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Articles Posted in Accountable Care Organizations

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The Center for Medicare and Medicaid Services (CMS) has published a 957-page final rule that confirms changes made to the Medicare Shared Savings Program (MSSP). This new rule will be expected to have a substantial impact on Accountable Care Organizations (ACOs) that rely on one-sided risk models, in so far as ACOs in the program will be forced to assume a larger amount of financial risk than under the current landscape. CMS’s new program, “Pathways to Success”, will afford smaller, physician-led ACOs a period of three years to remain in a one-sided risk model. All new ACOs will have two years, while existing ACOs with one-sided risk models will only have solely a year to adopt the new program and assume the additional financial risk.

CMS has also reduced the shared savings rate to 40% for ACOs that do not assume risk for health care costs, but the 50% rate for ACOs at all other levels of financial risk remains unchanged. With this new rule, announced December 21, 2018, CMS projects $2.9 billion in savings over the next ten years as ACOs take on more risk.

In CMS’s current program, which has been in effect for six years, ACOs were eligible to receive a portion of any savings that were generated, provided that they met quality standards for the care they provided to their patients. Currently, only a limited number of ACOs are subject to any sort of financial penalties in cases in which costs increase. However, from the experience running MSSP, CMS has been able to determine that ACOs that are required to take responsibility for costs tend to perform better than those that do not. This new rule provides incentives for ACOs to provide high-quality care in order to generate additional savings for themselves.

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March 2018 – Recent additions to the Medicare Shared Savings Program (“MSSP”), include several changes aimed to encourage Medicare beneficiaries to take a more proactive approach with their health care.

By way of background, on March 23, 2010, Section 3022 of the Affordable Care Act added section 1899 (42 U.S.C. § 1395jjj) to the Social Security Act, requiring that the U.S. Department of Health & Human Services (“DHHS”) establish the MSSP. The program provides for a new type of health care entity, an Accountable Care Organization (“ACO”), that is held accountable for the quality and experience of care for a population of assigned Medicare beneficiaries while reducing the rate of growth in health care spending for that population. Under the MSSP, an ACO’s quality and financial performance is assessed annually by the Center for Medicare and Medicaid Services (“CMS”) based on its assigned beneficiaries to determine whether the ACO has met the quality performance standards and reduced growth in expenditures compared to a historical financial benchmark. ACOs that meet or exceed a minimum savings rate and satisfy minimum quality performance standards are eligible to receive a portion of the shared savings generated which incentivizes ACOs to improve the coordination and quality of care. There are different tracks or programs, depending on the amount of risk an ACO wishes to assume.

On February 9, 2018, President Trump signed H.R. 1892, entitled the Bipartisan Budget Act of 2018, into law which, among other things, inserts 42 U.S.C. § 1395jjj(m) providing that certain ACOs (limited to ACOs in risk-bearing tracks) may apply to establish an ACO Beneficiary Incentive Program to provide incentive payments to beneficiaries who are furnished certain qualifying services by an ACO.

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On March 6, 2017, House Republicans released the much-anticipated American Health Care Act (“AHCA”) bill that would effectively replace the Patient Protection and Affordable Care Act (the “ACA”), which is currently responsible for covering approximately 20 million individuals through a combination of health insurance offered through state-based and federally-run Exchanges and the expansion of healthcare coverage.

One of President Trump’s policy promises has been that “On day one of the Trump Administration, we will ask Congress to immediately deliver a full repeal of Obamacare.” Now that President Trump is in office, and Republicans control the legislative branch of the government, members of Congress are actively working through the legislative process to repeal and replace the ACA.

In fact, the AHCA passed by the House Energy and Commerce Committee and the House Ways and Means Committee on March 9, 2017 and passed the House Budget Committee on March 26, 2017.  The AHCA is proceeding to the Rules Committee, which will set the terms of the debate before the bill goes to the full House.  Upon passage by the House, the bill will move to the Senate under budget reconciliation rules.

