Antitrust Implications for
Healthcare ACO’s
Richard Bays JD, MBA, RN, CPHQ
© R Bays 2013
Introduction
The Department of Health and Human Services
(DHHS) proposed the initial set of guidelines for
establishment o...
Introduction
The Patient Protection and Affordable Care Act
(PPACA) authorizes Center for Medicare and Medicaid
Services (...
Introduction
With the advent of ACOs, CMS and the OIG had to address the
application of the three federal laws to ACOs par...
Introduction
These antitrust issues required the Department of Justice (DOJ)
and the Federal Trade Commission (FTC) to add...
Introduction
Under the new framework of the healthcare system CMS and the OIG outlined
proposals to waive the Stark, Feder...
Introduction
Antitrust Effects:
The FTC and the Antitrust Division of the DOJ
recognize that, in certain markets, ACOs cou...
Healthcare Industry
Regulatory Framework
Healthcare Industry Regulatory Framework
I. Stark Law
The first federal law that CMS and the OIG had to address is
the app...
Healthcare Industry Regulatory Framework
The Stark law applies only to the referral of patients for
statutorily defined “D...
Healthcare Industry Regulatory Framework
The ban on physician self-referrals that is contained in the Stark
law is broad a...
Healthcare Industry Regulatory Framework
Exceptions examples con’t:
• Academic medical centers 42 C.F.R. Subpart J, §
411....
Healthcare Industry Regulatory Framework
Exceptions examples con’t:
• Permitted Compensation Arrangements: Rental of Offic...
Healthcare Industry Regulatory Framework
Exceptions examples con’t:
• Physician recruitment 42 U.S.C. § 1395nn(e)(5); 42 C...
Healthcare Industry Regulatory Framework
Unless an exception applies, the Stark law prohibitions
disallow claims to Medica...
Healthcare Industry Regulatory Framework
Financial relationship under Stark is defined as:
“A direct or indirect ownership...
Healthcare Industry Regulatory Framework
Stark Law Sanctions
Failure to comply with the Stark anti-referral prohibition ca...
Healthcare Industry Regulatory Framework
False Claims Act (FCA)
The False Claims Act is broadly written and designed to bo...
Healthcare Industry Regulatory Framework
False Claims Act
The False Claims Act imposes liability on any person who:
“(1)(A...
Healthcare Industry Regulatory Framework
False Claims Act
The False Claims Act liability takes the form of monetary
penalt...
Healthcare Industry Regulatory Framework
False Claims Act
For purposes of the statute, the terms “knowing” and
“knowingly”...
Healthcare Industry Regulatory Framework
False Claims Act
The Deficit Reduction Act of 2005 modified the Social Security
A...
Healthcare Industry Regulatory Framework
False Claims Act
If a State false claims act meets specified requirements, the St...
Healthcare Industry Regulatory Framework
II. MEDICARE AND MEDICAID FRAUD AND ABUSE LAW
“Federal Anti-kickback Statute”
The...
Healthcare Industry Regulatory Framework
Under the Anti-kickback Statute, it is illegal to
knowingly or willfully:
– offer...
Healthcare Industry Regulatory Framework
THREE NECESSARY ELEMENTS
1. Intentional Act
2. Direct or Indirect Payment of Remu...
Healthcare Industry Regulatory Framework
What is Remuneration?
Extremely Broad Scope, whether in cash or in kind, and whet...
Healthcare Industry Regulatory Framework
SAFE HARBOR PROVISIONS
If entity/person satisfies requirements of one or more of ...
Healthcare Industry Regulatory Framework
SAFE HARBOR PROVISIONS
• Investments in Ambulatory Surgical Centers (ASCs)
• Join...
Healthcare Industry Regulatory Framework
The Anti-Kickback Statute is broadly drafted and establishes penalties
for indivi...
Healthcare Industry Regulatory Framework
Absent a conviction, individuals who violate the Anti-Kickback Statute may
still ...
Healthcare Industry Regulatory Framework
III. Civil Monetary Penalties
The Civil Monetary Penalties law (CMP) prohibits a ...
Healthcare Industry Regulatory Framework
The Civil Monetary Penalties Law authorizes the imposition of
substantial civil m...
Healthcare Industry Regulatory Framework
The Civil Monetary Penalties Law authorizes the imposition of
substantial civil m...
Healthcare Industry Regulatory Framework
Civil Monetary Penalties
The Secretary of Health and Human Services, acting throu...
Healthcare Industry Regulatory Framework
Civil Monetary Penalties
The OIG is authorized to seek different amounts of CMPs ...
Healthcare Industry Regulatory Framework
Civil Monetary Penalties
Prior to initiating formal administrative CMP proceeding...
Antitrust Issues
Antitrust Issues
With the newly formed Accountable Care
Organizations arriving on the healthcare
industry landscape, we no...
Antitrust Issues
“Free and open markets are the foundation of a vibrant
economy. Aggressive competition among sellers in a...
Antitrust Issues
The Antitrust Laws
Congress passed the first antitrust law, the Sherman Act, in
1890 as a comprehensive c...
Antitrust Issues
I. Monopolization
Sherman Antitrust Act (15 U.S.C. §1)
Senator John Sherman was an expert on the regulati...
Antitrust Issues
Sherman Antitrust Act
A monopoly is a situation in which there is a single supplier or
seller of a good o...
Antitrust Issues
Sherman Antitrust Act
“Every person who shall monopolize, or attempt to monopolize,
or combine or conspir...
Antitrust Issues
Sherman Antitrust Act
Elements:
1. No Person shall
2. Monopolize, or attempt or conspire to monopolize
3....
Antitrust Issues
Sherman Antitrust Act
Requirements:
1. Monopoly power
2. Willful acquisition or maintenance of monopoly p...
Antitrust Issues
Sherman Antitrust Act
The monopoly power would look to the market, specifically:
A. Line of commerce
B. G...
Antitrust Issues
Sherman Antitrust Act
Potential Anticompetitive Act - Willful acquisition or maintenance of power
A. Is t...
Antitrust Issues
Sherman Antitrust Act
For Attempted monopolization:
1. Specific intent (often inferred)
2. Anticompetitiv...
Antitrust Issues
II. Violations "per se" and violations of the "rule of reason"
Violations of the Sherman Act fall loosely...
Antitrust Issues
II. Violations "per se" and violations of the "rule of reason"
Violations "per se":
Conduct characterized...
Antitrust Issues
II. Violations "per se" and violations of the "rule of reason"
Violations of the Sherman Act fall loosely...
Antitrust Issues
II. Violations "per se" and violations of the "rule of reason"
Violations of the "rule of reason":
The co...
Antitrust Issues
III. Tying - Clayton Act (15 U.S.C. § 12)
The Clayton Act made both substantive and procedural
modificati...
Antitrust Issues
Tying - Clayton Act
For competitive purposes, a monopolist may use forced buying,
or “tie-in” sales, to g...
Antitrust Issues
Tying - Clayton Act
Elements:
1. Tying and tied goods are two separate products
2. Market power in the ti...
Antitrust Issues
Tying - Clayton Act
To avoid issues with tying, one must evaluate if the components
satisfy the following...
Accountable Care
Organizations (ACOs)
Accountable Care Organizations (ACOs)
What is an ACO?
Accountable Care Organizations (ACOs) are groups of
doctors, hospita...
Accountable Care Organizations (ACOs)
Medicare offers several ACO programs:
1) Medicare Shared Savings Program —a program ...
Accountable Care Organizations (ACOs)
Currently as the Centers for Medicare and Medicaid Services
(CMS) are testing severa...
