V&E Health Industry Update, April 1, 2011
On March 31, 2011, the Centers for Medicare and Medicaid Services (CMS) issued for public comment its long-anticipated proposed rule regarding participation in Accountable Care Organizations (ACOs), pursuant to its Patient Protection and Affordable Care Act (PPACA) mandate (posted at http://www.ofr.gov/OFRUpload/OFRData/2011-07880_PI.pdf). The proposed regulations outline the requirements for Medicare providers and suppliers to participate in ACOs under the Medicare Shared Savings Program (MSSP). The proposed rule details the requirements for ACOs to take responsibility for improving the quality of care they deliver to a group of Medicare fee-for-service beneficiaries, while lowering costs, in return for a share of the resulting savings. Comments are due 60 days from the date of publication in the Federal Register.
Two Models for Participation
Under the proposed rule, an ACO will enter into an agreement with the Secretary to participate in the MSSP for not less than a three-year period. The proposed rule establishes two different models for initial participation in the MSSP: a shared-savings model (one-sided model) and a shared-savings/losses model (two-sided model). The thought is that the two-model system will reward ACOs willing to accept the risk of sharing in any losses while maintaining an incentive to encourage ACOs not immediately ready to accept such risk to still participate in the program.
Two-Sided Model ─ Upside and Downside Risk. Under the two-sided model, an ACO would be eligible to receive a higher potential shared savings (60 percent of resulting savings) relative to those participating in the one-sided model (50 percent of resulting savings), but also would be required to repay the Medicare program if costs for the ACO-aligned beneficiaries exceed certain thresholds. The two-sided model represents a bold new approach for the Medicare fee-for-service (FFS) program, under which providers in the past have not been paid, and therefore have had little incentive, to coordinate the care for their patients or to be accountable for the total costs and quality of the care provided.
One-Sided Model ─ Upside-Risk Only. Under the one-sided model, an ACO would initially have the opportunity to share in any actual savings during the first two years of the agreement, but would not be penalized if it exceeded the cost benchmarks. In year three, the ACO would then transition to the two-sided model. This approach allows participation by those with less experience managing care and accepting financial risk to gain experience with population management in the FFS setting before transitioning to more risk.
Under either model, ACO participants will continue to receive FFS payments. If savings are achieved and certain quality measures (discussed below) are satisfied, the ACO may then choose how it distributes shared savings or allocates risk among its ACO participants.
Quality Metrics: Reporting and Performance Requirements
The proposed rule dedicates substantial focus to quality measures. The rule contains 65 new quality measures divided across five different categories (Patient/Caregiver Experience, Care Coordination, Patient Safety, Preventive Health, At-Risk Population/Frail Elderly Health). The measures are quite specific, and a number of them are related to the treatment of Medicare beneficiaries with chronic diseases. Under the proposed rule, in order to receive shared savings, ACOs must meet a certain quality performance standard in relation to these measures. During the first year of participation in the program, ACOs must fully and accurately report on the quality measures to satisfy the quality performance standard. For subsequent years, the quality performance standard will be based on whether the ACOs actually attain certain performance thresholds. Importantly, an ACO that does not meet the quality performance thresholds for all proposed measures would not be eligible for shared savings, regardless of the costs reductions realized by the operation of the ACO.
Coordination Among Agencies: Antitrust, Fraud and Abuse, Tax
The proposed rule, in addition to three statements and notices simultaneously released by the Federal Trade Commission (FTC) and Department of Justice (DOJ), CMS, and DHHS Office of Inspector General (OIG), and the Internal Revenue Service (IRS), address the intersection of current antitrust, physician self-referral, anti-kickback, civil monetary penalty, tax, and other laws that some believe currently act as impediments to aligning incentives and coordinating care among providers:
A joint CMS and OIG notice titled “Medicare Program; Waiver Designs in Connection with the Medicare Shared Savings Program and the Innovation Center” (posted at: http://www.ofr.gov/inspection.aspx
An IRS notice soliciting comments regarding the need for additional tax guidance for tax-exempt organizations, including tax-exempt hospitals, participating in the MSSP (posted at: http://www.irs.gov/pub/irs-drop/n-11-20.pdf
Addressing the intersection of these laws was perhaps the most anticipated topic among industry members awaiting the release of the proposed rules. We briefly summarize each below.
Antitrust: The FTC and DOJ Antitrust Policy Statements for ACOs (Joint Antitrust Statement) explain that ACOs have potential pro-competitive efficiencies while laying out the antitrust framework for ensuring that ACOs will not reduce competition. As an initial matter, the Joint Antitrust Statement explains that compliance with the final CMS eligibility standards will preclude the application of the per se rule to ACOs. Instead, the antitrust analysis will focus on the competitive effects of an ACO. The Joint Antitrust Statement explains when the FTC and DOJ (the “Agencies”) will review an ACO: (1) Absent extraordinary circumstances, ACOs with shares less than 30 percent will not be challenged and need not notify the Agencies; (2) ACOs with shares greater than 50 percent must submit to a mandatory antitrust review by the Agencies prior to participating in the Shared Savings Program; and (3) ACOs with shares between 30 percent and 50 percent may submit voluntarily to antitrust review and are advised to avoid certain conduct. The Joint Antitrust Statement sets forth the method of calculating shares. The Joint Antitrust Statement identifies the information the Agencies will use to review an ACO and requires the Agencies to complete the review within 90 days of receiving such information. The Agencies are accepting comments to the Joint Antitrust Statement until May 31, 2011.
Fraud and Abuse: CMS and the OIG released a notice (the “Joint CMS/OIG Notice”) that addresses proposed waivers of the civil monetary penalties (CMP) law, federal anti-kickback statute, and the physician self-referral law for financial arrangements involving ACOs and their participants under the MSSP. Among other things, the proposed waivers would allow for the legitimate distribution of shared savings among ACO-participating providers and suppliers without running afoul of fraud and abuse laws. CMS will accept comments to the Joint CMS/OIG Notice no later than 60 days after the date of publication.
Tax: In Notice 2011-20, the IRS requests comments regarding what additional guidance, if any, is necessary with respect to a tax-exempt health care organization's participation in an ACO with respect to MSSP activities and non-MSSP activities. Significantly, Notice 2011-20 indicates that a tax-exempt organization's participation in the MSSP activities of an ACO will generally be regarded as furthering charitable purposes and not generating revenue subject to the unrelated business income tax, so long as the tax-exempt organization's participation is proportional to its ownership/participation/membership interest and the ACO's contractual arrangements are fair-market value. With respect to non-MSSP activities, Notice 2011-20 suggests that certain activities, such as negotiating on behalf of unrelated, proprietary entities, may not constitute the furtherance of charitable purposes, while other activities, such as participating in Medicaid shared savings arrangements, would further charitable purposes.
Other key issues discussed in depth in the proposed rule are:
- ACO eligibility and operational requirements (e.g., what qualifies as “shared governance” and what entity types are eligible to form ACOs);
- Assigning beneficiaries to ACOs and beneficiary notification of ACO participation;
- Shared savings payment methodology (including the establishment of an expenditure benchmark, performance target, minimum savings percentage, sharing rate, performance cap); and
- Proposals for monitoring ACO performance (and grounds and procedures for terminating agreements).
For more detailed information about this breaking news, including analysis of the proposed rule, the concurrent notices from other federal agencies, and other issues related to participation in the MSSP, please contact one of the following V&E lawyers: Dionne Lomax, Jim Reeder, or William Vigdor, Antitrust.