A Review of the Proposed ACO Regulations

On March 31, 2011, the Centers for Medicare and Medicaid Services (CMS) released the proposed rules on Accountable Care Organizations (ACO).  Under the Patient Protection and Affordable Care Act (PPACA) of 2010, the Department of Health and Human Services is required to develop a Medicare Shared Savings Program (MSSP).  MSSP provides for the coordination of care for Medicare fee-for-service beneficiaries by healthcare providers.  Integral to the MSSP are ACOs.  An ACO is comprised of providers of services and supplies across the spectrum of  care settings.  An ACO must seek to increase healthcare quality and decrease healthcare costs and CMS is offering additional reimbursement to ACOs that can demonstrate the achievement of these goals. 

ACOs will be primary-care centric.  The proposed regulations require that each ACO must have at least 5,000 primary care Medicare patients.  Other participants in ACOs include specialist physicians, physician assistants, nurses, home health agencies, and hospices.  Primary care physicians must be exclusive to one ACO; however, non-primary care physicians may join multiple ACOs.  Furthermore, an ACO may not require a non-primary care physician to be exclusive to the ACO.  At least 50% of an ACO’s primary care physicians must be meaningful EHR users by the start of the second reporting period. 

According to the proposed regulations, ACOs can be formed by the following organizations: ACO professionals in group practice arrangements; networks of individual practices of ACO professionals; partnerships or joint venture arrangements between prospective payment system hospitals and ACO professionals; prospective payment system hospitals employing ACO professionals; providers or suppliers otherwise recognized by the Department of Health and Human Services; and “critical access hospitals” that bill through Method II (cost-based facility services plus 115 percent fee schedule payment for professional services). 

The regulations propose that any organizational form is permitted and the formation of a new entity is not required; however, the regulations may require certain governance changes.  For example, if an ACO is comprised of multiple independent entities, the governing board must be separate and unique to the ACO.  Furthermore, the governing body must include participating ACO providers and suppliers and Medicare beneficiaries as well as a representative from a community stakeholder organization such as a local senior center.  ACO participants must have at least 75% control of the governing body.

The proposed rules on ACOs are an unprecedented collaboration by CMS, OIG, FTC, DOJ, and the IRS, and include tandem antitrust and IRS guidance.  CMS and the OIG have proposed waivers from the Stark Law, Anti-Kickback Statute, and the Civil Monetary Penalty law addressing the distribution of ACO shared savings.  In addition, CMS and OIG have requested comments on additional waivers related to financial arrangements regarding formation and operation of ACOs.  The IRS provided guidance for structuring a tax-exempt organization’s participation in an ACO to avoid the prohibitions on private inurement and private benefit, as well as the possibility of shared savings being unrelated business income.  The IRS has requested comments on additional guidance that may be necessary to facilitate participation in the MSSP.

The proposed rules forecast 75 to 150 ACOs will participate in the voluntary MSSP and up to 5 million Medicare beneficiaries will receive care from providers participating in ACOs.  Comments on the proposed regulations will be accepted until June 6, 2011.  According to PPACA, ACOs will be operational by January 1, 2012.

Interested healthcare facilities and providers should begin identifying potential ACO partners in their respective communities and consider the risks and rewards of the ACO model.

If you have any questions on the proposed ACO Regulations, please contact your Seyfarth attorney or any member of the Health Care Practice Group.