Proposed Changes to ACO Regulation Under the American Medical Insurance Act

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1 March 10, 2015 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS P Post Office Box 8013 Baltimore, Maryland Re: Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations; Proposed Rule Ladies and Gentlemen: The Health Law Section of the American Bar Association (the Section ) is pleased to submit these comments on the Proposed Rule (the Proposed Rule ) issued by the Centers for Medicare & Medicaid Services ( CMS ) to address proposed changes to the Medicare Shared Savings Program ( MSSP ) for Accountable Care Organizations ( ACOs ) participating in the MSSP. 1 The views expressed herein are presented on behalf of the Section. 2 No government attorneys or government professionals participated in the drafting or submission of these comments. These comments have not been approved by the House of Delegates or the Board of Governors of the American Bar Association and, accordingly, should not be construed as representing the position of the American Bar Association. The views expressed in these comments should also not be construed as representing the policy or views of any government employee who is a member of the Section, or its Council Fed. Reg (Dec. 8, 2014). 2 Contributors to these comments were Matt Jenkins, Kirk Nahra, Nathaniel T. Arden, Conor O. Duffy, Terri O Connell, Stanford Moore, Christi Braun, Claire Turcotte and Amy Fehn. In addition, Andy Demetriou, Clay J. Countryman and Tom Dowdell and Robyn Shapiro, Co-Chairs of the Section s Health Law and Policy Coordination Committee, served as reviewers and participated in the preparation of the final comments. The final comments were approved by the Section s Council on February 23, Although members of the Section who participated in the preparation and review of these comments have clients that may be affected by the Proposed Rule and the MSSP, if and when final rules relating thereto are adopted, no such member has been engaged by a client to participate in the drafting or submission of these comments. {BH }

2 The American Bar Association is the largest voluntary professional association in the world. The Section, with nearly 10,000 attorney members, is the voice of the organized healthcare bar within the ABA. Its members represent clients in all aspects of the health care industry, including physicians, institutional providers, teaching and research organizations, managed care organizations and other third-party payors, governmental health care programs and regulatory bodies, pharmaceutical companies and device manufacturers. Accordingly, the Section believes that it brings a broad and unique perspective to the challenges associated with the creation and regulation of integrated health care delivery entities and systems, such as the ACOs participating in the MSSP and that are the focus of the Proposed Rule. The Section appreciates CMS s comments that its intent in proposing the Proposed Rule is in part to encourage continued and enhanced stakeholder participation and to reduce administrative burden for ACOs while supporting their efforts to improve care outcomes. 3 Although CMS has identified the MSSP and ACOs as a major component of the Patient Protection and Affordable Care Act of 2010 (as amended by the Health Care and Education Reconciliation Act of 2010, the ACA ), there are several provision the existing MSSP regulations and in the Proposed Rule that we believe create impediments to the development of ACOs. In our view, overly restrictive provisions in the current MSSP regulations had resulted in most of the existing ACOs being smaller, physician-driven organizations (as opposed to truly integrated health systems) that will have little impact on lowering overall healthcare costs for Medicare beneficiaries. In addition, we note that a majority of the Pioneer ACOs, which were organizations with existing operations that fit with the objectives of the MSSP, have decided to withdraw from the program, due in part to the costs of compliance with the existing rules. Our comments address areas of the Proposed Rule, such as legal structure and governance, which are examples of regulatory overreach that do not further objectives of the MSSP and that we believe discourage development of ACOs. I. Legal Structure and Governance for ACOs in the MSSP The proposed revision to Section (b), eliminating otherwise independent ACO participants must and replacing it with ACO participants, each of which is identified by a unique Tax Identification Number ( TIN ), must is an appropriate change. 4 The existing phrase otherwise independent ACO participants lacks legal significance as it requires a subjective determination of what constitutes an independent ACO participant. 5 Using a unique TIN ins an objective basis for determining when a legal entity separate from any of its ACO participants must be established. That said, the Section continues to believe it is unwise and unnecessary to require an ACO to be established in a legal entity that is separate from any other integrated delivery enterprise or managed care vehicle in which all or a portion of its ACO participants are engaged (e.g., an integrated delivery enterprise that was formed to contract with multiple third-party payors). Given the significant expense and investment of human capital required to create an integrated provider network, in contrast to the fairly limited magnitude of shared savings under the MSSP, the Section previously noted that it was unlikely that ACOs purely dedicated to Medicare would ever be organized, and that remains the Section s view Fed. Reg. at Fed. Reg. at Id. {BH } 2

