Site moved to, redirecting in 1 second...

34 posts categorized "Anti-Kickback Statute"

November 08, 2012

David Harlow is keynote speaker at Louisiana Hospital Association 2012 Health Law Symposium

This morning I am in Baton Rouge, at the Louisiana Hospital Association conference center, sharing my perspectives on ACOs and the broad range of innovation in health care delivery and financing being ushered in under the Affordable Care Act.

I am also speaking about the use of health care social media in the face of concerns from legal, compliance and regulatory departments.

April 03, 2011

Accountable Care Organization (ACO) Regulations: First Look

ACO regulations and related federal issuances hit the street last Thursday, after several months of waiting -- from CMS, OIG, FTC, DOJ and IRS.  They cover the waterfront, ranging from the central regulation defining the structure and workings of the ACO, to  limited Stark self-referral ban and anti-kickback statute waivers in the fraud and abuse arena, to new frameworks for antitrust analysis, to rules governing joint ventures involving taxable and tax-exempt organizations. 

Update 11/12/2011:  The final ACO Regulations are out - follow the link to my thoughts (camel, not unicorn), links to all of the final regs and issuances, and to an archived webinar on the final ACO regs and what they mean for the health care marketplace.

I had the opportunity to discuss the proposed regs the day after they were issued on a special edition of the Blog Talk Radio show, ACO Watch, hosted by Gregg Masters (@2healthguru).  Gregg's guests included Mark Browne (@consultdoc), Vince Kuraitis (@VinceKuraitis), Jaan Sidorov (@DisMgtCareBlog) and yours truly (@healthblawg).  We are geographically diverse, and bring a variety of perspectives to the table.  I invite you have a listen -- we enjoyed the opportunity to discuss the rules, we all learned from each other, and we hope you enjoy the conversation as well.  (It runs about 90 minutes.)

Update 4/5/2011: For a collection of ACO analyses curated by Anita Samarth see:

Here are a few points to consider as part of a first look at the ACO rules:

1.    The rules were worth the wait.  There are a lot of moving parts to coordinate, and the multi-agency effort really came together.  The CMS rule also retains a fair amount of flexibility.  Some requirements are very specific, but others much less so.  (For one example of specific guidelines, take a look at the eight-part definition of patient-centeredness; an  organization must satisfy all eight in order to be an ACO.  Other requirements have no detail at all, and CMS will look to applicants to explain how they meet the requirements, without giving any hints.)

2.    This is the Frankenstein regulation:  A Medicare beneficiary must sit on the board of the ACO, CMS must approve all marketing materials before they are used ....  These requirements may be traced back to origins in CMS demonstration project and Medicare Advantage policies, respectively, and illustrate the way in which CMS took a short statute and really put some meat on the bones.  Some may balk at the weight of the requirements limiting the options of an ACO.

3.    CMS has bootstrapped a law aimed at ACOs serving at least 5,000 Medicare beneficiaries each into a system of rules that effectively requires that commercial business be handled in an ACO-like manner.  This, among other infrastructure requirements (e.g., 50% of ACO docs must be meaningful users of EHRs), leads to the conclusion that there will be relatively few ACOs, at least initially.  CMS estimates 75-150 nationwide.  There are, of course, many unanswered questions about what a commercial ACO would look like.  One model I am familiar with -- here in the People's Republic of Massachusetts -- is the AQC, or Alternative Quality Contract offered by Blue Cross Blue Shield of Massachusetts to providers enrolled in its HMO Blue product.  One question is whether a slightly different financial model could apply to the commercial side of the house.  One model worth a close look is Jeff Goldsmith's proposed ACO model, which would treat primary care, emergency and diagnostic care, and episodes of specialty care in three distinct ways.

In brief, Goldsmith recommends risk-adjusted capitation payments for primary care, fee-for-service payments for emergency care and diagnostic physician visits, and bundled severity-adjusted payments for episodes of specialty care.  Primary care would be provided through a patient-centered medical home model, which would likely have a collateral effect of reducing the total volume of emergency care and diagnostic physician visits.  Specialty care would be provided through "specialty care marts," ideally more than one per specialty per market to maintain a little healthy competition.