Accountable Care Organizations (ACOs)
These types of insurer-directed payment approaches to care delivery remind
many of t...
Accountable Care Organizations (ACOs)
The Shared Savings Program
The three goals stressed under the Shared Savings Program...
Accountable Care Organizations (ACOs)
COSTS
ACOs were created under the Patient Protection and Affordable Care Act
(PPACA)...
Accountable Care Organizations (ACOs)
Shared Savings and Shared Losses
An ACO will be eligible for shared savings only if ...
Accountable Care Organizations (ACOs)
Shared Savings and Shared Losses
Savings will be determined based upon a comparison ...
Accountable Care Organizations (ACOs)
Shared Savings and Shared Losses
Shared savings will be calculated using a 6-month c...
Accountable Care Organizations (ACOs)
What are the primary characteristics of an ACO?
Many experts believe that ACOs shoul...
Accountable Care Organizations (ACOs)
What are the primary characteristics of an ACO?
Proponents generally agree that the ...
Accountable Care Organizations (ACOs)
What are the primary characteristics of an ACO?
Proponents generally agree that the ...
Accountable Care Organizations (ACOs)
Who can participate in an ACO?
Physicians and hospitals are the target, particularly...
Accountable Care Organizations (ACOs)
What is required to be an ACO?
Eligible organizations must demonstrate that they are...
Accountable Care Organizations (ACOs)
What are the benefits to a Hospital in participating in an ACO?
•Better and demonstr...
Accountable Care Organizations (ACOs)
What are the benefits to Physicians for participating in an ACO?
•Improved office wo...
Accountable Care Organizations (ACOs)
What are the benefits to Patients?
•Coordinated care across both physician offices a...
DOJ & FTC
Response to Anticompetitive
Effects of ACOs
DOJ & FTC Response
The Federal Trade Commission and the Antitrust Division of
the Department of Justice (the “Agencies”) r...
DOJ & FTC Response
The Agencies recognize that not all such ACOs are likely to
benefit consumers, and under certain condit...
DOJ & FTC Response
The DOJ and FTC have jointly issued a proposed Statement of Antitrust
Enforcement Policy Regarding ACOs...
DOJ & FTC Response
Tax Considerations
The IRS also issued contemporaneously a solicitation for comments on
what guidance, ...
DOJ & FTC Response
Coordination with The Agencies
In connection with submitting an application to be accepted into
the MSS...
ACO Waivers and
Potential Issues
ACO Waivers and Potential Issues
The Stark Law, the Federal Antikickback Statute, and
Antitrust laws are structured to pre...
ACO Waivers and Potential Issues
I. Stark Law
The Stark Law, which governs physician self-referral for
Medicare and Medica...
ACO Waivers and Potential Issues
I. Stark Law
The Agencies define the term "reasonably related" with six
characteristics:
...
ACO Waivers and Potential Issues
II. Antikickback Statute
The Antikickback Statute prohibits the offer or receipt of
compe...
ACO Waivers and Potential Issues
II. Antikickback Statute
CMS and the OIG have made an exception for ACOs to
distribute sh...
ACO Waivers and Potential Issues
III. Non-profit tax exemption
The IRS established guidelines in March 2011 for tax-exempt...
ACO Waivers and Potential Issues
III. Non-profit tax exemption
While the IRS has said MSSP participation can be interprete...
ACO Waivers and Potential Issues
IV. Antitrust Laws
The FTC and the Antitrust Division of the Department of Justice recogn...
ACO Waivers and Potential Issues
IV. Antitrust Laws
The agencies also outlined anticompetitive concerns for ACOs
that fall...
ACO Waivers and Potential Issues
Four other circumstances likely to raise concerns of
anticompetitive behavior relate to p...
ACO Waivers and Potential Issues
Four other circumstances likely to raise concerns of
anticompetitive behavior relate to p...
ACO Waivers and Potential Issues
A common thread between all four waivers is the criterion that
ACOs must be good-standing...
Conclusion
Conclusion
What are some of the challenges facing ACOs?
In many other industries, “system-ness” within an organization pro...
Conclusion
What are some of the challenges facing ACOs?
Specific issues regarding ACO viability include internal and exter...
Conclusion
One of the most challenging aspects of operating an ACO lies in the legal
and regulatory issues that must be ad...
Conclusion
DOJ & FTC Guidance
Fortunately, The Department of Justice (DOJ) and the Federal Trade
Commission (FTC) (togethe...
Conclusion
DOJ & FTC Guidance
That regulatory entanglement regarding the Medicare Shared Savings
Program and ACO provision...
Conclusion
CMS Guidance
Although the antitrust agencies published their Policy Statement as a separate
document, CMS provi...
Conclusion
The Agencies outlined anticompetitive concerns for ACOs that fall outside of the
antitrust safety zone. One of ...
Conclusion
Similarly, CMS and the OIG have made an exception for ACOs
to distribute shared savings among ACO participants ...
Conclusion
The IRS guidance regarding non-profit tax exemption also
provides a loose description for operators of ACO’s. T...
Conclusion
While the traditional framework for antitrust has been “modified’
through the Agencies’ waivers, there remain m...
Conclusion
Compliance for the ACO may seem daunting but it can be
achieved through diligent planning and obtaining expert ...
Antitrust Implications for
Healthcare ACO’s
Presented at MC Law - Summer Session 2013
Richard Bays JD, MBA, RN, CPHQ
RBays...
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R Bays - Antitrust implications for Healthcare ACO’s

  1. 1. Antitrust Implications for Healthcare ACO’s Richard Bays JD, MBA, RN, CPHQ © R Bays 2013
  2. 2. Introduction The Department of Health and Human Services (DHHS) proposed the initial set of guidelines for establishment of Accountable Care Organizations (ACOs) under the Medicare Shared Savings Program on March 31, 2011.[1] These guidelines stipulate the necessary steps that voluntary groups of physicians, hospitals and other health care providers must complete in order to participate in ACOs.
  3. 3. Introduction The Patient Protection and Affordable Care Act (PPACA) authorizes Center for Medicare and Medicaid Services (CMS) to create the Medicare Shared Savings program (MSSP)[2], which allows for the establishment of ACO contracts with Medicare. ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to their Medicare patients.
  4. 4. Introduction With the advent of ACOs, CMS and the OIG had to address the application of the three federal laws to ACOs participating in the Shared Savings Program: 1. The Physician Self-Referral Law (Stark Law) which prohibits physicians from making referrals for Medicare “designated health services,” to entities with which they have a financial relationship. 2. The Federal Anti-kickback Statute which provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit, or receive remuneration to induce or reward the referral of business reimbursable under any Federal health care program. 3. The Civil Monetary Penalties law (CMP) that prohibits a hospital from making a payment, directly or indirectly, to induce a physician to reduce or limit services to Medicare and Medicaid beneficiaries under the physician’s direct care.[3]
  5. 5. Introduction These antitrust issues required the Department of Justice (DOJ) and the Federal Trade Commission (FTC) to address situations involving ACOs which was published as the Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (Policy Statement). Although the Policy Statement is styled as a mere statement of antitrust enforcement policy for ACOs, it is issued in support of a proposed regulation from CMS, regarding the MSSP and ACO provisions of PPACA. With this, the antitrust agencies (DOJ & FTC) clearly have taken on a much more significant role in the regulatory review process of a sister agency than previously.[4]
  6. 6. Introduction Under the new framework of the healthcare system CMS and the OIG outlined proposals to waive the Stark, Federal Anti-kickback Statute, and CMP laws in three circumstances: •The distribution of Program’s shared savings payments received by an ACO to qualified ACO participants. •An ACO’s distribution of Program’s shared savings payments to other individuals or entities for activities necessary for and directly related to the ACO’s participation in the Shared Savings Program. •For the anti-kickback statute and CMP only, certain financial relationships that are necessary for and directly related to the ACO’s participation in the Shared Savings Program and fully comply with an exception to the physician self-referral law. These waivers would cover shared savings earned during the agreement period with CMS and, as applicable, financial relationships existing during the agreement period.[5]
  7. 7. Introduction Antitrust Effects: The FTC and the Antitrust Division of the DOJ recognize that, in certain markets, ACOs could reduce competition and hurt consumers by raising prices and/or offering lower quality care. The agencies established guidelines in October 2011 for both MSSP participants and commercial ACOs.[6] This presentation examines the Healthcare Industry Regulatory Framework with Antitrust concerns in light of the new ACO formations.
