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1 HEALTH PRACTICE GROUP APRIL 2011 Saul Ewing Health Practice Group: George W. Bodenger Chair What keeps you up at night? The ACO Proposed Rule: A Need to Know Summary By Karen Palestini SUMMARY On March 30, 2011, the Center for Medicare and Medicaid Services released its proposed rule to implement Section 3022 of the Patient Protection and Accountable Care Act. Section 3022 of PPACA contains provisions relating to Medicare payments to providers of services and suppliers participating in Accountable Care Organizations. On March 30, 2011, the Center for Medicare and Medicaid Services ( CMS ) released its proposed rule to implement Section 3022 of the Patient Protection and Accountable Care Act ( PPACA ). Section 3022 of PPACA contains provisions relating to Medicare payments to providers of services and suppliers participating in Accountable Care Organizations ( ACOs ). Under these provisions, providers of services and suppliers can continue to receive traditional fee-for-service payments under Parts A and B of Medicare, and be eligible for additional payments ( Shared Savings ) based upon the attainment of specified quality and saving requirements. This Alert will highlight aspects of the proposed rule that are likely to be of interest to healthcare providers and others who may be considering whether or to what extent ACO alignment may be right for them. As these are proposed rules, CMS will be accepting comments until the close of business on June 6, ACO STRUCTURE AND PROGRAM INTEGRITY REQUIREMENTS CMS defines an ACO as a legal entity that is recognized and authorized under applicable state law, as identified by a taxpayer identification number ( TIN ), and comprised of an eligible group of ACO participants that works together to manage and coordinate care for Medicare fee-for-services ( FFS ) beneficiaries and has established a mechanism for shared governance

2 that provides all ACO participants with an appropriate proportionate control over the ACO s decision making process. PPACA lists the following groups of providers of services and suppliers as eligible to participate as an ACO: ACO professionals in group practice arrangements (e.g., physicians, physician assistants, nurse practitioners and clinical nurse specialists) Networks of individual practices of ACO professionals Partnerships or joint venture arrangements between hospitals and ACO professionals Hospitals employing ACO professionals Such other groups of providers of services and suppliers as the Secretary determines appropriate CMS recognized that critical access hospitals ( CAHs ), federally qualified health centers ( FQHCs ) and rural health clinics ( RHCs ) serve as safety net providers of primary care services in rural and other underserved areas and for low-income beneficiaries, including those dully-eligible for Medicare and Medicaid. However, CMS ultimately determined that, because FQHCs and RHCs claims do not include the data elements required for the assignment of beneficiaries to ACOs, it would not be possible for these entities to participate in the Shared Savings Program by forming their own ACOs. Notwithstanding this limitation, CMS did note that both FQHCs and RHCs could join as ACOs participants in ACOs formed by one or more of the statutorily authorized organizations. With regard to CAHs, CMS stated that only those CAHs that submit claims under the non-standard method (method II) will be authorized to form ACOs independently. CMS articulated its belief that each ACO should have a governance mechanism that allows for proportionate control for ACO participants, giving each ACO participant a voice in the ACO s decision making process, and be sufficient to meet the statutory requirements regarding clinical and administrative systems. CMS envisions a mechanism that is transparent, accountable and responsive to the ACO participants and the ACO providers/suppliers they represent. Not only must ACO participants have at least 75 percent control of the ACO s governing board, but CMS envisions that the governing board of the ACO will include community stakeholders and Medicare beneficiaries served by the ACO. Consistent with CMS three-part aim for ACOs (e.g., better care for individuals, better health for populations and lower growth in expenditures), an ACO s leadership and management structure must include clinical and administrative systems that embody or can achieve the following: An integrated organization with an environment that supports expending resources on multiple programs and initiatives to improve quality and reduce unnecessary services Dedicated physician leadership with a proven ability to motivate physicians to participate in the development and implementation of quality improvement and other clinical program initiatives Health information technology that facilitates the aggregation and analysis of data, allows patient-level feedback and provides alerts and reminders at the point of care Experience with non-medicare payer initiatives, particularly through a managed care affiliate, to improve quality and reduce