ACO Primer Part 4: Regulatory Compliance

Brent T. Hoard, Business and Health Care Attorney

In the fourth installment of our series on accountable care organizations (“ACOs”), we will focus on certain regulatory compliance concerns associated with the development and operation of ACOs. Please recall that the purpose of ACOs is to achieve significant efficiencies and cost savings across an expansive market. However, actually achieving and rewarding such efficiencies and cost savings would potentially put the participants in ACOs directly in conflict with current federal fraud and abuse laws, namely, the federal Anti-Kickback Statute (“Federal AKS”), Stark II Law (“Stark II”), and Civil Monetary Penalties Law provisions relating to the prohibition on hospital payments to induce physicians to reduce or limit services to Medicare beneficiaries (“CMP”).

It is important to recognize that all of the aforementioned laws were developed and promulgated to address fraud and abuse in a fee-for-service model. It follows that such laws may have unintended consequences in innovative reimbursement systems that emphasize payment for quality and value instead of volume. Accordingly, the controversial health care reform law provides that the Secretary of Health and Human Services may waive certain provisions of the fraud and abuse laws so that these laws do not unduly impede development of beneficial ACOs.

On April 7, 2011, the Centers for Medicare & Medicaid Services (“CMS”) and the Office of Inspector General published proposed rules regarding waivers of the application of the Federal AKS, Stark II, and CMP to certain financial arrangements among ACOs and participating parties. As a threshold matter, each ACO would be required to enter into a contract with CMS and agree to participate in CMS’s Shared Savings Program. In order to qualify for a waiver of each of the Federal AKS, Stark II, and CMP (as applicable), the ACO would further have to meet certain qualifications unique to the law for which the waiver is sought. Although the rules are not final at this time, they provide helpful guidance for the development of an ACO model that strives for compliance with federal fraud and abuse laws.

Given the complex regulatory compliance environment in which ACOs will be developed and operate (including the potential application of Florida law), we recommend that interested parties partner with knowledgeable and skilled health care counsel to address the myriad of possibilities and permutations inherent in successfully bringing an ACO to, and operating in, the marketplace. Please contact our office for additional information, and stay tuned for our next installment of the Blalock Walters ACO Primer.