Alphabet Soup: A Review of ACO Guidance from CMS, FTC, DOJ, OIG

Alphabet Soup: A Review of ACO Guidance from CMS, FTC, DOJ, OIG and IRS

November 10, 2011

Final ACO Fraud & Abuse Waivers

Daniel H. MelvinMcDermott Will & Emery312.984.6935dmelvin@mwe.com

November 10, 2011

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Waivers from what?

▪ Physician Self-referral Law (the Stark Law)▪ Anti-kickback Statute▪ Civil Monetary Penalties (CMP) Law

– Gainsharing CMP– Beneficiary Inducements CMP

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Proposed Waivers

▪ Only waived application of the fraud and abuse laws to:– Distributions of shared savings earned by the ACO– Other compensation arrangements that implicate the Stark Law,

and qualify for a Stark exception

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Final Waivers are . . .

▪ Breathtakingly broad, but have– strict procedural requirements– strict limitations on duration of the waiver protection

▪ Note: OIG and CMS (the Agencies) will monitor ACOs and are considering whether and how to narrow the waivers, prospectively, in future revisions

▪ Expect the Agencies to make minor revisions; this is the “beta version” of the waivers

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Final Waivers Rule

▪ Published in the November 2, 2011 Federal Register, along with Final ACO Rule

▪ For a full discussion with citations, see McDermott Will & Emery White Paper, “ACOs Get Broad Waivers from the Fraud and Abuse Laws”

▪ Interim final rule with comment period▪ Comments due by January 3rd, 2012▪ Effective Date: November 2, 2011

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Five Waivers

▪ ACO pre-participation waiver▪ ACO participation waiver▪ Shared savings distributions waiver▪ Compliance with Stark Law waiver▪ Patient incentive waiver

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Final Waivers – General Instructions

▪ The waivers are self-implementing; there are no filing or application procedures

▪ A financial arrangement need only meet one of the waivers to be protected

▪ The waivers will be posted on the Agencies’ websites, but will not be codified in the Code of Federal Regulations

▪ The waivers only apply to ACOs with a bona fide intent to participate in, or that actually participate in, the Medicare Shared Savings Program (MSSP)– including the Advance Payment Initiative of the Center for Medicare &

Medicaid Innovation (the Innovation Center). ▪ Waivers do not apply to the Innovation Center’s Pioneer ACOs, but

similar waivers forthcoming

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ACO Pre-participation Waiver

▪ Protects all of the parties to a pre-participation start-up arrangement (including outside parties) from liability under the Stark Law, the Kickback Law, and the Gainsharing CMP if procedural requirements met

▪ Parties must have a good faith intent to participate in the MSSP in a particular year (the Target Year)

▪ Parties cannot include a drug and device manufacturer, distributor, durable medical equipment supplier, or a home health agency

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ACO Pre-participation Waiver

▪ “Start-up arrangements” mean items, services, facilities and/or goods provided by the ACO, an ACO participant, or ACO provider/supplier, and used to create or develop an ACO, including donations of or subsidies for these items, services, facilities or goods.

▪ Examples (only):– Funding– Capital contributions– Legal and consulting services– Hiring of staff– Incentives to attract primary care physicians– Performance-based compensation to physicians– Information technology

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ACO Pre-participation Waiver

▪ Pre-participation waiver may only be used once by an ACO

▪ If MSSP application is not filed for the Target Year, ACO must submit an explanatory statement by the application deadline

▪ Duration – Start Date– Waiver protection begins one year preceding the application due

date for the ACO’s Target Year, unless the target year is 2012, in which case the waiver protects start-up arrangements occurring on and after November 2, 2011

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ACO Pre-participation Waiver

▪ Duration – End Date – Application accepted - participation agreement start date– Application denied - 6 months after the date of CMS’s

application denial notice (no new start-up arrangements)– Application not filed - earlier of application due date or date of