A quick explanation of this approach to an intensivist over the weekend elicited a favorable response.

4.    Also in the bootstrapping department, CMS has shifted the ACO from a "shared savings" approach to having ACOs share risk as well as the upside.  Of course, this makes a lot of sense; a number of commentators, including the HealthBlawger, had lamented the fact that risk sharing was left out of the statute.  CMS has used its general waiver and demo authority under the ACA to move the ACO into risk sharing.  The ACO may choose: share risk from day one, and enjoy a potentially higher percentage of the upside, or defer the risk sharing to year three.

5.    The retrospective nature of patient attribution and savings calculations mean that each ACO must treat every Medicare fee-for-service patient as if he or she is "theirs."  Patients have the right to decide whether they want their data shared with an ACO; if enough patients are spooked by health care data privacy and security issues, fewer and fewer will authorize the sharing from CMS to the ACO, and the ACO will have to drive by feel -- or base its management of Medicare beneficiaries on its management of its general patient population.

6.    Organizations that dominate their local markets may be the most successful as ACOs, but they may face the most involved antitrust review at the hands of the FTC/DOJ.

7.    Scoring on 65 quality metrics in 5 domains will help determine the amount of any shared savings to be paid to an ACO.  One domain, patient experience of care, links up nicely with the patient-centeredness threshhold requirement noted above.  (For private sector attention to patient experience, see what the Leapfrog Group is doing in this domain, using some of the same measures.)  While some may bristle at the number of metrics, it is worth noting that these metrics are all drawn from existing sets of measures.

8.    All in all, the regulations represent the first stage of realizing the ACO vision expressed by Don Berwick last fall: there is a field open to experimentation (albeit a field likely limited to large networks of significant means that can underwrite the up-front infrastructure costs), and the ACO rules sketched out in the statute and further delineated in the regulations will enable CMS to incentivize the provider community to help achieve the triple aim of better care for individuals, better health for populations and reduced per-capita costs.  

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

March 31, 2011

Accountable care organization proposed regulations released for public comment

The long-awaited ACO regulations were released by CMS in draft form today, accompanied by a series of conference calls for different constituencies.  Here is a mirrored copy: Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations - Proposed rule.

CMS Administrator Don Berwick introduced the regulations as implementing a vision of spreading the benefits of integrated health care systems through coordinated care, common medical records, patient education and investments in prevention -- in patient-centered organizations where there is shared decisionmaking among patients and providers.  Medicare fee-for-service beneficiaries will continue to be able to see providers of their choosing, and the overall goal is to provide better care, seamless care, coordinated care.  We can catch a glimpse of detail in a commentary piece by Berwick published today in the New England Journal of Medicine:

The financial opportunity for an ACO to achieve shared savings will vary according to its initial tolerance for risk. Two different models are proposed. In the first model, ACOs earlier in their evolution can elect to assume a smaller share of upside gains but no risk of loss for 2 years and then transition in year 3 to accepting risk. In the second model, organizations that are willing to take on both upside gains and downside risk can qualify for a higher proportion of shared savings from the start. The newly chartered Center for Medicare and Medicaid Innovation will concurrently launch aggressive testing of innovative models for a nationwide technical support platform for ACOs, to complement the numerous ongoing efforts in which the private sector is already engaged. The Center for Medicare and Medicaid Innovation is also now exploring ways to test alternative models of ACOs that differ from the models specified in the proposed rule.

For more on today's release, see the Kaiser Health News pieces here and here.

In addition, the Office of Inspector General issued an ACO announcement, highlighting the coordination across multiple agencies related to ACOs:

CMS and HHS Office of Inspector General (OIG) jointly issued a notice with comment period outlining proposals for waivers of certain Federal laws-the physician self-referral law, the anti-kickback statute, and certain provisions of the civil monetary penalty law-in connection with the Shared Savings Program. CMS and OIG are also asking for comments on further waiver design considerations for the Shared Savings Program and for the separate waiver authority for the Center for Medicare and Medicaid Innovation under section 1115A of the Social Security Act.