  8. 8. Healthcare Industry Regulatory Framework
  9. 9. Healthcare Industry Regulatory Framework I. Stark Law The first federal law that CMS and the OIG had to address is the application of the Physician Self-Referral Law (Stark Law) to ACOs participating in the Medicare Shared Savings Program. The Stark Law prohibits physicians from making self referrals for Medicare “designated health services,” (DHS) to entities with which they have a financial relationship.[7] It addresses the conflicts of interest that exist when a physician stands to gain financially from making patient care referrals and is codified under 42 U.S.C. § 1395nn.[8]
  10. 10. Healthcare Industry Regulatory Framework The Stark law applies only to the referral of patients for statutorily defined “Designated Health Services.” Currently, Designated Health Services (DHS) are defined as: • Clinical laboratory services; • Physical therapy services; • Occupational therapy services; • Radiology services, including ultrasound, MRI and CT scans; • Radiation therapy services; • Durable medical equipment; • Parenteral and enteral nutrients, • Equipment and supplies; • Prosthetics, orthotics and prosthetic devices and supplies; • Home health services; • Outpatient prescription drugs; and • Inpatient and outpatient hospital services.[9]
  11. 11. Healthcare Industry Regulatory Framework The ban on physician self-referrals that is contained in the Stark law is broad and sweeping. It is, however, subject to numerous exceptions.[10] The exceptions are subject to significant regulatory interpretation and qualifying criteria. Some examples of exceptions are: • Permitted Ownership and Investment interests: Hospital ownership exception (commonly the “Whole Hospital Exception”) 42 C.F.R. Subpart J, § 411.356(c)(3); 69 Fed. Reg. 16084-85; • In-office ancillary services 42 U.S.C. § 1395nn(b)(2); 42 C.F.R. Subpart J, § 411.355(b). • Pre-paid plans 42 U.S.C. § 1395nn(b)(3);
  12. 12. Healthcare Industry Regulatory Framework Exceptions examples con’t: • Academic medical centers 42 C.F.R. Subpart J, § 411.355(e). • Implants furnished by an ASC 42 C.F.R. Subpart J, § 411.355(f). • EPO/dialysis-related drugs furnished/ordered ESRD facility 42 C.F.R. Subpart J, § 411.355(g). • Preventive screening tests, immunizations and vaccines 42 C.F.R. Subpart J, § 411.355(h). • Eyeglasses and contact lenses following cataract surgery 42 C.F.R. Subpart J, § 411.355(i).
  13. 13. Healthcare Industry Regulatory Framework Exceptions examples con’t: • Permitted Compensation Arrangements: Rental of Office Space 42 U.S.C. § 1395nn(e)(1)(A); 42 C.F.R. Subpart J, §411.357(a). • Rental of Equipment 42 U.S.C. § 1395nn(e)(1)(B); 42 C.F.R. Subpart J, § 411.357(b). • Bona fide employment relationships 42 U.S.C. § 1395nn(e)(2); 42 C.F.R. Subpart J, § 411.357(c). • Personal service arrangements 42 U.S.C. § 1395nn(e)(3); See also 42 C.F.R. Subpart J, § 411.357(d).
  14. 14. Healthcare Industry Regulatory Framework Exceptions examples con’t: • Physician recruitment 42 U.S.C. § 1395nn(e)(5); 42 C.F.R. Subpart J, § 411.357(e). • Retention payments in underserved areas 42 C.F.R. Subpart J, § 411.357(t). • Electronic prescribing items and services 42 C.F.R. Subpart J, § 411.357(v). • Electronic health records items and services 42 C.F.R. Subpart J, § 411.357(w). • Intra-family rural referrals 42 C.F.R. Subpart J, § 411.355(j).
  15. 15. Healthcare Industry Regulatory Framework Unless an exception applies, the Stark law prohibitions disallow claims to Medicare for DHS if the referral originated from a physician who has a “financial relationship” with the entity providing the service. 42 U.S.C. § 1395nn(a)(1)
  16. 16. Healthcare Industry Regulatory Framework Financial relationship under Stark is defined as: “A direct or indirect ownership or investment interest” OR “A direct or indirect compensation arrangement.” AND Includes not only the physician’s personal financial relationships, BUT ALSO The financial interests and relationships of the physician’s immediate family members.[11]
  17. 17. Healthcare Industry Regulatory Framework Stark Law Sanctions Failure to comply with the Stark anti-referral prohibition can include denial of payment, mandatory refunds, civil monetary penalties and/or exclusion from participation in the Medicare program. Additionally, alleged Stark violations are frequently the basis for cases filed under the False Claims Act, codified at 31 U.S.C. § 3729. The False Claims Act authorizes private citizens to sue on behalf of the Federal government, and offers a percentage of the ultimate recovery to such citizens for their “whistleblower” efforts. Damage awards under the False Claims Act can be staggering, including up to $11,000 per false claim, treble damages, and recovery of all attorney fees.[12]
  18. 18. Healthcare Industry Regulatory Framework False Claims Act (FCA) The False Claims Act is broadly written and designed to both seek out and punish the perpetration of fraud against the U.S. Government. This Act dates back to the 1800s when President Lincoln and Congress enacted the statute to address defense procurement fraud that occurred in connection with defense contractors submitting fraudulent bills to the Union Army. Although the Act targets many types of fraudulent claims, health care and procurement fraud cases constitute the vast majority of all actions. 31 U.S.C. § 3729
  19. 19. Healthcare Industry Regulatory Framework False Claims Act The False Claims Act imposes liability on any person who: “(1)(A) knowingly presents or causes to be presented a false or fraudulent claim for payment or approval; (1)(B) knowingly makes, uses or causes to be made or used, a false record or statement material to a false or fraudulent claim; (1)(C) conspires to commit a violation of the FCA . . . or (1)(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a).
  20. 20. Healthcare Industry Regulatory Framework False Claims Act The False Claims Act liability takes the form of monetary penalties and the statute authorizes a civil penalty between $5,000 and $10,000 per claim ($5,500 to $11,000 adjusted for inflation, as provided in the statute), plus three times the amount of damages which the Government sustains because of the false claim. 31 U.S.C. § 3729(a).
  21. 21. Healthcare Industry Regulatory Framework False Claims Act For purposes of the statute, the terms “knowing” and “knowingly” mean that a person: (1) has actual knowledge, (2) acts in deliberate ignorance of the truth or falsity of the information or (3) acts in reckless disregard of the truth or falsity of the information. 31 U.S.C. § 3729(b). There is no requirement that the person submitting the claim have actual knowledge that the claim is false.