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The United States Department of Health and Human Services Office of Inspector General (“HHS-OIG”) has released its Work Plan for Fiscal Year 2016. This plan summarizes new and continuing areas of review and activities that HHS-OIG plans to pursue as well as describing its primary objectives. The newest additions to the work plan are:

• Medical device credits for replaced medical devices • Medicare payments during Medicare Severity Diagnosis Related Groups (MS-DRG) payment window • Content Management System (CMS) validation of hospital-submitted quality reporting data • Skilled nursing facility prospective payment system requirements • Orthotic braces-reasonableness of Medicare payments compared to amounts paid by other payers • Osteogenesis stimulators-lump-sum purchase versus rental • Orthotic braces-supplier compliance with payment requirements • Increased billing for ventilators • Ambulatory surgical centers-quality oversight • Physicians-referring/ordering Medicare services and supplies • Anesthesia services-non covered services • Physician home visits-reasonableness of services • Prolonged (E & M) services-reasonableness of services • Histocompatibility laboratories-supplier compliance with payment requirements • Accountable Care Organizations: Strategies and Promising Practices • Medicare payments for unlawfully present beneficiaries in the United States-mandated review • Medicare payments for incarcerated beneficiaries-mandated review • Content Management System (CMS) management of ICD-10 implementation • Medicare Advantage organization practices in Puerto Rico • Medicare Part D beneficiaries’ exposure to inappropriate drug pairs • Medicare Part D Eligibility Verification transactions • Part D Pharmacy Enrollment • Increase in prices for brand-name drugs under Part D • Specialty drug pricing and reimbursement in Medicaid • Express Lane Eligibility • State agency verification of deficiency corrections • Medical loss ratio-recoveries of MCO rebates from profit-limiting arrangements • Review of States’ methodologies for assigning Managed Care organization payments to different Medicaid FMAPs • Managed long-term-care reimbursements • Center for Disease Control (CDC)-oversight of the Select Agent Program • Controls over networked medical devices at hospitals • Food and Drug Administration (FDA)-tobacco establishment compliance with the Family Smoking Prevention and Tobacco Control Act • Health Resources and Services Administration (HRSA)-compliance with Maternal, Infant, and Early Childhood Home Visiting (MIECHV) Requirements • IHS-change card program review • NIH-controls over subcontracting of NIH grant and contract work • Controls over the preparation and receipt of select agent shipments • Review of Office for Human Research Protections compliance evaluations to ensure human subject protection • Foster Care-States’ protocols for the use and monitoring of psychotropic medications for children in foster care • States’ implementation of guardian ad litem requirements • Consumer Operated and Oriented Plan Loan Program-CO-OP compliance with requirements and CMS monitoring activities • Allowability of contract expenditures • Rollup of State-based marketplace eligibility determination audits and Content Management System (CMS) oversight • Health Resources and Services Administration (HRSA)-compliance with Maternal, Infant, and Early Childhood Home Visiting (MIECHV) requirements
The U.S. Department of Health and Human Services Office of Inspector General has released their Work Plan for Fiscal Year 2016

The HHS-OIG expects significant recoveries in audit receivables, investigative receivables and non-HHS investigative receivables resulting from their Work Plan, as well as tremendous savings in legislative, regulatory, and/or administrative actions.
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The long-awaited final regulations for the Medicare Shared Savings Program (“MSSP”) were released today. The MSSP was implemented by Section 3022 of the Patient Protection and Affordable Care Act and is the program in which ACOs may participate to receive shared savings.

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; 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; 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.
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In July, the HEALTH LAW ATTORNEY BLOG reported on five U.S. Senators asking the Office of Inspector General (“OIG”) and the Centers for Medicare and Medicaid Services (“CMS”) to issue guidance on physician owned distributorships (“PODs”) (or, sometimes referred to as physician owned intermediaries (“POIs”)). The OIG and CMS have issued their responses.