3 We believe that the participation of ACOs in the MSSP would increase if several current regulatory impediments, such as the legal structure requirements, are changed to allow greater flexibility in meeting the overall MSSP requirements. If a group of providers and suppliers organized for other purposes could be recognized as an ACO and participate in the MSSP, the prospect of shared savings would be an incentive for the creation of these entities. Section 1899(A)(b) of the ACA simply provides that certain groups of providers of services and suppliers which have established a mechanism for shared governance are eligible to participate as ACOs. Such language does not require the creation of separate legal entities. Imposing the requirement of separateness will tend to further limit the ability of various groups of providers and suppliers (as contemplated by the language of the ACA) to participate in the MSSP as ACOs. The proposed elimination of Sections (b)(4) and (5) is commendable. 6 The proposed revision to Section (b)(3), adding the phrase including the duty of loyalty, is unnecessary and intrudes upon matters of entity governance currently regulated by state law. 7 Fiduciary duties of the members of governing bodies of recognized legal entities in most states are understood to include the duties of loyalty and the duty of care. The problem with including such duties, in particular the duty of loyalty, in the context of these regulations is that CMS is illequipped to monitor compliance with such requirements or to craft appropriate remedies for perceived non-compliance. Determining what constitutes in any given circumstance a breach of a fiduciary duty is a task is best left to courts applying the laws of a given state that define and delimit the scope of fiduciary duties of the members of governing bodies of legal entities organized within a particular jurisdiction. The proposed revision to Section (c)(1) is unnecessary; the ACA already requires certain groups of providers of services and suppliers to establish a mechanism for shared governance to be eligible to participate in ACOs. 8 That language, however, simply contemplates that an ACO, which may or may not be constituted as a separate legal entity, must devise a means for sharing the responsibility for governance of the ACO among its constituent participants (e.g., an ACO that is a joint venture arrangement between hospitals and ACO professionals). The proposed revisions build upon a highly prescriptive current regulation that attempts to dictate matters of organizational governance that go well beyond what Section 1899(A)(b) contemplates. When an ACO is constituted as a single legal entity under state law (e.g., a corporation) that has a governing body, there is no need for a layer of regulatory control to be exercised by CMS beyond the corporate governance laws of the state in which that entity is established. Again, the problem with including such provisions in the ACO regulations is that CMS is ill-equipped to apply and enforce such provisions. For example, in its commentary, CMS observes: In order to comply with the requirement that the governing body be separate and unique to the ACO, it must not be responsible for representing the interests of any entity participating in the ACO or any entity that is not participating in the ACO. 9 6 Id Fed. Reg. at Id Fed. Reg. at {BH } 3

4 However, in further commentary addressing how it views the concept of shared governance, CMS writes: [T]he governing body must nevertheless represent a mechanism for shared governance among ACO participants. To that end, the governing body of an ACO that is composed of more than one ACO participant should not, for example, include representatives from only one ACO participant. For ACO s that have extensive participant lists, we would expect to see representatives from many different ACO participants on the governing body. 10 These two statements are difficult to reconcile, at best. The latter statement seems to reflect a bias toward participatory governance that overlooks routine private ordering of the governance of legal entities arising out of considerations of capitalization and the locus of business risk. In many, if not most, entities, governance rights properly belong to the sources of equity capital. Demanding broad participation on an ACO s governing body by many different ACO participants, irrespective of whether such participants hold any ownership stake in the organization, goes well beyond the concept of shared governance as articulated in Section 1899(A)(b) of the ACA. Moreover, this proposed change does