expenditure growth. CMS envisions that the ACO s operations would be managed by an executive, officer, manager or general partner, whose appointment and removal would be under the control of the organization s governing body and whose leadership team has demonstrated ability to influence or direct clinical practice to improve efficiency processes or outcomes. Clinical management would be directed by a senior-level medical director who is a board-certified physician, licensed in the state in which the ACO operates, and physically present in the state. The ACO participants and ACO providers/suppliers would need to demonstrate a meaningful commitment to the ACO s clinical integration program to ensure its likely success, which could include a meaningful financial investment in the ACO or a meaningful human investment (for example, time and effort) in the ongoing operations of the ACO. The ACO would be required to have a physician-directed quality assurance and process improvement committee that would oversee an ongoing quality assurance and improvement program. Its infrastructure (e.g., information technology) would need to enable the ACO to collect and evaluate data and provide feed

3 back to the ACO providers/suppliers across the entire organization, including at the point of care. CMS also proposes that ACOs have both conflicts of interest policies and compliance plans that address how they will comply with applicable legal requirements. Compliance plans should have the following elements: a designated compliance officer or individual who is not legal counsel to the ACO and who reports directly to the ACO s governing body; mechanisms for identifying or addressing compliance problems; a method for employees or contractors of the ACO or ACO providers/suppliers to report suspected problems; compliance training; and a requirement to report suspected violations of law to an appropriate law enforcement agency. CMS suggests that the ACO coordinate its compliance efforts with those of its ACO providers/suppliers. In contrast to the requirement that each ACO participant be enrolled in the Medicare program, the ACO itself need not be enrolled in the Medicare program. Because CMS is not going to require that ACOs enroll in the Medicare Program, ACOs will not be subject to the same screening processes as its ACO participants. CMS, therefore, is considering whether to screen ACOs during the application process with regard to program integrity history, including any history of programs exclusions or other sanctions and affiliations with individuals or entities that have a history of program integrity issues. Lastly, CMS states that it is concerned that ACOs or ACO participants may offer or be offered inducements to overutilize services or to otherwise increase costs for Medicare or other federal health care programs with respect to the care of individuals who are not assigned to the ACO. Thus, CMS is considering prohibiting ACOs and their ACO participants from conditioning participation in the ACO on referrals of federal health care program business that the ACO or its ACO participants know or should know is being provided to beneficiaries who are not assigned to the ACO. ENROLLMENT/APPLICATION PROCESS PPACA requires participating ACOs to enter into an agreement with the Secretary to participate in the Shared Savings Program for not less than three years. For the first round of the Shared Savings Program, CMS proposes to limit participation to three years. CMS is proposing to establish an application process with an annual application period during which a cohort of ACOs will be evaluated for eligibility to participate in the Shared Savings Program. In light of the short time frame for implementing the Shared Savings Program in the first year of the program (e.g., January 1, 2012), CMS acknowledges that a January 1 start date might not provide the flexibility necessary to allow all interested ACOs to complete their application packages. While CMS suggests that it might consider adding an additional start date of July 1 for the initial round of applications and allow the agreement period for ACOs with a July 1 start date to be increased from 3 to 3.5 years, it is open to any alternative commenters might be willing to offer. CMS is proposing that in order to be eligible to participate in the Shared Savings Program, the ACO provide documentation in its application describing its plans to: promote evidence-based medicine; promote beneficiary engagement; report internally on quality and cost metrics; and coordinate care. ACOs will need to submit with their applications all of the following: ACO documents (e.g., participation agreements, employment contracts and operating policies) that describe the ACO participants and ACO provider/suppliers rights and obligations in the ACO, the shared savings that will encourage ACO participants and ACO providers/suppliers to adhere to the quality assurance and improvement program and the evidence-based guidelines; Documents that describe the scope and scale of quality assurance and clinical integration program, including documents that describe all relevant clinical integration program systems and processes, such as the internal performance standards and processes for monitoring and evaluating performance; Supporting materials documenting the ACO s organization and management structure, including an organizational chart, a list of committees (including names of committee members) and their structures, and job descriptions for senior administrative and clinical leaders;