The Federal Trade Commission and the Department of Justice jointly issued a "Proposed Statement of Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program."

And the Internal Revenue Service (IRS) issued a notice requesting comments regarding the need for guidance on participation by tax-exempt organizations in the Shared Savings Program through ACOs.

We all have a little light reading to do.  I look forward to your comments and questions on these significant proposed regulations.  The CMS and OIG regulations are scheduled to be published in the Federal Register next week, and the comment period will extend through June 6, 2011.  The FTC and the IRS are accepting comments through May 31.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

March 14, 2011

David Harlow quoted in AMA American Medical News story on daily deal websites

Groupon, LivingSocial and other daily deal websites are being used by health care providers -- though thus far mostly by those that are not covered by traditional commercial or governmental health insurance (e.g., dental, chiropractic, acupuncture services).  Read the American Medical News story on Groupon, where I was quoted, and please take a look at my blog post on the subject as well -- at the Mayo Clinic Center for Social Media blog -- entitled: Groupons for Health Care Services: No-Brainer or Legal Minefield?  In that post, I observed:

There are a number of legal issues, and their resolution will depend, in part, on where you are situated, since many of the relevant rules are state laws, which vary.  For example:

Groupon collects 50% of the price of the groupon as its fee; is that illegal fee-splitting under applicable state law?

Is the 50% fee an illegal kickback in exchange for a referral?  Are you subject to federal laws in this area in addition to any state laws?

Do provider agreements with third party payors prohibit the offering of discounts to plan subscribers?  (If you can get over the first two issues, you may need to screen out folks who are insured by carriers who limit your ability to discount or risk being in default under an agreement with your biggest customer.)

There is at least one more issue to consider, as well:  State laws on gift certificates and their requirements touching on expiration dates.  Two lawsuits filed in the last week or so -- one against Groupon, and one against LivingSocial -- allege that the relatively short life of the daily deal violates state gift certificate laws.  The plaintiffs' lawyers would like to see these cases certified as class actions.

Bottom line: With the proliferation of high-deductible health plans, and FSAs, HSAs and the like, the general public is becoming more price sensitive in paying for health care services; while health care providers need to become more creative in order to address this issue, they must also remember that they are subject to a tangled web of regulations above and beyond other consumer-facing businesses.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

February 14, 2011

AQC to ACO: As goes Massachusetts, so goes the nation?

About four years ago here in Beantown, survivors of the last big ill-conceived or poorly-executed (depends who you ask) wave of health care management and finance innovation were kicking around for a new approach to aligning payor and provider incentives, focusing on quality and cost containment. To hear Andrew Dreyfus, CEO of Blue Cross Blue Shield of Massachusetts, tell the story, the Blues wanted to address both quality and cost, and therefore (after looking in vain for a model elsewhere that could be transplanted to Massachusetts) developed the Alternative Quality Contract, or AQC, which features a global payment model hybridized with substantial performance incentives, plus design features intended to lower the cost of care over time.

Many of the features put in place under the AQC will allow participating provider networks in Massachusetts to make the leap to ACO (once the beast is defined by the federales), despite the difference in payment methodology (global cap for AQC vs. FFS for ACO).

I was invited to hear Andrew present the AQC story this week together with Gene Lindsey, CEO of Atrius Health, a Massachusetts multispecialty physician network of some 700 physicians that participates in the AQC.  (Atrius'  largest group is Harvard Vanguard Medical Associates, whose docs used to be employed by Harvard Community Health Plan, the pioneering staff model HMO 'round these parts.) 

After mulling over Jeff Goldsmith's "Plan B" for ACOs in the commercial sector a few weeks back -- he thinks they need a radical redesign to work well -- it was fascinating to hear from a payor and a provider who have been working together for a few years now in what is effectively a physician-led ACO.  (Keep in mind that the vast majority of discussions about ACOs are focused on hospital-led models, with the exceptions of those by Vince Kuraitis and the HealthBlawger; please feel free to point us to others in the comments.)   An important data point in Gene's presentation is the breakdown of the budget: outpatient costs exceeded inpatient costs.  In addition to that point, the fact of the matter is that the most expensive piece of medical technology remains the physician's pen.  It therefore makes sense to place physician organizations at the center of ACOs; they don't provide all care to all members, but they do coordinate all care.

