Accountable care organization

On April 8, 2016, the IRS released a private letter ruling denying tax-exempt status under Code section 501(c)(3) to an accountable care organization (“ACO”) that was not participating in the Medicare Shared Savings Program (“MSSP”).  PLR 201615022 (the “2016 PLR”) is the IRS’s first public written guidance on the tax-exempt status of ACO activities since 2011.

Since the MSSP became operational in 2012, it has been supported by a multi-agency effort to provide participants’ assurance that the application of existing laws and regulations governing tax-exempt status and permissible practices under the fraud and abuse laws would not be used against them. Recently, there has been increasing debate about whether the protected status that federal agencies have provided MSSP participants should also apply to ACOs in the private sector.  In fact, the Centers for Medicare & Medicaid Services and the Department of Health & Human Services’ Office of the Inspector General addressed this issue in their joint issuance of the final rule discussing the waivers of fraud and abuse laws for MSSP ACO arrangements in October 2015.  Now, with the 2016 PLR, the IRS has added its own views on the outer limits of protections for tax-exempt entities that create ACOs outside the MSSP.

Continue Reading IRS Denies Tax-Exempt Status to Non-MSSP ACO

This month, the Centers for Medicare & Medicaid Services (CMS) announced the beginning of the second application cycle for its Next Generation ACO Model (Next Gen Model).  We discussed the goals of the Next Gen Model and how it compares to the Medicare Shared Savings Program and Pioneer ACO models in this post from last year.

The Next Gen Model, along with other value-based payment initiatives being run by CMS, advances the goals of the Affordable Care Act by moving providers away from fee-for-service reimbursement models. Since CMS began implementing its ACO-based initiatives in 2012, over 477 ACOs nationwide have partnered with the agency to test the theory that coordinated care provide higher quality at a lower cost for beneficiaries.

Twenty-one ACOs are currently participating in the Next Gen Model – more than the 15-20 CMS anticipated accepting. Like last year, the Centers for Medicare & Medicaid Innovation (“CMMI”) is holding a series of Open Door Forums to explain key aspects of the Next Gen Model on the following dates:

ACOs (including MSSP participants and Pioneer ACOs) have until May 2, 2015 to submit a Letter of Intent (LOI) using CMS’s designated portal.  Applicants must electronically complete the narrative portion of the Next Gen Model application by May 25, 2016 and submit their participating provider lists and geographic service areas no later than June 3, 2016.

This will be the final year for ACOs to participate in the Next Gen Model. It is hard to predict what will happen to the Medicare payment reforms tested in the Next Gen Model and other ACA-related programs as the United States enters into a new administration after the 2016 elections, but CMS is currently staying the course to reduce health care costs while improving quality.

On January 11, 2016, the Centers for Medicare & Medicaid Services (CMS) announced that 100 new Accountable Care Organizations (ACO) began participating in the Medicare Shared Savings Program (MSSP). CMS also announced that 21 new providers and hospitals have signed up to participate in other ACO-focused shared savings programs, including the Pioneer ACO Model, Next Generation ACO Model, and Comprehensive ESRD Care Model.  According to the latest figures:

  • the 477 participants in these CMS programs are now located in 49 states and the District of Columbia and will serve nearly 8.9 million Medicare beneficiaries;
  • there will be 434 ACOs participating in the MSSP in 2016, serving more than 7.7 million beneficiaries; and
  • approximately 15,000 more physicians are now participating in the MSSP through ACOs.

Notably, 64 of the ACOs across all of these programs are in a two-sided risk-bearing track. This means that, in addition to being eligible to receive shared savings, these ACOs have put themselves on the hook to repay the government for any losses incurred if their cost-control measures are unsuccessful.  The move toward two-sided risk signals progress towards the Administration’s goals to move 50% of traditional Medicare fee-for-service payments into alternative payment models that pay for quality of care rather than quantity of care by 2018.

Recent financial and performance results released by CMS demonstrate the ACOs’ success in controlling spending and improving quality. In fact, the agency paid out performance payments of more than $341 million in 2014 to reward the program participants’ achievement of these goals. As the success of the program continues, we can expect growing participation in ACO initiatives and increased pressure from CMS to move providers toward value-based payment models.

After much anticipation over the past few weeks, the Federal Register from Tuesday, June 9th contains the Final Rule proposing changes to the Medicare Shared Savings Program (MSSP) from the Centers for Medicare & Medicaid Services (CMS). The finalized changes to the MSSP provide additional flexibility and choice to Accountable Care Organizations (ACOs) currently participating in the program, but much uncertainty remains for future participants or those determining whether to continue their involvement in this initiative to control health care costs while improving quality for Medicare beneficiaries.

As expected, CMS established a “Track 3” model for MSSP ACOs with prospective beneficiary assignment that will not require ACOs that participated in the Track 1 one-sided risk model to transition to two-sided risk after the first three-year MSSP participation period. In contrast to the proposed rule, second-time Track 1 participants will have continued eligibility for 50 percent of the shared savings they earn during the subsequent MSSP agreement period. Other helpful changes that CMS finalized for ACOs participating in the MSSP include, but are not limited to:

  • clarifying key MSSP-related definitions in section 42 C.F.R. § 425.20;
  • revising the annual benchmark-setting methodology in 42 C.F.R. § 425.602 to equally weight each benchmark year and to account for shared savings in prior ACO agreement periods when resetting the historical benchmarks;
  • creating multiple Minimum Savings Rate (MSR)/Minimum Loss Rate (MLR) options for Track 2 (two-sided risk) ACOs beginning their MSSP agreement periods in January 2016; and
  • counting primary care services performed by Nurse Practitioners, Physician Assistants, and Clinical Nurse Specialists at the beginning of the beneficiary assignment process (without distinguishing whether such professionals are performing primary or specialty services).

Continue Reading Previewing the Final Rule Implementing Changes to Medicare Shared Savings Program

Through the announcement of its new “Next Generation ACO Model” (Next Gen Model) program on March 10, 2015, the Centers for Medicare & Medicaid Services is making good on its recently proclaimed goal to tie half of its fee-for-service Medicare payments to value-based payment methodologies by the end of 2018. The program name aptly describes it as the next step up from the Medicare Shared Savings Program (MSSP) and the Pioneer ACO Model initiatives already underway for ACOs. As with other ACO-focused initiatives administered by the federal government, the Next Gen ACO seeks to test shared savings and shared risk health care payment models, but will incorporate some significantly different features, such as: (1) a full capitation payment option beginning in 2017; (2) the option for beneficiaries to “self-align” with an ACO; and (3) direct-to-beneficiary rewards for receiving care from the ACO.

ACOs will have two opportunities to apply for the Next Gen Model – this year and in 2016. An ACO’s participation in the program will span over a total of five years consisting of three initial performance years and two optional one-year extensions.
Generally, the Next Gen Model’s participation prerequisites mimic the basic requirements applicable to applicants in the MSSP, such as the legal entity, governance structure, and ACO leadership body requirements. Like the Pioneer ACO Model, however, the Next Gen Model targets coordinated groups of providers that have more experience in managing the health of defined populations.

Some key differences to note when comparing the Next Gen Model to the MSSP and Pioneer ACO Model include the following:

Continue Reading Next Generation ACO Model Sets Tone for CMS’s Push Toward Value-Based Payment