4 Evidence that the ACO has a board-certified physician as its medical director who is licensed in the state in which the ACO resides and that a principal CMS liaison is identified in its leadership structure; and Evidence that the governing body includes persons who represent the ACO participants, and that these ACO participants hold at least 75 percent control of the governing body. Additionally, upon request, the ACO will be required to submit the documents effectuating its formation and operations, as well as descriptions of the remedial processes it will apply when ACO participants and ACO provider/suppliers fail to comply with the ACO s internal procedures and performance standards. For ACOs lacking an executive, officer, manager, or general partner; or senior level medical director; or physician-directed quality assurance and process improvement committee CMS indicates that it will consider applications from these applicants if they can describe how they plan to conduct their activities with alternate leadership and management structures to achieve program goals. In an effort to coordinate the ACO application process with the Antitrust Agency Policy Statement ( Policy Statement ) issued on the same date as CMS proposed rules, CMS proposes that, except for an ACO that qualifies for the rural exception articulated in the Policy Statement, CMS will not accept an application from an ACO with a primary service area ( PSA ) share above 50 percent unless a letter from the reviewing antitrust agency confirming that it has no present intent to challenge or recommend challenging the proposed ACO is submitted with the application. Consistent with the Policy Statement Safety Zone for certain ACOs with ACO participants providing the same service (common service) having a combined share of 30 percent or less of each common service in each ACO participant s PSA, CMS will accept the ACO s application without antitrust agency review. For ACOs with greater than 30 percent but less than 50 percent PSA share, CMS advises that applicants may proceed without antitrust agency review, but it strongly encourages these ACOs to request review by the antitrust agencies, which review the antitrust agencies have indicated will be conducted on an expedited basis as part of the Policy Statement. PROVIDER INVOLVEMENT CMS acknowledges that from a technical, operational perspective, there are two data sources that could be used to identify the specific providers of services and suppliers participating in ACO arrangements their (1) National Provider Identifiers ( NPIs ); and (2) Tax Identification Numbers ( TINs ). Under the Medicare program, individual practitioners are defined by their NPIs, but generally file and receive payment for Medicare claims based on their TINs. The TIN may be an employer identification number ( EIN ) or a social security number ( SSN ). During the Physician Group Practice Demonstration Project ( PGP Project ), CMS found that TINs provided the most direct link between the beneficiary and the practice providing primary care services. CMS also determined that TINs were more stable than NPIs and more likely to provide complete longitudinal data required for benchmarking and beneficiary assignment, and to promote the stability necessary for the ACO to commit to redesigning care processes and complete the required three-year agreement. Accordingly, CMS proposes to identify an ACO operationally as a collection of Medicare enrolled TINs. More specifically, an ACO will be identified operationally as a set of one or more TINs currently practicing as a group practice arrangement or in a network such as where hospitals are employing ACO professionals or where there are partnerships or joint ventures of hospitals and ACO professionals. CMS is proposing to require that organizations applying to be an ACO provide their ACO participants TINs. Each TIN will then be systematically linked to an individual physician specialty code by CMS. Based on its experience, CMS recognizes that TIN level data alone is not entirely sufficient for a number of purposes in the Shared Savings Program. In particular, NPI data will be useful to assess the quality of care furnished by an ACO e.g., NPI information will be necessary to determine what percent of physicians and other practitioners in the ACO are registered in the HITECH program. Therefore, CMS is also requiring ACOs to provide a list of associated NPIs for all ACO professionals, including a list that separately identifies physicians that provide primary care

