Healthcare Business News

Dodging an ACO chilling effect

Regulators ease up on provider collusion warnings

By Joe Carlson
Posted: October 31, 2011 - 12:01 am ET

Although the mammoth CMS final rule guiding Medicare accountable care organizations encourages close cooperation among healthcare providers, a companion set of rules from regulatory agencies reminds hospitals and doctors that too much collaboration is still illegal.

However, experts say regulators have significantly dialed back their warnings to providers about avoiding collusion and fraud in a new interim final rule and enforcement guidance statement last month on how antitrust, kickback and self-referral laws will be enforced against ACOs. The changes follow a deluge of public comments suggesting how the older, stricter proposals would have a chilling effect on the formation of ACOs.

Critically, the four agencies have nixed two separate legal approvals required under the draft rules governing the initiative, which is officially known as the Medicare Shared Savings Program in the Patient Protection and Affordable Care Act.

Advertisement | View Media Kit


The proposed rule, issued March 31, was widely panned as too restrictive. The CMS and HHS' inspector general's office would have required potential ACOs to seek specific waivers to the strict federal laws that would normally work to prevent collusion among healthcare providers, including the anti-kickback statute, the Stark law, and the inspector general's authority to impose civil monetary penalties.

Meanwhile, the Federal Trade Commission and the Justice Department had proposed all ACOs perform an intensive market analysis of whether the new organizations would have too much market power to control prices, including a mandatory review by the agencies in cases where ACOs controlled more than 50% of any service line in their primary service area.

Both requirements would have forced ACOs to seek pre-approval from the government in order to be approved as a Medicare ACO.

The interim final rule—which will become final after a 60-day public comment period—now says neither pre-approval is needed, though the agencies are retaining enforcement powers to use on ACOs when needed.

“For there to be improvements in quality of care and to get a handle on rising costs, some coordination among entities that might otherwise compete in the market is going to be required and indeed should be encouraged,” said Chris Gordon, a principal and antitrust lawyer with Washington-based Squire Sanders. “What I see going on is (regulators) trying to recognize that and encourage it, while at the same time making sure the checks are still in place.”

A Medicare ACO is designed to bring together healthcare providers from hospitals, physicians offices and elsewhere into a single organization that can coordinate and track patient care more efficiently than is done now and generate savings for the healthcare system.

Many similar organizations and alliances that pre-dated the reform law also included payers that would distribute any savings among the providers. The ACO rules laid out by the CMS don't focus on that possibility since Medicare is the payer that will be sharing the savings, though the antitrust rules specifically note that many providers say they intend for their Medicare ACOs to also work with private payers, which would trigger antitrust liability.

Even proponents of ACOs acknowledge that the organizations will require federal regulators to tolerate practices that they otherwise discourage, such as consolidating market share and paying doctors for referral activity. That's why the reform law, in addition to prescribing the creation of ACOs, directed regulators to tell healthcare providers exactly how they could avoid running afoul of the law.

In conjunction with the release of the final rule Oct. 20, the FTC and Justice Department released their 18-page revised statement of antitrust enforcement policy for ACOs, offering providers specific advice for how to behave, especially in cases where consolidated market power could attract scrutiny.

The effect, observers say, was to put the burden of enforcement back onto the government, instead of forcing providers to prove up front that their plans were legal.

“They assume any program in the shared savings program will generate higher quality and cost savings for consumers,” said Christi Braun, a lawyer with Mintz Levin in Washington. “Unless they have complaints from someone like a private payer that the group is engaged in conduct that is pushing prices out of line, an ACO is not likely to be prosecuted by the FTC or the DOJ.”

The statement says providers can ask for a 90-day, expedited review of their ACO plans voluntarily from a joint commission and Justice Department officials, with procedures similar to the inspector general's existing advisory opinion process for potential Stark and kickback cases.

Meanwhile, the CMS and HHS' inspector general relaxed the rules and broadened five specific waivers in their 83-page interim final rule also released Oct. 20. Robert Nauman, a senior associate at Squire Sanders in Columbus, Ohio, said the waivers are likely to become more specific over time.

“They intend to narrow this as the program evolves, unless they determine that these programs did not have the unintended consequence of contributing to abusive relationships,” Nauman said. “I see this as at least an attempt to get out of the way a little bit to let this program develop.”

What do you think?

Share your opinion. Send a letter to the Editor or Post a comment below.

Post a comment

Loading Comments Loading comments...



Switch to the new Modern Healthcare Daily News app

For the best experience of on your iPad, switch to the new Modern Healthcare app — it's optimized for your device but there is no need to download.