ACO’s explanatory statement to CMS, but extensions can be requested and granted▪ ACO must demonstrate a likelihood of successfully developing an ACO

eligible to participate by the next available application due date

▪ Start-up arrangements involving continuing financial arrangements with referral sources must have “out” or “unwind” provisions

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ACO Participation Waiver

▪ Protects all of the parties (including outside parties) to an arrangement continuing or commencing on and after the ACO enters into a MSSP participation agreement

▪ Protection extends to the Stark Law, the Kickback Law, and the Gainsharing CMP

▪ The arrangement must involve an ACO, an ACO participant, or an ACO provider/supplier

▪ The arrangement must meet specified procedural requirements

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ACO Participation Waiver

▪ “Arrangements” is not defined, but context and commentary indicate that the term includes:– items, services, facilities and/or goods, including donations of or

subsidies – used either to

▪ develop the ACO or▪ to support its ongoing operations and activities

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ACO Participation Waiver

▪ Duration - The protection of the waivers ends on the earlier of: – 6 months following the expiration of the participation agreement

(including any renewals)– the date on which the ACO voluntarily terminates the

participation agreement– the date of a CMS MSSP termination notice

▪ Financial arrangements must have “out” or “unwind”provisions

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ACO Pre-participation and Participation Waivers’Procedural Requirements

▪ A MSSP Purposes Determination - The ACO’s governing body must make a bona fide determination that the start-up or other arrangement is “reasonably related to the purposes of the Shared Savings Program”– Consistent with the members’ fiduciary duty and the ACO’s

conflicts of interest policy

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ACO Pre-participation and Participation Waivers’Procedural Requirements

▪ “Purposes of the Shared Savings Program” means the aims of:– promoting accountability for the quality, cost and overall

management for a Medicare patient population– managing and coordinating care for Medicare fee-for-service

beneficiaries through an ACO– encouraging investment in infrastructure and redesigned care

processes for high quality and efficient service delivery for patients

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ACO Pre-participation and Participation Waivers’Procedural Requirements

▪ The Final Waivers Rule is silent on whether the MSSP purposes determination must be made prior to the commencement of an arrangement to be effective

▪ The Agencies presumably recognize that certain pre-MSSP application start-up arrangements will have to be retrospectively ratified by the ACO’s governing body

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ACO Pre-participation and Participation Waivers’Procedural Requirements

▪ Diligent Steps Requirement (Pre-participation Waiver Only) - The parties must take diligent steps to develop an ACO that would be able to participate in the MSSP in the Target Year– Including diligent steps to meet the MSSP’s ACO governance,

leadership, and management requirements ▪ 42 C.F.R. § 425.106 and 425.108

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ACO Pre-participation and Participation Waivers’Procedural Requirements

▪ Documentation Requirement – What Must be Documented?– The start-up or other arrangement (and any later material

modifications to the arrangement) – The ACO governing body’s MSSP purposes determination– The ACO’s diligent steps to develop the ACO (ACO pre-

participation waiver only)– Final Waivers Rule prescribes details that must be included in

documentation

▪ How?– Electronic or paper– Must be contemporaneous

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ACO Pre-participation and Participation Waivers’Procedural Requirements

▪ How Long Must the Documentation be Retained?– 10 Years– Made available to the CMS upon request

▪ Who Must Retain the Documentation?– By implication, the ACO and any party that needs or may need

the protection of the waivers

▪ Remember: the documentation must be contemporaneous

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ACO Pre-participation and Participation Waivers’Procedural Requirements▪ Public Disclosure Requirement

– A description of the arrangement, except the financial or economic terms, must be disclosed at a time and in a place and manner established by CMS▪ The Agencies request comments on the form and timing of the public

disclosure– In the interim, parties should post the disclosure on a public Web

site belonging to the ACO or an individual or entity forming theACO▪ Include the name of the ACO and other identifying information sufficient

to make the Web site readily searchable– The disclosure must be clearly labeled as an arrangement for

which ACO waiver protection is sought – The disclosure should be made within 60 days of the date of the

arrangement

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Shared Savings Distribution Waiver▪ Protects