5 Importantly, CMS envisions that primary care physicians (e.g., physicians with a designation of internal medicine, geriatric medicine, family practice and general practice) will be exclusive to one ACO agreement in the Shared Savings Program because it will be the primary care physicians TINs upon which beneficiary assignment to the ACO will be based. Conversely, ACO participants upon whose TINs beneficiary assignment to the ACO is not dependent (e.g., acute care hospitals, surgical and medical specialties, FQHCs and RHCs) will not be restricted to participation in a single ACO but will be required to participate with all ACOs with which they are affiliated for the entire three-year term of each ACO s agreement with CMS. Finally, CMS proposes that ACOs not add ACO participants during the course of their three-year agreements. CMS articulates an antitrust concern and a concern that such additions may jeopardize conditions of the ACO s agreement with CMS. CMS has stated, however, that it is not at this time considering an outright prohibition on removal of ACO participants or to add/subtract ACO providers/suppliers. ATTRIBUTION/ALIGNMENT OF BENEFICIARIES WITH ACO Although PPACA defines the term ACO professional to include both physicians and non-physicians, such as advanced practice nurses, physician assistants and nurse practitioners; PPACA requires CMS to consider only beneficiaries utilization of primary care services provided by ACO professionals who are physicians for purposes of beneficiary assignment to an ACO. With this in mind, CMS proposes to assign beneficiaries to ACOs based on physicians designated as primary care providers (internal medicine, general practice, family practice and geriatric medicine) who are providing appropriate primary care services to beneficiaries (e.g., the select set of HCPCS codes identified in Section 5501 of PPACA, including G-codes associated with the annual wellness visit and Welcome to Medicare visit). CMS concedes that this method of assignment may reduce the number of beneficiaries assigned to an ACO by excluding primary care services delivered by specialists, especially in some areas that may have a shortage of primary care physicians. For each year of an agreement, each ACO will have an assigned population of beneficiaries. CMS has proposed a combined approach of retrospective beneficiary assignment for purposes of determining eligibility for shared savings and prospective provision of aggregate beneficiary level data for the assigned population of Medicare beneficiaries during the benchmark period. The benchmark period spans each three-year agreement term, and the benchmark for each agreement period uses the most recent available three years of per-beneficiary expenditures for parts A and B services for Medicare beneficiaries assigned to the ACO. CMC believes that providing data on those beneficiaries that are assigned to an ACO in the benchmark period (e.g., names, date of birth, sex and other information used to generate the three-year benchmark) will allow ACOs to have information on the population they will likely be responsible for in order to target their care improvements to that population while still not encouraging ACOs to limit their care improvement activities to only the subset of beneficiaries they believe will be assigned to them in the performance year. CMS also indicates that retrospective assignment for purposes of shared savings will accurately reflect the population that an ACO is actually caring for (taking into account beneficiaries moving in and out of the service area, transitioning into other Medicare plans that are not fee for services based, etc). CMS noted that during the PGP Project there was approximately a 25 percent variation in beneficiary assignment from year to year. Beneficiaries will be assigned to an ACO for purposes of the Shared Savings program if they receive a plurality of their primary care services from primary care physicians within that ACO. CMS is partial to the plurality standard because it ensures that beneficiaries will be assigned to an ACO when they receive more primary care than from any other provider. CMS proposes to base plurality determinations on accumulated allowed charges for the services delivered (as opposed to a simple service count) because this methodology allows for the capture of the intensity of primary care interactions, not merely the frequency of such services. PPACA requires that an ACO have at a minimum 5,000 assigned beneficiaries. Unlike managed care plans, beneficiaries can choose to seek care at any Medicare participating provider they