Andrew and Gene offer glowing reports from the front. More of the details are in their presentations, embedded below.


Almost half of the BCBSMA HMO members have a PCP who is enrolled in the AQC program. (They have other insurance products in the market, too, but the AQC is limited to providers that participate in the HMO plan.)  The program may be distinguished from capitation in the bad old days by three key features:

  • The first year's global payment equals the prior year's payment experience for the population served.
  • Quality measures are in place to guard against undertreatment
  • Global payments are risk-adjusted to account for the health status of individual patients

The results to date have been encouraging. There is improvement in both process and outcome measures for the populations served by providers operating under the AQC, BCBSMA is on track to reducing annual growth in costs by 1/2 within five years and provider groups participating in the AQC are seeing surpluses as a result of their integrated approach to care management.

As is the case everywhere, 50% of costs are incurred for the sickest 5% of the population, so intensive management of those cases will yield the biggest bang for the buck.  This is not news, yet effective care management seems to be.  Witness the recent Atul Gawande piece on "hot spotters" focusing on high-cost chronic care in Camden, NJ.   

For Gene Linsdey, long-time physician at Harvard Vanguard Medical Associates and its predecessor, Harvard Community Health Plan, and now CEO of Atrius Health, what rings true is guidance from the founder of HCHP, Dr. Robert Ebert:

The existing deficiencies in health care cannot be corrected simply by supplying more personnel, more facilities and more money. These problems can only be solved by organizing the personnel, facilities and financing into a conceptual framework and operating system that will provide optimally for the health needs of the population.

Ebert said this in 1969, decades before the rise of IHI and the Triple Aim ... though of course Don Berwick must've picked up some of these ideas when he was a practicing pediatrician at HCHP.  As Lindsey demonstrated, HCHP and its progeny have been tinkering with the conceptual framework and the operating system ever since.

In order for this model to work beyond the slightly unreal laboratory of BCBSMA and Atrius, where there are many long-term physician-patient relationships (so lack of a required patient buy-in to the AQC or ACO model is not that big a deal), and there are significant numbers of covered lives, a shift in thinking is required, an adoption of the patient-centered medical home mindset, and (per Lindsey) a dedication, at a large enough scale to manage the risk involved, to promote the necessary investments in organizational culture, medical management, data reporting analysis, health information and patient engagement.

As the multitude of federal agencies potentially involved in ACO regulation work out their internal differences (the FTC-DOJ catfight over who gets to write and enforce the antitrust rules that will govern ACOs is just the latest one; Stark, Anti-kickback, IRS and other rules are implicated as well), and as the elimination of overlapping agency jurisdiction -- as promised in the State of the Union address a few weeks ago -- plays out, we may well be grappling with a seismic shift in the way health care services are organized and delivered.  Here's hoping that the shift is less about jockeying for market power, and more about delivering greater value and quality to individuals in a manner that helps achieve the Triple Aim of improved population health, improved experience of care and reduced per capita cost.  

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

December 21, 2010

David Harlow quoted in AMA American Medical News story on geolocation services

As health care providers continue to wonder whether and how they should add social media to their mix of communications tactics, new tools -- and new uses for those tools -- continue to sprout up. 

I'm quoted in the current edition of American Medical News in a story that looks at the question of whether and how health care providers should use geolocation services (e.g., Foursquare, Gowalla) as additional channels through which they may communicate with patients, colleagues and referral sources -- or through which they may encourage patients and others to communicate among themselves.

I've touched on this issue in recent presentations on health care social media, and have noted that even "checking in" on line at an STD clinic -- an activity discounted by Mark Scrimshire in the article -- is something that people will do for a badge -- check out this fall's MTV/Foursquare Get Yourself Tested campaign.  (Taking it to the next level, targeted sharing of STD test results is the idea behind start-up

Health care providers can leverage the general public's interest in using geolocation services in a variety of ways.  In the the article, Chris Boyer notes that his health system works to ensure that check-in data (addresses and phone numbers drawn from other online services) for each service location is accurate, but doesn't necessarily encourage check-ins.