– distributions of shared savings, earned by the ACO through its MSSP participation, to or among:▪ ACO participants or▪ ACO providers/suppliers

– use of shared savings earned by an ACO through its MSSP participation▪ including compensation to outside parties for activities related to

MSSP purposes

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Shared Savings Distribution Waiver

▪ The waiver applies to the Stark Law, the Kickback Law and the Gainsharing CMP (but no inducement to reduce or limit medically necessary items or services to patients under the physician’s direct care)– The waiver protects incentives to provide alternative and

appropriate care (e.g., evidenced-based protocols), so long as the care is medically necessary

▪ No public disclosure or other procedural requirements▪ No time limits

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The Compliance With Stark Law Waiver

▪ Waives the Kickback Law and the Gainsharing CMP with respect to any financial relationship between or among the ACO, its ACO participants, and its ACO providers/suppliers that implicates the Stark Law, provided:– the financial relationship is reasonably related to the purposes of

the Shared Savings Program (defined above); and – the financial relationship fully complies with one of the Stark

Law’s DHS, ownership/investment, or compensation exceptions (42 C.F.R. § 411.355 - § 411.357)

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Which Waiver Should Be Used for Physician and Other Referral-Source Arrangements?

▪ Compliance with Stark Law and shared savings distribution waivers do not protect any arrangement not protected by the ACO pre-participation or participation waivers

▪ Note: Compliance with Stark Law and shared savings distribution waivers do not have the MSSP purposes determination, documentation and public disclosure burdens of the other waivers

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Just how broad are the final waivers?

▪ If the waivers’ procedural requirements are met, subject to certain limitations the waivers will allow a hospital that is interested in forming a Medicare ACO:– Fund ACO development costs– Fund ACO operating expenses– Fund staffing needs or loan staff or support services to the ACO– Donate EHR and connectivity to ACO-participating physicians

not currently permitted by the Stark Law, without regard for theDecember 31, 2013 sunset of the Stark Law’s EHR donation exception

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Just how broad are the final waivers?

▪ The ACO or a ACO-participating hospital can make compensation to ACO-participating physicians contingent on:– reductions in hospital length of stay– reductions in readmission rates – standardization and substitution of lower-cost surgical and

procedural implants, devices and supplies– improvements in operating room efficiency

▪ Such compensation is not currently permitted under the OIG’s broad interpretation of the Gainsharing CMP without a favorable OIG Advisory Opinion.

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Just how broad are the final waivers?▪ Can an ACO require ACO-participating physicians to

make referrals within the ACO’s provider network? – The ACO Final Rule says no– An ACO, ACO participant, or ACO provider/supplier can require

it’s employees and contractors to refer Medicare beneficiaries to it, subject to certain exceptions; but not a license to require employees or contractors to make referrals to others within the ACO’s provider network

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Just how broad are the final waivers? ▪ Can an ACO make the amount of compensation or

shared savings distributions to an ACO-participating physician contingent on the physician making Medicare referrals within the ACO’s provider network? – The Agencies:

▪ A per-referral payment to a specialist for every in-network referral would be unacceptable

▪ Arrangements with specialists or nursing facility staff members to engage in care coordination or compliance with evidence-based protocols for ACO beneficiaries could be permissible “even if the arrangement were to reflect a likelihood that the patient might be referred to or within an ACO”

– ACOs will have to navigate within these two extreme examples– Good News: Risk is MSSP termination, not fraud and abuse

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Patient Incentives Waiver

▪ Waives the Beneficiary Inducements CMP and the Kickback Law with respect to free or below-market items or services (not money) that are:– preventive care items or services; or– advance one or more of the following clinical goals:

▪ adherence to a treatment regime▪ adherence to a drug regime▪ adherence to a follow-up care plan ▪ management of a chronic disease or condition