  22. 22. Healthcare Industry Regulatory Framework False Claims Act The Deficit Reduction Act of 2005 modified the Social Security Act to create a financial incentive for States to enact false claims acts that create State liability for the submission of false or fraudulent claims to the State’s Medicaid program. 42 U.S.C. § 1396h(b).
  23. 23. Healthcare Industry Regulatory Framework False Claims Act If a State false claims act meets specified requirements, the State is entitled to an increase in ten percentage points in the State medical assistance percentage, as determined by Section 1095(b) of the Social Security Act. More specifically, a State must have in effect a law that: (1) establishes liability for the false or fraudulent claims described in the FCA regarding any State Medicaid plan expenditures; (2) contains provisions that are “at least as effective” in rewarding and facilitating qui tam actions as those in the FCA; (3) contains a requirement for filing an action under seal for sixty days pending review by the State Attorney General; and (4) contains a civil penalty that is not less than the penalty authorized under the FCA. 42 U.S.C. § 1396h(b).
  24. 24. Healthcare Industry Regulatory Framework II. MEDICARE AND MEDICAID FRAUD AND ABUSE LAW “Federal Anti-kickback Statute” The Federal Anti-kickback Statute provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit, or receive remuneration to induce or reward the referral of business reimbursable under any Federal health care program.[13] 42 U.S.C. § 1320a-7b
  25. 25. Healthcare Industry Regulatory Framework Under the Anti-kickback Statute, it is illegal to knowingly or willfully: – offer, pay, solicit, or receive remuneration; – directly or indirectly; – in cash or in kind; – in exchange for; • referring an individual; or • furnishing or arranging for a good or service; and – for which payment may be made under Medicare or Medicaid.[14]
  26. 26. Healthcare Industry Regulatory Framework THREE NECESSARY ELEMENTS 1. Intentional Act 2. Direct or Indirect Payment of Remuneration 3. To Induce the Referral of Patients or Business [15]
  27. 27. Healthcare Industry Regulatory Framework What is Remuneration? Extremely Broad Scope, whether in cash or in kind, and whether made directly or indirectly, including: • Kickbacks; • Bribes; • Rebates; • Gifts; • Above or below market rent or lease payments; • Discounts; • Furnishing supplies, services or equipment free, above or below market; • Above or below market credit arrangements; and • Waivers of payments due. [16]
  28. 28. Healthcare Industry Regulatory Framework SAFE HARBOR PROVISIONS If entity/person satisfies requirements of one or more of the following safe harbor provisions, otherwise suspect payment practices are NOT subject to criminal prosecution – • Investment interests for publicly traded companies and smaller entities; • Space and equipment rental agreements; • Personal services and management contracts; • Sale of a medical practice; • Employees; • Group purchasing organizations and Discounts; • Waiver of beneficiary co-insurance and deductible amounts; • Warranties; and • Health Plan/Managed care.[17]
  29. 29. Healthcare Industry Regulatory Framework SAFE HARBOR PROVISIONS • Investments in Ambulatory Surgical Centers (ASCs) • Joint Ventures in Underserved Areas • Practitioner Recruitment in Underserved Areas • Sales of Physician Practices to Hospitals in Underserved Areas • Subsidies for Obstetrical Malpractice Insurance in Underserved Areas • Investments in Group Practices • Specialty Referral Arraignments Between Providers • Cooperative Hospital Services Organization [18]
  30. 30. Healthcare Industry Regulatory Framework The Anti-Kickback Statute is broadly drafted and establishes penalties for individuals and entities on both sides of the prohibited transaction. Conviction for a single violation under the Anti-Kickback Statute may result in: • A fine of up to $25,000 AND • Imprisonment for up to five (5) years. 42 U.S.C. § 1320a-7b(b). In addition, conviction results in mandatory exclusion from participation in federal health care programs. 42 U.S.C. § 1320a-7(a).
  31. 31. Healthcare Industry Regulatory Framework Absent a conviction, individuals who violate the Anti-Kickback Statute may still face exclusion from federal health care programs at the discretion of the Secretary of Health and Human Services. 42 U.S.C. § 1320a-7(b). The government may also assess civil money penalties, which could result in treble damages plus $50,000 for each violation of the Anti- Kickback Statute. 42 U.S.C § 1320a-7a(a)(7). Although the Anti-Kickback Statute does not afford a private right of action, the False Claims Act provides a vehicle whereby individuals may bring qui tam actions alleging violations of the Anti-Kickback Statute. 31 U.S.C. §§ 3729–3733.
  32. 32. Healthcare Industry Regulatory Framework III. Civil Monetary Penalties The Civil Monetary Penalties law (CMP) prohibits a hospital from making a payment, directly or indirectly, to induce a physician to reduce or limit services to Medicare and Medicaid beneficiaries under the physician’s direct care. 42 U.S.C. § 1320a-7a
  33. 33. Healthcare Industry Regulatory Framework The Civil Monetary Penalties Law authorizes the imposition of substantial civil money penalties against an entity that engages in activities including, but not limited to: (1) knowingly presenting or causing to be presented, a claim for services not provided as claimed or which is otherwise false or fraudulent in any way; (2) knowingly giving or causing to be given false or misleading information reasonably expected to influence the decision to discharge a patient; (3) offering or giving remuneration to any beneficiary of a federal health care program likely to influence the receipt of reimbursable items or services;
  34. 34. Healthcare Industry Regulatory Framework The Civil Monetary Penalties Law authorizes the imposition of substantial civil money penalties against an entity that engages in activities including, but not limited to: (4) arranging for reimbursable services with an entity which is excluded from participation from a federal health care program; (5) knowingly or willfully soliciting or receiving remuneration for a referral of a federal health care program beneficiary; or (6) using a payment intended for a federal health care program beneficiary for another use. 42 U.S.C. § 1320a-7a.
  35. 35. Healthcare Industry Regulatory Framework Civil Monetary Penalties The Secretary of Health and Human Services, acting through the OIG, has both mandatory and permissive authority to exclude individuals and entities from participation in federal health care programs pursuant to this statute. 42 U.S.C. § 1320a-7a.
  36. 36. Healthcare Industry Regulatory Framework Civil Monetary Penalties The OIG is authorized to seek different amounts of CMPs and assessments based on the type of violation at issue. 42 CFR § 1003.103. In a case of false or fraudulent claims, the OIG may seek a penalty of up to $10,000 for each item or service improperly claimed, and an assessment of up to three times the amount improperly claimed. 42 U.S.C. § 1320a-7a(a). In a kickback case, the OIG may seek a penalty of up to $50,000 for each improper act and damages of up to three times the amount of remuneration at issue (regardless of whether some of the remuneration was for a lawful purpose). 42 U.S.C. § 1320a-7a(a).
  37. 37. Healthcare Industry Regulatory Framework Civil Monetary Penalties Prior to initiating formal administrative CMP proceedings, the OIG seeks to resolve matters through negotiation. Most CMP cases are resolved through settlement with no decision having been made on the merits of the OIG's allegations or the respondent's defenses. If the OIG and the respondent cannot reach a negotiated settlement, the case will result in an administrative decision, and, if appealed, additional administrative and court decisions. Any administrative or court decision represents a finding on the OIG's allegations and the respondent's defenses. [19]
  38. 38. Antitrust Issues
  39. 39. Antitrust Issues With the newly formed Accountable Care Organizations arriving on the healthcare industry landscape, we now examine some of the basic antitrust issues before moving on to a discussion regarding interfacing the two.
