Category — Issue Areas

The U.S. Department of Health and Human Services (HHS) issued two Notices of Proposed Rulemaking (NPRMs) on July 11, 2011 relating to state health insurance exchanges.  Both NPRMs will be published in the Federal Register on July 15, 2011.  Comments on both NPRMs are due by September 26, 2011.

The Patient Protection and Affordable Care Act (PPACA) requires each state to establish by January 2014 an American Health Benefit Exchange and a Small Business Health Options Program (“SHOP”) to facilitate health insurance purchasing by individuals and small employers.  Under PPACA, if a state fails to establish an Exchange and/or a SHOP by January 1, 2014, the Secretary of HHS must establish and operate the Exchange and/or SHIP  in that state.  PPACA provides that each Exchange will:  certify health plans that can offer coverage through the Exchange; assign ratings to each plan based on price and quality; provide consumer information on each plan (including an electronic calculator that consumers can use to assess the cost of coverage); determine eligibility for the Exchange, tax credits and cost-sharing programs, public health coverage programs (including Medicare, Medicaid, and CHIP), and exemptions from the individual mandate; and establish a “Navigator” program to assist consumers in making choices about their health care.

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On May 19, the Department of Health and Human Services (HHS) issued a final regulation implementing section 1003 of the Patient Protection and Affordable Care Act that requires review of certain health insurance premium increases.  Starting September 1, 2011,  premium increases of ten percent or more for non-grandfathered individual and small group health plans must be disclosed and reviewed by relevant officials.  States will primarily have the responsibility for reviewing rate increases and have already been awarded approximately $44 million in grants to obtain the necessary resources to conduct the reviews.  In September 2012, the ten-percent threshold will be replaced by state-specific percentages based on state cost trends.  The final rule also requires insurance companies to provide consumers with information and justifications for the rate increases in order to ensure transparency about consumer costs.  The rule does not provide HHS and states with authority to approve or reject the rate increases, but instead allows officials to enhance transparency in the insurance marketplace.

Section 4205 of the Patient Protection and Affordable Care Act of 2010 (PPACA) requires chain restaurants and vending machine operators with 20 or more locations or machines to provide calorie and other nutrition information to consumers.  Although FDA’s statutory deadline to publish the proposed rules was March 23, 2011 (within one year of PPACA’s enactment), the rules, entitled Food Labeling; Nutrition Labeling of Standard Menu Items in Restaurants and Similar Retail Food Establishments and Food Labeling; Calorie Labeling of Articles of Food in Vending Machines were published in the April 6, 2011 Federal Register and the public is invited to submit comments by July 5, 2011.

The Department of Justice (DOJ) and the Federal Trade Commission (FTC) (together, “the antitrust agencies”) have raised as many antitrust questions as they have answered 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 is issued in support of a proposed regulation from the Centers for Medicare & Medicaid Services (CMS), regarding the Medicare Shared Savings Program and ACO provisions of the Patient Protection and Affordable Care Act (PPACA).  As such, the antitrust agencies clearly have taken on a much more significant role in the regulatory review process of a sister agency than previously.  That regulatory entanglement can be seen in provisions of the Policy Statement that attempt to reconcile the contradictory goals of reducing antitrust uncertainty for ACOs in order to facilitate participation in the Medicare Shared Savings Program, while 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 intended to allow ease of application, but which, as discussed below, raise many questions as to their meaning and likely application.  Comments on the proposed Policy Statement are due on or before May 31, 2011, which is within 60 days of publication in the Federal Register.

Purpose of Antitrust Review of ACOs

Although the antitrust agencies published their Policy Statement as a separate document for notice and comment, 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:  (i) 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, (ii) ACO-versus-ACO competition is likely to improve the clinical quality of care that Medicare beneficiaries receive and (iii) 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.”  [Read more →]

On March 31, 2011, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule to implement the Medicare Shared Savings Program and Accountable Care Organization (ACO) provisions of the Patient Protection and Affordable Care Act (PPACA).  See Medicare Shared Savings Program: Accountable Care Organizations and Medicare Program, 76 Fed. Reg. 19,528 (proposed Apr. 7, 2011) (to be codified at 42 C.F.R. pt. 425).  This update provides an overview of how the proposed rule’s data sharing provisions implicate the Health Insurance Portability and Accountability Act (HIPAA) and its implementing regulations.  Comments on the rulemaking must be submitted to CMS by June 6, 2011. [Read more →]

Today, April 7, 2011, the Centers for Medicare & Medicaid Services (CMS) published the proposed rule on the Medicare Shared Savings Program/Accountable Care Organizations (ACOs).  In addition, CMS and the Office of Inspector General published the notice with comment period regarding waiver designs in connection with the Medicare Shared Savings Program.  Both documents are available in today’s Federal Register.

An analysis of the Medicare Shared Savings Program/ACO proposed rule can be found here and for more information on the ACO fraud and abuse waivers notice, please click here.

On March 31, 2011, the Internal Revenue Service (IRS) issued Notice 2011-20, which considers the federal income tax implications to those hospitals and other health care organizations described in Code Section 501(c)(3) that seek to participate in the Medicare Shared Savings Program through an accountable care organization (ACO).  This update summarizes the most significant conclusions of Notice 2011-20 for tax-exempt organizations and highlights some areas where additional guidance may be most needed.

What We Know From Notice 2011-20

In Notice 2011-20, the IRS provided tax-exempt organizations with initial guidance regarding the circumstances under which their participation in the Medicare Shared Savings Program through an ACO would not put at risk their tax-exempt status and would not cause any income they may receive from the ACO to be treated as unrelated business taxable income (UBTI).  In particular, the IRS provided the following guidance—

• Private Inurement and Private Benefit: The IRS “expects that it will not consider a tax-exempt organization’s participation in the Medicare Shared Savings Program through an ACO to result in inurement or impermissible private benefit” if the following conditions are satisfied: the ACO has been admitted into, and not been terminated from, the Medicare Shared Savings Program; the tax-exempt organization’s ownership interest in the ACO, if any, is proportional to the exempt organization’s capital contributions; allocations, distributions and returns of capital are in proportion to ownership interests; the exempt organization’s share of losses does not exceed its share of income or gain; and contracts and other transactions between an ACO and its tax-exempt and taxable participants are at fair market value.
• Unrelated Business Taxable Income: The IRS expects that any Medicare Shared Savings Program payments received by a tax-exempt organization from an ACO will be deemed to be from activities substantially related to the performance of the charitable purpose of lessening the burdens of government (i.e., relieving the government of its burden of providing Medicare to those in need) and will not be treated as UBTI if the ACO meets all of the eligibility requirements established by CMS. 

While this initial guidance from the IRS provides some assurance that tax-exempt organizations generally will be able to participate in the Medicare Shared Savings Program through an ACO without adverse federal income tax consequences, Notice 2011-20 leaves a number of important questions unanswered. [Read more →]

On March 31, 2011, the Centers for Medicare & Medicaid Services (CMS or the “Agency”), along with several other federal agencies, released a long-awaited proposed rule and other notices that would implement the Medicare Shared Savings Program and Accountable Care Organization (ACO) provisions of the Patient Protection and Affordable Care Act (PPACA). The proposed ACO regulations and policies are contained in four separate documents: (1) a CMS proposed rule establishing ACOs; (2) a Department of Health and Human Services Office of Inspector General/CMS notice with comment period proposing waivers for the Anti-Kickback Statute, the Physician Self-Referral Law (the “Stark Law”) and certain provisions of the Civil Monetary Penalties law; (3) a Federal Trade Commission/Department of Justice proposed statement of antitrust enforcement policy for ACOs; and (4) an Internal Revenue Service request for comments addressing guidance for tax-exempt organizations participating in the program. This health reform update gives a preliminary analysis of CMS’s proposed rule. The other three publications are reviewed in separate updates prepared by members of Akin Gump’s ACO team.

Although the CMS proposed rule has only been issued in draft form, publication in the Federal Register is expected on or around April 7, 2011. Comments on the rulemaking must be submitted to CMS within 60 days of publication.

Health industry stakeholders highly anticipated the release of this rule and early CMS estimates indicate that 1.5 to 4 million beneficiaries would be assigned to ACOs in the first three years of the program (as compared to 45 million beneficiaries who have traditional fee-for-service (FFS) Medicare coverage). This estimate reflects only those enrolled in the Medicare Shared Savings Program; additional individuals are anticipated to be enrolled in commercial and Medicaid ACOs. In press conferences and releases surrounding the announcement of the proposed rule, CMS appears confident that the ACO Shared Savings Program will incent providers to furnish coordinated and efficient care and ultimately lower costs throughout the health care delivery system. Summarized below are some noteworthy takeaways from the ACO proposed rule.

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On March 31, 2011, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule establishing accountable care organizations (ACOs) under the Medicare Shared Savings Program pursuant to provisions of the Patient Protection and Affordable Care Act (PPACA). CMS and the Department of Health and Human Services (HHS) Office of Inspector General (OIG) also jointly released a notice and solicitation of public comments (the Notice) regarding the waiver of certain federal fraud and abuse laws in connection with the Medicare Shared Savings Program.

Anticipating that the Medicare Shared Savings Program would potentially implicate fraud and abuse laws, Congress included a provision in the PPACA that grants the Secretary of HHS the authority to waive the application of certain fraud and abuse laws “as may be necessary” to implement the program. [1]   The fraud and abuse laws addressed by the proposed waivers are the Physician Self-Referral Law (the “Stark Law”),[2] the federal Anti-Kickback Statute,[3] and a provision of the Civil Monetary Penalties law (CMP Law), the so-called Gainsharing 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.[4] Industry stakeholders have expressed concerns that without such waivers the establishment and operation of ACOs would necessarily involve the creation of financial relationships between physicians and hospitals and other individuals and entities that would otherwise be restricted or prohibited by these laws.

The Notice sets forth three proposed waivers and solicits comments on a number of related issues. To be eligible for waivers from the fraud and abuse laws, an ACO must enter into a formal agreement with CMS to participate in the Medicare Shared Savings Program and the ACO, ACO participants and ACO providers/suppliers would be required to comply with the various ACO requirements found in Section 1899 of the Social Security Act[5] (as promulgated by the PPACA) and the ACO implementing regulations, including the requirements regarding transparency, reporting and monitoring.

The requirements for the proposed waivers are set forth below—

Today, several federal agencies issued proposed rules or notices regarding Accountable Care Organizations (ACOs)— 

• CMS issued a proposed rule that establishes ACOs under the Medicare Shared Savings Program.
• HHS OIG and CMS jointly issued a notice with comment period addressing proposals for waivers for the anti-kickback statute, the physician self-referral law and certain provisions of the civil monetary penalty law, as related to the Shared Savings Program.  They also issued a solicitation for comments on additional waivers for program as well as for separate waiver authority for the Center for Medicare and Medicaid Innovation.
• FTC and DOJ jointly issued a proposed antitrust policy statement for ACOs participating in the Shared Savings Program.
• The IRS issued a request for comments addressing guidance for tax-exempt organizations participating in the Shared Savings Program through ACOs.