not include any standards as to how an ACO would satisfy the representatives from many different ACO participants requirement; thus continuing to make it difficult for ACOs to determine how to meet the MSSP regulatory requirements. Additionally, proposed Section (c)(1)(ii), which states Provide for meaningful participation in the composition and control of the ACO s governing body for ACO participants or their designated representatives, is coupled with commentary stating [w]e also believe this authority extends to such activities including the appointment and removal of members of the governing body. 11 This commentary suggests that the members of an ACO s governing body should be elected or removed by the vote of ACO participants. Nothing in the Act s provision on shared governance mandates that as a requirement. Routinely, legal entities that are created as subsidiaries or controlled affiliates of other entities have governing bodies whose composition is controlled by a parent organization. The ACA does not, in any way, preclude the retention by a parent entity of the ability to control the composition of the governing body of a subsidiary or controlled affiliate which is organized to function as an ACO. To be sure, the members of the governing body of that ACO would owe typical fiduciary duties to the ACO. But the ACA provides no basis for suggesting that ACO participants must control the composition of an ACO s governing body rather than the organization(s) that may have capitalized the entity and sponsored its formation. II. Determination of Sufficient Number of Beneficiaries in the Application Process The Proposed Rule suggests several revisions to provide greater flexibility to ACOs in which the assigned beneficiary population falls below 5,000, including making corrective action plans discretionary rather than mandatory. 12 As an illustration of the necessity for this flexibility, CMS provides an example of an ACO that would initially appear to fulfill the 5,000 assigned Fed. Reg. at (emphasis added) Fed. Reg. at Fed. Reg. at {BH } 4

5 beneficiary requirement based on estimates used in the application process, but would not meet the requirement when final benchmark year data is generated. CMS stated that in such a case the ACO would be permitted to continue but would, at CMS s discretion, be subject to a corrective action plan. The Section agrees with the additional flexibility provided by the Proposed Rule; however, because the 5,000 assigned beneficiary requirement is a condition of participation, CMS noted that an ACO would need to correct this deficiency regardless of whether a formal corrective action plan were issued. This may be difficult for some organizations. In order to protect and encourage participation from smaller organizations that are close to or below the 5,000 beneficiary assignment requirement, we suggest allowing the organization to obtain estimated data on prospective beneficiary assignment prior to completing the time-intensive and costly application process. The Section suggests that the estimated beneficiary assignment numbers be made available to prospective ACOs during a pre-application period so that such prospective ACOs can evaluate the feasibility of achieving and maintaining the assigned beneficiary requirement and make any necessary adjustments prior to submitting the application. This would likely decrease the number of ACOs who join the MSSP only to fall below the beneficiary assignment requirement and would save CMS the expense associated with oversight of corrective action plans. In addition, the Section believes that if an ACO has already taken action that is reasonably likely to correct a deficiency, there are no grounds for CMS to impose a corrective action plan or terminate the ACO from the MSSP. Therefore, the Section supports a revision to (b) that exempts ACOs from the actions in and in situations where the ACO has taken action that is reasonably likely to raise its assigned beneficiaries above 5,000 in the following performance year. III. Participation Agreements In of the Proposed Rule, CMS sets forth several proposals to establish new definitions for the MSSP. 13 CMS first proposes to add participation agreement as a defined term meaning the written agreement required under (a) between the ACO and CMS that, along with the regulations at part 425, governs the ACO s participation in the Shared Savings Program. 14 CMS also proposes to add a related definition for ACO participant agreement which refers to the written agreement between an ACO and an ACO participant required at in which the ACO participant agrees to participate in, and comply with, the requirements of the Shared Savings Program. 15 The Section supports the proposal to add new definitions of participation agreement and ACO participant agreement. The establishment of participation agreement as a defined term will reduce uncertainty that can arise currently when interpreting references to an ACO s agreements with its participants or providers/suppliers. The Section believes that the addition of ACO participant agreement will reduce confusion with participation agreement and provide statutory and regulatory clarity to stakeholders interpreting the MSSP regulations. However, the Section believes that CMS can go further to reduce such confusion between the similarly titled terms in the MSSP regulations; the Section suggests that CMS consider capitalizing defined terms Fed. Reg. at Id. 15 Id. {BH } 5