  40. 40. Antitrust Issues “Free and open markets are the foundation of a vibrant economy. Aggressive competition among sellers in an open marketplace gives consumers — both individuals and businesses — the benefits of lower prices, higher quality products and services, more choices, and greater innovation.” The Federal Trade Commission January 6, 2010
  41. 41. Antitrust Issues The Antitrust Laws Congress passed the first antitrust law, the Sherman Act, in 1890 as a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade. In 1914, Congress passed two additional antitrust laws: the Federal Trade Commission Act, which created the FTC, and the Clayton Act. With some revisions, these are the three core federal antitrust laws still in effect today.[20]
  42. 42. Antitrust Issues I. Monopolization Sherman Antitrust Act (15 U.S.C. §1) Senator John Sherman was an expert on the regulation of commerce and the chief author of the Sherman Antitrust Act which was the first measure enacted by the U.S. Congress to prohibit trusts or monopolies of any type. The Act was based on the constitutional power of Congress to regulate interstate commerce. It was passed by an overwhelming vote of 51 to 1 in the Senate and a unanimous vote of 242 to 0 in the House.[21]
  43. 43. Antitrust Issues Sherman Antitrust Act A monopoly is a situation in which there is a single supplier or seller of a good or service for which there are no close substitutes. Economists and others have long known that unregulated monopolies tend to damage the economy by: (1) charging higher prices, (2) providing inferior goods and services and (3) suppressing innovation, as compared with a competitive situation.[22]
  44. 44. Antitrust Issues Sherman Antitrust Act “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.” 15 U.S.C. §2
  45. 45. Antitrust Issues Sherman Antitrust Act Elements: 1. No Person shall 2. Monopolize, or attempt or conspire to monopolize 3. Any part of trade or commerce 4. Among the several states
  46. 46. Antitrust Issues Sherman Antitrust Act Requirements: 1. Monopoly power 2. Willful acquisition or maintenance of monopoly power
  47. 47. Antitrust Issues Sherman Antitrust Act The monopoly power would look to the market, specifically: A. Line of commerce B. Geography Other factors would include: A. Market share - (probably need 75%) B. Power over price (a price maker)
  48. 48. Antitrust Issues Sherman Antitrust Act Potential Anticompetitive Act - Willful acquisition or maintenance of power A. Is there an exclusionary or anticompetitive act a. Erecting or maintaining barriers to entry b. Predatory pricing i. Below cost pricing ii. Ability to recoup losses through future higher than competitive pricing [1] Sherman act – requires a dangerous possibility [2] Clayton act – requires a reasonable possibility c. Leveraging monopoly power d. Refusal to deal – boycotts e. Essential facilities doctrine i. Monopoly over essential facility ii. Facility cannot be reasonably duplicated iii. Use of facility refused iv. No business justification for refusal
  49. 49. Antitrust Issues Sherman Antitrust Act For Attempted monopolization: 1. Specific intent (often inferred) 2. Anticompetitive act 3. Dangerous possibility of success a. Market b. Market share c. Ability to lessen or destroy competition
  50. 50. Antitrust Issues II. Violations "per se" and violations of the "rule of reason" Violations of the Sherman Act fall loosely into two categories: I. Violations "per se": These are violations that meet the strict characterization of Section 1 ("agreements, conspiracies or trusts in restraint of trade"). A per se violation requires no further inquiry into the practice's actual effect on the market or the intentions of those individuals who engaged in the practice.
  51. 51. Antitrust Issues II. Violations "per se" and violations of the "rule of reason" Violations "per se": Conduct characterized as per se unlawful is that which has been found to have a "'pernicious effect on competition' or 'lack[s] . . . any redeeming virtue'“[23] Such conduct "would always or almost always tend to restrict competition and decrease output.“[24] When a per se rule is applied, a civil violation of the antitrust laws is found merely by proving that the conduct occurred and that it fell within a per se category.[25] (This must be contrasted with rule of reason analysis.) Conduct considered per se unlawful includes horizontal price-fixing, and horizontal market division.
  52. 52. Antitrust Issues II. Violations "per se" and violations of the "rule of reason" Violations of the Sherman Act fall loosely into two categories: II. Violations of the "rule of reason": A totality of the circumstances test, asking whether the challenged practice promotes or suppresses market competition. Unlike with per se violations, intent and motive are relevant when predicting future consequences. The rule of reason is said to be the "traditional framework of analysis" to determine whether Section 1 is violated.[26]
  53. 53. Antitrust Issues II. Violations "per se" and violations of the "rule of reason" Violations of the "rule of reason": The court analyzes "facts peculiar to the business, the history of the restraining, and the reasons why it was imposed,“[27] to determine the effect on competition in the relevant product market.[28] A restraint violates Section 1 if it unreasonably restrains trade.[29]
  54. 54. Antitrust Issues III. Tying - Clayton Act (15 U.S.C. § 12) The Clayton Act made both substantive and procedural modifications to federal antitrust law. Substantively, the Act seeks to capture anticompetitive practices in their incipiency by prohibiting particular types of conduct not deemed in the best interest of a competitive market. Sections of the bill proposed substantive changes in the antitrust laws by way of supplementing the Sherman Act of 1890.[30]
  55. 55. Antitrust Issues Tying - Clayton Act For competitive purposes, a monopolist may use forced buying, or “tie-in” sales, to gain sales in other markets where it is not dominant and to make it more difficult for rivals in those markets to obtain sales. This may limit consumer choice for buyers wanting to purchase one, “tying” product by forcing them to also buy a second “tied” product as well. Typically, the “tied” product may be a less desirable one that the buyer might not purchase unless required to do so, or may prefer to get from a different seller. If the seller offering the tied products has sufficient market power in the “tying” product, these arrangements can violate the antitrust laws.[31]
  56. 56. Antitrust Issues Tying - Clayton Act Elements: 1. Tying and tied goods are two separate products 2. Market power in the tied product 3. No choice but to purchase the tied product 4. Effects substantial volume of commerce in the tied market Defenses: 1. Technological package 2. No separate demand
  57. 57. Antitrust Issues Tying - Clayton Act To avoid issues with tying, one must evaluate if the components satisfy the following: 1. Tying and tied goods are two separate products 2. Market power in the tied product 3. No choice but to purchase the tied product 4. Effects substantial volume of commerce in the tied market If these items are true then one may be subject to a tying problem with his product / components.