By way of brief background, a POD is an arrangement in which, according to the U.S. Senate Committee on Finance (“Finance Committee”), “allow physician investors to purchase ownership shares in an entity that, in turn, purchases or serves as a medical device distributor for the products the physician utilizes in surgery.” Because of lack of industry guidance on the potential for fraud and abuse violations, the Finance Committee issued Physician Owned Distributors (PODs): An Overview of Key Issues and Potential Areas for Congressional Oversight wherein it recommended letters be sent to the OIG and CMS articulating its concerns and asking for guidance.

On June 9, 2011, the Finance Committee issued two letters–one to the OIG and one to CMS. In its letter to the OIG, the Finance Committee sought guidance on how PODs fit, or don’t fit, within the confines of the Anti-Kickback Statute (“AKS”). In so doing, the Finance Committee insisted that

[I]t is incumbent upon the OIG to address this rapidly evolving healthcare market issue by conducting an inquiry into PODs and their current structures and activities and then reporting to us the results of such an inquiry, along with your recommendations for further action should be taken by the OIG and Congress to effectively address the patient and program risks presented by PODs.

In its letter to CMS, the Finance Committee sought guidance on the Physician Payments Sunshine Act (“Sunshine Act”) and accountable care organizations (“ACOs”). In seeking guidance on these issues, the Finance Committee requested CMS

[C]losely examine the physician ownership and investment interests presented by PODs and ensure that those are addressed as you finalize the reporting requirements of the Sunshine Act. This would mean that the distribution model of these physician owned companies would need to be included as CMS develops a final definition of “applicable manufacturers” and “applicable Group Purchasing Organizations (GPOs).”

The Finance Committee continued in its letter to ask CMS to take PODs into consideration when issuing the final ACO regulations:

CMS should take into account the POD models when developing its final regulation to ensure that qualification and oversight of ACOs protect against potential abuses posed by PODs. The final rule should prohibit ACOs from purchasing products or services from entities that are owned by physicians participating in the ACO. Ownership should be deemed to exist if the physician receives any remuneration (cash, equity, options, profits, dividends, etc.) from the entity supplying the product or service. It should be made clear that waivers of Stark and Anti-Kickback laws should not extend to PODs.

On August 10, 2011, CMS replied to the Finance Committee’s letter stating that it will take the Finance Committee’s letter into consideration when developing the Sunshine Act’s proposed regulations. CMS also stated that the period for submitting comments on the ACO Waiver Designs proposed regulations ended on June 6, 2011 and that it was reviewing the comments it received and was developing the final ACO regulations with respect to its waiver authority.

More significant, however, is the September 13, 2011 OIG response to the Finance Committee. The OIG revealed that, pursuant to a meeting with the Finance Committee on July 19, it is “initiating a review of PODs that will seek to determine the extent to which PODs provide spinal implants purchased by hospitals.” The OIG stated that it will be a national study of hospitals that bill Medicare for spinal surgery. After the review, the OIG intends to establish:

  • How widespread PODs are;
  • What services PODs offer to hospitals;
  • Whether PODs save hospitals money in the acquisition of implants; and
  • Whether the PODs identified in the review are associated with high use of spinal implants.

With respect to the AKS concerns raised by the Finance Committee, the OIG reminds the Finance Committee that such determinations are extremely fact specific and, therefore, the “OIG’s ability to issue guidance about the application of the statute to these business structures is limited.” The OIG also reminded the Finance Committee that when it evaluates the legality of situations in which referring physicians can earn a profit–including through an investment in an entity for which s/he generates business–it considers certain factors, including:

  • The terms under which a physician may invest in the entity;
  • The terms under which a physician-owner may be required to divest his/her ownership interest;
  • The actual return or projected return on the physician’s investment; and
  • The amount of revenues generated for the entity by its physician-investors.