6 in the regulations for the MSSP, as is common in private contracts, in order to provide further clarity on the use of such terms in the regulations and associated CMS guidance. CMS proposes to add a new to establish procedures for renewing the participation agreements of ACOs. 16 CMS notes that the current MSSP regulations are generally silent with respect to the procedures that apply to ACOs that successfully complete a 3-year agreement and would like to reapply for a subsequent assignment period in the MSSP. Under the Proposed Rule, an ACO would be permitted to request renewal of its participation agreement prior to its expiration in a form and manner and by the deadline specified by CMS in guidance. The Section agrees with CMS s proposal to establish a procedure by which an ACO can renew its existing participation agreement in the MSSP and supports creation of a streamlined process by which eligible ACOs can renew existing participation agreements that minimizes the administrative burden for ACOs, given the significant administrative costs already associated with participation in the MSSP. The Section recommends and supports the development of renewal guidance quickly by CMS, and that CMS allow ACOs to sign up for renewal at any time during the final performance year of their previous agreement, up to a certain deadline, to allow advance notice to CMS and allow advance preparation for the subsequent agreement period by the ACO. CMS solicits comments on its proposed criteria for determining whether to renew a participation agreement, including whether an ACO meets quality performance standards during at least one of the first two years of its previous agreement period. 17 CMS proposes to determine whether to renew a participation agreement on an evaluation of all of the following factors: Whether the ACO satisfies the criteria for operating under the selected risk model; The ACO s history of compliance with MSSP requirements; Whether the ACO has established that it complies with the eligibility and other requirements of the MSSP, including the ability to repay losses, if applicable; Whether the ACO met the quality performance standards during at least 1 of the first 2 years of the previous agreement period; Whether an ACO under a two-sided model has repaid losses owed to the program generated during the first 2 years of the previous agreement period; The results of a program integrity screening of the ACO, its ACO participants, and its ACO providers/suppliers (conducted in accordance with (b)). 18 The Section supports consideration of the above criteria, and offers three additional comments: First, we suggest that consideration of significant changes to an ACO that occurred during the previous agreement period may warrant inclusion in the evaluation criteria, as the Fed. Reg. at Id. 18 Id. {BH } 6

7 structure and makeup of an ACO at the end of its first agreement period could in certain cases have changed dramatically since its initial application. The Section recognizes that the significant changes in existing ACOs are discussed elsewhere in the Proposed Rule, but believes that the implications of such changes must also be considered when evaluating participation agreement renewals. Second, the Section suggests that CMS consider additional criteria related to patient care when evaluating an ACO s eligibility for a participation agreement renewal. The current evaluation criteria appear to focus more heavily on MSSP compliance, when the ultimate goal of the MSSP is to improve patient care while also reducing health care costs. Therefore, the Section suggests additional consideration of patient care-related criteria that can trump minor or inadvertent failures to meet the other criteria in order to ensure continuation of participation in the MSSP of ACOs providing high quality care to beneficiaries. Third, in light of the Proposed Rule s implicit goal of incentivizing ACO participation in two-sided risk models, we suggest that CMS should clarify in the above-listed evaluation criteria that Track 1 ACOs that do not meet certain of the stated renewal criteria may be allowed to reenroll in the MSSP, but only at the discretion of CMS and generally only for participation in a two-sided risk model under Track 2 or Track 3, again at the discretion of CMS after consideration of the best interests of the MSSP and quality patient care. IV. Assignment of Medicare Beneficiaries The Proposed Rule solicits comments on (1) modification of the definition of assignment ; (2) inclusion of non-physician practitioners at step one of the assignment process; (3) exclusion of certain physician specialties from step two of the assignment process; and (4) consolidation of the two-step process. 