Fraud and Abuse Considerations for Accountable Care Organizations (ACOs)

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1 Fraud and Abuse Considerations for Accountable Care Organizations (ACOs) By: Chris Rossman, Foley & Lardner LLP, Detroit, Michigan 1. The Centers for Medicare and Medicaid Services ( CMS ) and the Office of the Inspector General of the U.S. Department of Health and Human Services ( OIG ) jointly released an interim final rule 1 with comment period ( IFC ) establishing waivers ( Waivers ) of the application of the Physician Self-Referral Law, the Federal anti-kickback statute, and certain civil monetary penalties ( CMP ) law provisions to specified arrangements involving accountable care organizations ( ACOs ) under section of the Social Security Act ( Act ) (the Medicare Shared Savings Program or MSSP ), including ACOs participating in the Advance Payment Initiative The Waiver regulations were issued for public inspection on October 20, 2011, were published in the November 2, 2011 Federal Register, and were effective on November 2, The November 2, 2011 Federal Register also contained: a. The Federal Trade Commission and the Antitrust Division of the Department of Justice final Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program ( Policy Statement ). The Policy Statement is aimed at providing antitrust guidance for ACOs that intend to engage in joint contracting with private payors. b. CMS final regulations concerning the MSSP utilizing ACOs. The final regulations contain several significant changes from the widely criticized proposed rule issued earlier this year. c. CMS, through the Center for Medicare and Medicaid Innovation ( Innovation Center ), issued a notice announcing the Advance Payment ACO Model. Under the Advance Payment ACO Model, certain eligible ACOs that participate in the MSSP may receive payments to support and fund initial costs of developing infrastructure and systems to participate in the MSSP. CMS s stated goal is to remove financial barriers for certain smaller ACOs to encourage their participation in the MSSP Federal Register , November 2, Section 1899 of the Act was added by section 3022 of the Patient Protection and Affordable Care Act (Pub. L ), as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L (collectively the Affordable Care Act ). 3 Section 1899(f) authorizes the Secretary to waive certain fraud and abuse laws as necessary to carry out the provisions of section 1899 of the Act Federal Register 68012, November 2, 2011.

2 3. Simultaneously with the release of the final MSSP regulations, CMS and OIG jointly released the IFC. The IFC reflects CMS s conclusion that to carry out the MSSP, it is necessary or appropriate to waive certain provisions of the Physician Self-Referral Rule ( Stark Law ), the federal anti-kickback statute ( AKS ), the Civil Monetary Penalty ( CMP ) law prohibiting hospital payments to reduce or limit services ( Gainsharing CMP ), and the CMP law prohibiting inducements to beneficiaries ( Beneficiary Inducement CMP ) (collectively, the fraud and abuse laws ). 4. The Waivers apply only to the MSSP and to ACOs participating in the MSSP. There is no waiver, even for the MSSP, for state laws that are similar to the fraud and abuse laws. 5. CMS/OIG Interim Final Rule. a. On April 7, 2011, CMS and OIG jointly published a proposed rule with an opportunity for comment on proposed waivers and waiver-design considerations in connection with the MSSP. b. The proposed waivers included waivers of the Stark Law and the AKS for distributions of shared savings paid by CMS under the MSSP: 1) to or among ACO participants or ACO providers/suppliers, and 2) for activities necessary for and directly related to the ACO s participation in and operations under the MSSP. The proposed waivers also included waivers of AKS provisions with respect to financial relationships that implicated and fully complied with an exception to the Stark Law and waiver of application of the Gainsharing CMP: 1) for distributions of shared savings received by an ACO under the MSSP, where distributions are made by a hospital to a physician (provided the payments were not made knowingly to induce a physician to limit medically necessary items or services), and 2) for any financial relationship under the MSSP that implicated the Stark Law and fully complied with an exception to the Stark Law. c. No waivers were included in the proposed regulations for setting up or operating an ACO; rather the proposed waivers only related to distributions of the shared savings earned in the MSSP. 6. IFC Waivers: Overview. a. Based on CMS/OIG s consideration of numerous comments it received regarding the proposed waivers, the October 2011 IFC establishes five Waivers. According to CMS/OIG, the Waivers are intended to afford flexibility to ACOs in varying circumstances. They are designed to be self-implementing, to apply consistently across waived fraud and abuse laws, and to apply uniformly to each ACO, ACO participant, and ACO provider/supplier participating in the MSSP. b. The five Waivers are: i. ACO Pre-Participation Waiver, 2

