ACO Waivers: Why They Exist
The reasoning behind the ACO waivers is quite simple. The Medicare fraud and abuse laws, including the federal physician self-referral law (Stark Law, 42 U.S.C. § 1395nn), the federal healthcare program anti-kickback statute (Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b)), and the federal beneficiary inducement law (42 U.S.C. § 1320a-7a), are meant to shield Medicare beneficiaries from decisions involving healthcare treatment that are unduly influenced by providers’ financial incentives under the fee-for-service payment system. Building a robust ACO requires extensive clinical and operational integration between medical practitioners and facilities, and the fraud and abuse laws can inhibit that sort of integration. As CMS stated when establishing the waivers on an interim based in 2011, “[t]hese five waivers provide flexibility for ACOs and their constituent parts to pursue a wide array of activities, including start-up and operating activities, that further the purposes of the Shared Savings Program.” 76 Fed. Reg. 19,655, 67,993 (Apr. 7, 2011).
Types of ACO Waivers
The ACO Pre-Participation Waiver covers start-ups. The ACO Pre-Participation Waiver applies to ACO-related start-up arrangements that anticipate participating in the MSSP. 80 Fed. Reg. 66,742, § IV(1) (Oct. 29, 2015). It enables ACOs to waive compliance with the Stark Law and the Anti-Kickback Statute as long as the following conditions are satisfied:
a. There is a good-faith intent to develop an ACO to participate in the MSSP that year, and an application to participate in the MSSP is submitted that year.
b. Meaningful action is taken to develop an ACO that would be eligible for a participation agreement with CMS, including compliance with requirements pertaining to leadership, management, and governance.
c. The ACO’s governing body has made a “bona fide determination” that the arrangement is reasonably related to the goals of the MSSP.
d. Documentation regarding the efforts made to establish the ACO is maintained for 10 years after the arrangement is established. Id.
The ACO Participation Waiver covers existing ACOs. The ACO participation waiver has essentially the same requirements as the ACO Pre-Participation Waiver but applies to ACOs that have actually formed and are participating in the MSSP, not those in their planning stages. Compare 80 Fed. Reg. 66,742, § IV(1) (Oct. 29, 2015), with 80 Fed. Reg. 66,743, § IV (2) (Oct. 29, 2015).
The Shared Savings Distribution Waiver covers participation agreements. The Shared Savings Distribution Waiver, which applies to the use or distribution of shared savings by ACOs, affords ACOs a waiver from the Stark Law and Anti-Kickback Statute, provided that the following conditions are satisfied:
a. The ACO enters into a participation agreement with CMS and remains in good standing under such participation agreement.
b. Shared savings are earned under the MSSP.
c. The shared savings are earned during the term of the ACO’s participation agreement.
d. The shared savings are used for activities reasonably related to the purposes of the MSSP or distributed to, or among, the ACO’s ACO participants, its ACO providers/suppliers, or individuals and entities that participated during the year when the shared savings were earned. 80 Fed. Reg. 66,743, § IV(3) (Oct. 29, 2015).
The Physician Self-Referral Law Waiver covers referral situations. The Stark Law is among the most complex and challenging in the healthcare regulatory landscape. However, relationships between and among the ACO, its participants, and its ACO providers/suppliers may be protected in situations where arrangements would qualify for a Stark Law exception but could create liability under the Anti-Kickback Statute or the federal beneficiary inducement law, provided that these conditions are met:
a. The ACO has a participation agreement and is in good standing under such agreement.
b. The financial relationship is related to the purposes of the MSSP.
c. The financial relationship fully complies with a Stark Law exception. 80 Fed. Reg. 66,743, § IV(4) (Oct. 29, 2015); see 42 C.F.R. §§ 411.355–.357.
Waiver for Patient Incentives covers beneficiary situations. The Civil Monetary Penalties Law, which addresses inducements to beneficiaries, can be waived for ACOs, their participants, and providers providing services for free or less than fair market value if the following conditions are met:
a. The ACO has, and is in good standing under, a participation agreement with CMS.
b. There is a connection between the items or services and the care being provided to the beneficiary.
c. The benefits are in-kind.
d. The items or services are either preventive in nature or advance clinical goals. 80 Fed. Reg. 66,743, § IV(5) (Oct. 29, 2015).
Reconfiguration of Fraud and Abuse Laws?
ACOs have been successful in delivering high-quality care while reducing costs under the MSSP. However, it is not clear whether the ACO model will necessarily become the new standard in healthcare delivery in the United States. What does appear to be clear, however, is that the value-based payment methodology isn’t going anywhere. Although only 20 percent of Medicare beneficiaries’ care was financed through value-based payments in 2020, the U.S. Department of Health and Human Services (HHS) wants 85 percent of fee-for-service payments to be value-based by the end of 2016.
The most prominent, and some would say pernicious, federal fraud and abuse laws—most notably, the Stark Law—arose when health care was financed under a straightforward fee-for-service methodology. With the strides that the value-based payment movement has made, it seems that the financing of health care in the United States may actually be changing for good. If this is the case, will it be necessary to modify the federal fraud and abuse laws? The ways in which the MIPS and APM methodologies can be manipulated do not necessarily apply to the volume-driven fee-for-service system. Value-based payment methodologies involve sometimes complex clinical measurements and statistics, and physicians maximize their compensation when they increase quality and reduce cost—not simply by providing more services.
Whether or not such an adjustment in legislation is necessary will not be clear for some time. In the interim, however, fraud and abuse practitioners and the HHS should monitor the type of fraud that is uncovered related to value-based payments and consider whether new threats to the federal healthcare programs that emerge require regulatory or legislative action.
Keywords: criminal litigation, Medicare Access and Chip Reauthorization Act, Merit-Based Incentive Payment System, Advanced Payment Models, accountable care organizations, Medicare Shared Savings Program, waivers, Stark Law, Anti-Kickback Statute
Jeremy D. Sherer is an associate in Dentons US LLP's Washington, D.C., office.