19 The Section provides the following comments on exclusion of certain physician specialties from the assignment process. Exclusion of Certain Physician Specialties From Step Two of The Assignment Process CMS is proposing to exclude services provided by [more than 30] physician specialties from the beneficiary assignment process. 20 This change would be accomplished by amend[ing] by adding a new paragraph (b) to identify the physician specialty designations that would be considered in step 2 of the assignment process. 21 The Section believes the list of excluded specialties in the Proposed Rule would unduly restrict the development of ACOs, especially in some areas with shortages of primary care physicians, where specialists necessarily deliver the bulk of primary care services, 22 by reducing potential assignment of patients and thereby possibly disqualifying some ACOs from participation in the MSSP. CMS previously considered a narrower range of specialties for exclusion from in the assignment methodology, but now has decided to propose a broader list. 23 In our view this is an unwise limitation on ACOs, and one that is not supported by the text Fed. Reg. at Fed. Reg. at Fed. Reg Fed. Reg. at See Id. at {BH } 7

8 of the ACA, which does not include any limitations by physician specialty in the conditions for creation of an ACO or the assignment of beneficiaries. 24 We believe that the MSSP regulations should not include such a broad exclusion of physician specialties as proposed in the Proposed Rule. 25 For example, the ACA s statutory definition of physician does not limit the term physician, and does not include any limitations by physician specialty. 26 In the Proposed Rule, CMS included four tables that list specific CMS physician specialty codes that CMS is proposing to include and exclude for beneficiary assignment purposes under the MSSP. 27 Although CMS commented that it attempted to limit the list of physician specialty types that would be excluded from the assignment process to those physician specialties that would very rarely, if ever, provide primary care to beneficiaries, in reality, we believe it would be more useful and consistent with the ACA for CMS to take a broader approach of only listing those CMS physician specialties that would be included in the beneficiary assignment process and not to adopt of list of physician specialty codes to be excluded from the assignment process. 28 This inclusive type of approach focuses on those physician specialties that provide primary care services, and the use of an exclusion list could result in certain physician specialties being excluded from the assignment process, even where those specialties provide certain services to beneficiaries that are considered to be primary care purposes and where the participation of such specialties would thus be beneficial to the MSSP. In an earlier Final Rule, CMS commented that assignment in no way implies any limits, restrictions, or diminishment of the rights of Medicare FFS beneficiaries to exercise complete freedom of choice in the physicians and other health care practitioners and suppliers from whom they receive their services. 29 The Proposed Rule, however, places indirect limitations on Medicare beneficiaries that will affect ACOs. This provision of the Proposed Rule indirectly limits beneficiaries choices through forcing a gatekeeper medicine model on ACOs. For example, a patient with a skin lesion who goes directly to a dermatologist for management is removed from consideration for assignment to the ACO. Even a patient with appendicitis who goes to directly to a general surgeon for treatment is excluded from assignment consideration. Under current regulations, an ACO composed of excluded specialists providing primary care services may exist and have beneficiaries assigned to it. The Proposed Rule not only requires that an ACO have a primary care physician who is not within the excluded specialties in order to have beneficiaries assigned to it but also limits a beneficiary s choice of which provider he/she may see in order to be considered assigned to an ACO. We believe this is unnecessary and unwise. V. Provision of Aggregate and Beneficiary Identifiable Data From the beginning of the MSSP, CMS has recognized the importance of effective data sharing as a critical component in the success of the program. The original regulations 24 See 42 U.S.C. 1395x(r) Fed. Reg. at See 42 U.S.C. 1395x(r) Fed. Reg. at Fed. Reg. at Fed. Reg. at {BH } 8