6 need not seek care exclusively, primarily or at all through/from the ACO to which their data has been transmitted by CMS or to which they have been assigned in any given year in connection with the Shared Savings Program. Moreover, an ACO should not impede the ability of a beneficiary to seek care from providers that are not participating in the ACO, or develop policies that would restrict a beneficiary s freedom to seek care from providers and suppliers outside of the ACO. CMS envisions implementing PPACA s requirement that ACOs be patient-centered by requiring ACOs to have all of the following: A beneficiary experience of care survey (CMS specifically proposes the Clinician and Group Consumer Assessment of Healthcare Providers and Systems ( CAHPS ) survey tools) in place and a description in the ACO application of how the ACO will use the results to improve care over time Patient involvement in ACO governance A process for evaluating the health needs of the ACO s assigned population, including consideration of diversity in their patient populations, and a plan to address the needs of their populations Systems in place to identify high-risk individuals and processes to develop individualized care plans for targeted populations. These plans would be voluntary for the beneficiary, privacy protected, and would not be shared with Medicare or the ACO governing body if applicable and the beneficiary consents, the care plan should be shared with the caregiver, family and others involved in the beneficiary s care A mechanism in place for the coordination of care (e.g., via use of enabling technologies or care coordinators). This should include a process for the electronic exchange of care information when patients transition to another provider or setting of care, both within and outside the ACO, consistent with meaningful use requirements under the EHR program A process in place for communicating clinical knowledge/evidence-based medicine to beneficiaries in a way that is understandable to them Written standards in place for beneficiary access and communication and a processing place for beneficiaries to access their medical records Internal processes in place for measuring clinical or service performance by physicians across the practices, and using these results to improve care and service over time ACOS TASKED WITH EDUCATING BENEFICIARIES CMS intends to develop a communication plan, including educational materials and other forms of outreach, to provide beneficiaries with information in a timely manner about the Shared Savings Program in general, about their utilization of services furnished by a provider or supplier participating in an ACO, about the possibility of their being assigned to an ACO for quality and sharing purposes, about the potential that their health information may be shared with the ACO, and about their ability to opt-out of that data sharing. CMS goes on to state that [t]he only practical manner in which such notification [can] be provided in a timely manner is to require ACOs to provide such notification to beneficiaries when they seek services from ACO providers/suppliers. CMS envisions requiring ACOs to post signs in the facilities of participating ACO providers/suppliers indicating their participation in the Shared Savings Program and to make available standardized written information to Medicare FFS beneficiaries whom they serve. That said, CMS also expresses concern that there is a potential for beneficiaries to be misled about Medicare services available from an ACO or about the providers and suppliers from whom they can receive those services. Accordingly, CMS proposes to approve before use all ACO marketing materials, communications and activities related to the ACO and its participants in the Shared Savings Program, such as mailings, telephone calls or community events, that are used to educate, solicit, notify or contact Medicare beneficiaries or providers/suppliers regarding the ACO and its participation in the Shared Savings Program. SHARED SAVINGS PPACA provides that an ACO meeting quality performance measures shall be eligible to receive payment for shared savings only if the estimated average per capita Medicare expenditures under the ACO for Medicare FFS beneficiaries for parts A and B services, adjusted

7 for beneficiary characteristics, is at least the percent specified by the Secretary below the applicable benchmark. PPACA directs the Secretary to determine the appropriate percent described in the preceding sentence to account for normal variation in expenditures based upon the number of Medicare FFS beneficiaries assigned to the ACO (said percentage referred to as the minimum saving rate or MSR ). PPACA also requires the Secretary to establish limits on the total amount of shared savings that may be paid to an ACO. Thus, CMS proposes to make a number of determinations about the specific design of the shared savings methodology described by PPACA. First, CMS must establish the expenditure benchmark, which involves determining: (1) patient population (e.g., assigning patients to ACOs for purposes of quality and financial performance measurement) for whom the benchmark is calculated as mentioned previously, this is a prospective calculation conducted at the beginning of the ACO s three-year agreement; (2) appropriate adjustments for beneficiary characteristics such as demographic factors and/or health status that should be taken into account in the benchmark; (3) whether any other adjustments of the three-year benchmark are warranted, such as to avoid potentially disadvantaging various provider types (e.g., hospitals that receive disproportionate share payments or teaching hospitals that receive indirect graduate medical education