  58. 58. Accountable Care Organizations (ACOs)
  59. 59. Accountable Care Organizations (ACOs) What is an ACO? Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to their Medicare patients. The goal of coordinated care is to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds both in both delivering high-quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program.[32]
  60. 60. Accountable Care Organizations (ACOs) Medicare offers several ACO programs: 1) Medicare Shared Savings Program —a program that helps a Medicare fee-for-service program providers become an ACO. Applications are currently being accepted by Medicare. 2) Advance Payment ACO Model —a supplementary incentive program for selected participants in the Shared Savings Program. 3) Pioneer ACO Model —a program designed for early adopters of coordinated care. Medicare is no longer accepting applications.[33]
  61. 61. Accountable Care Organizations (ACOs) Currently as the Centers for Medicare and Medicaid Services (CMS) are testing several models of care delivery re-design [See previous slide] that aim to improve the efficiency of American healthcare systems, improve quality, and contain costs; private payers are testing models concurrently. Private commercial payers, such as Cigna, Anthem, and Aetna are supporting ACO formation, testing the concept either by aligning incentives with more organized provider groups and health systems in their marketplaces or by purchasing physician groups and providers to attempt to improve care delivery.[34]
  62. 62. Accountable Care Organizations (ACOs) These types of insurer-directed payment approaches to care delivery remind many of the HMO movement of the 1990s. Since that time, however, the term HMO has come to mean different things. Today, HMOs generally refer to: 1) Fully integrated delivery systems like Kaiser Permanente, where the insurer, physician groups, and hospitals are part of one integrated organization, and care is provided to only those who are insured by that organization; and 2) private health-plan products that call themselves HMOs, but are fundamentally only payment contracts with a network of mostly disaggregated physicians and hospitals. While some HMOs could meet the test of an ACO, not all of them have currently the capability.[35]
  63. 63. Accountable Care Organizations (ACOs) The Shared Savings Program The three goals stressed under the Shared Savings Program are: (1) to provide better care to patients with respect to safety, effectiveness, patient-centeredness, timeliness, efficiency, and equity; (2) to provide better health for populations through preventive service and education for issues such an substance abuse and physical inactivity; while (3) decreasing the cost of healthcare and eliminating waste in the system. CMS seeks to move the healthcare industry towards this patient-centered care approach by adding patients to the governance structure of ACOs, requiring patient satisfaction data, and requiring attention to care coordination issues. ACOs will receive shared savings only if they can meet quality standards related to these goals.[36]
  64. 64. Accountable Care Organizations (ACOs) COSTS ACOs were created under the Patient Protection and Affordable Care Act (PPACA) as a new health care delivery and payment model. However, judging by estimates provided by CMS and other agencies, it appears that the aggregate possible pool of savings to be shared with ACOs over the three- year period may not cover ACO’s expected start-up and first-year operating costs. Additionally, some ACOs may have to re-pay Medicare for any losses Medicare experiences as a result of costs associated with an ACO. CMS estimates average start-up costs and first-year operating expenses of $1.7 million for an ACO. The large costs are due to the numerous and highly detailed requirements that organizations must meet in order to be allowed to participate as an ACO under the Medicare Shared Savings Program (MSSP) established by PPACA. CMS expects that 1.5 to 4 million Medicare beneficiaries will align with an ACO in the first three years of the program and that an estimated 300 to 800 ACOs will participate. The median estimate of net savings to the Medicare program over the three-year period is $510 million.[37]
  65. 65. Accountable Care Organizations (ACOs) Shared Savings and Shared Losses An ACO will be eligible for shared savings only if it meets predetermined standards in all 65 different quality measures. ACOs must agree to a three- year agreement with CMS and can choose one of two models in which it can be eligible for shared savings. Under the “one-sided” model, an ACO will share in savings for the first two years and then be transitioned to a full risk model in the third year, when the ACO would be responsible for any losses to the Medicare program if costs exceed certain thresholds. Under the “two-sided” model, the ACO would be responsible for any losses beginning in the first year, but in return, would be eligible for a greater percentage of any savings. One-sided model ACOs may be eligible to share up to 52.5 percent of savings, while two-sided ACOs may share up to 65 percent.[38]
  66. 66. Accountable Care Organizations (ACOs) Shared Savings and Shared Losses Savings will be determined based upon a comparison with a benchmark of expected average per capita Medicare fee-for-service expenditures. It will be risk adjusted for beneficiary characteristics. The proposed regulations also contain safeguards against ACO providers who attempt to “game” the system by coding changes without improved patient care.[39]
  67. 67. Accountable Care Organizations (ACOs) Shared Savings and Shared Losses Shared savings will be calculated using a 6-month claim run off period. CMS will withhold 25 percent of any earned performance payment to guard against losses in future years as well as to provide an incentive to ACOs to stay in the program for the full three-year period. At the end of the 3-year period, any positive balances will be returned to the ACO. If the ACO does not complete the three-year term, it will forfeit any withheld savings. ACOs must also establish a method by which any losses to the Medicare program are guaranteed, such as obtaining re-insurance, obtaining a surety bond, placing funds in escrow, or another method deemed acceptable by CMS. The ACO must guarantee losses equal to one percent of the per capita expenditures to its assigned beneficiaries for the most recent year available.[40]
  68. 68. Accountable Care Organizations (ACOs) What are the primary characteristics of an ACO? Many experts believe that ACOs should be formed around strong primary care, specialty, and hospital physician-led alliances. Payment by insurers and the government should incentivize cost control and the improvement of care that is delivered within these organizations. In this way, ACOs can be formed that serve all patients equally, not just the people covered by Medicare.[41]
  69. 69. Accountable Care Organizations (ACOs) What are the primary characteristics of an ACO? Proponents generally agree that the following characteristics are essential in an ACO delivery model: 1. An ACO should have the capability to manage both the cost and quality of health care services under a range of payment systems, including fee-for- service, episode payments, and full and partial population-based prepayment (capitation). 2. Possession of sufficient infrastructure and management acumen to support comprehensive, valid, and reliable performance measurements; to make internal system improvements in care quality; and to externally report on its performance with regard to cost and quality of care.[42]
  70. 70. Accountable Care Organizations (ACOs) What are the primary characteristics of an ACO? Proponents generally agree that the following characteristics are essential in an ACO delivery model: 3. A clear organizational mission and commitment to achieve quality and cost efficiencies; a physician management structure that is supportive of all of the requirements listed above; and a culture that supports and rewards continuous quality improvement 4. The use of health information technology to manage patients across the continuum of care and across different institutional settings, including at least ambulatory and inpatient hospital care and possibly post-acute care.[43]
  71. 71. Accountable Care Organizations (ACOs) Who can participate in an ACO? Physicians and hospitals are the target, particularly multi- specialty group practices, independent practice associations (IPAs), networks of individual physician offices in partnership with hospitals and hospitals that employ clinicians or have affiliations with them, and integrated health systems.[44]
  72. 72. Accountable Care Organizations (ACOs) What is required to be an ACO? Eligible organizations must demonstrate that they are capable of doing the following: •Defining processes to promote care quality, report on costs, and coordinate care. •Developing a management and leadership structure for decision-making. •Developing a formal legal structure that allows the organization to receive and distribute bonuses to participating providers. •Including the primary care physicians (PCPs) of at least 5,000 Medicare beneficiaries •Providing CMS with a list of participating PCPs and specialists. •Having contracts in place with a core group of specialist physicians. •Participating for a minimum of three years.[45]
  73. 73. Accountable Care Organizations (ACOs) What are the benefits to a Hospital in participating in an ACO? •Better and demonstrable clinical outcomes. •Enhanced reputation for quality. •Physician loyalty. •Decreased costs of doing business. •Increased efficiency. •Improved affinity with the healthcare community. •Patient satisfaction.[46]
  74. 74. Accountable Care Organizations (ACOs) What are the benefits to Physicians for participating in an ACO? •Improved office workflow efficiencies. •Ease of access to key clinical information. •Increased care coordination and enhanced communication with all members of the patient’s care team. •Ability to manage difficult cases that require multiple visits and involve multiple providers. •Improved application of evidence-based medicine through disease management protocols and clinical decision support. •“Hassle-free” clinical practice and enormous increase in physician and staff job satisfaction.[47]
  75. 75. Accountable Care Organizations (ACOs) What are the benefits to Patients? •Coordinated care across both physician offices and hospitals. •Better health outcomes. •Availability of full medical history accessible by all members of the care team and in case of emergency. •The end to repeatedly filling out forms on medical history. •The end to repeats of unnecessary tests.[48]
  76. 76. DOJ & FTC Response to Anticompetitive Effects of ACOs
  77. 77. DOJ & FTC Response The Federal Trade Commission and the Antitrust Division of the Department of Justice (the “Agencies”) recognize that ACOs may generate opportunities for health care providers to innovate in both the Medicare and commercial markets and achieve for many other consumers the benefits Congress intended for Medicare beneficiaries through the Shared Savings Program. Therefore, to maximize and foster opportunities for ACO innovation and better healthcare for patients, the Agencies wish to clarify their antitrust enforcement policy regarding collaborations among independent providers that seek to become ACOs in the Shared Savings Program.[49]
  78. 78. DOJ & FTC Response The Agencies recognize that not all such ACOs are likely to benefit consumers, and under certain conditions ACOs could reduce competition and harm consumers through higher prices or lower quality of care. Thus, the antitrust analysis of ACO applicants to the Shared Savings Program seeks to protect both Medicare beneficiaries and commercially insured patients from potential anticompetitive harm while allowing ACOs the opportunity to achieve significant efficiencies.[50]
  79. 79. DOJ & FTC Response The DOJ and FTC have jointly issued a proposed Statement of Antitrust Enforcement Policy Regarding ACOs. The Statement sets forth a “safety zone” for ACOs that serve rural areas or that have a combined share of 30% or less of each common services in the ACO’s Primary Service Area (PSA). If an ACO has a PSA share above 50% for any common service that two or more ACO participants provide, the ACO must obtain a letter from the DOJ or FTC confirming that it has no present intent to challenge the ACO on antitrust grounds. If the ACO’s PSA share is between 30% and 50% for any common service provided by two or more ACO participants, the ACO may request an expedited review of its arrangement, or it may proceed without FTC/DOJ review and remain subject to an antitrust investigation.[51]
  80. 80. DOJ & FTC Response Tax Considerations The IRS also issued contemporaneously a solicitation for comments on what guidance, if any, is necessary for tax-exempt organizations participating in ACOs.