3 ii. iii. iv. ACO Participation Waiver, Shared Savings Distribution Waiver, Arrangements in Compliance With the Stark Law, and v. Waiver for Patient Incentives. 7. ACO Pre-Participation Waiver. This Waiver, designed to allow potential ACOs and ACO participants to share resources to start ACOs, waives the fraud and abuse laws for start-up arrangements that meet all of the following conditions: a. The arrangement is undertaken by one acting in good faith with intent to develop an ACO that will participate in the MSSP and to complete an application. The ACO and at least one ACO participant must be parties to the arrangement. No drug or device manufacturers, distributors, durable medical equipment suppliers, or home health suppliers may be parties to the arrangement. b. The parties developing the ACO must be taking diligent steps to develop an ACO that is eligible to participate in the MSSP during the target year including steps to meet the governance, leadership, and management requirements. c. The ACO s governing board has made and duly authorized a bona fide determination that the start-up arrangement is reasonably related to the purposes of the MSSP. d. The start-up arrangement, its authorization by the ACO governing body, and the diligent steps to start the ACO are contemporaneously documented. All such documentation must be maintained for at least 10 years following submission of the application. e. The description of the arrangement must be publically disclosed as described in guidance from the Secretary of HHS (though financial and economic terms need not be disclosed). f. An application for participation in the MSSP must be filed on or before the last applicable due date for the target year or the reasons for the failure must be submitted to the Secretary of HHS. If all six of the above conditions are met, the Waiver period starts on the date of publication of the IFC for a 2012 target date or one year preceding an application due date for subsequent target dates. The Waiver period ends: 1) for ACOs that enter a participation agreement, on the start date of such agreement, 2) for ACOs that apply for participation but whose application is denied, on the denial date or six months thereafter for an arrangement that qualified for the Waiver before the denial, or 3) for ACOs that fail to submit an application on the application due date or the date the ACO submits reasons for not applying (with some ability to extend the time for good reasons for failing to submit an application). 3

4 8. ACO Participation Waiver. Under this Waiver, an arrangement between the ACO, one or more ACO participants, and/or ACO providers/suppliers, is not a violation of the fraud and abuse laws, if all of the following conditions are met: a. The ACO has entered into or participates in the MSSP and remains in good standing thereunder. b. The ACO meets the ACO requirement concerning governance, leadership, and management. 5 c. The ACO s governing board has made and duly authorized a determination consistent with the duties required by the regulations, 6 that the arrangement is reasonably related to the purposes of the MSSP. d. Both the arrangement and authorization are contemporaneously documented with documents maintained and made available to the Secretary of HHS for 10 years. e. The description of the arrangement is publically disclosed in accordance with the guidance from the Secretary of HHS (which disclosure need not include financial or economic information). If all five of the above conditions are met, the Waiver will start on the start date of participation in the MSSP and expire six months after expiration of such participation agreement, including any renewals, or the date of the ACO s voluntary termination. 9. Shared Savings Distribution Waiver. This Waiver waives the fraud and abuse laws with respect to the distribution or use of shared savings earned by the ACO under the MSSP, provided all the following conditions are met: a. The ACO has entered into a participation agreement for MSSP and remains in good standing under its participation agreement. b. The shared savings are earned by the ACO pursuant to the MSSP. c. The shared savings are earned by the ACO during the term of its participation agreement, even if the actual distribution or use of shared savings occurs after expiration. d. The shared savings are: 5 42 CFR and CFR (b)(3). 4

5 i. Distributed to or among the ACO participants, ACO providers/suppliers, or individuals or entities that were its ACO participants or ACO providers/suppliers during the year the shared savings were earned; or ii. MSSP. Used for activities that are reasonably related to purposes of the e. With respect to the waiver of the Gainsharing CMP, shared savings distributions that are made directly or indirectly from a hospital to a physician are not made knowingly to induce a physician to reduce or limit medically necessary items or services to patients under the direct care of the physician. 10. Arrangements in Compliance With the Stark Law Waiver. This Waiver waives the AKS and Gainsharing CMP with respect to any financial relationship between or among the ACO, its ACO participants, and its ACO providers/suppliers that implicates the Stark Law, provided all the following conditions are met: a. The ACO has entered into a participation agreement for the MSSP and remains in good standing thereunder. b. The financial relationship is reasonably related to the purposes of the MSSP. c. The financial relationship fully complies with an exception to the Stark Law at 42 CFR to This Waiver commences on the start date of a participation agreement and ends upon the earlier of expiration of any proration or termination of this agreement. 11. Waiver for Patient Incentives. This Waiver waives application of the Beneficiary Inducement CMP and the AKS for items or services provided by an ACO, its ACO participants, or its ACO providers/suppliers to beneficiaries for free or below fair-market value if all of the following four conditions are all met: a. The ACO has entered into a participation agreement for the MSSP and remains in good standing thereunder. b. There is a reasonable connection between the items or services and medical care of the beneficiary. c. The items or services are in-kind. d. The items or services are preventive care, or advance one or more of the following clinical goals: i. Adherence to a treatment regime ii. Adherence to a drug requirement 5