9 recognized that broad data sharing was permitted with the scope of the HIPAA Privacy Rule, but implemented additional privacy requirements beyond those imposed by HIPAA. In the Proposed Rule, CMS is moving to streamline these additional processes. 30 We support this streamlining, although the Section does not believe that additional requirements are necessary beyond those imposed by the HIPAA Privacy Rule. While we believe that these new changes will improve data sharing practices, for the benefit of both individuals and ACOs, we encourage further steps to remove additional data sharing barriers beyond the provisions imposed by HIPAA, which apply elsewhere across the health care system. We support the expansion of data that will be shared under the Proposed Rule, including all data elements identified in the proposal. These additional categories will improve the ability of ACOs to provide more effective and efficient care to patients. We agree with CMS that these data sharing elements may be shared subject to the existing HIPAA rules, without anything more. The provider community has lived with and adapted to the privacy and security requirements of HIPAA for nearly two decades and established operating protocols to comply with that law. The proposal by CMS to continue regulatory mandates beyond the HIPAA rules is disruptive of existing procedures prevalent in the provider community, without commensurate benefits accruing to the MSSP. While we agree with efforts to streamline the current process, and support these changes as an improvement over the status quo, we would prefer to see the removal of all additional restrictions beyond the elements of the HIPAA rules. We believe that the HIPAA rules provide an appropriate framework for all other aspects of the health care system, including the Medicare program generally, and do not believe that additional requirements are necessary or appropriate in these circumstances. VI. Proposed Revisions to the Performance Models In the Proposed Rule, CMS seeks comment on alternative approaches to establishing, updating and resetting benchmarks. 31 CMS presents a number of options for both updating an ACO s benchmark between performance years and resetting the benchmark at the beginning of a new agreement period. The Section s primary concern related to the benchmarking process is that ACOs will be discouraged from participating in the MSSP if their benchmarks are lowered due to their geographic location or past MSSP success. First, the Section believes that benchmark updates between performance years should be calculated in such a way as to minimize the differences between ACOs in high cost/high growth regions and those in low cost/low growth regions. The Section disagrees with CMS that ACOs in high cost/high growth regions should be required to reduce their rate of spending more than ACOs in low cost/low growth regions. External factors can play a significant role in an ACO s costs. CMS should minimize the influence of these factors on an ACO s benchmark so that an ACO s success or failure is based on its ability to reduce costs compared to costs it would otherwise generate if the MSSP did not exist. CMS currently uses a flat dollar amount adjustment based on the national growth rate to update the benchmarks. As CMS notes in the Proposed Rule, this artificially lowers the benchmark of an ACO located in a high cost/high growth region as compared to the benchmark of a low cost/low growth ACO. 32 The Section Fed. Reg. at Fed. Reg. at Fed. Reg. at {BH } 9

10 believes that CMS should update benchmarks using the percentage increase in the national growth rate. Under this approach, an ACO s benchmark increase (or decrease) each performance year would be determined by the percentage of growth in the national per capita expenditures. Using a percentage as opposed to an absolute dollar amount will minimize external cost factors and maintain adequate incentives for ACOs in both high cost/high growth and low cost/low growth regions to reduce spending and deliver efficient care. The Section believes that CMS has authority to make such adjustment under Section 1899(i)(3) because this approach will improve efficiency in the delivery of health care as more ACOs will enter and remain in the MSSP, and costs to the Medicare program are unlikely to increase. Second, the Section supports a method for resetting an ACO s benchmark that does not penalize a successful ACO by lowering the benchmark to such an extent that the ACO cannot achieve further savings. CMS should encourage successful ACOs to participate in the MSSP to continue reducing Medicare costs and improving care quality. The Section believes that CMS should reset the benchmark by accounting for shared savings payments and equally weighting the three performance years. The Section agrees with CMS s assessment that accounting for shared savings will increase the incentive for ACOs to continue in the MSSP and to transition to a twosided risk model, because the shared savings payments will maintain an ACO s benchmark at a level where achieving further savings is possible. One of the principal downsides of including shared savings payments to reset the benchmark is that ACOs that achieve savings below the minimum savings rate will not receive the benefit of a higher benchmark. However, equally weighting the three performance years will mitigate this effect to some extent. By attributing less importance to the last performance year, where savings are most likely, an ACO s benchmark will not drop as low as it otherwise would and the ACO will have a greater likelihood of achieving savings and an incentive to continue in the MSSP. By both accounting for shared savings payments and equally weighting the performance years, all ACOs that achieve savings will be more likely to continue in the MSSP. Adjustments to Track 2 Minimum Savings Rate and Minimum Loss Rate CMS proposes to revise the