payments) or ACOs located in high cost or low cost areas; and (4) appropriate methods for trending the threeyear benchmark for each of the three performance years of the agreement period with the ACO. Second, CMS must compare the benchmark to the ACO s assigned beneficiaries per capita Medicare expenditures in each performance year to determine the amount of any savings. As CMS notes, a useful way to view the benchmark is as a surrogate measure of what the Medicare FFS Parts A and B expenditures would otherwise have been in the absence of the ACO. Third, CMS must establish the appropriate MSR, and the appropriate sharing rate. Finally, CMS must determine the sharing cap on the total amount of saving that may be paid to an ACO. CMS has proposed two payment models: (1) the one-sided model, under which ACOs share in saving but are not accountable for repaying losses if actual expenditures exceed the benchmark; and (2) the two-sided model, under which ACOs share in saving and are accountable for repaying losses if actual expenditures exceed the benchmark. CMS is allowing ACOs to choose between the two models for their initial agreement period, with ACOs choosing the one-sided model to be transitioned automatically to the two-sided model in year three of their agreements. This approach, according to CMS, gives ACOs an option of two tracks for their initial agreement period, thereby providing an opportunity for organizations more experienced with care coordination and risk models, that are ready to accept risk to enter a sharing arrangement that provides greater reward for greater responsibility in year 1, while also providing an entry point for organizations with less experience with risk models, such as some physician-driven organizations or smaller ACOs, to gain experience with population management before transitioning to more risk. For ACOs in the one-sided model whose savings exceed the MSR, CMS proposes a savings share rate of up to 50 percent of total savings, above a 2 percent savings threshold, with a payment cap of 7.5 percent of an ACO s benchmark. CMS is also proposing an additional increase of up to 2.5 percent for including FQHCs and/or RHCs as ACO participants. Thus, ACOs participating in the onesided model could realize a maximum shared savings of 52.5 percent. For ACOs in the two-sided model whose savings exceed the MSR, CMS proposes a savings share rate of up to 60 percent of total savings, with a payment cap of 10 percent of an ACO s benchmark. CMS is also proposing an additional increase of up to 5 percent for including FQHCs and/or RHCs as ACO participants. Thus, ACOs participating in the two-sided model could realize a maximum shared savings of 65 percent. However, ACOs in the two-sided model must share in losses which exceed 2 percent. A cap on the amount of losses is to be phased in starting at 5 percent in year one; 7.5 percent in year two; and 10 percent in year three. CMS acknowledges that some states may regulate risk bearing entities, such as ACOs participating in the two-sided model. Accordingly, CMS has requested comments as to whether the two-sided model would trigger the application of any state insurance laws, and the ways CMS can work with states and ACOs to minimize the burden of any additional regulations. Finally, to encourage ACOs to participate for all three years of their agreements, protect the Medicare program against losses and

8 ensure ACOs have an adequate repayment mechanism in the event they incur losses, CMS is proposing a flat 25 percent withholding rate to be applied to any performance payment. CMS envisions that at the end of each agreement period, positive balances will be returned to the ACO. However, if the ACO does not complete its three-year agreement, the ACO would forfeit and savings withheld. REPORTING AND SCORING OF QUALITY MEASURES CMS considered two alternatives for establishing quality standards: (1) rewards for better performance; and (2) a minimum quality threshold for shared savings. CMS ultimately proposed the performance score approach, and sought comments on the threshold approach. Under the performance score approach, the quality performance standard for the first year of the Shared Savings Program is at the reporting level. That is, the ACO would be eligible to receive the maximum amount of shared savings simply based on 100 percent complete and accurate reporting on all quality measures. CMS stated that it believes that setting the quality performance standard for the first year at full and accurate reporting will allow ACOs to ramp up, invest in infrastructure, engage ACO providers/suppliers, and redesign care processes to capture and provide data back to their ACO providers/suppliers to transform care at the point of care. Via future rulemaking, CMS plans to raise the quality performance standard requirements beginning in the second program year, when actual performance on the reported measures would be considered in determining whether an ACO is eligible to receive any shared savings. There are 65 quality performance measures subdivided into the following 5 domains: (1) Patient/Caregiver