There are no HIPAA issues raised by patients "checking in" on line, since it's a voluntary act by the patient, and doesn't really involve the provider.  Providers might decide to encourage check-ins (but not repeat visits -- we want to keep people healthy, right?) as a way to drive patients to links to targeted health information, or even, perhaps, coupons for coffee or something (as long as we don't bump up agianst limits on financial incentives ... though I think that would not be an issue under most circumstances.

Physicians and other providers could be encouraged to use geolocation services in ways that could promote crowing about adoption of best practices (hat tip to Nick Dawson) or achieving success in meeting targets for quality measures -- Be the first on your medical staff to become the mayor of the MRSA-free zone!  Get a badge for formulary compliance!

The possibilities are endless, and there are no deal-breaker regulatory restraints -- folks just need to be cognizant of the guardrails.

How would you like to see geolocation services used in health care? 

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

November 22, 2010

Health Care Reform: What Price Progress?

There's a lot of breast-beating going on out there regarding recent "shocking" behavior by many health care provider organizations.  Believe it or not, all across the nation, health care providers are seeking to affiliate/acquire/be acquired in the hopes of creating more efficient, more comprehensive provider networks, which can survive and flourish under new reimbursement regimes designed to squeeze inefficiencies out of the system in an effort to achieve the much-vaunted triple aim of providing high quality health care to ensure population health at a reasonable cost. 

This thread was picked up in Robert Pear's Sunday New York Times piece, Consumer Risks Feared as Health Law Spurs Mergers, which focuses on concerns that prices will go up as health care providers consolidate and gain greater market power.  

Clearly, some structural changes will be required in our health care "system" in order for efficiencies and savings to be realized by us all.  Since in this round of health reform we have not opted for a single payor system, or even a public option (remember the "Gummint out of my Medicare" comments at Obama town hall meetings?), we have to live with the consequences, i.e., continued involvement of market forces.  Thus, savings incentivized by changes in Medicare reimbursement policies will not be realized by the fragmented purchasers of health care services in the private sector unless they are able to adopt a mix of regulatory and market strategies to match those on the provider side (consider, for example, the fraud and abuse and anti-trust exemptions under discussion on the provider side for accountable care organizaitons, or ACOs).

In Massachusetts, we have seen the effects of having the provider market dominated by an 800-pound gorilla (higher prices for services that are not necessarily of higher quality, as documented by the state attorney general's report on the subject and other related state hearing testimony).  It will be very interesting to see what effect the new kid on the block (Cerberus' "Steward Healthcare," which is the new for-profit owner of the formerly Church-owned Caritas Health Care System) has on market dynamics here in the Bay State.  (See Paul Levy's recent take on Cerberus and Caritas, and some older HealthBlawg posts on Caritas -- more here.)  This is but one example of a provider-side strategy for dealing with new realities in the health care marketplace.  Payors may be able to gain firmer footing in their negotiations with provider networks (including dominant networks in their service areas) if they stand their ground.  Thus far, dominant provider networks have been able to cow payors into granting significant concessions, and the costs end up being passed along to the ultimate payors -- the employers and indivuduals who are the payors of ever-increasing premiums.  The reaction to the federales' move to global budgets and shared savings, ACOs and patient centered medical homes, cannot simply be ever-higher cost increases on the non-governmental-payor side.  It's unsustainable, and payors and providers need to work together to fashion a new reality.

Payors that sought to block or modify the ACA now don't want to see it repealed -- the uncertainty would be bad for business.  Providers are largely focused on structural changes (such as the consolidations described in the Robert Pear piece), but must also focus, as Kent Bottles wrote recently, on the cultural changes necessary to enable a more collaborative approach to delivering care in the face of new provider organizational structures, reimbursement systems, and quality metrics.  This is, of course, a requirement in any endeavor involving significant change, and I would add to Kent's recommended reading list John Kotter's writings on change management (highlighted again for me recently at a session I attended at the Annual Healthcare Internet Conference).  Any organization, or group of entities, considering development of an accountable care organization, or ACO, must dig deep into this reading list, and into this approach to thinking about change management.

