March 01, 2015

How to Advise Your Physician Clients under the Affordable Care Act

Kathryn Hickner-Cruz

Most physicians find the Patient Protection and Affordable Care Act (ACA)—and federal health care reform in general—rather distasteful. Even physicians who support the underlying policies of the ACA often feel that the law is just too complex. The ACA itself was, depending on the compilation referenced, hundreds or thousands of pages long. And the federal regulations that continue to be proposed and finalized and revised are collectively even more abundant. Simply stated, it’s a lot of information.

Although the media often focuses on those aspects of federal health care reform that relate to individual health care coverage and the employer mandate, many of the less controversial and less understood reforms relate to improving the health care delivery and payment system in this country. And, during the past five years or so, these are the reforms that have perhaps impacted the daily life of physicians the most.

As seasoned health care attorneys have worked with their physician clients during the past five years to implement compliance plans and reviews, enter alignment structures, pursue new reimbursement opportunities, and address governmental audits and scrutiny, they have noticed some changes in their physician clients’ practices as a result of the ACA. Below are a few examples.

Adjusting to a New Payment Regime

Federal health care reform seeks to reduce health care costs while simultaneously improving access to care, quality of care, and overall population health. There is a commonly held belief that achieving this objective will require significant change in the way that health care providers are reimbursed. Accordingly, the ACA reflects a desire to reimburse physicians and health care providers for value (i.e., the quality and efficiency of health care provided) instead of volume alone. Note that this trend is not limited to Medicare, Medicaid, and other federal health care programs under the ACA but has been advanced by commercial payors as well.

In addition to the Medicare Shared Savings Program (described further below), one example of an ACA initiative that impacts the manner in which physicians are reimbursed is the Center for Medicare and Medicaid Innovation (Innovation Center), established under Section 3021 of the ACA. ACA Section 3021 states that the purpose of the Innovation Center is to “test innovative payment and service delivery models to reduce program expenditures . . . while preserving or enhancing the quality of care furnished to individuals. . . . .”

Many physicians directly or indirectly participate in the Innovation Center’s shared savings, bundled payment, value-based purchasing, and other programs, as well as similar programs adopted by the commercial payors. For attorneys assisting their clients to participate and comply with such federal programs, the best source of information is typically the Innovation Center website (, which has an abundance of helpful webinars, data, reports, resources, and guidance.

Integrating with Other Health Care Providers

Many physicians have realized that they need to align with each other and with other health care providers (e.g., hospitals and health systems) in order to thrive under the new health care payment regime that increasingly focuses on reimbursing physicians for the value instead of the volume of services provided. This is true not only because of the care coordination and information sharing needed to achieve the payment program quality and efficiency benchmarks, but also because of the financial and human resources that are required to build the infrastructure and take on the financial risk necessary to succeed.

The current wave of physician alignment activity occurs along a spectrum of integration. Some models of alignment involve relatively limited integration (e.g., physician-hospital co-management arrangements and population health joint ventures) while others involve substantial integration (e.g., employment of formerly independent physicians and hospital acquisition of physician practices). Also consider that, in addition to more traditional asset and stock purchases, many hospital acquisitions of physician practices include hybrid arrangements whereby the hospitals and the physician groups have an ability to unwind the transaction relatively easily if the integration is not successful. Further, some physician “super groups” are formed to have the least amount of integration necessary to pass muster under the state and federal health care regulations (e.g., the Stark Law and the Anti-Kickback Statute, both federal).

Even in alignment relationships that involve a substantial degree of clinical and financial integration, there is often a tension between the level of integration that is required to thrive under ACA payment reform (e.g., flexibility to enter incentivizing financial relationships, share information, and coordinate care) and the current federal and state health care, tax exempt, and anti-trust regulations that restrict such alignment activity. Accordingly, the federal government has and continues to promulgate helpful guidance to assist in resolving these tensions and ambiguities. Consider for example the waivers promulgated by the U.S. Department of Health and Human Services Office of Inspector General (OIG) and Centers for Medicare & Medicaid Services (CMS) and the guidance promulgated by the Internal Revenue Service (IRS), Federal Trade Commission (FTC), and U.S. Department of Justice (DOJ). Also consider the proposed rule issued by the OIG on October 3, 2014, that would amend the safe harbors under the federal Anti-Kickback Statute and modify and add flexibility under the Civil Monetary Penalties Law.

Irrespective of this increased flexibility, it is important for physicians and their attorneys to remember that the federal fraud and abuse laws remain alive and well. Integration transactions and related arrangements among health care providers remain subject to such laws despite the fact that such integration may advance the laudable goals of improving quality and efficiency. Attorneys representing health care clients need to assist their clients to work through this maze of ambiguities and determine the current state of the ever-changing federal health care laws, regulations, and guidance in this area.