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Patient Incentives Waiver▪ Items and services must be:

– provided by an ACO, its ACO participants, or its ACO providers/suppliers

– to Medicare beneficiaries (whether assigned to the ACO or not)

▪ There must be a reasonable connection between the items or services and the medical care of the beneficiary– No beauty products, theatre tickets, baseball tickets, jewelry,

and household items that can be used for purposes other than direct healthcare related purposes

– Example of permissible item - blood pressure monitors for hypertensive patients

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Patient Incentives Waiver

▪ Note: ACOs cannot use waivers of patient cost-sharing or other incentives to keep Medicare beneficiaries “in-network”

▪ The Final ACO Rule prohibits providing beneficiaries with incentives to receive items or services from ACO participants or ACO providers/suppliers, but prohibition will be interpreted consistent with the Final Waivers Rule

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Commercial Payor Arrangements with ACOs

▪ The Agencies: – Distributions or use of earnings from commercial shared savings

or quality incentive arrangements can qualify for the protectionof the ACO participation waiver▪ Means the Agencies believe that such distributions or use of such

funds can be “reasonably related to the purposes of the Shared Savings Program”

– Many commercial shared savings arrangements are, or can be, structured to fit within the Stark risk-sharing exception

– Agencies want ACOs to be able to operate on a “payor-blind”basis

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Key Take-Aways

▪ Final waivers are very broad, but not without conditions▪ Compliance perspective: think of the waivers as

exceptions to the fraud and abuse laws ▪ Like all exceptions, there are legal requirements that

must be met to qualify for the exceptions▪ Risk: blowing the waivers’ requirements; failing to qualify▪ Recommendation:

– ACO compliance policy and procedure specific to financial arrangements by and among the ACO and participating providers and suppliers

– Rigorous legal and compliance officer review

Final FTC/DOJ Policy Statement on MSSP-Participating ACOsAshley M. FischerMcDermott Will & Emery312.984.7766amfischer@mwe.com

November 10, 2011

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FTC/DOJ Policy Statement

▪ On 10/20/2011, FTC/DOJ issued a final Statement of Antitrust Enforcement Policy Regarding ACOs Participating in the Medicare Shared Savings Program (MSSP)

▪ On 3/31/2011, FTC/DOJ had issued a proposed Policy Statement

▪ Numerous stakeholders submitted comments on the proposed Policy Statement– 127 posted on http://www.ftc.gov/os/comments/aco-comments/

▪ Final Policy Statement incorporates some but not many stakeholder comments

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Key Changes▪ Eliminated mandatory antitrust review prior to

participation in the MSSP for ACOs with a combined primary service area (PSA) share in excess of 50 percent in any common service

▪ Implemented a process for “newly-formed” ACOs to seek expedited voluntary antitrust review

▪ Extended rural exception from one physician to one physician or integrated group practice in a rural area

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Key Changes

▪ Extended applicability of the final Policy Statement to all collaborations of otherwise independent providers and provider groups that are eligible and intend, or have been approved, to participate in the MSSP– Draft Policy Statement was limited to collaborations formed after

March 23, 2010 (PPACA enactment date)

▪ Clarified that the Policy Statement does not apply to single, fully integrated entities

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Applicability

▪ Policy Statement applies to all MSSP-participating ACOs, irrespective of formation date– Does not apply to ACOs whose programs are substantially

similar to ACOs participating in the MSSP but who provide services in the commercially-insured market only

– Such organizations do not have the guaranty of rule of reason treatment or the safe harbor available to them

– Nevertheless, analytical framework of the Policy Statement should be instructive for ACOs participating only in the commercial marketplace

– Also, Policy Statement analytical principles apply to CMS Innovation Center ACO programs “as long as those ACOs are substantially clinically or financially integrated”

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Rule of Reason Treatment

▪ All MSSP-participating ACOs deemed to be sufficiently integrated within the meaning of the antitrust laws

