Accountable Care Organizations: Key Components to Consider

November 8, 2011

On October 20, 2011, the Centers for Medicare and Medicaid Services (CMS) issued the final rule (Final Rule) that will govern Accountable Care Organizations (ACOs). The Final Rule sets forth the final requirements related to the structure and governance of ACOs, the Medicare Shared Savings Program (MSSP), ACO formation and participation, antitrust concerns, health information and privacy, and controlling fraud and abuse. In this part of a multipart series on the Final Rule, we highlight a variety of unrelated but important issues. In subsequent parts, we will address ACO legal structure and governance, specifics about the MSSP calculation, HIPAA and other implications for information technology and other important issues for ACOs.

  1. Other ACO Owners/Participants

Section 1899(b)(1)(A) through (D) of the Social Security Act (the “Act”), as amended by the Affordable Care Act, sets forth specific provider types that may form and/or participate in an ACO. This section of the Act also provides that CMS may expand the list of providers and suppliers eligible to form or participate in an ACO by adopting new regulations. CMS used this discretionary power in the proposed regulations and narrowly expanded the list of eligible provider types that could form an ACO. CMS announced that, in addition to the providers explicitly named in Section 1899(b)(1)(A)-(D) of the Act, critical access hospitals (CAHs) billing under method II will be able to form an ACO. CMS added that federally qualified health centers (FQHCs) and rural health clinics (RHCs) will not be able to independently form an ACO but may be an ACO participant.

In the Final Rule, CMS clarifies its list of providers of services and suppliers that may join to form or just participate in an ACO. Specifically, the entities identified in section 1899(b)(1)(A) through (D) of the Act will be able to form ACOs, provided they meet all other eligibility requirements. Additionally, CAHs billing under method II, FQHCs, and RHCs may also form independent ACOs if they meet the eligibility requirements specified in the Final Rule. In addition, any Medicare enrolled entities that are not specified in the statutory definition of eligible entities in the Act can participate in the MSSP as ACO participants by joining an ACO containing one or more of the organizations eligible to form an ACO.

  1. Demonstration Programs and Regulatory Effect on ACOs

In the proposed ACO rule, CMS noted that existing accountable care demonstration programs, such as the Center for Medicare and Medicaid Innovation, may reveal ways to improve the MSSP. CMS clearly stated its desire to immediately implement regulatory changes that it believes will improve the MSSP and considered the benefits and disadvantages of how implementing such changes immediately might affect existing three-year ACO agreements. CMS ultimately concluded in the proposed rule that ACOs will be subject to future regulatory changes, even during the three-year agreement period, except for any changes related to (i) eligibility requirements concerning the structure and governance of ACOs, (ii) calculating the sharing rate, and (iii) the assignment of Medicare beneficiaries to an ACO.

In the Final Rule, CMS finalizes its proposal that ACOs will be required to adapt to regulatory changes, with the exception of changes to (i) eligibility requirements concerning the structure and governance of ACOs, (ii) calculation of sharing rate, and (iii) assignment of beneficiaries to ACOs. CMS, however, modifies the proposed rule and will allow ACOs the flexibility to voluntarily terminate their agreement in those instances when regulatory standards are established during the agreement period which the ACO believes will impact the ability of the ACO to continue to participate in the MSSP.

  1. ACO Marketing Material Approval

CMS also issued ACO marketing guidelines in the proposed regulations, which generated a significant amount of public comment. The ACO marketing rules were proposed by CMS because the agency noted its concern that Medicare beneficiaries may be misled about services available from an ACO or about the providers and suppliers from whom the beneficiaries can receive those services. CMS, therefore, proposed regulations that would have required ACOs to obtain prior approval form CMS before the ACO could use any materials, communications, and activities related the ACO and its participation in the MSSP.

CMS did finalize the definition of marketing materials and activities without substantive change to the proposed rules, but scaled back the prior approval process in the Final Rule. CMS amended the definition to include language in the proposed rule’s preamble that was inadvertently omitted from the proposed regulation’s text. Accordingly, the Final Rule excludes from the definition of marketing materials or activities those materials and activities that do not constitute "marketing" under 45 CFR 164.501 and 164.508(a)(3)(i). In place of the proposed prior approval process, the Final Rule allows ACOs to use marketing materials five days after filing them with CMS if the organization certifies that the marketing materials comply with all applicable marketing requirements. Additionally, CMS revised the regulation to specify that all ACO-related marketing materials and activities will be required to use template language when such language is made available by CMS. All ACO marketing must comply with the prohibitions set forth in the Final Rule regarding certain beneficiary inducements, must not be used in a discriminatory manner or for discriminatory purposes, and must not be inaccurate or misleading (materials must be provided in "plain" language that is easily comprehensible, clear, concise, well-organized, and comply with requirements of the Plain Writing Act of 2010). If CMS determines that ACOs are not in compliance with the ACO marketing guidelines, the ACO and its participants may be subject to penalties by CMS.

  1. Administrative and Judicial Review

CMS restated the statutory limitations on judicial and administrative review related to the MSSP in the proposed regulations issued in March 2011. CMS reminded providers and suppliers that, pursuant to Section 1899(g) of the Act, judicial and administrative review will not be available to ACOs in the following situations:

  1. Review by the Provider Reimbursement Review Board under Section 1869 of the Act.
  2. Initial determinations and provider appeals under Section 1878 of the Act.
  3. The specification of criteria under Section 1899(a)(1)(B) of the Act.
  4. The assessment of quality care furnished by an ACO and the establishment of performance standards under Section 1899(b)(3) of the Act.
  5. The assignment of Medicare beneficiaries to an ACO under Section 1899(c) of the Act.
  6. The determination of whether an ACO is eligible for shared savings under Section 1899(d)(2) of the Act.
  7. The determination of the amount of shared savings for a participating ACO, including the determination of the estimated average per capita Medicare expenditures under the ACO for Medicare fee for service beneficiaries assigned to the ACO and the average benchmark for the ACO under Section 1899(d)(1)(B) of the Act.
  8. The percent and any limit on the total amount of shared savings specified by the CMS under Section 1899(d)(2) of the Act.
  9. The termination of an ACO for failure to meet quality performance standards under Section 1899(d)(4) of the Act.

In the Final Rule, CMS finalized the reconsideration review process as proposed, with one exception. CMS decided to eliminate the specific provision related to review of determinations made by a reviewing antitrust agency because of certain revisions that CMS made to procedures for antitrust review in the Final Rule.

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