACO meeting all of CMS's participation requirements, the IRS also anticipates that any MSSP payments received by a tax-exempt organization from an ACO will be considered to be derived from activities that are substantially related to the performance of it charitable purposes, and, as such, not subject to unrelated business income tax. The IRS is seeking comments related to a tax-exempt organization's participation in ACO activities that are unrelated to the MSSP, such as entering into shared savings arrangements with commercial insurance providers and whether these activities might be related to the organization's tax-exempt purposes.
c. Antitrust Issues
The Department of Justice and the Federal Trade Commission (together, the "Agencies") issued an Antitrust Policy Statement that applies to ACOs approved for participation in the MSSP. The stated intent of the Agencies was to provide for innovation in both the Medicare and private insurance markets while protecting both Medicare beneficiaries and commercially insured patients from potential anticompetitive harm. The policies outlined in the Policy Statement apply to collaborations between otherwise independent providers and provider groups, formed after March 23, 2010, that have been approved to participate or seek to be approved to participate in the MSSP.
The Agencies determined that if an ACO uses the same governance and leadership structure and the same clinical and administrative processes as it uses to qualify for and participate in the MSSP, the Agencies will apply the rule of reason analysis to the ACO for the duration of its participation in the ACO. The rule of reason analysis evaluates whether the collaboration is likely to have substantial anticompetitive effects and, if so, whether the collaboration's potential pro-competitive efficiencies are likely to outweigh those effects. Determining that CMS's criteria for participation in the MSSP are broadly consistent with the Agencies' idea of clinical integration, the Agencies stated that organizations meeting CMS's criteria for approval as an ACO are reasonably likely to be bona fide arrangements intended to improve the quality of health care while reducing costs for purposes of both participation in the MSSP and negotiations with private sector payers.
The Agencies proposed using a streamlined analysis of those ACO applicants who meet CMS's eligibility criteria for participation in the MSSP. Their analysis will evaluate the ACO's share of services in each ACO participant's primary service area (PSA), reasoning that ACOs with a high PSA share may reduce quality, innovation and choice for patients by reducing the ability of other ACOs to compete in the same area. ACOs having independent ACO participants that provide the same service and have a combined share of 30 percent or less of each common service in each participant's PSA wherever two or more ACO participants provide the common service to patients from that PSA, are deemed to be in the "safety zone" and have no obligation to contact the Agencies prior to commencing operations. Any hospital or ambulatory surgery center participating in an ACO must be non-exclusive to the ACO (meaning that the hospital or ASC is allowed to contract individually or affiliate with other ACOs or commercial payers) to fall within the safety zone, regardless of its PSA share. The safety zone for physicians and other types of providers does not differ based on whether they are exclusive to the ACO or not.
An exception applies to rural providers, in which an ACO may include one physician per specialty from each rural county on a non-exclusive basis and still qualify for the safety zone, even if the inclusion of these physicians causes the ACO's share of any common service area to exceed 30 percent in any participant's PSA for the service. In addition, an ACO may include a rural hospital on a non-exclusive basis and still qualify for the safety zone, even if such inclusion causes the ACO's share of any common service to exceed 30 percent in any ACO participant's PSA for that service. For ACOs with a "dominant provider" (a participant that has a greater than 50 percent share in its PSA of any service that no other ACO participant provides to patients in that PSA), the dominant provider must be non-exclusive to the ACO and the ACO cannot require a commercial payer to contract exclusively with the ACO, in order to fall within the safety zone.
Pursuant to the CMS proposed Rules, an ACO that does not qualify for the rural exception cannot participate in the MSSP if its share exceeds 50 percent for any common service that two or more independent ACO participants provide to patients in the same PSA, unless the ACO is able to provide a letter from one of the Agencies stating that the Agency has no present intention to challenge or recommend challenging the ACO under the antitrust laws. The Agencies have committed to providing a review of any such ACO's request for a letter within 90 days of the Agency's receipt of the required documentation and will consider any information or alternative data suggesting that the PSA shares may not accurately reflect the ACO's likely market power and will consider any substantial pro-competitive justification for why the ACO needs the proposed market share to provide high-quality, cost-effective care to Medicare beneficiaries and patients in the commercial market.
Those ACOs that are outside of the safety zone but below the mandatory review 50 percent review threshold may proceed with or without antitrust assurances issued by the Agencies. ACOs in this category may enter into an agreement with CMS and begin operations while remaining subject to an antitrust investigation if it presents anticompetitive concerns. To lessen those concerns, the Agencies list five types of conduct that an ACO can avoid to significantly reduce the likelihood of such an investigation. These five types of conduct are:
· Preventing or discouraging commercial payers from directing or incentivizing patients to choose certain providers through "anti-steering," "guaranteed inclusion" or other similar contractual provisions;
· Tying sales of the ACO's services to the commercial payer's purchase of other services from providers outside the ACO (and vice versa), including providers affiliated with an ACO participant;
· Except for primary care physicians, contracting with other ACO physician specialists, hospitals, ASCs or other providers on an exclusive basis, thus preventing or discouraging them from contracting outside the ACO;
· Restricting a commercial payer'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, if that information is similar to the cost, quality, efficiency and performance measures used in the MSSP; and
· Sharing among the ACO's provider participants competitively sensitive pricing or other data that could be used to set prices or other terms for services they provide outside the ACO.
An ACO falling into this category and desiring to obtain assurances from the Agencies prior to beginning operations may seek an expedited review from one of the Agencies, similar to that for ACOs with a greater than 50 percent market share. However, if the ACO receives a determination from the Agency stating that it is likely to challenge or recommend challenging the ACO, CMS will not approve the ACO for participation in the MSSP.
This is a brief summary of the proposed Rules which contain many layers of detail and solicitations by CMS for public comments on numerous issues. Please contact Kevin Woodhouse at (317) 236-2154 or Kevin.Woodhouse@icemiller.com; or Margaret Emmert at (317) 236-2169 or Margaret.Emmert@icemiller.com if you have any questions or if we can otherwise assist you in any way.
This publication is intended for general information
purposes only and does not and is not intended to constitute legal
advice. The reader must consult with legal counsel to determine how laws
or decisions discussed herein apply to the reader's specific circumstances.
April 18, 2011