minimum savings rate ( MSR ) and minimum loss rate ( MLR ) for Track 2 ACOs to encourage participation in two-sided risk models. The Section agrees with CMS that many ACOs are hesitant to participate in a two-sided risk model, in part because the relatively low MLR places ACOs, particularly small ACOs, at significant risk of repaying CMS due to normal variations alone. The additional ten percent of potential shared savings offered in Track 2 does not appear to offset this risk of loss, especially when it is combined with the substantial financial investment ACOs must make to coordinate care among many ACO participants and ACO providers/suppliers. As CMS cites in the Proposed Rule, virtually every ACO participating in the MSSP chose Track 1. The Section agrees that adjusting the MSR and MLR depending on the number of beneficiaries assigned to an ACO will encourage greater participation in Track 2 because of the lowered risk of loss due to normal variations. VII. Waivers of Certain Payment Requirements The Proposed Rule seeks comments on potential waivers to encourage ACO entry into the two-sided performance-based risk models in the MSSP. 33 As CMS indicates in the Proposed Rule, providers in the Medicare FFS system have a financial incentive to increase their volume of Fed. Reg. at {BH } 10

11 services. 34 To give up the FFS system and take a financial risk requires that an ACO have more flexibility and control as to the care and benefits provided. Entities at financial risk, such as the Medicare Advantage plans, already have the ability to implement certain waivers, and commercial insurers have long known the wisdom of waivers to reduce utilization and ensure higher quality care. Essentially, CMS needs to bring back the market risk forces that have been taken out of Medicare FFS to encourage ACO risk taking and beneficiary enrollment in ACOs. CMS proposed four potential waivers in which one or more may be included in the final rule. The waivers would allow two-sided model ACOs to waive the: (1) Three consecutive inpatient hospital days requirement before inpatient SNF care was covered (42 U.S.C. 1395x(i)); (2) Originating site for telehealth payments (42 U.S.C. 1395m(m)(4)(C)(i) and (ii)); (3) Homebound requirement before home health benefits received (42 U.S.C. 1395n(a) and 42 U.S.C. 1395f(a)); and (4) Referral limits to discharge planning (42 U.S.C. 1395x(ee)(2)(H) and 42 C.F.R ). 35 All four of the proposed options should be implemented in the final rule to promote the two-sided models for all risk tracks, with the ACO being allowed to select either Track 2 (prospective and retrospective) or Track 3 (prospective only). As CMS repeatedly notes, implementation of the waivers for prospective beneficiaries in Track 3 is beneficial because the ACO will be clear as to which beneficiary population is at risk (and to which the waivers would apply). Waivers for Track 2, which include prospective and retrospective beneficiaries, may not have all of the advantages of clarity as to their population but they are the ACOs that have taken risks and have more experience generally with risk taking under the MSSP. Track 2 ACOs should not be denied the benefit of waivers because they have led the charge into risk models. In addition to providing two-sided model ACOs with more control and flexibility via waivers, CMS should consider the recommendations made by MedPAC in its June 16, 2014 letter to CMS: Reduce the administrative burden on ACOs in two-sided risk models when possible. Otherwise, any financial rewards from taking risks will be quickly drowned by additional administration. For example, ACOs should be provided relief from the audits conducted by a recovery audit contractor for services ordered by an ACO participating physician for an attributed ACO beneficiary. 42 U.S.C. 1395ddd(h). The risks taken by the ACO provide a strong incentive to provide quality care to reduce unnecessary utilization and an audit for the purpose of Medicare recovery is superfluous. Some financial waivers or inducements should be provided to allow a beneficiary to differentiate between an ACO s services and services under FFS which is not allowed at this time. 42 C.F.R The concept is similar to how beneficiaries can distinguish between the advantages of a Medicare Advantage plan and FFS Medicare. Such waivers would attract a beneficiary s attention and Fed. Reg. at and Fed. Reg. at {BH } 11

12 engagement and bring back the market forces that would help promote ACOs. It would also assist the ACO in educating and coordinating the care of the beneficiary, and help further transition from the Medicare FFS model. We encourage CMS to implement the waivers and suggestion because all of the above proposed provisions would assist in further development of risk-taking ACOs. Conclusion Thank you again for the opportunity to provide these comments. If you have any questions or would like any additional information or explanation, please contact Michael E. Clark, Chair of the Health Law Section, at (713) or Simeon Carson, Director of the Health Law Section, at (312) Very truly yours, Michael E. Clark, Chair, ABA Health Law Section {BH } 12