The OIG did not state how long its review would last, but providers and suppliers should be aware that the OIG is beginning to focus its attention on this issue and that guidance will be forthcoming.
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On Friday, June 3, the American Medical Association (“AMA”) submitted its comments concerning the Accountable Care Organizations (“ACOs”) Proposed Rule (the “Proposed Rule”) to Donald Berwick, the Centers for Medicare and Medicaid Services (“CMS”) Administrator. The Proposed Rule was issued by CMS on March 31, 2011. In its comments, AMA provided its views and recommendations regarding the Proposed Rule while reiterating its belief that a successful ACO model “can be an effective tool to improve quality, manage care coordination, reduce health care costs, and create a supportive environment for practicing physicians.” However, AMA urged CMS to issue an interim final rule to allow for the flexibility to change and improve the regulations as more information about the ACO model becomes available.

AMA addressed a number of issues in its extensive comments. First, AMA suggested changes to the proposed ACO payment and risk structure. AMA recommended the inclusion of at least one shared savings only option which would not include a mandatory shared loss provision in order to encourage participation by a greater variety of practices. AMA believes that without such an option participation could be unnecessarily limited because providers already have an incentive to become more cost-effective without the down-side risk provision. In the alternative, AMA suggested that the shared savings only option should, at the very least, be extended to smaller ACOs. AMA also urged CMS to allow health care providers to bill Medicare for procedures which are not currently billable under payment options which embrace down-side risk. AMA also suggested that ACOs share in a portion of all savings that are achieved without a minimum savings threshold, and that CMS increase the savings percentage ACOs are eligible to receive, especially at the beginning of the program. AMA also urged the removal of the withholding and line of credit provision of the Proposed Rule and suggested adjustments to the expenditure benchmark based on the health status of an ACO’s patients during the performance period. Lastly, AMA urged the exclusion of the care costs for outlier patients from the savings calculation.

Next, AMA urged the inclusion of a number of transitional ACO models in order to encourage small and solo practice participation in ACOs. AMA urged “CMS to allow these alternative ACOs to share in a percentage of all savings that are achieved, rather than simply sharing in the savings above the minimum savings threshold proposed in the rule.”

AMA also urged CMS to accept a more flexible approach to ACO beneficiary assignment. At the very least, AMA urged CMS to strike a balance between prospective and retrospective attribution. However, AMA stated that ideally “CMS should adopt a prospective approach that allows patients to volunteer to be part of the ACO and permits the ACOs to know up-front those beneficiaries for whom the ACO will be responsible.” AMA believes that these proactive efforts are crucial in order to encourage and educate beneficiaries to behave in ways which will make ACOs successful.

Next, AMA expressed its views regarding the quality measures and other reporting requirements found in the Proposed Rule. AMA urged CMS to “(1) align quality measure domains and quality measures across its programs (including the ACO, Electronic Health Record [EHR] Incentive Program, and PQRS) and reduce the number of required measures in the initial years; (2) provide ACOs with some flexibility of measure selection; (3) reconsider data submission methods; and (4) support clinical quality registries as a significant data submission method.” Among the numerous specific suggestions, AMA urged that CMS publish the required quality measures at least 90 days prior to the initial effective date of the ACO program and modify the 100 percent reporting on all measures requirement which is currently necessary under the proposed rule to qualify providers for a share of the savings.

AMA went on to address a number of other issues. AMA was pleased with the overall ACO governance structure proposal, but suggested some differing requirements for oversight of ACOs. AMA went on to disagree with the exclusion of rural health clinics from the proposed plan. Next, AMA agreed with CMS’ overall attempt to propose waivers of federal program integrity laws in an effort to “test new payment models and methods that improve patient outcomes and promote value” and suggested a few improvements. Subsequently, AMA also urged CMS to consider its letter to the Federal Trade Commission (“FTC”) and the Department of Justice (“DOJ”), which it recently wrote in response to the Statement of Antitrust Enforcement Policy, alongside the comments that AMA has provided to CMS. Lastly, AMA further urged CMS to ensure that tax-exempt ACOs may distribute the shared savings to ACO-participating providers or stakeholders without losing the ACO’s tax-exempt status.

