Publications: Prescription for Accountable Care May Now Be Easier to Swallow; CMS Releases Final Rule for Medicare Shared Savings Program

This Client Update is part of the continuing series that Ungaretti & Harris will be releasing as additional guidance on Accountable Care Organizations becomes available.

On October 20, 2011, the Centers for Medicare and Medicaid Services ("CMS") issued the final rule ("Final Rule") for providers seeking to organize and operate accountable care organizations ("ACOs") that will participate in the Medicare Shared Savings Program ("SSP"). The Department of Justice ("DOJ"), the Federal Trade Commission ("FTC"), the Department of Health and Human Services’ Office of the Inspector General ("OIG"), and the Internal Revenue Service ("IRS") also released guidance to address the interplay between ACOs and antitrust, fraud and abuse, and federal tax laws. Following the release of the proposed rule ("Proposed Rule") on March 31, 2011, a variety of provider groups, commentators, and industry representatives expressed concern over the financial models as they were originally proposed and the inflexibility of certain governance and operational provisions. In drafting the 696-page Final Rule, CMS considered more than 1,300 comments on the Proposed Rule and made significant adjustments to many portions of it which are intended to generate greater interest in the development of ACOs. Although there are numerous changes to the Proposed Rule, this article summarizes ten key developments. 

• Preliminary Prospective Beneficiary Assignment, with Period-End Reconciliation. Under the Proposed Rule, CMS would provide ACOs with the names of patients included in an ACO's participant population, but would not have actually assigned patients to an ACO until the end of a reporting period. A significant change under the Final Rule provides that beneficiaries will be assigned to an ACO preliminarily on a prospective basis. The roster of ACO beneficiaries will be updated on a quarterly basis, with a final reconciliation occurring at the end of the reporting period. This change offers ACO providers more certainty regarding the population of patients that they are truly "accountable" for under the SSP.
• Broader Array of Eligible Entities. Under the Final Rule, Federally Qualified Health Centers ("FQHCs") and Rural Health Clinics ("RHCs") are eligible to both form and participate in an ACO. This change is especially significant for safety-net providers associated with these types of facilities, as the Medicare model is expected to pave the way for SSP-like programs in Medicaid, Children's Health Insurance Programs, and the commercial market. To the extent that FQHCs and RHCs were originally left out of the SSP, many commentators were concerned that they would be left out of future shared savings programs as well. CMS also clarified that physicians, including primary care physicians, may also participate in multiple ACOs by participating under different Tax Identification Numbers ("TINs").
• Phased-In Performance Measurement. Under the Proposed Rule, ACOs were subject to reporting on 65 different quality and efficiency metrics. Under the Final Rule, CMS has reduced this number to 33 with an emphasis on care delivered in an ambulatory setting. Additionally, the requirement that providers improve on these 33 metrics will be phased in over time. In Year 1, ACOs are eligible for shared savings merely by reporting on all 33 quality metrics. In Year 2, ACOs will be paid for improving quality on 25 of the 33 and by reporting the remaining 8. In Year 3, ACOs will share in savings for improving quality on 32 of the 33 metrics and by reporting on the 33rd metric. Finally, meaningful use of electronic health records ("EHR") is no longer a condition of participation but has been retained as a quality metric.
• Adjusted Risk Models. Under the Proposed Rule, ACOs had the option to choose between two risk models (Track 1 and Track 2), both of which included some downside risk in the event that the ACO beneficiaries’ healthcare costs actually rose during the three year participation period, rather than falling, as intended. Under the Final Rule, CMS revised the Track 1 Risk Model to eliminate downside risk during the initial agreement period. With this change, providers have the option of entering into the SSP without exposing themselves to downside risk. Track 2 continues to maintain an element of downside risk for providers.
• Additional Savings Available under SSP. Under the Final Rule, Shared Savings will now be calculated from the first dollar of savings instead of including only those savings above the applicable minimum savings rate (between 2.0% and 3.9%). ACOs must still meet the minimum savings rate to share in savings to the Medicare program. Additionally, the Performance Payment Limit has been increased to 10% of benchmark expectations for the Track 1 Risk Model, up from 7.5% in the Proposed Rule, and to 15% of benchmark expectations for the Track 2 Risk Model, up from 10% in the Proposed Rule.
• No Pre-Approval of Marketing Materials. The Proposed Rule stated that ACOs were prohibited from using marketing materials, communications, and activities ("marketing materials") related to the ACO’s participation in the SSP until the marketing materials were approved by CMS. Under the Final Rule, ACOs no longer need to have CMS pre-approve their marketing materials. ACOs may begin to use their marketing materials five days after submitting them to CMS, provided that the ACO certifies that the materials comply with the marketing regulations and CMS does not disapprove the materials. CMS may, however, disapprove marketing materials at any time and ACOs may be subject to sanction for use of prohibited marketing materials.
• No Mandatory Antitrust Review. In the Final Policy Statement issued by the DOJ and FTC (collectively, the "Agencies"), the Agencies removed mandatory antitrust review as a condition of entry into the SSP for ACOs whose participating physicians constitute a high percentage of the geographic market. Although the Agencies pledge to monitor complaints regarding ACO formation and conduct, they will not engage in mandatory antitrust review of ACOs as a prerequisite to participation in the SSP.
• New Pre-Participation Waiver. In the Interim Final Rule with Comment Period ("Interim Final Rule"), the OIG outlines two modified fraud and abuse waivers and three new fraud and abuse waivers that were not included in the Proposed Rule. The two modified waivers are the "Shared Savings Distribution Waiver" and the "Compliance with the Physician Self-Referral Law ("Stark") Waiver." The Compliance with Stark provision waives the gainsharing Civil Monetary Penalties statute ("CMP") and the federal Anti-kickback Statute ("AKS") for ACO arrangements that implicate Stark. The Shared Savings Distribution provision waives Stark, AKS, and the CMP for distributions of shared savings payments earned under the SSP. The first of the new waivers is an "ACO Pre-Participation Waiver" of Stark, the AKS, and the CMP. The pre-participation provision waives these laws with respect to ACO-related arrangements in anticipation of an organization's participation in the SSP. Organizations must take a number of steps toward ACO development before qualifying for the pre-participation waiver, including demonstrating good faith intent to create an ACO under the SSP, taking diligent steps to develop an ACO, documenting the key terms of the start-up arrangement, and publicly disclosing a description of the start-up arrangement in accordance with CMS requirements.
• New ACO Participation Waiver. The second new waiver is a waiver of Stark, AKS, and the CMP that applies to all ACO-related arrangements during the term of an ACO's participation agreement under the SSP. An ACO must enter into, and be in good standing under, its participation agreement with CMS in order to take advantage of the participation waiver.
• New Patient Incentive Waiver. The third new waiver is a waiver of the AKS and the beneficiary inducements provision of the CMP for incentives offered by ACOs to patients under the SSP. Patient incentives generally implicate the AKS and CMP, which prohibit attempts to induce patients to receive covered items and services from a particular provider through the offer or transfer of remuneration. The patient incentive waiver permits ACOs to offer free or discounted items or services to patients to encourage patients to engage in preventive care and comply with treatment plans but does not include waivers of co-payments or deductibles.

In developing the above changes to the Proposed Rule, CMS has responded to the healthcare industry by modifying the Final Rule to address many of the industry's concerns with the SSP. Cautious providers who initially expressed reluctance to organize and operate ACOs now have additional incentives and support for participating in the SSP.

For more information on this update, please contact , , or any member of the Ungaretti & Harris LLP Healthcare Department.