  81. 81. DOJ & FTC Response Coordination with The Agencies In connection with submitting an application to be accepted into the MSSP, ACOs must also seek a waiver from the OIG. The OIG has issued separate guidance indicating its proposed procedure for issuing waivers of the application of certain Civil Monetary Penalty law provisions, the Federal anti-kickback statute, and the physician self-referral (Stark) law to specified financial arrangements involving ACOs.[52]
  82. 82. ACO Waivers and Potential Issues
  83. 83. ACO Waivers and Potential Issues The Stark Law, the Federal Antikickback Statute, and Antitrust laws are structured to prevent fraud and abuse of federal healthcare programs, but could potentially impede ACO development and participation in the Medicare Shared Savings Program. The Agencies accordingly designed a series of self- implementing waivers for the application of these laws, but the exemptions can lead to broad interpretations.[53] We will now examine four key area applications.
  84. 84. ACO Waivers and Potential Issues I. Stark Law The Stark Law, which governs physician self-referral for Medicare and Medicaid patients, is strict liability and does not factor the intent of the parties. Compensation arrangements between a hospital and a physician group, such as sharing achieved cost savings, would have violated the Stark Law as this type of arrangement did not meet the law's original safe harbors or exceptions. However, CMS and the OIG established the exemption in October 2011 that financial relationships between ACO participants are waived under the Stark Law if "reasonably related to the purposes of the Medicare Shared Savings Program.“[54]
  85. 85. ACO Waivers and Potential Issues I. Stark Law The Agencies define the term "reasonably related" with six characteristics: 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 Medicare costs and expenditures; 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.[55]
  86. 86. ACO Waivers and Potential Issues II. Antikickback Statute The Antikickback Statute prohibits the offer or receipt of compensation in exchange for referrals or services that are reimbursable under Medicare or Medicaid. Since this is an intent-based statue, it would potentially prohibit ACO payment arrangements that induce referrals of Medicare reimbursable business if not for the regulatory waiver.[56]
  87. 87. ACO Waivers and Potential Issues II. Antikickback Statute CMS and the OIG have made an exception for ACOs to distribute shared savings among ACO participants during the year in which the shared savings were earned. Furthermore, under the OIG and CMS waiver, shared savings payments made directly or indirectly from a hospital to a physician must not be made with the intent to induce the physician to limit medically necessary services to patients.[57]
  88. 88. ACO Waivers and Potential Issues III. Non-profit tax exemption The IRS established guidelines in March 2011 for tax-exempt organizations participating in MSSP, noting that a hospital or health system's participation in an ACO can generally be linked to the charitable purpose of "lessening the burdens of government." Under this premise, the IRS has said participation in the MSSP should not prompt unrelated business income taxes for tax-exempt organizations. The agency also established some basic principles for tax-exempt organizations participating in the MSSP. For example, all transactions among participations must be fair market value and the tax-exempt organization's share of economic benefits from the ACO should be proportional to its contributions to the ACO.[58]
  89. 89. ACO Waivers and Potential Issues III. Non-profit tax exemption While the IRS has said MSSP participation can be interpreted as a charitable purpose, the agency did not provide examples of charitable and non-charitable activities. This is especially significant for ACOs participating in activities unrelated to MSSP, such as negotiations with commercial payors. The IRS is still seeking comment to further define this exemption. Given the relative youth of ACOs, it remains unclear what types of non-MSSP activities may still further an ACO's charitable mission.[59]
  90. 90. ACO Waivers and Potential Issues IV. Antitrust Laws The FTC and the Antitrust Division of the Department of Justice recognize that, in certain markets, ACOs could reduce competition and hurt consumers by raising prices and/or offering lower quality care. The agencies established guidelines in October 2011 for both MSSP participants and commercial ACOs. The guidelines established a safety zone for participants in the MSSP and indicated other ACO providers would be evaluated under the rule of reason. The rule of reason analysis determines whether the ACO in question is likely to have anticompetitive effects. If so, the rule evaluates whether the ACO's potential pro-competitive effects are likely to outweigh those anti-competitive effects.[60]
  91. 91. ACO Waivers and Potential Issues IV. Antitrust Laws The agencies also outlined anticompetitive concerns for ACOs that fall outside of the antitrust safety zone. One of those concerns is if an ACO improperly shares competitively sensitive information. This is problematic regardless of the ACO's primary service area or market power, as it can lead participants to price-fix or otherwise collude in their provision of healthcare services outside the ACO.[61]
  92. 92. ACO Waivers and Potential Issues Four other circumstances likely to raise concerns of anticompetitive behavior relate to provider-payor relationships. The agencies outline specific instances that ACOs with primary service area shares and market power "may wish to avoid." Those include: 1) Preventing or discouraging private payors from incentivizing patients to choose certain providers, including providers not participating in the ACO. 2) Linking the sales of ACO services to the private payor's purchase of other services from providers outside the ACO. For example, an ACO should not require a payor to contract with all of the hospitals under the same system of the hospital participating in the ACO.[62]
  93. 93. ACO Waivers and Potential Issues Four other circumstances likely to raise concerns of anticompetitive behavior relate to provider-payor relationships. The agencies outline specific instances that ACOs with primary service area shares and market power "may wish to avoid." Those include: 3) Contracting exclusively with ACO physicians, hospitals, ambulatory surgery centers and other providers to prevent those providers from contracting with payors outside the ACO. 4) Restricting a private payor's ability to share enrollees information on its health plan cost, quality, efficiency and performance to help enrollee choose providers — if that information is similar to the cost, quality, efficiency and performance measures used in MSSP.[63]
  94. 94. ACO Waivers and Potential Issues A common thread between all four waivers is the criterion that ACOs must be good-standing participants in the MSSP. The agencies' waivers and exemptions do not provide protection for commercial ACOs or hospitals' participation in other value- based payment arrangements with private payors. It is critical that hospitals ensure such commercial arrangements comply with the four federal laws discussed previously in absence of regulatory waivers. Providers should also analyze and ensure ACOs abide by their respective state laws, as over 30 states have their own False Claims Act, Antikickback statutes and self-referral or "mini-Stark" laws.