Organizing, Leading, and Joining Accountable Care Organizations

To further advance its goals of improving the quality of care and decreasing expenditures, the ACA embraced the concept of accountable care organizations (ACOs). Although there are many definitions, ACOs are ultimately groups of health care providers that voluntarily come together to be accountable for the quality and efficiency of services provided to a certain population. In general, ACOs participate in shared savings programs that allow the ACOs to profit when savings are achieved and quality benchmarks are satisfied. Each shared savings program has unique requirements of participating ACOs, but most require some degree of clinical and administration coordination and information sharing—whether through contractual arrangements alone or highly integrated networks.

There are several types of Medicare ACOs and shared savings programs. The Medicare Shared Savings Program (MSSP) was established under Section 3022 of the ACA. Additional information regarding the MSSP, including the latest guidance such as the December 8, 2014, MSSP proposed rule, can be found on the CMS website (see, for example,

Many ACOs also participate in the Medicare Pioneer ACO Model and the Medicare Advance Payment ACO Model, which are implemented through the Innovation Center. The Innovation Center website has much more information about each of these shared savings programs. In the Medicare context, the shared savings paid to ACOs under these programs are in addition to the fee-for-service compensation that their participants already receive from Medicare. It is important to remember that, although the ACA focuses on the shared savings programs and ACOs established by Medicare, ACOs participate (sometimes simultaneously) with shared savings programs established or sponsored by hospitals, commercial payors, and Medicaid.

Physician clients often feel overwhelmed or confused when reviewing their ACO participation options and lack negotiating leverage when reviewing their ACO participation agreements. That being said, it is very important that they understand the terms to which they are agreeing and maintain flexibility to the extent possible given the uncertainty in this context. Attorneys can assist in this regard.

Guarding the Privacy and Security of Patient Health Information

The ACA also builds on and strengthens the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the regulations promulgated under HIPAA. For example, the ACA imposes new rules for HIPAA transactions, new standards for electronic funds transfers and electronic health care claims, and related certification and penalty provisions.

Although not necessarily attributable to the ACA, physicians are, since the passage of the ACA, increasingly aware of and affected by HIPAA and the other federal laws and regulations designed to protect the privacy and security of patient health information. These laws require consumers and the government to be notified of certain breaches in the privacy and security of health information; require the federal government to audit the compliance by physicians, other covered entities, and business associates with HIPAA; and require the federal government to address complaints. Non-compliance with HIPAA can result in a variety of repercussions, including civil monetary penalties and criminal liability. (For a summary of the federal government’s HIPAA compliance activity and guidance regarding how to comply with HIPAA, visit As a result of this enforcement activity, many physicians realize that they must continuously review and strengthen their health information privacy and securities policies and procedures.

Strengthening Compliance Programs and Preparing for Audit and Enforcement Activity

Lastly, the ACA (especially Title VI) has strengthened the federal fraud and abuse laws adopted to protect the federal health care programs from fraud and waste. For example, the ACA has enhanced the monetary penalties, expanded the Recovery Audit Contractor (RAC) program, increased certain transparency and disclosure requirements, and allocated more resources toward the enforcement of the federal health care regulations.

Consistent with these initiatives, Section 6401 of the ACA mandates that all providers and suppliers establish compliance programs as a condition of Medicare enrollment. Although the core elements of such mandatory compliance programs have not yet been promulgated, more and more physician practices are realizing the importance of compliance and are developing compliance plans. Attorneys drafting such compliance policies and procedures are guided by existing OIG guidance. For example, the OIG Roadmap for New Physicians ( is one of the most helpful single pieces of compliance guidance that has been published as it provides a broad but thorough overview of federal fraud and abuse laws. The OIG website ( features an abundance of sample compliance materials, including PowerPoints and speaker notes. (See, for example, and


The trend today is for health care providers to align with one another to coordinate care and adopt initiatives designed to improve the quality and efficiency of the health care services that they provide. At the same time, the federal government is actively and strictly enforcing its complex and robust regulatory regime. Many physicians are realizing that, for good or for bad, the status quo is not an option. Attorneys are working with their physician clients to navigate the federal law and guidance and help poise their physician clients for future success in this rapidly changing health care environment under the ACA.

Kathryn Hickner-Cruz

Kathryn Hickner-Cruz is a health care attorney with The Health Law Partners, P.C., in Southfield, Michigan. She specializes in health care transactional matters and compliance with federal and state health care regulations.