Because of the federal government’s preference for, and reliance on the success of, accountable care organizations (ACOs), some ACOs assume their legal status shields the organization from legal scrutiny on all issues. However, since the 2010 advent of ACOs, the law has adapted uniquely to these organizations. This fourth installment of a five-part series on the valuation of ACOs will discuss this unique regulatory environment in which ACOs operate.
MSSP ACO Eligibility
Qualification for ACO contract participation with MSSP, the most popular ACO program, requires:
General eligibility requirements;
Being an eligible provider and supplier;
Meeting minimum participation levels required of primary care providers;
Reporting on qualities and costs;
Care coordination capabilities; and,
The governance structure of the ACO vests decision-making control in ACO participants.1
Additionally, ACOs must meet certain governance and leadership structure requirements:
“The ACO’s governing body has made and duly authorized a bona fide determination… that the arrangement is reasonably related to the purposes of the Shared Savings Program;
“Both the arrangement and its authorization by the governing body are documented;” and,
“The description of the arrangement is publicly disclosed at a time and in a place and manner established in guidance issued by
ACOs must have at least 5,000 assigned beneficiaries for the lower levels of MSSP participation.3 An ACO’s clinical management must be managed by a board-certified physician that is a senior-level medical director.4
ACOs are required to maintain documentation for 10 years on:
“A description of the arrangement, including all parties to the arrangement;”
“[The] date of the arrangement;”
“The purpose of the arrangement;”
“The items, services, facilities, and/or goods covered by the arrangement (including non-medical items, services, facilities, or goods);” and,
“The financial or economic terms of the arrangement
Finally, ACOs require extensive quality measures and patient satisfaction reporting.6
The formation of ACOs has often been criticized for facilitating the increased consolidation of market power in healthcare. Legal implications can arise from anticompetitive behavior on the part of ACOs, as antitrust laws still apply to ACOs and the Department of Health and Human Services (HHS) is not authorized to waive the applicability of antitrust laws to ACO formation and operation.7 The lack of authorization leaves ACOs in a precarious position because ACO actions can be interpreted as anticompetitive. However, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) had originally allowed for certain exceptions to be made for ACOs participating in MSSP.8 The goal of this FTC/DOJ policy was to prevent ACOs from enhancing or entrenching market power.9 Further, the FTC and DOJ wanted to encourage the development of a competitive ACO marketplace.10 However, the DOJ announced the withdrawal of this statement on February 6, 2023, classifying it as outdated and not reflecting the realities of the current market.11 The withdrawal was seen as consistent with the Biden Administration’s priorities on being more aggressive with the enforcement of antitrust issues.12 The withdrawal of this FTC/DOJ policy signals a potential increase in the scrutiny of ACO antitrust actions, among other networks of organizations and providers.13
Federal Fraud & Abuse Laws
Additionally, healthcare provider organizations face a range of federal and state legal and regulatory constraints, which affect their formation, operation, procedural coding and billing, and transactions. Fraud and abuse laws, specifically those related to the federal Anti-Kickback Statute (AKS) and physician self-referral laws (the Stark Law), may have the greatest impact on the operations of healthcare providers.
The AKS and Stark Law are generally concerned with the same issue – the financial motivation behind patient referrals. However, while the AKS is broadly applied to payments between providers or suppliers in the healthcare industry and relates to any item or service that may be paid for under any federal healthcare program, the Stark Law specifically addresses the referrals from physicians to entities with which the physician has a financial relationship for the provision of defined services that are paid for by the Medicare program.14 Additionally, while violation of the Stark Law carries only civil penalties, violation of the AKS carries both criminal and civil penalties.15
Enacted in 1972, the federal AKS makes it a felony for any person to “knowingly and willfully” solicit or receive, or to offer or pay, any “remuneration”, directly or indirectly, in exchange for the referral of a patient for a healthcare service paid for by a federal healthcare program,16 even if only one purpose of the arrangement in question is to offer remuneration deemed illegal under the AKS.17 Notably, a person need not have actual knowledge of the AKS or specific intent to commit a violation of the AKS for the government to prove a kickback violation,18 only an awareness that the conduct in question is “generally unlawful.”19 Further, a violation of the AKS is sufficient to state a claim under the False Claims Act (FCA).20
Due to the broad nature of the AKS, legitimate business arrangements may appear to be prohibited.21 In response, AKS safe harbors set out regulatory criteria that, if met, shield an arrangement from regulatory liability, and are meant to protect transactional arrangements unlikely to result in fraud or abuse.22 Failure to meet all of the requirements of a safe harbor does not necessarily render an arrangement illegal.23 It should be noted that, in order for a payment to meet the requirements of many AKS safe harbors, the compensation must not exceed the range of fair market value and must be commercially reasonable.
Of note, in a December 2020 final rule, the HHS Office of Inspector General (OIG) released several revisions to the AKS, many of which are similar to those revisions to the Stark Law proposed by CMS, as discussed below.24 Among the more notable revisions are new safe harbors for value-based arrangements (the safe harbor requirements for which arrangements lessen as the participants take on more financial risk).25
The Stark Law prohibits physicians from referring Medicare patients to entities with which the physicians or their family members have a financial relationship for the provision of designated health services (DHS).26 Further, when a prohibited referral occurs, entities may not bill for services resulting from the prohibited referral.27 Under the Stark Law, DHS include, but are not limited to, the following:
Inpatient and outpatient hospital services;
Radiology and certain other imaging services;
Radiation therapy services and supplies;
Certain therapy services, such as physical therapy;
Durable medical equipment; and,
Outpatient prescription drugs.28
Under the Stark Law, financial relationships include ownership interests through equity, debt, other means, and ownership interests in entities also have an ownership interest in the entity that provides DHS.29 Additionally, financial relationships include compensation arrangements, which are defined as arrangements between physicians and entities involving any remuneration, directly or indirectly, in cash or in kind.30 Notably, the Stark Law contains a large number of exceptions, which describe ownership interests, compensation arrangements, and forms of remuneration to which the Stark Law does not apply.31 Similar to the AKS safe harbors, without these exceptions, the Stark Law may prohibit legitimate business arrangements.
As noted above, in December 2020, CMS released a number of revisions to the Stark Law in a final rule, including new permanent exceptions for value-based arrangements.32 These new exceptions protect the following arrangements:
Full Financial Risk Arrangements: Includes capitated payments and predetermined rates or a global budget;
Value-Based Arrangements with Meaningful Downside Financial Risk: Where a physician pays no less than 25% of the value of the remuneration the physician receives when he or she does not meet pre-determined benchmarks; and,
Value-Based Arrangements: Applies regardless of risk level to encourage physicians to enter value-based arrangements, even if they only assume upside risk.33
ACO Fraud & Abuse Waivers
ACO formation may have a variety of legal risks. To encourage participation in MSSP, CMS and the OIG have created waivers to shield participating ACOs from legal risks related to fraud and abuse.34 There are five waivers available:
The Pre-Participation Waiver
allows ACO participants to fund ACO development for the overall benefit of the ACO participants;35
The Participation Waiver
, applies broadly to ACO-related arrangements and is similar to the Pre-Participation Waiver
in that it protects ACO activities required to sustain the business, such as investment and operating agreements.36
The Shared Savings Waiver
protects arrangements related to, and allows for the distribution and use of, shared savings payments earned from the MSSP.37
The Compliance with Stark Law Waiver
allows the ACO to pursue arrangements that may otherwise implicate the AKS;38
The Patient Incentive Waiver
offers protection from fraud and abuse laws when an ACO, ACO participant, or ACO provider provides medically-related incentives to MSSP beneficiaries, e.g., free or below-fair market value items and services that advance the goals of preventative care, adherence to medications/treatment, or management of chronic diseases/conditions.39
Importantly, the waivers must be reasonably related to the MSSP to shield an ACO from fraud and abuse implications.40 Arrangements that are unrelated to the MSSP (even if they have similar underlying purposes) are not shielded from fraud and abuse law by ACO waivers.41
ACOs face many obstacles within the regulatory environment that can prohibit their formation, growth, and development. Understanding fraud and abuse laws, among other statutes and regulations, are integral to the success of an ACO. Another factor integral to the success of an ACO is their health information technology infrastructure. Consequently, the final installment in this series will discuss the technological environment in which ACOs operate.
“Health Law: Cases, Materials and Problems” Furrow, Greaney, Johnson, Jost, Schwartz, Brown, Clark, Gatter, King, and Pendo, West Academic, 2018, p. 657.
“Medicare Program; Final Waivers in Connection with the MSSP” Federal Register Vol. 80, No. 209 (October 29, 2015), p. 66743.
“ACO Participant List and Participant Agreement: Guidance” Centers for Medicare & Medicaid Services, March 2023, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/ACO-Participant-List-Agreement.pdf (Accessed 6/8/23), p. 3.
Federal Register Vol. 80, No. 209 (October 29, 2015) p. 66743.
“ACO Comparison Chart” National Association of Accountable Care Organizations, 2023, https://www.naacos.com/assets/docs/pdf/2023/ACO-ComparisonChart2023.pdf (Accessed 6/7/23).
“Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program” Federal Trade Commission and the Department of Justice, 2011, https://www.justice.gov/sites/default/files/atr/legacy/2011/10/20/276458.pdf (Accessed 6/13/23), p. 1-5.
“Antitrust: DOJ Scuttles ACO Guidance, Unsettles Ground under Provider Joint Contracting Models” By Kinai Patel, Alexis Bortniker, and Diane Hazel, Foley & Lardner LLP, March 17, 2023, https://www.foley.com/en/insights/publications/2023/03/antitrust-doj-aco-guidance-provider-joint (Accessed 6/9/23).
“Comparison of the Anti-Kickback Statute and Stark Law” Health Care Fraud Prevention and Enforcement Action Team (HEAT) Office of Inspector General (OIG), https://oig.hhs.gov/documents/provider-compliance-training/939/StarkandAKSChartHandout508.pdf (Accessed 5/26/23).
“Criminal Penalties for Acts Involving Federal Health Care Programs” 42 USC § 1320a-7b(b)(1).
“Re: OIG Advisory Opinion No. 15-10” By Gregory E. Demske, Chief Counsel to the Inspector General, Letter to [Name Redacted], July 28, 2015, https://oig.hhs.gov/fraud/docs/advisoryopinions/2015/AdvOpn15-10.pdf (Accessed 5/13/22), p. 4-5; “U.S. v. Greber” 760 F.2d 68, 69 (3d. Cir. 1985).
“Patient Protection and Affordable Care Act” Pub. L. No. 111-148, §§ 6402, 10606, 124 Stat. 119, 759, 1008 (March 23, 2010).
“Health Care Fraud and Abuse Laws Affecting Medicare and Medicaid: An Overview” By Jennifer A. Staman, Congressional Research Service, September 8, 2014, https://www.fas.org/sgp/crs/misc/RS22743.pdf (Accessed 5/13/22), p. 5.
“Health Care Reform: Substantial Fraud and Abuse and Program Integrity Measures Enacted” McDermott Will & Emery, April 12, 2010, p. 3; “Patient Protection and Affordable Care Act” Pub. L. No. 111-148, § 6402, 124 Stat. 119, 759 (March 23, 2010).
Demske, Chief Counsel to the Inspector General, Letter to [Name Redacted], July 28, 2015, p. 5.
“Medicare and State Health Care Programs: Fraud and Abuse; Clarification of the Initial OIG Safe Harbor Provisions and Establishment of Additional Safe Harbor Provisions Under the Anti-Kickback Statute; Final Rule” Federal Register Vol. 64, No. 223 (November 19, 1999), p. 63518, 63520.
“Re: Malpractice Insurance Assistance” By Lewis Morris, Chief Counsel to the Inspector General, United States Department of Health and Human Services, Letter to [Name redacted], January 15, 2003, https://oig.hhs.gov/fraud/docs/alertsandbulletins/malpracticeprogram.pdf (Accessed 5/13/22), p. 1.
“Medicare and State Health Care Programs: Fraud and Abuse; Revisions to Safe Harbors Under the Anti-Kickback Statute, and Civil Monetary Penalty Rules Regarding Beneficiary Inducements” Federal Register, December 2, 2020, Vol. 85, No. 232, p. 77814-77815.
“CRS Report for Congress: Medicare: Physician Self-Referral (“Stark I and II”)” By Jennifer O’Sullivan, Congressional Research Service, The Library of Congress, July 27, 2004, available at: http://www.policyarchive.org/handle/10207/bitstreams/2137.pdf (Accessed 5/13/22); “Limitation on certain physician referrals” 42 USC § 1395nn.
“Limitation on certain physician referrals” 42 USC § 1395nn(a)(1)(A).
“Limitation on Certain Physician Referrals” 42 USC § 1395nn(a)(1)(B); “Definitions” 42 CFR § 411.351 (2015). Note the distinction in 42 CFR § 411.351 regarding what services are included as DHS: “Except as otherwise noted in this subpart, the term ‘designated health services’ or DHS means only DHS payable, in whole or in part, by Medicare. DHS do not include services that are reimbursed by Medicare as part of a composite rate (for example, SNF Part A payments or ASC services identified at §416.164(a)), except to the extent that services listed in paragraphs (1)(i) through (1)(x) of this definition are themselves payable through a composite rate (for example, all services provided as home health services or inpatient and outpatient hospital services are DHS).”
“Limitation on certain physician referrals” 42 USC § 1395nn (a)(2).
“Limitation on certain physician referrals” 42 USC § 1395nn (h)(1).
“Limitation on certain physician referrals” 42 USC § 1395nn.
“Medicare Program; Modernizing and Clarifying the Physician Self-Referral Regulations” Federal Register, Vol. 85, No. 232 (December 2, 2020), p. 77492.
“Taking advantage of Medicare ACO waivers” Advisory Board, March 17, 2023, https://www.advisory.com/daily-briefing/2013/07/12/law-review (Accessed 6/8/23).
Federal Register, Vol. 80, No. 209 (October 29 2015), p. 66733.