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14 posts categorized "IRS"

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

September 30, 2009

Whither meaningful use of the certified, interoperable EHR?

Paul Roemer asks:

Have you ever been a part of a successful launch of a national IT system that: 

  • required a hundred thousand or so implementations of a parochial system?
  • has been designed by 400 vendors?
  • had 400 applications based on their own standards?
  • has had to transport different versions of health records in and out of hundreds of different regional health information networks?
  • needed to be interoperable?
  • could have resulted in someone's death if it failed?
Me neither.

The challenges are many, yet many health care systems already are, or soon will be, moving to implement pieces of this national system.  Are they motivated by the HITECH Act promise of up to $44,000 per physician for meaningful use of a certified EHR?  Perhaps, but that won't cover the cost.  The real value is in the ability to manage a patient's care effectively, efficiently and seamlessly across practice sites and, beyond that, to learn from population-level data. 

The federales already know this -- check out the recent All Things Considered piece on the Medicare claims database.  The aggregators of de-identified data putting it to secondary uses already know this, though their work may be made more complicated by the new HIPAA and Son of HIPPA rules out from HHS and FTC.  Some health systems know this, and are prepared to match the federales' incentive payments to docs who get on the bus (adding some Stark, fraud and abuse and tax issues to the already-heavy load of considerations).

Health care provider systems are ready to get with the program, but may need some guidance in negotiating the regulatory and operational minefields as they move to implement EHR systems. 

If you're part of a system looking for some ground-floor planning and strategic thinking on this thorny set of issues, please get in touch with Paul or me.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

December 03, 2008

Interoperable EHRs: elusive grail or within our grasp?

The indefatigable John Halamka makes a convincing case that "interoperability is implementable today with harmonized standards, appropriate security, and a service oriented architecture using the internet," and that the only thing barring the way to a fully interoperable national EHR system is resources, or incentives -- the technology is there.

(This conclusion begs the question: is GE's recently-announced foray into developing a new open standard for EHRs really necessary?  The $200 million committed seems to be a drop in the proverbial bucket; as a recovering public health official, I always tend to ask: How many childhood vaccines could you buy with that kind of money instead?)

So, what sort of incentives would move providers to climb on board the interoperable EHR express?  The federales have taken at least two approaches thus far:

First, the executive order giving hospitals a free pass for kicking in some dough when physicians in a position to refer business are buying EHR systems.  (Not exactly doing land-office business, even after the IRS cleared up a little issue -- the executive order created a Stark exception and fraud and abuse safe harbor but hadn't addressed issues raised by tax-exempt hospitals forking over big bucks for the benefit of for-profit medical groups.)

Second, a little MIPPA carrot-then-stick action on the electronic prescription front, with the potential promise of expanding the 2% incentives into other related arenas.

Will these incentives move a lot of docs online?  I'm not convinced.  Frankly, the hospital community is not exactly looking for ways to spend money these days.  I'd like to see the time limits on the executive order extended so that hospitals have a chance to rebound and fund some physician EHR infrastructure.  The MIPPA-type or RHQDAPU-type incentives will move docs, as other similar incentives have moved docs and hospitals to report on a million measures.

I'd like to see the federales make some bold moves -- which the Obama administration may be prepared to do -- and fund EHR infrastructure in the private sector.  Directly.  By writing some checks.  There's at least $700 million of public and private funds on the table, but more is needed. The benefits to be realized are great enough, both in terms of public health and in terms of cost savings to government and other payors (and by payors I mean ultimate payors -- those who pay health insurance premiums) that the short-term cost (which is not inconsequential) should be underwritten in the same sort of deficit spending kind of way that FDR used to fund the New Deal.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

February 22, 2008

SEIU's new tactics

This week, fellow Boston health care blogger Paul Levy (Running a Hospital) continues to chronicle the thrust-and-parry between SEIU and the Beth Israel Deaconess Medical Center, where he is CEO, as the SEIU's tactics get some ink in the NY Times.  In this round, the SEIU writes to BIDMC trustees who work in the for-profit world, questioning BIDMC financial reports and pushing Sarbanes-Oxley-type responsibilities for the board.  Paul puts the current tactics in perspective in his post.

-- David Harlow

November 15, 2007

Stark III partial effective date delay published today

CMS today published a rule delaying the effective date of the Stark III "stand in the shoes" rule, as it applies to AMCs and 501(c)(3) integrated health systems, for one year (i.e., until December 4, 2008). The one-year delay in the effective date of part of the Stark III rule was announced November 9, as academic medical centers and their advisors sought to have CMS delay, amend or clarify portions of the rule that would remove Stark exception protections from many current mission support payment arrangments between faculty practice plans and other components of AMCs.

In one of the few bits of editorializing in this brief issuance, CMS staff responded to the suggestion by some that tax-exempt AMCs need to toe the line in order to maintain their tax-exempt status and avoid intermediate sanctions that may be imposed by the IRS -- thus insinuating that "double oversight" by two Federal agencies is unnecessary -- thus:

We note that, in a prior rulemaking (Phase I), in response to a comment that compensation arrangements between organizations regulated under the IRS rules pose minimal risk of program or patient abuse, we indicated that regulation under IRS rules, though beneficial, is not necessarily sufficient to prevent fraud or abuse (66 FR 917).  Our action delaying the date of applicability of the Phase III provisions in § 411.354(c)(1)(ii), § 411.354(c)(2)(iv), and § 411.354(c)(3) with respect to integrated section 501(c)(3) health care systems should not be read as a reversal of our previous position. As stated above, we are delaying the date of applicability of these provisions in a targeted manner in order to evaluate any unintended impact of the Phase III ‘‘stand in the shoes’’ provisions.

While CMS may end up clarifying some ambiguities in the rule, a wholesale rollback is probably too much to ask for.  There will, nevertheless, likely be some significant back-and-forth between CMS and the regulated community between now and next December.

In the interim, it is worth reiterating that the delay in effective date applies to a very narrow range of situations -- see the relevant portion of the regulation with the delayed-effective-date "stand in the shoes" language highlighted.  The delayed sections of the reg only apply to two narrow categories of provider: (1) AMC, as defined in the Stark reg, and (2) integrated 501(c)(3) health system, where each component of the system is a 501(c)(3) tax-exempt entity.

While the good folks at CMS further "evaluate" this reg, they will also be pondering the Stark 2.5 rule (or is that now Stark IV?) embedded in the 2008 MPFS.  As that reg works its way through the process, it may have even more far-reaching effects.

-- David Harlow

July 22, 2007

Charity care at tax-exempt hospitals: how much is enough? for the IRS? for Sen. Grassley?

The IRS's interim report on hospitals and community benefits was released last week, one day after the latest missive from Sen. Chuck Grassley.

One interesting point of comparison: Grassley would condition hospitals' tax-exempt status on spending 5% of annual patient revenues or operating expenses (whichever is greater) on charity care.  The survey shows that a quarter of all hospitals provide only 1% and over half of hospitals provide only 3%; only about 20% of hospitals provide more than 10%.

The WSJ Health Blog asks whether the IRS should be in the business of setting a 5% charity care threshhold.  Some say yes; some say no. 

Truth is, the IRS has been wrestling with this for a long time and has not come up with a bright-line test; it seems that instituting one will create at least as many problems as the current more diffuse test has engendered.

-- David Harlow 

July 19, 2007

Sen. Chuck Grassley has another go at 501(c)(3) hospitals

Sen. Chuck Grassley: there he goes again.  (Check out some of his other recent activities regarding tax-exempt hospitals.)  As Finance committee chairman, he's put out a press release and discussion draft of potential non-profit hospital reforms.  The draft tees up the proposal thus:

The staff proposal recommends setting specific standards for hospitals that seek exemption under § 501(c)(3), including: (i) establishing a charity care policy and wide publication of that policy; (ii) quantitative standards for charity care; (iii) requirements for joint ventures between nonprofit hospitals and for-profit entities; (iv) board composition and other governance requirements and executive compensation; (v) limiting charges billed to the uninsured; (vi) placing restrictions on conversions; (vii) curtailing unfair billing and collection practices; (viii) transparency and accountability requirements; and, (ix) sanctions for failure to comply with applicable requirements for a 501(c)(3) or 501(c)(4) hospital.

The draft gets into some detail on each of these proposals.  Comments are invited over the next month.

Question to consider:  Should tax-exempt payors be subject to the same sort of scrutiny?

-- David Harlow

June 26, 2007

IRS offers further clarification of EHR safe harbors

The IRS recently issued a Q&A document clarifying a handful of questions raised by the memorandum on the EHR safe harbors issued last month

One of the Q&A's seems to represent significant backpedaling by the IRS from its earlier guidance, which said docs had to provide hospitals access to PHI except as prohibited by law.  Now the IRS recognizes that the physician may have contractual obligations to patients and that the hospital and physician may negotiate terms and conditions of access.  It's the fifth of six points set forth in the latest guidance:

Q5 -- What type of restrictions, if any, may a medical staff physician impose on the hospital’s access to electronic medical records created by the physician using the Health IT Items and Services subsidized by the hospital?

A5 – A physician may deny a hospital access to such records if that access would violate federal and state privacy laws or the physician’s contractual obligations to patients. Also, the hospital and physician may agree on reasonable conditions to the hospital's access. For example, their agreement could allow the hospital to access a patient’s medical records only when that patient becomes a patient of the hospital, and could deny the hospital access to nonmedical information such as billing, insurance eligibility, and referral information.

Works for me.

-- David Harlow

June 14, 2007

IRS releases draft revisions to form 990 - annual report for tax-exempt entities including hospitals

The IRS issued proposed revisions to Form 990 today, including a new schedule for hospitals which

Requires organization to report aggregate community benefit for all facilities, and certain information regarding billings, collections, and joint ventures; requires list of facilities and description of type of services provided at each facility; requires reporting of certain policies and activities to communities served by the organization.

See the IRS press release and the IRS web page on the proposed revisions to Form 990.  The comment period is open for 90 days.

I suppose this could count as the response called for in the letter from Senators Grassley and Baucus to Treasury last month.  Think the IRS had a heads-up on the Senators' letter?

Wipe off those spectacles and prepare for a little more transparency.

-- David Harlow