ACO FINAL RULE ON RISK SHARING

In late 2011, CMS released its final rule for ACOs under the Medicare Shared Savings Program (MSSP). The final rule provides a two track model. Under track one, a shared savings only approach is available, but only for the duration of the ACOs first agreement period. Track two is a two-sided gain/loss model for the period of the ACOs first agreement. After the initial agreement period, all ACOs will be required to participate under the two-sided share gain and share loss model.

If you chose the gain/loss model, your ACO will be required to demonstrate the ability to repay CMS for the ACOs portion of losses. The rule allows CMS to withhold twenty-five percent (25%) of an ACO’s shared savings in order to secure repayment of shared losses in later years. CMS may also require additional repayment methods if it deems the risk to CMS high.

While the final rule is better, careful study of expected gains and losses will be necessary since CMS does not respond or negotiate like private source joint venturers and simply will make its self “whole” by withholding payments.

STATE LAW vs. STARK LAW

“Stark” prohibits a physician from receiving compensation or financial benefit from as a hospital in return for referring patients to that hospital for designated services, unless an exception applies. Usually the parties carefully craft a contract to meet an exception, such as the service contract exception. Sometimes such contracts expire. Under state law this may be a small problem since the terms of the contract will be deemed, usually, to continue to apply. However, under Stark the lack of a current written contract normally means the exception to Stark is eliminated and a Stark Violation occurs.

In a recent case this situation occurred and a doctor continued to perform medical director services for a hospital for over a year after technical contract termination. The hospital was aware that the doctor continued to provide services and bill for them despite the termination of the contract. Faced with the hospitals refusal to pay for the services actually received from the doctor, the doctor asserted his right to recover the value of his services under a theory of unjust enrichment. The hospital argued that a allowing a recovery under a state law theory of unjust enrichment would “frustrate” the purposes of Stark and require the hospital to violate Stark. The Court found the hospital’s arguments unconvincing and allowed the claim to go forward. This is an important precedent in favor of doctors who continue to provide services with the knowledge of a hospital against a later claim that the facility does not have to pay for the services actually received.

It does not answer the question of the consequences to the hospital. Since Stark prohibits billing Medicare, the patient or third-party payer for a service which violated Stark, it appears that the hospital or facility would have to pay the physician, but would not be able to recover it from any payer which is covered by Stark.

This case provides another reason for hospitals/clinics to make sure that compensation arrangements are continuously in compliance with Stark or with a Stark exception where referrals are involved. You may also wish to have your contracts with hospitals or practice groups reviewed to specifically require that you be paid for services actually rendered without regard to any failure by a hospital to extend or renew a written contract. If you are a hospital, you may wish to provide specifically what would happen under this circumstance and provide an equal burden upon both the physician and the hospital in terms of responsibility for compliance with Stark. Here it appears that the Court assumed that the responsibility for Stark compliance was with the hospital.

AGs ON THE MARCH

State Attorney Generals are beginning to sue healthcare providers for alleged patient privacy violations. These actions by the State Attorney Generals are heavily publicized and can be lucrative for the state, if not for the patients actually involved in such a breach.

Failing to have basic security procedures in place and failure to encrypt can not only be costly in terms of reporting costs and response costs required under HIPPA but lawsuits from Attorney Generals, or other parties can make such data breaches catastrophic financially.

MEDICARE DEMONSTRATION PROJECTS

Over the last twenty (20) years CMS conducted demonstrations to improve the quality of healthcare and efficiency. Value based payment demonstrations have provided financial incentives to improve quality and efficiency of care/disease management. Care coordination demonstrations seek improvements in care for chronic illnesses, or exceptionally costly treatments. Congressional budget office reviewed the outcomes of 10 major demonstrations. Almost every program has not reduced Medicare spending.

The interesting take by the CBO is not that the assumptions in the studies on how to control healthcare were incorrect or untenable, rather the demonstrations and studies need to be designed better so that the expected results are obtained.

Those of you that are considering participating in ACO gain/ loss sharing arrangements, may wish to carefully ponder the governments past lack of success in these efforts and its inability to address the underlying issues that are raising the cost of healthcare, as opposed to complaining that the studies are not designed properly to give the answer that CMS and HHS desired.

This newsletter is edited by Paul Wallace, a member of the American Bar Association Healthcare Law Section and the American Health Lawyers Association who has been representing physicians and healthcare practices for over 25 years. Mr. Wallace assists physicians in health practices in contract items, federal legal compliance, creation of practice entities, estate and wealth planning and similar issues. Please feel free to call if you have any questions about this newsletter or any other matter at (812) 402-1600 or pwallace@joneswallace.com.