For the complete text of the comments, please click here.
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The national health care reform, the implementation of which effectively requires a shift of health insurer spending more heavily towards medical care, is projected to reduce insurance profit margins to approximately 3% to 5%. This is a substantial decline considering these margins historically averaged around 7% to 8%. As a result, major health insurers in the United States are diversifying their businesses to include new partnerships and acquisitions that allow the companies to provide health information technology (“HIT”), take part in accountable care organizations (“ACOs”), and employ doctors directly.

The HIT market, in particular, is alluring to health insurers. Approximately 20% of managed-care business deals since 2010 involved HIT firms. Large profit margins reported by some companies with a presence in the HIT market (in excess of 20% in some instances), brought about by relatively low overhead, contribute to the appeal of these acquisitions. Interest in HIT businesses is fueled even further by the $27 billion available to doctors and hospitals for record computerization from the federal government.

Further, health insurers are participating in ACO formation projects and the direct employment of physicians. Their participation in creating ACOs seems a natural complement to plans’ core business considering that under the ACO plan the financial risk of patient care is partly transferred from the insurers to doctors and hospitals. Absent a change in the federal ACO proposed regulations, however, the 25% cap on ownership by non-providers might militate against ownership in ACOs. The direct employment of physicians, on the other hand, might prove financially beneficial to insurers while reducing patient costs, especially if the predicted shortage of primary-care doctors is not meaningfully addressed.

The recent health insurer diversification triggers concerns among certain health care policy makers, namely as a result of the possibility that such efforts will take attention from the core of each insurer’s business. This, however, has not deterred a number of major U.S. health insurers from attempting to diversify, and the expectation is that the trend will continue.
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On Friday, June 3, the American Medical Association (AMA) submitted its comments to Donald Berwick of the Centers for Medicare and Medicaid Services (CMS) regarding CMS’ proposed rule for Accountable Care Organizations (ACOs). In its opening remarks, the AMA states the following:

The AMA is pleased to provide our views and recommendations for revising the proposed rule so that the ACO model can be tested in a broad spectrum of physician practices. We are confident that a well-developed ACO model can be an effective tool to improve quality, manage care coordination, reduce health care costs, and create a supportive environment for practicing physicians. Since this is a completely new Medicare delivery and payment model, the AMA urges CMS to issue an interim final rule, rather than a final rule, so that CMS maintains the flexibility to modify and improve the ACO regulations as the agency learns more about this model.

In addition to calling for an interim final rule, within its 31 pages of comments, the AMA submitted comments on issues including:

• The ACO payment and risk structure,
• The need for additional payment models,
• Beneficiary assignment,
• Quality measures and other reporting requirements,
• ACO governance structure,
• Rural health clinics,
• Waivers of federal program integrity laws,
• Antitrust issues, and
• Private inurement.

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On May 26, the American Medical Association (AMA) submitted a letter to Donald Clark–the Federal Trade Commission (FTC) Secretary–in response to the proposed FTC and Department of Justice (DOJ) Statement of Antitrust Enforcement Policy regarding accountable care organizations (ACOs). The AMA opened its letter by urging the FTC to consider its comments insofar as “the ACO requirements and antitrust clearance process could have a significant and negative impact on the ability of physicians, hospitals, and other eligible ACO entities to successfully form and participate in the ACO models.” Moreover, the AMA emphasized the need to protect physician-led ACOs as the current regulations will have the “unintended consequence” of promoting hospital consolidation of physician markets through the acquisition of physician practices. According to the AMA, such a trend towards practice acquisition would thereby exert pressure on physicians to become employed or sell their practices to a hospital in order to participate in ACOs under the Shared Savings Program.

The AMA has stated it will submit its comments to the Centers for Medicare and Medicaid Services (CMS) on the ACO proposed rule on June 6. Please visit THE HEALTH LAW ATTORNEY BLOG for updates on the AMA’s comments as well as other developments regarding ACOs.
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