  95. 95. Conclusion
  96. 96. Conclusion What are some of the challenges facing ACOs? In many other industries, “system-ness” within an organization provides consistency of quality and outcomes. This is an operational imperative of any efficient enterprise, but is substantially lacking in the U.S. healthcare system. Clinical and financial integration will be necessary to achieve the aims of an ACO, but a successful integration cannot occur without a method to systematically provide favorable medical outcomes. Despite the evidence that the more highly integrated and organized health care systems in this country have proven to be more adept at managing cost and quality, integrated systems of care are not the norm.[64]
  97. 97. Conclusion What are some of the challenges facing ACOs? Specific issues regarding ACO viability include internal and external organizational factors such as: • Governance – Establishing an entity that can manage risk and balance the interests of the various organizations and individuals involved. Creating a shared vision and commitment to the best methods to provide care. • Physician participation – Recruiting and retaining primary and specialty MD’s. • Technology – Adopting health information exchange technology that enables ACO participants to leverage existing information systems to exchange data across care locations, facilitate care collaboration, perform quality reporting and ensure all the data for fulfilling ACO objectives is captured. • Consumer acceptance – Educating patients on the benefits of coordinated care and assuring them that the ACO will not reduce the quality of care to save money. [65]
  98. 98. Conclusion One of the most challenging aspects of operating an ACO lies in the legal and regulatory issues that must be addressed to allow for ACO collaboration and integration. The Healthcare Industry Regulatory Framework requires a detailed understanding of: 1. Stark Laws [Federal and State] 2. False Claims Act 3. Antikickback Statutes 4. Civil Monetary Penalties Antitrust Issues must also be factored such as: 1. Monopolization / Potential Anticompetitive Acts [Sherman Act] 2. Per Se Violations 3. Rule of Reason 3. Tying [Clayton Act]
  99. 99. Conclusion DOJ & FTC Guidance Fortunately, The Department of Justice (DOJ) and the Federal Trade Commission (FTC) (together, the antitrust agencies) have answered some of the pressing antitrust questions with their March 31, 2011, Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (Policy Statement). Although the Policy Statement is styled as a mere statement of antitrust enforcement policy for accountable care organizations (ACOs), similar to earlier enforcement statements, in fact it was issued in support of a proposed regulation from the Centers for Medicare and Medicaid Services (CMS), regarding the Medicare Shared Savings Program and ACO provisions of the Patient Protection and Affordable Care Act (PPACA). We are now seeing the antitrust agencies clearly taking on a much more significant role in the regulatory review process of a sister agency than previously.[66]
  100. 100. Conclusion DOJ & FTC Guidance That regulatory entanglement regarding the Medicare Shared Savings Program and ACO provisions of the Patient Protection and Affordable Care Act can be seen in provisions of the Policy Statement that attempt to (1) reconcile the contradictory goals of reducing antitrust uncertainty for ACOs in order to facilitate participation in the Medicare Shared Savings Program, while (2) sending a strong enforcement message that the antitrust agencies will not tolerate ACOs that acquire the ability to exercise market power in commercial markets. The results are highly technical rules, such as Primary Service Area Safety Zones, intended to allow ease of application, but which, raise many questions as to their meaning and likely application.[67]
  101. 101. Conclusion CMS Guidance Although the antitrust agencies published their Policy Statement as a separate document, CMS provided its own explanation for the role of antitrust review in the Medicare Shared Savings Program. In CMS’ proposed rule, it identified three reasons for its incorporation and reliance on the antitrust agencies’ Policy Statement: (1) ACOs that do not face significant antitrust risk are likely to complete the three-year commitment that CMS requires without disruption of the program due to antitrust challenge, (2) ACO-versus-ACO competition is likely to improve the clinical quality of care that Medicare beneficiaries receive and (3) ACOs exercising market power in the private market are likely to prefer private pay patients over Medicare patients and, thus, to limit access by Medicare patients to their services. The antitrust agencies, in turn, explained that they issued their Policy Statement “to maximize and foster opportunities for ACO innovation” and “both to clarify the antitrust analysis of newly formed collaborations among independent providers . . . and to coordinate the antitrust analysis with the CMS.”[68]
  102. 102. Conclusion The Agencies outlined anticompetitive concerns for ACOs that fall outside of the antitrust safety zone. One of those concerns is if an ACO improperly shares competitively sensitive information. This is problematic regardless of the ACO's primary service area or market power, as it can lead participants to price-fix or otherwise collude in their provision of healthcare services outside the ACO. Even though the Agencies designed a series of self-implementing waivers for the application of these laws, the exemptions can lead to broad interpretations. For example the Stark Law, which governs physician self-referral for Medicare and Medicaid patients, is strict liability and does not factor the intent of the parties. Compensation arrangements between a hospital and a physician group, such as sharing achieved cost savings, would have violated the Stark Law as this type of arrangement did not meet the law's original safe harbors or exceptions. However, CMS and the OIG established the exemption in October 2011 that financial relationships between ACO participants are waived under the Stark Law if "reasonably related to the purposes of the Medicare Shared Savings Program.“ The Agencies define the term "reasonably related" with six characteristics which can lead to broad and diverse interpretations for ACO’s.[69]
  103. 103. Conclusion Similarly, CMS and the OIG have made an exception for ACOs to distribute shared savings among ACO participants during the year in which the shared savings were earned to overcome the prohibitions of the Antikickback Statute. A common thread between all waivers is the criterion that ACOs must be good-standing participants in the MSSP. The Agencies' waivers and exemptions do not provide protection for commercial ACOs or hospitals' participation in other value- based payment arrangements with private payors.[70]
  104. 104. Conclusion The IRS guidance regarding non-profit tax exemption also provides a loose description for operators of ACO’s. The IRS has stated that MSSP participation can be interpreted as a charitable purpose but did not provide examples of charitable and non-charitable activities. This is especially significant for ACOs participating in activities unrelated to MSSP, such as negotiations with commercial payors. The IRS has yet to further define this exemption and it remains unclear what types of non- MSSP activities may still further an ACO's charitable mission.[71]
  105. 105. Conclusion While the traditional framework for antitrust has been “modified’ through the Agencies’ waivers, there remain many pitfalls in obtaining compliance for operating an ACO in the market. Providers must continue to examine their operations to achieve compliance with traditional regulatory requirements such as False Claims Act, Antikickback statutes and self-referral Stark laws as well as the Agencies new positions on antitrust issues. Providers must ensure such commercial arrangements comply with these federal laws discussed previously in absence of regulatory waivers. Providers should also analyze and ensure ACOs abide by their respective state laws, as over 30 states have their own False Claims Act, Antikickback statutes and self- referral or "mini-Stark" laws.[72]
  106. 106. Conclusion Compliance for the ACO may seem daunting but it can be achieved through diligent planning and obtaining expert legal advice to guide the organization through the maze of new regulatory requirements. As the new health care system is gradually unveiled by the government, adaptations will be necessary to balance the mandates and deliver high quality, affordable health care to beneficiaries.
  107. 107. Antitrust Implications for Healthcare ACO’s Presented at MC Law - Summer Session 2013 Richard Bays JD, MBA, RN, CPHQ RBaysConsulting@Gmail.com

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