In the short term, health reform's cost controls focus on ratcheting down fee schedules.  In the long term, however, it's all about moving away from fee-for-service medicine.  This will require broader thinking on the part of both providers and payors, and an openness to collaboration at levels previously unseen.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting


November 19, 2010

David Harlow Keynotes on Health Care Social Media and the Law at Annual Healthcare and the Internet Conference

I attended the 14th Annual Healthcare and the Internet Conference in Las Vegas this week, and gave a keynote presentation entitled: "Health Care Social Media - The Lawyers Don't Always Say No" in which I discussed the reasons for health care providers to engage with their constituencies via social media -- both from a business perspective and from a regulatory perspective (ACO rules and future phases of Meaningful Use rules effectively demand a response from providers involving social media), and how to do it without getting into trouble (there are a variety of HIPAA, other privacy, liability, anti-kickback and fraud and abuse issues to keep in mind when planning for patient engagement through social media). Here are the slides from my talk:

Some of the themes I touched upon ran through other sessions at the conference as well: development of patient portals, on-line services and a panoply of off-the-shelf and customized web and social media solutions. There was a great deal of sharing -- formal and informal -- throughout, and I enjoyed meeting many folks in person (some of whom I've known for a while, but only on line).   Kudos to the team at Greystone for putting on a terrific conference.

Update 11/21/2010: Check out the #hcic tweetstream.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

November 08, 2010

OIG Issues "Roadmap for New Physicians" - A Guide to Avoiding Fraud and Abuse - and Some Thoughts on its Context

In October, the Office of Inspector General issued a report on Fraud and Abuse Training in Medical Education, finding that 44% of medical schools reported giving some instruction in the anti-kickback statute and related laws, even though they weren't legally required to do so. (As an aside, do we really live in such a nanny state? Over half of all medical schools don't teach their students anything about this issue -- because nobody's making them -- even though it is an issue that looms large in the practice of medicine.)  On a more positive note, about 2/3 of institutions with residency programs instruct participants on the law, and 90% of all medical schools and training programs expressed an interest in having dsome instructional materials on the subject of the anti-kickback statute, physician self-referrals (Stark) rules and the False Claims Act.

So in November, the OIG released a Roadmap for New Physicians - A Guide to Avoiding Fraud and Abuse, available on line and as a PDF.  It is a good 30-page primer on the subject.  While some of the examples given are specific to newly-minted physicians, anyone in the health care industry would benefit by reading it.  The document offers a window into the thinking of the OIG, its perspective on the wide range of issues summarized within, and is a good touchstone for any individual or organization seeking to structure a relationship that needs to stay within the bounds of these laws.

Of course, since so much may be changing under the Affordable Care Act, this document may be ripe for revision next year.  For example, the Accountable Care Organization regulations are due to be released in draft form before year-end, and they are expected to include new proposed exceptions and/or safe harbors under these rules.  (Though based on some recent news reports of internal disputes on implementation, one wonders whether the ACO rules will be issued in a timely fashion.)  As payment methodologies move further in the direction of value-based purchasing encompassing bundled and global payments with quality incentives, and provider organizations move further in the direction of the ACO and the patient-centered medical home, the fraud and abuse and self-referral rules, intended as a brake on bad behavior in the context of fee-for-service medicine, become less relevant -- and even become an impediment -- to new systems of care and new systems of financing of that care.

Well, following the recent midterm elections, we are now all entering a period of uncertainty, living up to the supposed Chinese curse: "May you live in interesting times."  (A related supposed Chinese curse: "May you come to the attention of those in authority."  Hmm.)

