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CMS Interim Final Rule on Healthcare Fraud and Abuse Laws for ACOs

November 3, 2011

On October 20, 2011, the same date the final rules for implementing the Medicare Shared Savings Program (MSSP) were issued, the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services Office of Inspector General (OIG) issued an interim final rule with a 60-day comment period establishing five waivers of certain federal healthcare fraud and abuse laws for Accountable Care Organizations (ACOs) participating in the MSSP. The interim final rule includes additional waivers and a number of key differences from the proposed rule.

Proposed Waivers

The proposed rule included only three waivers addressing application of the Stark physician self-referral law, the federal Anti-Kickback Statute, and the civil monetary penalty (CMP) or “gainsharing” law to distributions of shared savings under the MSSP and providing immunity under the Anti-Kickback and gainsharing laws for financial relationships among ACO participants that comply with any available exception to the Stark law. For further information on the proposed rule, click here.

Interim Final Waivers

The interim final rule expands the number of waivers to five and includes a waiver for start-up or “pre-participation” activities by ACOs in anticipation of participation in the MSSP, a broad “participation” waiver that applies to ACO-related arrangements during the term of an ACO’s participation, and a “patient incentive” waiver to allow ACOs to offer medically-related incentives to beneficiaries under the MSSP.

The waivers are self-executing, which means that no separate application form or submission is required for ACOs to qualify for the waivers. The waivers do not limit the availability of any existing exceptions or safe harbors available under Stark, Anti-Kickback, or CMP gainsharing or beneficiary inducement laws; rather, they are available in addition to existing exceptions and safe harbors. CMS does not intend to codify the waivers in regulations, but information on waivers will be made available on both the CMS and OIG websites.

Pre-Participation and Participation Waivers

Stark, Anti-Kickback, and gainsharing laws are waived for certain “start-up arrangements” that predate an ACO’s participation in the MSSP where the following conditions are met:

  1. The arrangement is conducted with a good faith intent to develop an MSSP-participating ACO starting in a target year;
  2. The parties are taking diligent steps to develop the ACO within the target year;
  3. The ACO’s governing body has made a bona fide determination that the arrangement is “reasonably related” to the purposes of the MSSP; and
  4. The arrangement, diligent steps, and authorization are contemporaneously documented and publicly disclosed (on its website) by the ACO.

The waiver, only available to an ACO once, would start on the date one year prior to the anticipated application due date (the target year) and would end on the start date of participation or the date six months after the date of denial of an application or the application due date when the ACO fails to submit an application, unless it qualifies for an extension by demonstrating to CMS a likelihood of successfully developing an ACO by the next available application date.

For an ACO participating in the MSSP (whether or not it had in place a pre-participation waiver), Stark, Anti-Kickback, and gainsharing laws are waived for any arrangement of an ACO provided all of the following conditions are met:

  1. The ACO has an MSSP participation agreement in good standing;
  2. The ACO meets the governance, leadership, and management requirements for participation in the MSSP;
  3. The ACO’s governing body has made a bona fide determination that the arrangement is “reasonably related” to the purposes of the MSSP; and
  4. The arrangement and authorization are contemporaneously documented and publicly disclosed (on its website) by the ACO.

The waiver would start on the date of the participation agreement and end on the date six months following the date of expiration or voluntary termination of the agreement or, where terminated by CMS, on the date of the termination notice. For ACOs that have a pre-participation waiver, it would merge with the participation waiver and no separate governing body approval is required.

The pre-participation and participation waivers are designed to cover a broad array of start-up arrangements that include any items, services, facilities, or goods used to create or develop an ACO. Examples listed by CMS are infrastructure creation and provision, information technology (such as EHR and reporting systems), hiring of staff, care coordination mechanisms, consulting and legal services, and incentives to attract primary care physicians. The waiver applies to arrangements within the ACO (among and between the ACO and ACO providers/suppliers) as well as outside the ACO with providers/suppliers involved in ACO-related activities such as coordinating or managing care for ACO participants. The waivers do not require written agreements for all of the various arrangements, but this is recommended by CMS as a best practice.

Waiver for Shared Savings Distributions

Stark, Anti-Kickback, and gainsharing laws are waived with respect to distributions or use of shared savings earned by an ACO where the following conditions are met:

  1. The ACO has an MSSP participation agreement in good standing;
  2. The shared savings are earned by the ACO pursuant to the MSSP;
  3. The shared savings are earned by the ACO during the term of its participation agreement (when such shared savings are used or distributed is irrelevant);
  4. The shared savings are (a) distributed to the ACO’s ACO participants, ACO providers/ suppliers, or individuals or entities that were ACO participants or ACO providers/ suppliers during the year the shared savings were earned by the ACO or (b) used for activities that are reasonably related to the purposes of the MSSP; and
  5. Payments of shared savings distributions are not knowingly made to induce the physician to reduce or limit “medically necessary” items or services to patients under the direct care of the physician.

“Medically necessary” will be interpreted as being consistent with the Medicare program rules and accepted standards of practice.

The waiver is limited to distributions of shared savings only and does not include similar performance-based payments from private commercial plans. ACOs qualifying for the waiver are permitted to distribute or use shared savings in any manner or form within the ACO and in a greater range of manners or forms with outside parties. For example, the wavier permits “downstream” distributions of shared savings among the ACO, ACO participants, and ACO providers/ suppliers. Distributions to outside parties, such as referring physicians, are also permitted if the shared savings will be used for activities that are reasonably related to the purposes of the MSSP.

Stark Law Waiver

The Stark law waiver provides immunity under the Anti-Kickback and gainsharing laws for financial relationships among ACO participants (other than distribution of shared savings) where the following conditions are met:

  1. The ACO has an MSSP participation agreement in good standing;
  2. The financial relationship is “reasonably related” to the purposes of the MSSP; and
  3. The financial relationship implicates Stark and fully complies with an available Stark exception.

This waiver, which was also included in the proposed rule, simplifies the regulatory analysis by eliminating the need to separately determine if an Anti-Kickback Statute safe harbor is met or to evaluate the arrangement under available OIG advisory opinions regarding gainsharing.

Waiver for Patient Incentives

The Anti-Kickback Statute and the CMP law provisions prohibiting inducements to beneficiaries are waived for items or services provided by an ACO to beneficiaries for free or below fair market value where the following conditions are met:

  1. The ACO has an MSSP participation agreement in good standing;
  2. There is a “reasonable connection” between the items or services and the medical care of the beneficiary;
  3. The items or services are in-kind (not cash) and
  4. Are preventive care items or services; or
  5. Advance one or more of the following clinical goals:
    1. Adherence to a treatment regime.
    2. Adherence to a follow-up care plan.
    3. Management of a chronic disease or condition.

Currently, this waiver is applicable to all beneficiaries and not just the beneficiaries assigned to the ACO in question. It is not, however, applicable to discounts offered by manufacturers or suppliers of goods or services to ACOs or ACO participants or providers/suppliers.

CMS declines to define “preventive care” so as to allow additional flexibility for ACOs. By way of example, CMS provides that under the “reasonable connection” standard, supplying blood pressure cuffs might be permissible, but providing beauty products or theater tickets would not be. Financial incentives such as waivers or reductions in copays or deductibles would not be eligible for this waiver.

Reasonably Related Definition Used Within Waiver Requirements

The pre-participation and participation waivers, the Stark law waiver, and the shared savings distribution waiver all require that arrangements be “reasonably related to the purposes of the Shared Savings Program.” The meaning of “purposes of the Shared Savings Program” includes, but is not limited to, the following:

  1. Promoting accountability for the quality, cost and overall care for a Medicare population;
  2. Managing and coordinating care for Medicare fee-for-service beneficiaries through an ACO;
  3. Encouraging investment in infrastructure and redesigned care processes for high-quality and efficient service delivery for patients, such as appropriate reduction of costs to the Medicare program and growth of expenditures of the Medicare program;
  4. Evaluating health needs of the ACO’s assigned population;
  5. Communicating clinical knowledge and evidence-based medicine to beneficiaries; and
  6. Developing standards for beneficiary access and communication.

To be “reasonably related” to the MSSP’s purposes, the arrangement need only have a nexus with one such purpose. However, arrangements that have purposes similar to those listed above but that are not related to the MSSP are not “reasonably related to the purposes of the Shared Savings Program.”

Application and Scope of the Waivers is Limited

A key point for all of the waivers is that a minimum qualification is an MSSP participation agreement with CMS and compliance with all ACO regulations. The waivers are unavailable to an ACO that does not participate in the MSSP. For ACOs that do not participate in the MSSP but instead enter into shared savings programs and other pay-for-performance programs only with private payors, the waivers do not provide any additional protection. Such ACOs would be required to analyze financial relationships and other remunerative arrangements among ACO participants under federal healthcare fraud and abuse laws without any reliance upon the waivers. In addition, all ACOs must be mindful that there are state “baby Stark,” Anti-Kickback, and fee-splitting laws that could be implicated by ACOs that are not affected by the waivers. ACO compliance with these state laws will need to be carefully analyzed as well.

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