▪ Agencies will afford rule of reason treatment to an ACO if, in the commercial market, the ACO uses the same governance and leadership structure and the same clinical and administrative processes that it uses to qualify for and participate in the MSSP

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Safety Zone

▪ Safety zone for an ACO comprised of independent ACO participants that provide a common service where the ACO’s combined share of the common service is 30% or less in each ACO participant’s primary service area (PSA)

▪ PSA is “the lowest number of contiguous zip codes from which” the ACO participant “draws at least 75% of its”patients

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Voluntary Agency Antitrust Review

▪ “Newly formed” ACOs may seek voluntary expedited antitrust review

▪ ACOs that, as of 3/23/2010, “had not yet signed or jointly negotiated any contracts with private payors” and have not yet participated in the MSSP

▪ Must seek expedited review prior to participation in the MSSP▪ Must submit request to both the FTC and DOJ▪ Agencies will determine which Agency reviews▪ Expedited review is 90 days ▪ Both an ACO’s request letter and the Agency’s response will be

made public consistent with confidentiality provisions

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Calculating PSA Shares

▪ Three-step process– Identify each service provided by at least two independent ACO

participants– Identify the PSA for each common service for each participant in

the ACO – Calculate the ACO’s PSA share for each common service in

each PSA from which at least two ACO participants serve patients for that service

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Common Services▪ Physicians

– The “service” is the physician’s primary specialty, as designated on the physician’s Medicare Enrollment Application and identified by Medicare Specialty Code

– The ACO must calculate its shares of Medicare fee-for-service allowed charges.

▪ Hospitals– The “service” is each major diagnostic category (MDC)– The ACO must calculate its shares of inpatient discharges using state-

level all-payor hospital discharge data where available. ▪ Outpatient facilities

– The “service” is an outpatient category, as defined by CMS– The ACO must calculate its shares of Medicare fee-for-service

payments.

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Exclusivity

▪ Any hospital or ASC participating in an ACO must be non-exclusive to the ACO to qualify for the safety zone, irrespective of its PSA share

▪ Physicians may be non-exclusive or exclusive to the ACO and still qualify for the safety zone, subject to the rural exception and dominant participant limitation

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Rural Exception

▪ An ACO may include one physician or integrated group practice (PGP) per specialty from each rural area and still qualify for the safety zone so long as – The physician or PGP is non-exclusive to the ACO– The physician or PGP’s primary office is in an “isolated rural” or

“other small rural” zip code as classified by the WWAMI Rural Health Research Center of the University of Washington’s seven category classification

▪ Applies even if inclusion of that physician/PGP causes the ACO’s share of any common service to exceed 30% in any ACO participant’s PSA for that service

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Rural Exception

▪ An ACO may include rural hospitals and still qualify for the safety zone so long as that hospital participates on a non-exclusive basis

▪ Rural hospital:– Critical access hospital– Sole community hospital– Any other acute care hospital

▪ In a rural area ▪ Having 50 or fewer inpatient beds▪ Located at least 35 miles from any other inpatient acute care hospital

▪ Applies even if inclusion of a rural hospital causes the ACO’s share of any common service to exceed 30% in any ACO participant’s PSA for that service

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Dominant Participant Limitation

▪ To fall within the safety zone, any ACO that includes a participant with greater than a 50% share (dominant participant) in its PSA of any service that no other ACO participant provides must be non-exclusive to the ACO

▪ In addition, an ACO with a dominant participant cannot require a payor to contract exclusively with the ACO or otherwise restrict the payor’s ability to contract with other ACOs or provider networks

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ACO Conduct To Avoid

▪ Agencies identify five types of conduct that, under certain circumstances, may raise competitive concerns– Sharing among ACO participants competitively sensitive

information that could give rise to an unlawful agreement (irrespective of PSA shares)

– Preventing or discouraging commercial payors from steering patients to other providers

– Tying sales of the ACO’s services to the payor’s purchase of other services from providers outside the ACO