Experience; (2) Care Coordination; (3) Patient Safety; (4) Preventative Health; and (5) At-Risk Population/Frail Elderly Health. The At-Risk Population domain includes the following chronic diseases: diabetes mellitus; heart failure; coronary artery disease; hypertension; and chronic obstructive pulmonary disorder. For years subsequent to the first program year, CMS plans to calculate the percentage of points an ACO earns for each domain after determining the point earned for each measure, Then, CMS plans to divide the points earned by each ACO across all measures in the domain by the total available points in that particular domain. Each domain will be worth a pre-defined number of points based on the number of individual measures in the domain. Each domain will be weighted equally, such that all domain scores will be averaged together to calculate the overall quality score that will be used to calculate the ACO s final sharing rate. Using the one-sided model, if all domain scores averaged together equal.90, then the ACO could earn 45 percent of the sharable savings generated (e.g., 90 percent of the potential 50 percent of shared savings). For quality measures dealing with laboratory results that are not conducive to claims based reporting, CMS proposes to make available the Group Practice Reporting Option ( GPRO ) data collection and survey tool. CMS indicates that this tool will reduce the administrative burden on health care providers participating in ACOs by allowing them to tap into their existing information technology tools that support data collection and health care provider feedback, including at point of care. Also, given that CMS has proposed that at least 50 percent of an ACO s primary care physicians become meaningful EHR users (consistent with the final rules for the EHR Incentive Programs), CMS intent is to develop the capability of the GPRO web-based tool to interface with EHR technology, such that EHR data can directly populate the ACO GPRO tool with the required quality data. CMS will use a GPRO audit process to determine whether quality data in the relevant domains is being reported accurately and timely. One final note on shared savings CMS has determined that the following existing shared savings programs overlap with the Shared Savings Program, and, therefore, Medicare-enrolled TINs may not participate in both the Shared Savings Program and: (1) the Independence at Home Medical Practice Demonstration program; (2) the Medicare Health Care Quality Demonstration Programs; (3) the Medical home demonstrations with a shared saving element (e.g., the multi-payer advanced primary care demonstration; or (4) the Physician Group Practice Transition Demonstration. Conversely, CMS does not consider the following programs likely to generate duplicative shared savings: (1) state initiatives to provide health for Medicaid enrollees with chronic conditions; or (2) the program to establish community health teams to support patientcentered medical homes

9 MONITORING ACOS; CORRECTIVE ACTION PLANS; TERMINATION CMS offers the following non-exhaustive examples of methods it could use to monitor ACO performance: analysis of specific financial and quality data as well as aggregated annual and quarterly reports; site visits; assessment and following up of beneficiary and provider complaints; and audits (e.g., analysis of claims; chart review; beneficiary surveys and coding audits). CMS may take any or all of the following actions prior to terminating an ACO from the Shared Savings Program: provide a warning notice; request a corrective action plan; and/or place the ACO on a special monitoring plan. CMS has indicated that, for violations it considers minor in nature and pose no immediate risk or harm to beneficiaries or impact on care, it will allow ACOs the opportunity to submit a corrective action plan ( CAP ) before termination. Failure of the ACO to submit, obtain approval from CMS for, or implement a CAP may result in termination of the agreement. CMS may terminate an agreement with an ACO before the end of the three-year agreement period for any of the following reasons: Avoidance of at-risk beneficiaries Failure to meet the Shared Savings Program s quality performance standards Any material change impacting ability to meet eligibility requirements, including but not limited to: Changes in ACO participants that are the basis of the beneficiary assignment Increase in provider/supplier composition that results in a reviewing antitrust agency to state that it is likely to challenge or recommend challenging the ACO Changes in the ACO s leadership and management structure that results in an inability to perform its functions Sanctions or other actions taken against the ACO, its ACO participants and ACO provider/suppliers or contracted entities performing services or functions on behalf of the ACO, by an accrediting organization, or by a state, federal or local government agency Failure of the ACO to effectuate required regulatory changes during the agreement period after given the opportunity for a CAP Failure of an ACO to demonstrate that