The development and implementation of accountable care organizations will require health care providers to navigate a host of regulatory obstacles originally designed to restrict collaborative activity. As a result, the Patient Protection and Affordable Care Act explicitly authorizes the Secretary of the U.S. Department Health & Human Services to waive the federal fraud and abuse laws as necessary for the implementation of ACOs.

In keeping with this congressional directive, at the same time the Centers for Medicare and Medicaid Services released proposed rules regarding requirements for ACOs, it issued, in cooperation with the HHS Office of Inspector General (OIG), a joint notice outlining proposed waivers of the Stark Law, the Gainsharing Civil Money Penalty (CMP) Law, and the Anti-kickback Statute.

This advisory explains the breadth and limitations of the proposed waivers. In sum, the joint notice demonstrates the government’s willingness to modify the fraud and abuse laws to permit the formation of Shared Savings Programs but the waivers fall short with respect to a number of regulatory impediments. Parties interested in forming an ACO and participating in the Shared Savings Program should submit comments to the agencies regarding the need for broader waivers before the June 6, 2011, submission deadline.

The proposed waivers

Under the Shared Savings Program, ACO participants would continue to be paid on a fee for service basis for the services they provide to Medicare beneficiaries. ACO participants can earn additional payments if the ACO lowers the overall cost of providing care to beneficiaries assigned to it while maintaining quality of care standards. Congress recognized that ACOs would create financial relationships among health care providers that may not be permissible under existing fraud and abuse laws and granted the HHS Secretary the authority to waive those laws.

The waivers proposed by the Secretary focus on the distribution of ACO shared savings, including savings distributions: (1) to or among ACO participants; or (2) for activities necessary for and directly related to the ACO's participation in the Shared Savings Program. The Gainsharing CMP waiver also requires that shared savings payments are not made knowingly to induce a physician to reduce or limit medically necessary items or services. No protection would be granted for distributions of shared savings to referring physicians outside the ACO unless the distributions were for activities necessary for or directly related to the ACO's participation in and operations under the program.