6 iii. iv. Adherence to a follow-up care plan Management of a chronic disease or condition This Waiver commences on the start date of a participation agreement and ends on the earlier of expiration or termination of the participation agreement. 12. Certain Applicable Definitions and Standards. The IFC and the five exceptions embody certain definitions of terms that are used to provide safeguards. Among the terms with particular definitions are: a. Reasonably related to the purposes of the MSSP. The purposes of the MSSP consist of: i. Promoting accountability for the quality, cost, and overall care for a Medicare population ii. Managing and coordinating care for Medicare fee-for-service beneficiaries through an ACO iii. Encouraging investment in infrastructure and redesigning care processes for high-quality and efficient service delivery for patients, including Medicare beneficiaries iv. Evaluating health needs of the ACO s assigned population v. Communicating clinical knowledge and evidence-based medicine to beneficiaries vi. Developing standards for beneficiary access and communication 13. Start-up arrangements. The Pre-Participation Waiver permits certain arrangements to be undertaken by appropriate parties in connection with developing an ACO, including financial relationships related to start-up arrangements during the participation phase. Start-up arrangements are defined to mean: a. Any items, services, facilities, or goods (including non-medical items, services, facilities, or goods) used to create or develop an ACO that are provided by such ACO, ACO participants, or ACO providers/suppliers b. Subsidies for such items, services, facilities, or goods c. The IFC lists the following 14 arrangements that may qualify as start-up arrangements: i. Infrastructure creation and provision ii. Network development and management 6

7 iii. iv. Care coordination mechanisms Clinical management systems v. Quality improvement mechanisms vi. vii. Creation of governance and management structure Care utilization management viii. Creation of incentives for performance-based payment systems and transitions from fee-for-service ix. Hiring of new staff to be involved (including care coordinators, quality leadership, organization management, analytical team, liaison team, IT support, and risk management) x. Information technology (including EHR systems, electronic health information exchange, data reporting systems, and data analytics) xi. Consultant and other professional support (including market analysis, legal services, and financial and accounting services) xii. xiii. Organization and staff training Incentives to attract primary care physicians xiv. Capital investments (including loans, capital contributions, grants, and withholds) 14. Bona fide determination of ACO governing body. The ACO Pre-Participation and ACO Participation Waivers require the ACO s governing body to make a bona fide determination that an arrangement is reasonably related to the purposes of the MSSP, and that the arrangement be duly authorized by the governing body. 15. Audit trail. The ACO Pre-Participation and ACO Participation Waivers require an audit trail of contemporaneous documentation, which must include the basis for arrangement and be maintained and available to the Secretary of HHS upon request for 10 years. CMS/OIG also note that under the ACO regulations, the governing board must have a meaningful conflictof-interest policy that applies to this determination. CMS/OIG warn the governing body to exercise diligence in making the determination and to articulate its reasoning. 16. Transparency requirement. This requires public disclosure describing the arrangement (without a need to disclose financial or economic terms). The goals of this transparency requirement are that there be no secret arrangements, that information concerning the arrangement is available to other parties and regulators, and that the availability of information to will help establish an incentive to exercise due diligence. 7

8 17. Additional Provisions. a. In the commentary announcing the IFC, CMS/OIG also noted: i. The Waivers presented are limited to the MSSP, and they generally do not extend to demonstration programs approved by the Center for Medicare and Medicaid Innovation. ii. There is no specific waiver for commercial ACOs, but the waivers do offer some flexibility. For example, CMS/OIG note that the Participation Waiver does not turn on the source of funds, and many commercial shared savings arrangements may qualify for the Stark Compliance Waiver. iii. The Patient Incentives Waiver is intended to allow arrangements to engage patients in better managing their own health care. The exception does not include financial incentives such as waiving or reducing cost sharing amounts, the provision of free or below-cost items, or service by manufacturers or other venders. iv. CMS/OIG intend to monitor ACOs through June 2013 and indicate that they may narrow the Waivers if they find they are used to shelter abusive arrangements. 18. Summary. CMS/OIG have significantly greater flexibility through waivers of application of the Stark Law, AKS, Gainsharing CMP, and Beneficiary Inducement CMP for ACOs applying for and participating in the MSSP. Those who have worried about the need for arrangements that may implicate those fraud and abuse laws will find more protection is available for arrangements designed to meet the defined purposes of the MSSP. Moreover, the waivers may offer certain providers incentives for participation in the MSSP, as they allow alignment strategies between participating hospitals and physicians that may not otherwise be available. 7 7 The author wishes to thank several other members of Foley & Lardner LLP who have written summaries of the Waivers that were used in in the preparation of this paper: Young, and Torrey K. Young. 8

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