– Contracting with ACO participants on an exclusive basis– Restricting a payor’s ability to disclose to its beneficiaries cost

and quality data

The IRS Evolving Position on Tax-Exemption and ACOsRobert C. Louthian, IIIMcDermott Will & Emery202.756.8172rlouthian@mwe.com

November 10, 2011

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Background

▪ IRS Treatment of Electronic Health Records (“EHR”)– EHR Directive (May 2007) – Ultimate IRS EHR Position

▪ IRS Notice 2011-20 (Apr. 18, 2011). IRS releases initial statement on participation by tax-exempt entities in ACOs

▪ IRS Fact Sheet 2011-11 (Oct. 20, 2011). IRS releases additional guidance in a question and answer format– Timed with release of CMS final regulations– Confirms, clarifies and expands on previous guidance

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IRS Notice 2011-20 – The Good and the Bad

▪ The Good– IRS recognizes that a tax-exempt organization’s participation in

MSSP ACOs can serve charitable purposes, specifically lessening the burdens of government

– IRS also recognizes that a tax-exempt organization’s participation in Medicaid ACOs could serve separate charitable purpose of “relief of the poor”

– IRS affirmatively states that with respect to MSSP ACOs, a tax-exempt hospital’s participation in such ACO will not result in inurement or impermissible private benefit if “Five Factors” set forth in the Notice are satisfied

– IRS seeking comments

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IRS Notice 2011-20 – The Good and the Bad

▪ The Bad– The Notice suggests that an exempt organization participating in

an MSSP ACO must satisfy all Five Factors. However, satisfaction of all Five Factors for tax-exempt organizations would be difficult

– The Notice never states that ACOs (MSSP or otherwise) can obtain exemption under Section 501(c)(3). Solely deals with participation in ACOs

– The IRS strongly suggests non-MSSP ACOs do not further charitable purposes

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Fact Sheet 2011-11 – The Evolution of the IRS Position ▪ Reflects a more flexible approach toward ACOs (MSSP,

Medicaid and Commercial ACOs) than Notice 2011-20▪ Demonstrates that the IRS is listening to concerns and

its position is evolving▪ Very readable

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Fact Sheet 2011-11 – Confirmation of Earlier Guidance

▪ Participation in MSSP and Medicaid ACOs can further exempt purposes

▪ Tax-exempt participant’s share of MSSP and Medicaid ACO shared savings will not be UBTI

▪ Notice 2011-20 remains effective post CMS Final Regulations (i.e., changes included in CMS Final regulations did not change IRS positions in Notice 2011-20)– Waivers are not mentioned in Fact Sheet 2011-11

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Fact Sheet 2011-11 – Confirmation of Earlier Guidance

▪ Basic tax rules applicable to separate corporations and participation in partnerships by exempt organizations apply

▪ Participation in ACOs through partnerships is controlled by existing IRS precedent (e.g., Rev. Rul. 2004-51)

▪ Facts and circumstances/case-by-case approach

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Fact Sheet 2011-11 – Expansion on Prior Guidance▪ Affirmatively states that MSSP and Medicaid ACOs can

qualify for exemption under Section 501(c)(3) (Q16)▪ States that non-MSSP activities are not inconsistent with

exempt status and may not be UBTI (Q11-Q15)▪ MSSP and Medicaid ACOs that qualify for exemption

can engage in non Shared Savings Program activities. (Q17)

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Fact Sheet 2011-11 – Expansion on Prior Guidance▪ States that IRS EHR Directive (May 2007) applies to hospitals participating

in MSSP ACOs (Q 22)

– IRS EHR Directive. Benefits provided by a hospital will not constitute inurement or impermissible private benefit if (a) the benefits fall within applicable HHS regulations/safe harbors; (b) the hospital ensures that the services are available to all of its medical staff physicians, and (c) the hospital provides the same level of subsidy to all of its medical staff physicians or varies the level of subsidy by applying criteria related to meeting the health care needs of the community.

