Federal Agencies Release Highly Anticipated Guidance for Accountable Care Organizations

Health Law Bulletin

Federal Agencies Release Highly Anticipated Guidance for Accountable Care Organizations

April 5, 2011 

On March 31, 2011, several federal agencies released guidance relating to the Medicare Shared Savings Program (the "Shared Savings Program") and the establishment of accountable care organizations ("ACOs") thereunder.  The guidance includes the following:

-The proposed rule for the Shared Savings Program from the Centers for Meidicare & Medicaid Services ("CMS"), which can be found at:  www.cms.gov/sharedsavingsprogram

-A brief fact sheet summarizing the proposed rules which can be found at: www.healthcare.gov/news/factsheets/accountablecare03312011a.html

-A notice and request for comments released jointly by CMS and Department of Health and Human Services, Office of Inspector General ("OIG") regarding fraud and abuse waivers, which can be found at:
www.ofr.gov/inspection.aspx?AspxAutoDetectCookieSupport=1#special

-A "Proposed Statement of Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program" issued jointly by the Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") which can be found at:  www.ftc.gov/opp/aco

-A notice from the Internal Revenue Service requesting comments regarding participation by tax-exempt organizations in ACOs under the Shared Savings Program, which can be found at: www.irs.gov/pub/irs-drop/n-11-20.pdf

-Healthcare providers must either form or join an ACO prior to submitting an application to CMS in order to participate in the Shared Savings Program.

-The governing board of an ACO must consist of healthcare providers, suppliers and Medicare beneficiaries.

-ACOs will be evaluated based on the following criteria: patient/caregiver care experiences; care coordination; patient safety; preventive health; and at-risk population/frail elderly health.

-Healthcare providers participating in an ACO will receive shared savings based on benchmarks developed by CMS. ACOs must choose between two risk-sharing models. The first model is a one-sided risk model in which ACOs share only savings for the first two years in the program and then share savings and losses in the third year.  Under this model, ACOs are eligible to receive 50% of any shared savings.  The second model is a two-sided risk model in which ACOs share both savings and losses for all three years. Under this model, ACOs are eligible to receive 60% of any shared savings.

-CMS will develop expenditure benchmarks for each ACO based on a number of factors including geographic location and patient characteristics. In order to receive shared savings, the ACO must meet certain performance standards and demonstrate that its expenditures are less than the established benchmark by a certain percentage.  CMS is also proposing a shared savings payment limit of 7.5% of an ACO's expenditure benchmark under the one-sided risk model and a limit of 10% of an ACO's expenditure benchmark under the two-sided risk model, which would also apply to the third year for ACOs that choose the one-sided risk model.

-CMS and OIG have proposed waivers to the Stark self-referral regulations, Anti-Kickback Statute and Civil Monetary Penalty law for arrangements involving the distribution of shared savings.

-With respect to antitrust matters, the DOJ and FTC have made the following proposals: ACOs with physician market shares of 30% or less in each specialty and in which any hospital participates on a non-exclusive basis will qualify for a safety zone; ACOs with market shares between 30% and 50% will not raise significant antitrust issues if they avoid certain specified conduct, and they may obtain advisory opinions from the DOJ or FTC; and ACOs with market shares exceeding 50% must obtain a positive advisory opinion from either the DOJ or FTC. Any advisory opinions issued by the DOJ or FTC will be made on a 90-day expedited basis.

We will continue to review and monitor these significant developments. As we gather more information, we will share this information with you promptly.

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If you have questions or concerns regarding these new developments relating to ACOs, please contact us.

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