David Harlow
The Harlow Group LLC
Health Care Law and Consulting


October 06, 2010

ACO Workshop: The Feds commit to making Accountable Care Organizations work with safe harbors, waivers

Don Berwick kicked off the day-long Accountable Care Organization (ACO) Workshop and Listening Session, co-hosted by the FTC, CMS and the OIG, with a short, stirring speech that touched on his Triple Aim for health care: better care for individuals, better health for populations and reduced per-capita costs.  He committed the government to interpreting applicable statutes "wisely, so as not to impede the development of ACOs."  That sums up the reason this workshop was so eagerly anticipated.  Health care providers are extremely eager to become ACOs - though the term has yet to be fully defined - yet are extremely concerned about the potential to have specific ACO arrangements identified as illegal by the FTC, the OIG or CMS because the arrangements violate antitrust law, Stark, anti-kickback or anti-fraud and abuse laws, or may be subject to civil monetary penalties.  The health reform legislation authorized these agencies to develop waiver programs and safe harbors in order to implement the ACO concept, and proposed rules doing so will have to be issued this fall in order to have these systems up and running next year, as called for by the law.  Berwick's commitment to make this as pain-free as possible was echoed by FTC Chairman Jon Leibowitz and HHS Inspector General Dan Levinson.  Check out the live-tweeting transcript of the day's events. (Audio of the day's proceedings should be posted in the near future.)

So, this leaves just a few questions:

  • What is an ACO and why are they given special status under the law?
  • Why are waivers or safe harbors needed if ACOs are authorized by the Federal health reform law?
  • What waivers or safe harbors are likely to be proposed in the next month or so?
  • Will these waivers and safe harbors protect ACO activity where the payor is a commercial payor, rather than a federal health care program payor?

What is an ACO and why are they given special status under the law?

The health reform law, now known by its acronym PPACA or ACA (Patient Protection and Affordable Care Act, or simply Affordable Care Act), authorizes (among many other demo and pilot programs) the establishment of a shared savings program known as the ACO program, in Section 3022 (codified as Title XVIII, Section 1899). See CMS Shared Savings (ACO) FAQ for details.  At its core, the law requires that an ACO must:

1) Have a formal legal structure to receive and distribute shared savings
2) Have a sufficient number of primary care professionals for the number of assigned beneficiaries (to be 5,000 at a minimum)
3) Agree to participate in the program for not less than a 3-year period
4) Have sufficient information regarding participating ACO health care professionals as the Secretary determines necessary to support beneficiary assignment and for the determination of payments for shared savings.
5) Have a leadership and management structure that includes clinical and administrative systems
6) Have defined processes to (a) promote evidenced-based medicine, (b) report the necessary data to evaluate quality and cost measures (this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHR), and (c) coordinate care
7) Demonstrate it meets patient-centeredness criteria, as determined by the Secretary. 

The ACO provision in the ACA has garnered a disproportionate amount of attention, likely because of the opportunity for shared savings and the opportunity for hospitals to more closely ally their affiliated physicians.  However, the point was made time and again at the workshop that the goal of the program is to improve patient care and the patient experience -- without that guidepost at the core, the exercise won't work.

Aside from large IDS's seeking to use the ACO program as a means to protect and potentially grow market share and margin (after all, "no margin, no mission"), why would hospitals want to get involved?  Hospital reimbursement is on the line here: about 70% of costs -- and potential savings -- are on the hospital side of the equation, and much of the control over those costs lies with physicians.  If they are not already employed physicians, the sharing of savings means the hospital will be sharing with the physicians, and not vice versa.  Despite this apparent disincentive, past experience has shown that strong physician-led initiatives can bring hospitals into the fold.  Two examples: the Medicare Physician Group Practice Demonstration Project (an ACO precursor) and the Grand Junction, Colorado experience: a physician-led arrangement initially targeted by the FTC as a price-fixing scheme, eventually resolved through a settlement agreement, and now seen as a national model of collaboration, aligned incentives, cost-effectiveness, and quality improvement.

Why are waivers or safe harbors needed if ACOs are authorized by the Federal health reform law?