– Does this address waivers?

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Fact Sheet 2011-11 – Important Clarifications

▪ The “Five Factors” – In Notice 2011-20, the IRS states that because of CMS regulation and oversight of MSSP ACOs, the IRS “expects”that it will not consider a tax-exempt organization’s participation in an MSSP ACO to result in inurement or impermissible private benefit to ACO participants where Five Factors are satisfied

▪ Importantly, Notice 2011-11 clarifies that not all of Five Factors listed in Notice 2011-20 must be satisfied

▪ In addition to clarifying that not all Five Factors must be satisfied, the IRS clarifies Factors 1, 2 and 3 (Factors 4 and 5 remain unchanged)

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Fact Sheet 2011-11 – Five Factors Clarifications

▪ Factor 1: The terms of the tax-exempt organization’s participation in the Shared Savings Program through the ACO (including its share of Shared Savings or Losses and expenses) are set forth in advance in a written agreement negotiated at arm’s length

▪ Clarification: The written agreement need not specify the charitable organization’s precise share or exact amount of any Shared Savings payments distributed by the ACO. Instead, it’s sufficient for the written agreement to set forth the methodology for determining an ACO’s allocation of Shared Savings payments

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Fact Sheet 2011-11 – Five Factors Clarifications

▪ Factor 2: CMS has accepted the ACO into, and has not terminated the ACO from, the Shared Savings Program

▪ Clarification: Termination of an ACO from the Shared Savings Program will not automatically jeopardize the status of a tax-exempt participant. Whether an ACO’s termination from the MSSP jeopardizes the status of a tax-exempt participant will depend on all the facts and circumstances

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Fact Sheet 2011-11 – Five Factors Clarifications

▪ Factor 3: The tax-exempt organization’s share of economic benefits derived from the ACO (including its share of Shared Savings payments) is proportional to the benefits or contributions the tax-exempt organization provides to the ACO. If the tax-exempt organization receives an ownership interest in the ACO, the ownership interest received is proportional and equal in value to its capital contributions to the ACO and all ACO returns of capital, allocations and distributions are made in proportion to ownership interests

▪ Clarification: The ownership interests in an ACO need not necessarily be directly proportional to capital contributions. ACO distributions of Shared Savings payments need not always be in proportion to such ownership interests. According to the IRS, “not all ACOs need to conform to this example for purposes of Factor 3. Factor 3 takes into account all contributions made by the charitable organization and other ACO participants to the ACO, in whatever form (cash, property, services), and all economic benefits received by ACO participants (including shares of Shared Savings payments and any ownership interests)”

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Planning Considerations

▪ The Fact Sheet demonstrates a more flexible IRS approach that recognizes ACOs, both MSSP and non-MSSP, may qualify for exemption

▪ Analysis is on a case-by-case basis ▪ Basis for Exemption

– Lessening the burdens (Rev. Ruls. 85-1, 85-2; EHR Directive/IRS position on RHIOs)

– Promotion of health (Rev. Ruls.81-276, 76-455; PLR 200044039 (Aug. 3, 2000))

▪ Passthrough entities (Rev. Ruls. 2004-51, 98-15)

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Planning Considerations – Post Fact Sheet 2011-11

▪ Choice of Entity (nonprofit corporation vs. partnership vs. single member LLC)

▪ Focus on quality improvement issues in a meaningful manner

▪ For non-MSSP ACOs, consider alternatives to government oversight (e.g., IRS position that a health care entity need not have community-based board if such board is controlled by entity with community board; compensation committee)

▪ Careful selection of entity participating in partnership-type ACOs. Parent entity v. operating entity

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The IRS and ACOs

▪ The Future▪ Compare IRS treatment of EHRs/RHIOs▪ The IRS is asking for additional information/comments▪ IRS position should continue to evolve in more favorable

fashion as time goes on

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QUESTIONS?