it has adequate resources in place to repay losses and to maintain those resources for the agreement period Noncompliance with requirements regarding beneficiary notification of provider/supplier participation in the ACO Failure to completely and accurately report or failure to make timely corrections Material noncompliance, or a pattern of noncompliance, with the public reporting and other CMS reporting requirements Limiting or restricting internally compiled beneficiary summary care or medical records from providers and suppliers both within and outside of the ACO, as permitted by law Failure to offer beneficiaries the option to opt out of sharing claims information Improper use or disclosure of claims information received from CMS in violation of the HIPAA Privacy Rule, Medicare Part D Data Rule, Privacy Act, the data use agreement, or other applicable law or regulations Violation of physician self-referral prohibition, civil monetary penalty laws, anti-kickback statute, other antifraud laws, antitrust laws, or other applicable Medicare laws, rules or regulations that are relevant to ACO operations Submission to CMS of false, inaccurate or incomplete data and/or information, including but not limited to, information provided in the Shared Savings Program application, quality data, financial data and information regarding the distribution of shared savings Failure to submit payment due to CMS in a timely manner Use of marketing materials or activities or other beneficiary communications subject to approval that have not been approved by CMS With regard to situations in which an ACO s assigned population falls below 5,000 during the course of the agreement period, CMS

10 proposes to issue a warning and place the ACO on a CPA. If the ACO fails to meet the eligibility criteria of having more than 5,000 beneficiaries by the completion of the next performance year, the ACO s participation agreement will be terminated and the ACO will not be eligible to share in savings for that year. OTHER DOCUMENTS RELEASED AND OF GENERAL IMPORTANCE CMS has worked closely with agencies across the Federal government to ensure a coordinated and aligned inter- and intra-agency effort to address the legal and tax implications of ACOs. In particular, CMS, the HHS Office of Inspector General (OIG), the Federal Trade Commission (FTC), the Antitrust Division of the Department of Justice (DOJ), and the Internal Revenue Service (IRS) have released three documents in conjunction with the proposed ACO rules on which they seek comment: 1. A joint CMS and OIG Notice and Solicitation of Public Comments on Waivers in Connection with Sections 1899 and 1115A of the Social Security Act. 2. An IRS notice, Notice , requesting comments regarding the need for guidance on participation by tax-exempt organizations in the Medicare Shared Savings Program through ACOs. 3. A joint FTC and DOJ Proposed Statement of Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (Antitrust Policy Statement). All of these documents, as well as the proposed rule itself, can be obtained via the OIG website. Simply type into your browser and the site will link you to the documents. PRESENTATIONS/ABOUT THE AUTHOR AND SAUL EWING The Firm is offering presentations to providers who would like to learn more about ACOs, shared savings, the Centers for Innovation, alternative provider alignments models and related topics. Please contact the author to arrange the presentation of your choice. Earlier this year, Karen Palestini, a partner at Saul Ewing and a member of the Firm s Health Practice Group ( HPG ) formed one of the first legal entities in New Jersey that will function as an ACO. Ms. Palestini and other members of the HPG have been actively involved in advising clients and offering seminars on hospital-physician alignment models such as ACOs, co-management agreements, foundation models, captive PCs, employment models and medical homes. This Alert was written by Karen Palestini, a member of the firm s Health Practice Group. Karen can be reached at or This publication has been prepared by the Health Practice Group for information purposes only. The provision and receipt of the information in this publication (a) should not be considered legal advice, (b) does not create a lawyer-client relationship, and (c) should not be acted on without seeking professional counsel who have been informed of the specific facts. Under the rules of certain jurisdictions, this communication may constitute Attorney Advertising Saul Ewing LLP, a Delaware Limited Liability Partnership. ALL RIGHTS RESERVED Baltimore, MD 500 East Pratt St. Charles O. Monk, II Chesterbrook, PA 1200 Liberty Ridge Dr. Michael S. Burg Harrisburg, PA 2 North Second St. Eric L. Brossman Newark, NJ One Riverfront Plaza Stephen B. Genzer New York, NY 400 Madison Ave. John J. Jerome Philadelphia, PA 1500 Market St. Bruce D. Armon Princeton, NJ 750 College Rd. E Marc A. Citron Washington, DC 2600 Virginia Ave. NW Mark L. Gruhin Edward R. Levin Wilmington, DE 222 Delaware Avenue Wendie C. Stabler William E. Manning

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