The general idea is to get providers across the continuum of care to band together, work on reducing costs and improving quality, continue to be paid on a fee-for-service basis by CMS, and then retrospectively look at system-wide savings (e.g., avoided readmissions) and share those savings around.  Sharing those savings around outside of an integrated delivery system raises a host of potential antitrust, fraud and abuse (anti-kickback), Stark and CMP issues, and the statute authorizes the development of waiver programs and safe harbors in order to make it all work.  It's really a square peg-round hole problem, because the policy basis for making illegal this sort of sharing is grounded on fee-for-service, retrospective reimbursement systems.  Prospective payment, particularly bundled payments for episodes of care, eliminates the potential for the harm these rules protect against (over-provision of care due to financial incentives), yet they are still on the books.  For example, we want physicians to share in the hospital savings experienced as a result of an avoided readmission which would not be eligible for separate reimbursement; this opportunity will incentivize them to work harder to prevent the readmission.  Under current rules, however, a payment by the hospital, directly or indirectly, to the physician, tied to that savings, is impermissible.

What waivers or safe harbors are likely to be proposed in the next month or so?

Federal officials at listening sessions are notoriously tight-lipped, so not much was said about what to expect, other than proposed regulations are expected to come out this fall.  However, all were keen to emphasize that they want to eliminate the regulatory impediments to ACOs, and welcome further comments from the public.

As a whole, the regulated community is eager to have greater certainty, in the form of new regulated guidance; however, some would prefer to simply be guided by what's out there already: advisory opinions, guidelines, regulations, etc., that lay out safe harbors.  For example, the joint DOJ-FTC healthcare antitrust guidelines provide that clinical integration -- even in the absence of full merger or acquisition, or direct employment of physicians by a hospital -- will keep providers out of antitrust hot water even iof they are collaborating in ways otherwise prohibited.  At the other end of the spectrum, some folks would prefer to have the federales get broad authority to issue blanket waivers without establishing super-specific criteria.

Establishing criteria for waivers or safe harbors will be somewhat difficult, because the definition of an ACO is a little slippery. The financial arrangement at its core can be simply a shared savings arrangement, but it might also veer into other territory: underwriting patient expenses such as transportation costs or home monitoring device costs, or the payment of a physician group's up-front capital expenses by a hospital in order to kick-start the process (all potentially illegal inducements under current law).

Many of the comments were directed at ensuring that a particular type of arrangement or organization does not escape the feds' notice, so that they can all be written into waiver or safe harbor language.   

Will these waivers and safe harbors protect ACO activity where the payor is a commercial payor, rather than a federal health care program payor?

The rules at issue are all Federal health program rules -- except for the FTC antitrust rules, which apply across the board. 

A number of forum participants suggested that a rule of reason analysis under the antitrust laws (rather than "per se" analysis) would be needed in order to address market power issues in each unique ACO situation.  It seems to me that such an approach would be throwing away the current opportunity to craft a set of guidelines focused not only on ACOs but on other provider arrangements likely to come down the pike under other ACA demo and pilot authority.  This opportunity should be seized by the other agencies as well -- not just the FTC. 

Final thoughts

Will providers actually come together to form ACOs?  The jury is still out.  There is certainly a lot of noise being made, but the long-term key from both a policy and business perspective is that the efforts of the provider organizations must be to make themselves more patient-centered.  Berwick's emphasis on this point was striking, and he illustrated it with an anecdote from his days of practicing as a pediatrician at Harvard Community Health Plan, where systems were in place to support a patient-clinician partnership at a very high level, suggesting that HCHP was an ACO long ago.  In current-day Massachusetts, Blue Cross Blue Shield of MA has rolled out its Alternative Quality Contract to  a quarter of its provider network; half of the docs involved are in small practices.  While it has taken some years for the AQC program -- another proto-ACO program -- to get off the ground, it is significant because it has allowed for the agglomeration of small practices into a larger whole for purposes of the contract, thus perhaps lighting the way for ACO participation by organizations other than IDS's.

So is this deja vu all over again? Have we stepped back in time a couple of decades to re-experience managed care failures of an earlier era?  Certainly, some rpoviders see the ACO structure as a way to increase market share, margin and bargaining power -- and it's a no-downside financial deal.  As noted above, it cannot be only that.  There are significant costs and potentially difficult negotiations ahead as providers across the continuum work with the regulators to hash out the final status of the ACO landscape, and then deal with integrating themselves into one or more ACOs with a laser focus on patient-centered care.  That focus should yield benefits up and down the line: for patients, providers and ultimate payors in both the public and private sectors.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting